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-------------------------------------------------------------------------------- AMENDMENT TO ULTRAMAR CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Ultramar Diamond Shamrock Corporation, a Delaware corporation, pursuant to authority granted by its Board of Directors, hereby adopts the following amendments to the Ultramar Corporation Supplemental Executive Retirement Plan. Such amendments shall be effective as of May 1, 2000, subject to such further limitations and restrictions as are set forth below. 1. The first sentence of Section 4.1(c) (defining “Average Annual Compensation”) is amended and restated in its entirety, effective for any person who remains employed by Ultramar Diamond Shamrock Corporation on the date set forth above, as follows:   “Average Annual Compensation” shall be determined in the same manner as under the Pension Plan except as otherwise set forth herein, and provided that, Average Annual Compensation shall also include an “average bonus” if (i) the Participant’s employment with a Participating Employer is terminated for any reason other than Cause on or after the first day of the month in which he attains age fifty-five (55) or (ii) the Participant remains employed with the Company (or any subsidiary or affiliate of the Company) upon the occurrence of a Change in Control. 2. Clause (i) of Section 4.1(m) (defining “SERP Interest Rate”), is amended and restated, in its entirety, as follows: (i) with respect to the computation of the amount of a lump sum benefit upon a Change in Control under Section 4.2(e), the interest rate issued by the Pension Benefit Guaranty Corporation for private sector lump sum payments, as such rate is in effect on the first day of the calendar year that contains the date of the distribution. 3. Section 4.1(q) (defining “Trust”) is amended and restated in its entirety, as follows:   (q) “Trust”shall mean the Ultramar Diamond Shamrock Corporation Benefits Trust between the Company and Sterling National Bank and Trust Company of New York, as it may be amended from time to time. 4. The first sentence of Section 4.2(b) is amended and restated, in its entirety, as follows:   A Participant who retires from employment with a Participating Employer (other than on account of a termination for Cause) on or after the first day of the month following his attainment of age sixty-two (62) (with the determination of such Participant’s then age calculated by taking into account any additional years considered added to such Participant’s actual age pursuant to the terms of any separate agreement between the Participant and the Company pertaining to such person’s participation in the SERP) and who is entitled to a benefit under the Pension Plan shall be entitled to receive the greater of the Supplemental Pension determined under Section 4.2(a) or this Section 4.2(b). -------------------------------------------------------------------------------- Amendment to Ultramar Corporation SERP Page 2 of 8 5. The first sentence of clause (ii) of Section 4.2(e) is amended and restated, in its entirety, effective for any person who remains employed by Ultramar Diamond Shamrock Corporation on the date set forth above, as follows:   If there is a Change in Control, each Participant who remains employed by the Company (or any subsidiary or affiliate) on the Change in Control Date shall be (i) one hundred percent (100%) vested in his Supplemental Pension and (ii) paid a single lump sum payment in cash equal to the Actuarial Equivalent lump sum value of his Supplemental Pension, determined as of the date of the Change in Control using the SERP Interest Rate and SERP Mortality Table, in lieu of all other benefits under the SERP; provided that any amendment of the SERP made within the six-month period ending on the effective date of the Change in Control shall be ignored for purposes of computing the amount of the lump sum payment under this clause (ii) to the extent that the application of such amendment would cause the amount of the lump sum to be less than that computed without application of such amendment. 6. Section 4.4(a) is amended and restated, in its entirety, as follows: (b) Any benefit payable to a Participant or Spouse hereunder shall be paid by the Company. Notwithstanding the foregoing, such benefits shall instead be paid from the Trust, under such circumstances (including a Change in Control) as are specified under the terms of the Trust. To the extent that the Trust does not pay the benefits under the SERP to which any Participant (or Spouse) is entitled, the Company remains responsible to do so. Moreover, all assets of the Trust remain, at all times, subject to the claims of the Company’s creditors in the event of the Company’s insolvency, and no Participant (or any Spouse thereof) shall, at any time, have a prior claim to any Trust assets. 7. Section 4.5 is amended and restated, in its entirety, effective for any person who remains employed by Ultramar Diamond Shamrock Corporation on the date set forth above, as follows:   4.5 Additional Terms. A Participant shall, subject only to the provisions of Section 15, which shall govern in the event of any conflict, receive such additional terms (including, but not limited to, years of age and/or service for vesting and/or benefit accrual purposes under the SERP) as determined by the Committee, in its sole discretion. -------------------------------------------------------------------------------- Amendment to Ultramar Corporation SERP Page 3 of 8 8. A new Section 15 is added, effective for any person who remains employed by Ultramar Diamond Shamrock Corporation on the date set forth above, as follows: 15. Special Change in Control Provisions. (a) The provisions of this Section 15 shall apply with respect to each Participant in the group listed in subsection (b) hereof (each, hereafter, a “Covered Participant”) who, except as otherwise provided in this Section 15, remains employed by the Company (or any subsidiary or affiliate of the Corporation) (collectively, “UDS”) upon the occurrence of a Change in Control. The provisions of this Section 15 shall apply, notwithstanding any other provision of the SERP to the contrary. (b) The Covered Participants, identified by social security number, are as follows:   ###-##-#### ###-##-#### ###-##-#### (c) For purposes of this Section 15, the term “SERP Side Letter” means, with respect to any Covered Participant, that separate agreement between such person and the Company pertaining to such person’s participation in the SERP, as such agreement may be amended from time to time. (d) For purposes of this Section 15, and with respect to any Covered Participant, the term “Computation Period” means the calendar year in which there occurs a Change in Control, as well as each of the two immediately succeeding years. (e) For purposes of the following subsection (f) of this Section 15, “Average Annual Compensation” shall, with respect to any Covered Participant, and notwithstanding the terms of such Covered Participant’s SERP Side Letter, be determined as if (i) such person remains a UDS employee until the end of such person’s Computation Period, (ii) such person’s compensation for each of the three years during such Computation Period and otherwise taken into account, without regard to this subsection (e), in so determining such person’s Average Annual Compensation (inclusive of amounts taken into account in determining such person’s average bonus percentage) is equal to such person’s compensation (otherwise so taken into account in determining Average Annual Compensation, including the average bonus percentage) for the year immediately prior to the year in which the Change in Control occurs. -------------------------------------------------------------------------------- Amendment to Ultramar Corporation SERP Page 4 of 8 (f) Notwithstanding any provisions of the SERP (or of any particular Covered Participant’s SERP Side Letter) to the contrary, the amount of any lump sum otherwise payable to such person under the SERP on account of being employed by UDS upon the occurrence of a Change in Control shall be determined in the following steps, with the lump sum being the amount determined under the following clause (ii): (i) Determine the amount of the annual SERP benefit which would otherwise be immediately payable to such person, starting on the Change in Control Date, and determined as if such person terminated employment on the Change in Control Date and with such person’s Average Annual Compensation determined pursuant to the provisions of the foregoing subsection (e) of this Section 15, and after taking into account the other provisions of the SERP, as well as such person’s SERP Side Letter (other than any provision thereof relating to (A) the conversion of such annual SERP benefit into a lump sum amount or (B) the determination of such person’s Average Annual Compensation); provided, however, that in making such determination, in the event that such person is under age sixty-two (62) on the Change in Control Date, (A) the Pension Plan benefit and the Other Pension Benefits otherwise taken into account in such determination shall be the amount of such respective benefits otherwise payable to such person at age sixty-two (62), but with such benefit amounts determined as if such person terminated employment on the Change in Control Date, and (B) there shall be no reduction on account of early payment of the SERP benefit pursuant to the provisions of Section 4.2(c) (or otherwise). (ii) Determine the immediate present value, based upon such Covered Participant’s actual age on the Change in Control Date, of the annual benefit amount, calculated under the foregoing clause (i), which would otherwise be paid to such person starting on the Change in Control Date, with such present value being determined using the interest rate and mortality table set forth in Section 4.1(m)(i) and Section 4.1(n)(i), respectively (except to the extent that a larger lump sum would result from using the interest rate and mortality table set forth in Section 4.1(m)(ii) and Section 4.1(n)(ii), respectively, in which event the interest rate and mortality table set forth in Section 4.1(m)(ii) and Section 4.1(n)(ii), respectively, shall instead apply).) -------------------------------------------------------------------------------- Amendment to Ultramar Corporation SERP Page 5 of 8 (g) Attached to the SERP, as Exhibit A, is a separate schedule for each Covered Participant illustrating the manner, in accordance with the forgoing provisions of this Section 15 and the other provisions of the SERP (and the terms of such person’s SERP Side Letter, as such agreement may be modified pursuant to the foregoing provisions of this Section 15), in which the lump sum payment to such person with respect to the SERP would, in the event that such person remains employed by UDS upon the occurrence of a Change in Control, be calculated for such person, assuming that (I) the Change in Control Date occurs on December 31, 2000, (II) such lump sum distribution also occurs on that date and (III) such person remains employed by UDS on that date. In the event of a Change in Control occurring on December 31, 2000, the amount of the lump sum payable to any Covered Participant who remains employed by UDS on such date shall (assuming such lump sum is also paid on that same date) be the amount set forth with respect to such person in the relevant attached schedule. In the event that a Change in Control Date occurs on some other date, the methodology set out in such schedules shall be dispositive in resolving any issues which may arise in connection with determining the amount of the lump sum otherwise payable to any such Covered Participant who so remains employed by UDS upon the occurrence of such other Change in Control Date. (h) If a Covered Participant who receives a lump sum distribution on account of being employed by UDS on a Change in Control Date continues to be employed by UDS and thereafter becomes entitled to a subsequent distribution with respect to the SERP, the amount of such subsequent SERP benefit, expressed as an annual benefit, which annual benefit is the starting point in determining the amount of such subsequent distribution, shall be equal to the excess of: (i) the amount of the annual SERP benefit, otherwise payable at that time (or, at age sixty-two (62), in the event that such person is then under age sixty-two (62), determined under the SERP and after taking into account the provisions of such person’s SERP Side Letter, over (ii) the amount of the annual SERP benefit which was taken into account under clause (i) of the subsection (f) of this Section 15 as the starting point in determining the amount of such prior lump sum distribution.   In all other respects, the amount of any subsequent distribution shall be determined in accordance with such rules of uniform application as may be established by the Compensation Committee. -------------------------------------------------------------------------------- Amendment to Ultramar Corporation SERP Page 6 of 8 (i) Notwithstanding any other provision of the SERP (or of the Covered Participant’s SERP Side Letter) to the contrary, in the event of such person’s “involuntary termination, other than for Cause” (as those terms are defined under such person’s employment agreement with the Company), in anticipation of a Change in Control: (i) the foregoing provisions of this Section 15, and all other provisions of the SERP (and of such person’s SERP Side Letter) shall apply to such person to the same extent as if a Change in Control had, solely with respect to such person, occurred on the date immediately preceding the date on which such person is so terminated from employment, and (ii) such Participant’s benefit under the Pension Plan, for purposes of determining the offset under Section 4.2(a), Section 4.2(b) and such person’s SERP Side Letter for such person’s Pension Plan benefit, to the extent otherwise applicable, shall be computed by including the additional years of age and service credit which were (or will be) taken into account, pursuant to the provisions of Section 5.5(i)(a)(3) of such Participant’s employment agreement with the Company, in computing the amount of the lump sum payment made (or to be made) to such Participant in lieu of an actual increase in such Participant’s benefit under the Pension Plan. (j) If that Covered Participant whose social security number is ###-##-#### remains employed with UDS on the Change in Control Date, determined without regard to the foregoing subsection (e), such person shall receive a lump sum payment of $500,000 upon the earlier of: (i) such person’s “involuntary termination, other than for Cause,” as those terms are defined under the employment agreement between such person and the Company; provided, however, that an “involuntary termination” shall not be deemed to have occurred for purposes of this clause (i) in the event that such person voluntarily terminates employment on account of a significant reduction, occurring not later than the Change in Control Date, in such person’s duties or the addition, occurring not later than the Change in Control Date, of duties which, in either case, are materially inconsistent with such person’s then title or position, such that no amount shall be paid pursuant to this subsection (j) to such person; and further, provided, however, that an “involuntary termination” shall be deemed to have occurred for purposes of this clause (i) in the event that such person voluntarily terminates employment on account of a significant reduction, occurring subsequent to the Change in Control Date, in such person’s duties or the addition, occurring subsequent to the Change in Control Date, of duties which, in either case, are materially inconsistent with such person’s title or position as in effect on the Change in Control Date, such that an amount shall be paid pursuant to this subsection (j) to such person, or -------------------------------------------------------------------------------- Amendment to Ultramar Corporation SERP Page 7 of 8 (ii) twelve months following the Change in Control Date, provided such person is still employed by UDS on such date.   No amount shall be payable pursuant to this subsection (j) in the event that such Covered Participant terminates employment prior to the date set forth in the foregoing clause (ii) for any reason not described in the foregoing clause (i).   Any amount otherwise payable pursuant to this subsection (j) to such Covered Participant (i) shall not be reduced by any amounts previously paid to such person pursuant to any other provision of the SERP and (ii) shall be disregarded in determining the amount of any future benefits otherwise payable to such person pursuant to any other provision of the SERP. (k) Notwithstanding any other provision of the SERP to the contrary, to the extent that any subsequent amendment to this Section 15 would adversely affect the determination of any particular Covered Participant’s SERP benefit, such amendment shall be effective with respect to such person only if such person consents, in writing, to the application of such amendment, other than an amendment to subsection (h) of this Section 15, as to which the consent of Covered Participants shall not be required. -------------------------------------------------------------------------------- Amendment to Ultramar Corporation SERP Page 8 of 8 ULTRAMAR DIAMOND SHAMROCK CORPORATION By: /s/ Timothy J. Fretthold —————————————— Timothy J. Fretthold Executive Vice President Accepted and agreed to with respect to the calculation of their benefits under the Ultramar Corporation Supplemental Executive Retirement Plan By: /s/ Jean Gaulin —————————————— Jean Gaulin By: /s/ Christopher Havens —————————————— Christopher Havens
EX-10 3 amend9.htm AMENDMENT 9 AMENDMENT NO. 9 TO LOAN AND SECURITY AGREEMENT -------------------------------------------------------------------------------- J.B. POINDEXTER & CO., INC. 1100 Louisiana Street Suite 5400 Houston, Texas 77002 As of March 27, 2001 Congress Financial Corporation 1133 Avenue of the Americas New York, New York 10036 Ladies and Gentlemen:          Congress Financial Corporation ("Lender"), J.B. Poindexter & Co., Inc. ("Borrower"), EFP Corporation ("EFP"), Lowy Group, Inc. ("Lowy"), Magnetic Instruments Corp. ("MIC"), Morgan Trailer Mfg. Co. ("Morgan"), Truck Accessories Group, Inc. ("TAG"), Raider Industries Inc. ("Raider"), KWS Manufacturing Company, Inc. ("KWS"), Universal Brixius, Inc. ("Brixius"), Morgan Trailer Financial Corporation ("MTFC") and Morgan Trailer Financial Management, L. P. ("MTF Management", and together with EFP, Lowy, MIC, Morgan, TAG, Raider, KWS, Brixius and MTFC, each individually sometimes referred to herein as a "Guarantor" and, collectively, "Guarantors") have entered into certain financing arrangements as set forth in the Loan and Security Agreement, dated as of June 28, 1996, by and among Lender, Borrower and Guarantors, as amended by Amendment No. 1 to Loan and Security Agreement, dated May 13, 1998, Amendment No. 2 to Loan and Security Agreement, dated as of June 30, 1998, Amendment No. 3 to Loan and Security Agreement, dated as of June 24, 1999, Amendment No. 4 to Loan and Security Agreement, dated as of February 25, 2000, Amendment No. 5 to Loan and Security Agreement, dated as of March 8, 2000, Amendment No. 6 to Loan and Security Agreement, dated as of March 17, 2000, Amendment No. 7 to Loan and Security Agreement, dated as of September 29, 2000, Amendment No. 8 to Loan and Security Agreement, dated as of October 31, 2000, and as further amended by this Amendment No. 9 to the Loan and Security Agreement (this "Amendment"), dated as of the date hereof (and as heretofore amended or may hereafter be further amended, modified, supplemented, extended, renewed, restated or replaced, the "Loan Agreement"), together with all other agreements, documents, supplements and instruments now or at any time hereafter executed and/or delivered by any other person, with, to or in favor of Lender in connection therewith (all of the foregoing, together with this Amendment and the other agreements and instruments delivered hereunder, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, collectively, the "Financing Agreements").         Borrower and Guarantors have requested that Lender enter into certain amendments to the Loan Agreement. Lender is willing to agree to the foregoing, subject to the terms and conditions contained herein.         In consideration of the foregoing, the mutual agreements and covenants contained in this Amendment, and other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, Borrower, Guarantors and Lender agree as follows:         1. Definitions.           (a) Amendment to Definition.             (i) KWS Supplemental Revolving Loan Termination Date. Section 1(a)(xix) of Amendment No. 5 to Loan Agreement is hereby deleted in its entirety and replaced with the following:               "(xix) KWS Supplemental Revolving Loan Termination Date shall mean the earlier to occur of (A) March 1, 2002 or (B) Lender's determination that as of the end of the fiscal quarter of KWS set forth below, the Fixed Charge Coverage Ratio of KWS shall be less than the ratio set forth below next to such fiscal quarter: Fiscal Quarter Ending Fixed Charge Coverage Ratio --------------------- --------------------------- March 31, 2001 ........ .05:1.0 June 30, 2001 ......... .30:1.0 September 30, 2001 .... .78:1.0 December 31, 2001 and . 1.0:1.0 as of the end of all fiscal quarters thereafter          (b) Interpretation. For purposes of this Amendment, unless otherwise defined herein, all capitalized terms used herein, shall have the respective meanings ascribed to them in the Loan Agreement.         2. Waiver.         (a) Notwithstanding anything to the contrary contained in Section 5 of the Loan Agreement, subject to the terms and conditions contained herein, Lender waives the automatic payment in full of the KWS Supplemental Revolving Loans through the date hereof as a result of the occurrence of the KWS Supplemental Revolving Loan Termination Date solely by reason of the failure of KWS to maintain a Fixed Charge Coverage Ratio of .5:1.0 as of the fiscal quarter ended December 31, 2000.         (b) Lender has not waived and is not by this Amendment waiving, and has no intention of waiving, any other failure to comply with the Fixed Charge Coverage Ratio required to be maintained as set forth in the definition of the KWS Supplemental Revolving Loan Termination Date as amended hereby, which may have occurred before the date hereof, or may be continuing on the date hereof or that may occur after the date hereof, other than the failure to maintain a Fixed Charge Coverage Ratio of .5:1.0 as of the fiscal quarter ended December 31, 2000. Lender reserves the right, in its discretion, to exercise any or all of its rights and remedies arising under the Financing Agreements, applicable law or otherwise as a result of any other occurrence of the KWS Supplemental Revolving Loan Termination Date that may have occurred before the date hereof, or is continuing on the date hereof, or that may occur after the date hereof for non-compliance with the Fixed Charge Coverage Ratio or otherwise, other than the failure to maintain a Fixed Charge Coverage Ratio of .5:1.0 as of the fiscal quarter ended December 31, 2000.         3. Representations, Warranties and Covenants. In addition to the continuing representations, warranties and covenants heretofore or hereafter made by Borrower and Guarantors to Lender pursuant to the other Financing Agreements, Borrower and Guarantors hereby represent, warrant and covenant with and to Lender as follows (which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof and shall be incorporated into and made a part of the Financing Agreements):         (a) This Amendment has been duly authorized, executed and delivered by Borrower and each Guarantor, and the agreements and obligations of Borrower and each Guarantor contained herein constitute legal, valid and binding obligations of Borrower and each Guarantor enforceable against Borrower and each Guarantor in accordance with their respective terms.         (b) Neither the execution and delivery of this Amendment, nor the modifications to the Financing Agreements contemplated by this Amendment shall violate any applicable law or regulation, or any order or decree of any court or any governmental instrumentality in any respect or does or shall conflict with or result in the breach of, or constitute a default in any respect under, any indenture, including, without limitation, the Senior Note Indenture, or any material mortgage, deed of trust, security agreement, agreement or instrument to which Borrower and each Guarantor is a party or may be bound, or violate any provision of the organizational documents of Borrower and each Guarantor.         (c) All of the representations and warranties set forth in the Loan Agreement as amended hereby, and the other Financing Agreements, are true and correct in all material respects, except to the extent any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct as of such date.         (d) After giving effect to the amendments to the Loan Agreement provided in this Amendment, no Event of Default shall exist or have occurred and no event, act or condition shall have occurred or exist which with notice or passage of time or both would constitute an Event of Default.         4. Amendment Fee. In consideration of the foregoing, Borrower agrees to pay Congress a fee for entering into this Amendment in the amount of $5,000, which shall be fully earned on the date hereof and which shall be due and payable on the date of execution hereof. Such fee may be charged by Congress to any loan account of Borrower maintained by Congress under the Financing Agreements.         5. Condition Precedent. The effectiveness of this Amendment and the agreement of Lender to the waiver, modifications and amendments set forth herein are subject to the receipt by Lender of an executed original (or facsimile copy) or executed original (or facsimile copy) counterparts of this Amendment, as the case may be, duly authorized, executed and delivered by Borrower and Guarantors and receipt by Lender of the fee referred to in Section 4 above.         6. Effect of this Amendment. Except for the specific waiver and amendments expressly set forth herein, no other waiver, changes or modifications to the Financing Agreements, and no waivers of any provisions thereof are intended or implied, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent of conflict between the terms of this Amendment and the other Financing Agreements, the terms of this Amendment shall control. The Loan Agreement and this Amendment shall be read and construed as one agreement.          7. Governing Law. The rights and obligations hereunder of each of the parties hereto shall be governed by and interpreted and determined in accordance with the internal laws of the State of New York (without giving effect to principles of conflicts of laws).          8. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.         9. Counterparts. This Amendment may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto.         [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]         Please sign in the space provided below and return a counterpart of this Amendment, whereupon this Amendment, as so agreed to and accepted by Lender, shall become a binding agreement among Borrower, Guarantors and Lender.     Very truly yours,                           J.B. POINDEXTER & CO., INC.                           By:_______________________                           Title:______________________ AGREED AND ACCEPTED: CONGRESS FINANCIAL CORPORATION By:_________________________ Title:______________________ ACKNOWLEDGED AND CONSENTED TO: EFP CORPORATION By:___________________________ Title:________________________ LOWY GROUP, INC. By:___________________________ Title:________________________ [SIGNATURES CONTINUE ON NEXT PAGE] [SIGNATURES CONTINUED FROM PREVIOUS PAGE] MAGNETIC INSTRUMENTS CORP. By:______________________ Title:____________________ MORGAN TRAILER MFG. CO. By:_______________________ Title:____________________ TRUCK ACCESSORIES GROUP, INC. By:_______________________ Title:_____________________ RAIDER INDUSTRIES INC. By:_______________________ Title:____________________ KWS MANUFACTURING COMPANY, INC. By:________________________ Title:_____________________ UNIVERSAL BRIXIUS, INC. By:________________________ Title:_____________________ [SIGNATURES CONTINUE ON NEXT PAGE] [SIGNATURES CONTINUED FROM PREVIOUS PAGE] MORGAN TRAILER FINANCIAL CORPORATION By:______________________ Title:____________________ MORGAN TRAILER FINANCIAL MANAGEMENT, L.P. By: MORGAN TRAILER MFG. CO., as General Partner By:__________________________________ Title:_________________________________
EXHIBIT 10(d)      FIRST NATIONAL BANK OF OMAHA SENIOR MANAGEMENT STOCK OPTION PLAN SECTION 1. ESTABLISHMENT AND PURPOSE      1.1 Establishment. As of the Effective Date First National Bank of Omaha ("Company") hereby establishes, for the benefit of certain Participants, a plan which shall be known as the First National Bank of Omaha Senior Management Stock Option Plan (the "Plan"). The Plan is intended to be an individual account plan, which is intended to be exempt from Parts 2 through 4 of Title I of ERISA. The Plan is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. All provisions of the Plan shall be construed accordingly.      1.2 Purpose. The future success of the Company and its Affiliates, who may adopt the Plan, depends on its ability to attract, retain and motivate executives and other key employees. This Plan provides a long-term incentive for these employees to increase the value of the Company's stock.      To help the Company and its Affiliates attract, retain and motivate executives and other key employees, the Company has established the Plan. Under the Plan, the Company or its Affiliates who adopt the Plan (the "Participating Company") awards Participants with Options. The Plan is designed to facilitate Participants' acquisitions of retirement and survivor benefits. SECTION 2. REFERENCES, CONSTRUCTION AND DEFINITIONS      Unless otherwise indicated, all references to sections and subsections shall be to this Plan document. The Plan and all rights thereunder shall be construed and enforced in accordance with ERISA and, to the extent that state law is applicable, the laws of the State of Nebraska. The titles and captions preceding sections and subsections of this Plan document have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provision. When the context so requires, the singular includes the plural. Whenever used herein and capitalized, the following terms shall have the respective meanings indicated unless the context plainly requires otherwise.      2.1 Account means, with respect to a Participant, the account maintained showing a Participant's individual interest under this Plan.      2.2 Administrative Committee means the Retirement Plan Administrative Committee and is the entity responsible for administering the Plan as provided for in Section 7 of this Plan      2.3 Affiliate means any company affiliated with the Company under applicable law and any other company designated as an Affiliate by the Company for purposes of this Plan.      2.4 Beneficiary means the person, including natural person or persons, trusts for the benefit of such person or persons, or charitable institutions under Code Section 501(c)(3), designated by a Participant pursuant to Section 8 to become the Optionholder of specified Options owned by the Participant upon the death of such Participant.      2.5 Business Day means any day on which First National Bank of Omaha and the New York Stock Exchange are open for business.      2.6 Code means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they are in effect as of the effective date and as they may from time to time be amended or renumbered.      2.7 Company means First National Bank of Omaha and any successor thereto.      2.8 Company Stock means shares of common stock, par value $5.00 per share, issued by First National of Nebraska, Inc. or any successor securities.      2.9 Effective Date means December 31, 2000.      2.10 Employee means an individual who is a common law employee of the Participating Company.      2.11 ERISA means the Employee Retirement Income Security Act of 1974, as now in effect or as hereafter amended. All citations to sections of ERISA are to such sections as they are in effect as of the effective date and as they may from time to time be amended or renumbered.      2.12 Executive Committee means the Executive Committee of the Board of Directors of the Company.      2.13 Exercise means, with respect to an Option, to buy the Underlying Shares by the filing of an Exercise Election Form and by tendering the Exercise Price in accordance with procedures set by the Administrative Committee.      2.14 Exercise Date means the date the Optionholder tenders a valid Exercise Election which is approved by the Administrative Committee.      2.15 Exercise Election means the filing by an Optionholder of a written Exercise Election Form in substantially the same form as Exhibit E attached hereto.      2.16 Exercise Period means, with respect to an Option, the period, as set forth in the Option Certificate, beginning with the Grant Date of the Option and ending 15 years following a Participant's Normal Retirement during which the Optionholder can exercise the Option, to the extent Vested and subject to provisions set forth in Section 5. With respect to a terminated Participant, the Exercise Period shall end 15 years following the date on which the terminated Participant would have reached Normal Retirement.      2.17 Exercise Price means, with respect to an Option the greater of (i) the Indexed Exercise Price and (ii) the Minimum Exercise Price.      2.18 Forfeitures means, with respect to a Participant who incurs a Termination of Employment, the amount of the Participant's Options that is not vested and as a result forfeited by the Participant. Such Forfeitures shall become the property of the Company.      2.19 Grant Date means the date on which an Option under this Plan is granted.      2.20 Indexed Exercise Price means, with respect to an Option as of any date, 50% of the Market Value of the Underlying Shares at Grant Date adjusted thereafter at a rate equal to the Underlying Share Return of the Option.      2.21 Intrinsic Value means, with respect to an Option as of any date, the excess, if any, of the Market Value of the Underlying Shares of the Option over the Option's Exercise Price.      2.22 Market Value shall be determined by the Executive Committee. If shares of Company Stock are traded in the over-the-counter market, the Executive Committee shall rely on the average sale price for the last 30 trading days occurring prior to the valuation date, as reported by a recognized market maker (currently Kirkpatrick Pettis); provided that if less than 400 shares of Company Stock are traded within such period, the period shall be extended to include such number of days prior to the valuation date so that a total of at least 400 shares have been traded. If shares of Company Stock are traded on a national exchange, "Market Value" shall be the average closing sale price for the 30 trading days occurring prior to the valuation date. If the sale price is not available for shares of Company Stock as described above, "Market Value" shall be the price reasonably determined by the Executive Committee in the good faith exercise of its discretion.      2.23 Minimum Exercise Price means not less than 25% of the Market Value of the Underlying Shares at Grant Date.      2.24 Normal Retirement means the earlier of the date upon which the Participant attains age 65 or the date of the Participant's actual retirement from the Company or its subsidiaries in accordance with the Company policies which define Normal Retirement or any contractually determined normal retirement date.      2.25 OPT Plan means the First National Bank of Omaha Senior Management Option Plan as it may be amended from time to time.      2.26 Option means the rights the Company grants to a Participant on the Option's Grant Date to purchase specified Underlying Shares at a specified price before the expiration of the Exercise Period. Each Option grant is to be evidenced by an Option Certificate. Bonus Deferral Options are the Options granted to Participants who defer a portion of their Bonus Payment Awards. The Bonus Payment Awards are the portion of the Company's long-term incentive compensation paid to executives, including Participants, based on the financial performance of the Company. Performance Award Options are the Options granted by the Company to certain Participants as determined by the Executive Committee as set forth in 3.2(a).      2.27 Option Account means the account maintained with respect to each Option pursuant to Section 6.1 to keep track of the Underlying Shares of the Option.      2.28 Option Certificate means the certificate issued by the Participating Company to a Participant to evidence the grant of an Option, in substantially the form attached hereto as Exhibit A. The Option Certificate shall provide the information set forth in Section 3.2(c) for each and every Option granted to a Participant.      2.29 Option Expiration Time means the date, as set forth in the Option Certificate, beyond which no Exercise shall be honored.      2.30 Optionholder means, with respect to an Option, the Person who is the beneficial owner of the Option and has the right to exercise the Option.      2.31 Participant means, as of any date, any Employee who has received one or more Options and at least one of such Options remains exercisable, including Employees who are retired on or after the Effective Date of this Plan and Employees who have assigned their shares under Section 3.3(b).      2.32 Participating Company means the Company or an Affiliate which, by action of its board of directors or equivalent governing body and with the written consent of the Company, has adopted the Plan; provided that the Company may, subject to the foregoing proviso, waive the requirement that such board of directors or equivalent governing body effect such adoption. By its adoption of or participation in the Plan, a Participating Company shall be deemed to appoint the Company its exclusive agent to exercise on its behalf all of the power and authority conferred by the Plan upon the Company and accept the delegation to the Executive Committee of all the power and authority conferred upon it by the Plan. The authority of the Company to act as such agent shall continue until the Plan is terminated as to the Participating Company. The term "Participating Company" shall be construed as if the Plan were solely the Plan of such Participating Company, unless the context plainly requires otherwise.      2.33 Plan means this First National Bank of Omaha Senior Management Stock Option Plan as it may be amended from time to time hereafter.      2.34 Plan Year means the calendar year; provided, however, that the first Plan Year shall be the period commencing on the Effective Date of the Plan and ending on December 31 of the year of the Effective Date of the Plan.      2.35 Retirement means a Participant's Normal Retirement as defined in Section 2.24. The term "Retire" means the act of taking Retirement.      2.36 Termination of Employment means a termination of employment with the Participating Company as determined by the Executive Committee in accordance with reasonable standards and policies adopted by the Executive Committee by reason of resignation, discharge, death, disability or any other termination.      2.37 Underlying Shares means, with respect to an Option, the shares of Company Stock on which the Option is granted.      2.38 Underlying Share Return means the rate of growth or decline of the Market Value of the Underlying Shares. The Underlying Share Return shall include, without limitation, growth or decline of the Market Value attributable to unrealized appreciation or depreciation and additional Underlying Shares obtained through the reinvestment of dividends or other distributions attributable to the Underlying Shares.      2.39 Vested means, with respect to an Option or a portion thereof, that the Participant has acquired a nonforfeitable right to exercise the Option or the vested portion thereof subject to Exercise provisions in Section 5. The Vesting period will be outlined in the Option Certificate delivered to the Participant. SECTION 3. ELIGIBILITY, PARTICIPATION AND OPTION GRANTS      3.1 Eligibility. The Executive Committee shall designate those Employees eligible to become a Participant in the Plan; provided, however, unless the Company is exempt from ERISA, each such Employee designated by the Executive Committee shall be a member of the Participating Company's "select group of management or highly compensated employees", as defined in Sections 201(2), 301(a)(3) and 401(a) of ERISA, as amended.      3.2 Grants.      (a)  Performance Award Options. Each Plan Year, the Executive Committee shall establish a method to allocate the Incentive Pool for that Plan Year to Participants. The Incentive Pool is the award made to a select group of Employees whose individual contributions have materially assisted the Company in the achievement of its financial and corporate goals. A Participant who is not employed as of December 31 of the Plan Year shall not receive an allocation of the Incentive Pool for that Plan Year, unless the Executive Committee determines otherwise in its sole and absolute discretion; provided, however, that no portion of the Incentive Pool may be used for Options under this Plan unless the Participant is employed as of such December 31. Eligible Participants may elect to allocate all or a portion of his share of the Incentive Pool under this Plan and the remaining portion, if any, under the OPT Plan by filing a Plan Election with the Administrative Committee (in substantially the form attached hereto as Exhibit D). A separate account shall be maintained in this Plan for each Participant which shows his portion of the Incentive Pool allocated under this Plan. Such account shall be the Performance Award Account. As of each December 31, the Executive Committee shall allocate the Incentive Pool in conformity with the established methodology to each eligible Participant. The Company shall grant Performance Award Options under this Plan such that the Intrinsic Value of such Options at the Grant Date will be equal to the dollar value of the Performance Award Account of a Participant. The Grant Date of a Performance Award Option under this Plan shall be the date upon which the Incentive Pool is allocated to a Participant as determined by the Executive Committee.      (b)  Bonus Deferral Options. The Executive Committee shall determine for each Participant Bonus Awards. A Bonus Award is a payment of cash compensation determined as of the last day of the Plan Year and paid in the following Plan Year as incentive pay to the Participant under compensation plans approved by the Executive Committee. Such Bonus Award shall be payable not later than January 31 of the year following the Plan Year in which it was earned. Each eligible Participant who receives a Bonus Award shall be granted the opportunity to make an election prior to the end of the Plan Year in which the Bonus Award is determined to exchange all or a portion of his Bonus Award for a grant of Options under this Plan. Such elections shall be made by filing an Election Form with the Administrative Committee (in substantially the form attached hereto as Exhibit C.)      (c)  Rollover Options. Prior to the Effective Date, Participants shall have the opportunity to elect Options based on amounts transferred to this Plan from the First National of Nebraska, Inc. Senior Management Long Term Incentive Plan. Such election shall be made by filing a Rollover Election Form with the Administrative Committee (in substantially the form attached hereto as Exhibit F).      (d)  Option Certificates. The Administrative Committee shall deliver an Option Certificate (in substantially the form attached hereto as Exhibit A) to each Participant who receives a grant of Options pursuant to paragraphs (a), (b), (c) and (e) of this Section 3.2. The Option Certificate shall specify the Options Grant Date, the number of Options granted, the vesting schedule (if any) applicable to such Options and the expiration date of such Options. The Option Certificate shall also specify any restrictions upon the exercise of any vested Options. Additionally, the Option Certificate may specify any additional terms not set forth in this Plan applicable to the Options granted. The Administrative Committee shall be responsible for assuring the accuracy of information set forth on the Option Certificate.      (e)  Board Approval. Each grant of Options elected or determined under this Plan shall be submitted to the Board of Directors of the Company for approval or disapproval prior to award of the grant. A member of the Board of Directors shall not vote with respect to any grant of Options made to him or her under this Plan.      3.3 Nonalienation.      (a)  Subject to subsection (b) of this Section 3.3, no Option, interest, expectancy, benefit, payment, claim or right of any Participant or Optionholder under the Plan shall be (a) subject in any manner to any claims of any creditor of the Participant or Optionholder, (b) subject to the debts, contracts, liabilities or torts of the Participant or Optionholder or (c) subject to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind. If any Person shall attempt to take any action contrary to this Section, such action shall be null and void and of no effect, and the Administrative Committee and the Participating Company shall disregard such action and shall not in any manner be bound thereby and shall suffer no liability on account of its disregard thereof. If the Participant or Optionholder, or any other beneficiary hereunder shall become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right hereunder, then such right or benefit shall, in the discretion of the Administrative Committee, cease and terminate, and in such event, the Administrative Committee may hold or apply the same or any part thereof for the benefit of the Participant or Optionholder or the spouse, children, or other dependents of the Participant or Optionholder, or any of them, in such manner and in such amounts and proportions as the Administrative Committee may deem proper.      (b) Notwithstanding subsection (a) of this Section 3.3, a Participant may at any time prior to death assign an Option to the Participant's spouse, children or a trust for the benefit of the Participant, the Participant's spouse or children. The Participant may also assign an Option to a tax-exempt entity as defined in Code Section 501(c)(3). Notwithstanding the foregoing, such an assignment shall be permitted only if (i) the Participant is 100% Vested in the Option and (ii) the Participant receives no consideration for the assignment. Any such assignment shall be evidenced by an appropriate written document executed by the Participant and a copy delivered to the Administrative Committee in advance of the effective date of the assignment. In the event of such an assignment, the assignee shall become the Optionholder of the Option and shall be entitled to all the rights of the Participant with respect to the assigned Option (except that the assignee may not make an assignment under this Section 3.3(b)), and such Option shall continue to be subject to all of the terms, conditions and restrictions applicable to the Option, as set forth in the Plan; provided, however, that the Participant shall remain a Participant in this Plan as long as at least one share remains exercisable. If an assignment is made under this Section 3.3(b), the assignee is subject to Section 3.3(a).      (c) Neither a Participant nor an Optionholder of a Participant may assign, sell, pledge or otherwise transfer an Option within six months of the Grant Date of the Option or assign, sell, pledge or otherwise transfer any shares of Company Stock acquired upon the exercise of an Option granted under this Plan within six months of the Grant Date of the Option. SECTION 4. VESTING OF OPTIONS      4.1 Performance Award Options. For each Performance Award Option granted after the Effective Date of the Plan, a Participant will be vested in his Performance Award Option as follows: A Participant shall become 35% vested on the December 31st following the Plan Year in which the Performance Award Option was granted. An additional 10% vesting will be awarded on each of the five December 31st thereafter, and the Participant will be 100% vested in the Performance Award Option on the seventh December 31st following the grant of the Performance Award Option. A Participant must be employed by the Company or a Participating Company on the last day of such Plan Year to receive a vesting increment for that Plan Year. Notwithstanding the above, a Participant will be 100% vested in his Performance Award Option if he terminates employment after attaining age 60 and completing five years of service. A year of service is defined as a calendar year of service with the Company or a Participating Company where the Participant is employed on the last day of the Plan Year. A Participant will be 100% Vested in his Performance Award Option if, while employed by the Company or a Participating Company, he attains age 65, dies or becomes Totally and Permanently Disabled, regardless of his years of service. A Participant shall be Totally and Permanently Disabled for purposes of this Plan if, in the sole and absolute discretion of the Administrative Committee, the Participant is unable to perform his or her usual and customary employment with the Company or a Participating Company as a result of a physical or mental condition of the Participant due to injury or illness.      4.2 Rollover Options. For Rollover Options granted based on amounts transferred to this Plan under Section 3.2(c), the Options will be vested in accordance with the vesting schedule in effect under the First National of Nebraska, Inc. Senior Management Long Term Incentive Plan and shall be set forth on Exhibit F.      4.3 Bonus Deferral Options. Bonus Deferral Options shall be 100% vested immediately on the Grant Date. SECTION 5. EXERCISE OF OPTIONS      5.1 Exercisability. Subject to restrictions in this Section and to vesting requirements in Section 5 of this Plan, on any Business Day, the Optionholder may file an Exercise Election (substantially in the form of Exhibit E) with the Administrative Committee to exercise an Option.   (a) A Participant who is currently employed by the Company or a Participating Company or the Optionholder of a Participant currently employed by the Company or a Participating Company may   Exercise up to 10% of his Vested Performance Award Options during any Plan Year except that no Exercise of Performance Award Options shall be permitted if, as of the Exercise Date, the Intrinsic Value of the Participant's Performance Award Option Exercises to date, calculated from the Effective Date of this Plan, equals or exceeds 20% of the total Intrinsic Value of all the Participant's Performance Award Option Accounts under the Plan. For purposes of this subsection 5.1(a) of the Plan, amounts held in this Plan shall be combined with amounts, if any, in the Participant's account in the OPT Plan.           (b)   A Participant who terminates service before Retirement or the Optionholder of the terminated Participant shall be entitled to Exercise his Vested Performance Award Options, subject to Section 6.1(a), during the Exercise Period.           (c)   A Participant who Retires or the Optionholder of such Retired Participant shall be entitled to exercise his Performance Award Options during the Exercise Period.           (d)   A Participant may Exercise Bonus Deferral Options on any Business Day during the Exercise Period, subject to procedures and timing set forth in Section 6.3 of this Plan. In no event shall an Option be eligible for Exercise in a manner not permitted by the Option Certificate.      5.2 Exercise Price. The Exercise Price of the Options granted under Section 3.2 shall be noted on the Option Certificate. The initial Exercise Price will be 50% of the Market Value of the Underlying Shares at Grant Date adjusted thereafter at a rate equal to the Underlying Share Return of the Option. Notwithstanding the foregoing, the Exercise Price shall never be less than 25% of the Market Value of the Underlying Shares at Grant Date.      5.3 Procedures and Timing. To Exercise an Option, the Participant or the Optionholder of such Participant must file with the Administrative Committee a properly completed Exercise Election duly executed by the Optionholder. Within seven (7) Business Days of receipt of such Exercise Election, the Participating Company shall discharge the Participating Company's obligations with respect to the Option upon payment of the Exercise Price. If the Exercise Election form is not properly completed, as determined by the Administrative Committee, it shall be promptly returned to the Participant or Optionholder with written notice of deficiencies.      5.4 Withholding. Whenever payment is made pursuant to the exercise of an Option, all tax withholding shall be made either by means of tax withholding or payment from the Optionholder to the Participating Company of an amount equal to the withholding taxes due to be paid on behalf of the Participant by the Participating Company. The Participating Company may also withhold such reasonable fees as the Administrative Committee may establish from time to time.      5.5 Partial Exercises. The Optionholder may elect to Exercise less than all of his Vested Options in accordance with Section 5.1.      5.6 Payments to Beneficiary. If a Participant or Optionholder entitled to a benefit under this Plan dies before payment of the benefit is made, then payment of the benefit shall be made to such Participant's or Optionholder's Beneficiary as designated pursuant to Section 8.1 of this Plan. SECTION 6. ACCOUNTS      6.1 Option Accounts. The Administrative Committee shall keep or cause to be kept a separate Participant account for each Participant or Optionholder and a separate Option Account with respect to each Option. As of each Business Day, each Option Account shall be adjusted to reflect any transfers of shares, exercises, forfeitures, reinvestments, or other Option activity. The Option Account shall reflect the current Market Value of the Option Account. Such Accounts shall be maintained under procedures adopted by the Administrative Committee. SECTION 7. ADMINISTRATION OF THE PLAN      7.1 Powers and Duties of the Executive Committee. The Executive Committee shall have general responsibility for the administration of the Plan (including but not limited to complying with reporting and disclosure requirements, and establishing and maintaining Plan records). In the exercise of its sole and absolute discretion, the Executive Committee shall interpret the Plan's provisions and determine the eligibility of individuals for benefits. The Executive Committee may delegate to the Administrative Committee those duties and responsibilities it determines to be best executed by the Administrative Committee.      7.2 Agents. The Executive Committee or Administrative Committee may engage such legal counsel, certified public accountants and other advisers and service providers, who may be advisers or service providers for the Participating Company or an Affiliate, and make use of such agents and clerical or other personnel, as it shall require or may deem advisable for purposes of the Plan. The Executive Committee or Administrative Committee may rely upon the written opinion of any legal counsel or accountants engaged by the Executive Committee or Administrative Committee, and may delegate to any such agent or to any sub-committee or member of the Executive Committee or Administrative Committee its authority to perform any act hereunder, including, without limitation, those matters involving the exercise of discretion, provided that such delegation shall be subject to revocation at any time at the discretion of the Executive Committee or Administrative Committee.      7.3 Structure of Administrative Committee. No member of the Administrative Committee shall be entitled to act on or decide any matter relating solely to such member or any of such member's rights or benefits under the Plan. In the event the Administrative Committee is unable to act in any matter by reason of the foregoing restriction, the Executive Committee shall act on such matter.      7.4 Adoption of Procedures by Administrative Committee. The Administrative Committee shall establish its own procedures, adopt rules for efficient operation and the time and place for its meetings, and provide for the keeping of minutes of all meetings.      7.5 Instructions for Payments. All requests of or directions to the Participating Company for payment or disbursement shall be signed by a member of the Administrative Committee or such other person or persons as the Administrative Committee may from time to time designate in writing. This person shall cause to be kept full and accurate accounts of payments and disbursements under the Plan.      7.6 Claims for Benefits. All claims for benefits under the Plan shall be submitted in writing to the Administrative Committee. Within a reasonable period of time the Administrative Committee shall decide the claim by majority vote in the exercise of its sole and absolute discretion. Written notice of the decision on each such claim shall be furnished within 90 days after receipt of the claim; provided that, if special circumstances require an extension of time for processing the claim, an additional 90 days from the end of the initial period shall be allowed for processing the claim, in which event the claimant shall be furnished with a written notice of the extension prior to the termination of the initial 90-day period indicating the special circumstance requiring an extension. If the claim is wholly or partially denied, such written notice shall set forth an explanation of the specific findings and conclusions on which such denial is based. A claimant may review all pertinent documents and may request a review by the Administrative Committee of such a decision denying the claim. Such a request shall be made in writing and filed with the Administrative Committee within 60 days after delivery to said claimant of written notice of said decision. Such written request for review shall contain all additional information which the claimant wishes the Administrative Committee to consider. The Administrative Committee may hold any hearing or conduct any independent investigation which it deems necessary to render its decision, and the decision on review shall be made as soon as possible after the Administrative Committee's receipt of the request for review. Written notice of the decision on review shall be furnished to the claimant within 60 days after receipt by the Administrative Committee of a request for review, unless special circumstances require an extension of time for processing, in which event an additional 60 days shall be allowed for review and the claimant shall be so notified in writing. Written notice of the decision on review shall include specific reasons for such decision. For all purposes under the Plan, such decisions on claims (where no review is requested) and decisions on review (where review is requested) shall be final, binding and conclusive on all parties.      7.7 Hold Harmless. To the maximum extent permitted by law, no member of the Administrative Committee shall be personally liable by reason of any contract or other instrument executed by such member or on such member's behalf in such member's capacity as a member of the Executive Committee or Administrative Committee nor for any mistake of judgment made in good faith, and the Participating Company shall indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums of which are paid from the Company's own assets), each member of the Executive Committee or Administrative Committee and each other officer, employee, or director of the Participating Company or an Affiliate to whom any duty or power relating to the administration or interpretation of the Plan against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Participating Company) arising out of any act or omission to act in connection with the Plan unless arising out of such person's own fraud or bad faith. SECTION 8. DESIGNATION OF BENEFICIARIES      8.1 Beneficiary Designation. Every Participant and every Optionholder shall file with the Administrative Committee a written designation (in substantially the form attached hereto as Exhibit B) of one or more persons as the Beneficiary who shall be entitled to become the Optionholder of Options held by the Participant upon the Participant's death. A Participant or Optionholder may from time to time revoke or change such Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Administrative Committee. The last such designation received by the Administrative Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Administrative Committee prior to the Participant's death, and in no event shall it be effective as of any date prior to such receipt. All decisions of the Administrative Committee concerning the effectiveness of any Beneficiary designation and the identity of any Beneficiary shall be final. Notwithstanding the foregoing, the Beneficiary of an Optionholder shall Exercise all Options under this Plan by the due date for filing the final tax return of the deceased Optionholder, provided however, such three year term shall not extend the Exercise Period set forth in the Option Certificate. SECTION 9. AMENDMENT OR TERMINATION OF THE PLAN      9.1 Right to Amend or Terminate Plan. The Company reserves the right at any time to amend or terminate the Plan, in whole or in part, and for any reason and without the consent of any Participating Company, Participant or Beneficiary. Each Participating Company by its participation in the Plan shall be deemed to have delegated this authority to the Company.      The Administrative Committee may adopt any ministerial and nonsubstantive amendment which may be necessary or appropriate to facilitate the administration, management and interpretation of the Plan, provided the amendment does not materially affect the currently estimated cost to the Participating Companies of maintaining the Plan. Each Participating Company by its participation in the Plan shall be deemed to have delegated this authority to the Administrative Committee.      In no event shall an amendment or termination modify, reduce or otherwise affect the Participating Company's obligations under the Plan, as such obligations are defined under the provisions of the Plan existing immediately before such amendment or termination.      In the event the Company determines, in good faith, that some or all of the benefits under this Plan may be subject to taxation, the Plan shall be amended to continue the deferred nature of such benefits and to avoid the imposition of current taxation on the Participants.      9.2 Notice. Notice of any amendment or termination of the Plan shall be given by the Administrative Committee to all Participating Companies. SECTION 10. GENERAL PROVISIONS AND LIMITATIONS      10.1 No Right to Continued Employment. Nothing contained in the Plan shall give any Employee the right to be retained in the employment of the Participating Company or an Affiliate or affect the right of any such employer to dismiss any Employee. The adoption and maintenance of the Plan shall not constitute a contract between any Participating Company and Employee or consideration for, or an inducement to or condition of, the employment of any Employee.      10.2 Required Information. Each Participant and Optionholder shall file with the Administrative Committee such pertinent information concerning himself or herself, such Participant's Beneficiary, or such other person as the Administrative Committee may reasonably specify, and no Participant, Beneficiary, or other person shall have any rights or be entitled to any benefits under the Plan unless such information is filed by or with respect to the Participant.      10.3 No Trust or Funding Created. The obligations of the Participating Company to make payments hereunder shall constitute a liability of the Participating Company to a Participant or Beneficiary, as the case may be. Such payments shall be made from the general funds of the Participating Company, and the Participating Company shall not be required to establish or maintain any special or separate fund, or purchase or acquire life insurance on a Participant's life, or otherwise to segregate assets to assure that such payment shall be made, and neither a Participant nor a Beneficiary shall have any interest in any particular asset of the Participating Company by reason of its obligations hereunder. Nothing contained in the Plan shall create or be construed as creating a trust of any kind or any other fiduciary relationship between the Participating Company and a Participant or any other person. The rights and claims of a Participant or a Beneficiary to a benefit provided hereunder shall have no greater or higher status than the rights and claims of any other general, unsecured creditor of the Participating Company; provided, however, this section does not prohibit the establishment by the Company of a grantor trust, substantially similar to the Internal Revenue Service's model trust as described in Revenue Procedure 92-64, to enable the Company to hold assets which may in the Company's discretion be used to meet the obligations of the Plan.      10.4 Binding Effect. Obligations incurred by the Participating Company pursuant to this Plan shall be binding upon and inure to the benefit of the Participating Company, its successors and assigns, and the Participant and the Participant's Beneficiary.      10.5 Merger or Consolidation. In the event of a merger or a consolidation by the Company with another corporation, or the acquisition of substantially all of the assets or outstanding stock of the Company by another corporation, then and in such event the obligations and responsibilities of the Company under this Plan shall be assumed by any such successor or acquiring corporation, and all of the rights, privileges and benefits of the Participants and Beneficiaries hereunder shall continue.      10.6 Option Cancellation. Each Optionholder has the right, without consent of the Participating Company, to surrender any Option for cancellation. Upon such surrender, the Optionholder shall receive no value in exchange and shall release and discharge the Participating Company from any and all obligations under the Option surrendered.      10.7 Entire Plan. The Plan document and the Exhibits hereto and the appropriate Option Certificates, and any written amendments thereto, contain all the terms and provisions of the Plan and shall constitute the entire Plan, any other alleged terms or provisions being of no effect. EXHIBIT A OPTION CERTIFICATE The Participating Company hereby certifies that it has granted to the Participant, under the First National Bank of Omaha Senior Management Stock Option Plan (the "Plan"), the Option described herein. Option No.:                                                                      Participant:   Name                                                                                                                        Address                                                                                                                                  Social Security No.                                                                                                    Age                                                                                                                   Number of Options and Vesting, if any, applicable to Options:   Grant Date:                                                                      Grant Date Market Value of Underlying Shares: $                                                         Exercise Price: As of the Exercise Date, the greater of (A) the Indexed Exercise Price and (B) the Minimum Exercise Price.   Capitalized terms shall have the meanings the Plan ascribes to them.   Issued by First National of Nebraska, Inc. this _______day of _________________, 200___.       By:                                                                                                                                                                                                                                EXHIBIT B BENEFICIARY DESIGNATION To:   Administrative Committee of the First National Bank of Omaha Senior Management Stock Option Plan (the "Plan")   From:   Name                                                                       Address                                                                  Social Security No.                                                            I, a Participant in the Plan, hereby name the following person or persons, entity or entities (herein called "Designated Beneficiary(ies)") to receive ownership of Options issued under the Plan and that I own upon my death (herein called "Survivor Options").         Name and Relationship Address Social Security No.                                                                                               1.   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------           2.   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------           3.   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   4.   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                  If my Survivor Options, if any, are to be paid to more than one Designated Beneficiary, I understand that such Survivor Options shall be divided equally between or among such Designated Beneficiaries.                        If any Designated Beneficiary(ies) named above is (are) not in existence at my death, then I name the following Contingent Designated Beneficiary(ies) to receive the Survivor Options that such Designated Beneficiary(ies) would have received.             Name and Relationship Address Social Security No.              Contingent Beneficiary to Designated Beneficiary No. _____.               -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------              Contingent Beneficiary to Designated Beneficiary No. _____.               -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                    Contingent Beneficiary to Designated Beneficiary No. _____.               -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------        Contingent Beneficiary to Designated Beneficiary No. _____.            -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------           -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                         I understand that if a Designated Beneficiary dies before I do and there is no Contingent Designated Beneficiary named to take such Designated Beneficiary's share, then the Survivor Option will be paid to my Surviving Spouse, if any, and if not to my estate.               I understand that this Beneficiary Designation Form shall remain in effect until revoked by me in writing or until superseded by my execution and delivery of a substitute Beneficiary Designation Form. I understand that no such revocation or substitute Beneficiary Designation Form will be effective until it is actually received by the Administrative Committee.               I understand that Survivor Options have federal and state tax consequences and that such consequences may depend on the identity of the beneficiary of such payments (for example, whether the beneficiary is my spouse); and I acknowledge that I have been advised to consult an independent, professional tax advisor before completing this Beneficiary Designation Form.     -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     Participant's Signature       Date     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT C BONUS DEFERRAL ELECTION FORM To: Administrative Committee of the First National Bank of Omaha Senior Management Stock Option Plan (the "Plan")   From: Name    ______________________________________________________________________________________________________________       Address _____________________________________________________________________________________________________________               _____________________________________________________________________________________________________________               _____________________________________________________________________________________________________________       Social Security No. _____________________________________________________________________________________________________       CHECK AND COMPLETE ONLY ONE BELOW   [_] Election for Plan Year _______________________                                                        Pursuant to the terms of the Plan, I hereby elect to forgo the receipt of the following amounts of my Bonus Award which I earn during   the _______ Plan Year and which, but for this Bonus Deferral Election, would be paid to me on ________________________.     ________ percent of Bonus Award or $__________________     FUND ALLOCATION                                                I understand that the Plan allows me to make a Fund Allocation Election. I understand that to make a Fund Allocation Election, I must complete a separate Fund Allocation Election form and file it with the Executive Committee or its designee.         BENEFICIARY DESIGNATION        I understand that the Plan allows me to make a Beneficiary Designation. I understand that to make a Beneficiary Designation, I must complete a separate Beneficiary Designation form and file it with the Administrative Committee or its designee.     OPTIONS   I understand that the Participating Company will grant Options to me under the Plan.       RELIANCE ON OWN ADVISORS         I affirm that in making this Bonus Deferral Election, I have relied on my own tax and financial advisors and not on the Participating Company, any of its employees, agents or representatives.     INCORPORATION OF PLAN   The Plan is incorporated herein by reference and shall govern the rights and obligations hereunder.       ___________________________________________________   Date________________________________       Participant's Signature               Accepted by the Administrative Committee.           ___________________________________________________   Date________________________________       Authorized Signature      EXHIBIT D PLAN ELECTION To: Administrative Committee of the First National Bank of Omaha Senior Management Stock Option Plan (the "Plan")   From:   Name       --------------------------------------------------------------------------------           Address       --------------------------------------------------------------------------------     --------------------------------------------------------------------------------     --------------------------------------------------------------------------------           Social Security No.         --------------------------------------------------------------------------------             I, a Participant in the Plan, hereby request that ____% of my portion of the Incentive Pool be available for the issuance of Performance Award Options under this Plan. I understand that all remaining amounts, if any, of my share of the Incentive Pool shall be available for Performance Award Options under the OPT Plan.                  I understand that this election is subject to the terms of the Plan, and that the Plan's provisions are incorporated herein by reference.           -------------------------------------------------------------------------------- Date --------------------------------------------------------------------------------   Participant's Signature       Accepted by the Administrative Committee.       -------------------------------------------------------------------------------- Date --------------------------------------------------------------------------------   Participant's Signature      EXHIBIT E EXERCISE ELECTION To: Administrative Committee of the First National Bank of Omaha Senior Management Stock Option Plan (the "Plan")   From: Name ____________________________________________________________________________________       Address __________________________________________________________________________________                                                                                                                                                                                                                                                                                                                                           Social Security No. __________________________________________________________________________           I, an Optionholder under the Plan, hereby elect to exercise my Options as follows:   (check and complete one)       [_]  All of my Options       [_]  The following Options: ________________________________________________________________________           I understand that this Exercise Election is subject to the Plan provisions and Administrative Committee approval, and is subject to tax withholding.           ________________________________________ Date __________________   Participant's Signature             _______________Date Received by Administrative Committee       Approval:         ___________________________________________ Date ___________________   Authorized Administrative Committee Signature EXHIBIT F ROLLOVER ELECTION FORM - PRIOR PLAN WAIVER To: Administrative Committee of the First National Bank of Omaha Senior Management Stock Option Plan (the "Plan")   From: Name ______________________________________________________________       Address ____________________________________________________________          ________________________________________________________________          ________________________________________________________________       Social Security No. ____________________________________________________          I, a Participant in the First National of Nebraska, Inc. Senior Management Long Term Incentive Plan (the "Prior Plan"), hereby elect to terminate my participation in the Prior Plan, to cancel my benefits under the Prior Plan, and to receive Options under the Plan as designated on the attached Election Between Plans form. I understand that any and all rights that I may have had under the Prior Plan shall be forfeited and that this waiver is irrevocable.      I understand that the Intrinsic Value of the Options granted to me under the Plan shall be equal to the value of my account balance under the Prior Plan as of the December 31, 2000 effective date of the Plan.   __________________________________ Date __________________   Participant Signature           Accepted by the Administrative Committee:         __________________________________ Date __________________
  TERMINATION AGREEMENT & RELEASE              This is an Agreement between Home Depot U.S.A., Inc. (the “Company”) and Mark R. Baker (the “Executive”).              WHEREAS, the Executive intends to resign from the Company; and,              WHEREAS, the Company and the Executive intend the terms and conditions of this Agreement to govern all issues related to the Executive’s employment and resignation from the Company; and,              WHEREAS, the Executive acknowledges that he has been given a reasonable period of time, up to and including twenty-one (21) days, to consider the terms of this Agreement; and,              WHEREAS, the Company advised the Executive in writing to consult with a lawyer before signing this Agreement; and,              WHEREAS, the Executive has represented and hereby reaffirms that he has disclosed to the Company any information in his possession concerning any conduct involving the Company or its affiliates that he has any reason to believe involves any false claims to the United States or is or may be unlawful or violates Company policy in any material respect; and,              WHEREAS, the Executive acknowledges that the consideration provided him under this Agreement is sufficient to support the releases provided by him under this Agreement; and,              WHEREAS, the Executive represents that he has not filed any charges, claims or lawsuits against the Company involving any aspect of his employment which have not been terminated as of the date of this Agreement; and,              WHEREAS, the Executive understands that the Company regards the representations by him as material and that the Company is relying on these representations in entering into this  Agreement, NOW, THEREFORE, the Company and the Executive agree as follows: 1.          Employment Status and Termination Date.  The Executive shall continue as an active employee of the Company through August 31, 2001.  Executive shall then be placed on a paid Leave of Absence (“LOA”) commencing on September 1, 2001 and extending through the earlier of either (a) August 31, 2002 or (b) Executive’s acceptance of employment outside the Company.  If Executive accepts other employment, the paid LOA will end immediately and Executive will be placed on an unpaid LOA, without pay or benefits, until August 31, 2002.  Executive’s last day of employment (“Termination Date”) will be August 31, 2002, or as otherwise provided in paragraph 10 below.  Executive will notify the Company, in writing, as soon as he has accepted employment outside the Company.  Executive shall not accrue any vacation days or credit subsequent to August 31, 2001. 2.          Annual Salary.  Executive shall continue at his current salary level during the paid LOA. 3.          Annual Bonus.  Executive shall be paid a bonus for the Company’s 2001 fiscal year ending in 2002, equal to 100% of his current annual salary, such payment to be paid at the same time as the Company normally pays its other executive officers their bonuses.  This bonus payment will be contingent upon Executive executing an additional release, the same as set forth in paragraph 7 below, covering the period between the Effective Date of this Agreement through August 31, 2001. Executive shall not be entitled to any bonus for the Company’s 2002 fiscal year ending in 2003. 4.          Benefits.  The Executive will be eligible to continue to participate in the Company’s employee benefit plans and programs during the paid LOA.  Provided that Executive does not breach any of the terms of this Agreement, the Company agrees that as of June 29, 2001, the $170,000 of the original outstanding principal balance and any related accrued interest thereon that Executive owes the Company under the Promissory Note dated December 29, 2000, shall be forgiven and forever discharged.  The Company shall reimburse Executive for any federal and state taxes paid by him due to the cancellation of such indebtedness, on a fully tax grossed-up basis. 5.          Stock Options. All of Executive’s outstanding, non-vested stock options will vest in accordance with the terms of the original grant except that none of such options shall vest after the Termination Date.  All of Executive’s vested stock options must be exercised within 90 days of the Termination Date.  Executive shall not be eligible to receive any stock option grants subsequent to August 31, 2001. 6.          Outplacement Services.  The Company shall provide outplacement services for the Executive during the paid LOA.  Such services shall be provided through an agency selected by the Company.  Services shall include the reasonable costs of office space, use of equipment, such as a personal computer, copier, phone, fax machine, and administrative support. 7.          Release of Claims. The Executive and his heirs, assigns, and agents release, waive and discharge the Company and its past and present directors, officers, employees, subsidiaries, affiliates, and agents from each and every claim, action or right of any sort, known or unknown, arising on or before the Effective Date. (a)         The foregoing release includes, but is not limited to, any claim of discrimination on the basis of race, sex, religion, marital status, sexual orientation, national origin, handicap or disability, age, veteran status, special disabled veteran status, or citizenship status; any other claim based on a statutory prohibition; any claim arising out of or related to an express or implied employment contract, any other contract affecting terms and conditions of employment, or a covenant of good faith and fair dealing. (b)        The Executive represents that he understands the foregoing release, that rights and claims under the Age Discrimination in Employment Act of 1967, as amended, are among the rights and claims against the Company he is releasing, and that he understands that he is not presently releasing any rights or claims arising after the Effective Date. (c)         The Executive further agrees never to sue the Company or cause the Company to be sued regarding any matter within the scope of the above release. If the Executive violates this release by suing the Company or causing the Company to be sued, the Company may recover all damages as allowed by law, including all costs and expenses of defending against the suit incurred by the Company and reasonable attorneys’ fees. The Company releases, waives, and discharges Executive from each and every claim, action or right of any sort, arising on or before the Effective Date and based upon facts presently known to the Executive Vice President, Human Resources. 8.          Confidential Information.  The Executive acknowledges that, in connection with his employment at the Company, he obtained knowledge about confidential and proprietary information, or trade secrets of the Company, including but not limited to lists of customers and vendors, technical information about Company products, strategic plans of company businesses and price information (hereinafter the “Information”). Executive agrees, either prior to or following the Effective Date, not to use, publish or otherwise disclose any Information to others, including but not limited to a subsequent employer or competitor to the Company. If the Executive has any question regarding what data or information would be considered by the Company to be information subject to this provision, the Executive agrees to contact the Executive Vice President, Human Resources for written clarification. 9.          Non-Competition and Non-Solicitation. (a)         The Executive agrees that he will not, prior to August 31, 2004, enter into or maintain an employment or contractual relationship, either directly or indirectly, to provide services to any company or entity engaged in any way in a business that competes directly or indirectly with the Company without the prior written consent of the Company.  Businesses that compete with the Company specifically include, but are not limited to, the following entities and each of their subsidiaries affiliates, assigns, or successors in interest:  Lowe’s Companies, Inc. (including, but not limited to, Eagle Hardware and Garden); Hechinger Investment Company, Inc. (including, but not limited to, Home Quarters, Hechinger, and Builder’s Square); Payless Cashways, Inc.; Dekor; Sears (including, but not limited to, Orchard Supply and Hardware Company); Wal-Mart; Home Base, Inc; and Menard, Inc. (b)        To the extent that any relationship or employment prior to August 31, 2004 is covered by the above non-compete provision, Executive agrees to request permission from the Executive Vice President, Human Resources of the Company prior to entering any such relationship or employment. The Company may approve or not approve of the relationship or employment at its absolute discretion. (c)         The Executive agrees that prior to August 31, 2004, he will not directly or indirectly solicit any person who is an employee of the Company to terminate his or her relationship with the Company without prior written approval from the Executive Vice President, Human Resources of the Company. 10.        Breach by Executive.  The Company’s obligations to the Executive under this Agreement, including the loan forgiveness set forth in paragraph 5 above, are contingent on Executive’s performance of his obligations under this Agreement. Any material breach by Executive of this Agreement will result in the immediate cancellation of all Executive’s stock options and the immediate termination of Executive’s employment, as well as entitle the Company to all its other remedies in law or equity.  In the event of such breach, Executive would also be required to repay the $170,000 principal balance of the Promissory Note dated December 29, 2000, plus interest accrued from June 29, 2000, calculated in accordance with the terms of the Promissory Note. 11.        Executive Availability.  The Executive agrees to make himself reasonably available to the Company to respond to requests by the Company for information pertaining to or relating to the Company and/or the Company’s affiliates, subsidiaries, agents, officers, directors or employees which may be within the knowledge of the Executive. Executive will cooperate fully with the Company in connection with any and all existing or future litigations or investigations brought by or against the Company or any of its past or present affiliates, agents, officers, directors or employees, whether administrative, civil or criminal in nature, in which and to the extent the Company deems the Executive’s cooperation necessary. The Company will reimburse the Executive for reasonable out-of-pocket expenses incurred as a result of such cooperation. Nothing herein shall prevent the Executive from communicating with or participating in any government investigation. 12.        Non Disparagement.  The Executive agrees, subject to any obligations he may have under applicable law, that he will notmake or cause to be made any statements that disparage, are inimical to, or damage the reputation of the Company or any of its past or present affiliates, subsidiaries, agents, officers, directors or employees. In the event such a communication is made to anyone, including but not limited to the media, public interest groups and publishing companies, it will be considered a material breach of the terms of this Agreement and the Executive will be required to reimburse the Company for any and all compensation and benefits paid under the terms of this Agreement and all commitments to make additional payments to the Executive will be null and void. 13.        Insider Trading.  The Executive acknowledges that prior to the Termination Date, he remains subject to the restrictions of the Company’s Insider Trading Policy.  After the Termination Date, the Insider Trading Policy will no longer apply to the Executive.  However, the Executive acknowledges that through his employment with the Company he may have learned material, non-public information regarding the Company.  The federal securities laws prohibit trading by persons while aware of material, non-public information.  The Executive should seek advice of his legal counsel prior to conducting any transactions in the Company’s stock if the Executive thinks he may possess such information. 14.        Future Employment. The Executive agrees and acknowledges that the Company, its affiliates, or subsidiaries are not obligated to offer employment to the Executive (or to accept services or the performance of work from the Executive directly or indirectly) now or in the future. 15.        Severability of Provisions. In the event that any provision in this Agreement is determined to be legally invalid or unenforceable by any court of competent jurisdiction, and cannot be modified to be enforceable, the affected provision shall be stricken from the Agreement, and the remaining terms of the Agreement and its enforceability shall remain unaffected. 16.        Right to Revoke this Agreement. The Executive may revoke this Agreement in writing within seven days of signing it. The Agreement will not take effect until the Effective Date. If the Executive revokes this Agreement, all of its provisions shall be void and unenforceable. 17.        Effective Date. The Effective Date shall be the day after the end of the revocation period described in Section 16. 18.        Confidentiality. The Executive shall keep strictly confidential all the terms and conditions, including amounts, in this Agreement and shall not disclose them to any person other than the Executive’s spouse, the Executive’s legal or financial advisor, or U.S. governmental officials who seek such information in the course of their official duties, unless compelled by law to do so. If a person not a party to this Agreement requests or demands, by subpoena or otherwise, that the Executive disclose or produce this Agreement or any terms or conditions thereof, the Executive shall immediately notify the Company and shall give the Company an opportunity to respond to such notice before taking any action or making any decision in connection with such request or subpoena. 19.        Survival of Provisions.  Paragraphs 8, 9, 11, and 18 shall survive the term of this Agreement. 20.        Entire Agreement. This Agreement constitutes the entire understanding between the parties. The parties have not relied on any oral statements that are not included in this Agreement. Any modifications to this Agreement must be in writing and signed by the Executive and an authorized employee or agent of the Company. 21.        This Agreement shall be construed, interpreted and applied in accordance with the law of the State of Delaware, without giving effect to the choice of law provisions thereof.   Home Depot U.S.A., Inc.   By /s/ Dennis M. Donovan   6/13/01     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     Dennis M. Donovan   Date     Executive Vice President         Human Resources                   /s/ Mark R. Baker   6/13/01     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     Mark R. Baker   Date     Executive        
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.8 AMENDED TERM NOTE Due: September 1, 2004 TERM NOTE USANA HEALTH SCIENCES, INC. $8,000,000.00   Dated: March 26, 2001 Seattle, Washington     USANA HEALTH SCIENCES, INC., a Utah corporation ("Borrower") unconditionally promises to pay to the order of Bank of America, N.A. ("Bank"), at its Commercial Banking office, on or before September 1, 2004, in immediately available funds, the principal sum of Eight Million and No/100 Dollars ($8,000,000.00), plus interest. Interest under this Note shall accrue on the daily unpaid principal balance from the date of this Note in accordance with the terms, conditions, and definitions of Exhibit A attached, which are incorporated herein.     This Note is governed by and shall be construed in accordance with the laws of the State of Washington. This Note is also governed by the Credit Agreement dated March 26, 2001, between Bank and Borrower (the "Agreement"), and all terms, conditions, and definitions of the Agreement are incorporated herein. This Note amends, restates and continues that certain Revolving Note made by Borrower in favor of Bank dated September 20, 1999 in the amount of $10,000,000 (as amended from time to time, the "Prior Note"). The indebtedness evidenced by the Prior Note has not been repaid, satisfied or discharged and nothing herein shall constitute a repayment, satisfaction or discharge of such indebtedness. This is the "Term Note" referred to in the Agreement.     Borrower shall pay all accrued interest under this Note on each Interest Payment Date until the maturity date of this Note. Principal of this Note shall be repaid in quarterly installments as follows (a) four installments of $500,000 each commencing on March 1, 2002 and continuing the first Business Day of the following June, September and December and (b) seven installments of $857,143 each commencing on March 3, 2003 and continuing thereafter on first Business Day of each June, September, December and March. Any prepayments of principal under this Note shall be applied to installments of principal due under this Note in inverse order of their maturities. All unpaid principal and accrued but unpaid interest shall be due and payable in full on September 1, 2004.     If at any time in connection with this Note Borrower and Bank enter into a "Swap Contract" as such term is defined in the Agreement, and if as a consequence the quarterly installment payments under this Note will change, then unless otherwise agreed to in writing, this Note shall thereafter be repaid in quarterly installments, due on the first Business Day of each December March, June, and September until the maturity date of this Note, equal to the sum of (a) accrued interest, computed as provided herein, to the due date of the quarterly payment, plus (b) quarterly principal payments in the amounts set forth in a schedule (the "Principal Payment Schedule") to be prepared by Bank and delivered to Borrower after the Swap Contract has been entered into. The Principal Payment Schedule shall be deemed incorporated into and a part of this Note.     All conversions between the interest rate options, and all payments of principal and interest, may be reflected on a schedule or a computer-generated statement which shall be come a part hereof. Bank is authorized to automatically debit each required installment of interest from Borrower's checking account number 68504810 at Bank, or such other deposit account at Bank as Borrower may authorize in the future.     If a "Default" shall occur as such term is defined in the Agreement, interest shall accrue, at the option of the holder of this Note, from the date of Default, at a floating rate per annum three percent (3%) above the Prime Rate, as the Prime Rate may vary from time to time, and the entire unpaid -------------------------------------------------------------------------------- principal amount of this Note, together with all accrued interest, shall become immediately due and payable at the option of the holder hereof.     Borrower hereby waives presentment, demand, protest, and notice of dishonor hereof. Each party signing or endorsing this Note signs as maker and principal, and not as guarantor, surety, or accommodation party; and is estopped from asserting any defense based on any capacity other than maker or principal.     ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, TO EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.     USANA HEALTH SCIENCES, INC.     By: /s/ GILBERT A. FULLER -------------------------------------------------------------------------------- Gilbert A. Fuller, Senior Vice President & CFO -------------------------------------------------------------------------------- Exhibit A INTEREST PROVISIONS Article 1: Definitions     All terms defined below shall have the meaning indicated:     1.1  Adjusted LIBOR Rate shall mean for any day that per annum rate equal to the sum of (a) the Margin, (b) the Assessment Rate, and (c) the quotient of (i) the LIBOR Rate was determined for such day, divided by (ii) the Reserve Adjustment. The Adjusted LIBOR Rate shall change with any change in the LIBOR Rate on the first day of each Interest Period and on the effective date of any change in the Assessment Rate or Reserve Adjustment.     1.2  Agreement shall mean the Credit Agreement dated as of March 26, 2001, between Borrower and Bank, including all amendments thereto and restatements thereof.     1.3  Assessment Rate shall mean as of any day the minimum annual percentage rate established by the Federal Deposit Insurance Corporation (or any successor) for the assessment due from members of the Bank Insurance Fund (or any successor) in effect for the assessment period during which said day occurs based on deposits maintained at such members' offices located outside of the United States. In the event of a retroactive reduction in the Assessment Rate after a commencement of any Interest Period, Bank shall not retroactively adjust as to such Interest Period any interest rate calculated using the Assessment Rate.     1.4  Bank shall mean the holder of the Note.     1.5  Borrower shall mean the maker of the Note.     1.6  Business Day shall mean any day other than a Saturday, Sunday, or other day on which commercial banks in Seattle, Washington, are authorized or required by law to close.     1.7  Commencement Date shall mean the first day of any Interest Period as requested by Borrower.     1.8  Floating Rate shall mean the Prime Rate per annum plus the Margin.     1.9  Floating Rate Loans shall mean those portions of principal of the Note accruing interest at the Floating Rate.     1.10  Interest Payment Date shall mean (a) the first Business Day of each month for Floating Rate Loans, (b) the last day of the Interest Period as to LIBOR Rate Loans with Interest Periods of three months or less, (c) as to LIBOR Rate Loans with Interest Periods of more than three months, on the day which is three months after the Commencement Date and the last day of the Interest Period, and (d) upon maturity of this Note, including maturity by acceleration.     1.11  Interest Period shall mean the period commencing on the date of any conversion to an Adjusted LIBOR Rate and ending on any date thereafter as selected by Borrower, subject to the restrictions of Section 2.3. If any Interest Period would end on a day which is not a Business Day, the Interest Period shall be extended to the next succeeding Business Day.     1.12  LIBOR Rate shall mean for any Interest Period the per annum rate for U.S. Dollar deposits for a period equal to the Interest Period appearing on the display designated as "Page 3750" on the Telerate Service (or such other page on that service or such other service designated by the British Banker's Association for the display of that Association's Interest Settlement Rates for U.S. Dollar deposits) as of 11:00 a.m., London time, on the day which is two London Banking Days prior to the first day of the Interest Period. If there is no period equal to the Interest Period on the display, the LIBOR Rate shall be determined by straight-line interpolation to the nearest month (or week or day if expressed in weeks or days) corresponding to the Interest Period between the two nearest neighboring periods on the display.     1.13  LIBOR Rate Loans shall mean those portions of principal of the Note accruing interest at the Adjusted LIBOR Rate. --------------------------------------------------------------------------------     1.14  London Banking Day shall mean any day other than a Saturday, Sunday, or other day on which commercial banks in London, England, are authorized or required by law to close.     1.15  Margin shall have the meaning given in the Agreement.     1.16  Note shall mean the promissory note to which this exhibit is attached.     1.17  Prime Rate shall mean the rate of interest publicly announced from time to time by Bank as its "Prime Rate." The Prime Rate is set based on various factors, including Bank's costs and desired return, general economic conditions, and other factors, and is used as a reference point for pricing some loans. Bank may price loans to its customers at, above, or below the Prime Rate. Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Prime Rate.     1.18  Reserve Adjustment shall mean as of any day the remainder of one minus that percentage (expressed as a decimal) which is the highest of any such percentages established by the Board of Governors of the Federal Reserve System (or any successor) for required reserves (including any emergency, marginal, or supplemental reserve requirement) regardless of the aggregate amount of deposits with said member bank and without benefit of any possible credit, proration, exemptions, or offsets for time deposits established at offices of member banks located outside of the United States or for eurocurrency liabilities, if any. Article 2: Interest Rate Options     2.1  Interest Rate and Payment Date. The Note shall bear interest from the date of advance on the unpaid principal balance outstanding from time to time at the Floating Rate or Adjusted LIBOR Rate as selected by Borrower and all accrued interest shall be payable in arrears on each Interest Payment Date.     2.2  Procedure. Borrower may, by 11:30 a.m., Pacific time, on any London Banking Day two London Banking Days before a Commencement Date, request Bank to give an Adjusted LIBOR Rate quote for a specified loan amount and Interest Period. Bank will then quote to Borrower the available Adjusted LIBOR Rate. Borrower shall have one hour from the time of the quote to elect an Adjusted LIBOR Rate by giving Bank irrevocable notice of such election.     2.3  Restrictions. Each Interest Period shall be one, two, three or six months. In no event shall an Interest Period extend beyond the maturity date of the Note. The minimum amount of a LIBOR Rate Loan shall be $100,000.     2.4  Prepayments. If Borrower prepays all or any portion of a LIBOR Rate Loan prior to the end of an Interest Period, there shall be due at the time of any such prepayment the Prepayment Fee, determined in accordance with Exhibit 1 attached to the Note. Floating Rate Loans may be prepaid on any Business Day, without premium or penalty.     2.5  Reversion to Floating. The Note shall bear interest at the Floating Rate unless an Adjusted LIBOR Rate is specifically selected. At the termination of any Interest Period each LIBOR Rate Loan shall revert to a Floating Rate Loan unless Borrower directs otherwise pursuant to Section 2.2.     2.6  Inability to Participate in Market. If Bank in good faith cannot participate in the Eurodollar market for legal or practical reasons, there shall be no Adjusted LIBOR Rate option. Bank shall notify Borrower of and when it again becomes legal or practical to participate in the Eurodollar market, at which time the Adjusted LIBOR Rate option shall resume being an interest rate option.     2.7  Costs. Borrower shall reimburse Bank for all costs, taxes, and expenses, and defend and hold Bank harmless for any liabilities, which Bank may incur as a consequence of any changes in the cost of participating in, or in the laws or regulations affecting, the Eurodollar market, including any additional reserve requirements, except to the extent such costs are already calculated into the Adjusted LIBOR Rate. This covenant shall survive the payment of the Note. --------------------------------------------------------------------------------     2.8  Basis of Quotes. Borrower acknowledges that Bank may or may not in any particular case actually match-fund a LIBOR Rate Loan. FDIC assessments, and Federal Reserve Board reserve requirements, if any are assessed, will be based on Bank's best estimates of its marginal cost for each of these items. Whether such estimates in fact represent the actual cost to Bank for any particular dollar or Eurodollar deposit or any LIBOR Rate Loan will depend upon how Bank actually chooses to fund the LIBOR Rate Loan. By electing an Adjusted LIBOR Rate, Borrower waives any right to object to Bank's means of calculating the Adjusted LIBOR Rate quote accepted by Borrower. -------------------------------------------------------------------------------- Exhibit 1—PREPAYMENT FEES     If the principal balance of this note is prepaid in whole or in part, whether by voluntary prepayment, operation of law, acceleration or otherwise, a prepayment fee, in addition to any interest earned, will be immediately payable to the holder of this note.     The amount of the prepayment fee depends on the following: (1)The amount by which interest reference rates as defined below have changed between the time the loan is prepaid and either a) the time the loan was made for fixed rate loans, or b) the time the interest rate last changed (repriced) for variable rate loans. (2)A prepayment fee factor (see "Prepayment Fee Factor Schedule" on reverse). (3)The amount of principal prepaid. If the proceeds from a CD or time deposit pledged to secure the loan are used to prepay the loan resulting in payment of an early withdrawal penalty for the CD, a prepayment fee will not also be charged under the loan. Definition of Prepayment Reference Rate for Variable Rate Loans     The "Prepayment Reference Rate" used to represent interest rate levels for variable rate loans shall be the index rate used to determine the rate on this loan having maturities equivalent to the remaining period to interest rate change date (repricing) of this loan rounded upward to the nearest month. The "Initial Prepayment Reference Rate" shall be the Prepayment Reference Rate at the time of last repricing and a new Initial Prepayment Reference Rate shall be assigned at each subsequent repricing. The "Final Prepayment Reference Rate" shall be the Prepayment Reference Rate at the time of prepayment. Definition of Prepayment Reference Rate for Fixed Rate Loans     The "Prepayment Reference Rate" used to represent interest rate levels on fixed rate loans shall be the bond equivalent yield of the average U.S. Treasury rate having maturities equivalent to the remaining period to maturity of this loan rounded upward to the nearest month. The "Initial Prepayment Reference Rate" shall be the Prepayment Reference Rate at the time the loan was made. The "Final Prepayment Reference Rate" shall be the Prepayment Reference Rate at time of prepayment.     The Prepayment Reference Rate shall be interpolated from the yields as displayed on Page 119 of the Dow Jones Telerate Service (or such other page or service as may replace that page or service for the purpose of displaying rates comparable to said U.S. Treasury rates) on the day the loan was made (Initial Prepayment Reference Rate) or the day of prepayment (Final Prepayment Reference Rate).     An Initial Prepayment Reference Rate of  N/A  % has been assigned to this loan to represent interest rate levels at origination. Calculation of Prepayment Fee     If the Initial Prepayment Reference Rate is less than or equal to the Final Prepayment Reference Rate, there is no prepayment fee.     If the Initial Prepayment Reference Rate is greater than the Final Prepayment Reference Rate, the prepayment fee shall be equal to the difference between the Initial and Final Prepayment Reference Rates (expressed as a decimal), multiplied by the appropriate factor from the Prepayment Fee Factor Schedule, multiplied by the principal amount of the loan being prepaid. -------------------------------------------------------------------------------- Example of Prepayment Fee Calculation     Variable Rate Loan:  A non-amortizing 6-month LIBOR based loan with principal of $250,000 is fully prepaid with 3 months remaining until next interest rate change date (repricing). An Initial Prepayment Reference Rate of 7.0% was assigned to the loan at last repricing. The Final Prepayment Reference Rate (as determined by the 3-month LIBOR index) is 6.5%. Rates therefore have dropped 0.5% since last repricing and a prepayment fee applies. A prepayment fee factor of 0.31 is determined from Table 3 below and the prepayment fee is computed as follows: Prepayment Fee = (0.07-0.065) × (0.31) × ($250,000) = $387.50     Fixed Rate Loan:  An amortizing loan with remaining principal of $250,000 is fully prepaid with 24 months remaining until maturity. An Initial Prepayment Reference Rate of 9.0% was assigned to the loan when the loan was made. The Final Prepayment Reference Rate (as determined by the current 24-month U.S. Treasury rate on Page 119 of Telerate) is 7.5%. Rates therefore have dropped 1.5% since the loan was made and a prepayment fee applies. A prepayment fee factor of 1.3 is determined from Table 1 below and the prepayment fee is computed as follows: Prepayment Fee = (0.09-0.075) × (1.3) × ($250,000) = $4,875 PREPAYMENT FEE FACTOR SCHEDULE TABLE I: FULLY AMORTIZING LOANS     Months Remaining To Maturity/Repricing1 -------------------------------------------------------------------------------- Proportion of Remaining Principal Amount Being Prepaid --------------------------------------------------------------------------------   0 --------------------------------------------------------------------------------   3 --------------------------------------------------------------------------------   6 --------------------------------------------------------------------------------   9 --------------------------------------------------------------------------------   12 --------------------------------------------------------------------------------   24 --------------------------------------------------------------------------------   36 --------------------------------------------------------------------------------   48 --------------------------------------------------------------------------------   60 --------------------------------------------------------------------------------   84 --------------------------------------------------------------------------------   120 --------------------------------------------------------------------------------   240 --------------------------------------------------------------------------------   360 -------------------------------------------------------------------------------- 90-100%   0   .21   .36   .52   .67   1.3   1.9   2.5   3.1   4.3   5.9   10.3   13.1 60-89%   0   .24   .44   .63   .83   1.6   2.4   3.1   3.9   5.4   7.5   13.2   17.0 30-59%   0   .28   .53   .78   1.02   2.0   3.0   4.0   5.0   7.0   9.9   18.5   24,4 0-29%   0   .31   .63   .92   1.22   2.4   3.7   5.0   6.3   9.0   13.4   28.3   41.8 TABLE II: PARTIALLY AMORTIZING (BALLOON) LOANS     Months Remaining To Maturity/Repricing1 -------------------------------------------------------------------------------- Proportion of Remaining Principal Amount Being Prepaid --------------------------------------------------------------------------------   0 --------------------------------------------------------------------------------   3 --------------------------------------------------------------------------------   6 --------------------------------------------------------------------------------   9 --------------------------------------------------------------------------------   12 --------------------------------------------------------------------------------   24 --------------------------------------------------------------------------------   36 --------------------------------------------------------------------------------   48 --------------------------------------------------------------------------------   60 --------------------------------------------------------------------------------   84 --------------------------------------------------------------------------------   120 --------------------------------------------------------------------------------   240 --------------------------------------------------------------------------------   360 -------------------------------------------------------------------------------- 90-100%   0   .26   .49   .71   .94   1.8   2.7   3.4   4.2   5.6   7.4   11.6   14.0 60-89%   0   .30   .59   .86   1.15   2.2   3.3   4.3   5.3   7.1   9.4   15.0   18.1 30-59%   0   .31   .63   .95   1.27   2.6   3.9   5.3   6.6   9.1   12.6   21.2   26.2 0-29%   0   .31   .63   .95   1.27   2.6   4.0   5.4   7.0   10.2   15.7   33.4   46.0 TABLE III: NONAMORTIZING (INTEREST ONLY) LOANS     Months Remaining To Maturity/Repricing1 -------------------------------------------------------------------------------- Proportion of Remaining Principal Amount Being Prepaid --------------------------------------------------------------------------------   0 --------------------------------------------------------------------------------   3 --------------------------------------------------------------------------------   6 --------------------------------------------------------------------------------   9 --------------------------------------------------------------------------------   12 --------------------------------------------------------------------------------   24 --------------------------------------------------------------------------------   36 --------------------------------------------------------------------------------   48 --------------------------------------------------------------------------------   60 --------------------------------------------------------------------------------   84 --------------------------------------------------------------------------------   120 --------------------------------------------------------------------------------   240 --------------------------------------------------------------------------------   360 -------------------------------------------------------------------------------- 0-100%   0   .31   .61   .91   1.21   2.3   3.4   4.4   5.3   6.9   8.9   13.0   14.8 -------------------------------------------------------------------------------- 1For the remaining period to maturity/repricing between any two maturities/repricings shown in the above schedules, interpolate between the corresponding factors to the closest month.     The holder of this note is not required to actually reinvest the prepaid principal in any U.S. Government Treasury Obligations, or otherwise prove its actual loss, as a condition to receiving a prepayment fee as calculated above. -------------------------------------------------------------------------------- QuickLinks AMENDED TERM NOTE TERM NOTE USANA HEALTH SCIENCES, INC. Exhibit A INTEREST PROVISIONS Article 1: Definitions Article 2: Interest Rate Options Exhibit 1—PREPAYMENT FEES Definition of Prepayment Reference Rate for Variable Rate Loans Definition of Prepayment Reference Rate for Fixed Rate Loans Calculation of Prepayment Fee Example of Prepayment Fee Calculation PREPAYMENT FEE FACTOR SCHEDULE
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT       This Amendment No. 1 (the “Agreement”) to the Employment Agreement between Vadim Babenko, residing at 18 Pitt Court Rockville, MD 20850 (“Employee”) and InforMax, Inc., a Delaware corporation, with its principal offices at 7600 Wisconsin Avenue, Suite 1100, Bethesda, MD 20814 (“InforMax” or the “Company”), amends the existing Employment Agreement between the parties executed on July 14, 2000 (the “Employment Agreement”), effective as of March 1, 2001 (the “ New Effective Date”) and sets forth the amended terms and conditions of Employee’s continued employment by InforMax. WITNESSETH       WHEREAS, Employee is presently employed by InforMax; and       WHEREAS, InforMax and Employee believe that it is their mutual best interest to amend the Employment Agreement to assure the continued services of Employee on behalf of InforMax subject to the terms and conditions set forth herein;       NOW THEREFORE, in consideration of the mutual premises and of the mutual covenants and conditions contained in this Agreement, the parties hereto, intending to be legally bound, agree as follows: 1. Amended provisions of Employment Agreement. The Employment Agreement is hereby amended as of the New Effective Date as indicated below in this Section 1. Except as expressly amended below, the Employment Agreement in the form originally executed by the parties shall remain binding upon the parties.         (i) Section 1 “Employment” as contained in the Employment Agreement is hereby deleted in its entirety and replaced with the amended provision below to read as follows as of the New Effective Date:           “1. Employment. Commencing as of the New Effective Date and until the end of the term of this Agreement, Employee shall be available to perform and shall perform for the Company such services (as set forth in the Description of Services attached hereto as Exhibit A) and as the President of the Company may reasonably designate. InforMax hereby confirms that from and after the New Effective Date, Employee shall no longer be subject to InforMax’s Insider Trading Policy, including, but not limited to, application of the “trading window” provision contained in Section B(2) thereof (as such securities policy may be amended and/or replaced, in whole or in part, from time to time by the Company, except as may be required by applicable law). InforMax and the Employee acknowledge and agree that the Employee ceased to be an “officer” and an “executive officer” (as such terms are defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended and Item 401(b) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), respectively) of InforMax as of the New Effective Date. It is acknowledged by the Company and Employee that, from and after the New - i - --------------------------------------------------------------------------------   Effective Date, neither party expects that Employee shall be provided with material non-public information or access to such information by the Company in connection with Employee’s ordinary course of providing the services contemplated by this Agreement.     During the term of this Agreement, Employee shall have physical access to InforMax facilities located at 7600 Wisconsin Avenue and at 2 Bethesda place, as needed to carry out his duties, and to the office he currently occupies in 2 Bethesda Place.”           (ii) Section 2 “Term of Agreement” as contained in the Employment Agreement is deleted in its entirety and replaced with the amended provision below to read as follows as of the New Effective Date:              “2. Term of Agreement. Subject to Section 4 hereof, the term of this Agreement shall commence on the New Effective Date and shall terminate on March 1, 2002.”         (iii) Section 3(a) “Compensation—Base Salary” as contained in the Employment Agreement is deleted in its entirety and replaced with the amended provision below to read as follows as of the New Effective Date:              "(a) Base Salary/ Options. Employee shall be entitled to receive, and the Company shall be obligated to provide, compensation of $300,000 to Employee during the term of this Agreement. Such payments shall be made by the Company on a semi-monthly basis in equal amounts. Once the Company’s aggregate payments to the Employee during the term of this Agreement have reached $300,000, the Company’s payment obligations with regard to Employee’s compensation shall cease in all respects. Employee hereby acknowledges that pursuant to Section 3(c) of Employee’s Stock Option Agreement dated March 19, 1999, Employee’s right to purchase up to 1,683,450shares of InforMax’s Common Stock thereunder (subject to adjustment as provided therein), shall terminate three years from Employee’s effective date of termination. Employee hereby acknowledges that pursuant to Section 3(c) of Employee’s Stock Option Agreement dated December 11, 1997, Employee’s right to purchase up to 668,000 shares of InforMax’s Common Stock thereunder (subject to adjustment as provided therein), shall terminate three months from Employee’s effective date of termination. From the New Effective Date, Employee shall not be entitled to the receipt of any payments or benefits from InforMax other than those provided for in this Section 3.”         (iv) Section 3(b) “Benefit Plans” as contained in the Employment Agreement is deleted in its entirety and replaced with the amended provision below to read as follows as of the New Effective Date:         “Employee shall be entitled to participate in such benefits plans of InforMax now in existence or which may hereafter during the term of this Agreement become effective and available for employee participation. In particular, until the expiration of the term of this agreement or its earlier termination pursuant to the terms hereof, Employee shall be entitled to group medical insurance for the Employee and his --------------------------------------------------------------------------------   family, continued use of the Company-leased car currently made available to the Employee, and a Company-paid cell phone which shall be used according to Company policy"         (v) Section 3(f) “Compensation—Affiliate Status” is hereby added as a new provision to the Employment Agreement to read as follows as of the New Effective Date:         "(f) Affiliate Status. InforMax hereby confirms that, but for Employee’s beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of shares of InforMax’s Common Stock, par value $.001 per share, as of the New Effective Date of this Agreement, InforMax would not otherwise deem Employee to be an “affiliate” of InforMax, as such term is defined in Rule 144(a)(1) promulgated under the Securities Act. At such time as Employee provides evidence reasonably satisfactory to InforMax that indicates that Employee ceases to beneficially own ten percent (10%) or more of InforMax’s outstanding Common Stock, InforMax hereby agrees that, upon (i) Employee’s written request and delivery of a representation letter to InforMax detailing, , Employee’s beneficial ownership, and (ii) expiration of the ninety (90) day period from the date that Employee does not beneficially own ten percent (10%) of InforMax’s outstanding Common Stock contained in Rule 144(k) promulgated under the Securities Act, InforMax will promptly authorize and direct its transfer agent to remove any stop-transfer order and other restrictive legend limiting the free transferability, by virtue of the shares being deemed “restricted securities” under Rule 144, of Employee’s 83,500 shares represented by Certificate No. IM2, upon Employee’s surrender of such stock certificate. Notwithstanding the provisions of this Section 3, Employee agrees to continue to be bound by the Market Standoff Letter between Employee and Company dated June 22, 1999 and any other restrictions or agreements to which the shares are subject.         (v) Section 4 “Termination of Employment” as contained in the Employment Agreement is deleted in its entirety and replaced with the provision below to read as follows as of the New Effective Date:         “4. Termination of Employment. Subject to the terms and conditions of this Section 4, Employee’s employment with InforMax may be terminated prior to the completion of the term detailed in Section 2 of this Agreement:         (a) This Agreement shall terminate automatically upon the death of Employee.           (b) This Agreement may be terminated by the Company by written notice to Employee at any time upon a material breach by Employee of any of the material provisions of this Agreement, after written notice by the Company and 30 days’ reasonable opportunity by Employee from the date of such notice to cure such breach.           (c) Employee may, at any time and with or without cause, terminate this Agreement upon written notice to the Company given not less than seven --------------------------------------------------------------------------------   (7) days prior to such termination. Such notice shall specify the effective date of termination for all purposes hereunder and as contemplated by Section 3 hereof.              (d) Upon a termination contemplated by Sections 4(a) or (b), the Company’s payment obligations under Section 3(a) hereto shall cease as of the date thereof. Upon a termination by the Employee under Section 4(c) prior to the end of the term contemplated by Section 2, the Company shall promptly pay to Employee any net compensation amount due unto Employee under Section 3, such that the total compensation paid to Employee during the term and upon termination shall equal $300,000 in the aggregate.         (vi) Section 5 “Devotion of Time” as contained in the Employment Agreement is deleted in its entirety and replaced with the provision below to read as follows as of the New Effective Date:           “5. Devotion of Time. Except for vacations as provided herein and absences due to temporary illness or family emergencies, Employee agrees to devote necessary time during the term of this Agreement to advance the Company’s interests. Nothing in this Agreement shall be construed to prevent Employee from concurrently providing services to persons other than the Company, subject to the limitations set forth in Sections 6, 7 and 8 hereof and provided, however, that such other employment, engagements and activities (i) do not materially interfere with his ability to perform the services contemplated hereby, (ii) are not otherwise injurious to the business or reputation of the Company or any of its subsidiaries, and (iii) are disclosed in advance to the President of the Company, or to such other person as the Company may direct. Employee agrees, however, to notify the Company in writing of any and all potential or actual conflicts of interest arising as a result of its services to third parties during the term of this Agreement, and shall provide the Company with sufficient detail to enable the Company to evaluate any potential conflicts of interest. In the event that the Company, in its sole discretion, determines that Employee has a potential or actual conflict of interest (whether or not Employee has so notified the Company), the Company, at its sole discretion, may terminate this Agreement in accordance with the termination provision hereof.” 2. Entire Agreement and Severability. This Agreement, together with Employment Agreement amended hereby, constitutes the entire agreement between the parties hereto with respect to the transactions contemplated herein, and it supersedes all prior oral or written agreements, commitments or understandings with respect to the matters provided for herein. No amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed and delivered by the party against whom enforcement of the amendment, modification, or discharge is sought. Invalidity or unenforceability of any provision of this Agreement shall in no way affect the validity of enforceability of any other provision. 3. Waiver. No delay or failure on the part of any party hereto in exercising any right, power or privilege under this Agreement or under any other documents furnished in connection with or pursuant to this Agreement shall impair any such right, power or privilege or be construed as a -------------------------------------------------------------------------------- waiver of any default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exercise of such right, power or privilege, or the exercise of any other right, power or privilege. No waiver shall be valid against any party hereto unless made in writing and signed by the party against whom enforcement of such waiver is sought and then only to the extent expressly specified therein. 4. Notices. All notices, demands, requests, or other communications that may be or are required to be given, served, or sent by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, sent by overnight courier or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telecopy or telex, addressed as follows: (a)     If to the Company:   InforMax, Inc. 7600 Wisconsin Avenue 11th Floor Bethesda, MD 20814 Attn: James E. Bernstein, M.D. (b)     If to Employee:   Dr. Vadim Babenko 18 Pitt Court Rockville, MD 20850 5. Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required. It shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a number of counterparts containing the respective signatures of, or on behalf of, all of the parties hereto. --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the Company and Employee have caused this Agreement to be executed as of the date set forth below:       INFORMAX, INC.   By: /s/ James E. Bernstein, M.D. —————————————————————— Date: May 1, 2001 Name: James E. Bernstein, M.D. Title: President   EMPLOYEE   /s/Dr. Vadim Babenko —————————————————————— Date: May 1, 2001 Dr. Vadim Babenko -------------------------------------------------------------------------------- EXHIBIT A – DESCRIPTION OF SERVICES Employee shall provide services in the area of bioinformatics and genomics technology and market opportunity assessment as directed by the President.
Exhibit (10)(q)* to Report on Form 10-K for Fiscal Year Ended June 30, 2001 by Parker-Hannifin Corporation     Parker-Hannifin Corporation 2002-03-04 Long Term Incentive Plan Description.       *Numbered in accordance with Item 601 of Regulation S-K. PARKER-HANNIFIN CORPORATION 2002-03-04 LONG TERM INCENTIVE PLAN The purpose of the Plan is to provide a long-term incentive portion of bonus compensation. The Plan's focus is on return on equity. It balances a competitive base salary pay structure, an annual cash bonus compensation based on a return on average assets, and a stock option plan with ten-year exercise rights. The return on equity objective is a key financial goal and comprehends return on sales at the net income level and asset utilization. The participants in this Plan are limited to Corporate Officers and Group Presidents. They clearly can affect broadly the overall financial performance of the company. The key elements of Parker-Hannifin's Plan are as follows: Participation Those key executives having a critical impact on the long term performance of the Company selected by the Chief Executive Officer and approved by the Compensation and Management Development Committee of the Board. Performance Period Three-year average Return on Equity with the grant to cover FY 02, 03 and 04. Size of Awards Commensurate with bonus compensation and stock option level of participants as determined by the CEO with approval of the Compensation and Management Development Committee. Form of Awards Awards will be expressed as a certain number of shares of Parker stock calculated by dividing the dollar equivalent of the award by the June 30, 2001 Parker stock price. Performance Objective The Return on Equity objective is 15%. Value Range Actual value of the payments under the Plan will be within a range of 25% to 200% of target value based on performance against the objective. Performance Range For performance below a threshold of 9% ROE objective, no payment will be made. For performance between 9% and 21% ROE, payments will be earned between 25% and 200% of the target value on a proportional basis above and below the target value. The Plan is capped at 200%. -1- Payment Payments earned under the Plan will be paid at the end of the three-year performance period. Payment will be made in restricted stock of the Corporation unless the participant is retired at the time of payment or has previously elected a cash payment to be deferred under the Corporation's Executive Deferral Plan. The value of the cash payment in lieu of restricted shares is determined based upon the share price of Parker-Hannifin's Common Shares on June 30, 2004. The restricted shares would be subject to a vesting schedule and such other terms and conditions determined by the Compensation Committee at the time of issuance. Any payout pursuant to this plan that will result in the exceedance of the $1 million cap on the tax deductibility of executive compensation will be deferred until such time in the earliest subsequent fiscal year that such cap will not be exceeded. Termination of Employment If a participant dies, retires (with consent of the Compensation and Management Development Committee if earlier than age 60) or is disabled during the performance period, he/she will receive a pro rata portion of the award payable upon completion of the performance period. A participant who resigns or is otherwise terminated during the performance period forfeits the award. Performance Schedule The Plan performance schedule, based on the three-year simple average of annual report return on average equity, is as follows: Return on Equity   -------------------------------------------------------------------------------- <9.0%       9.0%       11.0%       13.0%       15.0%       17.0%       19.0%       21.0%    -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     Payout % 0   25 50 75 100 133 167 200 Change in Control In the event of a "Change in Control" of the Corporation (as defined below), the payout under the Plan will be accelerated to fifteen (15) days after the Change in Control. The amount of the payout will be in cash and will be the greater of the target award or the amount the payout would have been had ROE during the Performance Period to the end of the fiscal quarter immediately preceding the date of the Change in Control continued throughout the Performance Period. The cash amount of such payout will be based upon the closing New York Stock Exchange stock price of the Corporation's Common Shares on the first day of the Performance Period or the date of the Change in Control, whichever is greater. If the Participant will reach age 65 prior to the end of the Performance Period, the payout in the event of a Change in Control will be reduced on a pro rata basis. -2- "Change in Control" means the occurrence of one of the following events:         (i) any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Parker-Hannifin Corporation (the "Company") representing 20% or more of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board of Directors of the Company (the "Board") (the "Company's Voting Securities"); provided, however, that the event described in this paragraph shall not be deemed to be a Change in Control by virtue of any of the following situations: (A) an acquisition by the Company or any corporation or entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities of such corporation or other entity (a "Subsidiary"); (B) an acquisition by any employee benefit plan sponsored or maintained by the Company or any Subsidiary; (C) an acquisition by any underwriter temporarily holding securities pursuant to an offering of such securities; (D) a Non-Control Transaction (as defined in paragraph (iii)); (E) as pertains to a Plan participant (the "Executive"), any acquisition by the Executive or any group of persons (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act) including the Executive (or any entity in which the Executive or a group of persons including the Executive, directly or indirectly, holds a majority of the voting power of such entity's outstanding voting interests); or (F) the acquisition of Company Voting Securities from the Company, if a majority of the Board approves a resolution providing expressly that the acquisition pursuant to this clause (F) does not constitute a Change in Control under this paragraph (i);         (ii) individuals who, at the beginning of any period of twenty-four (24) consecutive months, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority thereof; provided, that (A) any person becoming a director subsequent to the beginning of such twenty-four (24) month period, whose election, or nomination for election, by the Company's shareholders was approved by a vote of at least two-thirds of the directors comprising the Incumbent Board who are then on the 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 paragraph (ii), considered as though such person were a member of the Incumbent Board; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be a member of the Incumbent Board;         (iii) the consummation of a merger, consolidation, share exchange or similar form of corporate reorganization of the Company or any Subsidiary that requires the approval of the Company's shareholders, whether for such transaction or the issuance of securities in connection with the transaction or otherwise (a "Business Combination"), unless (A) immediately following such Business Combination: (1) more than 50% of the total voting power of the corporation resulting from such Business Combination (the "Surviving Corporation") or, if applicable, the ultimate parent corporation which directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent -3- Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to the Business Combination (or, if applicable, shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (2) no person (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), and (3) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), following the Business Combination, were members of the Incumbent Board at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (a "Non-Control Transaction") or (B) the Business Combination is effected by means of the acquisition of Company Voting Securities from the Company, and a majority of the Board approves a resolution providing expressly that such Business Combination does not constitute a Change in Control under this paragraph (iii); or         (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company and its Subsidiaries.         Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which, by reducing the number of Company Voting Securities outstanding, increases the percentage of shares beneficially owned by such person; provided, that if a Change in Control would occur as a result of such an acquisition by the Company (if not for the operation of this sentence), and after the Company's acquisition such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control shall then occur.         Notwithstanding anything in this Plan to the contrary, if the Executive's employment is terminated prior to a Change in Control, and the Executive reasonably demonstrates that such termination was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control, (a "Third Party"), then for all purposes of this Plan, the date immediately prior to the date of such termination of employment shall be deemed to be the date of a Change in Control for such Executive. -4-
Exhibit 10.30     WELLS FARGO BANK                                                                                                    REVOLVING LINE OF CREDIT NOTE   $3,000,000.00 San Jose, California   August 10, 2001   FOR VALUE RECEIVED, the undersigned Fiberstars, Inc. (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATINAL ASSOCIATION (“Bank”) at its office at Santa Clara Valley RCBO, 121 Park Center Plaza 3rd Flr, San Jose, CA  95113, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of $3,000,000.00, or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.   DEFINITIONS:   As used herein, the following terms shall have the meanings set forth after each, and any other tem defined in this Note shall have the meaning set forth at the place defined:   (a)       “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close.   (b)       “Fixed Rate Term” means a period commencing on a Business Day and continuing for 1, 2, or 3 months, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than $100,000.00; and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.   (c)       “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) determined by dividing Base LIBOR by a percentage equal to 100% less any LIBOR Reserve Percentage.   (i)            “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies.  Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other marked indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.   (ii)           “LIBOR Reserve Percentage” mans the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term   (d)       “Prime Rate” means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s base rates and serves as the basis upon which effective rate of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate.   INTEREST:   (a)       Interest.  The outstanding principal balance of Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (I) at a fluctuating rate per annum equal to the Prime Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be 1.75000% above LIBOR in effect on the first day of the applicable Fixed Rate Term.  When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank.  With respect to each LIBOR selection hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.   (b)       Selection of Interest Rate Options.  At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (I) the interest rate option selected by Borrower, (ii) the principal amount subject thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.  Any such notice may be given by telephone (or such other electronic methods Bank may permit) so long as, with respect to each LIBOR selection, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at it’s sole option by without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.   (c)       Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.   (d)      Payment of Interest.  Interest accrued on this Note shall be payable on the 28th day of each month, commencing August 28, 2001.   (e)       Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note.   (f)        Commitment Fee.  Prior to the initial extension of credit under this Note, Borrower shall pay to Bank a non-refundable commitment fee of $500.00.   (g)       Collection of Payments.  Borrower authorizes Bank to collect all interest and fees due hereunder by charging Borrower’s deposit account number 4496-813031 with Bank, or any other deposit account maintained by any Borrower with Bank, for the full amount thereof.  Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.   SIGHT COMMERCIAL AND STANDBY LETTER OF CREDIT SUBFEATURE:   (a)       Letter of Credit Subfeature.  As a subfeature under this Note, Bank agrees from time to time during the term hereof to issue or cause an affiliate to issue standby letters of credit for the account of Borrower to finance guarantee lease payments of their German facility and/or sight commercial letters of credit for the account of Borrower to finance Borrower’s inventory purchases (each, a “Letter of Credit” and collectively, “Letters of Credit”); provided however, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed $400,000.00.  The form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole discretion.  Each standby Letter of Credit shall be issued for a term not to exceed 365 days, and each commercial Letter of Credit shall be issued for a term not to exceed 180 days, as designated by Borrower; provided however, that no standby Letter of Credit shall have an expiration date more than 90 days beyond the maturity date of this Note.  The undrawn amount of all Letters of Credit shall be reserved under this Note and shall not be available for borrowings hereunder.  Each Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit agreements, applications and any related documents required by Bank in connection with the issuance thereof.  Each draft paid under a Letter of Credit shall be deemed an advance under this Note and shall be repaid by Borrower in accordance with the terms and conditions of this Note; provided however, that if advances hereunder are not available, for any reason, at the time any draft is paid, then Borrower shall immediately pay to Bank the full amount of such draft, together with interest thereon from the date such draft is paid to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances hereunder.  In such even Borrower agrees that Bank, in its sole discretion, may debit any deposit account maintained by Borrower with Bank for the amount of any such draft.   (b)       Letter of Credit Fees.  Borrower shall pay to Bank fees upon the issuance of each Letter of Credit, upon the payment or negotiation of each draft under any Letter of Credit and upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank’s standard fees and charges then in effect for such activity.   CLEAN ACCEPTANCE SUBFEATURE:   (a)       Acceptance Subfeature.  As a subfeature under this Note, Bank agrees from time to time during the term hereof to create bankers’ acceptances (each, an “Acceptance” and collectively, “Acceptances”) for the account of Borrower by accepting drafts drawn on Bank By Borrower for the purpose of financing Borrower’s importation of good into the United States; provided however, that the aggregate amount of all outstanding Acceptances shall not at any time exceed $400,000.00.  The form and substance of each Acceptance shall be subject to approval by Bank, in its sole discretion.  Each Acceptance shall be in the minimum amount of $5,000.00.  Each Acceptance shall be subject to the additional terms and conditions of an Acceptance Agreement in form and substance satisfactory to Bank.  Each Acceptance shall be created for a term not to exceed the lesser of 365 days, as designated by Borrower, or such period of time as may be necessary to comply with the terms of the Acceptance Agreement; provided however, that no Acceptance shall mature more than 90 days beyond the maturity date of this Note.  The outstanding amount of all Acceptances shall be reserved under this Note and shall not be available for borrowings hereunder.  The amount of each Acceptance which matures shall be deemed an advance under this Note and shall be repaid by Borrower in accordance with the terms and conditions of this Note; provided however, that if advances hereunder are not available, for any reason, at the time any Acceptance matures, then Borrower shall immediately pay to Bank the full amount of such matured Acceptance, together with interest thereon form the date such Acceptance matures to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances hereunder.  In such event Borrower agrees that Bank, in its sole discretion may debit any deposit account maintained by Borrower with Bank for the amount of any such Acceptance.  All Acceptances created hereunder shall be discounted with Bank.   (b)       Acceptance Fees.  For each Acceptance created hereunder, Borrower shall pay to Bank on the data such Acceptance is created an acceptance fee determined in accordance with Bank’s standard fees and charges then in effect for the creation of Acceptances.   BORROWING AND REPAYMENT:   (a)       Use of Proceeds.  Advances under this Note shall be available solely to finance working capital requirements.   (b)       Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with, or at any time as a supplement to, this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above; and provided further, that Borrower shall maintain a zero balance on advances under this Note for a period of at lease 30 consecutive days during each fiscal year.  All payments credited to principal shall be applied first, tot the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first.  The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of any principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and payable in full on October 15, 2001; except with respect to any draft paid under a commercial Letter of Credit and any Acceptance which matures subsequent to said date, the full amount of which shall be due and payable by Borrower immediately upon payment or at such maturity as applicable.   (c)       Advances.  Advances hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (i) David N. Ruckert or Roland Dennis or Bob Connors, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account.  The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.   PREPAYMENT:   (a)       Prime Rate.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty.   (b)       LIBOR.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of $100,000.00; provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.  In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which his the sum of the discontinued monthly differences for each month from the month of prepayment through the month in which such Fixed Rate term matures, calculated as follows for each such month:   (i)            Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.   (ii)           Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect o the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.   (iii)          If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.   Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.  Each Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount  represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum 2.000% above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).  Each change in the rate of interest on any such past due prepayment fee shall become effective on the date each Prime Rate change is announced within Bank.   COLLATERAL:      As security for the payment and performance of all obligations of Borrower under this Note, Borrower grants to Bank security interests of first priority (except as agreed otherwise by Bank in writing) in the following property of Borrower, now owned or at any time hereafter acquired: all accounts receivable, other rights to payment and general intangibles; all inventory, together with security interests in all other personal property of Borrower now or at any time hereafter pledged to Bank as collateral for any other commercial credit accommodation granted by Bank to Borrower.  All of the foregoing shall be evidenced by a subject to the terms of such security agreements, financing statements and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank.  Borrower shall reimburse Bank immediately upon demand for all costs and expenses incurred by Bank in connection with any of the foregoing security, including without limitation, filing fees and allocated costs of collateral audits.   EVENTS OF DEFAULT:      Any default in the payment or performance of any obligation under this Note, or any defined event of default under any loan agreement now or at any time hereafter in effect between Borrower and Bank (whether executed prior to, concurrently with or at any time after this Note), shall constitute an “Event of Default” under this Note.   MISCELLANEOUS:   (a)       Remedies.  Upon the occurrence of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal, interest, fees and charges outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any of the holder to extend any further credit hereunder shall immediately cease and terminate.  Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.   (b)       Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.   (c)       Governing Law.  This note shall be governed by and construed in accordance with the laws of the State of California.   IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.   Fiberstars, Inc.         By: /s/ Robert A. Connors   Title: Chief Financial Officer            
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.17 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS ENCLOSED BY BRACKETS AND UNDERLINED. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. AMERINET, INC. GROUP PURCHASING AGREEMENT Between AMERINET, INC. And SPECIALTY LABORATORIES ("Supplier")     This Group Purchasing Agreement (the "Agreement") is entered into effective as of the date set forth on the signature page hereof, between AmeriNet, Inc. ("AmeriNet"), and the Supplier named above ("Supplier").     WHEREAS, AmeriNet is a Delaware corporation, representing the member Institutions served by its Shareholders (which member institutions are hereinafter referred to as the "Institutions" or Participating Institutions"); and     WHEREAS, AmeriNet's Shareholders are Hospital Shared Services, Warrendale, PA; Intermountain Health Care1 Inc., Salt Lake City, UT; and Vector Healthsystems, Providence, RI. Supplier acknowledges that any Institution meeting the membership requirements of those Shareholders shall be eligible for AmeriNet programs and pricing, and shall be entitled to place purchase orders under the terms of this Agreement for the duration of this Agreement; and     WHEREAS, AmeriNet heretofore delivered its Request for Proposal to Supplier, and Supplier has agreed to the terms of the Request for Proposal and this Agreement; and     WHEREAS, the philosophy of AmeriNet is to secure Agreements with suppliers that provide to the Participating Institutions products and services which are of optimum quality, at appropriate pricing and with appropriate service. NOW, THEREFORE, Supplier and AmeriNet agree as follows: 1.The term of this Agreement is for a term of THIRTY-SIX (36) months, commencing on SEPTEMBER 1, 1998, and ending on AUGUST 31, 2001 (the "Contract Period"). RESPONSE:   AGREED. PLEASE SEE SPECIALTY'S "CONTRACT TERMS AND RESTRICTIONS". 2.Execution of this Agreement shall be construed as a guarantee by the Supplier of its ability to supply any products included within this Agreement to all Participating Institutions for the duration of the Agreement. Should the Supplier fail to make any delivery within customary time periods, and should such failure cause any Institution purchase in the open market in order to obtain items not delivered, then the Supplier shall provide reimbursement to said Institution for the difference between contract costs and excess costs occasioned by such open-market purchases. Multiple delinquencies in delivery by the Supplier may be construed as the Supplier's inability to -------------------------------------------------------------------------------- meet the reasonable requirements of AmeriNet's Institutions, and shall constitute a material breach of contract sufficient to cause cancellation of the Agreement by AmeriNet. Such cancellation shall not relieve the Supplier of any liability for damages resulting. RESPONSE:   SPECIALTY GUARANTEES THE ABILITY TO PERFORM SERVICES INCLUDED WITHIN THIS AGREEMENT. SPECIALTY SHALL NOT BE LIABLE FOR ANY FAILURE TO DELIVER ITS DUTIES UNDER THIS AGREEMENT DUE TO ACTS OF GOD; ACTS, REGULATIONS OR LAWS OF ANY GOVERNMENT; WAR OR ANY OTHER CONDITION OR CAUSE BEYOND REASONABLE CONTROL. 3.If in AmeriNet's sole judgment, the Supplier is unable to supply Institutions' reasonable requirements for the duration of this agreement, AmeriNet reserves the right at any time, or from time to time, to select an alternate or additional supplier in order to supplant or supplement Supplier. RESPONSE:   AGREED. 4.If in AmeriNet's sole judgment, Supplier does not maintain adequate equipment, inventory or personnel to properly service Institutions' requirements, then this Agreement shall be subject to cancellation by AmeriNet upon thirty (30) days written notice. RESPONSE:   AGREED. 5.AmeriNet reserves the right to terminate this Agreement on twenty-four (24) hours notice in the event Supplier files for bankruptcy, for reorganization or for protection from its creditors under federal law or the laws of any state or nation. AmeriNet further reserves the right to cancel this Agreement on twenty-four (24) hours notice in situations where the Supplier transfers assets in fraud of its creditors and in situations where AmeriNet, in its sole discretion, believes that the Supplier is financially unable to adequately carry out its obligations under this Agreement. RESPONSE:   AGREED. 6.Attached as Addendum A to this Agreement is a current AmeriNet membership list. AmeriNet shall further provide the Supplier with any membership additions or deletions on a routine basis. The Supplier shall guarantee that all the benefits of this Agreement shall be granted to all AmeriNet member Institutions, but only to authorized AmeriNet member Institutions. RESPONSE:   AGREED. 7.The Supplier, upon receipt from AmeriNet of membership deletions, shall immediately make those deleted Institutions ineligible for contract benefits, and will charge those deleted Institutions pricing consistent with lesser volume purchases than those represented by the Group (AmeriNet). RESPONSE:   AGREED. 8.Should the Supplier distribute its products directly to Institutions, rather than through dealers, each Institution shall place its purchase orders directly with the Supplier. It will be the Supplier's responsibility to obtain payment from Institutions. All disputes and controversies concerning any purchase order, invoice, products, shipments or delivery dates shall be handled by Supplier on a direct basis with the Institutions. With respect to all products supplied by Suppliers, title shall pass from the Supplier to the Institution at the point of delivery, and if any sales tax is due, it shall be Supplier's sole responsibility to collect and pay such tax. Supplier shall defend, indemnify and hold harmless AmeriNet against any and all suits, claims and expenses arising out of any failure to pay sales tax on said purchased products. RESPONSE:   AGREED. 9.Should the Supplier distribute its products in part or in total through dealers, Supplier shall agree to allow access to these special terms and pricing only to those dealers approved by AmeriNet. -------------------------------------------------------------------------------- Furthermore, Supplier agrees to provide written notification of contract terms and pricing to AmeriNet authorized dealers at least 30 working days prior to their effective date. Supplier shall be liable for compensation to AmeriNet authorized dealers for any and all costs incurred by the dealer for credit and rebilling, or any cost otherwise incurred by the dealer as a result of Supplier's failure to comply with this provision. RESPONSE:   AGREED. 10.In accordance with state and federal mandates, Supplier is expected to furnish to all AmeriNet Institutions, affiliates and participants the most current Material Safety Data Sheet (MSDS) for any hazardous substance purchased through this Agreement. Failure to comply with this stipulation may subject the Agreement to cancellation. RESPONSE:   AGREED. 11.Supplier shall present to Institutions a packing slip or invoice copy upon delivery of products. Information to be contained on these documents shall include, but not be limited to: purchase order number, date of shipment, description of products and quantities shipped. RESPONSE:   AGREED. 12.Supplier shall furnish only those brands specified in this Agreement or in subsequent contract addenda and shall not be allowed to furnish alternate or substitute brands to any Institution without receiving the prior approval of said Institutions. RESPONSE:   AGREED. 13.All products furnished by Supplier shall be packaged and labeled in accordance with good manufacturing practices and shall be shipped in containers that conform to all shipping regulations. No product which has been repackaged from original containers or which has been relabeled or which contains any effacement reducing its value shall be acceptable without the express prior consent of the Institutions. RESPONSE:   AGREED. PLEASE SEE SPECIALTY'S "SHIPPING INSTRUCTIONS". 14.Supplier shall provide for the reporting of all contract sales, by Participating Institution, to AmeriNet on a monthly basis unless other arrangements are specified in this Agreement.     In addition, Supplier shall be required to submit an administrative fee equal to [***]* of all gross sales realized under this Agreement to AmeriNet. -------------------------------------------------------------------------------- *PORTIONS OF THIS PAGE HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.     Supplier shall include the following information when submitting administrative fees and contract activity reports:     I.  Administrative Fees: A.Checks are to be made payable to "AmeriNet Inc." And NOT to a division or person's name. B.Check stubs must include AmeriNet's contract number and period for which administrative fees are being paid, i.e. 1/1/99 - 1/31/99. If a payment is being made on behalf of Supplier by a parent corporation, the contract Supplier's name should be identified on the face of the check stub.     II.  Contract Activity Reports: A.Supplier's name and AmeriNet's contract number should appear on all reports. -------------------------------------------------------------------------------- B.Reporting period must be identified, i.e. 1/1/99 - 1/31/99. C.Total product sales volume (not line item detail) must be identified for each member Institution, along with the Institution's name, address and zip code (Note: Zip code is mandatory information). Each Institution's HIN number may be substituted for name, address and zip code. D.At the end of all reports, total sales volume of all member Institutions must be included. E.Reports may be submitted in printed form, but submission via electronic media such as magnetic tape or diskette is preferred. Please refer to the enclosed specification sheet (Addendum C) for details.     All Supplier reports and administrative fee payments are due at AmeriNet within 30 days of the close of the reporting period. A quick-payment discount of 1% of the net AmeriNet payment due will be allowed for all checks and reports received within fifteen (15) days of the close of the reporting period. A late payment penalty surcharge of 1-1/2% per month of all net AmeriNet payments due may be assessed by AmeriNet for all checks and/or reports received more than thirty (30) days past the close of the reporting period.     Suppliers more than sixty (60) days past the close of the reporting period in submission of either checks or reports will be subject to cancellation of this Agreement by AmeriNet. RESPONSE:   SPECIALTY AGREES TO ALL THE SPECIFICATIONS OF ITEM 14 WITH ONE EXCEPTION, 1) SUPPLIER SHALL BE REQUIRED TO SUBMIT AN ADMINISTRATIVE FEE EQUAL TO [***]* OF ALL GROSS SALES REALIZED UNDER THIS AGREEMENT TO AMERINET, INC. -------------------------------------------------------------------------------- *PORTIONS OF THIS PAGE HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. 15.During the term of this Agreement, AmeriNet retains the right to audit or to have audited Supplier's records, such audits to include but not be limited to tracking of administrative contract fees, Supplier's costs and Supplier's freight charges. Should any audit produce evidence that proper credit for administrative contract fees was not given to AmeriNet, or overcharges were incurred by Institutions, then Supplier shall respond to such evidence and cure the default within fifteen (15) days. Failure to cure shall be sufficient cause for AmeriNet to seek actual damages. RESPONSE:   AGREED. 16.Upon request by AmeriNet, Supplier shall provide, at no charge, AmeriNet or its Institutions with representative samples of its products in quantities which are adequate for purposes of evaluation by the Institutions. RESPONSE:   AGREED. 17.All risk of damage to or loss of products shall be assumed by Supplier until deliveries are made to, and accepted by, AmeriNet's Institutions. RESPONSE:   AGREED. 18.Supplier acknowledges the Institution's right to return, without penalty, cost or delay, excess or unnecessary products for full original purchase price credit. RESPONSE:   AGREED. -------------------------------------------------------------------------------- 19.In the performance of its duties and obligations under this Agreement, SUPPLIER shall at all times be in compliance with all applicable Federal, State and Local laws, regulations and ordinances now in effect or as hereafter amended or promulgated. RESPONSE:   AGREED. 20.All products supplied by Supplier shall be warranted to be free from defects and imperfections in design, material, and workmanship, to be merchantable, and if intended for a particular purpose, to be fit for such purpose. RESPONSE:   AGREED. 21.Upon request of AmeriNet, Supplier shall provide evidence of insurance for a) Worker's Compensation covering its full liability under the appropriate states' statutes and b) sufficient comprehensive general (and professional, if applicable) liability insurance. Supplier shall keep and maintain the foregoing insurance during the term of the Agreement. Supplier shall immediately (and no later than fifteen (15) days prior to the effective date of any change) notify AmeriNet in writing of any changes in the foregoing insurance, including, but not limited to, cancellation, material change or change in coverage, AmeriNet shall have the right to change the Agreement on thirty (30) days notice in the event of any material change in insurance coverage. RESPONSE:   AGREED. CERTIFICATE OF INSURANCE LIABILITY WILL BE FORWARDED UPON REQUEST. 22.Supplier shall defend, indemnify and hold harmless AmeriNet, its Shareholders and Institutions against any and all suits, claims and expenses (including attorneys' fees) for damage to property or for injury to or death of persons caused by, or in any way arising out of, Supplier's furnishing of products, equipment or services thereunder, except those which result from the negligent act or omission of a purchasing Institution, its officers, agents or employees. RESPONSE:   EACH PARTY AGREES TO MUTUALLY INDEMNIFY AND HOLD HARMLESS, THEIR DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS, OR LIABILITIES OF ANY NATURE WHICH MAY BE ASSESSED AGAINST THEM BY THIRD PARTIES IN CONNECTION WITH THE PERFORMANCE OF SERVICES UNDER THIS AGREEMENT. 23.Supplier shall defend, indemnify and hold harmless AmeriNet, its Shareholders and Participating Institutions against any and all suits, claims and expenses (including attorneys' fees) arising out of the use or sale of any product thereunder being in violation of any rights under patent, trademark or copyright laws. RESPONSE:   EACH PARTY AGREES TO MUTUALLY INDEMNIFY AND HOLD HARMLESS, THEIR DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS, OR LIABILITIES OF ANY NATURE WHICH MAY BE ASSESSED AGAINST THEM BY THIRD PARTIES IN CONNECTION WITH THE PERFORMANCE OF SERVICES UNDER THIS AGREEMENT. 24.Supplier shall not assign, transfer, convey, sublet or otherwise dispose of any of its right title or interest in this Agreement without the prior written approval of AmeriNet. RESPONSE:   AGREED. 25.It is hereby understood and agreed that for the term of this Agreement, the total price paid by any Institution for products or services under this Agreement shall be [***]*. Supplier furthermore -------------------------------------------------------------------------------- agrees to adjust the terms and pricing provided under this Agreement to comply with the terms set forth in this section should any group or entity with [***]* -------------------------------------------------------------------------------- *PORTIONS OF THIS PAGE HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. RESPONSE:   AGREED. 26.In the event PRICE INCREASES occur during the term of this Agreement, which are permitted under the terms of this Agreement, Supplier shall give AmeriNet at least sixty (60) days prior written notice before implementing the increases. RESPONSE:   AGREED. 27.Supplier guarantees that it will not persuade or induce any Institution to terminate its status or relationship with AmeriNet or its Shareholders by offering more attractive contract prices, terms or conditions to the Institution directly or to another group purchasing program. Violation of that guarantee will constitute sufficient cause for AmeriNet to seek damages from Supplier for loss of all prospective contract administration fees. RESPONSE:   AGREED. 28.Should Supplier offer to any AmeriNet Institution a price lower than the contract price, or terms more attractive than the terms stipulated in this Agreement, then the same offer shall be considered to have been made to AmeriNet, and if accepted, will constitute an amendment to this Agreement. RESPONSE:   AGREED. 29.Upon the release of new products, Supplier agrees to add such products to the Agreement within thirty (30) days, subject to AmeriNet's approval. RESPONSE:   AGREED. 30.It is understood that new clinical developments in patient care or new regulatory agency restrictions may result in changed conditions, and if in AmeriNet's sole discretion, this Agreement or Supplier's products do not adequately meet such conditions, AmeriNet shall have the option to pursue alternate or additional contracts. RESPONSE:   AGREED. 31.This Agreement shall be signed by a duly authorized representative or agent of Supplier, such signature to constitute proof of that person's authority to bind the Supplier. RESPONSE:   AGREED. 32.Supplier represents that it prepared its proposal to AmeriNet without any collusion whatsoever among or between any other potential or actual contractors of AmeriNet. RESPONSE:   AGREED. 33.In that many AmeriNet member facilities are providers under the federal Medicare programs, the provisions of Section 952 of the Omnibus Reconciliation Act of 1980 {42 U.S.C. Section 1395X(V0(1)} (the "Act") may be in force. Supplier hereby agrees to abide by the terms of the Act and its interpretative regulations including, but not limited to, maintenance of records concerning services and cost incurred under said Agreement for four (4) years, and obtaining such a written contractual commitment from any of the Supplier's subcontractors. RESPONSE:   AGREED. -------------------------------------------------------------------------------- 34.The attached "AmeriNet Proposal Data Sheet" (Addendum B) must be completed and attached to this Agreement, and shall be a part of this Agreement, binding on Supplier. RESPONSE:   AGREED. 35.The enclosed addendum's referenced as: A.   AmeriNet ValuLab Membership List     -------------------------------------------------------------------------------- B.   Proposal Data Sheet     -------------------------------------------------------------------------------- C.   Supplier Contract Reporting     -------------------------------------------------------------------------------- D.   Supplier Proposal dated:     -------------------------------------------------------------------------------- 37.This document, along with the AmeriNet Request For Proposal, and the Addendums B and C (Parts A&B) attached, and the Supplier Proposal when properly executed by authorized parties of AmeriNet and the Supplier, will constitute the full complete Agreement between the parties as to the terms outlined herein. RESPONSE:   AGREED. I have read and understand AmeriNet's general terms and conditions and any special terms and conditions contained herein, and agree to supply the products and services for which prices are proposed in accordance with all provisions, terms and conditions stated herein. Agreement Accepted By: --------------------------------------------------------------------------------     SUPPLIER NAME:   Specialty Laboratories     -------------------------------------------------------------------------------- ADDRESS:   2211 Michigan Avenue     --------------------------------------------------------------------------------     Santa Monica, California 90404-3900     -------------------------------------------------------------------------------- AUTHORIZED REPRESENTATIVE:     SIGNED:   /s/ Gary Nay     -------------------------------------------------------------------------------- NAME (print):   Gary Nay     -------------------------------------------------------------------------------- TITLE:   Contract Administration Supervisor     -------------------------------------------------------------------------------- DATE:   June 19, 1998     -------------------------------------------------------------------------------- Agreement Accepted By: --------------------------------------------------------------------------------     NAME:   AmeriNet, Inc,     -------------------------------------------------------------------------------- ADDRESS:   2060 Craigshire Road     --------------------------------------------------------------------------------     P.O. Box 46930     --------------------------------------------------------------------------------     St. Louis, MO 63146     -------------------------------------------------------------------------------- AUTHORIZED REPRESENTATIVE:     SIGNED:   /s/ Mary Kay Pace     -------------------------------------------------------------------------------- NAME (print):   Mary Kay Pace     -------------------------------------------------------------------------------- TITLE:   Director of Operations     -------------------------------------------------------------------------------- DATE:   July 15, 1998     --------------------------------------------------------------------------------           AMERINET SHAREHOLDERS:         [LOGO]   [LOGO]   [LOGO] Hospital Shared Services   Intermountain Health Care   Vector Healthsystems -------------------------------------------------------------------------------- CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF THIS AGREEMENT. THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS ENCLOSED BY BRACKETS AND UNDERLINED. THE CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. May 2, 2001 Mr. Otto Schaefer Account Executive Business Development Specialty Laboratories 2211 Michigan Avenue Santa Monica, CA 90404-3900 Dear Otto, This letter acknowledges receipt and acceptance of your contract renewal proposal for Reference Laboratory Services for a period of three (3) years beginning June 1, 2001 and ending May 31, 2004. AmeriNet has assigned contract number [***]* to this agreement. Please reference this contract number on all correspondence, sales reports and checks for payment of [***]* administrative fees that are to be paid quarterly. Enclosed with this letter are two (2) copies of the signature page to execute this agreement. Please sign both copies and return one to my attention. We are pleased to enter into this venture with Specialty Laboratories and we look forward to working with you on this contract. Sincerely, Christine Kozlowski Christine Kozlowski Senior Contract Manager Enclosure *PORTIONS OF THIS PAGE HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILLED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.17
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.41 CERTIFICATE OF AMENDMENT TO THE BYLAWS OF VICINITY CORPORATION A Delaware Corporation     The undersigned, being the duly acting and appointed Secretary of Vicinity Corporation, a Delaware corporation, hereby certifies that effective June 29, 2001, the Board of Directors of this corporation amended the Bylaws of this corporation to read as follows, effective as of the date set forth below. Article III, Section 2 (Number and Qualification of Directors):     The number of directors of the corporation shall be five (5). Dated: June 29, 2001     /s/ MAURY AUSTIN    -------------------------------------------------------------------------------- Maury Austin, Secretary -------------------------------------------------------------------------------- QuickLinks CERTIFICATE OF AMENDMENT TO THE BYLAWS OF VICINITY CORPORATION A Delaware Corporation
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.33(e) AMENDMENT NUMBER ONE to the Guaranty dated as of January 24, 2001 made by AAMES FINANCIAL CORPORATION in favor of GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.     This AMENDMENT NUMBER ONE (this "Amendment") is made as of this 30th day of March, 2001, by and between AAMES FINANCIAL CORPORATION ("Guarantor") and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. (the "Lender"), to the GUARANTY, dated as of January 24, 2001, made by the Guarantor in favor of Lender (the "Guaranty"). RECITALS     WHEREAS, Guarantor has requested that Lender agree to the amendments to the Guaranty as set forth herein; and     WHEREAS, Lender has consented to such amendments to the Guaranty as set forth herein.     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and of the mutual covenants herein contained, the parties hereto hereby agree as follows:     SECTION 1. Effective as of March 30, 2001, clause (i) of Section 3(b) of the Guaranty is hereby deleted in its entirety and replaced with the following:     "(i) Maintenance of Tangible Net Worth. The Tangible Net Worth of the Guarantor, on a consolidated basis and on any given day, shall be not less than (A) $37,000,000 prior to January 1, 2002, and (B) $34,000,000, thereafter;"     SECTION 2. Effective as of March 30, 2001, clause (ii) of Section 3(b) of the Guaranty is hereby deleted in its entirety and replaced with the following:     "(ii) Maintenance of Ratio of Total Indebtedness to Tangible Net Worth. The Guarantor shall not permit the ratio of Total Indebtedness (not taking into account the aggregate outstanding amount borrowed by the Guarantor under any secured financing facilities for which adequate collateral has been pledged thereunder by the Guarantor) to Tangible Net Worth, on a consolidated basis and on any given day, to be greater than 10:1;"     SECTION 3. Effective as of March 30, 2001, clause (iii) of Section 3(b) of the Guaranty is hereby modified by deleting the reference to "$15,000,000" therein and replacing it with "$17,500,000".     SECTION 4. Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Guaranty.     SECTION 5. Representations. In order to induce Lender to execute and deliver this Amendment, the Guarantor hereby represents to Lender that as of the date hereof, after giving effect to this Amendment, the Guarantor is in full compliance with all of the terms and conditions of the Guaranty.     SECTION 6. Limited Effect. Except as expressly amended and modified by this Amendment, the Guaranty shall continue in full force and effect in accordance with its terms. Reference to this Amendment need not be made in the Guaranty or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Guaranty, any reference in any of such items to the Guaranty being sufficient to refer to the Guaranty as amended hereby. --------------------------------------------------------------------------------     SECTION 7. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO CONFLICT OF LAWS DOCTRINE APPLIED IN SUCH STATE.     SECTION 8. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. [SIGNATURE PAGE FOLLOWS] 2 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, Guarantor and Lender have caused this Amendment to be executed and delivered by their duly authorized officers as of the day and year first above written.     AAMES FINANCIAL CORPORATION,       Guarantor     By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------     GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,       LENDER     By: -------------------------------------------------------------------------------- Name: -------------------------------------------------------------------------------- Title: -------------------------------------------------------------------------------- 3 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.33(e) AMENDMENT NUMBER ONE to the Guaranty dated as of January 24, 2001 made by AAMES FINANCIAL CORPORATION in favor of GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
QuickLinks -- Click here to rapidly navigate through this document Exhibit F FORM OF PURCHASE AGREEMENT     THIS PURCHASE AGREEMENT is made as of the   day of September, 2000, by and between STAAR Surgical Company (the "Company"), a corporation organized under the laws of the State of Delaware, with its principal offices at 1911 Walker Avenue, Monrovia, California 91016, and the purchaser whose name and address is set forth on the signature page hereof (the "Purchaser").     IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and the Purchaser agree as follows:     1.  Sale and Purchase of the Shares.  The Company has authorized the sale of up to 1,500,000 shares (the "Shares") of common stock, par value $.01 per share (the "Common Stock"), of the Company on the terms and subject to the conditions set forth in this Agreement. At the Closing (as defined in Section 3), the Company will sell to the Purchaser, and the Purchaser will buy from the Company, upon the terms and conditions contained in this Agreement, the number of Shares specified below such Purchaser's name on the signature page attached hereto at the price set forth thereto.     2.  Other Purchasers.  The Company intends to enter into this same form of purchase agreement with certain other investors (the "Other Purchasers") and expects to complete sales of the Shares to them. The Purchaser's obligations hereunder are expressly not subject to or conditioned on the purchase of the Shares by any or all of the Other Purchasers.     3.  Closing; Delivery; Conditions.       3.1  Closing.  The purchase and sale of the Shares (the "Closing") shall occur as soon as practicable after the execution of this Agreement by the Company and the Purchasers at the time and location (the "Closing Date") agreed upon by the Company and the Placement Agent (as defined herein). The Placement Agent will promptly notify the Purchasers of the Closing Date by facsimile transmission or otherwise.     3.2  Delivery of the Shares.  Subject to the satisfaction of the conditions set forth below, at the Closing, the Company will deliver to each Purchaser one or more stock certificates, registered in the name of such Purchaser, representing the number of Shares to be purchased by such Purchaser as set forth opposite such Purchaser's name on the signature page hereto and bearing an appropriate legend stating that the Shares have not been registered under the Securities Act (as defined herein) and cannot be sold unless registered under the Securities Act, or an exemption from registration is available. Such deliveries shall be made against payment of the purchase price therefore (the "Purchase Price") by wire transfers to the respective accounts as designated in writing by the Company, of immediately available funds in the respective amounts set forth on the signature page hereto, as the case may be, at least two business days prior to the Closing. The name(s) in which the stock certificate are to be registered are set forth in the Stock Certificates Questionnaire attached hereto as part of Appendix I.     3.3  Closing Conditions.       (a) The Company's respective obligations to complete the purchase and sale of the Shares and deliver the stock certificates representing the Shares to the Purchasers at the Closing shall be subject to the following conditions, any one or more of which may be waived by the Company:     (1) receipt by the Company of same-day funds in the full amount of the Purchase Price for the Shares being purchased hereunder; and     (2) the accuracy of the representations and warranties made by the Purchasers and the fulfillment of those obligations of the Purchasers to be fulfilled prior to the Closing. 1 --------------------------------------------------------------------------------     (b) The Purchaser's obligation to accept delivery of such stock certificate(s) and to pay for the Shares evidenced thereby shall be subject to the accuracy in all material respects of the representations and warranties made by the Company herein and the fulfillment in all material respects of those obligations of the Company to be fulfilled prior to the Closing.     4.  Certain Definitions.  Unless the context otherwise requires, the terms defined in this Section 4 shall have the meaning herein specified for purposes of this Agreement.     "Agreement" means this agreement, including the exhibits and appendices thereto.     "Agreements" means this Agreement and the agreements executed by the Other Purchasers, collectively.     "Commission" means the Securities and Exchange Commission.     "Exchange Act" means the Securities and Exchange Act of 1934, as amended from time to time.     "Material Adverse Change" means a material adverse change in the condition (financial or otherwise), properties, business, or results of operations of the Company and its Subsidiaries taken as a whole.     "Material Adverse Effect" means a material adverse effect on the condition (financial or otherwise), properties, business, or results of operations of the Company and its Subsidiaries taken as a whole.     "Placement Agent" means CIBC World Markets Corp., and Adams, Harkness & Hill, Inc.     "Purchasers" means the Purchaser and the Other Purchasers.     "Private Placement Memorandum" means the Confidential Private Placement Memorandum dated [September XX, 2000], including all exhibits thereto.     "Registration Statement" means the registration statement on Form S-3, as may be amended, that will be filed pursuant to the Private Placement Memorandum with the Commission covering the re-sale of the Shares.     "Securities Act" means the Securities Act of 1933, as amended from time to time.     5.  Representations, Warranties and Covenants of the Company.  The Company hereby represents and warrants to, and covenants with, the Purchaser as follows:     5.1  Organization and Qualification.  The Company (and each such subsidiary or other entity controlled directly or indirectly by the Company (the "Subsidiaries") is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. The Company and each of its 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 by it or location of the assets or properties, owned, leased or licensed by it requires such qualification, except where failure to so qualify or to be in good standing would not have a Material Adverse Effect.     5.2  Authorized Capital Stock.  The Company had the authorized and outstanding capital stock set forth under the heading "Capitalization" in the Private Placement Memorandum, as of the date set forth therein. All of the issued and outstanding shares of the Company's Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, have been issued in compliance in all material respects with all federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and conform in all material respects to the description thereof contained in the Private Placement Memorandum. Except as disclosed in or contemplated by the Private Placement Memorandum, the Company does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to 2 -------------------------------------------------------------------------------- purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock.     5.3  Shares.  The Shares have been duly authorized and, when issued, delivered and paid for in the manner set forth in the Agreements, will be duly authorized, validly issued, fully paid and nonassessable, and will conform in all material respects to the description thereof set forth in the Private Placement Memorandum. No preemptive rights or other rights to subscribe for or purchase exist with respect to the issuance and sale of the Shares by the Company pursuant to this Agreement. No stockholder of the Company has any right (which has not been waived or has not expired by reason of lapse of time following notification of the Company's intent to file the Registration Statement) to require the Company to register the sale of any shares owned by such stockholder under the Securities Act in the Registration Statement. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Shares to be sold by the Company as contemplated herein.     5.4  Corporate Acts and Proceedings.  The Company has full legal right, corporate power and authority to enter into the Agreements and perform the transactions contemplated hereby and thereby. The Agreements have been duly and validly authorized, executed and delivered by the Company. The execution, delivery and performance of the Agreements by the Company or its Subsidiaries and the consummation of the transactions herein contemplated will not violate any provision of the organizational documents of the Company and will not result in the creation of any lien, charge, security interest or encumbrance upon any assets of the Company pursuant to the terms or provisions of, or will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company or the Subsidiaries are a party or by which the Company or the Subsidiaries or their respective properties may be bound or affected and in each case which would have a Material Adverse Effect or, to the Company's knowledge, under any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or its Subsidiaries or their respective properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except for compliance with the Blue Sky laws and federal securities laws applicable to the offering of the Shares. Upon their execution and delivery, and assuming the valid execution thereof by the respective Purchasers and payment of their respective Purchase Price, the Agreements will constitute valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Company in Section 9 hereof may be legally unenforceable.     5.5  Contracts.  The contracts described in the Private Placement Memorandum as being in effect on the date hereof that are material to the Company, are in full force and effect on the date hereof; and neither the Company nor its Subsidiaries, nor, to the Company's knowledge, is any other party in breach of or default under any of such contracts which would have a Material Adverse Effect.     5.6  No Actions.  Other than as described in the Private Placement Memorandum, there are no legal or governmental actions, suits or proceedings pending or, to the Company's knowledge, overtly threatened to which the Company or its Subsidiaries are or may be a party or of which property owned or leased by the Company or its Subsidiaries are or may be the subject, or related to environmental or discrimination matters, which actions, suits or proceedings, individually or in the aggregate, might prevent or might reasonably be expected to materially and adversely affect the transactions 3 -------------------------------------------------------------------------------- contemplated by this Agreement or result in a Material Adverse Change; and no labor disturbance by the employees of the Company exists, to the Company's knowledge, or is imminent which might reasonably be expected to have a Material Adverse Effect. Neither the Company nor its Subsidiaries is a party to or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body administrative agency or other governmental body.     5.7  Properties.  The Company and each of its Subsidiaries has good and marketable title in fee simple to all real property and good and marketable title to all personal property reflected as owned by them in the consolidated financial statements included in the Private Placement Memorandum. Such property is not subject to any lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if any, reflected in such consolidated financial statements (including the notes thereto), or (ii) those which are not material in amount and do not adversely affect the use of such property by the Company or its Subsidiaries. Any property or building held under lease by the Company or its Subsidiaries is held under valid, existing and enforceable leases, free and clear of all liens, encumbrances, claims, and defects except such as would not have a Material Adverse Effect. Except as disclosed in the Private Placement Memorandum and except for the property referred to in Section 5.8, each of the Company and its Subsidiaries owns or leases all such properties as are necessary to its operations as now conducted.     5.8  Proprietary Rights.  Except as disclosed in the Private Placement Memorandum, (i) to the Company's knowledge, the Company has filed for or holds rights, licenses or options for the inventions, patent applications, patents, trademarks (both registered and unregistered), trade names, copyrights and trade secrets necessary for the conduct of the Company's business as currently conducted (collectively, the "Intellectual Property"); and (ii) to the Company's knowledge (for each of the following subsections (a) through (e)): (a) there are no third parties who have any ownership rights to any Intellectual Property that is owned by, or has been licensed to the Company for the products described in the Private Placement Memorandum in the case of any business the Company has or intends to conduct during the year ending December 31, 2000 that would preclude the Company from conducting its business as currently conducted and as the Private Placement Memorandum indicates the Company contemplates conducting; (b) there are currently no sales of any products that would constitute an infringement by a third party of any Intellectual Property owned, licensed or optioned by the Company; (c) there is no pending or threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any Intellectual Property owned, licensed or optioned by the Company, other than claims which would not be reasonably expected to have a Material Adverse Effect; (d) there is no pending or threatened action, suit, proceeding or claim by others challenging the validity or scope of any Intellectual Property owned, licensed or optioned by the Company, other than claims which would not be reasonably expected to have a Material Adverse Effect; and (e) there is no pending or threatened action, suit, proceeding or claim by others that the Company infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary right of others, other than claims which would not be reasonably expected to have a Material Adverse Effect.     5.9  No Material Adverse Change.  Since June 30, 2000, and except as disclosed in the Private Placement Memorandum, (i) neither the Company nor its Subsidiaries have incurred any material liabilities or obligations, indirect, or contingent, or entered into any material verbal or written agreement or other transaction which is not in the ordinary course of business or which could reasonably be expected to result in a material reduction in the future earnings of the Company; (ii) neither the Company nor its Subsidiaries have sustained any material loss or interference with its businesses or properties from fire, flood, windstorm, accident or other calamity not covered by insurance; (iii) neither the Company nor its Subsidiaries have paid or declared any dividends or other distributions with respect to its capital stock and the Company and its Subsidiaries are not in default in the payment of principal or interest on any outstanding debt obligations; (iv) there has not been any change in the capital stock of the Company or its Subsidiaries other than the sale of the Shares 4 -------------------------------------------------------------------------------- hereunder and shares or options issued pursuant to employee equity incentive plans or purchase plans approved by the Company's or the Subsidiaries' Board of Directors, as the case may be, or indebtedness material to the Company or its Subsidiaries (other than in the ordinary course of business); and (v) there has not been a Material Adverse Change.     5.10  Financial Statement.  BDO Seidman, LLP (a) have expressed their opinion with respect to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, (b) have not given the Company any indication that they will not include such opinion in the Registration Statement and the Prospectus, and (c) have confirmed to the Company that they are independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.     5.11  No Defaults.  Except as to defaults, violations and breaches which individually or in the aggregate would not be material to the Company and its Subsidiaries, taken as a whole, neither the Company nor its Subsidiaries are in violation or default of any provision of their certificate of incorporation or bylaws, or other organizational documents, or in breach of, or default with respect to, any provision of any material agreement filed as an exhibit to the Company's filings with the Commission, any judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, or permit to which it is a party or by which it or any of its properties are bound; and there does not exist any state of fact which, with notice or lapse of time or both, would constitute an event of breach or default on the part of the Company or the Subsidiaries as defined in such documents, except such breaches or defaults which individually or in the aggregate would not be material to the Company and its Subsidiaries, taken as a whole.     5.12  Compliance.  Neither the Company nor its Subsidiaries have been advised, and neither has any reason to believe, that it is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal environmental laws and regulations; except where failure to be so in compliance therewith would not have a Material Adverse Effect.     5.13  Taxes.  Each of the Company and its Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns which are required to be filed, or has received extensions thereof, and has paid or accrued all taxes shown as due thereon, and neither the Company nor its Subsidiaries has knowledge of a tax deficiency which has been or might be asserted or threatened against it which could have a Material Adverse Effect. On the Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection with the sale and transfer of the Shares to be sold to the Purchaser hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will be or will have been fully complied with.     5.14  Books, Records and Accounts.  The books, records and accounts of the Company and its Subsidiaries accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the results of operations of, the Company and its Subsidiaries. The Company and each of its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances 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 accordance 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.     5.15  Offering Materials.  The Company has not distributed and will not distribute prior to the Closing Date any offering material in connection with the offering and sale of the Shares other than the Private Placement Memorandum or any amendment or supplement thereto. The Company has not in the past nor will it hereafter take any action independent of the Placement Agent to sell, offer for 5 -------------------------------------------------------------------------------- sale or solicit offers to buy any securities of the Company which would bring the offer, issuance or sale of the Shares, as contemplated by this Agreement, within the provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was or shall be within the exemptions of Section 4 of the Securities Act.     5.16  Insurance.  The Company maintains insurance of the type and in the amount that the Company reasonably believes is adequate for its business, including, but not limited to, insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect.     5.17  Investment Company.  The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for an investment company, within the meaning of the Investment Company Act of 1940, as amended.     5.18  Contributions.  At no time since its incorporation has the Company, directly or indirectly, (i) used any corporate or other funds for gifts, entertainment or other unlawful contributions to any candidate for public office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof.     5.19  Additional Information.  The Company represents and warrants that the information contained in the following documents, which the Placement Agent has furnished to the Purchaser, or will furnish prior to the Closing, is and will be true and correct in all material respects as of the respective dates that they were filed with the Commission, or their final dates, if not filed with the Commission 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 therein, in light of the circumstances under which they were made, not misleading:     (1) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999;     (2) the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000;     (3) the Company's Proxy Statement for the 2000 Annual Meeting of Stockholders;     (4) the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000;     (5) the Registration Statement;     (6) the Private Placement Memorandum, including all addenda and exhibits thereto (other than the Appendices); and     (7) all other documents, if any, filed by the Company with the Commission since June 30, 2000 pursuant to the reporting requirements of the Exchange Act.     5.20  Legal Opinions.  Prior to the Closing, Pollet & Richardson, counsel to the Company, will deliver its legal opinion to the Placement Agent (stating that each of the Purchasers may rely thereon as if directly addressed to each of them), substantially in such form as such counsel rendering the opinion and the Placement Agent may agree upon (the "Opinion Letter").     6.  Representations, Warranties and Covenants of the Purchaser.       6.1  Investment Intent and Expense.  The Purchaser represents and warrants to, and covenants with, the Company that: (i) the Purchaser is knowledgeable, sophisticated and experienced in making, 6 -------------------------------------------------------------------------------- and is qualified to make, decisions with respect to investments in shares representing an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company, and has requested, received, reviewed and considered all information it deems relevant in making an informed decision to purchase the Shares; (ii) the Purchaser is acquiring the number of Shares set forth on the signature page hereto in the ordinary course of its business and for its own account for investment (as defined for purposes of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and the regulations thereunder) only and with no present intention of distributing any of such Shares or any arrangement or understanding with any other persons regarding the distribution of such Shares within the meaning of Section 2(11) of the Securities Act; (iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Act and the Rules and Regulations; (iv) the Purchaser has completed or caused to be completed the Registration Statement Questionnaire and the Stock Certificate Questionnaire, both attached hereto as Appendix I, for use in preparation of the Registration Statement, and the answers thereto are true, correct and complete as of the date hereof and will be true. correct and complete as of the effective date of the Registration Statement; (v) the Purchaser has, in connection with its decision to purchase the number of Shares set forth on the signature page hereto, relied solely upon the Private Placement Memorandum and the documents included therein and the representations and warranties of the Company contained herein; and (vi) the Purchaser is a "qualified institutional buyer" within the meaning of Rule 144A promulgated under the Securities Act.     6.2  Restrictions on Transfer.  The Purchaser hereby covenants with the Company not to make any sale of the Shares without satisfying the prospectus delivery requirement under the Securities Act, and the Purchaser acknowledges and agrees that such Shares are not transferable on the books of the Company unless the certificate submitted to the transfer agent evidencing the Shares is accompanied by a separate officer's certificate: (i) in the form of Appendix II hereto, (ii) executed by an officer of, or other authorized person designated by, the Purchaser, and (iii) to the effect that (A) the Shares have been sold in accordance with the Registration Statement, all federal laws and requirements, including without limitation the Securities Act and the rules and regulations promulgated thereunder and any applicable state securities or blue sky laws and (B) the requirement of delivering a current prospectus has been satisfied. The Purchaser acknowledges that there may occasionally be times when the Company determines the use of the prospectus forming a part of the Registration Statement should be suspended until such time as an amendment or supplement to the Registration Statement or the Prospectus has been filed by the Company and any such amendment to the Registration Statement is declared effective by the Commission, or until such time as the Company has filed an appropriate report with the Commission pursuant to the Exchange Act. The Purchaser hereby covenants that it will not sell any Shares pursuant to said prospectus during the period commencing at the time at which the Company gives the Purchaser written notice of the suspension of the use of said prospectus and ending at the time the Company gives the Purchaser written notice that the Purchaser may thereafter effect sales pursuant to said prospectus and the Purchaser hereby covenants that it will thereafter solely utilize said amended or supplemented prospectus for the sale of Shares. The Purchaser further covenants to notify the Company promptly of the sale of any or all of its Shares.     6.3  Authorization.  The Purchaser further represents and warrants to, and covenants with, the Company that (i) the Purchaser has full right, power, authority and capacity to enter into this Agreement and to consummate the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (ii) upon the execution and delivery of this Agreement, this Agreement shall constitute a valid and binding obligation of the Purchaser enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' and contracting parties' rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and 7 -------------------------------------------------------------------------------- except as the indemnification agreements of the Purchaser in Section 9 hereof may be legally unenforceable.     6.4  Restriction on Sales, Short Sales and Hedging Transactions.  Purchaser represents and agrees that during the period of five business days immediately prior to the execution of this Agreement by Purchaser, Purchaser did not, and from such date through the effectiveness of the Registration Statement (as defined below), Purchaser will not, directly or indirectly, execute or effect or cause to be executed or effected any short sale, option or equity swap transactions in or with respect to the Common Stock or any other derivative security transaction the purpose or effect of which is to hedge or transfer to a third party all or any part of the risk of loss associated with the ownership of the Shares by the Purchaser; provided however, that the Purchaser shall be allowed to effectuate such above described transactions, but only up to the aggregate number of Shares purchased by such Purchaser hereunder, and then only in compliance with all applicable state and federal securities laws and the rules and regulations thereunder.     6.5  No Legal, Tax or Investment Advice.  Purchaser understands that nothing in the Private Placement Memorandum, the Agreement, the Opinion Letter or any other materials presented to Purchaser in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice. Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares.     6.6  Further Agreements of Purchaser.       (a) The Purchaser understands that the Shares are being offered and sold to it in reliance upon specific exemptions from the registration requirements of the Securities Act, the rules and regulations promulgated thereunder, and state securities laws and that the Company is relying upon the truth and accuracy of, and the Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Shares.     (b) The Purchaser understands that its investment in the Shares involves a significant degree of risk and that the market price of the Common Stock has been volatile and that no representation is being made as to the future value of the Common Stock. The Purchaser has the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares and has the ability to bear the economic risks of an investment in the Shares.     (c) The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Shares.     (d) The Purchaser understands that, until such time as the Registration Statement has been declared effective or the Shares may be sold pursuant to Rule 144 under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Shares will bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for the Shares): "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended. The securities may not be sold, transferred or assigned in the absence of an effective registration statement for the securities under said Act, or an opinion of counsel, in form, substance and scope reasonably acceptable to the Company, that registration is not required under said Act or unless sold pursuant to Rule 144 under said Act."     (e) The Purchaser's principal executive offices are in the jurisdiction set forth immediately below the Purchaser's name on the signature pages hereto. 8 --------------------------------------------------------------------------------     (f)  The Purchaser hereby covenants with the Company not to make any sale of the Shares under the Registration Statement without effectively causing the prospectus delivery requirement under the Securities Act to be satisfied, and the Purchaser acknowledges and agrees that such Shares are not transferable on the books of the Company unless the certificate submitted to the transfer agent evidencing the Shares is accompanied by a separate Purchaser's Certificate: (i) in the form of Appendix II hereto, (ii) executed by an officer of, or other authorized person designated by, the Purchaser, and (iii) to the effect that (A) the Shares have been sold in accordance with the Registration Statement, the Securities Act and any applicable state securities or blue sky laws and (B) the requirement of delivering a current prospectus has been satisfied. The Purchaser acknowledges that there may occasionally be times when the Company must suspend the use of the prospectus forming a part of the Registration Statement until such time as an amendment to the Registration Statement has been filed by the Company and declared effective by the Commission, or until such time as the Company has filed an appropriate report with the Commission pursuant to the Exchange Act. The Purchaser hereby covenants that it will not sell any Shares pursuant to said prospectus during the period commencing at the time at which the Company gives the Purchaser written notice of the suspension of the use of said prospectus and ending at the time the Company gives the Purchaser written notice that the Purchaser may thereafter effect sales pursuant to said prospectus. The Purchaser further covenants to notify the Company promptly of the sale of any or all of its Shares and the Purchaser hereby covenants that it will thereafter solely utilize said amended or supplemented prospectus for the sale of Shares.     (g) Notwithstanding anything to the contrary contained herein, at any time after the effectiveness of the Registration Statement, the Company may refuse to permit the Purchaser to resell any Shares pursuant to the Registration Statement for a period not to exceed ninety (90) days (the "Blackout Period"); provided however, that to exercise this right, the Company must deliver a certificate in writing to the Purchaser to the effect that a delay in such sale is necessary because a sale pursuant to such Registration Statement in its then-current form would not be in the best interests of the Company and its stockholders due to disclosure obligations of the Company. Notwithstanding the foregoing, the Company shall not be entitled to exercise its right to block such sales more than three (3) times during the effectiveness of the Registration Statement or more than one (1) time in any four-month period. Each Purchaser hereby covenants and agrees that it will not sell any Shares pursuant to the Registration Statement during such Blackout Periods.     7.  Survival of Representations, Warranties and Agreements.  Notwithstanding any investigation made by any party to this Agreement or by the Placement Agent, all covenants, agreements, representations and warranties made by the Company and the Purchaser herein and in the certificates for the Shares delivered pursuant hereto shall survive the execution of this Agreement, the delivery to the Purchaser of the Shares being purchased and the payment therefor.     8.  Covenants.       8.1  Registration Procedures and Expenses.       (a) The Company shall:     (1) as soon as practicable after the Closing, but in no event later than two (2) weeks following the Closing, prepare and file with the Commission the Registration Statement relating to the sale of the Shares by the Purchaser from time to time through the automated quotation system of the Nasdaq National Market or the facilities of any national securities exchange on which the Company's Common Stock is then traded or in privately-negotiated transactions;     (2) use its reasonable efforts subject to receipt of necessary information from the Purchasers, to cause the Commission to notify the Company of the Commission's willingness to declare the 9 -------------------------------------------------------------------------------- Registration Statement effective within 60 days after the Registration Statement is filed by the Company;     (3) prepare and file with the Commission such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective until the earlier of (i) twenty-four (24) months after the effective date of the Registration Statement or (ii) the date on which the Shares may be resold by the Purchasers without registration by reason of Rule 144(k) under the Securities Act or any other rule of similar effect;     (4) furnish to the Purchaser with respect to the Shares registered under the Registration Statement (and to each underwriter, if any, of such Shares) such reasonable number of copies of prospectuses in order to facilitate the public sale or other disposition of all or any of the Shares by the Purchaser; provided, however, that the obligation of the Company to deliver copies of prospectuses to the Purchaser shall be subject to the receipt by the Company of reasonable assurances from the Purchaser that the Purchaser will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such prospectuses;     (5) file documents required of the Company for normal blue sky clearance in states specified in writing by the Purchaser; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented; and     (6) bear all expenses in connection with the procedures in paragraphs (1) through (5) of this Section 8.1 and the registration of the Shares pursuant to the Registration Statement, other than fees and expenses, if any, of counsel or other advisers to the Purchaser or the Other Purchasers or underwriting discounts, brokerage fees and commissions incurred by the Purchaser or the Other Purchasers, if any.     (b) The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder (or, if the Company is not required to file such reports, it will, upon the request of any Purchaser, make publicly available other information), and it will take such further action as any Purchaser may reasonably request, all to the extent required from time to time to enable such Purchaser to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Purchaser, the Company will deliver to such holder a written statement as to whether it has complied with such requirements.     8.2  Transfer of Shares After Registration.  The Purchaser agrees that it will not effect any disposition of the Shares or its right to purchase the Shares that would constitute a sale within the meaning of the Securities Act, except as contemplated in the Registration Statement referred to in Section 8.1, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Purchaser or its Plan of Distribution.     8.3  Termination of Conditions and Obligations.  The restrictions imposed by Section 6 or this Section 8 upon the transferability of the Shares shall cease and terminate as to any particular number of the Shares upon the passage of twenty-four months from the effective date of the Registration Statement covering such Shares or at such time as an opinion of counsel satisfactory in form and substance to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act. 10 --------------------------------------------------------------------------------     8.4  Information Available.  So long as the Registration Statement is effective covering the resale of Shares owned by the Purchaser, the Company will furnish to the Purchaser:     (1) upon request, as soon as practicable after available (but in the case of the Company's Annual Report to Stockholders, within 120 days after the end of each fiscal year of the Company), one copy of (i) its Annual Report to Stockholders (which Annual Report shall contain financial statements audited in accordance with generally accepted accounting principles by a national firm of certified public accountants), (ii) if not included in substance in the Annual Report to Stockholders, its Annual Report on Form 10-K, (iii) if not included in substance in its Quarterly Reports to Shareholders, its quarterly reports on Form 10-Q, and (iv) a full copy of the particular Registration Statement covering the Shares (the foregoing, in each case, excluding exhibits);     (2) upon the reasonable request of the Purchaser, a reasonable number of copies of the prospectuses to supply to any other party requiring such prospectuses; and the Company, upon the reasonable request of the Purchaser, will meet with the Purchaser or a representative thereof at the Company's headquarters to discuss information relevant for disclosure in the Registration Statement covering the Shares subject to appropriate confidentiality limitations.     9.  Indemnification.  For the purpose of this Section 9 only:     (1) the term "Purchaser" shall include the Purchaser and any affiliate of such Purchaser; and the term "Registration Statement" shall include any final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement referred to in Section 8.1.     (2) The Company agrees to indemnify and hold harmless each of the Purchasers and each person, if any, who controls any Purchaser within the meaning of the Securities Act, against any and all losses, claims, damages, liabilities or expenses, joint or several, to which such Purchasers or such controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the prospectus, financial statements and schedules, and all other documents filed as a part thereof, as amended at the time of effectiveness of the Registration Statement (the "Prospectus"), or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, or arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company contained in this Agreement, or any failure of the Company to perform in all material respects its obligations hereunder or under law, and will reimburse each Purchaser and each such controlling person for any legal and other expenses as such expenses are reasonably incurred by such Purchaser 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 Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchaser expressly for use therein, or (ii) the failure of such Purchaser to comply with the covenants and agreements contained in Sections 6.2 or 8.2 hereof respecting sale of the Shares, or (iii) the inaccuracy of any representations made by such Purchaser herein or (iv) any statement or 11 -------------------------------------------------------------------------------- omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Purchaser prior to the pertinent sale or sales by the Purchaser.     (3) Each Purchaser will severally indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Purchaser) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure to comply with the covenants and agreements contained in Sections 6.2 or 8.2 hereof respecting the sale of the Shares or (ii) the inaccuracy of any representation made by such Purchaser herein or (iii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Purchaser expressly for use therein, and will reimburse the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person for any legal and other expense reasonably incurred by the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action.     (4) Promptly after receipt by an indemnified party under this Section 9 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 9 promptly notify the indemnifying party in writing thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 9 or to the extent it is not materially prejudiced as a result of such failure. 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 may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party, based upon the advice of such indemnified party's counsel, the indemnified party shall have reasonably concluded that there may be a conflict of interest 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 which 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 its 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 9 for any legal or other expenses subsequently reasonably incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance 12 -------------------------------------------------------------------------------- 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, approved by such indemnifying party in the case of paragraph (2), representing all of 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 action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party.     (5) If the indemnification provided for in this Section 9 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under paragraphs (2), (3) or (4) of this Section 9 in respect to any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Purchaser from the placement of the Shares 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 the relative fault of the Company and the Purchaser in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Company on the one hand and each Purchaser on the other shall be deemed to be in the same proportion as the amount paid by such Purchaser to the Company pursuant to this Agreement for the Shares purchased by such Purchaser that were sold pursuant to the Registration Statement bears to the difference (the "Difference") between the amount such Purchaser paid for the Shares that were sold pursuant to the Registration Statement and the amount received by such Purchaser from such sale. 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 paragraph (3) of this Section 9, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in paragraph (3) of this Section 9 with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this paragraph (5); provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under paragraph (4) for purposes of indemnification. The Company and each Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined solely by pro rata allocation (even if the 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 paragraph. Notwithstanding the provisions of this Section 9, no Purchaser shall be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that such 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 Purchasers' obligations to contribute pursuant to this Section 9 are several and not joint.     10.  Broker's Fee.  The Purchaser acknowledges that the Company intends to pay to the Placement Agent a fee in respect of the sale of the Shares to the Purchaser. Each of the parties hereto hereby represents that, on the basis of any actions and agreements by it, there are no other brokers or finders entitled to compensation in connection with the sale of the Shares to the Purchaser. 13 --------------------------------------------------------------------------------     11.  Notices.  All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, confirmed facsimile or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed and shall be delivered as addressed as follows:     (1) if to the Company, to: Andrew F. Pollet Chairman STAAR Surgical Company 1911 Walker Avenue Monrovia, California 91016       with a copy to: Pollet & Richardson 10900 Wilshire Boulevard Suite 500 Los Angeles, California 90024 Attention: Andrew F. Pollet, Esq. or to such other person at such other place as the Company shall designate to the Purchaser in writing; and     (2) if to the Purchaser, at its address as set forth at the end of this Agreement, or at such other address or addresses as may have been furnished to the Company in writing.     12.  Changes.  This Agreement may not be modified or amended except pursuant to an instrument in writing signed by an authorized representative of the Company and the Purchaser.     13.  Headings.  The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.     14.  Severability.  In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.     15.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflict of laws and the federal law of the United States of America.     16.  Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.     [Signature Page Follows] 14 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the day and year first above written.     STAAR SURGICAL COMPANY     /s/ ANDREW F. POLLET    -------------------------------------------------------------------------------- By: Andrew F. Pollet Its: Chairman       Baystar International, Ltd. -------------------------------------------------------------------------------- Name of Purchaser (Individual or Institution)   Steven Lamar -------------------------------------------------------------------------------- Name of Individual representing Purchaser (if an Institution) V.P. of Baystar International Management, LLC -------------------------------------------------------------------------------- Title of Individual representing Purchaser (if an Institution)   /s/ STEVEN LAMAR    -------------------------------------------------------------------------------- Signature of Individual Purchaser or Individual representing Purchaser     Address:  1500 West Market St., Ste 200                  Mequon, WI 53092 Telephone: (415) 834-4600 --------------------------------------------------------------------------------     Telecopier: (415) 834-4601 -------------------------------------------------------------------------------- Number to Be Purchased --------------------------------------------------------------------------------   Price Per Share In Dollars --------------------------------------------------------------------------------   Aggregate Price -------------------------------------------------------------------------------- 105,000   $14.00   $1,470,000 15 -------------------------------------------------------------------------------- QuickLinks Exhibit F FORM OF PURCHASE AGREEMENT
EXHIBIT 10.50   SECOND AMENDED AND RESTATED AGREEMENT THIS SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), dated as of October 12, 2001, is made by BMC INDUSTRIES, INC., a Minnesota corporation (the “Pledgor”), to BANKERS TRUST COMPANY, as Collateral Agent (the “Pledgee”) for the benefit of (i) the Lenders and the Agent under the Credit Agreement hereinafter referred to (such Lenders and the Agent are hereinafter called the “Bank Creditors”), (ii) if one or more Lenders or any Affiliate of a Lender enters into one or more (A) interest rate protection agreements (including, without limitation, interest rate swaps, caps, floors, collars and similar agreements), (B) foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (C) other types of hedging agreements from time to time (collectively, the “Interest Rate Protection or Other Hedging Agreements”), with, or guaranteed by, the Pledgor, any such Lender or Lenders or Affiliate or Affiliates (even if the respective Lender subsequently ceases to be a Lender under the Credit Agreement for any reason) so long as any such Lender or Affiliate participates in the extension of such Interest Rate Protection or Other Hedging Agreements and their subsequent assigns, if any (collectively, the “Other Creditors”) and (iii) U.S. Bank National Association ("US Bank") as lender under that certain Continuing Reimbursement Agreement for Commercial Letters of Credit, dated as of July 14, 2000 the "US Bank Letter of Credit Facility") among the Borrower and US Bank (the "LC Creditor" and, together with the Bank Creditors and the Other Creditors, are hereinafter called the “Secured Creditors”).  Except as otherwise defined herein, terms used herein and defined in the Credit Agreement shall be used herein as so defined.     W I T N E S S E T H: WHEREAS, the Pledgor, the financial institutions from time to time party thereto, and Bankers Trust Company, as Agent (together with any successor agent, the “Agent”), have entered into an Amended and Restated Credit Agreement, dated as of June 25, 1998, providing for the making of Loans and the issuance of, and participation in, Letters of Credit as contemplated therein (as used herein, the term “Credit Agreement” means the Credit Agreement described above in this paragraph, as in effect on the date hereof and as amended by that certain Second Amendment and Restatement Agreement dated as of the date hereof, as the same may be amended, modified, extended, renewed, replaced, restated or supplemented from time to time, and including any agreement extending the maturity of or restructuring of all or any portion of the Indebtedness under such agreement or any successor agreements); WHEREAS, the Pledgor may at any time and from time to time enter into, or guarantee obligations of its Subsidiaries under, one or more Interest Rate Protection or Other Hedging Agreements with one or more Other Creditors; WHEREAS, it is a condition to each of the above–described extensions of credit that the Pledgor shall have executed and delivered this Agreement; WHEREAS, the Pledgor desires to enter into this Agreement in order to satisfy the condition described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties to the Pledgee for the benefit of the Secured Creditors and hereby covenants and agrees with the Pledgee for the benefit of the Secured Creditors as follows: 1.             SECURITY FOR OBLIGATIONS.  This Agreement is made by the Pledgor for the benefit of the Secured Creditors to secure: (i)            the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and indebtedness (including, without limitation, indemnities, Fees and interest thereon) of the Pledgor to the Bank Creditors, whether now existing or hereafter incurred under, arising out of, or in connection with the Credit Agreement and the other Loan Documents and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained in the Credit Agreement and the other Loan Documents (all such principal, interest, obligations and liabilities described in this clause (i) being herein collectively called the “Credit Agreement Obligations”); (ii)           the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities owing by the Pledgor to the Other Creditors under, or with respect to, (x) any Interest Rate Protection or Other Hedging Agreement, including all obligations of the Pledgor in respect of Interest Rate Protection or Other Hedging Agreement, whether such Interest Rate Protections or Other Hedging Agreements are now in existence or hereafter arising, and the due performance and compliance by the Pledgor with all of the terms, conditions and agreements contained therein and (y) the US Bank Letter of Credit Facility up to a maximum amount of $2,000,000 (provided that at no time shall there be more than $2,000,000 under the US Bank Letter of Credit Facility secured by the Security Documents) (all such obligations and liabilities described in this clause (ii) being herein collectively called the “Other Obligations”); (iii)          any and all sums advanced by the Pledgee in accordance with the Loan Documents in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv)          in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i) , (ii) and (iii) above, after an Event of Default (as such term is defined in the Credit Agreement) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys’ fees and court costs; and (v)           all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the “Obligations,” it being acknowledged and agreed that the “Obligations” shall include extensions of credit of the types described above, whether outstanding on the date of this Agreement or extended from time to time after the date of this Agreement. 2.             DEFINITION OF STOCK, NOTES, SECURITIES, ETC.  As used herein, the term “Stock” shall mean (x) all of the issued and outstanding shares of capital stock at any time owned by the Pledgor of any Material Subsidiary which is a Domestic Subsidiary and (y) 65% of the issued and outstanding shares of capital stock at any time owned by the Pledgor of any first tier Foreign Subsidiary which is a Material Subsidiary, (ii) the term “Notes” shall mean Note B and all promissory notes issued in lieu thereof, and (iii) the term “Securities” shall mean all of the Stock and the Notes.  The Pledgor represents and warrants, as to the stock of Material Subsidiaries owned by the Pledgor and the Notes, that on the date hereof (a) the Stock consists of the number and type of shares of the stock of the corporations as described in Part I of Annex A hereto; (b) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Part I of Annex A hereto; (c) the Notes consist of the promissory notes described in Part II of Annex A hereto; and (d) the Pledgor is the holder of record and sole beneficial owner of the Stock, and there exist no options or preemptive rights in respect of any of such Stock.  If and to the extent that the Pledgee receives or holds stock certificates representing more than 65% of the total combined voting power of all classes of capital stock of any first tier Foreign Subsidiary that is a Material Subsidiary entitled to vote, the Pledgee agrees to act as bailee (and not as a pledgee, the Pledgee hereby disclaiming any security interest in such portion except as otherwise provided in the last sentence of this Section 2) and custodian for the benefit of the Pledgor with respect to any portion of such capital stock representing more than 65% of the total combined voting power of all classes of capital stock of any such Foreign Subsidiary entitled to vote except as otherwise provided in the last sentence of this Section 2.  If following a change in the relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder which would permit a pledge of 66% or more (or would be adjusted to permit a pledge of less than 66%) of the total combined voting power of all classes of capital stock of such Foreign Subsidiary entitled to vote without causing the undistributed earnings of such Foreign Subsidiary as determined for Federal income taxes to be treated as a deemed dividend to the Pledgor for Federal income tax purposes, then the 65% limitation set forth in clause (y) of the first sentence of this Section 2 shall no longer be applicable (or shall be adjusted as appropriate) and the Pledgor shall duly pledge and deliver to the Pledgee such of the Stock not theretofore required to be pledged hereunder or the Pledgee shall return such Stock as applicable. 3.             PLEDGE OF SECURITIES, STOCK, ETC. 3.1           Pledge.  To secure the Obligations, and for the purposes set forth in Section 1 hereof, the Pledgor hereby (i) grants to the Pledgee a security interest in all of the Collateral (as hereinafter defined), (ii) pledges and deposits with the Pledgee the Securities owned by the Pledgor on the date hereof, and acknowledging that it previously delivered to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of Notes, and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such Securities), or such other instruments of transfer as are acceptable to the Pledgee and (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of the Pledgor’s right, title and interest in and to such Securities (and in and to all certificates or instruments evidencing such Securities), to be held by the Pledgee as collateral security for the Obligations, upon the terms and conditions set forth in this Agreement. 3.2           Subsequently Acquired Securities.  If the Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, the Pledgor will immediately pledge and deposit such Securities (or certificates or instruments representing such Securities) as security with the Pledgee and deliver to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of Notes, and accompanied by undated stock powers duly executed in blank by the Pledgor (and accompanied by any transfer tax stamps required in connection with the pledge of such Securities) in the case of Stock, or such other instruments of transfer as are reasonably acceptable to the Pledgee, and any other foreign security documentation reasonably requested by Pledgee, and will promptly thereafter deliver to the Pledgee a certificate executed by a Responsible Officer of the Pledgor describing such Securities and certifying that the same have been duly pledged with the Pledgee hereunder.  If any Domestic Subsidiary of Pledgor shall hereafter own capital stock of any Material Subsidiary, then Pledgor shall cause such Domestic Subsidiary to enter into a pledge agreement in substantially the form hereof, and shall deliver any other security documentation reasonably requested by Pledgee, in order to cause the stock of such Material Subsidiary to be pledged to the Pledgee for the benefit of the Lenders.  Subject to the last sentence of Section 2, the Pledgor shall not be required at any time to pledge hereunder more than 65% of the total combined voting power of all classes of capital stock of any Foreign Subsidiary entitled to vote. 3.3           Uncertificated Securities.  Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 8-313 and 8-321 of the New York Uniform Commercial Code if applicable).  The Pledgor further agrees to take such actions as the Pledgee deems necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated Stock promptly upon the reasonable request of the Pledgee.  Subject to the last sentence of Section 2, the Pledgor shall not be required, at any time, to pledge hereunder more than 65% of the total combined voting power of all classes of capital stock of any Foreign Subsidiary entitled to vote. 3.4           Definitions of Pledged Stock; Pledged Notes; Pledged Securities and Collateral.  All Stock at any time pledged or required to be pledged hereunder is hereinafter called the “Pledged Stock;” and all Notes at any time pledged or required to be pledged hereunder are hereinafter called the “Pledged Notes;” all Pledged Stock and Pledged Notes together are called the “Pledged Securities;” and the Pledged Securities, together with all proceeds thereof, including any securities and moneys received and at the time held by the Pledgee hereunder, are hereinafter called the “Collateral.” 4.             APPOINTMENT OF SUB–AGENTS; ENDORSEMENTS, ETC.  The Pledgee shall have the right to appoint one or more sub–agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub–agent appointed by the Pledgee. 5.             VOTING, ETC., WHILE NO EVENT OF DEFAULT.  Unless and until an Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Securities owned by it, and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate or result in breach of any covenant contained in this Agreement, the Credit Agreement, any other Loan Document or any Interest Rate Protection or Other Hedging Agreement (collectively, the “Secured Debt Agreements”), or which could reasonably be expected to have the effect of impairing the value of the Collateral or any part thereof or the position or interests of the Pledgee or any Secured Creditor.  All such rights of the Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing, and Section 7 hereof shall become applicable. 6.             DIVIDENDS AND OTHER DISTRIBUTIONS.  Unless an Event of Default shall have occurred and be continuing, all cash dividends and distributions payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the Pledgor which owns such Pledged Stock or Pledged Notes; provided, that all cash dividends payable in respect of the Pledged Stock which are reasonably determined by the Pledgee to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital, to the Pledgee and retained by it as part of the Collateral.  The Pledgee also shall be entitled to receive directly, and to retain as part of the Collateral: (a)           all other or additional stock or other securities or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Pledged Stock; (b)           all other or additional stock or other securities or property (including cash) paid or distributed in respect of the Pledged Stock by way of stock–split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (c)           all other or additional stock or other securities or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. Subject to the last sentence of Section 2, the Pledgor shall not be required at any time to pledge hereunder more than 65% of the total combined voting power of all classes of capital stock of any Foreign Subsidiary entitled to vote.  Nothing contained in this Section 6 shall limit or restrict in any way the Pledgee’s right to receive proceeds of the Collateral in any form in accordance with Section 3 of this Agreement.  All dividends, distributions or other payments which are received by the Pledgor contrary to the provisions of this Section 6 and Section 7 shall be received in trust for the benefit of the Pledgee, shall be segregated from other property or funds of the Pledgor and shall be forthwith paid over to the Pledgee as Collateral in the same form as so received (with any necessary endorsement). 7.             REMEDIES IN CASE OF EVENTS OF DEFAULT.  In case an Event of Default shall have occurred and be continuing, then and in every such case, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement, any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled to exercise all the rights and remedies of a secured party under the Uniform Commercial Code and also shall be entitled, without limitation, to exercise the following rights, which the Pledgor hereby agrees to be commercially reasonable: (a)           to receive all amounts payable in respect of the Collateral otherwise payable to the Pledgor under Section 6 hereof; (b)           to transfer all or any part of the Collateral into the Pledgee’s name or the name of its nominee or nominees; (c)           to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other lawful action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon); (d)           to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney–in–fact of the Pledgor, with full power of substitution to do so); and (e)           to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine, provided that at least 15 business days’ written notice of the time and place of any such sale shall be given to the Pledgor.  Pledgee shall not be obligated to make any such sale of Collateral regardless of whether any such notice of sale has theretofore been given.  The Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise.  At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption.  Neither the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8.             REMEDIES, ETC., CUMULATIVE.  Each and every right, power and remedy of the Pledgee provided for in this Agreement or any Secured Debt Agreement, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy.  The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement, or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof.  Unless otherwise required by the Loan Documents, no notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Pledgee or any Secured Creditor to any other or further action in any circumstances without notice or demand. 9.             APPLICATION OF PROCEEDS. (a)           The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral, the application of which is not otherwise provided for herein, shall be applied (after payment of any amounts payable to the Pledgee or the Agent pursuant to this Agreement or the Credit Agreement) in whole or in part by the Pledgee against all or any part of the Obligations in the following order:  (i) first, to any fees, costs or other expenses due under the Loan Documents; (ii) next, to any interest due under the Loan Documents; (iii) next, to any principal due under the Loan Documents and amount due under Interest Rate Protection and Other Hedging Agreements; and (iv) last, to any other Obligations.  Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to the Pledgor or otherwise disposed of in accordance with the UCC or other applicable law. (b)           It is understood and agreed that the Pledgor shall remain liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. 10.           PURCHASERS OF COLLATERAL.  Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11.           INDEMNITY.  The Pledgor agrees to indemnify and hold harmless the Pledgee and each Secured Creditor and their respective successors, assigns, employees, agents and servants (individually an “Indemnitee,” and collectively the “Indemnitees”) from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and to reimburse each Indemnitee for all costs and expenses, including reasonable attorneys’ fees, growing out of or resulting from this Agreement or the exercise by any Indemnitee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement (but excluding any claims, demands, losses, judgments and liabilities or expenses to the extent incurred by reason of gross negligence or willful misconduct of such Indemnitee).  If and to the extent that the obligations of the Pledgor under this Section 11 are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12.           FURTHER ASSURANCES; POWER–OF–ATTORNEY. (a)           The Pledgor agrees that it will join with the Pledgee in executing and, at the Pledgor’s own expense, file and refile under the Uniform Commercial Code or other applicable law such financing statements, continuation statements and other documents in such offices as the Pledgee may reasonably deem necessary and wherever required by law in order to perfect and preserve the Pledgee’s security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of the Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem necessary to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. (b)           The Pledgor hereby appoints the Pledgee as the Pledgor’s attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, in the Pledgee’s reasonable discretion to take any action and to execute any instrument required by paragraph (a) if Pledgor has failed to do so after demand by Pledgee. 13.           THE PLEDGEE AS AGENT.  The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement.  It is expressly understood and agreed by the parties hereto and each Secured Creditor, by accepting the benefits of this Agreement that each acknowledges and agrees that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement.  The Pledgee shall act hereunder on the terms and conditions set forth herein and in Article X of the Credit Agreement. 14.           TRANSFER BY PLEDGOR.  The Pledgor will not sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except as may be permitted in accordance with the terms of the Credit Agreement). 15.           REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.  The Pledgor represents and warrants and covenants that (a) it is, or at the time when pledged hereunder will be, the legal, record and beneficial owner of, and has (or will have) good title to, all Securities pledged by it hereunder, subject to no Lien (except the Lien created by this Agreement); (b) it has full corporate power, authority and legal right to pledge all the Securities pledged by it pursuant to this Agreement; (c) this Agreement has been duly authorized, executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); (d) except to the extent already obtained or made, no consent of any other party (including, without limitation, any stockholder or creditor of the Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by the Pledgor in connection with (i) the execution, delivery or performance of this Agreement, (ii) the validity or enforceability of this Agreement, (iii) the perfection or enforceability of the Pledgee’s security interest in the Collateral or (iv) except for compliance with or as may be required by applicable securities laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the exercise by the Pledgee of any of its rights or remedies provided herein; (e) the execution, delivery and performance of this Agreement by the Pledgor does not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign or of the certificate of incorporation or by–laws of the Pledgor, or of any securities issued by the Pledgor or any of its Subsidiaries, or of any material mortgage, indenture, lease, deed of trust, loan agreement, credit agreement or other contract, agreement or instrument or undertaking to which the Pledgor or any of its Subsidiaries is a party or which purports to be binding upon the Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of (or the obligation to create or impose) any lien or encumbrance on any of the assets of the Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (f) all the shares of the Stock have been duly and validly issued, are fully paid and nonassessable and are subject to no options to purchase or similar rights; (g) each of the Pledged Notes to the extent issued by the Pledgor or any of its Subsidiaries constitutes, or when executed by the obligor thereof will constitute, the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); and (h) the pledge, collateral assignment and delivery to the Pledgee of the Securities (other than uncertificated securities) pursuant to this Agreement creates a valid and perfected first priority Lien in the Securities, and the proceeds thereof, subject to no other Lien or to any agreement purporting to grant to any third party a Lien on the property or assets of the Pledgor which would include the Stock.  The Pledgor covenants and agrees that it will defend the Pledgee’s right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and the Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the Secured Creditors. 16.           PLEDGOR’S OBLIGATIONS ABSOLUTE, ETC.  The obligations of the Pledgor under this Agreement shall be absolute and unconditional and (except as provided in Section 18 hereof) shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument including, without limitation, this Agreement; (c) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (d) any limitation on any party’s liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor or any Subsidiary of the Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing. 17.           REGISTRATION, ETC. (a)           If there shall have occurred and be continuing an Event of Default and acceleration of the Notes then, and in every such case, upon receipt by the Pledgor from the Pledgee of a written request or requests that the Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock, the Pledgor as soon as practicable and at its expense will use its commercially reasonable efforts to cause such registration to be effected (and be kept effective) and will use its commercially reasonable efforts to cause such qualification and compliance to be declared effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933, as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements, provided that the Pledgee shall furnish to the Pledgor such information regarding the Pledgee as the Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance.  The Pledgor will cause the Pledgee to be kept advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee, each Secured Creditor and all others participating in the distribution of such Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to the Pledgor by the Pledgee or such other Secured Creditor expressly for use therein. (b)           If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7 hereof, and such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem reasonably necessary or advisable in order that such sale may legally be effected without such registration.  Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale, and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof.  In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, in good faith deems reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18.           TERMINATION; RELEASE. (a)           After the Termination Date (as defined below), this Agreement and the security interest created hereby shall terminate (provided that all indemnities set forth in Section 11 hereof shall survive any such termination), and the Pledgee, at the request and expense of the Pledgor, will execute and deliver to the Pledgor all such proper instruments as Pledgor may reasonably request acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any monies at the time held by the Pledgee or any of its sub-agents hereunder.  As used in this Agreement, “Termination Date” shall mean the date upon which the Total Revolving Loan Commitment and all Interest Rate Agreement or Other Hedging Agreements have been terminated, no Note under the Credit Agreement is outstanding (and all Loans have been repaid in full), all Letters of Credit have been terminated and all Obligations (as defined in the Credit Agreement) then owing have been paid in full. (b)           Notwithstanding anything to the contrary contained above, upon the presentment of satisfactory evidence to the Pledgee in its sole discretion that all obligations evidenced by any Pledged Note have been repaid in full, and that any payments received by the Pledgor were permitted to be received by the Pledgor pursuant to Section 6 hereof, the Pledgee shall, upon the request and at the expense of the Pledgor, duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such Pledged Note if same has not theretofore been sold or otherwise applied or released pursuant to this Agreement. (c)           In the event that any part of the Collateral is sold in connection with a sale permitted by Section 8.4 of the Credit Agreement or otherwise released at the direction of the Majority Lenders (or all Lenders if required by Section 11.1 of the Credit Agreement) and the proceeds of such sale or sales or from such release are applied in accordance with the provisions of Section 4.4 of the Credit Agreement, to the extent required to be so applied, the Pledgee, at the request and expense of the Pledgor, will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and has not theretofore been released pursuant to this Agreement. (d)           At any time that the Pledgor desires that Collateral be released as provided in the foregoing sub-section (a), (b) or (c), as the case may be, it shall deliver to the Pledgee a certificate signed by a Responsible Officer stating that the release of the respective Collateral is permitted pursuant to such subsection (a), (b) or (c), as the case may be. (e)           The Pledgee shall have no liability whatsoever to any Secured Creditor as the result of any release of Collateral by it in accordance with this Section 18. 19.           NOTICES ETC.  All such notices and communications hereunder shall be personally delivered, sent by registered or certified mail, postage prepaid, return receipt requested, or by a reputable courier delivery service, or by prepaid telex, TWX or telegram (with messenger delivery specified in the case of a telegram), or by telecopier, and shall be deemed to be given for purposes of this Agreement on the date received if deposited in registered or certified mail, postage prepaid, and otherwise on the day that such writing is delivered or sent to the intended recipient thereof, or in the case of notice delivered by telecopy, upon completion of transmission with a copy of such notice also being delivered under any of the methods provided above.  All notices and other communications shall be in writing and addressed as follows: (a)           if to the Pledgor: BMC Industries, Inc. One Meridian Crossings Suite 850 Minneapolis, Minnesota 55423 Attn:  Kathleen Pepski, Chief Financial Officer Telephone: (952) 851-6030 Telecopy:   (952) 851-6050 (b)           if to the Pledgee, at: Bankers Trust Company One Bankers Trust Plaza 130 Liberty Street 14th Floor New York, New York 10006 Attn:  Douglas Dibella Telephone: (212) 250-3301 Telecopy:   (212) 250-7351 with copies to: Bankers Trust Company 233 South Wacker Drive Suite 8400 Chicago, Illinois 60606 Attn:  John Anos Telephone:  (312) 993-8141 Telecopy:    (312) 993-8162 Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Attn:  Charles B. Boehrer, Esq. Telephone:  (312) 558-5600 Telecopy:    (312) 558-5700 (c)           if  to any Bank Creditor, either (x) to the Agent, at the address of the Agent specified in the Credit Agreement or (y) at such address as such Bank Creditor shall have specified in the Credit Agreement; (d)           if to any Other Creditor at such address as such Other Creditor shall have specified in writing to the Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 20.           WAIVER; AMENDMENT.  None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Pledgor and the Pledgee (with the written consent of the Majority Lenders or, to the extent required by Section 11.1 of the Credit Agreement with the consent of each of the Lenders); provided, however, that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such affected Class (or in the case of the LC Creditor, the LC Creditor).  For the purpose of this Agreement, the term “Class” shall mean each class of Secured Creditors, i.e., whether (i) the Bank Creditors as holders of the Credit Agreement Obligations, (ii) the Other Creditors as the holders of the Other Obligations; or (iii) the LC Creditor.  For the purpose of this Agreement, the term “Requisite Creditors” of any Class shall mean each of (A) with respect to the Credit Agreement Obligations, the Majority Lenders and (B) with respect to the Other Obligations, the holders of 51% of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. 21.           MISCELLANEOUS.  This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.  The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument.  In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto. 22.           RECOURSE.  This Agreement is made with full recourse to the Pledgor and pursuant to and upon all the representations, warranties, covenants and agreements on the part of the Pledgor contained herein, in the other Loan Documents, in the Interest Rate Protection or Other Hedging Agreements and otherwise in writing in connection herewith or therewith. [signature page follows] IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written.     BMC INDUSTRIES, INC., as Pledgor               By:    /s/ Kathleen P. Pepski   Name:  Kathleen P. Pepski   Title:     Senior Vice President and Chief     Financial Officer         BANKERS TRUST COMPANY, as Pledgee         By:   /s/ Robert Telesca   Name:  Robert Telesca   Title:     Vice President         ACKNOWLEDGED AND ACCEPTED IN ITS   CAPACITY AS A SECURED CREDITOR:         U.S. BANK NATIONAL ASSOCIATION         By:    /s/ William J. Umscheid   Name:  William J. Umscheid   Title:     Vice President Annex A to Pledge Agreement   Part I.      Pledged Stock   Name of Pledgor   Name of Issuing Corporation   Type of Shares   Number  of Shares Authorized   Number of Shares Outstanding   Share Certificate Number   Percentage of Outstanding Shares of Capital Stock BMC Industries, Inc.   Vision-Ease Lens, Inc. (US)   common   1,000   100   1   100% BMC Industries, Inc.   Buckbee-Mears Holding Company B.V.   common   100,000   20,000   1   65%   Part II.    Pledged Note   1.             Note in a stated face amount of EURO 77,000,000 made by Buckbee-Mears Holding Company B.V. in favor of BMC Industries, Inc.          
SECOND AMENDED AND RESTATED LETTER OF CREDIT AGREEMENT by and among PMA CAPITAL CORPORATION, THE BANKS PARTY HERETO AND PNC BANK, NATIONAL ASSOCIATION, AS AGENT AND AS ISSUING BANK _________________ $55,000,000 _________________ Dated as of November 22, 2000 -------------------------------------------------------------------------------- TABLE OF CONTENTS   Page   2 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 2 1.1Definitions 2 1.2Principles of Construction 18   2. AMOUNT AND TERMS OF LETTERS OF CREDIT 20 2.1.Issuance of Letters of Credit 20 2.2.Letter of Credit Participation and Funding Commitments 21 2.3.Interest Rate 22 2.4.Termination or Reduction of Commitment 23 2.5.Amendments to Letters of Credit 23 2.6.Extension of Commitment and Termination Date 24 2.7.Extension of the Stated Expiration Date of Each Letter of Credit 24 2.8.Reimbursement Obligations Absolute 25 2.9.No Liability of the Issuing Bank 26 2.10.Increased Costs: Capital Adequacy 26 2.11.Taxes 27 2.12.Agent's Records 29 2.13.Use of Proceeds 30 2.14.Collateral 30 2.15.Replacement of Banks 31 2.16.Commitment Fee 32 2.17.Letter of Credit Commissions 32 2.18.Utilization of Commitment in Optional Currencies 32   3. CONDITIONS PRECEDENT 33 3.1.Conditions to Effectiveness 33 3.2.Conditions for Issuance of All Letters of Credit and Extension and Increases thereof and Conditions to Effectiveness of Letters of Credit 36 3.3.Transitional Arrangements 36   4. REPRESENTATIONS AND WARRANTIES 38 4.1.Corporate Organization and Power 38 4.2.Authorization 38 4.3.No Violation 38 4.4.Governmental Authorization; Permits 39 4.5.Litigation 39 4.6.Taxes 39 4.7.Subsidiaries 40 i -------------------------------------------------------------------------------- 4.8.Full Disclosure 40 4.9.Margin Regulations 40 4.10.No Material Adverse Change 40 4.11.Financial Matters 41 4.12.Ownership of Properties 42 4.13.ERISA 42 4.14.Environmental Matters 42 4.15.Compliance With Laws 43 4.16.Regulated Industries 43 4.17.Insurance 43 4.18.Certain Contracts 44 4.19.Reinsurance Agreements 44   5. AFFIRMATIVE COVENANTS 45 5.1.GAAP Financial Statements 45 5.2.Statutory Financial Statements 46 5.3.Other Business and Financial Information 46 5.4.Corporate Existence; Franchises; Maintenance of Properties 49 5.5.Compliance with Laws 49 5.6.Payment of Obligations 50 5.7.Insurance 50 5.8.Maintenance of Books and Records; Inspection 50 5.9.Dividends 51 5.10.Ownership of Insurance Subsidiaries 51 5.11.Further Assurances 51   6. FINANCIAL COVENANTS 51 6.1.Capitalization Ratio 51 6.2.Cash Coverage Ratio 51 6.3.Statutory Surplus 52   7. NEGATIVE COVENANTS 52 7.1.Merger; Consolidation; Disposition of Assets 52 7.2.Indebtedness 53 7.3.Liens 54 7.4.Investments; Acquisitions 55 7.5.Restricted Payments 55 7.6.Transactions with Affiliates 56 7.7.Certain Amendments 56 7.8.Lines of Business 56 7.9.Limitations on Certain Restrictions 57 7.10.Fiscal Year 57 7.11.Accounting Changes 57 7.12.Reinsurance Agreements 57 ii -------------------------------------------------------------------------------- 8. DEFAULT 58 8.1.Events of Default 58   9. THE AGENT 62 9.1.Appointment 62 9.2.Delegation of Duties 62 9.3.Exculpatory Provisions 63 9.4.Reliance by Agent 63 9.5.Notice of Default 64 9.6.Non-Reliance on Agent and Other Banks 64 9.7.Indemnification 64 9.8.Agent in Its Individual Capacity 65 9.9.Successor Agent 65   10. OTHER PROVISIONS 66 10.1.Amendments and Waivers 66 10.2.Notices 67 10.3.No Waiver; Cumulative Remedies 68 10.4.Survival of Representations and Warranties 69 10.5.Payment of Expenses and Taxes 69 10.6.Assignments and Participants 70 10.7.Counterparts 71 10.8.Adjustments; Set-off 71 10.9.Construction 72 10.10.Indemnity 73 10.11.Governing Law 73 10.12.Headings Descriptive 73 10.13.Severability 74 10.14.Integration 74 10.15.Consent to Jurisdiction 74 10.16.Service of Process 74 10.17.No Limitation on Service or Suit 74 10.18.WAIVER OF TRIAL BY JURY 75 10.19.Confidentiality 75 iii -------------------------------------------------------------------------------- EXHIBITS Exhibit A List of Commitment Percentages Exhibit B Form of Assignment and Acceptance Agreement Exhibit C Form of Letter of Credit Request Exhibit D Form of Letter of Credit Exhibit E-1 Form of Compliance Certificate (GAAP Financial Statements) Exhibit E-2 Form of Compliance Certificate (Statutory Financial Statements) Exhibit F Form of Financial Condition Certificate Exhibit G Form of Opinion of Counsel to the Applicant Exhibit H Form of Extension Request   SCHEDULES Schedule I Existing Letters of Credit Schedule 1.1  Management Group Schedule 3.1   2000 Reserve Loss Schedule 4.4   Licenses Schedule 4.6  Taxes Schedule 4.7  Subsidiaries Schedule 4.14(a)   Environmental Matters Schedule 4.14(b)  Environmental Matters Schedule 4.18  Material Contracts Schedule 4.19  Reinsurers and Collateral Securing Certain Reinsurers' Obligations Schedule 7.2 Indebtedness Schedule 7.3 Liens Schedule 7.6 Transactions with Affiliates Schedule 10.2 List of Banks and their Addresses iv --------------------------------------------------------------------------------     SECOND AMENDED AND RESTATED LETTER OF CREDIT AGREEMENT, dated as of November 22, 2000, by and among PMA CAPITAL CORPORATION, a Pennsylvania corporation (the “Applicant”), each subsidiary of the Applicant which is or may become a party hereto (each a “Co-Applicant”), the banks or other lending institutions party hereto (together with their respective successors and assigns, the “Banks”, and each a “Bank”) and PNC BANK, NATIONAL ASSOCIATION, as agent for itself and the other Banks (in such capacity, together with its successors and assigns in such capacity, the “Agent”), and as issuing bank (in such capacity, together as with its successors and assigns in such capacity, the “Issuing Bank”) for the Letters of Credit (as defined in Section 1). RECITALS     A.   The Applicant is a party to a Letter of Credit Agreement dated as of November 10, 1995, as amended and restated as of March 14, 1997 and thereafter amended prior to the date hereof (the “Existing Credit Agreement”), among the Applicant, the lenders party thereto (collectively, the “Existing Banks”), CoreStates Bank, N.A., as co-agent (the “Exiting Co-Agent”), and The Bank of New York, as the administrative agent for the Existing Banks and the issuing bank for the Letters of Credit (in such capacity, together with its successors in such capacity, the “Exiting Agent and Issuing Bank”).     B.   The parties hereto have agreed to amend and restate the Existing Credit Agreement as provided in this Agreement in order to effect the following: (i) to remove the Exiting Agent and Issuing Bank and Exiting Co-Agent as parties hereto; (ii) to substitute as Agent and Issuing Bank, PNC Bank, National Association; (iii) to provide for the replacement of the outstanding Letters of Credit issued by the Exiting Agent and Issuing Bank, described in Schedule I hereto (“Existing Letters of Credit”), with Letters of Credit issued by PNC Bank, National Association; (iv) to increase the amount of the aggregate Commitments available hereunder to $55,000,000; (v) to remove certain of the Existing Banks as parties hereto and add certain other lenders (the “New Banks”) as parties; and (vi) to modify certain terms and conditions set forth therein.     C.   The New Banks are willing to become parties to this Agreement and to provide the Commitments set forth for such New Banks herein, and otherwise to enjoy the benefits and be subject to all the obligations of the Banks under this Agreement.     D.   For convenience, this Agreement is dated as of November 22, 2000 (the “Restatement Effective Date”), and references to certain matters related to the period prior thereto have been deleted. -------------------------------------------------------------------------------- 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION     1.1.   Definitions         As used in this Agreement, terms defined in the preamble have the meanings therein indicated, and the following terms have the following meanings:         “Affiliate” shall mean, as to any Person, each other Person that directly, or indirectly through one or more intermediaries, owns or controls, is controlled by or under common control with, such Person or is a director or officer of such Person. For purposes of this definition, with respect to any Person, “control” shall mean (i) the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, or (ii) the beneficial ownership of securities or other ownership interests of such Person having ten percent (10%) or more of the combined voting power of the then outstanding securities or other ownership interests of such Person ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors or other governing body of such Person.         “Agent” means PNC in its capacity as agent for the Banks hereunder, and its successors and assigns in such capacity.         “Agreement” means this Second Amended and Restated Letter of Credit Agreement, as the same may be amended, supplemented or otherwise modified from time to time.         “Alternate Base Rate” means on any date, a rate of interest per annum equal to the higher of (i) the Federal Funds Rate in effect on such date plus one half of one percent (½ of 1%) or (ii) the Prime Rate in effect on such date. Each change in the Alternate Base Rate resulting from a change in the Federal Funds Rate or the Prime Rate shall take effect on the date when such change in the Federal Funds Rate or the Prime Rate occurs.         “Annual Statement” shall mean, with respect to any Insurance Subsidiary for any fiscal year, the annual financial statements of such Insurance Subsidiary as required to be filed with the Insurance Regulatory Authority of its jurisdiction of domicile and in accordance with the laws of such jurisdiction, together with all exhibits, schedules, certificates and actuarial opinions required to be filed or delivered therewith.         “Applicable Fee Percentage” means (i) with respect to the Letter of Credit Commissions, 0.450% and (ii) with respect to Commitment Fees, 0.150%.         “Assignment and Acceptance Agreement” means an assignment and acceptance agreement executed by a Bank and an Eligible Assignee substantially in the form of Exhibit B. 2 --------------------------------------------------------------------------------         “Assignment Fee” has the meaning set forth in Section 10.6(b).         “Authorized Signatory” means as to (i) any Person which is a corporation, the chairman of the board, the president, any vice president, the chief financial officer or any other duly authorized officer of such Person and (ii) any Person which is not a corporation, the general partner or other managing Person thereof.         “Available Amount” means at any time the amount of the Commitment less the Letter of Credit Exposure.         “Available Dividend Amount” shall mean, with respect to any Insurance Subsidiary for any period of four consecutive fiscal quarters, the aggregate maximum amount of dividends that is, or would be if such period were a fiscal year, permitted by the Insurance Regulatory Authority of its jurisdiction of domicile, under applicable Requirements of Law (without the necessity of any consent, approval or other action of such Insurance Regulatory Authority involving the granting of permission or the exercise of discretion by such Insurance Regulatory Authority), to be paid by such Insurance Subsidiary to the Applicant or another Subsidiary of the Applicant in respect of such four-quarter period as if such period were a fiscal year (whether or not any such dividends are actually paid).         “Bank” means each bank listed on the signature pages hereof and each assignee which becomes a Bank pursuant to Section 10.6, and their respective assigns, each of which shall meet the criteria of “Eligible Assignee” hereunder.         "Bankruptcy Code" shall mean 11 U.S.C.§§101 et seq., as amended from time to time, and any successor statute.         “Beneficiary Notification Date” shall mean, with respect to an Evergreen Letter of Credit, the last day on which the beneficiary thereof may be notified in order that such Stated Expiration Date is not to be automatically extended.         “Benefit Arrangement” shall mean any time, an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.         “Benefitted Bank” has the meaning set forth in Section 10.8.         "BNY" means The Bank of New York.         “Business Day” means any day other than a Saturday, a Sunday or other day on which commercial banks located in Philadelphia or New York are authorized or required by law or other governmental action to close; and with respect to draws or reimbursements under a Letter of Credit denominated in an Optional Currency such day shall be a day (i) on which dealings in deposits in the relevant Optional Currency are carried on in the applicable interbank 3 -------------------------------------------------------------------------------- market, and (ii) on which foreign exchange markets are open for business in the principal financial center of the country of the relevant Optional Currency.         “Caliber” shall mean Caliber One Indemnity Company, a Delaware insurance company.         “Capitalization Ratio” shall mean, as of the last day of any fiscal quarter, the ratio of (i) Consolidated Indebtedness as of such date to (ii) the sum of Consolidated Indebtedness and Consolidated Net Worth, each as of such date.         “Cash Coverage Ratio” shall mean as of the last day of any period of four consecutive fiscal quarters (the “Measurement Period”), the ratio of:                (i)    the aggregate of (y) the Available Dividend Amount for the Measurement Period for the Insurance Subsidiaries, other than each Insurance Subsidiary that is a Subsidiary of another Insurance Subsidiary plus (z) the Net Tax Sharing Payments (whether a positive or negative number) for the Measurement Period, to                (ii)    the aggregate of (x) Interest Expense incurred during the Measurement Period, (y) the aggregate of all operating costs and expenses of the Applicant, including rent, utilities and payroll expenses paid by the Applicant during the Measurement Period, and (z) all dividends paid by the Applicant during the Measurement Period.         “Cash Equivalents” shall mean (i) securities issued or unconditionally guaranteed by the United States of America or any agency or instrumentality thereof, backed by the full faith and credit of the United States of America and maturing within one hundred eighty (180) days from the date of acquisition, (ii) commercial paper issued by any Person organized under the laws of the United States of America, maturing within one hundred eighty (180) days from the date of acquisition and, at the time of acquisition, having a rating of at least A-1 or the equivalent thereof by Standard & Poor’s and at least P-1 or the equivalent thereof by Moody’s, (iii) time deposits, certificates of deposit and banker’s acceptances maturing within one hundred eighty (180) days from the date of issuance and issued by a bank or trust company organized under the laws of the United States of America or any state thereof that has combined capital and surplus of at least $500,000,000 and that has (or is a subsidiary of a bank holding company that has) a long-term unsecured debt rating of at least A or the equivalent thereof by Standard & Poor’s or at least A-2 or the equivalent thereof by Moody’s, and (iv) repurchase obligations of a bank or trust company described in clause (iii) above and having a term not exceeding seven (7) days with respect to underlying securities of the types described in clause (i) above entered into with any bank or trust company meeting the qualifications specified in clause (iii) above.         “CMOs” shall mean any security or certificate representing any interest or participation in a pool of Mortgage Backed Securities (it being understood that Mortgage Backed Securities themselves are not CMOs). 4 --------------------------------------------------------------------------------         “Collateral” has the meaning set forth in Section 2.14.         “Collateral Accounts” has the meaning set forth in Section 2.14 hereof.         “Co-Applicant” means each Subsidiary of the Applicant which is or becomes a party hereto.         “Combined Annual Statement” shall mean, with respect to PMACIC and the Consolidated Affiliates, the combined annual statement of such entities on the Fire and Casualty form (or any successor form thereto) as required to be filed by any such entity with the Insurance Regulatory Authority of its jurisdiction of domicile in accordance with the laws of such jurisdiction, together with all exhibits, schedules, certificates and actuarial opinions required to be filed or delivered therewith.         “Commitment” means the commitment of PNC, as Issuing Bank, to issue Letters of Credit having an aggregate outstanding Dollar Equivalent face amount up to $55,000,000 (as reduced from time to time pursuant to Section 2.4), and with respect to the Banks shall mean their commitment to participate in the Letter of Credit Exposure in an amount equal to their respective Commitment Percentages as set forth in Section 2.2 in an aggregate amount up to their respective Commitment Amounts.         “Commitment Amount” means as to any Bank, the maximum Dollar amount of its Commitment set forth opposite the name of such Bank in Exhibit A under the heading “Commitment Amount”.         “Commitment Fee” has the meaning set forth in Section 2.16.         “Commitment Percentage” means as to any Bank, the percentage set forth opposite the name of such Bank in Exhibit A under the heading “Commitment Percentage”.         “Commitment Period” means the period from the Original Effective Date through the day preceding the Termination Date.         “Compliance Certificate” shall mean a fully completed and duly executed certificate in the form of Exhibit E-1 or Exhibit E-2, as applicable.         “Consolidated Affiliates” shall mean, collectively, Caliber, the PMA Group and any other fire and casualty insurance company that is or hereafter becomes an Affiliate of PMACIC and the accounts of which are prescribed or permitted by Statutory Accounting Principles to be consolidated with those of PMACIC for purposes of any Combined Annual Statements.         “Consolidated Indebtedness” shall mean, as of the last day of any fiscal quarter, the aggregate (without duplication) of all Indebtedness of the Applicant and its Subsidiaries as of 5 -------------------------------------------------------------------------------- such date, determined on a consolidated basis in accordance with Generally Accepted Accounting Principles but excluding reimbursement obligations with respect to letters of credit issued hereunder.         “Consolidated Net Worth” shall mean, at any time, the net worth of the Applicant and its Subsidiaries at such time, determined on a consolidated basis in accordance with Generally Accepted Accounting Principles but (i) excluding any preferred stock or other class of equity securities that, by its stated terms (or by the terms of any class of equity securities issuable upon conversion thereof or in exchange therefor), or upon the occurrence of any event, matures or is mandatorily redeemable, or is redeemable at the option of the holders thereof, in whole or in part, and (ii) without regard to the requirements of Statement of Financial Accounting Standards No. 115 issued by the Financial Accounting Standards Board.         “Consolidated Statutory Surplus” shall mean, as to all Insurance Subsidiaries, as of any date, the sum (without duplication) of the total amounts shown (i) with respect to each Insurance Subsidiary not legally domiciled in the United States, the shareholders’ equity of such Insurance Subsidiary as determined in accordance with Generally Accepted Accounting Principles (without regard to the requirements of Statement of Financial Accounting Standards No. 115 issued by the Financial Accounting Standards Board), (ii) with respect to each other Insurance Subsidiary that is a life and accident and health insurance company, on line 38, column 1, page 3 of the Annual Statement of such Insurance Subsidiary, and (iii) with respect to each other Insurance Subsidiary, on line 27, column 1, page 3 of the Annual Statement of such Insurance Subsidiary, excluding in each case under clauses (i), (ii) and (iii) any finance Subsidiary that is a Subsidiary of an Insurance Subsidiary, or the sum of amounts determined in a consistent manner for any date other than one as of which an Annual Statement is prepared.         “Contingent Obligation” shall mean, with respect to any Person, (without duplication) any direct or indirect liability of such Person with respect to any Indebtedness, liability or other obligation (the “primary obligation”) of another Person (the “primary obligor”), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor, in respect thereof, to make payment of such primary obligation or (d) otherwise to assume or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof; provided, however, that, with respect to the Applicant and its Subsidiaries, the term Contingent Obligation shall not include (w) guarantees or agreements issued by the Applicant to Insurance Regulatory Authorities pursuant to which the Applicant agrees to maintain the statutory surplus of PMAIC and MAIC in an amount (in each case) not to exceed $7,500,000, (x) guarantees or agreements issued by Applicant to PMAIC pursuant to which Applicant agrees to maintain the statutory surplus of PMA Cayman in an amount not to exceed $15,000,000, (y) endorsements for 6 -------------------------------------------------------------------------------- collection or deposit in the ordinary course of business or (z) obligations entered into by an Insurance Subsidiary in the ordinary course of its business under insurance policies or contracts issued by it or to which it is a party, including reinsurance agreements (and security posted by any such Insurance Subsidiary in the ordinary course of its business to secure obligations thereunder).         “Control Agreements” shall mean those certain Notification and Control Agreements among the Applicant and one or more Co-Applicants, the Agent and the Custodian relating to the Pledge Agreement and the Collateral Accounts.         “Covenant Compliance Worksheet” shall mean a fully completed worksheet in the form of Attachment A to Exhibit E-1 or Exhibit E-2, as applicable.         “Credit Documents” means collectively, this Agreement, each Letter of Credit Request, the Pledge Agreement, the Control Agreements and all other agreements, instruments, documents and certificates now or hereafter executed and delivered to the Agent or any Bank by or on behalf of the Applicant or any of its Subsidiaries with respect to this Agreement and the transactions contemplated hereby, in each case as amended, modified, supplemented or restated from time to time.         “Credit Party” means the Applicant, each Co-Applicant and each other party (other than the Agent, the Issuing Bank and the Banks) that is a signatory to a Credit Document.         “Custodian” shall mean PNC in its capacity as custodian of the Collateral Accounts and its successors and assigns in such capacity.         “Date of Issuance” means any Business Day specified in a Letter of Credit Request as a date on which the Applicant and, if applicable, a Co-Applicant, requests the issuance by the Issuing Bank of a Letter of Credit.         “Default” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.         “Discounted Collateral Value” means, in respect of Eligible Collateral consisting of (i) cash, one hundred percent (100%) of the amount thereof, (ii) Treasury Securities, ninety percent (90%) of the fair market value thereof, and (iii) U.S. Federal Agency Obligations, eighty (80%) of the fair market value thereof,. The fair market value of Treasury Securities and U.S. Federal Agency Obligations shall be as determined in good faith by the Agent and the Agent’s good faith determination thereof shall be conclusive absent manifest error.         “Dollar Equivalent” shall mean, with respect to any amount of any currency, the Equivalent Amount of such currency expressed in Dollars. 7 --------------------------------------------------------------------------------         “Dollar Roll Agreements” shall mean, as to any Person, an agreement pursuant to which such Person sells securities to another Person and agrees to repurchase “substantially the same” securities (as determined by the Public Securities Association and Generally Accepted Accounting Principles) at a described or specified date and price.         “Dollars” and “$” means lawful currency of the United States of America.         "Duff & Phelps" shall mean Duff & Phelps Credit Rating Co., Inc., its successors and assigns.         “Eligible Assignee” shall mean and include a commercial bank or other financial institution (other than a property or casualty insurance company) acceptable to the Issuing Bank and the Agent.         "Eligible Collateral" means cash (in Dollars), Treasury Securities and U.S. Federal Agency Obligations.         “Environmental Claims” shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by any Person in the ordinary course of its business and not in response to any third party action or request of any kind) or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (collectively, “Claims”), including, without limitation, (i) any and at Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Substances or arising from alleged injury or threat of injury to human health or the environment.         “Environmental Laws” shall mean any and all federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations, rules of common law and orders of courts or Governmental Authorities, relating to the protection of human health or occupational safety or the environment, now or hereafter in effect and in each case as amended from time to time, including, without limitation, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Substances.         “Equivalent Amount” shall mean, at any time, as determined by the Agent (which determination shall be conclusive absent manifest error), with respect to an amount of any currency (the “Reference Currency”) which is to be computed as an equivalent amount of another currency (the “Equivalent Currency”): (i) if the Reference Currency and the Equivalent Currency are the same, the amount of such Reference Currency, or (ii) if the Reference Currency and the Equivalent Currency are not the same, the amount of such Equivalent Currency 8 -------------------------------------------------------------------------------- converted from such Reference Currency at Agent’s spot selling rate (based on the rates quoted by Reuters) for the sale of such Equivalent Currency for such Reference Currency at the open of Agent’s business on the Business Day on which such calculation is made.         “Equivalent Currency” shall have the meaning assigned to such term in the definition of Equivalent Amount.         “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.         “ERISA Group” shall mean the Applicant and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Applicant, are treated as a single employer under Section 414 of the Internal Revenue Code.         “Event of Default” has the meaning set forth in Section 8.1.         “Evergreen Letter of Credit” shall mean a Letter of Credit, the Stated Expiration Date of which, by terms of such Letter of Credit, is automatically extended for the period therein specified unless the beneficiary thereof is notified a specified number of days prior to the then scheduled Stated Expiration Date that such scheduled Stated Expiration Date will not be extended.         “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.         “Existing Banks” has the same meaning set forth in the Recitals.         “Existing Credit Agreement” has the same meaning set forth in the Recitals.         “Existing Letters of Credit” has the same meaning set forth in the Recitals.         “Exiting Agent and Issuing Bank” has the same meaning set forth in the Recitals.         “Extension Consent Period” means the period which is less than thirty-five (35) days, but equal to or greater than thirty (30) days, prior to the then current Termination Date (provided, however, that if such thirtieth (30th) prior day falls on a day that is not a Business Day, such date shall be extended to the next following Business Day).         “Extension Request” has the meaning set forth in Section 2.6. 9 --------------------------------------------------------------------------------         “Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) 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 (i) 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 (ii) 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 quoted to PNC on such day on such transactions as determined by the Agent.         “Generally Accepted Accounting Principles” shall mean generally accepted accounting principles, as followed in the United States and as set forth in the statements, opinions and pronouncements of the Accounting Principles Board, the American Institute of Certified Public Accountants and the Financial Accounting Standards Board (or, to the extent not so set forth in such statements, opinions and pronouncements, as generally followed by entities similar in size to the Applicant and engaged in generally similar lines of business), consistently applied and maintained and in conformity with those used in the preparation of the most recent financial statements of the Applicant referred to in Section 4.1l(a).         “Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof and any central bank thereof, any municipal, local, city or county government, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.         “Hazardous Substances” shall mean any substances or materials (i) that are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants or toxic substances under any Environmental Law, (ii) that are defined by any Environmental Law as toxic, explosive, corrosive, ignitable, infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of which require investigation or response under any Environmental Law, (iv) that constitute a nuisance, trespass or health or safety hazard to Persons or neighboring properties, (v) that consist of underground or aboveground storage tanks, whether empty, filled or partially filled with any substance or (vi) that contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or wastes, crude oil, nuclear fuel, natural gas or synthetic gas.         “Hedge Agreement” shall mean any interest or foreign currency rate swap, cap, collar, option, hedge, forward rate or other similar agreement or arrangement designed to protect against fluctuations in interest rates or currency exchange rates.         “Historical Statutory Statements” shall have the meaning given to such term in Section 4.11(b). 10 --------------------------------------------------------------------------------         “Indebtedness” shall mean, with respect to any Person (without duplication), (i) all indebtedness of such Person for borrowed money or in respect of loans or advances, (ii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (iii) all reimbursement obligations of such Person with respect to surety bonds, letters of credit and bankers’ acceptances (in each case, whether or not drawn or matured and in the stated amount thereof), (iv) all obligations of such Person to pay the deferred purchase price of property or services, (v) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (vi) all obligations of such Person as lessee under leases that are or should be, in accordance with Generally Accepted Accounting Principles, recorded as capital leases, to the extent such obligations are required to be so recorded, (vii) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock or other equity securities that, by their stated terms (or by the terms of any equity securities issuable upon conversion thereof or in exchange therefor), or upon the occurrence of any event, mature or are mandatorily redeemable, or are redeemable at the option of the holder thereof, in whole or in part, (viii) the net termination obligations of such Person under any Hedge Agreements, other than any Hedge Agreement that qualifies as a hedge of an exposure to an identifiable interest rate risk as determined in accordance with Statement of Financial Accounting Standards No. 80 issued by the Financial Accounting Standards Board, calculated as of any date as if such agreement or arrangement were terminated as of such date, (ix) all indebtedness of such Person in respect of Reverse Repurchase Agreements and Dollar Roll Agreements, (x) all Contingent Obligations of such Person and (xi) all indebtedness referred to in clauses (i) through (x) above secured by any Lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person.         “Indemnified Person” has the meaning set forth in Section 10.10.         “Insurance Agreement” shall mean all contracts of insurance issued by any Insurance Subsidiary.         “Insurance Regulatory Authority” mean, with respect to any Insurance Subsidiary, the insurance department or similar Governmental Authority charged with regulating insurance companies or insurance holding companies, in its jurisdiction of domicile and, to the extent that it has regulatory authority over such Insurance Subsidiary, in each other jurisdiction in which such Insurance Subsidiary conducts business or is licensed to conduct business.         “Insurance Subsidiary” shall mean any Subsidiary of the Applicant the ability of which to pay dividends is regulated by an Insurance Regulatory Authority or that is otherwise required to be regulated thereby in accordance with the applicable Requirements of Law of its jurisdiction of domicile, and shall mean and include, without limitation, each of PMACIC and PMAIC.         “Interest Expense” shall mean, for any period, total interest expense of the Applicant for such period in respect of Indebtedness of the Applicant and its Subsidiaries 11 -------------------------------------------------------------------------------- (including all such interest expense accrued or capitalized during such period, whether or not actually paid during such period, and such portion of finance leases properly characterized as interest), adjusted to give effect to all interest rate swap, cap or other interest rate hedging arrangements and fees and expenses paid in connection therewith, all as determined on a consolidated basis in accordance with Generally Accepted Accounting Principles.         “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute, and all rules and regulations from time to time promulgated thereunder.         “Invested Assets” shall mean, with respect to any Person, the amount, on a consolidated basis, of such Person’s investments, cash and cash equivalents as reflected on its most recent balance sheet.         “Investment Grade Securities” shall mean (i) non-equity securities (other than those issued by an Affiliate of the Applicant and other than CMOs and REMICS) that, if rated by the NAIC, are rated “NAIC 2” (or the equivalent thereof) or better by the NAIC, or, if not rated by the NAIC, are rated “BBB-” (or the equivalent thereof) or higher by Standard & Poor’s, “Baa3” (or the equivalent thereof) or higher by Moody’s, or “BBB-” (or the equivalent thereof) or higher by Duff & Phelps, (ii) municipal bonds that, if rated by the NAIC, are rated “NAIC 2" (or the equivalent thereof) or better by the NAIC, or if not rated by the NAIC, are rated “SP-2” (or the equivalent thereof) or higher by Standard & Poor’s, “Baa3” or “MIG4” (or the equivalent thereof) or higher by Moody’s, or “BBB-”(or the equivalent thereof) or higher by Duff &Phelps, and (iii) Permitted CMOs and Mortgage Backed Securities that, if rated by the NAIC, are rated “NAIC 2”(or the equivalent thereof) or higher by Standard &Poor’s, “Baa3”(or the equivalent thereof) or higher by Moody’s, or “BBB-”(or the equivalent thereof) or higher by Duff &Phelps (or, in the case of clauses (i), (ii) and (iii) above, in the event all such rating agencies cease to publish investment ratings, carrying an equivalent rating of a nationally recognized rating agency).         “Issuing Bank” means PNC in its capacity as issuing bank hereunder, and its successors in such capacity.         “Letters of Credit” shall mean letters of credit issued by the Issuing Bank for the account of the Applicant and any Co-Applicant as defined in Section 2.1.         “Letter of Credit Commissions” has the meaning set forth in Section 2.17.         “Letter of Credit Exposure” means at any date, (i) in respect of all the Banks, the Dollar Equivalent sum, without duplication, of (x) the aggregate undrawn face amount of the outstanding Letters of Credit at such date, (y) the aggregate amount of unpaid drafts drawn on all Letters of Credit at such date, and (z) the aggregate unpaid reimbursement obligations in respect of the Letters of Credit at such date, and (ii) in respect of any Bank, a Dollar Equivalent 12 -------------------------------------------------------------------------------- amount equal to such Bank’s Commitment Percentage multiplied by the amount determined under clause (i) of this definition.         “Letter of Credit Request” means a request from the Applicant, or from the Applicant and a Co-Applicant, for the issuance of a Letter of Credit, substantially in the form of Exhibit C.         “Licenses” shall have the meaning given to such term in Section 4.4(c).         “Lien” shall mean any mortgage, pledge, hypothecation, assignment, security interest, lien (statutory or otherwise), preference, priority, charge or other encumbrance of any nature, whether voluntary or involuntary, including, without limitation, the interest of any vendor or lessor under any conditional sale agreement, title retention agreement, capital lease or any other lease or arrangement having substantially the same effect as any of the foregoing, except as created under the Credit Documents.         “MAIC” shall mean Manufacturers Alliance Insurance Company, a Pennsylvania insurance corporation.         “Management Group” shall mean, collectively, the individuals listed on Schedule 1.1; provided, however, each individual shall be included in the Management Group only so long as such individual is a member of the Applicant’s Board of Directors or is employed by the Applicant or any Material Insurance Subsidiary in a senior management position.         “Margin Stock”shall have the meaning given to such term in Regulation U.         “Material Adverse Change” shall mean a material adverse change in the condition (financial or otherwise), operations, business, properties or financial prospects of the Applicant or the Applicant and its Subsidiaries, taken as a whole.         “Material Adverse Effect” shall mean a material adverse effect upon (i) the condition (financial or otherwise), operations, business, properties or financial prospects of the Applicant or the Applicant and its Subsidiaries, taken as a whole, (ii) the ability of the Applicant to perform its obligations under this Agreement or any of the other Credit Documents or (iii) the legality, validity or enforceability of this Agreement or any of the other Credit Documents.         “Material Insurance Subsidiary” shall mean any Insurance Subsidiary that is a Material Subsidiary.         “Material Plan” shall mean, at any time, a Plan or Plans having aggregate Unfunded Liabilities in excess of $1,000,000. 13 --------------------------------------------------------------------------------         “Material Subsidiary” shall mean each of (i) PMACIC, (ii) Caliber, (iii) the members of the PMA Group, (iv) at the relevant time of determination, any Subsidiary of the Applicant having (after the elimination of intercompany accounts) (y) assets constituting at least ten percent (10%) of the total assets of the Applicant and its Subsidiaries on a consolidated basis, or (z) revenues constituting at least ten percent (10%) of the total revenues of the Applicant and its Subsidiaries on a consolidated basis, in each case as determined as of the date of the financial statements of the Applicant and its Subsidiaries most recently delivered under Section 5.1 prior to such time, and (v) any Subsidiary that has one of the foregoing as a Subsidiary;         "Moody's" shall mean Moody's Investors Service, Inc., its successors and assigns.         “Mortgage Backed Securities” shall mean investment securities representing any undivided interest or participation in or which are secured by, a pool of loans secured by mortgages or deeds of trust.         “Multiemployer Plan” shall mean, at any time, an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five (5) plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five (5) year period.         “NAIC” shall mean the National Association of Insurance Commissioners and any successor thereto.         “Net Tax Sharing Payments” shall mean, for any period, (i) the aggregate (without duplication) of all payments made or to be made to the Applicant by its Subsidiaries pursuant to tax sharing or allocation agreements or arrangements or otherwise in respect of taxable income realized during such period, minus(ii) the aggregate (without duplication) of all foreign, federal, state or local income, franchise and other tax payments made or to be made by the Applicant in respect of taxable income realized during such period and any payments made or to be made by the Applicant during such period pursuant to such tax sharing or tax allocation agreement or arrangement.         “New Banks” has the same meaning set forth in the Recitals.         “Obligations” means all of the obligations and liabilities of the Applicant and the Co-Applicants under the Credit Documents, including, without limitation, reimbursement obligations (whether absolute or contingent) under any Letter of Credit or Credit Document and all obligations in respect of fees, expenses and other amounts payable under any Credit Document, in each case whether fixed, contingent, now existing or hereafter arising, created, assumed, incurred or acquired. 14 --------------------------------------------------------------------------------         “Optional Currency” shall mean any of the following currencies: (i) British pounds, (ii) Canadian dollars, (iii) German marks, (iv) euros, (v) French francs, (vi) Mexican pesos, (vii) Swiss francs and (viii) Japanese yen and any other currency approved by Agent pursuant to Section 2.18(b).         "Original Effective Date" means March 14, 1997.         “Outstanding Letters of Credit” means at any time the Letters of Credit outstanding at such time.         “PAC I” shall means a planned amortization class bond which is a tranche or class of CMO or REMIC that is retired according to a predetermined amortization schedule independent of the prepayment rate on the underlying collateral and which has the highest level of protection within the pool against prepayment or extension.         “Parent” means, with respect to any Bank, any Person controlling such Bank.         “PBGC” shall mean the Pension Benefit Guaranty Corporation and any successor thereto.         “Permitted CMOs and Mortgage Backed Securities” shall mean (i) mortgage participation certificates issued by the Federal Home Loan Mortgage Corporation, (ii) mortgage backed securities issued by the Federal National Mortgage Association, (iii) securities guaranteed by the Government National Mortgage Association, and (iv) other securities and certificates representing participations in any CMO or REMIC which are PAC I’s or which have comparable priority in respect of the repayment thereof.         “Permitted Liens” shall have the meaning given to such term in Section 7.3.         “Person” shall mean any corporation, association, joint venture, partnership, limited liability company, organization, business, individual, trust, Governmental Authority or other entity of whatever nature.         “Plan” shall mean, at any time, an employee Pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five (5) years been maintained, or contributed to, by any Person which was at such a time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group.         “Pledge Agreement” shall mean that certain Pledge and Security Agreement from the Applicant to the Agent relating to the Collateral Accounts, as the same may be amended, supplemented or otherwise modified from time to time. 15 --------------------------------------------------------------------------------         "PMA Cayman" shall mean PMA Holdings, Cayman Ltd., a Cayman Island corporation.         “PMA Group” shall mean PMAIC, Manufacturers Alliance Insurance Company, a Pennsylvania insurance corporation, and Pennsylvania Manufacturers Indemnity Company, a Pennsylvania insurance corporation.         “PMACIC” shall mean PMA Capital Insurance Company (formerly known as PMA Reinsurance Corporation), a Pennsylvania insurance corporation.         “PMAIC” shall mean Pennsylvania Manufacturers’ Association Insurance Company, a Pennsylvania insurance corporation.         “PNC” shall mean PNC Bank, National Association.         “Prime Rate” means the rate of interest publicly announced by PNC in Philadelphia from time to time as its Prime Rate.         “Property” means all types of real, personal, tangible, intangible or mixed property.         “Quarterly Statement” shall mean, with respect to any Insurance Subsidiary for any fiscal quarter, the quarterly financial statements of such Insurance Subsidiary as required to be filed with the Insurance Regulatory Authority of its jurisdiction of domicile, together with all exhibits, schedules, certificates and actuarial opinions required to be filed or delivered therewith.         “Reference Currency” shall have the meaning assigned to such term in the definition of Equivalent Amount.         “Regulations D, T, U and X” shall mean Regulations D, T, U and X respectively, of the Federal Reserve Board, and any successor regulations.         “Reinsurance Agreement” shall mean any agreement, contract, treaty, certificate of other arrangement whereby any Insurance Subsidiary agrees to transfer, cede or retrocede to another insurer or reinsurer all or part of the liability assumed or assets held by such Insurance Subsidiary under a policy or policies of insurance issued by such Insurance Subsidiary.         “REMIC” shall mean real estate mortgage investment conduit.         “Replaced Bank” has the meaning set forth in Section 2.15.         “Required Banks” means at any time Banks representing at least 51% of the Commitment or, if the Commitment shall have been terminated, at least 51% of the Letter of Credit Exposure at such time. 16 --------------------------------------------------------------------------------         “Requirement of Law” shall mean, with respect to any Person, the charter, articles or certificate of organization or incorporation and bylaws or other organizational or governing documents of such Person, and any statute, law, treaty, rule, regulation, order, decree, writ, injunction or determination of any arbitrator or 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 or otherwise pertaining to any or all of the transactions contemplated by this Agreement and the other Credit Documents.         "2000 Reserve Loss" shall have the meaning set forth in Section 3.1(a)(ii) below         “Restatement Effective Date” has the meaning set forth in the Recitals.         “Reverse Repurchase Agreement” shall mean, as to any Person, an agreement pursuant to which such Person sells securities to another Person (the “Counterparty”) and agrees to repurchase such securities at a described or specified date and price; provided, however, that “Reverse Repurchase Agreements” shall not include any agreement pursuant to which such Person lends securities pursuant to a securities lending arrangement to a Counterparty who collateralizes such borrowing with cash, Cash Equivalents, letters of credit or other collateral acceptable to the Required Banks, and agrees to return such securities to such Person at a described or specified date.         “Revolving Credit Agreement” shall mean that certain Revolving Credit Agreement among the Applicant and the lenders party thereto, The Bank of New York, as administrative agent for the lenders, and First Union National Bank, as documentation agent for the lenders, dated as of March 14, 1997, as amended.         "Standard & Poor's" shall mean, Standard & Poor's Ratings Services, a division of McGraw-Hill Companies, Inc., its successors and assigns.         “Stated Expiration Date” means, with respect to each Letter of Credit, the date occurring up to one year after the Date of Issuance, as such date may be extended in accordance with the terms of this Agreement.         “Statutory Accounting Practices” shall mean, with respect to any Insurance Subsidiary, the statutory accounting practices prescribed or permitted by the relevant Insurance Regulatory Authority of its state of domicile, consistently applied and maintained and in conformity with those used in the preparation of the most recent Historical Statutory Statements.         “Subsidiary” with respect to any Person, any corporation or other Person of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors, in the case of a corporation, or of the ownership or beneficial interests, in the case of a Person not a corporation, is at the time, directly or indirectly, owned or controlled by such Person and one or more of its other Subsidiaries or a combination thereof (irrespective of whether, at the time, securities of any other class or classes 17 -------------------------------------------------------------------------------- of any such corporation or other Person shall or might have voting power by reason of the happening of any contingency). When used without reference to a parent entity, the term “Subsidiary”shall be deemed to refer to a Subsidiary of the Applicant.         “Surplus Relief Reinsurance Agreement” shall mean any agreement or other arrangement whereby any Insurance Subsidiary cedes business under a reinsurance agreement that would not be considered a transaction that indemnifies an insurer against loss or liability relating to insurance risk, as determined in accordance with Statement of Financial Accounting Standards No. 113 (“FAS 113”) issued by the Financial Accounting Standards Board.         “Termination Date” means November 20, 2001, or such earlier date on which the Commitment is terminated, or if the Commitment is extended with the consent of the Banks pursuant to Section 2.6, such later date.         “Trabaja” shall mean Trabaja Reinsurance Company, a Cayman Island insurance company.         “Treasury Security” shall mean any “Treasury security” under, and as such term is defined in, 31 C.F.R. part 306, subpart O, as amended.         “United States” means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions.         “Unfunded Liabilities” shall mean, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA.         “U.S. Federal Agency Obligations” shall mean bonds, debentures, notes or other evidences of indebtedness issued by the Federal National Mortgage Association or issued or guaranteed by the Government National Mortgage Association.         “Wholly Owned” shall mean, with respect to any Subsidiary of any Person, that one hundred percent (100%) of the outstanding capital stock or other ownership interests of such Subsidiary is owned, directly or indirectly, by such Person.     1.2. Principles of Construction.         (a)   All terms defined in a Credit Document shall have the meanings given such terms therein when used in the other Credit Documents or any certificate, opinion or other document made or delivered pursuant thereto, unless otherwise defined therein. 18 --------------------------------------------------------------------------------         (b)   Except as specifically provided otherwise in this Agreement, all accounting terms used herein that are not specifically defined shall have the meanings customarily given them, and all financial computations hereunder shall be made, in accordance with Generally Accepted Accounting Principles (or, to the extent that such terms apply solely to any Insurance Subsidiary or if otherwise expressly required, Statutory Accounting Practices). Notwithstanding the foregoing, in the event that any changes in Generally Accepted Accounting Principles or Statutory Accounting Practices after the date hereof are required to be applied to the transactions described herein and would affect the computation of the financial covenants contained in Section 6.1 through 6.4, as applicable, such changes shall be followed in the computation of such financial covenants only from and after the date this Agreement shall have been amended to take into account any such changes, provided the parties agree to negotiate in good faith to so amend this Agreement as soon as practicable after such a change. References to amounts on particular exhibits, schedules, lines, pages and columns of any Annual Statement or Quarterly Statement are based on the format promulgated by the NAIC for the 1999 Annual Statements and Quarterly Statements. In the event such format is changed in future years so that different information is contained in such items or they no longer exist, or if the Annual Statement or Quarterly Statement is replaced by the NAIC or by any Insurance Regulatory Authority after the date hereof such that different forms of financial statements are required to be furnished by the Insurance Subsidiaries in lieu thereof, such references shall be to information consistent with that reported in the referenced item in the 1999 Annual Statements or Quarterly Statements, as the case may be.         (c)   The words “hereof”, “herein”, “hereto” and “hereunder” and similar words when used in a Credit Document shall refer to such Credit Document as a whole and not to any particular provision thereof, and Section, schedule and exhibit references contained therein shall refer to Sections thereof or schedules or exhibits thereto unless otherwise expressly provided therein.         (d)   The phrase "may not" is prohibitive and not permissive.         (e)   Unless the context otherwise requires, words in the singular number include the plural, and words in the plural include the singular.         (f)   Unless specifically provided in a Credit Document to the contrary, references to a time shall refer to Philadelphia city time.         (g)   Unless specifically provided in a Credit Document to the contrary, 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 means “to but excluding”.         (h)   References in any Credit Document to a fiscal period shall refer to that fiscal period of the Applicant. 19 -------------------------------------------------------------------------------- 2.  AMOUNT AND TERMS OF LETTERS OF CREDIT     2.1. Issuance of Letters of Credit         (a)   Subject to the terms and conditions of this Agreement, the Issuing Bank agrees, in reliance on the agreement of the other Banks set forth in Section 2.2, to issue standby letters of credit (collectively, the “Letters of Credit”; each, individually, a “Letter of Credit”) during the Commitment Period for the account of the Applicant, or jointly and severally for the account of the Applicant and each Co-Applicant delivering a Letter of Credit Request. The aggregate Letter of Credit Exposure shall not at any time exceed the amount of the Commitment at such time, and such Letters of Credit may be denominated in either Dollars or an Optional Currency. In addition, the Letter of Credit Exposure in respect of Letters of Credit issued during the Commitment Period for the account of Subsidiaries of the Applicant which are not Material Insurance Subsidiaries shall not at any time exceed $15,000,000 in the aggregate. Each Letter of Credit issued pursuant to this Section shall have a Stated Expiration Date. No Letter of Credit shall be issued if the Agent determines that the conditions set forth in Section 3.2 have not been satisfied.         (b)   Each Letter of Credit shall be issued for the account of the Applicant, individually, or for the account of the Applicant and one or more Co-Applicants, jointly and severally, in support of an obligation of the Applicant or of the Applicant and one or more Co-Applicants in favor of a beneficiary which has requested the issuance of such Letter of Credit as a condition to a transaction entered into in connection with the Applicant’s or the Co-Applicant’s or Co-Applicants’ reinsurance or insurance business or otherwise for the general corporate purposes of the Applicant or Co-Applicant(s); provided, however, that the Letter of Credit Exposure with respect to Letters of Credit issued for the general corporate purposes of the Applicant or Co-Applicant(s) shall not at any time exceed $15,000,000. The Applicant, and any Co-Applicant, as the case may be, shall give the Agent a Letter of Credit Request for the issuance of each Letter of Credit by 11:00 A.M., one Business Day prior to the requested Date of Issuance. Each Letter of Credit Request executed by a Co-Applicant shall provide that such Co-Applicant shall be, from and after the Date of Issuance of the Letter of Credit which is requested, a party hereto and shall have all the rights and obligations of a Co-Applicant under this Agreement and under the other Credit Documents to which it is a party. Such Letter of Credit Request shall specify (i) the beneficiary of such Letter of Credit and the obligations of the Applicant and/or Co-Applicant in respect of which such Letter of Credit is to be issued, (ii) the Applicant’s and/or Co-Applicant’s proposal as to the conditions under which a drawing may be made under such Letter of Credit and the documentation to be required in respect thereof, (iii) the maximum Dollar Equivalent amount to be available under such Letter of Credit, (iv) the requested Date of Issuance, (v) the requested Stated Expiration Date for such Letter of Credit which shall not be more than one year from the requested Date of Issuance, (vi) whether such Letter of Credit is to be an Evergreen Letter of Credit and, if so, the Beneficiary Notification Date (which shall be at least thirty (30) days prior to the Stated Expiration Date thereof), (vii) the account party with respect to such Letter of Credit and (viii) whether such Letter of Credit shall be denominated in Dollars or an Optional Currency. Upon receipt of such Letter of Credit 20 -------------------------------------------------------------------------------- Request, the Agent shall promptly notify the Issuing Bank and each other Bank thereof. The Issuing Bank shall make every effort on the proposed Date of Issuance and subject to the other terms and conditions of this Agreement, issue the requested Letter of Credit. Each Letter of Credit shall be in form and substance reasonably satisfactory to the Issuing Bank, with such provisions with respect to the conditions under which a drawing may be made thereunder and the documentation required in respect of such drawing as the Issuing Bank shall reasonably require. The parties agree that a Letter of Credit substantially in the form of Exhibit D shall be deemed to be in form and substance reasonably satisfactory to the Issuing Bank; provided, however, that Letters of Credit issued pursuant hereto need not be in the form of said Exhibit D. Each Letter of Credit shall be used solely for the purposes described therein.         (c)   Each payment by the Issuing Bank of a draft drawn under a Letter of Credit shall give rise to an immediate obligation on the part of the Applicant, or to an immediate joint and several obligation on the part of the Applicant and the Co-Applicant, as the case may be, to reimburse the Issuing Bank in Dollars for the Dollar Equivalent amount thereof on the Business Day on which the payment of such draft has been made to the beneficiary (which notice shall be given promptly and shall be deemed to constitute a demand for reimbursement).     2.2. Letter of Credit Participation and Funding Commitments.         (a)   Each Bank hereby unconditionally and irrevocably, severally for itself only and without any notice to or the taking of any action by such Bank, takes an undivided participating interest in the obligations of the Issuing Bank under and in connection with each Letter of Credit in an amount equal to such Bank’s Commitment Percentage of the Dollar Equivalent amount of such Letter of Credit provided that the aggregate Letter of Credit Exposure of such Bank shall not exceed such Bank’s Commitment Amount. Each Bank shall be liable to the Issuing Bank for its Commitment Percentage of the unreimbursed Dollar Equivalent amount of any draft drawn and honored under each Letter of Credit. Each Bank shall also be liable for a Dollar Equivalent amount equal to the product of its Commitment Percentage and any amounts paid by the Applicant or any Co-Applicant that are subsequently rescinded or avoided, or must otherwise be restored or returned. Subject to the penultimate sentence of subsection (b) below, such liabilities (i) shall be payable in Dollars and (ii) shall be unconditional and without regard to the occurrence, of any Default or Event of Default or the compliance by the Applicant or any Co-Applicant with any of their obligations under the Credit Documents.         (b)   The Agent will promptly (and in no event later than two (2) Business Days) notify each Bank (which notice shall be promptly confirmed in writing) of the date and the Dollar Equivalent amount on the Business Day paid of any draft presented under any Letter of Credit with respect to which full reimbursement of payment is not made by the Applicant or any Co-Applicant immediately, and forthwith upon receipt of such notice, such Bank (other than the Issuing Bank) shall make available to the Agent for the account of the Issuing Bank its Commitment Percentage of such amount of such unreimbursed draft at the office of the Agent specified in Section 10.2, in lawful money of the United States and in immediately available 21 -------------------------------------------------------------------------------- funds, before 4:00 P.M., on the day such notice was given by the Agent, if the relevant notice was given by the Agent at or prior to 1:00 P.M., on such day, and before 12:00 Noon, on the next Business Day, if the relevant notice was given by the Agent after 1:00 P.M., on such day. The Agent shall distribute the payments made by each Bank (other than the Issuing Bank) pursuant to the immediately preceding sentence to the Issuing Bank promptly upon receipt thereof in like funds as received. Each Bank shall indemnify and hold harmless the Agent and the Issuing Bank from and against any and all losses, liabilities (including liabilities for penalties), actions, suits, judgments, demands, costs and expenses) resulting from any failure on the part of such Bank to provide, or from any delay in providing, the Agent with such Bank’s Commitment Percentage of the Dollar Equivalent amount of any payment made by the Issuing Bank under a Letter of Credit in accordance with this subsection (b) above (except in respect of losses, liabilities or other obligations suffered by the Issuing Bank). If a Bank does not make available to the Agent, when due, such Bank’s Commitment Percentage of any unreimbursed payment made by the Issuing Bank under a Letter of Credit (other than payments made by the Issuing Bank by reason of its gross negligence or willful misconduct), such Bank shall be required to pay interest in Dollars to the Agent for the account of the Issuing Bank on such Bank’s Commitment Percentage of such payment from the date such Bank’s payment is due until the date such payment is received by the Agent at a rate of interest per annum equal to (i) for the first three (3) days after the due date of such payment, the Federal Funds Rate and (ii) thereafter, the Federal Funds Rate plus two percent (2%). The Agent shall distribute such interest payments to the Issuing Bank upon receipt thereof in like funds as received.         (c)   Whenever the Agent is reimbursed by the Applicant or any Co-Applicant, for the account of the Issuing Bank, for the Dollar Equivalent of any payment under a Letter of Credit and such payment relates to an amount previously paid by a Bank in respect of its Commitment Percentage of the amount of such payment under such Letter of Credit, the Agent will pay over such payment in Dollars to such Bank (i) before 4:00 P.M. on the day such payment from the Applicant or the Co-Applicant is received, if such payment is received at or prior to 1:00 P.M. on such day, or (ii) before 12:00 Noon on the next succeeding Business Day, if such payment from the Applicant or the Co-Applicant is received after 1:00 P.M. on such day.     2.3. Interest Rate         If all or any portion of the Dollar Equivalent of any reimbursement obligation in respect of a Letter of Credit shall not be paid on the Business Day on which payment of such draft has been made, such overdue amount shall bear interest at a rate per annum equal to the Alternate Base Rate plus two percent (2%) from the date of such nonpayment until paid in full (whether before or after the entry of a judgment thereon). All such interest shall be payable in Dollars and monthly in arrears on the last day of each month of each year. Interest computed with reference to the Prime Rate or the Federal Funds Rate shall be calculated on the basis of a three hundred sixty (360) day year for the actual number of days elapsed. The Applicant acknowledges that to the extent interest is based on the Prime Rate, such rate is only one of the bases for computing interest on extensions of credit made by the Banks, and by basing interest on the Prime Rate, the Banks have not committed to charge, and neither the Applicant nor any 22 -------------------------------------------------------------------------------- Co-Applicant has in any way bargained for, interest based on a lower or the lowest rate at which the Banks may now or in the future make extensions of credit to other Persons.     2.4. Termination or Reduction of Commitment         The Applicant shall have the right, upon at least three (3) Business Days’ prior written notice to the Agent, at any time to terminate or reduce the amount of the Commitment in an amount of $10,000,000 or such amount plus multiples of $5,000,000 in excess thereof, provided that after giving effect thereto, the Commitment shall not be less than the Letter of Credit Exposure at such time. Any reduction of the Commitment shall be applied pro rata according to the Commitment Percentage of each Bank. Simultaneously with any reduction of the Commitment the Applicant shall pay the Commitment Fee accrued on the amount by which the Commitment has been reduced.     2.5. Amendments to Letters of Credit         (a)   At any time during the Commitment Period:                (i)    except as otherwise provided in Section 2.7(a), Evergreen Letters of Credit shall be automatically extended unless at least two (2) Business Days prior to the Beneficiary Notification Date, the Agent shall have received written notice from the Applicant, a Co-Applicant or a Bank that a Default or an Event of Default has occurred and is continuing in which event the Agent shall instruct the Issuing Bank to, and the Issuing Bank shall, notify the beneficiary of such Evergreen Letter of Credit on or before the Beneficiary Notification Date that the Stated Expiration Date of such Evergreen Letter of Credit will not be extended;                (ii)    the Applicant, together with the Co-Applicant, if any, with respect to an Outstanding Letter of Credit, shall have the right to request in writing that such Outstanding Letter of Credit be amended, including an amendment to increase or reduce the undrawn face amount thereof and/or, in the case of a Letter of Credit other than an Evergreen Letter of Credit, to extend for up to one year from the date of such amendment the then Stated Expiration Date. Provided that (A) no Default or Event of Default shall exist and be continuing and (B) after giving effect thereto (1) the Letter of Credit Exposure does not exceed the Commitment and (2) the Letter of Credit Exposure with respect to Letters of Credit issued for the account of Subsidiaries of the Applicant which are not Material Insurance Subsidiaries does not exceed $15,000,000 in the aggregate, the Agent shall promptly request that the Issuing Bank amend such Letter of Credit to give effect to such increase, reduction, extension and/or other requested amendment, and the Issuing Bank shall either amend such Letter of Credit or issue a substitute Letter of Credit containing such amended terms. Notwithstanding the foregoing, in the event that a requested amendment of a Letter of Credit would reduce the amount available to be drawn thereunder, reduce the period during which drawings can be made thereunder or would otherwise be adverse to the beneficiary thereof, such amendment or such substitute Letter of Credit shall not, by its term, be effective unless and until such beneficiary shall have consented in writing thereto. 23 --------------------------------------------------------------------------------         (b)   Following the Termination Date, provided that no Default or Event of Default shall then exist and be continuing, the Applicant, together with the Co-Applicant, if any, with respect to an Outstanding Letter of Credit, may request that an Outstanding Letter of Credit be amended, including an amendment to increase or reduce the undrawn face amount but excluding any amendment which extends the Stated Expiration Date which extensions are governed by Section 2.7, provided that any such increase in the face amount of Outstanding Letters of Credit which expire on the same date, after giving effect to any reductions which become effective on the same date as such increase with respect to such Outstanding Letters of Credit which expire on the same date, shall not cause an increase, at such date, in the undrawn face amount of Outstanding Letters of Credit which expire on the same date. Upon receipt of such request, the Agent shall promptly request that the Issuing Bank amend such Letter of Credit to give effect to such amendment, and the Issuing Bank, shall either amend such Letter of Credit or issue a substitute Letter of Credit containing such amended terms. Notwithstanding the foregoing (i) in the event that such requested amendment would increase the amount available to be drawn therewith, the Agent shall not request the Issuing Bank to either amend such Letter of Credit or issue a substitute Letter of Credit, and the Issuing Bank shall not so amend or issue unless all of the Banks shall have consented thereto and (ii) in the event that a requested amendment of a Letter of Credit would reduce the amount available to be drawn thereunder, reduce the period during which drawings can be made thereunder or would otherwise be adverse to the beneficiary thereof, such amendment or such substitute Letter of Credit shall not, by its terms, be effective unless and until such beneficiary shall have consented in writing thereto.     2.6. Extension of Commitment and Termination Date         Provided that no Default or Event of Default shall exist and be continuing, the Applicant may request that the Commitment be extended for an additional period of three hundred sixty-four (364) days by giving written notice of such request substantially in the form of Exhibit H (an “Extension Request”) to the Agent during the period not more than one hundred eighty (180) days but not less than sixty (60) days prior to the then Termination Date, and upon the receipt of such notice, the Agent shall promptly notify each Bank of such request. If each Bank consents to such Extension Request during the Extension Consent Period by giving written notice thereof to the Agent, then effective on the first day of the Extension Consent Period, the then applicable Termination Date shall be extended by three hundred sixty-four (364) days. If all of the Banks have not consented to such Extension Request during the Extension Consent Period and such nonconsenting Bank or Banks have not been replaced pursuant to Section 2.15 during the Extension Consent Period, the Termination Date shall not be extended.     2.7. Extension of the Stated Expiration Date of Each Letter of Credit         The Stated Expiration Date of each Letter of Credit shall be up to one year from its Date of Issuance thereof, or, if extended during the Commitment Period as provided in Section 2.5, such later date. In addition, with respect to a Letter of Credit the Stated Expiration Date of which is after the Termination Date, such Stated Expiration Date thereof may be extended as follows: 24 --------------------------------------------------------------------------------         (a)   Evergreen Letters of Credit. In the case of an Evergreen Letter of Credit the Beneficiary Notification Date for which is before the Termination Date, the Stated Expiration Date for such Letter of Credit shall be automatically extended for a term of up to one (1) year from the then Stated Expiration Date in accordance with the provisions of this subsection (a) unless either (i) the Applicant and/or Co-Applicant, if any, for such Letter of Credit have or (ii) any bank has notified the Agent and the Issuing Bank at least ten (10) days prior to such Beneficiary Notification Date that such Evergreen Letter of Credit is not to be extended. The Agent shall advise each Bank of any such extension of the Stated Expiration Date of such Letter of Credit. Notwithstanding the foregoing, in the event that at least two (2) Business Days prior to the Beneficiary Notification Date the Agent shall have received written notice from the Applicant, a Co-Applicant or a Bank that a Default or an Event of Default has occurred and is continuing, or if the Beneficiary Notification Date for such Evergreen Letter of Credit is after the Termination Date, the Agent shall instruct the Issuing Bank to, and the Issuing Bank shall, notify the beneficiary of such Evergreen Letter of Credit on or before the Beneficiary Notification Date that the Stated Expiration Date of such Evergreen Letter of Credit will not be extended.         (b)   Other Letters of Credit. In the case of a Letter of Credit other than an Evergreen Letter of Credit, the Applicant and the Co-Applicants, if any, may request in writing delivered to the Agent that the Stated Expiration Date thereof be extended for a term of up to one (1) year from the then Stated Expiration Date, and the Agent shall then elect, in its sole discretion, to extend such Stated Expiration Date. Upon receipt of such request, the Agent will promptly notify each Bank thereof. If all of the Banks consent to such extension, the Agent shall notify the Issuing Bank and the Issuing Bank shall amend such Letter of Credit to reflect such extended Stated Expiration Date. Each Bank will use its best efforts to promptly respond to any such request; provided that no Bank’s failure to so respond shall create any claim against it or have the effect of extending the Stated Expiration Date of such Letter of Credit. Notwithstanding the foregoing, in the event that the Agent shall have received prior written notice from the Applicant, a Co-Applicant or Bank that a Default or an Event of Default has occurred and is continuing, the Agent shall not extend the Stated Expiration Date of such Letter of Credit.         (c)   In General. Each Letter of Credit may be extended in the manner set forth herein an unlimited number of times. In the event that the Termination Date is extended pursuant to Section 2.6 after the procedures set forth in this Section 2.7 have commenced, the provisions of Section 2.5 shall apply and shall supercede the provisions of this Section 2.7.         2.8.    Reimbursement Obligations Absolute. The reimbursement obligations of the Applicant and each Co-Applicant, if any, in respect of a Letter of Credit (x) shall be payable in Dollars, (y) shall be absolute, unconditional and irrevocable, and (z) shall be performed strictly in accordance with the terms of this Agreement, irrespective of any circumstances, including, without limitation, the following:                (i)    any lack of validity or enforceability of any Letter of Credit; 25 --------------------------------------------------------------------------------                (ii)    any amendment or waiver of, or consent to departure from, all or any of the other Credit Documents;                (iii)    the existence of any claim, set-off, defense or other right which the Applicant, any Co-Applicant, or any other Person may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Person or entity for whom any such beneficiary or any such transferee may be acting), the Issuing Bank, the Agent, any Bank, any participant or assignee, or any other Person or entity, whether in connection with this Agreement, any other Credit Document or any unrelated transaction;                (iv)    any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever;                (v)    payment by the Issuing Bank under a Letter of Credit against presentation of a draft or certificate which does not comply with the terms of the Letter of Credit; or                (vi)    any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.         2.9. No Liability of the Issuing Bank         It is understood that in making any payment under a Letter of Credit (i) the Issuing Bank’s exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including reliance on the Dollar Equivalent amount of any draft presented under such Letter of Credit, whether or not the Dollar Equivalent amount due to the beneficiary 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 (ii) any noncompliance of the documents presented in an immaterial respect under a Letter of Credit with the terms thereof shall in each case not be deemed wilful misconduct or gross negligence of the Issuing Bank.         2.10. Increased Costs: Capital Adequacy         (a)   If on or after the Original Effective Date the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Issuing Bank or any Bank with any request or directive after such date (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, 26 -------------------------------------------------------------------------------- modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, the Issuing Bank or any Bank or shall impose on any Bank any other condition affecting its Commitment or the term thereof or its obligation to issue or participate in Letters of Credit and the result of any of the foregoing is to increase the cost to the Issuing Bank or such Bank of issuing or maintaining the Letters of Credit or its obligations pursuant to Section 2.2, or to reduce the amount of any sum received or receivable by the Issuing Bank or such Bank under this Agreement with respect thereto, by an amount deemed by the Issuing Bank or such Bank to be material, then, within fifteen (15) days after demand by the Issuing Bank or such Bank (with a copy to the Agent), the Applicant shall pay in Dollars to the Issuing Bank or such Bank such additional amount or amounts as will compensate the Issuing Bank or such Bank for such increased cost or reduction.         (b)   If any Bank or the Issuing Bank shall have determined that, after the Original Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank or the Issuing Bank (or its Parent) as a consequence of such Bank’s or the Issuing Bank’s, obligations hereunder to a level below that which such Bank or the Issuing Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank or the Issuing Bank to be material, then from time to time, within fifteen (15) days after demand by such Bank or the Issuing Bank (with a copy to the Agent), the Applicant shall pay in Dollars to such Bank or the Issuing Bank such additional amount or amounts as will compensate such Bank or the Issuing Bank (or its Parent) for such reduction.         (c)   Each Bank or the Issuing Bank, as the case may be, will promptly notify the Applicant and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section. A certificate of any Bank or the Issuing Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank or the Issuing Bank may use any reasonable averaging and attribution methods.         2.11. Taxes.         (a)   All payments made by the Applicant and Co-Applicants hereunder shall be made free and clear of and without deduction for any present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto (excluding, in the case of the Agent and each Bank, income taxes and franchise or gross receipts taxes or 27 -------------------------------------------------------------------------------- other revenue-based taxes imposed on the Agent or such Bank, as the case may be, levied by any Governmental Authority or other taxing authority imposing such tax (all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and withholdings being hereinafter called “Taxes”)). If the Applicant and Co-Applicants shall be required by applicable law to deduct any Taxes from or in respect of any sum payable hereunder, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Agent and each Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Applicant and Co-Applicants shall make such deductions and (iii) the Applicant and Co-Applicants shall timely pay the full amount deducted to the relevant tax authority or other authority in accordance with applicable law.         (b)   In addition, the Applicant and Co-Applicants 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 or from the execution, delivery, or registration of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as “Other Taxes”).         (c)   The Applicant and Co-Applicants shall indemnify the Agent and each Bank for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this subsection) paid by the Agent or any Bank and any liability (including penalties, interest, and expenses other than those arising solely from the Agent’s or any such Bank’s failure to timely notify the Applicant of such Taxes or Other Taxes payable hereunder) 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 from the date the Agent or a Bank makes written demand therefor.         (d)   Within thirty (30) days after the date of any payment of any Taxes by the Applicant and Co-Applicants, if available, the Applicant and Co-Applicants shall furnish to the Agent and each Bank, at its address referred to herein, the original or a certified copy of a receipt evidencing payment thereof.         (e)   Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in subsections 2.11(a) through (d) shall survive the payment in full of all payments due hereunder.         (f)   At least five (5) Business Days prior to the first date on which interest or fees are payable hereunder, each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Applicant and Co-Applicants and the Agent (i) two duly completed copies of United States Internal Revenue Service Form W-8ECI or W-8BEN or successor applicable form, as the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form. Each such Bank also 28 -------------------------------------------------------------------------------- agrees to deliver to the Applicant and the Agent two further copies of the said Form W-8ECI or W-BEN and Form W-8 or W-9, or successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Applicant, and such extensions or renewals thereof as may reasonably be requested by the Applicant or the Agent, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank so advises the Applicant and the Agent. Each such Bank shall certify (i) in the case of a Form W-8ECI or W-BEN, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9 or successor applicable form, that it is entitled to an exemption from United States backup withholding tax.         (g)   Notwithstanding the foregoing subsections 2.11(a) through (e), the Applicant and Co-Applicants shall not be required to pay any additional amounts to any Bank in respect of United States withholding tax pursuant to such subsections if (i) the obligation to pay such additional amounts would not have arisen but for a failure by such Bank to comply with the requirements of subsection 2.11(f) or (ii) such Bank shall not have furnished the Applicant with such forms listed in subsection 2.11(f) and shall not have taken such other steps as reasonably may be available to it under applicable tax laws and any applicable tax treaty or convention to obtain an exemption from, or reduction (to the lowest applicable rate) of, such United States withholding tax.     2.12. Agent’s Records         The Agent’s records regarding the amount of each Letter of Credit, each payment by the Applicant or any Co-Applicant of reimbursement obligations in respect of Letters of Credit and other information relating to the Letters of Credit shall be presumptively correct absent manifest error. 29 --------------------------------------------------------------------------------         2.13.   Use of Proceeds. The Applicant and Co-Applicants will use the Letters of Credit only for the following purposes:                (a)    The collateralization of reinsurance liabilities assumed by direct and indirect Wholly Owned Consolidated Subsidiaries of the Applicant;                (b)    The collateralization of insurance liabilities of any direct and indirect Wholly Owned Consolidated Subsidiaries of the Applicant;                (c)    The collateralization of reinsurance recoverable from Trabaja, not to exceed $24,000,000; and                (d)    Otherwise for the Applicant's or Co-Applicant's general corporate purposes.                Notwithstanding anything to the contrary contained in any Credit Document, the Applicant and each Co-Applicant agrees that no part of the proceeds of any Letters of Credit will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any Margin Stock.    2.14. Collateral                (a)    In General.                     (i)    With respect to each Letter of Credit, on or prior to the Date of Issuance thereof, the Applicant and/or any Co-Applicant, if applicable, shall deliver to the Custodian for deposit in the Collateral Accounts (as defined below) Eligible Collateral, the Discounted Collateral Value of which together with the Discounted Collateral Value of all other Eligible Collateral then held in the Collateral Accounts shall not be less than the Letter of Credit Exposure determined with respect to all Letters of Credit.                     (ii)    The Applicant hereby unconditionally agrees that at all times the Obligations attributable to Letters of Credit shall be secured by a security interest in Eligible Collateral, the Discounted Collateral Value of which equals or exceeds the Letter of Credit Exposure attributable to all Letters of Credit at such time; provided, however, that at no time shall U.S. Federal Agency Obligations issued by the Federal National Mortgage Association represent more than fifty percent (50%) of the Eligible Collateral securing the Obligations. In the event that the Discounted Collateral Value of the Eligible Collateral is less than such amount, the Applicant or, if applicable, the Co-Applicant(s), shall promptly (and in no event later than two (2) Business Days) deliver to the Custodian additional Eligible Collateral as shall be necessary so that the Discounted Collateral Value of all Eligible Collateral then held in the Collateral Accounts shall equal or exceed the Letter of Credit Exposure attributable to all Letters of Credit at such time. 30 --------------------------------------------------------------------------------                     (iii) In the event that the Discounted Collateral Value of the Eligible Collateral in the Collateral Accounts is greater than one hundred five percent (105%) of the Letter of Credit Exposure at such time and so long as no Default or Event of Default shall then exist, the Applicant and/or Co-Applicant, if applicable, shall have the right to withdraw from the Collateral Accounts Eligible Collateral in an amount such that after giving effect to such withdrawal the Discounted Collateral Value of the Eligible Collateral remaining in the Collateral Accounts is equal to or greater than the above one hundred five percent (105%), subject to the terms of the Control Agreements and the Pledge Agreement and the Agent agrees to direct the Custodian to make any such permitted withdrawal.                (b)    Collateral Accounts. To secure prompt and complete payment, observance and performance of the Obligations, the Applicant and certain of the Co-Applicants have, pursuant to the Pledge Agreement, pledged and granted to the Agent a security interest in and to all of the Applicant’s and each such Co-Applicant’s right, title and interest in and to the Collateral Accounts and all Property, including all money and securities, at any time and from time to time on deposit therein, and all of the Proceeds (which shall include all distributions and income on and in respect of all of the foregoing and all other rights and benefits in respect thereof) of all of the foregoing, whether now owned or existing or hereafter arising or acquired (collectively, the “Collateral”). The Applicant and certain of the Co-Applicants have established and shall maintain, at the offices of the Custodian located at 620 Liberty Avenue, 10thFloor, Pittsburgh, PA 15222 in their names in favor of the Agent, one or more securities custody accounts (collectively, the “Collateral Accounts”) pursuant to one or more Custody Agreements between the Applicant, certain of the Co-Applicants and the Custodian. Subject to the provisions of the Pledge Agreement and the Control Agreements, the Custodian shall hold any Eligible Collateral delivered to it as Collateral.                (c)    All Property in the Collateral Accounts shall be held by the Custodian as collateral for the payment and performance of all Obligations. At the direction of the Agent, Collateral may (A) be applied to reimburse the Issuing Bank for Letter of Credit payments and disbursements, and (B) be held for the satisfaction of the reimbursement obligations of the Applicant and Co-Applicants for the then outstanding Letter of Credit Exposure. After the occurrence and during the continuation of an Event of Default, the Agent may, in accordance with the provisions of this Agreement and the Pledge Agreement, apply or cause the Custodian to apply all or any portion of the Collateral held in the Collateral Accounts to the Obligations and shall have the power to sell, or cause the Custodian to sell, any securities held therein in connection therewith.         2.15. Replacement of Banks                (a)    If any Bank does not consent to an Extension Request pursuant to Section 2.6, the Applicant shall have the right, if no Default or Event of Default then exists, to replace such Bank (any such Bank being referred to herein as “Replaced Bank”) with one or more Eligible Assignee or Eligible Assignees, each of which shall be acceptable to the Agent and the Issuing Bank, and such Replaced Bank shall assign to such Eligible Assignee or Eligible 31 -------------------------------------------------------------------------------- Assignees who are willing to so purchase the same for such Replaced Bank, all (but not less than all) of such Replaced Bank’s rights and obligations under this Agreement, providedthat such Eligible Assignee or Eligible Assignee shall pay to such Replaced Bank, an amount equal to all interest, fees and other amounts owing or accrued to such Replaced Bank to the date of such assignment, but without any premium.                (b)    For each assignment, the parties shall execute and deliver to the Agent an Assignment and Acceptance Agreement. Upon such execution and delivery, from and after the effective date specified in such Assignment and Acceptance Agreement, the assignee thereunder shall be a party hereto and the assignor Bank released from its obligations hereunder to the extent provided therein.         2.16. Commitment Fee                The Applicant agrees to pay in Dollars to the Agent, for the account of the Banks in accordance with each Bank’s Commitment Percentage, a fee (the “Commitment Fee”), during the Commitment Period, equal to the Applicable Fee Percentage per annum on the average daily Available Amount. The Commitment Fee shall be payable quarterly in arrears on the last day of each March, June, September and December of each year and on the Termination Date or other date on which the Commitment shall expire or otherwise terminate, and upon each reduction of the Available Amount. The Commitment Fee shall be calculated on the basis of a three hundred sixty-five (365) or three hundred sixty-six (366) day year, as applicable, for the actual number of days elapsed.         2.17. Letter of Credit Commissions         The Applicant agrees to pay in Dollars to the Agent, for the account of the Banks in accordance with each Bank’s Commitment Percentage, commissions (the “Letter of Credit Commissions”) with respect to each Letter of Credit for the period from and including the Date of Issuance thereof to and including the expiration date thereof (giving effect to any extensions, cancellations or other amendments thereto), at a rate per annum equal to the Applicable Fee Percentage per annum on the average daily Dollar Equivalent amount available to be drawn under such Letter of Credit. The Letter of Credit Commissions shall be (i) calculated on the basis of a three hundred sixty-five (365) or three hundred sixty-six (366) day year, as applicable, for the actual number of days elapsed, (ii) payable quarterly in arrears on the last day of each March, June, September and December of each year and on the date that the Commitment shall expire and (iii) nonrefundable. In addition to the Letter of Credit Commissions, the Applicant agrees to pay in Dollars to the Issuing Bank, for its own account, its standard fees and charges customarily charged to customers similar to the Applicant with respect to any Letter of Credit.         2.18. Utilization of Commitment in Optional Currencies.         (a)   The Agent will determine the Dollar Equivalent amount of (i) proposed Letter of Credit to be denominated in an Optional Currency as of the Date of Issuance and (ii) 32 -------------------------------------------------------------------------------- Outstanding Letters of Credit denominated in an Optional Currency as of the last Business Day of each month.                (b)    The Applicant and/or Co-Applicant, if applicable, may deliver to Agent a written request that Letters of Credit issued hereunder also be permitted to be made in any other lawful currency (other than Dollars), in addition to the currencies specified in the definition of “Optional Currency”herein provided that such currency must be freely traded in the offshore interbank foreign exchange markets, freely transferable, freely convertible into Dollars and available to the Agent in the applicable interbank market. The Agent will promptly notify the Banks of any such request promptly after the Agent receives such request. The Agent may grant or accept such request in their sole discretion. The requested currency shall be approved as an Optional Currency hereunder only if the Agent approves of the Applicant’s and/or Co-Applicant’s request.                (c)    If at any time the Agent determines that the Dollar Equivalent of the Letter of Credit Exposure of all the Banks exceeds the aggregate of the Commitment Amounts of all the Banks whether because of currency fluctuations or otherwise (the amount of such excess being referred to as the “Excess Letter of Credit Exposure”), the Applicant shall (i) promptly, and in any event not later than thirty (30) days from the date the Agent notifies the Applicant of such Excess Letter of Credit Exposure, eliminate any such Excess Letter of Credit Exposure by arranging for the surrender of, or reduction in amount available to be drawn under, one or more Letters of Credit, and (ii) until such time as it has taken the action required by subsection (i) above, cause the Eligible Collateral at such time contained in the Collateral Accounts (x) to include an amount of cash (in Dollars) equal to or greater than the Excess Letter of Credit Exposure and (y) to otherwise meet the coverage requirements of Section 2.14(a). 3.   CONDITIONS PRECEDENT         3.1. Conditions to Effectiveness                The effectiveness of this Agreement and the obligation of the Issuing Bank to issue any Letter of Credit on the Restatement Effective Date or any day thereafter, and the Banks to participate therein shall be subject to the fulfillment of the following conditions precedent:                (a)    The Agent shall have received the following, each dated as of the Restatement Effective Date (unless otherwise specified) and in sufficient copies for each Bank:                     (i)    counterparts of the Pledge Agreement and the Control Agreements duly executed by the parties thereto and evidence satisfactory to the Agent of the establishment of the Collateral Accounts and the transfer thereto of sufficient Eligible Collateral to satisfy the requirements of Section 2.14; 33 --------------------------------------------------------------------------------                     (ii)    a certificate, signed by the chief executive officer, chief financial officer or an executive vice president of the Applicant, in form and substance satisfactory to the Agent, certifying that (A) all representations and warranties of the Applicant contained in this Agreement and the other Credit Documents are true and correct in all material respects as of the Restatement Effective Date, (B) no Default or Event of Default has occurred and is continuing, (C) there are no insurance regulatory proceedings pending or, to such individual’s knowledge, threatened against any of the Insurance Subsidiaries in any jurisdiction that, if adversely determined, would be reasonably likely to have a Material Adverse Effect, and (D) except for the fiscal year 2000 third quarter reserve loss by PMACIC (the “2000 Reserve Loss”), as more fully described on Schedule 3.1 attached hereto, both immediately before and after giving effect to the consummation of the transactions contemplated by this Agreement, no Material Adverse Change has occurred sinceDecember 31, 1999, and there exists no event, condition or state of facts that could reasonably be expected to result in a Material Adverse Change;                     (iii)   a certificate of the secretary or an assistant secretary of each of the Applicant and its Material Subsidiaries, in form and substance satisfactory to the Agent, certifying (A) that attached thereto is a true and complete copy of the articles or certificate of incorporation and all amendments thereto of the Applicant or such Subsidiary, as the case may be, certified as of a recent date by the Secretary of State (or comparable Governmental Authority) of its jurisdiction of organization, and that the same has not been amended since the date of such certification, (B) that attached thereto is a true and complete copy of the bylaws of the Applicant or such Subsidiary, as the case may be, as then in effect and as in effect at all times from the date on which the resolutions referred to in clause (C) below were adopted to and including the date of such certificate, and (C) as to the Applicant only, that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the Applicant authorizing the execution, delivery and performance of this Agreement and the other Credit Documents to which it is a party, and as to the incumbency and genuineness of the signature of each officer of the Applicant executing this Agreement or any of the other Credit Documents, and attaching all such copies of the documents described above;                     (iv)    a certificate of the Applicant's chief financial officer as to the financial condition of the Applicant in the form of Exhibit F; and                     (v)    a favorable opinion of Charles A. Brawley, III, Esq., covering the matters set forth in items 1 through 8 of Exhibit G and a favorable opinion of Duane, Morris & Heckscher LLP as to item 9 of Exhibit G, in each case acceptable to the Agent, addressed to Agent and the Banks.                (b)    The Agent shall have received (i) a certificate as of a recent date of the good standing of each of the Applicant and its Material Subsidiaries under the laws of its jurisdiction of organization from the Secretary of State (or comparable Governmental Authority) of such jurisdiction, and (ii) as to each Material Insurance Subsidiary, a certificate of compliance 34 -------------------------------------------------------------------------------- as of a recent date, issued by the Insurance Regulatory Authority of its jurisdiction of legal domicile and any other jurisdiction in which such Insurance Subsidiary is reasonably likely to be commercially domiciled as defined under the laws and revelations of such jurisdiction.                (c)    All approvals, permits and consents of any Governmental Authorities (including, without limitation, all relevant Insurance Regulatory Authorities) or other Persons required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been obtained (without the imposition of conditions that are not reasonably acceptable to the Agent), and all related filings, if any, shall have been made, and all such approvals, permits, consents and filings shall be in full force and effect and the Agent shall have received such copies thereof as it shall have requested; all applicable waiting periods shall have expired without any adverse action being taken by any Governmental Authority having jurisdiction; and no action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before, and no order, injunction or decree shall have been entered by, any court or other Governmental Authority, in each case to enjoin, restrain or prohibit, to obtain substantial damages in respect of, or that is otherwise related to or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or that, in the opinion of the Agent, would otherwise be reasonably likely to have a Material Adverse Effect.                (d)    Except for the 2000 Reserve Loss, since December 31, 1999, both immediately before and after giving effect to the consummation of the transactions contemplated by this Agreement there shall not have occurred any Material Adverse Change or any event, condition or state of facts that could reasonably be expected to result in a Material Adverse Change.                (e)    The Agent shall be satisfied with the actuarial review and valuation statement of, and opinion as to the adequacy of, each Insurance Subsidiary’s loss and loss adjustment expense reserve positions as of December 31, 1999, with respect to the insurance business then in force, prepared and given by each Insurance Subsidiary’s chief actuary.                (f)    The Applicant shall have paid all fees and expenses of the Agent required hereunder or under any other Credit Document to be paid on or prior to the Restatement Effective Date (including fees and expenses of counsel) in connection with this Agreement and the transactions contemplated hereby.                (g)    Where applicable, the Agent shall have received an agreement in substantially the form of the Letter of Credit Request from each Co-Applicant with respect to any Existing Letter of Credit issued for the account of such Co-Applicant.                (h)    The Agent and each Bank shall have received such other documents, certificates, opinions and instruments as it shall have reasonably requested. 35 --------------------------------------------------------------------------------         3.2. Conditions for Issuance of All Letters of Credit and Extension and Increases thereof and Conditions to Effectiveness of Letters of Credit                The obligation of the Issuing Bank to issue any Letter of Credit on a Date of Issuance and each Bank to participate therein and any increase of the face amount of any Letter of Credit or any extension of the Stated Expiration Date of any Letter of Credit is subject to the satisfaction of the following conditions precedent as of such Date of Issuance or the date of such increase or extension:                (a)    On each Date of Issuance, and on each date on which the face amount of any Letter of Credit is to be increased or the Stated Expiration Date of any Letter of Credit is to be extended, and both before and after giving effect to the Letters of Credit to be issued thereon or such increase or extension, as the case may be, (i) each of the representations and warranties contained in Section 4 and in the other Credit Documents shall be true and correct in all respects on and as of such date with the same effect as if made on and as of such date (except to the extent any such representation or warranty is expressly stated to have been made as of a specific date, in which case such representation or warranty shall be true and correct in all respects as of such date), (ii) no Default or Event of Default shall have occurred and be continuing on such date, (iii) the aggregate Letter of Credit Exposure will not exceed the Commitment, (iv) the aggregate Letter of Credit Exposure with respect to Letters of Credit issued for the account of Subsidiaries of the Applicant which are not Material Insurance Subsidiaries will not exceed $15,000,000 and (v) the aggregate Letter of Credit Exposure with respect to Letters of Credit issued for the general corporate purposes of the Applicant or a Co-Applicant shall not exceed $15,000,000. Each request by the Applicant for the issuance of a Letter of Credit shall constitute a certification by the Applicant as of such date that each of the foregoing matters is true and correct in all material respects.                (b)    All documents required by the provisions of the Credit Documents to be executed or delivered to the Agent on or before the applicable Date of Issuance shall have been executed and shall have been delivered at the office of the Agent set forth in Section 10.2 on or before such Date of Issuance.                (c)    With respect to the issuance of each Letter of Credit, the Agent shall have received a Letter of Credit Request duly executed by an Authorized Signatory of the Applicant and, if applicable, the Co-Applicant.                (d)    With respect to each Letter of Credit, the Applicant or the Co-Applicants, as the case may be, shall have delivered Eligible Collateral to the Agent as required by Section 2.14.         3.3. Transitional Arrangements.                (a)    On the Restatement Effective Date, replacement Letters of Credit issued by the Issuing Bank under this Agreement shall be substituted for the Existing Letters of Credit 36 -------------------------------------------------------------------------------- issued by BNY under the Existing Credit Agreement, the effectiveness of which replacement Letters of Credit shall be conditioned on the surrender to BNY for cancellation of the corresponding Existing Letter of Credit. By execution of this Agreement, the Applicant and each Co-Applicant, as applicable, requests the Issuing Bank to issue such replacement Letters of Credit in substantially the same form as the Existing Letters of Credit they are to replace. The Applicant agrees to use its best efforts to cause each beneficiary of an Existing Letter of Credit to promptly surrender such Existing Letter of Credit in exchange for the corresponding replacement Letter of Credit.                (b)    Each Letter of Credit substituted for an Existing Letter of Credit pursuant to Section 3.3(a) hereof shall supersede such Existing Letter of Credit in its entirety, shall be deemed to be made under this Agreement and shall be governed by this Agreement and the other Credit Documents.                (c)    As of the Restatement Effective Date, except as otherwise provided in this Agreement, the Existing Credit Agreement shall be superseded by this Agreement and the Credit Documents and shall be of no further force and effect.                (d)    Until such time as an Existing Letter of Credit is surrendered to BNY for cancellation, such Existing Letter of Credit shall be deemed to be a Letter of Credit issued hereunder, and BNY shall be entitled to the rights and benefits of the Issuing Bank hereunder in respect of such Existing Letter of Credit for purposes of the obligations (i) of the Applicant and Co-Applicant, as the case may be, to reimburse BNY for any payments of drafts under such Existing Letter of Credit as provided in Sections 2.1(c) and 2.3 hereof and to indemnify BNY as provided in Section 10.10, and (ii) of each Bank, as defined herein, to participate in and to make available for BNY’s account such Bank’s Commitment Percentage of the amount of any unreimbursed draft on such Existing Letter of Credit as provided in Section 2.2 hereof. Each Existing Letter of Credit shall be entitled to the benefits of the security otherwise provided under Section 2.14 for the Letter of Credit issued hereunder in replacement for such Existing Letter of Credit for so long as it remains outstanding or any draft thereunder has not been fully reimbursed. In no event shall the maturity date of any Existing Letter of Credit be extended by BNY and as to any Existing Letter of Credit pursuant to the terms of which the Stated Expiration Date would be automatically extended, unless the beneficiary thereof is notified in advance of the then scheduled expiration date that such scheduled expiration date will not be extended, BNY shall give such a notice of non-extension to the beneficiary at the earliest permitted opportunity following the Restatement Effective Date if such a notice has not been given prior to the Restatement Effective Date.                (e)    All interest, commissions and all commitment and other fees and expenses owing or accrued under or in respect of the Existing Credit Agreement and the Existing Letters of Credit not replaced hereunder, shall be calculated as of the Restatement Effective Date (prorated in the case of any fractional periods), and shall be paid on such date in accordance with the method specified in the Existing Credit Agreement, as if it were still in effect. 37 -------------------------------------------------------------------------------- 4.   REPRESENTATIONS AND WARRANTIES         In order to induce the Agent and the Banks to enter into this Agreement and the Issuing Bank to issue the Letters of Credit and the Banks to participate therein, the Applicant makes the following representations and warranties to the Agent, each Bank and the Issuing Bank:         4.1. Corporate Organization and Power                Each of the Applicant and its Material Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has the full corporate power and authority to execute, deliver and perform the Credit Documents to which it is or will be a party, to own and hold its property and to engage in its business as presently conducted, and (iii) is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the nature of its business or the ownership of its properties requires it to be so qualified except where the failure to be so qualified would not have a Material Adverse Effect.         4.2. Authorization                The Applicant has taken all necessary corporate action to execute, deliver and perform each of the Credit Documents to which it is or will be a party, and has, or on the Restatement Effective Date (or any later date of execution and delivery) will have, validly executed and delivered each of the Credit Documents to which it is or will be a party. This Agreement constitutes, and each of the other Credit Documents upon execution and delivery by the Applicant will constitute, assuming the due execution of the other parties hereto, the legal, valid and binding obligation of the Applicant, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’rights generally or by general equitable principles.         4.3. No Violation                The execution, delivery and performance by the Applicant of this Agreement and each of the other Credit Documents, and compliance by it with the terms hereof and thereof, do not and will not (i) contravene any Requirement of Law applicable to the Applicant, (ii) conflict with, result in a breach of or constitute (with notice, lapse of time or both) a default under any material indenture, agreement or other instrument to which it is a party, by which it or any of its properties is bound or to which it is subject, or (iii) result in or require the creation or imposition of any Lien upon any of its properties or assets except to the extent provided in the Credit Documents. No Subsidiary is subject to any restriction or encumbrance on its ability to make dividend payments or other distributions in respect of its capital stock, to make loans or advances to the Applicant or any other Subsidiary, or to transfer any of its assets or properties to the Applicant or any other Subsidiary, in each case other than such restrictions or encumbrances existing under or by reason of the Credit Documents or the Revolving Credit Agreement or applicable Requirements of Law. 38 --------------------------------------------------------------------------------         4.4. Governmental Authorization; Permits                (a)   No consent, approval, authorization or other action by, notice to, or registration or filing with, any Governmental Authority or other Person is or will be required as a condition to or otherwise in connection with the due execution, delivery and performance by the Applicant of this Agreement or any of the other Credit Documents or the legality, validity or enforceability hereof or thereof.                (b)   Each of the Applicant and its Subsidiaries has, and is in good standing with respect to, all governmental approvals, licenses, permits and authorizations necessary to conduct its business as presently conducted and to own or lease and operate its properties except where the failure to do so would not have a Material Adverse Effect.                (c)    Schedule 4.4 lists with respect to each Material Insurance Subsidiary, as of the Restatement Effective Date, all of the jurisdictions in which such Material Insurance Subsidiary holds licenses (including, without limitation, licenses or certificates of authority from relevant Insurance Regulatory Authorities), permits or authorizations to transact insurance and reinsurance business (collectively, the “Licenses”), and indicates the line or lines of insurance in which each such Material Insurance Subsidiary is permitted to be engaged with respect to each License therein listed. To the knowledge of the Applicant, (i) no such License is the subject of a proceeding for suspension, revocation or limitation or any similar proceedings, (ii) there is no sustainable basis for such a suspension, revocation or limitation, and (iii) no such suspension, revocation or limitation is threatened by any relevant Insurance Regulatory Authority. No Material Insurance Subsidiary transacts as of the Restatement Effective Date any insurance business, directly or indirectly, in any jurisdiction other than those listed on Schedule 4.4, where such business requires any license, permit or other authorization of an Insurance Regulatory Authority of such jurisdiction.         4.5. Litigation                There are no actions, investigations, suits or proceedings pending or, to the knowledge of the Applicant, threatened, at law, in equity or in arbitration, before any court, other Governmental Authority or other Person, (i) against or affecting the Applicant, any of its Subsidiaries or any of their respective properties that would, if adversely determined, be reasonably likely to have a Material Adverse Effect or (ii) with respect to this Agreement or any of the other Credit Documents.         4.6. Taxes                Each of the Applicant and its Subsidiaries has timely filed all federal and all material state and local tax returns and reports required to be filed by it and has paid all taxes, assessments, fees and other charges levied upon it or upon its properties that are shown thereon as due and payable, other than those that are being contested in good faith and by proper proceedings and for which adequate reserves have been established in accordance with Generally 39 -------------------------------------------------------------------------------- Accepted Accounting Principles. Such returns accurately reflect in all material respects all liability for taxes of the Applicant and its Subsidiaries for the periods covered thereby. Except as set forth on Schedule 4.6, there is no ongoing audit or examination or, to the knowledge of the Applicant, other investigation by any Governmental Authority of the tax liability of the Applicant or any of its Subsidiaries; and there is no unresolved claim by any Governmental Authority concerning the tax liability of the Applicant or any of its Subsidiaries for any period for which tax returns have been or were required to have been filed, other than claims for which adequate reserves have been established in accordance with Generally Accepted Accounting Principles.         4.7. Subsidiaries                Schedule 4.7 sets forth a list, as of the Restatement Effective Date, of all of the Subsidiaries of the Applicant and, as to each such Subsidiary, the percentage ownership (direct and indirect) of the Applicant in each class of its capital stock and each direct owner thereof, and indicates in each case whether such Subsidiary is a Material Subsidiary.         4.8. Full Disclosure                All factual information heretofore or contemporaneously furnished to the Agent or any Bank in writing by or on behalf of the Applicant or any of its Subsidiaries for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all other such factual information hereafter furnished to the Agent or any Bank in writing by or on behalf of the Applicant or any of its Subsidiaries will be, true and accurate in all material respects on the date as of which such information is dated or certified (or, if such information has been amended or supplemented, on the date as of which any such amendment or supplement is dated or certified) and not made incomplete by omitting to state a material fact necessary to make the statements contained therein, in light of the circumstances under which such information was provided, not misleading.         4.9. Margin Regulations                Neither the Applicant 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. No Letter of Credit will be used, directly or indirectly, to purchase or carry any Margin Stock, to extend credit for such purpose or for any other purpose that would violate or be inconsistent with Regulations T, U or X or any provision of the Exchange Act.         4.10. No Material Adverse Change                Except for the 2000 Reserve Loss, there exists no event, condition or state of facts that could reasonably be expected to result in a Material Adverse Change. 40 --------------------------------------------------------------------------------         4.11. Financial Matters                (a) The Applicant has heretofore furnished to the Agent copies of the audited consolidated balance sheets of the Applicant and its Subsidiaries as of December 31, 1999, 1998, 1997 and 1996, and the related statements of income, stockholders’equity and cash flows for the fiscal years then ended, together with the opinions of PricewaterhouseCoopers, L.L.P. (or its predecessor, Coopers &Lybrand, L.L.P.) thereon. Such financial statements have been prepared in accordance with Generally Accepted Accounting Principles (subject, with respect to the unaudited financial statements, to the absence of notes required by Generally Accepted Accounting Principles and to normal year-end audit adjustments) and present fairly the financial condition of the Applicant and its Subsidiaries on a consolidated basis as of the respective dates thereof and the consolidated results of operations of the Applicant and its Subsidiaries for the respective periods then ended. Except as fully reflected in the most recent financial statements referred to above and the notes thereto, there are no material liabilities or obligations with respect to the Applicant or any of its Subsidiaries of any nature whatsoever (whether absolute, contingent or otherwise and whether or not due).                (b) The Applicant has heretofore furnished to the Agent copies of (i) the Annual Statements of each of the Insurance Subsidiaries as of December 31, 1999, 1998 and 1997, and for the fiscal years then ended, each as filed with the relevant Insurance Regulatory Authority (collectively, the “Historical Statutory Statements”). The Historical Statutory Statements (including, without limitation, the provisions made therein for investments and the valuation thereof, reserves, policy and contract claims and statutory liabilities) have been prepared in accordance with Statutory Accounting Practices (except as may be reflected in the notes thereto), were in compliance with applicable Requirements of Law when filed and present fairly the financial condition of the respective Insurance Subsidiaries covered thereby as of the respective dates thereof and the results of operations, changes in capital and surplus and cash flow of the respective Insurance Subsidiaries covered thereby for the respective periods then ended. Except for liabilities and obligations disclosed or provided for in the Historical Statutory Statements (including, without limitation, reserves, policy and contract claims and statutory liabilities), no Insurance Subsidiary had, as of the date of its respective Historical Statutory Statements, any material liabilities or obligations of any nature whatsoever (whether absolute, contingent or other-wise and whether or not due) that, in accordance with Statutory Accounting Practices, would have been required to have been disclosed or provided for in such Historical Statutory Statements. All books of account of each Insurance Subsidiary fully and fairly disclose all of its material transactions, properties, assets, investments, liabilities and obligations, are in its possession and are true, correct and complete in all material respects.                (c) Each of the Applicant and its Material Subsidiaries, after giving effect to the consummation of the transactions contemplated hereby, (i) will have capital sufficient to carry on its businesses as conducted and as proposed to be conducted, (ii) will have assets with a fair saleable value, determined on a going concern basis, (y) not less than the amount required to pay the probable liability on its existing debts as they become absolute and matured and (z) greater than the total amount of its liabilities (including identified contingent liabilities, 41 -------------------------------------------------------------------------------- valued at the amount that can reasonably be expected to become absolute and matured), and (iii) will not intend to, and will not believe that it will, incur debts or liabilities beyond its ability to pay such debts and liabilities as they mature.         4.12. Ownership of Properties                Each of the Applicant and its Material Subsidiaries (i) has good and marketable title to all real property owned by it, (ii) holds interests as lessee under valid leases in full force and effect with respect to all material leased real and personal property used in connection with its business, and (iii) has good title to all of its other properties and assets reflected in the most recent financial statements referred to in Section 4.11(a) (except as sold or otherwise disposed of since the date thereof in the ordinary course of business), in each case under (i), (ii) and (iii) above free and clear of all Liens other than Permitted Liens.         4.13. ERISA                Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in Compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.         4.14. Environmental Matters                (a) Except as set forth in Schedule 4.14(a), no Hazardous Substances are or, to the knowledge of the Applicant, have been generated, released, treated or disposed of by the Applicant or any of its Subsidiaries or, to the knowledge of the Applicant, by any other Person or otherwise, in, on or under any portion of any real property owned by the Applicant or any of its Subsidiaries, except in material compliance with all applicable Environmental Laws, and, to the knowledge of the Applicant, no portion of any such real property has been contaminated by any Hazardous Substance. For purposes of this Section 4.14, “contaminated”means the presence of Hazardous Substances that require or required, as the case may be, remediation under any Environmental Law.                (b) Except as set forth on Schedule 4.14(b), to the knowledge of the Applicant, (i) no portion of any real property owned by the Applicant or any of its Subsidiaries has been used as or for a mine, a landfill, a dump or other disposal facility, a gasoline service station, or (other than for petroleum substances stored in the ordinary course of business) a 42 -------------------------------------------------------------------------------- petroleum products storage facility, (ii) no portion of such real property or any other real property at any time owned by the Applicant or any of its Subsidiaries has, pursuant to any Environmental Law, been placed on the “National Priorities List”or “CERCLIS List”(or any similar federal, state or local list) of sites subject to possible environmental problems, and (iii) there are not and have never been any underground storage tanks situated on any real property owned by the Applicant or any of its Subsidiaries.                (c) All activities and operations of the Applicant and its Subsidiaries are in compliance with the requirements of all applicable Environmental Laws, except to the extent the failure so to comply, individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect. Other than normal claims in the ordinary course of business pursuant to insurance policies written by an Insurance Subsidiary, neither the Applicant nor any of its Subsidiaries is involved in any suit, action or proceeding, or has received any notice, complaint or other request for information from any Governmental Authority or other Person, with respect to any actual or alleged Environmental Claims that, if adversely determined, would be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect; and, to the knowledge of the Applicant, there are no threatened actions, suits, proceedings or investigations with respect to any such Environmental Claims, nor any basis therefor.         4.15. Compliance With Laws                Each of the Applicant and its Subsidiaries has timely filed all material reports, documents and other materials required to be filed by it under all applicable Requirements of Law with any Governmental Authority, has retained all material records and documents required to be retained by it under all applicable Requirements of Law, and is otherwise in compliance with all applicable Requirements of Law in respect of the conduct of its business and the ownership and operation of its properties, except for such Requirements of Law the failure to comply with which, individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect.         4.16. Regulated Industries                Neither the Applicant nor any of its Subsidiaries is (i) an “investment company,”a company “controlled”by an “investment company,”or an “investment advisor,”within the meaning of the Investment Company Act of 1940, as amended, or (ii) a “holding company,”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 of the Public Utility Holding Company Act of 1935, as amended.         4.17. Insurance                The assets, properties and business of the Applicant and its Subsidiaries are insured against such hazards and liabilities (other than normal life insurance risk), under such coverages and in such amounts, as are customarily maintained by prudent companies similarly 43 -------------------------------------------------------------------------------- situated and under policies issued by insurers of recognized responsibility. No notice of any pending or threatened cancellation or material premium increase has been received by the Applicant or any of its Subsidiaries with respect to any such insurance policies, and the Applicant and each of its Subsidiaries are in substantial compliance with all conditions contained therein.         4.18. Certain Contracts                Schedule 4.18 lists, as of the Restatement Effective Date, each material contract, agreement or commitment, written or oral, other than Reinsurance Agreements and Insurance Agreements, to which the Applicant or any of its Subsidiaries is a party, by which any of them or their respective properties is bound or to which any of them is subject (other than insurance policies written in the ordinary course of business) and that (i) relates to employment or labor matters, (ii) involves aggregate consideration payable to or by any party thereto of $1,000,000 or more or (iii) is otherwise material to the business, condition (financial or otherwise), operations, performance or properties of the Applicant or any of its Subsidiaries, and also indicates the parties, subject matter thereof. As of the Restatement Effective Date, each such contract is in full force and effect, and neither the Applicant nor any of its Subsidiaries or, to the knowledge of the Applicant, any other party thereto, is in breach of or in default under any such contract. As of the Restatement Effective Date, none of such other parties has notified the Applicant that it has any presently exercisable right to terminate any such contract nor will any such other party have any right to terminate any such contract on account of the execution, delivery and performance of the Credit Documents.         4.19. Reinsurance Agreements                (a) Except as set forth on Schedule F to the Annual Statements for the Insurance Subsidiaries for the fiscal year ending December 31, 1999, there are no material liabilities outstanding as of the Restatement Effective Date under any Reinsurance Agreement. Each Reinsurance Agreement is in full force and effect; none of the Insurance Subsidiaries or, to the knowledge of the Applicant, any other party thereto, is in breach of or default under any such contract; and the Applicant has no reason to believe that the financial condition of any other party to any such contract is impaired such that a default thereunder by such party could reasonably be anticipated. Each Reinsurance Agreement is qualified under all applicable Requirements of Law to receive the statutory credit assigned to such Reinsurance Agreement in the relevant annual Statement or Quarterly Statement at the time prepared. Except as set forth on Schedule 4.19, each Person to whom any of the Insurance Subsidiaries has ceded any material liability pursuant to any Reinsurance Agreement on the Restatement Effective Date either: (i) has a rating of “A-”or better by A.M. Best &Company or (ii) has provided collateral in favor of the applicable Insurance Subsidiary of the type and in an amount described in Schedule 4.19.                (b) As of the Restatement Effective Date, no Insurance Subsidiary is a party 44 -------------------------------------------------------------------------------- to any Surplus Relief Reinsurance Agreement. 5.   AFFIRMATIVE COVENANTS         The Applicant agrees that so long as this Agreement is in effect, any reimbursement obligations (contingent or otherwise) in respect of any Letter of Credit remain outstanding and unpaid, or any other amount is owing under any Credit Document to the Issuing Bank, any Bank or the Agent:         5.1. GAAP Financial Statements                The Applicant will deliver to each Bank:                (a)    As soon as available and in any event within sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year, beginning with the third fiscal quarter ending September 30, 2000, unaudited consolidated balance sheets of the Applicant and its Subsidiaries as of the end of such fiscal quarter and unaudited consolidated statements of income, comprehensive income and cash flows for the Applicant and its Subsidiaries for the fiscal quarter then ended and for that portion of the fiscal year then ended, in each case setting forth comparative consolidated figures as of the end of and for the corresponding period in the preceding fiscal year, all prepared in accordance with Generally Accepted Accounting Principles (subject to the absence of notes required by Generally Accepted Accounting Principles and subject to normal year-end audit adjustments) applied on a basis consistent with that of the preceding quarter or containing disclosure of the effect on the financial condition or results of operations of any change in the application of accounting principles and practices during such quarter; and                (b)    As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year, beginning with the fiscal year ended December 31, 2000, (i) an audited consolidated balance sheet of the Applicant and its Subsidiaries as of the end of such fiscal year and audited consolidated statements of income, comprehensive income, stockholders’equity and cash flows for the Applicant and its Subsidiaries for the fiscal year then ended, including the applicable notes, in each case setting forth comparative figures is of the end of and for the preceding fiscal year, certified by the independent certified public accounting firm regularly retained by the Applicant or another independent certified public accounting firm of recognized national standing reasonably acceptable to the Required Banks, together with a report thereon by such accountants that is not qualified as to going concern or scope of audit and to the effect that such financial statements present fairly the consolidated financial condition and results of operations of the Applicant and its Subsidiaries as of the dates and for the periods indicated in accordance with generally accepted accounting principles, and (ii) unaudited consolidating statements of income and cash flows for the Applicant and its Subsidiaries for the fiscal year then ended, in reasonable detail, all prepared in accordance with Generally Accepted Accounting Principles applied on a consistent basis with that of the preceding fiscal year or containing disclosure of the effect on the financial condition or results of operations of any 45 -------------------------------------------------------------------------------- change in the application of accounting principles and practices during such fiscal year.         5.2. Statutory Financial Statements                The Applicant will deliver to each Bank:                (a)    As soon as available and in any event within sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year, beginning with the first fiscal quarter ending after the date hereof, a Quarterly Statement of each Insurance Subsidiary as of the end of such fiscal quarter and for that portion of the fiscal year then ended, in the form filed with the relevant Insurance Regulatory Authority, prepared in accordance with Statutory Accounting Practices;                (b)    As soon as available and in any event within sixty (60) days after the end of each fiscal year, beginning with the fiscal year ended December 31, 2000, an Annual Statement of each Insurance Subsidiary as of the end of such fiscal year and for the fiscal year then ended, in the form filed with the relevant Insurance Regulatory Authority, prepared in accordance with Statutory Accounting Practices; and                (c)    As soon as available and in any event within one hundred twenty-one (121) days after the end of each fiscal year, beginning with the fiscal year ended December 31, 2000, a Combined Annual Statement of PMACIC and its Consolidated Affiliates as of the end of such fiscal year and for the fiscal year then ended, in the form filed with the relevant Insurance Regulatory Authority, prepared in accordance with Statutory Accounting Practices.         5.3. Other Business and Financial Information                The Applicant will deliver to each Bank:                (a)    Concurrently with each delivery of the financial statements described in Sections 5.1 and 5.2, a Compliance Certificate in the form of Exhibit E-1 (in the case of the financial statements described in Section 5.1) or Exhibit E-2 (in the case of the financial statements described in Section 5.2) with respect to the period covered by the financial statements then being delivered, executed by the chief financial officer of the Applicant (or a vice president of the Applicant having significant responsibility for financial matters), together, in the case of the financial statements described in Section 5.1, with a Covenant Compliance Worksheet reflecting the computation of the financial covenants set forth in Sections 6.1 and 6.2 as of the last day of the period covered by such financial statements, and in the case of the financial statements described in Section 5.2, with a Covenant Compliance Worksheet reflecting the computation of the financial covenants set forth in Sections 6.3 and 6.4 as of the last day of the period covered by such financial statements;                (b)    Promptly upon filing with the relevant Insurance Regulatory Authority and in any event within ninety (90) days after the end of each fiscal year, beginning with the 46 -------------------------------------------------------------------------------- fiscal year ended December 31, 2000, a copy of each Insurance Subsidiary’s “Statement of Actuarial Opinion”(or equivalent information should the relevant Insurance Regulatory Authority not require such a statement) as to the adequacy of such Insurance Subsidiary’s loss reserves for such fiscal year, together with a copy of its management discussion and analysis in connection therewith, each in the format prescribed by the applicable insurance laws of such Insurance Subsidiary’s jurisdiction of domicile;                (c)   Promptly upon the sending or filing thereof, copies of any “internal control”letter filed by on behalf of the Applicant or any of its Subsidiaries with any Insurance Regulatory Authority;                (d)    Promptly upon the sending, filing or receipt thereof, copies of (i) all financial statements, reports, notices and proxy statements that the Applicant or any of its Subsidiaries shall send or make available generally to its shareholders, (ii) all regular, periodic and special reports, registration statements and prospectuses that the Applicant or any of its Subsidiaries shall render to or file with the Securities and Exchange Commission, the National Association of Securities Dealers, Inc. or any national securities exchange, (iii) all significant reports on examination or similar significant reports, financial examinations reports or market conduct examination reports by the NAIC or any Insurance Regulatory Authority or other Governmental Authority with respect to any Insurance Subsidiary’s insurance business, and (iv) all significant filings made under applicable state insurance holding company acts by the Applicant or any of its Subsidiaries, including, without limitation, filings seeking approval of transactions with Affiliates;                (e)    Promptly upon (and in any event within three (3) Business Days after) an officer of the Applicant obtaining knowledge thereof, written notice of any of the following:                     (i)    the occurrence of any Default or Event of Default, together with a written statement of the chief executive officer or chief financial officer of the Applicant specifying the nature of such Default or Event of Default, the period of existence thereof and the action that the Applicant has taken and proposes to take with respect thereto;                     (ii)    the institution or threatened institution of any action, suit, investigation or proceeding against or affecting the Applicant or any of its Subsidiaries, including any such investigation or proceeding by any insurance Regulatory Authority or other Governmental Authority (other than routine periodic inquiries, investigations or reviews), that would, if adversely determined, be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, and any material development in any litigation or other proceeding previously reported pursuant to Section 4.5 or this Section 5.3(e)(ii);                     (iii)    the receipt by the Applicant or any of its Subsidiaries from any Insurance Regulatory Authority or other Governmental Authority of (A) any notice asserting any failure by the Applicant or any of its Subsidiaries to be in compliance with applicable Requirements of Law or that threatens the taking of any action against the Applicant or such 47 -------------------------------------------------------------------------------- Subsidiary or sets forth circumstances that, if taken or adversely determined, would be reasonably likely to have a Material Adverse Effect, or (B) any notice of any actual or threatened suspension, limitation or revocation of, failure to renew, or imposition of any restraining order, escrow or impoundment of funds in connection with, any license, permit, accreditation or authorization of the Applicant or any of its Subsidiaries, where such action would be reasonably likely to have a Material Adverse Effect;                     (iv)    the occurrence of any of the following, together with a reasonably detailed description thereof and copies of any filings, communications, reports or other information relating thereto made available to the Applicant or any of its Subsidiaries: (A) the assertion of any Environmental Claim against or affecting the Applicant, any of its Subsidiaries or any of their respective real property, leased or owned; (B) the receipt by the Applicant or any of its Subsidiaries of notice of any alleged violation of or noncompliance with any Environmental Laws by the Applicant or any of its Subsidiaries; or (C) the taking of any remedial action by the Applicant, any of its Subsidiaries or any other Person in response to the actual or alleged generation, storage, release, disposal or discharge of any Hazardous Substances on, to, upon or from any real property leased or owned by the Applicant or any of its Subsidiaries; but in each case under clauses (A), (B) and (C) above, only to the extent the same would be reasonably likely to have a Material Adverse Effect;                     (v)    the occurrence of any actual changes in any insurance statute or regulation governing the investment or dividend practices of any Insurance Subsidiary that would be reasonably likely to have a Material Adverse Effect;                     (vi)    if and when any member of the ERISA Group (A) gives or is required to give notice to the PBGC of any “reportable event”(as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (B) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (C) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer, any Plan, a copy of such notice; (D) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (E) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (F) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (G) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Applicant setting forth details as to such occurrence and action, if any, which the Applicant or applicable member of the ERISA Group is required or 48 -------------------------------------------------------------------------------- proposes to take; and                     (vii)    any other matter or event that has, or would have a Material Adverse Effect together with a written statement of the chief executive officer or chief financial officer of the Applicant setting forth the name and period of existence thereof and the action that the Applicant has taken and proposes to take with respect thereto;                (f)    Promptly, notice of (i) the occurrence of any material amendment or modification to any Reinsurance Agreement (whether entered into before or after the Restatement Effective Date), including any such agreements that are in a runoff mode on the Restatement Effective Date, which amendment or modification would be reasonably likely to have a Material Adverse Effect, or (ii) the receipt by the Applicant or any of its Subsidiaries of any written notice of any denial of coverage, litigation, claim or arbitration arising out of any Reinsurance Agreement to which it is a party which would be reasonably likely to have a Material Adverse Effect;                (g)    As promptly as reasonably possible, such other information about the business, condition (financial or otherwise), operations or properties of the Applicant or any of its Subsidiaries (including, without limitation, financial, actuarial and other information with respect to Reinsurance Agreements) as the Agent or any Bank may from time to time reasonably request; and                (h)    Upon the request of the Agent at the direction of the Required Banks (which absent a showing of good cause shall not be more often than one time during any twelve-month period), at the Applicant’s expense, deliver to each Bank within sixty (60) days of such request an actuarial review of the liabilities and other items of each Insurance Subsidiary prepared by an actuary or a firm of actuaries reasonably acceptable to the Agent, such actuarial review to be in form and substance reasonably acceptable to the Required Banks.         5.4. Corporate Existence; Franchises; Maintenance of Properties                The Applicant will, and will cause each of its Subsidiaries to, maintain and preserve in full force and effect its corporate existence, except as expressly permitted otherwise by Section 7.l. The Applicant will, and will cause each of its Subsidiaries to, (i) obtain, maintain and preserve in full force and effect all other rights, franchises, licenses, permits, certifications, approvals and authorizations required by Governmental Authorities and necessary to the Ownership, Occupation or use of its properties or the conduct of its business, except to the extent the failure to do so would not be reasonably likely to have a Material Adverse Effect, and (ii) keep all material properties in good working order and condition (normal wear and tear excepted) and from time to time make all necessary repairs to and renewals and replacements of such properties, except to the extent that any of such properties are obsolete or are being replaced.         5.5. Compliance with Laws 49 --------------------------------------------------------------------------------                The Applicant will, and will cause each of its Subsidiaries to, comply in all respects with all Requirements of Law applicable in respect of the conduct of its business and the ownership and operation of its properties, except to the extent the failure so to comply would not be reasonably likely to have a Material Adverse Effect.         5.6. Payment of Obligations                The Applicant will, and will cause each of its Subsidiaries to, (i) pay all liabilities and obligations as and when due (subject to any applicable subordination provisions), except to the extent failure to do so would not be reasonably likely to have a Material Adverse Effect, and (ii) pay and discharge all taxes, assessments and governmental charges or levies imposed upon it, upon its income or profits or upon any of its properties, prior to the date on which penalties would attach thereto, and all lawful claims that, if unpaid, might become a Lien upon any of the properties of the Applicant or any of its Subsidiaries; provided, however, that neither the Applicant nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim that is being contested in good faith and by proper proceedings and as to which the Applicant or such Subsidiary is maintaining adequate reserves with respect thereto in accordance with Generally Accepted Accounting Principles.         5.7. Insurance                The Applicant will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurance companies insurance with respect to its assets, properties and business, against such hazards and liabilities (other than normal life insurance risk), of such types and in such amounts, as is customarily maintained by companies in the same or similar businesses similarly situated.         5.8. Maintenance of Books and Records; Inspection                The Applicant will, and will cause each of its Subsidiaries to, (i) maintain adequate books, accounts and records, in which full, true and correct entries shall be made of all financial transactions in relation to its business and properties, and prepare all financial statements required under this Agreement, in each case in accordance with Generally Accepted Accounting Principles or Statutory Accounting Practices, as applicable, and in compliance with the requirements of any Governmental Authority having jurisdiction over it, and (ii) permit employees or agents of the Agent or any Bank, at the Agent’s or Bank’s expense (except as provided in Section 10.5), to inspect its properties and examine or audit its books, records, working papers and accounts and make copies and memoranda of them, and to discuss its affairs, finances and accounts with its officers and employees and, with the prior consent of the Applicant (such consent not to be unreasonably withheld), the independent public accountants of the Applicant and its Subsidiaries (and by this provision the Applicant authorizes such accountants to discuss the finances of the Applicant and its Subsidiaries), all at such times and from time to time, upon reasonable notice and during business hours, as may be reasonably requested. 50 --------------------------------------------------------------------------------         5.9. Dividends                The Applicant will take all action necessary to cause its Subsidiaries to make such dividends, distributions or other payments to the Applicant as shall be necessary for the Applicant to make payments of the Obligations. In the event the approval of any Governmental Authority or other Person is required in order for any such Subsidiary to make any such dividends, distributions or other payments to the Applicant, or for the Applicant to make any such principal or interest payments, the Applicant will forthwith exercise its best efforts and take all actions permitted by law and necessary to obtain such approval.         5.10. Ownership of Insurance Subsidiaries                The Applicant will cause each of its Insurance Subsidiaries to remain at all times a Wholly Owned Subsidiary of the Applicant, except as expressly permitted otherwise by Section 7.1.         5.11. Further Assurances                The Applicant will, and will cause each of its Subsidiaries to, make, execute, endorse, acknowledge and deliver any amendments, modifications or supplements hereto and restatements hereof and any other agreements, instruments or documents, and take any and all such other actions, as may from time to time be reasonably requested by the Agent or the Required Banks to effect, confirm or further assure or protect and preserve the interests, rights and remedies of the Agent and the Banks under this Agreement and the other Credit Documents. 6.   FINANCIAL COVENANTS         The Applicant agrees that so long as this Agreement is in effect, any reimbursement obligations (contingent or otherwise) in respect of any Letter of Credit remain outstanding and unpaid, or any other amount owing under any Credit Document to the Issuing Bank, any Bank or the Agent:         6.1. Capitalization Ratio                The Applicant will not permit the Capitalization Ratio to be greater than 0.35 to 1.0 as of the last day of any fiscal quarter, beginning with the fiscal quarter ending September 30, 2000.         6.2. Cash Coverage Ratio                The Applicant will not permit the Cash Coverage Ratio to be less than 2.75 to 1.0, with respect to any four fiscal quarter period ending on or after September 30, 2000. 51 --------------------------------------------------------------------------------         6.3. Statutory Surplus                The Applicant will cause the Consolidated Statutory Surplus of the Insurance Subsidiaries to be not less than $450,000,000 at all times from and after the Restatement Effective Date.         6.4. Risk-Based Capital                The Applicant will not permit “total adjusted capital”(within the meaning of the Risk-Based Capital for Insurers Model Act as promulgated by the NAIC as of the date hereof (the “Model Act”)) of the following Insurance Subsidiaries to be less than the percentages set forth below, as of the dates set forth below, of the applicable “Company Action Level RBC”(within the meaning of the Model Act):                     (i)    with respect to PMACIC, as of the last day of any fiscal year, beginning with the fiscal year ending December 31, 1999, not less than one hundred fifty percent (150%);                     (ii)    with respect to any other Insurance Subsidiary (other than an Insurance Subsidiary not required by the relevant Insurance Regulatory Authority to meet any RBC requirements), as of the last day of any fiscal year beginning with the fiscal year ending December 31, 1999, not less than, one hundred twenty percent (120%). 7.   NEGATIVE COVENANTS                The Applicant agrees that, so long as this Agreement is in effect, any reimbursement obligations (contingent or otherwise) in respect of any Letter of Credit remain outstanding and unpaid, or any other amount is owing under any Credit Document to the Issuing Bank, any Bank or the Agent:         7.1. Merger; Consolidation; Disposition of Assets                The Applicant will not, and will not permit or cause any of its Subsidiaries to, liquidate, wind up or dissolve, enter into any consolidation, merger or other combination, or sell, assign, lease, convey, transfer, assumption reinsurance or otherwise dispose of (whether in one or a series of transactions) all or any substantial portion of its assets, business or properties outside of the ordinary course of its business, or agree to do any of the foregoing; provided, however, that:                     (i)    any Subsidiary may merge or consolidate with, or sell or otherwise dispose of assets to, another Subsidiary or the Applicant so long as (y) the surviving or transferee corporation is the Applicant or a Wholly Owned Subsidiary and (z) immediately after giving effect thereto, no Default or Event of Default would exist; and 52 --------------------------------------------------------------------------------                     (ii)    the Applicant and its Subsidiaries may (x) sell, or otherwise dispose of, the capital stock or all or any portion of the assets, business or properties of a Subsidiary that is not a Material Subsidiary, (y) liquidate, windup or dissolve any Subsidiary that is not a Material Subsidiary, and (z) sell, or otherwise dispose of, any asset or group of assets constituting less than (A) in any single transaction or series of related transactions, ten percent (10%) of Consolidated Statutory Surplus as of the last day of the fiscal quarter ending on or immediately prior to the date of such sale, and (B) during any fiscal year, in the aggregate with all such other sales pursuant to this clause (ii), thirty percent (30%) of Consolidated Statutory Surplus as of the end of the immediately preceding fiscal year.         7.2. Indebtedness                The Applicant will not, and will not permit or cause any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist, any Indebtedness other than:                     (i)    Indebtedness under the Revolving Credit Agreement and any other Credit Document (as therein defined), provided the aggregate principal amount thereof does not exceed $225,000,000;                     (ii)    Accrued expenses, current trade or other accounts payable and other current liabilities arising in the ordinary course of business and not incurred through the borrowing of money, provided that the same shall be paid when due except to the extent being contested in good faith and by appropriate proceedings;                     (iii)    Indebtedness of any Wholly Owned Subsidiary of the Applicant to the Applicant or to another Wholly Owned Subsidiary and of the Applicant to any Wholly Owned Subsidiary;                     (iv)    Indebtedness due under the Credit Documents and the Existing Letters of Credit;                     (v) Indebtedness existing on the Restatement Effective Date as set forth on Schedule 7.2; provided that for so long as no Default or Event of Default has occurred and is continuing at such time, such Indebtedness may be extended, renewed or refunded as long as the principal amount of such renewed Indebtedness shall not exceed the principal amount of such Indebtedness being extended, renewed or refunded together with any accrued interest with respect thereto;                     (vi) Indebtedness in respect of any Hedge Agreement covering a notional principal amount not in excess of the amount of the aggregate Commitments;                     (vii) Indebtedness (other than Indebtedness specified in clauses (i) through (vi) above) in the aggregate principal amount outstanding not exceeding $15,000,000 at 53 -------------------------------------------------------------------------------- any time and constituting (y) unsecured Indebtedness of the Applicant or (z) reimbursement obligations under letters of credit (whether or not drawn or matured in the stated amount thereof) issued on behalf of an Insurance Subsidiary in the ordinary course of such Insurance Subsidiary’s business; and                     (viii) Indebtedness in respect of guarantees for officer loan programs for the purpose of purchasing Applicant's common stock not to exceed $5,000,000 outstanding at any time.         7.3. Liens                The Applicant will not, and will not permit or cause any of its Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist, or enter into or suffer to exist any agreement or restriction that prohibits or conditions the creation, incurrence or assumption of, any Lien upon or with respect to any part of its property or assets, whether now owned or hereafter acquired, or agree to do any of the foregoing, other than the following (collectively, “Permitted Liens”):                (i)    Liens (y) in existence on the Restatement Effective Date and set forth on Schedule 7.3 and (z) arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any such Lien, provided that such Indebtedness is not increased and is not secured by any additional assets;                (ii)    Liens imposed by law, such as Liens of carriers, warehousemen, mechanics, materialmen and landlords, and other similar Liens incurred in the ordinary course of business for sums not constituting borrowed money that are not overdue for a period of more than thirty (30) days or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with Generally Accepted Accounting Principles;                (iii)    Liens (other than any lien imposed by ERISA, the creation or incurrence of which would result in an Event of Default under Section 8.1(k)) incurred in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure the performance of letters of credit, bids, tenders, statutory obligations, surety and appeal bonds, leases, government contracts and other similar obligations (other than obligations for borrowed money) entered into in the ordinary course of business;                (iv)    Liens for taxes, assessments or other governmental charges or statutory obligations, that are not delinquent or remain payable without any penalty or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with Generally Accepted Accounting Principles;                (v)    Liens in connection with pledges and deposits made pursuant to statutory 54 -------------------------------------------------------------------------------- and regulatory requirements of Insurance Regulatory Authorities by an Insurance Subsidiary in the ordinary course of its business, for the purpose of securing regulatory capital or satisfying other financial responsibility requirements;                (vi)    with respect to any real property occupied by the Applicant or any of its Subsidiaries, all easements, rights of way, licenses and similar encumbrances on title that do not materially impair the use of such property for its intended purposes;                (vii)    Liens in favor of the Agent and the Banks hereunder; and                (viii)    Liens (other than Liens specified in clauses (i) through (vii) above) securing obligations in the aggregate principal amount not exceeding, at any time, the greater of (y) five percent (5 %) of Consolidated Net Worth as of the end of the immediately preceding fiscal year or (z) $20,000,000.         7.4. Investments; Acquisitions                The Applicant will not, and will not permit or cause any of its Subsidiaries to, directly or indirectly, purchase, own, invest in or otherwise acquire any capital stock, evidence of indebtedness or other obligation or security or any interest whatsoever in any other Person, or make or permit to exist any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any other Person, or purchase or otherwise acquire (whether in one or a series of related transactions) any portion of the assets, business or properties of another Person, or create or acquire any Subsidiary, or become a partner or joint venturer in any partnership or joint venture (collectively, “Investments”), or make a commitment or otherwise agree to do any of the foregoing, if, immediately after any such Investment, the amount of the cash, Cash Equivalents and Investment Grade Securities owned by the Applicant and its Subsidiaries, on a consolidated basis, would be less than eighty-five percent (85%) of the total Invested Assets of the Applicant and its Subsidiaries determined as of the end of the most recent fiscal quarter.         7.5. Restricted Payments                (a)    The Applicant will not, and will not permit or cause any of its Subsidiaries to, directly or indirectly, declare or make any dividend payment, or make any other distribution of cash, property or assets, in respect of any of its capital stock or any warrants, rights or options to acquire its capital stock, or purchase, redeem, retire or otherwise acquire for value any shares of its capital stock or any warrants, rights or options to acquire its capital stock, or set aside funds for any of the foregoing, except that:                     (i)    each Wholly Owned Subsidiary may declare and make dividend payments or other distributions to the Applicant or another Wholly Owned Subsidiary to the extent permitted under applicable Requirements of Law and, as to the Insurance Subsidiaries, by each relevant Insurance Regulatory Authority, and 55 --------------------------------------------------------------------------------                     (ii) the Applicant may declare and make dividend payments or other distributions, and may purchase, redeem, retire or otherwise acquire shares of its capital stock, in cash or in-kind, in each case, provided that immediately after giving effect thereto, no Default or Event of Default would exist.                The Applicant will not, and will not permit or cause any of its Subsidiaries to, make (or give any notice in respect of) any voluntary or optional payment or prepayment on any Indebtedness or, directly or indirectly, make any redemption (including pursuant to any change of control provision), retirement, defeasance or other acquisition for value of any Indebtedness, or make any deposit or otherwise set aside funds for any of the foregoing purposes.         7.6. Transactions with Affiliates                The Applicant will not, and will not permit or cause any of its Subsidiaries to, enter into any transaction with any officer, director, stockholder or other Affiliate of the Applicant or any Subsidiary, except in the ordinary course of its business and upon fair and reasonable terms that are no less favorable to it than would obtain in a comparable arm’s length transaction with a Person other than an Affiliate of the Applicant or such Subsidiary; provided, however, that nothing contained in this Section shall prohibit:                     (i) transactions described on Schedule 7.6 or otherwise expressly permitted hereunder; and                     (ii) the payment by the Applicant of reasonable and customary fees to members of its board of directors.         7.7. Certain Amendments                The Applicant will not, and will not permit or cause any of its Subsidiaries to, (i) amend, modify or waive, or permit the amendment, modification or waiver of, any provision of any agreement or instrument evidencing or governing any Indebtedness, including, without limitation, the Revolving Credit Agreement, or (ii) amend or modify its articles or certificate of incorporation or bylaws, in each case under clauses (i) and (ii) other than any amendments or modifications that could not reasonably be expected to affect the Banks adversely.         7.8. Lines of Business                The Applicant will not, and will not permit or cause any of its Subsidiaries to, engage to any substantial degree in any business other than the lines of property and casualty insurance or reinsurance business and other businesses engaged in by the Applicant and its Subsidiaries on the date hereof or a business reasonably related thereto. 56 --------------------------------------------------------------------------------         7.9. Limitations on Certain Restrictions                The Applicant will not, and will not permit or cause any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any restriction or encumbrance on (i) the ability of the Applicant and its Subsidiaries to perform and comply with their respective obligations under the Credit Documents or the Revolving Credit Agreement and the Credit Documents (as therein defined), (ii) the ability of the Applicant or any Subsidiary to grant, assume or permit to exist any Lien upon any of its assets or properties as security, directly or indirectly, for the Obligations, other than the restrictions, set forth in the Credit Documents or the Revolving Credit Agreement and the Credit Documents (as therein defined), or (iii) the ability of any Subsidiary of the payments or other distributions in respect of its capital to the Applicant or any other Subsidiary, or to transfer to the Applicant or any other Subsidiary, in each case other existing under or by reason of the Credit Documents or applicable Requirements of Law.         7.10. Fiscal Year                The Applicant will not, and will not permit or cause any of its Subsidiaries to, change the ending date of its fiscal year to a date other than December 31 unless (i) the Applicant shall have given the Banks written notice of its intention to change such ending date at least sixty (60) days prior to the effective date thereof and (ii) prior to such effective date this Agreement shall have been amended to make any changes in the financial covenants and other terms and conditions to the extent necessary, in the reasonable determination of the Required Banks, to reflect the new fiscal year ending date.         7.11. Accounting Changes                The Applicant will not, and will not permit or cause any of its Subsidiaries to, make or permit any material change in its accounting policies or reporting practices, except as may be required by Generally Accepted Accounting Principles or Statutory Accounting Practices, as applicable, and any change to an accounting principle that can be demonstrated by the Applicant to be “preferable”in accordance with Statements on Auditing Standards No. 58 as promulgated by the Auditing Standards Board.         7.12. Reinsurance Agreements                The Applicant will not, and will not permit or cause any of its Insurance Subsidiaries to, (i) except for the Reinsurance Agreements existing on the Restatement Effective Date with the reinsurers set forth on Schedule 4.19, be or become a party to any Reinsurance Agreement (whether in effect as of the Restatement Effective Date or at any time thereafter) with any reinsurer not rated “A-”or better by A.M. Best &Company or an insurer financial strength rating of “BBB+", or better, by Standard and Poor’s, unless (y) the aggregate amount of reinsurance recoverable due from such reinsurers with ratings below such level does not exceed $5,000,000, or (z) such reinsurer has either (A) provided a letter of credit issued by a United 57 -------------------------------------------------------------------------------- States bank having a long term senior debt rating of “A”or better by Standard &Poor’s and Moody’s, in favor of the Applicant or the applicable Insurance Subsidiary in an amount equal to or greater than the obligations transferred pursuant to such Reinsurance Agreement, (B) placed the assets transferred by the Insurance Subsidiary pursuant to such Reinsurance Agreement in a trust with a fiduciary and under terms, including investment restrictions consistent with this Agreement, satisfactory to the Agent, or (C) otherwise provided collateral in favor of the Applicant or the applicable Insurance Subsidiary in form and amount satisfactory to the Required Banks, (ii) enter into any Reinsurance Agreements, or make any amendment or modification to or waiver of any Reinsurance Agreements, that would, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect, or (iii) be or become a party to any Surplus Relief Reinsurance Agreement if the increase in Consolidated Statutory Surplus as a result of or arising from such Surplus Relief Reinsurance Agreement, when added to the increase in Consolidated Statutory Surplus as a result of or arising from all other Surplus Relief Reinsurance Agreements theretofore entered into by any Insurance Subsidiary, net of any surplus relief recaptured in respect of such Surplus Relief Reinsurance Agreements, exceeds the lesser of (y) ten percent (10%) of Consolidated Statutory Surplus as of the most recent fiscal year end, or (z) $45,000,000. 8.   DEFAULT         8.1. Events of Default                The following shall each constitute an “Event of Default” hereunder:                (a)    The failure of the Applicant or any Co-Applicant to pay any reimbursement obligations in respect of any Letter of Credit within one (1) Business Day after demand; or                (b)    The failure of the Applicant or any Co-Applicant to pay any interest or any other fees or expenses payable under any Credit Document or otherwise to the Agent with respect to the credit facilities established hereunder within three (3) Business Days of the date when due and payable; or                (c)    The issuance of any Letter of Credit for a purpose inconsistent with or in violation of Section 2.1(b) or the use of the proceeds of any Letter of Credit in a manner inconsistent with or in violation of Section 2.13; or                (d)    The Applicant shall fail to observe, perform or comply with any condition, covenant or agreement contained in any of Sections 2.14(a), 5.3 or 5.4(i), Section 6 or Section 7 or the failure of the Agent to have a perfected first priority security interest in the Collateral (other than to the extent covered solely by the action or inactions of the Agent); or                (e)    The Applicant, any Co-Applicant or any of the Applicant’s Subsidiaries shall fail to observe, perform or comply with any condition, covenant or agreement contained in 58 -------------------------------------------------------------------------------- this Agreement or any of the other Credit Documents other than those enumerated in clauses (a), (b), (c), or (d) above and such failure shall continue unremedied for any grace period specifically applicable thereto or, if no such grace period is applicable, for a period after the Applicant acquires knowledge thereof of (i) five (5) days with respect to covenants set forth in Sections 5.1 or 5.2 or (ii) thirty (30) days with respect to any other condition, covenant or agreement; or                (f)    Any representation, warranty, certification or statement made by the Applicant or any Co-Applicant in this Agreement or in any Credit Document or any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); or                (g)    The Applicant or any of its Subsidiaries shall (i) fail to pay when due (whether by scheduled maturity, acceleration or otherwise and after giving effect to any applicable grace period) any principal of or interest on any Indebtedness (other than the Indebtedness incurred pursuant to this Agreement) having an aggregate principal amount of at least $1,000,000; or (ii) fail to observe, perform or comply with any condition, covenant or agreement contained in any agreement or instrument evidencing or relating to any such Indebtedness, or any other event shall occur or condition exist in respect thereof, and the effect of such failure, event or condition is to cause, or permit the holder or holders of such Indebtedness (or a trustee or agent on its or their behalf) to cause (with the giving of no lapse of time, or both), such Indebtedness to become due, or to be prepaid, redeemed, purchased or defeased, prior to its stated maturity; or                (h)    The Applicant or any of its Subsidiaries shall (i) file a voluntary petition or commence a voluntary case seeking liquidation, winding-up, reorganization, dissolution, arrangement, readjustment of debts or any other relief under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any petition or case of the type described in subsection (i) below, (iii) apply for or consent to the appointment of or taking possession by a custodian, trustee, receiver or similar official for or of itself or all or a substantial part of its properties or assets, (iv) fail generally, or admit in writing its inability, to pay its debts generally as they become due, (v) make a general assignment for the benefit of creditors or (vi) take any corporate action to authorize or approve any of the foregoing; or                (i)    Any involuntary petition or case shall be filed or commenced against the Applicant or any of its Subsidiaries seeking liquidation, winding-up, reorganization, dissolution, arrangement, readjustment of debts, the appointment of a custodian, trustee, receiver or similar official for it or all or a substantial part of its properties or any other relief under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, and such petition or case shall continue undismissed and unstayed for a period of sixty (60) days; or an order, judgment or decree approving or ordering any of the foregoing shall be entered in any such proceeding; or                (j)    Any one or more money judgments, writs or warrants of attachment, 59 -------------------------------------------------------------------------------- executions or similar processes involving an aggregate amount (exclusive of amounts fully bonded or covered by insurance as to which the surety or insurer, as the case may be, has acknowledged its liability in writing) in excess of $1,000,000 (other than a liability of an Insurance Subsidiary under an insurance contract written in the ordinary course of business) shall be entered or filed against the Applicant or any of its Subsidiaries or any of their respective properties, and the same shall not be dismissed, stayed or discharged for a period of thirty (30) days; or                (k)    Any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $1,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a Trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $1,000,000; or                (l)    Any Insurance Regulatory Authority or other Governmental Authority having jurisdiction shall issue any order of conservation, supervision, rehabilitation or liquidation or any other order of similar effect in respect of any Insurance Subsidiary, and such action, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect; or                (m)    Any one or more licenses, permits, accreditations or authorizations of the Applicant or any of its Subsidiaries shall be suspended, limited or terminated or shall not be renewed, or any other action shall be taken, by any Governmental Authority in response to any alleged failure by the Applicant or any of its Subsidiaries to be in compliance with applicable Requirements of Law, and such action, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect; or                (n)    Any of the following shall occur: (i) any Person, including, without limitation, any individual member of the Management Group, or group of Persons acting in concert as a partnership or other group shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become, after the date hereof, the “beneficial owner”(within the meaning of such term under Rule 13d-3 under the Exchange Act) of securities of the Applicant representing thirty percent (30%) or more of the combined voting power of the then outstanding securities of the Applicant ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors; provided, however, The PMA Foundation, a Pennsylvania non-profit corporation, may become the beneficial owner of securities of the Applicant representing fifty percent (50%) or 60 -------------------------------------------------------------------------------- less of the combined voting power of the then outstanding securities of the Applicant so long as it remains a non-profit corporation that has no members with voting rights and the Management Group collectively may become the beneficial owner of securities of the Applicant representing fifty percent (50 %) or less of the combined voting power of the then outstanding securities of the Applicant, or (ii) the Board of Directors of the Applicant shall cease to consist of a majority of the individuals who constituted the Board of Directors of the Applicant as of the date hereof or who shall have become a member thereof subsequent to the date hereof after having been nominated, or otherwise approved in writing, by at least a majority of individuals who constituted the Board of Directors of the Applicant as of the date hereof (or their replacements approved as herein required).                Upon the occurrence of an Event of Default or at any time thereafter during the continuance thereof, (a) if such event is an Event of Default specified in clause (h) or (i) above, the Commitment shall immediately and automatically terminate and any reimbursement obligations owing or contingently owing in respect of all Outstanding Letters of Credit and all other amounts owing under the Credit Documents shall immediately become due and payable, and the Agent may, and, upon the direction of the Required Banks shall, exercise any and all remedies and other rights provided in the Credit Documents, and (b) if such event is any other Event of Default, any or all of the following actions may be taken: (i) with the consent of the Required Banks, the Agent may, and upon the direction of the Required Banks shall, by notice to the Applicant, declare the Commitment to be terminated forthwith, whereupon the Commitment shall immediately terminate, and (ii) with the consent of the Required Banks, the Agent may, and upon the direction of the Required Banks shall, by notice of default to the Applicant, declare any reimbursement obligations owing or contingently owing in respect of all Outstanding Letters of Credit and all other amounts owing under the Credit Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable, and the Agent may, and upon the direction of the Required Banks shall, exercise any and all remedies and other rights provided pursuant to the Credit Documents. Except as otherwise provided in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Each Credit Party hereby further expressly waives and covenants not to assert any appraisement, valuation, stay, extension, redemption or similar laws, now or at any time hereafter in force which might delay, prevent or otherwise impede the performance or enforcement of any Credit Document.                Upon the occurrence of an Event of Default or at any time thereafter during the continuance thereof, the Agent may and, at the direction of Required Banks, shall (i) exercise any and all rights and remedies granted to a secured party by the Uniform Commercial Code in effect in the State of Pennsylvania or otherwise allowed at law, and otherwise provided by this Agreement, and (ii) dispose of the Collateral consisting of Treasury Securities and U.S. Federal Agency Obligations as it may choose, so long as every aspect of the disposition including the method, manner, time, place and terms are commercially reasonable, and the Applicant and each Co-Applicant agrees that, without limitation, the following are each commercially reasonable: (A) the Agent shall not in any event be required to give more than five (5) days prior notice to the Applicant or any Co-Applicant of any such disposition, (B) any place within the cities of 61 -------------------------------------------------------------------------------- New York, Philadelphia or Pittsburgh may be designated by the Agent for disposition, and (C) the Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.                In the event that the Commitment shall have been terminated pursuant to the provisions of this Section, any funds received by the Agent and the Banks from or on behalf of the Applicant and/or any Co-Applicant shall, in the event that any Letters of Credit remain outstanding, either be held by the Agent or applied by the Agent in liquidation of the obligations of the Applicant and the Co-Applicants under the Credit Documents in the Agent’s discretion. Any such funds to be applied by the Agent and the Banks in liquidation of the obligations of the Applicant and the Co-Applicants under the Credit Documents shall be applied (i) first, to reimburse the Agent and the Banks for any expenses due from the Applicant and/or any Co-Applicant, pursuant to the provisions of Section 10.5; (ii) second, to the payment of the accrued and unpaid Commitment Fees, Letter of Credit Commissions and all other fees, expenses and amounts due under the Credit Documents (other than the reimbursement obligations); (iii) third, to the payment of interest due on the reimbursement obligations, on a pro rata basis; (iv) fourth, to the payment of the reimbursement obligations, on a pro rata basis; and (v) fifth, to the payment of any other amounts owing to the Agent and the Banks under any Credit Document. 9.   THE AGENT         9.1. Appointment                Each Bank and the Issuing Bank hereby irrevocably designates and appoints PNC as Agent hereunder and under the other Credit Documents and each such Bank and the Issuing Bank hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of the Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of the Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in any Credit Document, the Agent shall not have any duties or responsibilities other than those expressly set forth therein, or any fiduciary relationship with any Bank or the Issuing Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into the Credit Documents or otherwise exist against the Agent.         9.2. Delegation of Duties                The Agent may execute any of its duties under the Credit Documents by or through agents or attorneys-in-fact and shall be entitled to rely upon the advice of counsel concerning all matters pertaining to such duties. 62 --------------------------------------------------------------------------------         9.3. Exculpatory Provisions                Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with the Credit Documents (except for its or their own gross negligence or willful misconduct, including gross negligence or willful misconduct in selecting a Person to whom duties are delegated pursuant to Section 9.2), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof contained in the Credit Documents, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, the Credit Documents or for the value, validity, effectiveness, genuineness, perfection, enforceability or sufficiency of any of the Credit Documents or for any failure of any Credit Party or any other Person to perform its obligations thereunder. The Agent shall not be under any obligation to any Bank or the Issuing Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, the Credit Documents, or to inspect the properties, books or records of any Credit Party. The Agent shall not be under any liability or responsibility whatsoever, as Agent, to any Credit Party or any other Person as a consequence of any failure or delay in performance, or any breach, by any Bank or the Issuing Bank of any of its obligations under any of the Credit Documents.         9.4. Reliance by Agent                The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, opinion, letter, cablegram, telegram, facsimile, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitations counsel to any Credit Party), independent accountants and other experts selected by the Agent. The Agent may treat each Bank and the Issuing Bank, or the Person designated in the last notice filed with it under this Section, as the holder of all of the interests of such Bank or Issuing Bank hereunder until written notice of transfer, signed by such Bank or Issuing Bank (or the Person designated in the last notice filed with the Agent) and by the Person designated in such written notice of transfer, in form and substance satisfactory to the Agent, shall have been filed with the Agent. The Agent shall not be under any duty to examine or pass upon the validity, effective, enforceability, perfection or genuineness of the Credit Documents or any instrument, document or communication furnished pursuant thereto or in connection therewith, and the Agent shall be entitled to assume that the same are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be. The Agent shall be fully justified in failing or refusing to take any action under the Credit Documents unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate. The Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request or direction of the Required Banks, and such request or direction and any action taken or failure to act pursuant thereto shall be binding upon all the 63 -------------------------------------------------------------------------------- Banks, including all future Banks and the Issuing Bank.         9.5. Notice of Default                The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Agent has received written notice thereof from the Issuing Bank, a Bank or the Applicant or any Co-Applicant. In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Issuing Bank, the Banks and the Applicant. The Agent shall take such action with respect to such Default or Event of Default as shall be directed by the Required Banks; provided, however, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem to be in the best interests of the Banks.         9.6. Non-Reliance on Agent and Other Banks                Each Bank and the Issuing Bank expressly acknowledges that neither the Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent hereinafter, including any review of the affairs of any Credit Party, shall be deemed to constitute any representation or warranty by the Agent to any Bank or the Issuing Bank. Each Bank and the Issuing Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank or the Issuing Bank, and based on such documents and information as it has deemed appropriate, made its own evaluation of and investigation into the business, operations, Property, financial and other condition and creditworthiness of the Credit Parties and made its own decision to enter into this Agreement. Each Bank and the Issuing Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, evaluations and decisions in taking or not taking action under any Credit Document, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Credit Parties. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Bank or the Issuing Bank with any credit or other information concerning the business, operations, Property, financial and other condition or creditworthiness of the Credit Parties which may come into the possession of the Agent or any of its officers, directors, employees, agent, attorneys-in-fact or affiliates.         9.7. Indemnification                Each Bank agrees to indemnify and reimburse in Dollars the Agent in its capacity as such (to the extent not promptly reimbursed by the Applicant or any Co-Applicant and without limiting the obligation of any Credit Party to do so), in the Dollar Equivalent amount of its pro rata share (based on its Commitment Percentage hereunder), from and against any and all 64 -------------------------------------------------------------------------------- liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever including, without limitation, any amounts paid to the Banks (through the Agent) by the Applicant or any Co-Applicant pursuant to the terms of the Credit Documents, that are subsequently rescinded or avoided, or must otherwise be restored or returned) which may at any time be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the Credit Documents or any other documents contemplated by or referred to therein or the transactions contemplated thereby or any action taken or omitted to be taken by the Agent under or in connection with any of the foregoing; provided, however, that no Bank shall be liable for the payment of any portion, of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting primarily from the finally adjudicated gross negligence or willful misconduct of the Agent (or any final settlement in which the Agent admits being guilty of gross negligence or willful misconduct). Without limitation of the foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its pro rata share of any unpaid fees owing to the Agent, and any costs and expenses (including, without limitation, reasonable fees and expenses of counsel) payable by the Applicant under Section 10.5, to the extent that the Agent has not been paid such fees or has not been reimbursed for such costs and expenses, by the Applicant or other Credit Party. The failure of any Bank to reimburse the Agent promptly upon demand for its pro rata share of any amount required to be paid by the Banks to the Agent as provided in this Section shall not relieve any other Bank of its obligation hereunder to reimburse the Agent for its pro rata share of such amount, but no Bank shall be responsible for the failure of another Bank to reimburse the Agent for such other Bank’s pro rata share of such amount. The agreements in this Section shall survive the payment of all amounts payable under the Credit Documents.         9.8. Agent in Its Individual Capacity                The Agent and its respective affiliates may make loans to, accept deposits from, issue letters of credit for the account of, and generally engage in any kind of business with, any Credit Party as though the Agent were not Agent hereunder. With respect to its Commitment and participation as a Bank with respect to Letters of Credit, the Agent, in its individual capacity and not as Agent, shall have the same rights and powers under the Credit Documents as any Bank and may exercise the same as though it were not the Agent, and the terms “Bank”and “Banks”shall in each case include the Agent in its individual capacity and not as Agent.         9.9. Successor Agent.                If at any time the Agent deems it advisable, in its sole discretion, it may submit to each of the Banks and the Issuing Bank a written notice of its resignation as Agent under the Credit Documents, such resignation to be effective upon the earlier of (i) the written acceptance of the duties of the Agent under the Credit Documents by a successor Agent and (ii) on the thirtieth (30th) day after the date of such notice. Upon any such resignation, the Required Banks shall have the right to appoint from among the Banks a successor Agent. If no successor Agent shall have been so appointed by the Required Banks and accepted such appointment in writing within thirty (30) days after retiring Agent’s giving of notice of resignation, then the retiring 65 -------------------------------------------------------------------------------- Agent may, on behalf of the Banks, appoint a successor Agent, which successor Agent shall be a commercial bank organized under the laws of the United States of America or any State thereof and having a combined capital, surplus, and undivided profits of at least $100,000.000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent’s rights, powers, privileges and duties as Agent under the Credit Documents shall be terminated. The Applicant, Co-Applicant, Issuing Bank and the Banks shall execute such documents as shall be necessary to effect such appointment. After any retiring Agent’s resignation as Agent, the provisions of the Credit Documents shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Credit Documents. If at any time there shall not be a duly appointed and acting Agent, the Applicant agrees to make each payment due under the Credit Documents directly to the Issuing Bank and the Banks entitled thereto during such time. 10.  OTHER PROVISIONS         10.1. Amendments and Waivers                With the written consent of the Required Banks, the Agent and the appropriate Credit Parties may, from time to time, enter into written amendments, supplements or modifications of the Credit Documents and, with the consent of the Required Banks, the Agent on behalf of the Banks may execute and deliver to any such parties a written instrument waiving or a consent to a departure from, on such terms and conditions as the Agent may specify in such instrument, any of the requirements of the Credit Documents or any Default or Event of Default and its consequences; provided, however, that:                (a)    no such amendment, supplement, modification, waiver or consent shall, without the consent of all of the Banks, (i) increase the Commitment Percentage of any Bank or the Commitment, (ii) extend the Termination Date (except as provided in Section 2.6) or, subject to Section 2.5, the Stated Expiration Date of any Letter of Credit, (iii) reduce interest, any fees or other amounts payable hereunder, (iv) postpone any date fixed for payment of reimbursement obligations, interest or any fees or other amounts payable hereunder, (v) change the provisions of Sections 2.11, 2.12, 2.14, 10.1 or 10.6(a), (vi) increase the sublimit applicable to Letters of Credit issued at the request of Subsidiaries of the Applicant which are not Material Insurance Subsidiaries, (vii) change the definition of Required Banks or (viii) release any Collateral other than as expressly permitted hereunder;                (b)    without the written consent of the Issuing Bank, no such amendment, supplement, modification or waiver shall change the Commitment, change the amount or the time of payment of the Letter of Credit Commissions or change any other term or provision which relates to the Commitment or the Letters of Credit; and                (c)    without the written consent of the Agent, no such amendment, supplement, modification or waiver shall amend, modify or waive any provision of Section 9 or 66 -------------------------------------------------------------------------------- otherwise change any of the rights or obligations of the Agent hereunder or under the Credit Documents.                Any such amendment, supplement, modification or waiver shall apply equally to each of the Banks and shall be binding upon the parties to the applicable Credit Document, the Banks, the Agent, the Issuing Bank and all future Banks. In the case of any waiver, the parties to the applicable Credit Document, the Banks and the Agent shall be restored to their former position and rights hereunder and under the other Credit Documents to the extent provided for in such waiver, and any Default or Event of Default waived shall not extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. The Credit Documents may not be amended orally or by any course of conduct.         10.2. Notices                All notices, requests and demands to or upon the respective parties to the Credit Documents to be effective shall be in writing and, unless otherwise expressly provided therein, shall be deemed to have been duly given or made when delivered by hand, or when deposited in the mail, first-class postage or, in the case of notice by facsimile, when sent, addressed as follows in the case of the Applicant, the Issuing Bank, the Agent and to the address of a Bank designated as such on Schedule 10.2 hereto and to the address of a Credit Party set forth in a Credit Document, or to such other addresses as to which the Agent may be hereafter notified by the respective parties thereto:   The Applicant:     PMA Capital Corporation Mellon Bank Center, 28th Floor 1735 Market Street Philadelphia, Pennsylvania 19103-7590 Attention: Francis W. McDonnell, Senior Vice President, Chief Financial Officer and Treasurer Telephone: (215) 665-5070 Facsimile: (215) 665-5043   with a copy to in the case of notices to the Applicant:     PMA Capital Corporation Mellon Bank Center, 28th Floor 1735 Market Street Philadelphia, Pennsylvania 19103-7590 Attention: Charles A. Brawley, III, Esq. Telephone: (215) 665-5039 Facsimile: (215) 665-5043   67 --------------------------------------------------------------------------------   The Agent:     PNC Bank, National Association 249 Fifth Street Pittsburgh, Pennsylvania 15222 Attention: Patricia Sullivan Telephone: (412) 768-0403 Facsimile: (412) 762-8672   The Issuing Bank:     PNC Bank, National Association 237 Fifth Avenue Third Floor, Annex Building Pittsburgh, Pennsylvania 15222 Attention: Letter of Credit Department Telephone: (412) 762-2078 Facsimile: (412) 705-0966,   with a copy to in the case of notices to the Agent or the Issuing Bank:     PNC Bank, National Association 1600 Market Street Philadelphia, Pennsylvania 19103 Attention: Kirk Seagers Telephone: (215) 585-5393 Facsimile: (215) 585-7615,   except that any notice, request or demand by the Applicant to or upon the Agent, the Issuing Bank or the Banks pursuant to Sections 2.1, 2.5 or 2.6 shall not be effective until received, and any notice of payment or demand for payment under Section 2.1(c) shall not be effective until received at the facsimile number designated above for the Applicant. Any party to a Credit Document may rely on signatures of the parties thereto which are transmitted by facsimile or other electronic means as fully as if originally signed.         10.3. No Waiver; Cumulative Remedies                No failure to exercise and no delay in exercising, on the part of the Agent, the Issuing Bank or any Bank, any right, remedy, power or privilege under any Credit Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any Credit Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges under the Credit Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 68 --------------------------------------------------------------------------------         10.4. Survival of Representations and Warranties                All representations and warranties made under the Credit Documents and in any document, certificate or statement delivered pursuant thereto or in connection therewith shall survive the execution and delivery of the Credit Documents.         10.5. Payment of Expenses and Taxes                The Applicant agrees, promptly upon presentation of a statement or invoice therefor, and whether any Letter of Credit is issued (i) to pay or reimburse the Agent for all its out-of-pocket costs and expenses reasonably incurred in connection with (A) the development, preparation and execution of, the Credit Documents and any amendment, supplement or modification thereto (whether or not executed), any documents prepared in connection therewith and the consummation of the transactions contemplated thereby, including syndication, and (B) any costs incurred in connection with any confirmation of any Letters of Credit and, including, in each case without limitation, the reasonable attorneys’fees and disbursements, (ii) to pay or reimburse the Agent or the Issuing Bank for the cost of any confirmation of any Letter of Credit, (iii) to pay or reimburse the Agent, the Issuing Bank and the Banks for all of their respective costs and expenses, including, without limitation reasonable fees and disbursements of counsel, incurred in connection with (A) any Default or Event of Default and any enforcement or collection proceedings resulting therefrom or in connection with the negotiation of any restructuring or “work-out”(whether consummated or not) of the obligations of the Credit Parties under any of the Credit Documents, and (B) the enforcement of this Section, (iv) to pay, indemnify, and hold each Bank, the Issuing Bank and the Agent harmless from and against any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the directions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, the Credit Documents and any such other documents, and (v) to pay, indemnify and hold each Bank, the Issuing Bank and the Agent and each of their respective officers, directors and employees harmless from and against any and all other liabilities, obligations, claims, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or name whatsoever (including, without limitation reasonable counsel fees and disbursements) with respect to the enforcement and performance of the Credit Documents, the issuance and use of the Letters of Credit (all the foregoing, collectively, the “indemnified liabilities”) and, if and to the extent that the foregoing indemnity may be unenforceable for any reason, the Applicant agrees to make the maximum payment permitted or not prohibited under applicable law; provided, however, that the Applicant shall have no obligation hereunder to pay indemnified liabilities to the Agent, the Issuing Bank or any Bank arising from the finally adjudicated gross negligence or willful misconduct of the Agent, the Issuing Bank or such Bank or claims between one indemnified party and another indemnified party (or any final settlement in which the Agent, the Issuing Bank, or such Bank admits being guilty of gross negligence or willful misconduct). The Applicant further agrees that all payments made pursuant to this Section 10.5 shall be made in Dollars. The agreements in this 69 -------------------------------------------------------------------------------- Section shall survive the termination of the Commitment and the payment of all amounts payable under the Credit Documents.         10.6. Assignments and Participants                (a)    The Credit Documents shall be binding upon and inure to the benefit of the Applicant, the Co-Applicants, the Banks, the Issuing Bank, the Agent, all future Banks and their respective successors and assigns, except that no Credit Party may assign, delegate or transfer any of its rights or obligations under the Credit Documents without the prior written consent of the Agent and each Bank.                (b)    Each Bank shall have the right at any time, upon written notice to the Agent of its intent to do so, to sell, assign, transfer or negotiate all or any part of such Bank’s rights under the Credit Documents to one or more of its affiliates which would otherwise be Eligible Assignees, to one or more of the other Banks (or to affiliates of such other Banks which would be an Eligible Assignee) or, with the prior written consent of the Applicant, the Issuing Bank and the Agent (which consent shall not be unreasonably withheld and which consent of Applicant shall not be required upon the occurrence and during the continuance of an Event of Default), to sell, assign, transfer or negotiate all or any part of such Bank’s rights and obligations under the Credit Documents to any other bank, insurance company, pension fund, mutual fund or other financial institution which meets the criteria of Eligible Assignee, provided that (i) each such sale, assignment, transfer or negotiation (other than sales, assignments, transfers or negotiations to affiliates of such Bank) shall be in a minimum amount of $5,000,000, and (ii) there shall be paid to the Agent by the assigning Bank a fee (the “Assignment Fee”) of $3,000. For each assignment, the parties to such assignment shall execute and deliver to the Agent for its acceptance and recording an Assignment and Acceptance Agreement. Upon such execution, delivery, acceptance and recording by the Agent, from and after the effective date specified in such Assignment and Acceptance Agreement, the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance Agreement, the assignor Bank thereunder shall be released from its obligations under the Credit Documents. Upon any such sale, assignment or other transfer, the Commitment Percentages set forth in Exhibit A shall be adjusted accordingly by the Agent and a new Exhibit A shall be distributed by the Agent to the Applicant and each Bank.                (c)    Each Bank may grant participations in all or any part of its Commitment Percentage to one or more banks, insurance companies (other than property and casualty insurance companies), financial institutions, pension funds or mutual funds, provided that (i) such Bank’s obligations under the Credit Documents shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties to the Credit Documents for the performance of such obligations, (iii) the Applicant, the Issuing Bank, the Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under the Credit Documents, (v) no sub-participations shall be permitted and (vi) the voting rights of any holder of any participation shall be limited to decisions that only do any of the following: (A) subject the participant to any additional obligation, (B) reduce interest, any 70 -------------------------------------------------------------------------------- fees or other amounts payable hereunder, or (C) postpone any date fixed for the payment of reimbursement obligations, interest or any fees or other amounts payable hereunder. The Applicant acknowledges and agrees that any such participant shall for purposes of Sections 2.11 and 2.12 be deemed to be a “Bank”; provided, however, the Applicant shall not, at any time, be obligated to pay any participant in any interest of any Bank hereunder any sum in excess of the sum which the Applicant would have been obligated to pay to such Bank in respect of such interest had such Bank not sold such participation.                (d)    No Bank shall, as between and among the Applicant, any Co-Applicant, the Issuing Bank, the Agent and such Bank, be relieved of any of its obligations under the Credit Documents as a result of any sale, assignment, transfer or negotiation of, or granting of participations in, all or any part of its Commitment Percentage, except that a Bank shall be relieved of its obligations to the extent of any such sale, assignment, transfer or negotiation of any Commitment Percentage.                (e)    Notwithstanding anything to the contrary contained in this Section, any Bank may at any time or from time to time assign all or any portion of its rights under the Credit Documents to a Federal Reserve Bank, provided that any such assignment shall not release such assignor from its obligations thereunder.                (f)    Any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the Assignee or Participant or proposed Assignee or Participant any information relating to the Applicant and its Subsidiaries furnished to it by or on behalf of any other party hereto, provided that such Assignee or Participant or proposed Assignee or Participant agrees in writing to keep such information confidential to the same extent required of the Banks under Section 10.19.         10.7. Counterparts                Each Credit Document may be executed by one or more of the parties thereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same document. It shall not be necessary in making proof of any Credit Document to produce or account for more than one counterpart signed by the party to be charged. A counterpart of any Credit Document, and of any amendment, modification, consent or waiver to or of any Credit Document transmitted by facsimile shall be deemed to be an originally executed counterpart. A set of the copies of the Credit Documents signed by all the parties thereto shall be deposited with each of the Applicant and the Agent. Any party to a Credit Document may rely upon the signatures of any other party thereto which are transmitted by facsimile or other electronic means to the same extent as if originally signed.         10.8. Adjustments; Set-off                (a)    If any Bank (a “Benefitted Bank”) shall at any time receive any payment or collateral in respect of the Obligations in excess of its pro rata share (based on its 71 -------------------------------------------------------------------------------- Commitment Percentage) (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8.1(h) or (i), or otherwise), such Benefitted Bank shall purchase from each of the other Banks such portion of each such other Bank’s participation in the Obligations, and shall provide each of such other Banks with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks, provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Applicant and Co-Applicants agree that each Bank so purchasing a portion of another Bank’s percentage of Obligations may exercise all rights of payment (including, without limitation, rights of set-off, to the extent not prohibited by law) with respect to such portion as fully as if such Bank were the direct holder of such portion.                (b)    In addition to any rights and remedies of the Banks provided by law, upon the occurrence of and during the continuance of an Event of Default under Section 8.1(a) or (b), each Bank shall have the right, without prior notice to the Applicant, any such notice being expressly waived by each Credit Party to the extent not prohibited by applicable law, to set-off and apply against any indebtedness, whether contingent, matured or unmatured of such Credit Party to such Bank, any amount owing from such Bank to such Credit Party, at, or at any time after, the happening of any of the above mentioned events. To the extent not prohibited by applicable law, the aforesaid right of set-off may be exercised by such Bank against such Credit Party or against any trustee in bankruptcy, custodian, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor of such Credit Party, or against anyone else claiming through or against such Credit Party or such trustee in bankruptcy, custodian, debtor in possession, assignee for the benefit of creditors, receivers or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by such Bank prior to the making, filing or issuance, or service upon such Bank of, or of notice of, any such petition, assignment for the benefit of creditors, appointment or application for the appointment of a receiver, or issuance of execution, subpoena, order or warrant. Each Bank agrees promptly to notify the applicable Credit Party, the Issuing Bank and the Agent after any such set-off and application made by such Bank, provided that the failure to give such notice shall not affect the validity of such set-off and application.         10.9. Construction                Each Credit Party represents that it has been represented by counsel in connection with the Credit Documents and the transactions contemplated thereby and that the principle that agreements are to be construed against the draftsman shall be inapplicable. 72 --------------------------------------------------------------------------------         10.10. Indemnity                The Applicant agrees to indemnify and hold harmless the Agent, the Issuing Bank and each Bank and their affiliates, directors, officers, employees, attorneys and agents (each an “Indemnified Person”) from and against any loss, cost, liability, claim, damage or expense (including the reasonable fees and disbursements of counsel of such Indemnified Person, including all local counsel hired by any such counsel) incurred by such Indemnified Person in investigating, preparing for, defending against, or providing evidence, producing documents or taking any-other action in respect of, any commenced or threatened litigation, administrative proceeding or investigation under any federal securities law or any other statute of any jurisdiction, or any regulation, or at common law or otherwise, which is alleged to arise out of or is based upon (i) any untrue statement or alleged untrue statement of any material fact by any Credit Party in any document or schedule executed or filed with any governmental body, agency or authority, by or on behalf of any Credit Party; (ii) any omission or alleged omission to state any material fact required to be stated in such document or schedule, or necessary to make the statements made therein, in light of the circumstances under which made, not misleading; (iii) any acts, practices or omissions or alleged acts, practices or omissions of any Credit Party or its agents relating to the issuance and maintenance of any or all Letters of Credit or the use of any or all Letters of Credit by the Applicant which are alleged to be in violation of Section 2.13, or in violation of any federal securities law or of any other statute, regulation or other law of any jurisdiction applicable thereto or (iv) the violation of, noncompliance with or liability under any applicable environmental laws applicable to the Credit Parties. The indemnity set forth herein shall be in addition to any other obligations or liabilities of the Applicant and/or Co-Applicant to each Indemnified Person under the Credit Documents or at common law or otherwise, and shall survive any termination of the Credit Documents, the expiration of the Commitment and the payment of all obligations of the Applicant and Co-Applicants under the Credit Documents, provided that the Applicant shall have no obligation under this Section to an Indemnified Person with respect to any of the foregoing to the extent found in a final judgment of a court having jurisdiction to have resulted primarily out of the gross negligence or wilful misconduct of such Indemnified Person or arising solely from claims between one such Indemnified Person and another such Indemnified Person.         10.11. Governing Law                The Credit Documents and the rights and obligations of the parties thereunder shall be governed by, and construed and interpreted in accordance with, the internal laws of the Commonwealth of Pennsylvania, without regard to principles of conflict of laws.         10.12. Headings Descriptive                Section headings have been inserted in the Credit Documents for convenience only and shall not be construed to be a part thereof. 73 --------------------------------------------------------------------------------         10.13. Severability                Every provision of the Credit Documents is intended to be severable, and if any term or provision thereof shall be invalid, illegal or unenforceable for any reason, the validity, legality and enforceability of the remaining provisions thereof shall not be affected or impaired thereby, and any invalidity, illegality or unenforceability in any jurisdiction shall not affect the validity, legality or enforceability of any such term or provision in any other jurisdiction.         10.14. Integration                All exhibits to a Credit Document shall be deemed to be a part thereof. The Credit Documents embody the entire agreement and understanding among the Credit Parties, the Agent, the Issuing Bank and the Banks with respect to the subject matter thereof and supersede all prior agreements and understandings among the Credit Parties, the Agent, the Issuing Bank and the Banks with respect to the subject matter thereof.         10.15. Consent to Jurisdiction                Each Credit Party hereby irrevocably submits to the jurisdiction of any Pennsylvania State or Federal court sitting in the City of Philadelphia over any suit, action or proceeding arising out of or relating to the Credit Documents. Each Credit Party hereby irrevocably waives, to the fullest extent permitted or not prohibited by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum. Each Credit Party hereby agrees that a final judgment in any such suit, action or proceeding brought in such a court, after all appropriate appeals, shall be conclusive and binding upon it.         10.16. Service of Process                Each Credit Party hereby irrevocably consents to the service of process in any suit, action or proceeding by sending the same by first class mail, return receipt requested or by overnight courier service, to the address of such Credit Party set forth in or referred to in Section 10.2 or in the applicable Credit Document executed by such Credit Party. Each Credit Party hereby agrees that any such service (i) shall be deemed in every respect effective service of process upon it in any such suit, action, or proceeding, and (ii) shall to the fullest extent enforceable by law, be taken and held to be valid personal service upon and personal delivery to it.         10.17. No Limitation on Service or Suit                Nothing in the Credit Documents or any modification, waiver, consent or amendment thereto shall affect the right of the Agent or any Bank to serve process in any manner permitted by law or limit the right of the Agent, the Issuing Bank or any Bank to bring 74 -------------------------------------------------------------------------------- proceedings against any Credit Party in the courts of any jurisdiction or jurisdictions in which such Credit Party may be served.         10.18. WAIVER OF TRIAL BY JURY                THE AGENT, THE ISSUING BANK, THE BANKS AND EACH CREDIT PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, EACH CREDIT PARTY HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE AGENT, THE ISSUING BANK, OR THE BANKS, OR COUNSEL TO THE AGENT, THE ISSUING BANK OR THE BANKS, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT, THE ISSUING BANK OR THE BANKS WOULD NOT, INTHE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. EACH CREDIT PARTY ACKNOWLEDGES THAT THE AGENT, THE ISSUING BANK AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTERALIA, THE PROVISIONS OF THIS SECTION.         10.19. Confidentiality                Each Bank agrees to keep confidential, pursuant to its customary procedures for handling confidential information of a similar nature and in accordance with safe and sound banking practices, all nonpublic information provided to it by or on behalf of the Applicant or any of its Subsidiaries in connection with this Agreement or any other Credit Document; provided, however, that any Bank may disclose such information (i) to its directors, employees and agents and to its auditors, counsel and other professional advisors, (ii) at the demand or request of any bank regulatory authority, court or other Governmental Authority having or asserting jurisdiction over such Bank, as may be required pursuant to subpoena or other legal process, or otherwise in order to comply with any Requirement of Law, (iii) in connection with any proceeding to enforce its other Credit Document or any other litigation or proceeding is a party, (iv) to the Agent or any other Bank, (v) to the extent the same has become publicly available other than as a result of a breach of this Agreement and (vi) pursuant to and in accordance with the provisions of Section 10.6(f). 75 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.       PMA CAPITAL CORPORATION   By: /s/ Francis W. McDonnell -------------------------------------------------------------------------------- Name: Francis W. McDonnell -------------------------------------------------------------------------------- Title: Senior Vice President, Chief Financial Officer and Treasurer --------------------------------------------------------------------------------   PNC BANK, NATIONAL ASSOCIATION, Individually and as Agent and Issuing Bank   By: /s/ Kirk Seayers -------------------------------------------------------------------------------- Name: Kirk Seayers -------------------------------------------------------------------------------- Title: Vice President --------------------------------------------------------------------------------   FLEET NATIONAL BANK   By: /s/ Lawrence Davis -------------------------------------------------------------------------------- Name: Lawrence Davis -------------------------------------------------------------------------------- Title: Associate, Portfolio Manager --------------------------------------------------------------------------------   CREDIT LYONNAIS NEW YORK BRANCH   By: /s/ Peter Rasmussen -------------------------------------------------------------------------------- Name: Peter Rasmussen -------------------------------------------------------------------------------- Title: First Vice President --------------------------------------------------------------------------------   ALLFIRST BANK   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   SOVEREIGN BANK   By: /s/ Michael J. Hassett -------------------------------------------------------------------------------- Name: Michael J. Hassett -------------------------------------------------------------------------------- Title: Vice President --------------------------------------------------------------------------------   76 -------------------------------------------------------------------------------- Co-Applicants:       PMA CAPITAL INSURANCE COMPANY   By: /s/ Albert D. Ciavardelli -------------------------------------------------------------------------------- Name: Albert D. Ciavardelli -------------------------------------------------------------------------------- Title: Treasurer --------------------------------------------------------------------------------   PENNSYLVANIA MANUFACTURERS' ASSOCIATION INSURANCE COMPANY   By: /s/ Francis W. McDonnell -------------------------------------------------------------------------------- Name: Francis W. McDonnell -------------------------------------------------------------------------------- Title: Vice President --------------------------------------------------------------------------------   HIGH MOUNTAIN REINSURANCE LTD.   By: /s/ Francis W. McDonnell -------------------------------------------------------------------------------- Name: Francis W. McDonnell -------------------------------------------------------------------------------- Title: Vice President & CFO --------------------------------------------------------------------------------   WALPROP, INC.   By: /s/ Francis W. McDonnell -------------------------------------------------------------------------------- Name: Francis W. McDonnell -------------------------------------------------------------------------------- Title: Vice President, Treasurer and Assistant Secretary --------------------------------------------------------------------------------   PMA INTERNATIONAL INSURANCE CAYMAN LTD.   By: /s/ Lily Chen -------------------------------------------------------------------------------- Name: Lily Chen -------------------------------------------------------------------------------- Title: Assistant Secretary --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT A COMMITMENT Bank Commitment    Percentage     Commitment    Amount         PNC Bank, National Association 27.27273% $   15,000,000   Fleet National Bank 22.72727% 12,500,000   Credit Lyonnais New York Branch 27.27273% 15,000,000   Sovereign Bank 22.72727% 12,500,000 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   Total 100.0000000% $   55,000,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT         This Assignment and Acceptance Agreement is made and entered into as of _________, 200_, by and between ____________________ (the “Assignor”) and _______________ (the “Assignee”). R E C I T A L S         A. The Assignor, certain other banks (together with any prior assignees, (the “Banks”) and PNC Bank, National Association, as agent (the “Agent”) and as issuing bank (the “Issuing Bank”), are parties to that certain Second Amended and Restated Letter of Credit Agreement dated as of ________________, 2000 (as from time to time amended, the “Agreement”) with PMA Capital Corporation, a Pennsylvania corporation (the “Applicant”) and certain subsidiaries of the Applicant party thereto. Pursuant to the Agreement, the Banks agreed to participate in Letters of Credit issued by the Issuing Bank under the Agreement in accordance with their Commitment Percentage. The Assignor’s Commitment (without giving effect to the assignment effected hereby or to other assignments thereof which have not yet become effective) is specified in Item 1 of Schedule 1 hereto. The Assignor’s percentage of the Letter of Credit Exposure (without giving effect to the assignment effected hereby or to other assignments thereof which have not yet become effective) is specified in Item 2 of Schedule 1 hereto. All capitalized terms not otherwise defined herein are used herein as defined in the Agreement.         B. The Assignor wishes to sell and assign to the Assignee, and the Assignee wishes to purchase and assume from the Assignor, the portion of the Assignor’s Commitment specified in. Item 3 of Schedule 1 hereto together with its related rights and obligations under the Credit Documents and in respect of the Collateral (the “Assigned Commitment”).         The parties agree as follows:         1.   Assignment. Subject to the terms and conditions set forth herein and in the Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, without recourse, on the date set forth above (the “Assignment Date”) all obligations of the Assignor under the Agreement with respect to the Assigned Commitment together with its related rights and obligations under the Credit Documents and in respect of the Collateral. As consideration for the assignment and sale contemplated hereby, the Assignee shall pay to the Assignor on the date hereof the amount heretofore agreed between them.         2.   Representation and Warranties. Each of the Assignor and the Assignee represents and warrants to the other that (a) it has full power and legal right to execute and deliver this Assignment and Acceptance Agreement and to perform the provisions of this Assignment and -------------------------------------------------------------------------------- Acceptance Agreement; (b) the execution, delivery and performance of this Assignment and Acceptance Agreement have been authorized by all action, corporate or otherwise, and do not violate any provisions of its charter or by-laws or any contractual obligations or requirement of law binding on it; and (c) this Assignment and Acceptance Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. The Assignor further represents that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor. The Assignee further represents that it is an “Eligible Assignee” as said term is defined in the Agreement.         3.   Condition Precedent. The obligations of the Assignor and the Assignee hereunder shall be subject to the fulfillment of the condition that the Assignor shall have complied with the other applicable provisions of Section 10.6 of the Agreement.         4.   Notice of Assignment. The Assignor agrees to give notice of the assignment and assumption of the Assigned Commitment to the Agent, the Issuing Bank and the Applicant and hereby instructs the Agent, the Issuing Bank and the Applicant to make all payments with respect to the Assigned Commitment directly to the Assignee at the applicable office specified on Schedule 2 hereto; provided, however, that the Applicant, the Agent and the Issuing Bank all shall be entitled to continue to deal solely and directly with the Assignor in connection with the interests so assigned until the Agent, the Issuing Bank and the Applicant, to the extent required by Section 10.6 of the Agreement, shall have received notice of the assignment, the Applicant, the Agent and the Issuing Bank shall have consented in writing thereto to the extent required by Section 10.6 of the Agreement, and the Agent shall have recorded and accepted this Assignment and Acceptance Agreement and received the Assignment Fee required to be paid pursuant to Section 10.6 of the Agreement. From and after the date (the “Effective Date”) on which the Agent shall notify the Applicant and the Assignor that the requirements set forth in the foregoing sentence shall have occurred and all consents (if any) required shall have been given, (i) the Assignee shall be deemed to be a party to the Agreement and, to the extent that rights and obligations thereunder shall have been assigned to Assignee as provided in such notice of assignment to the Agent, shall have the rights and obligations of a Bank under the Agreement, and (ii) the Assignee shall be deemed to have appointed the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto. After the Effective Date, the Agent shall make all payments in respect of the interest assigned hereby (including payments of interest, fees and other amounts) to the Assignee. The Assignor and Assignee shall make all appropriate adjustment in payments under the Assigned Commitment for periods prior to the Effective Date hereof directly between themselves. If the Assignee is not a United States Person as defined in Section 7701(a)(30) of the Code, the Assignee shall deliver herewith the forms required by Section 2.11 of the Agreement to evidence the Assignee’s complete exemption from United States withholding taxes with respect to payments under the Credit Documents.         5.   Independent Investigation. The Assignee acknowledges that it is purchasing the Assigned Commitment from the Assignor totally without recourse and, except as provided in Section 2 hereof, without representation or warranty. The Assignee further acknowledges that it has made -2- -------------------------------------------------------------------------------- its own independent investigation and credit evaluation of the Applicant and any Co-Applicant in connection with its purchase of the Assigned Commitment. Except for the representations or warranties set forth in Section 2, the Assignee acknowledges that it is not relying on any representation or warranty of the Assignor, expressed or implied, including without limitation, any representation or warranty relating to the legality, validity, genuineness, enforceability, collectibility, interest rate, repayment schedule or status of the Assigned Commitment, the legality, validity, genuineness or enforceability of the Agreement, or any other Credit Document referred to in or delivered pursuant to the Agreement, or financial condition or creditworthiness of the Applicant, any Co-Applicant or any other Person. The Assignor has not and will not be acting as either the representative, agent or trustee of the Assignee with respect to matters arising out of or relating to the Agreement or this Assignment and Acceptance Agreement. From and after the Effective Date, except as set forth in Section 4 above, the Assignor shall have no rights or obligations with respect to the Assigned Commitment.         6.   Consent of the Applicant. Pursuant to the provisions of Section 10.6 of the Agreement, and to the extent required thereby, the Applicant, by signing below, consents to this Assignment and Acceptance Agreement and to the assignment contemplated herein.         7.   Method of Payment. Any payments to be made by either party hereunder shall be in funds available at the place of payment on the same day and shall be made by wire transfer to the account designated by the party to receive payment.         8.   Integration. This Assignment and Acceptance Agreement shall supersede any prior agreement or understanding between the parties (other than the Credit Documents) as to the subject matter hereof.         9.   Counterparts. This Assignment and Acceptance Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon both parties, their successors and assigns.         10.   Headings. Section headings have been inserted herein for convenience only and shall not be construed to be a part hereof.         11.   Amendments; Waivers. This Assignment and Acceptance Agreement may not be amended, changed, waived or modified except by a writing executed by the parties hereto, and may not be amended, changed, waived or modified in any manner inconsistent with Section 10.6 of the Agreement without the prior written consent of the Agent.         12.   Governing Law. This Assignment and Acceptance Agreement shall be governed by, and construed in accordance with the laws of, the Commonwealth of Pennsylvania. -3- --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.       ________________________, as Assignor   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   ________________________, as Assignee   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------         Consented to:   PMA CAPITAL CORPORATION   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   Consented to and Accepted:   PNC BANK, NATIONAL ASSOCIATION, as Agent   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   PNC BANK, NATIONAL ASSOCIATION, as Issuing Bank   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   -4- -------------------------------------------------------------------------------- SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE AGREEMENT between ______________________, as Assignor and ______________________, as Assignee relating to Second Amended and Restated Letter of Credit Agreement among PMA Capital Corporation, the Banks party thereto, and PNC Bank, National Association, as Agent and as Issuing Bank, dated as of ____________, 2000       Item 1.(a) Assignor's Commitment           Percentage: __________ %       (b)     Assignor's Commitment: $___________       Item 2. Assignor’s Letter of           Credit Exposure:           (the Assignor's Commitment Percentage           times the Letter of Credit Exposure)   $___________       Item 3. Assigned Commitment: $___________ -------------------------------------------------------------------------------- SCHEDULE 2 TO ASSIGNMENT AND ACCEPTANCE AGREEMENT between _______________________, as Assignor and _______________________, as Assignee relating to Second Amended and Restated Letter of Credit Agreement among PMA Capital Corporation, the Banks party thereto, and PNC Bank, National Association as Agent and as Issuing, Bank, dated as of _______________, 2000 Address for Notices ______________________________ ______________________________ Attention: ______________________ Telephone: _____________________ Fax: __________________________ -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT C FORM OF LETTER OF CREDIT REQUEST _________________, 200_ PNC Bank, National Association, as Agent 249 Fifth Street Pittsburgh, PA 15222 Attention: Arlene Ohler PNC Bank, National Association, as Issuing Bank 237 Fifth Avenue Third Floor, Annex Building Pittsburgh, PA 15222 Attention: Letter of Credit Department Gentlemen:         Reference is made to the Second Amended and Restated Letter of Credit Agreement, dated as of _______________, 2000, by and among PMA CAPITAL CORPORATION (the “Applicant”), each Subsidiary of the Applicant which is or may become a party thereto (each, a “Co-Applicant”), the Banks party thereto and PNC BANK, NATIONAL ASSOCIATION, as Agent and Issuing Bank (as from time to time amended, the “Agreement”).         Capitalized terms used herein that are defined in the Agreement shall have the meanings therein defined.         1. Pursuant to Section 2.1 and 3.2(c) of the Agreement, the undersigned Applicant [and, if applicable, ____________________ (the “Co-Applicant(s)”)] hereby requests that the Issuing Bank issue the Letter(s) of Credit in accordance with the information annexed hereto which contains the verbatim text of the proposed letter(s) of credit including the proposed terms and conditions and a precise description of the documentation required to be complied with and submitted by the beneficiary, which, if complied with by the beneficiary on or prior to the Stated Expiration Date, would require the Issuing Bank to make payment under the Letter of Credit. -1- --------------------------------------------------------------------------------         2. The Applicant hereby certifies that on the date hereof and on the Date of Issuance set forth in Annex A, and after giving effect to the Letter(s) of Credit requested hereby:                (a) The Applicant is and shall be in compliance with all of the terms, covenants and conditions of the Credit Documents.                (b) There exists and there shall exist no Default or Event of Default under the Agreement.                (c) Each of the representations and warranties contained in the Agreement which is required to be made on such Date of Issuance is and shall be true and correct in all material respects.                (d) After giving effect to the Letter(s) of Credit requested to be issued hereby, the aggregate Letters of Credit Exposure will not exceed the Commitment and the aggregate Letter of Credit Exposure with respect to Letters of Credit issued for the account of Subsidiaries of the Applicant which are not Material Insurance Subsidiaries will not exceed $15,000,000.         [3. Each Co-Applicant which signs this Letter of Credit Request acknowledges that it has received a copy of the Agreement and acknowledges and agrees that from and after the Date of Issuance of the Letter(s) of Credit requested hereby, the undersigned shall be jointly and severally liable with the Applicant for all obligations with respect to the Letter(s) of Credit requested hereby and that the undersigned shall be a party to the Agreement and the other Credit Documents as a Co-Applicant with all the rights and obligations of a Co-Applicant under the Agreement and Credit Documents with respect to the Letter(s) of Credit requested hereby, and each and every reference in the Agreement and in any other Credit Document to “Co-Applicant” shall mean and be a reference to include the undersigned. The undersigned will, at the request of the Agent, execute a copy of the Agreement and such other Credit Documents as may be required.]1         [4. Each Co-Applicant which signs this Letter of Credit Request represents and warrants that the Agreement and each Credit Document executed by the undersigned Co-Applicant constitutes a legal, valid and binding obligation of the undersigned Co-Applicant in each case enforceable in accordance with its terms.]         [5. Each Co-Applicant which signs this Letter of Credit Request specifically acknowledges that certain provisions of the Agreement, including, without limitation, Section 10.1 (Amendments and Waivers), 10.3 (No Waiver; Cumulative Remedies), 10.6 (Assignments and Participation), 10.7 (Counterparts), 10.11 (Governing Law), 10.13 (Severability), 10.14 (Integration), 10.15 (Consent to Jurisdiction), 10.16 (Service of Process), 10.17 (No Limitation on Service or Suit) and 10.18 (Waiver of Trial by Jury) thereof, are made applicable to the Co-Applicant.] _________________ 1 Delete Items 3 through 5 if inapplicable -2- --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the Applicant [and Co-Applicant, if applicable] has caused this certificate to be executed by its duly authorized-officer(s) as of the date and year first written above.       PMA CAPITAL CORPORATION   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   [CO-APPLICANT]   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   [CO-APPLICANT]   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   -3- -------------------------------------------------------------------------------- Annex A LETTER OF CREDIT INFORMATION 1.   Name of Beneficiary: _______________________________________________________. 2.   Address of Beneficiary to which Letter of Credit will be sent: _______________________________________________________ _______________________________________________________. 3.   Name of Account Party: _____________________________________________________. 4.   Address of Account Party: ___________________________________________________. 5.   Conditions under which a drawing may be made (specify the required documentation): ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________. 6.   Maximum amount to be available under such Letter of Credit: $_________________. 7.   Requested Date of Issuance: __________________, 200_. 8.   Stated Expiration Date: _____________________, 200_.1 9.   Text of Letter of Credit: _________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ 10.   Name and address of Co-Applicant, if any: __________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ 11.   Obligations in respect of which the Letter of Credit is to be issued: ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ __________________ 1 Not to be more than one year from the date of issuance. -1- -------------------------------------------------------------------------------- 12.   Letter of Credit is to be (check one box only):   |_|   Evergreen Letter of Credit.   |_|   Not an Evergreen Letter of Credit. 13.   If the Evergreen Letter of Credit box in Item 13 was checked, specify the Beneficiary Notification Date. -2- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT D FORM OF LETTER OF CREDIT PNC BANK, NATIONAL ASSOCIATION 237 Fifth Avenue Third Floor, Annex Building Pittsburgh, PA 15222 OUR REF NO.              DATE Beneficiary [Address] GENTLEMEN/LADIES: OUR REFERENCE NO. ACCOUNT OF: [Name of Account Party] [Address] AVAILABLE WITH:              OURSELVES                                                BY PAYMENT DRAFTS AT SIGHT DRAWN ON PNC BANK, NATIONAL ASSOCIATION, PITTSBURGH, PENNSYLVANIA, AS INDICATED BELOW. TO THE EXTENT OF:     ***USD     *** EXPIRY DATE: PLACE OF EXPIRY:     OUR COUNTERS ADDITIONAL DETAILS: WE HEREBY ESTABLISH THIS IRREVOCABLE LETTER OF CREDIT IN YOUR FAVOR FOR DRAWINGS UP TO US$________________________ , EFFECTIVE [Date] AND EXPIRING AT OUR OFFICE AT 237 FIFTH AVENUE, THIRD FLOOR, ANNEX BUILDING, PITTSBURGH, PENNSYLVANIA 15222, WITH OUR CLOSE OF BUSINESS ON [Date]. -------------------------------------------------------------------------------- WE HEREBY UNDERTAKE TO PROMPTLY HONOR YOUR SIGHT DRAFT(S), MARKED “DRAWN UNDER LETTER OF CREDIT NO. ______________", FOR ALL OR ANY PART OF THIS LETTER OF CREDIT IF PRESENTED AT OUR 237 FIFTH AVENUE, THIRD FLOOR, ANNEX BUILDING OFFICE, PITTSBURGH, PENNSYLVANIA 15222 ON OR BEFORE THE EXPIRY DATE OR ANY AUTOMATICALLY EXTENDED DATE. EXCEPT AS STATED HEREIN, THIS UNDERTAKING IS NOT SUBJECT TO ANY CONDITION OR QUALIFICATION. THE OBLIGATION OF PNC BANK, NATIONAL ASSOCIATION UNDER THIS LETTER OF CREDIT IS THE INDIVIDUAL OBLIGATION OF PNC BANK, NATIONAL ASSOCIATION, AND IS IN NO WAY CONTINGENT UPON REIMBURSEMENT WITH RESPECT THERETO. [IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT IS DEEMED TO BE AUTOMATICALLY EXTENDED, WITHOUT AMENDMENT, FOR ONE YEAR FROM THE EXPIRY DATE OR ANY FUTURE EXPIRATION DATE, UNLESS AT LEAST DAYS PRIOR TO ANY EXPIRATION DATE WE NOTIFY YOU BY REGISTERED MAIL THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD.]* THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500. YOURS VERY TRULY, AUTHORIZED SIGNATURE _________________ * To be included in Evergreen Letters of Credit only. -2- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT E-1 FORM OF COMPLIANCE CERTIFICATE (GAAP Financial Statements)         THIS CERTIFICATE is given pursuant to Section 5.3(a) of the Second Amended and Restated Letter of Credit Agreement, dated as of ________________, 2000 (as amended, modified or supplemented from time to time, the “Agreement, ” the terms defined therein being used herein as therein defined), by and among PMA Capital Corporation (the “Applicant”), the Banks party thereto and PNC Bank, National Association, as Agent and Issuing Bank.         The undersigned hereby certifies that:1                1.    He is [the duly appointed chief financial officer of the Applicant] [a duly appointed vice president of the Applicant having significant responsibility for financial matters].                2.    Enclosed with this Certificate are copies of the financial statements of the Applicant and its Subsidiaries as of _______________, and for the [__________ -month period] [year] then ended, required to be delivered under Section [5.1(a)] [5.l(b)] of the Agreement. Such financial statements have been prepared in accordance with generally accepted accounting principles [(subject to the absence of notes required by generally accepted accounting principles and subject to normal year-end audit adjustments)]2 and present fairly the financial condition of the Applicant and its Subsidiaries on a consolidated basis as of the date indicated and the results of operations of the Applicant and its Subsidiaries on a consolidated basis for the period covered thereby.                3.    The undersigned has reviewed the terms of the Agreement and has made, or caused to be made under the supervision of the undersigned, a review in reasonable detail of the activities of the Applicant and its Subsidiaries during the accounting period covered by such financial statements with a view to determining whether the Applicant has performed and maintained all of its obligations under the Agreement.                4.    Based upon the review described in paragraph 3 above, the undersigned has no knowledge of the existence of any Default or Event of Default during or at the end of the accounting period covered by such financial statements or as of the date of this Certificate except as set forth herein].3 _________________ 1      Insert applicable bracketed language throughout the Certificate. 2      Insert in the case of quarterly financial statements. 3      Insert if applicable and describe in the Certificate or in a separate attachment any exceptions to paragraph 4 above by listing, in reasonable detail, the nature of the Default or Event of Default, the period during which it existed and the action the Applicant has taken or proposes to take with respect thereto. -1- --------------------------------------------------------------------------------         5. Attached to this Certificate as Attachment A is a Covenant Compliance Worksheet reflecting the computation of the financial covenants set forth in Sections 6.1 and 6.2 of the Agreement, as of the last day of the period covered by the financial statements enclosed herewith.         IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the _______ day of ___________________, 200_.       [signature]   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   -2- -------------------------------------------------------------------------------- ATTACHMENT A TO GAAP COMPLIANCE CERTIFICATE COVENANT COMPLIANCE WORKSHEET       Capitalization Ratio (Section 6.1 of the Agreement): Not greater than 0.35 to 1.0       (1) Consolidated Indebtedness:       (a)   Indebtedness of Applicant and Subsidiaries as of         __________, ____ (the "Measurement Date") $_________________       (b)   Reimbursement obligations with respect to         letters of credit hereunder. _________________       (c)   Consolidated Indebtedness: Subtract lines l(b)         and l(c) from l (a) $_________________       (2) Capitalization:       (a)   Consolidated Indebtedness as of the         Measurement Date (from Line l(d)) $_________________       (b)   Consolidated Net Worth as of the Measurement         Date _________________       (c)   Capitalization: Add Lines 2(a) and 2(b) $_________________       (3) Ratio of Consolidated Indebtedness to Total Capitalization:         Divide Line l(d) by Line 2(c) ___ to                               -1- --------------------------------------------------------------------------------       Cash Coverage Ratio (Section 6.2 of the Agreement): Not less than 2.75 to 1.0       (1) Cash Available:       (a)   Aggregate Available Dividend Amount for the         Insurance Subsidiaries1         for the Measurement Period2 $_________________       (b)   Net Tax Sharing Payments for the Measurement         Period               (i)   Tax sharing payments received by Applicant $_________________               (ii)   Tax sharing payments estimated to be                 received by Applicant in respect of                 Measurement Period _________________               (iii)  Taxes paid by Applicant (_______________)               (iv)   Taxes estimated to be paid by Applicant in                 respect of Measurement Period (_______________)               (v)   Other payments, if any, paid or to be paid                 by Applicant under tax sharing                agreements or arrangements during                Measurement Period (_______________)               (vi)    Net Amount (lines (i) + minus lines (iii) +                 (iv) + (v)) _______________       (C)   Cash Available:         Add lines 1(a) and l(b)(v) $_______________       (2) Cash Uses:       (a)   Interest Expense incurred during the         Measurement Period $_________________       _______________ 1      Other than each Insurance Subsidiary that is a Subsidiary of another Insurance Subsidiary and determined as if the four fiscal quarters measured constitute a fiscal year for regulatory purposes. 2      The four fiscal quarters immediately preceding the Measurement Date. -2- --------------------------------------------------------------------------------       (b)   Operating, expenses paid by the Applicant         during the Measurement Period _________________       (c)   Dividends paid by the Applicant during the         Measurement Period _________________       (d)   Cash Uses:         Add lines 2(a), 2(b) and 2(c) $                                       (3) Cash Coverage Ratio:    Divide line l(c) by line 2(d) ___ to 1.0                   -3- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT E-2 FORM OF COMPLIANCE CERTIFICATE (Statutory Financial Statements)         THIS CERTIFICATE is given pursuant to Section 5.3(a) of the Second Amended and Restated Letter of Credit Agreement, dated as of November 22, 2000 (as amended, modified or supplemented from time to time, the “Agreement,” the terms defined therein being used herein as therein defined), by and among PMA Capital Corporation (the “Applicant”), the Co-Applicants party thereto, the Banks party thereto and PNC Bank, National Association, as Agent and Issuing Bank.         The undersigned hereby certifies that:4                1)    He is [the duly appointed chief financial officer of the Applicant] [a duly appointed vice president of the Applicant having significant responsibility for financial matters].                2)    Enclosed with this Certificate are copies of the financial statements of the Applicant and its Subsidiaries as of __________, and for the [__________-month period] [year] then ended, required to be delivered under Section [5.2(a)] [5.2(b)] of the Agreement. Such financial statements have been prepared in accordance with Statutory Accounting Principles and present fairly the financial condition of the Applicant and its Subsidiaries on a consolidated basis as of the date indicated and the results of operations of the Applicant and its Subsidiaries on a consolidated basis for the period covered thereby.                3)    Attached to this Certificate as Attachment A is a Covenant Compliance Worksheet reflecting the computation of the financial covenants set forth in Sections 6.3 and 6.4 of the Agreement as of the last day of the period covered by the financial statements enclosed herewith. _________________ 4 Insert applicable bracketed language throughout the Certificate. -1- --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the undersigned has executed and delivered this Certificate as of the ________ day of _______________, ____.       [signature]   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   -2- -------------------------------------------------------------------------------- ATTACHMENT A TO STATUTORY COMPLIANCE CERTIFICATE COVENANT COMPLIANCE WORKSHEET       Statutory Surplus (Section 6.3 of the Agreement): Not less than $450,000,000       (1) Statutory Surplus of each Insurance Subsidiary1 as of (the "Measurement Date"):       (a)   PMACIC $_________________       (b)   Other Insurance Subsidiaries legally domiciled in         the United States2 $_________________       (c)   [Other Insurance Subsidiaries not legally domiciled         in the United States3]2 $_________________       (2) Consolidated Statutory Surplus -- Sum of lines in item (1) $_________________       _______________ 1      Do not include any Insurance Subsidiary whose Statutory Surplus is included in the Statutory Surplus of another Insurance Subsidiary. 2      List each such Insurance Subsidiary individually. 3      Include the shareholders’equity of such Insurance Subsidiary as determined in accordance with Generally Accepted Accounting Principles (without regard to the requirements of Statement of Financial Accounting Standards No. 115 issues by the Financial Accounting Standards Board). -------------------------------------------------------------------------------- ATTACHMENT A TO STATUTORY COMPLIANCE CERTIFICATE COVENANT COMPLIANCE WORKSHEET       Risk-Based Capital (Section 6.4 of the Agreement):1 For each Insurance Subsidiary, as   appropriate, line (a) to be not less   than line (d)       (1) PMACIC       (a)   Total adjusted capital as of the         Measurement Date $_________________       (b)   Company Action Level RBC2 as of the         Measurement Date $_________________       (c)   Required Multiple 150%       (d)   Required total adjusted capital as of the         Measurement Date:         Multiply Line l(b) by l(c) $_________________       (2) Other Insurance Subsidiaries3       (a)   Total adjusted capital as of the         Measurement Date $_________________       (b)   Company Action Level RBC2 as of the         Measurement Date $_________________       (c)   Required Percentage3: 120%       (D)   Required total adjusted capital as of the         Measurement Date:         Multiply Line 3(b) by 3(c) $_________________       _________________ 1      To be calculated and submitted annually. 2      As defined by the Risk-Based Capital for Insurers Model Act of the NAIC. 3      Complete different schedule for each Insurance Subsidiary required by the relevant Insurance Regulatory Authority to meet any RBC requirements. -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT F FORM OF FINANCIAL CONDITION CERTIFICATE         THIS FINANCIAL CONDITION CERTIFICATE is delivered pursuant to Section 3.1 (a)(iv) of the Second Amended and Restated Letter of Credit Agreement, dated as of November 22, 2000 (the “Agreement”), by and among PMA Capital Corporation, a Pennsylvania corporation (the “Applicant”), the Co-Applicants party thereto, the Banks party thereto and PNC Bank, National Association, as Agent and as Issuing Bank. Capitalized terms used herein without definition shall have the meanings given to such terms in the Agreement.         The undersigned hereby certifies for and on behalf of the Applicant as follows:                1.    Capacity. The undersigned is, and at all pertinent times mentioned herein has been, the Applicant’s duly qualified and acting chief financial officer (and in such capacity has responsibility for the management of the Applicant’s financial affairs) and senior accounting officer (and in such capacity has responsibility for the preparation of the Applicant’s financial statements). The undersigned has, together with other officers of the Applicant, acted on behalf of the Applicant in connection with the negotiation and consummation of the Agreement and the transactions contemplated thereby.                2.    Procedures. For purposes of this certificate, the undersigned, or officers or other personnel of the Applicant under the direction and supervision of the undersigned, have, as of or prior to the date hereof, undertaken the following activities in connection herewith:   a) The undersigned has carefully reviewed the following:   i) the contents of this certificate;   ii) the Agreement (including the exhibits and schedules thereto); and   iii) the audited consolidated balance sheets of the Applicant for the fiscal years ended December 31, 1997, 1998 and 1999, and the related consolidated statements of income, comprehensive income and cash flows of the Applicant for the three-year period ended December 31, 1999, each audited by PricewaterhouseCoopers, L.L.P. (successor by merger to Coopers and Lybrand, L.L.P.) .   b) With respect to any Contingent Obligations of the Applicant, the undersigned:   i) has inquired of certain officers and other personnel of the Applicant who have responsibility for the legal, financial and accounting affairs of the Applicant, as to the existence and estimated amounts of all Contingent Obligations known to them; --------------------------------------------------------------------------------   ii) has confirmed with senior officers of the Applicant that, to the best of such officers knowledge, (i) all appropriate items have been included in the Contingent Obligations made known to the undersigned in the course of the inquiry of the undersigned in connection herewith, and (ii) the amounts relating thereto were the maximum estimated amounts of liability reasonably likely to result therefrom as of the date hereof, and   iii) confirms that, to the best of his knowledge, all material Contingent Obligations that may arise from any pending litigation, asserted claims and assessments, guarantees, uninsured risks, and other Contingent Obligations of the Applicant have been considered in making the certification set forth herein, and with respect to each such Contingent Obligation the estimable maximum estimated of liability with respect thereto was used in making such certification.                c)    In connection with the preparation for consummation of the transactions contemplated by the Agreement, the undersigned has caused the preparation of and has reviewed projected financial statements consisting of balance sheets and statements of income of the Applicant giving effect to the transactions contemplated by the Agreement. The assumptions upon which such projections are based were, in the opinion of the undersigned, reasonable when made and continue to be reasonable as of the date hereof, subject to the uncertainties and approximations inherent in any projections.                d)    The undersigned has inquired of certain officers of the Applicant having responsibility for financial reporting and accounting matters regarding whether such persons were aware of any events or conditions that, as of the date hereof, would cause the statements made in Section 3 below to be untrue.                e) The    undersigned has conferred with counsel to the Applicant for the purpose of discussing the meaning of the contents of this Certificate (including, without limitation, Sections 3(a), 3(c) and 3(d) below).                3.    Certifications. Based on the foregoing, the undersigned hereby certifies as follows:                a)    The Applicant is not now, nor will consummation of the transactions contemplated by the Agreement and the incurrence of the Obligations under the Agreement render the Applicant, “insolvent”(as hereinafter defined). The undersigned understands that, in this context, “insolvent”means that the present fair saleable value of assets is less than the amount that will be required to be paid on or in respect of the existing debts and other liabilities as such debts and liabilities of the Applicant mature. The undersigned understands that the term “debts”includes -2- -------------------------------------------------------------------------------- any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent, including any guaranty obligations. A valuation of the Applicant, on the basis thereof, with reasonable allowance for error, would reflect the net worth of the Applicant in the aggregate (excess of fair value of assets over liabilities) as not less than $__________.                b)    After giving effect to the transaction contemplated by the Agreement, all accounts and other liabilities of the Applicant are current and not past due.                c)    The undersigned believes that, by incurring the Obligations pursuant to the Agreement, the Applicant will not incur debts beyond its ability to pay as such obligations mature (taking into account the timing and amounts of cash to be payable on or in respect of the Applicant’s Indebtedness). The foregoing conclusion is based in part on the projections, which demonstrate that the cash flow of the Applicant, after taking into account all anticipated uses of the cash of the Applicant, will at all times be sufficient to pay all amounts on or in respect of Indebtedness of the Applicant when such amounts are required to be paid (including without limitation, scheduled payments pursuant to the Agreement).                d)    As of the date hereof, the consummation of the transactions contemplated by the Agreement will not leave the Applicant with “unreasonably small capital”within the meaning of Section 548(a) of the Bankruptcy Code or with remaining assets that are unreasonably small. In reaching this conclusion, the undersigned understands that “unreasonably small capital”depends upon the nature of the particular business or businesses conducted or to be conducted, and has reached this conclusion based on the needs and anticipated needs for capital of the businesses conducted or anticipated to be conducted by the Applicant in light of the Applicant’s available credit capacity.                e)    The Applicant has not executed the Agreement, or any documents mentioned herein, or made any transfer or incurred any obligations thereunder, with intent to hinder, delay or defraud either present or future creditors of the Applicant.                f)    The undersigned understands that the Banks have performed their own review and analysis of the financial condition of the Applicant, but that the Banks are relying on the foregoing statements in connection with the extension of credit to the Applicant pursuant to the Agreement.         Executed this ____ day of ______________, 2000. ___________________________________ Chief Financial Officer PMA Capital Corporation -3- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT G MATTERS TO BE COVERED IN OPINIONS OF COUNSEL TO THE APPLICANT         1. Each of the Applicant and its Material Subsidiaries is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the nature of its business or the ownership of its properties requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect.         2. Each of the Applicant and its Material Subsidiaries has the full corporate power and authority to execute, deliver and perform the Credit Documents to which it is a party, to own and hold its property and to engage in its business as presently conducted.         3. The Applicant and each Co-Applicants have taken all necessary corporate action to execute, deliver and perform each Credit Document, and each Credit Document has been validly executed and delivered by, and constitutes the legal, valid and binding obligation of the Applicant, enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting creditors’ rights generally or by general equitable principles which may limit rights of acceleration, self-help and the availability of equitable remedies, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law).         (d) No consent, approval, authorization, exemption or other action by, notice to, or declaration or filing with, any governmental or regulatory authority of the United States or the Commonwealth of Pennsylvania is required in connection with the due execution, delivery and performance by the Applicant of the Credit Documents, the legality, validity or enforceability thereof or the consummation of the transactions contemplated thereby.         5. The execution, delivery and performance by the Applicant and each Co-Applicant of the Credit Documents, and compliance by it therewith, do not and will not (i) violate any provision of its certificate of incorporation or bylaws, (ii) contravene any provisions of any applicable law, rule or regulation or, to the best of such counsel’s knowledge, any judgment, order, writ, injunction or decree to which it is subject, (iii) to the best of such counsel’s knowledge, conflict with, result in a breach of or constitute (with notice, lapse of time or both) a default under any material indenture, agreement or other instrument to which it is a party, by which it or any of its properties is bound or to which it may be subject, or (iv) result in the creation or imposition of any Lien (except for Permitted Liens) arising under any of the documents or instruments referred to in clause (iii), upon any property or assets of the Applicant and each Co-Applicant; provided, however, in the case of (ii), (iii) and (iv) herein, where to do so would not have a Material Adverse Effect.         6. To the best of such counsel's knowledge, there are no actions, investigations, suits or proceedings pending or threatened, at law, in equity or in arbitration, before any court, other -------------------------------------------------------------------------------- Governmental Authority or other Person, against or affecting the Applicant and its Subsidiaries or any of their respective properties that, if adversely determined, would be reasonably likely to have a Material Adverse Effect.         7. Neither the Applicant nor any of its Subsidiaries is an “investment company,” a company controlled by an “investment company,” or an “investment advisor,” within the meaning of the Investment Company Act of 1940, as amended.         8. Neither the Applicant nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and the consummation of the transactions contemplated by the Agreement will not violate Regulations T, U or X of the Board of Governors of the Federal Reserve System.         9. The provisions of the Pledge Agreement are effective to create an enforceable security interest in favor of the Agent (for the benefit of the Banks) in the Collateral (as defined in the Pledge Agreement). Upon the execution and delivery of the Control Agreements among the Applicant, the Co-Applicants, the Agent and the Custodian (as defined in the Pledge Agreement), dated as of November __, 2000, the Agent will have a perfected security interest in and to the Collateral in the Securities Accounts (as defined in the Pledge Agreement) under Division 9 of the Uniform Commercial Code (the “UCC”) which will have priority over conflicting security interests created under Section 9115 of the UCC. -2- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXHIBIT H FORM OF EXTENSION REQUEST                EXTENSION REQUEST (this “Extension Request”), dated as of __________ __, 200_, made by PMA CAPITAL CORPORATION, a Pennsylvania corporation (the “Applicant”) pursuant to the Second Amended and Restated Letter of Credit Agreement, dated as of November 22, 2000, by and among the Applicant, the Co-Applicants party thereto, the Banks party thereto and PNC BANK, NATIONAL ASSOCIATION, in its capacity as Agent and as Issuing Bank (as time amended, supplemented or otherwise modified from time to time, the “Agreement”). RECITALS                A. Capitalized terms used herein which are not defined herein and which are defined in the Agreement shall have the same meanings as therein defined.                B. Section 2.6 of the Agreement provides that so long as no Default or Event of Default shall exist and be continuing, the Applicant may request that the Termination Date be extended for a period of 364 days by delivering an Extension Request to the Agent.                C. Section 2.6 of the Agreement further provides that if each Bank consents to an Extension Request during the Extension Consent Period by giving written notice thereof to the Agent, then effective on the first day of the Extension Consent Period, the then applicable Termination Date shall be extended by 364 days.                D. As of the date hereof, the Termination Date (without giving effect to the extension requested hereby) is November __, 2001.                E. The Applicant desires that the Termination Date be extended for an additional period of 364 days and the Banks signing below desire to consent thereto.                In consideration of the premises, and the terms and conditions herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:         1. Pursuant to Section 2.6 of the Agreement, the Applicant hereby requests that the Termination Date be extended for an additional period of 364 days.         2. The Applicant hereby represents and warrants to the Agent, the Co-Agent, the Issuing Bank and each Bank that no Default or Event of Default exists and is continuing.         3. Each Bank signing below hereby consents to this Extension Request. --------------------------------------------------------------------------------         4. Subject to receipt by the Agent during the Extension Consent Period of a counterpart of this Extension Request signed by each Bank (or a replacement bank pursuant to Section 2.15), then effective on the first day of such Extension Consent Period, the then applicable Termination Date shall be extended by 364 days.         5. This instrument may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this instrument to produce or account for more than one counterpart signed by the party to be charged.         6. This instrument is being delivered in and is intended to be performed in the Commonwealth of Pennsylvania and shall be construed and enforceable in accordance with, and be governed by, the internal laws of the Commonwealth of Pennsylvania without regard to principles of conflict of laws.         IN WITNESS WHEREOF, each of the parties has caused this Extension Request to be executed by its duly authorized officer as of the date and year first written above.       PMA CAPITAL CORPORATION   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   PNC BANK, NATIONAL ASSOCIATION, Individually and as Agent and Issuing Bank   By:   -------------------------------------------------------------------------------- Name:   -------------------------------------------------------------------------------- Title:   --------------------------------------------------------------------------------   -2- --------------------------------------------------------------------------------
DEFERRAL AGREEMENT UNDER THE ALLIANCE CAPITAL MANAGEMENT L.P. ANNUAL ELECTIVE DEFERRAL PLAN FOR YEAR 2000 BONUS OR YEAR END COMMISSION PAYMENTS           This agreement (the “Plan Agreement”) is entered between Robert Joseph (“you”) and Alliance Capital Management L.P. (the “Company”) with respect to your elective deferral of a portion of your Bonus or Year End Commission Payments for the year 2000 under the Alliance Capital Management L.P. Annual Elective Deferral Plan (the “Plan”).  You have elected to defer a portion of your year 2000 Bonus or Year End Commission Payments as set forth in the Deferral Election signed by you and submitted with this Plan Agreement (your “Elective Deferral”) and in connection with that deferral you agree to the terms set forth in this Plan Agreement.  The Plan provides a description of the terms and conditions governing your Elective Deferral and all other aspects of your participation in the Plan.  If there is any inconsistency between the terms of this Plan Agreement and the terms of the Plan, the Plan’s terms completely supersede and replace the conflicting terms of this Plan Agreement.  All capitalized terms have the meanings given them in the Plan, unless specifically stated otherwise in this Plan Agreement.           1.       Crediting of Your Elective Deferral.  Your Elective Deferral will be credited to you under the Plan as of the date such amount(s) would otherwise have been paid to you absent your Deferral Election.           2.       Crediting of Your Company Matching Contribution.  As of the date that you are credited with the amount(s) constituting your Elective Deferral, you shall also be credited with an additional amount equal to 20% of those amount(s) (the “Company Matching Contribution”).           3.       Conversion to Units.  Your Elective Deferral and related Company Matching Contribution shall be converted into Units as soon as practicable after such amounts are credited to you.  The price per Unit used for such conversion shall be based on: (i) For Units purchased from one or more holders of outstanding Units, the cost paid by the Company for such Units as determined pursuant to the purchase and pricing methodologies generally used under the Partners Plan, reduced, at the discretion of the Committee, by the applicable commissions and purchase transaction fees; and     (ii) For Units newly issued and acquired directly from Holding, a price equal to the average regular session closing price of the Units reflected on the NYSE composite tape for the December 31 following the relevant Deferral Election Date (or, if such date is not a trading day on the NYSE, then the last preceding trading day).             4.       Distributions on Units.  Any quarterly or special distribution paid with respect to Units credited to you shall also be credited to you and shall be converted into additional Units at such intervals as may be established by the Committee, but in any event no less frequently that annually.  The price per Unit used for such conversion shall be based on: (i) For Units purchased from one or more holders of outstanding Units, the cost paid by the Company for such Units as determined pursuant to the purchase and pricing methodologies generally used under the Partners Plan, reduced, at the discretion of the Committee, by the applicable commissions and purchase transaction fees; and     (ii) For Units newly issued and acquired directly from Holding, a price equal to the average regular session closing price of the Units reflected on the NYSE composite tape for the date such distributions are paid.             5.       Your Account.  As of the date that you are credited with cash amounts in respect of your Elective Deferral, Company Matching Contribution or any distribution on Units credited to you in respect of your Elective Deferral or Company Matching Contribution, those amounts shall be posted to a bookkeeping account established under the Plan in your name (your “Plan Account”).  As of the date that any such amounts are converted into Units, your Plan Account shall be amended to reflect such conversion to Units.           6.       Vesting.           (a)      Elective Deferrals. Your Elective Deferral and all distributions credited with respect to Units into which your Elective Deferral has been converted, shall be 100% vested and non-forfeitable from and after the date such Elective Deferral and distributions are credited to you.            (b)     Company Match.  You shall become vested in your Company Matching Contribution and all distributions credited with respect to Units into which your Company Matching Contribution has been converted, in installments of one-third of the amount of your Company Matching Contribution and such distributions as of December 31 of each of 2001, 2002 and 2003, provided that you remain in the employ of the Company or an affiliate as of each such December 31, except that the entire amount of your Company Matching Contribution and the related distributions credited to you will fully vest if, prior to your Termination of Employment, you die, incur a Disability or attain age 62.  In the event of your Termination of Employment prior to age 62 other than due to death or Disability, to the extent that any portion of your Company Matching Contribution and related distributions is not vested as of the date of your Termination of Employment, such unvested portion shall be forfeited by you.           7.       Distribution.           (a)      Distribution Election.  You are required to complete the distribution section of your Deferral Election to designate the time and method of distribution for the amounts covered by your Deferral Election and the Company Matching Contribution and distributions relating to such amounts.  The distribution instructions set forth in your Deferral Election shall be irrevocable as to the amounts covered by such election; provided, however, that, if you so request, the Committee may, in its sole discretion, allow you to amend your distribution instructions to extend the deferral of the amounts covered by your Deferral Election and the Company Matching Contribution and related distributions, if such amendment is made at least one year prior to the scheduled distribution commencement date for such amounts and the amendment defers commencement of such distribution for at least three years beyond the scheduled distribution commencement date.           (b)      Uncertainty as to Distribution Commencement Date.  If, with respect to amounts covered by your Deferral Election, you have failed to elect a distribution commencement date or there exists any ambiguity as to the distribution commencement date you have elected, such amounts (including the relevant vested Company Matching Contribution) may be distributed to you after the earlier of the date of your Termination of Employment or the third anniversary of your Deferral Election Date, unless determined otherwise by the Committee, in its sole discretion.           (c)      Uncertainty as to Method of Payment.  If, with respect to amounts covered by your Deferral Election, you have failed to elect a method of payment or there exists any ambiguity as to the method of payment you elected, the method of payment for such amounts (including the relevant vested Company Matching Contribution) shall be lump sum, unless determined otherwise by the Committee, in its sole discretion.           (d)      Form of Distributions.  All distributions shall be paid in-kind in the form of Units.           8.       Financial Emergencies.  If you experience an Unforseeable Financial Emergency, you may petition the Committee to (i) suspend any deferrals required but not yet made under your Deferral Election and/or (ii) receive a partial or full payout of you Account Balance.  The Committee shall have complete discretion to accept or reject your petition and to determine the amounts, if any, which may be paid out to you; provided, however, that the payout shall not exceed the lesser of your Account Balance, or the amount reasonably needed to satisfy the Unforseeable Financial Emergency.           9.       Withdrawal Election.  You (or, after your death, your Beneficiary) may elect, at any time, to withdraw all of your Account Balance, less a withdrawal penalty equal to 10% of such amount.  This election can be made at any time before or after your Retirement, Disability, death or Termination of Employment, and whether or not you (or your Beneficiary) is in the process of being paid pursuant to an installment payment schedule.  No partial withdrawals of your Account Balance shall be allowed.  You (or your Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee.  Once you have withdrawn your Account Balance your participation in the Plan shall terminate and you shall not be eligible to participate in the Plan in the future.           10.     Beneficiary Designation.  You are encouraged to designate a Beneficiary to receive your Account Balance under the Plan in the event of your death.  You may do so by completing and signing a Beneficiary Designation Form provided by the Committee and returning it to the Committee.  You shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time.  Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled.  The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by you and accepted by the Committee prior to your death.  No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee or its designated agent.  In the event of your death, the amounts relating to your Elective Deferral and the related Company Matching Contribution as well as all other amounts comprising your Account Balance will be distributed in accordance with your last Beneficiary Designation Form submitted and acknowledged by the Committee.  If you fail to designate a Beneficiary by way of a properly completed Beneficiary Designation Form acknowledged by the Committee or if all your designated Beneficiaries predecease you or die prior to complete distribution of your Account Balance, then your designated Beneficiary shall be deemed to be your estate.  If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to withhold such payments until this matter is resolved to the Committee's satisfaction.           11.     Tax Withholding.  As and when any federal, state or local tax or any other charge is required by law to be withheld with respect to the vesting of amounts credited to you, the payment of distributions on any Units credited to you and the distribution of Units or other amounts from your Plan Account (a “Withholding Amount”), you agree promptly to pay the Withholding Amount to the Company in cash.  You agree that if you do not pay the Withholding Amount to the Company, the Company may withhold any unpaid portion of the Withholding Amount from any amount otherwise due to you.  Notwithstanding the foregoing, the Company may, in its sole discretion, establish and amend policies from time to time for the satisfaction of Withholding Amounts by the deduction of a portion of the Units credited to you under the Plan.           12.     Administration.  It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Plan Agreement, all of which shall be binding upon you.  The Committee is under no obligation to treat you or your interest under the Plan with the treatment provided for other participants in the Plan.           13.     Miscellaneous.           (a)      This Plan Agreement does not confer upon you any right to continuation of employment by the Company, nor does this Plan Agreement interfere in any way with the Company's right to terminate your employment at any time.           (b)      Nothing in this Plan Agreement is intended or should be construed as a guarantee or assurance that you will receive any amounts in respect of a Bonus or Year End Commission Payments or any award under the Partners Plan, and all such entitlements remain in the sole discretion of the Company.           (c)      This Plan Agreement will be governed by, and construed in accordance with, the laws of the state of New York (without regard to conflict of law provisions).           (d)      This Plan Agreement and the Plan constitute the entire understanding between you and the Company regarding your year 2000 Elective Deferral and the related Company Matching Contribution.  Any prior agreements, commitments or negotiations concerning the same are superseded.  This Plan Agreement may be amended only by another written agreement, signed by both parties.             BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.           IN WITNESS WHEREOF, the parties hereto have caused this Plan Agreement to be executed effective as of November 16, 2000.   Alliance Capital Management L.P. By:     Alliance Capital Management           Corporation, General Partner   Participant Signature:   /s/ Robert Joseph -------------------------------------------------------------------------------- Robert Joseph      
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.48 ATTACHMENT III (To Stock Option Agreement for French Employees) Provisions Applicable to Persons Subject to the Laws of France (As Amended August 1, 2001)     The Company has adopted the following provisions in order that an Option granted to an Employee who is subject to the laws of France will provide the maximum benefits under the provisions of French law (the "French Option"), and in order to provide incentives for such Employee to exert maximum efforts for the success of the Company. Except as set forth below, the terms of the Option Agreement for a French Option shall otherwise comply with the other terms of the Plan. Eligibility (a)No person shall be granted a French Option unless such person is an Employee. (b)Throughout the term of the Plan, no French Option shall be granted, if by making such grant, the aggregate number of shares subject to outstanding French Options under all stock options of the Company would exceed one-third of the aggregate number of all shares of all classes of stock of the Company authorized for issuance. (c)No persons shall be eligible for the grant of a French Option if, at the time of grant, such person owns (or is deemed to own pursuant to the applicable laws of France) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates. Limitation on Grant     No French Option may be granted within 20 trading days following (i) an increase in the authorized capital of the Company or (ii) a distribution or payment of a dividend on the Common Stock. French Option Provisions (a)Exercise Price. The exercise price of a French Option shall not be less than 80% of the average of the closing price of the Common Stock as reported in the Wall Street Journal or such other source as the Board deems reliable, for the 20 trading days preceding the date of grant. (b)Exercise. No French Option granted on or prior to April 27, 2000 may be exercised within five (5) years of the date of grant; no French Option granted after April 27, 2000 may be exercised within four (4) years of the date of grant. Shares of Common Stock issued to the Optionee upon exercise of French Options may be issued only in the name of the Optionee. (c)Transferability. The terms of a French Option shall not permit transfer of the French Option, except on death and then only to the extent permitted by French law. Further, the terms of a French Option shall provide that during the lifetime of the Optionee the French Option may be exercised only by the Optionee. In the event of the death of the Optionee during the Optionee's Continuous Status, such French Option may be transferred to the extent permitted by French law. A French Option so transferred may be exercised (to the extent the Optionee was entitled to exercise such French Option as of the date of death) by the transferee only within the period ending on the earlier of (i) the date six (6) months following the date of death, or (ii) the expiration of the term of such French Option as set forth in the Option Agreement. -------------------------------------------------------------------------------- Adjustments upon Changes in Stock     Any adjustment pursuant to Section 11 of the Plan in stock subject to a French Option shall be made only to the extent such adjustment does not cause the Company to become subject to tax liabilities to which it would not otherwise be subject. Form of Option     All French Options shall be evidenced by an agreement in the form annexed hereto as Attachment 1. 2 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.48
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT     This Third Amendment to Loan and Security Agreement is entered into as of May 11, 2001 (the "Amendment"), by and between COMERICA BANK-CALIFORNIA ("Bank") and MSC.Software Corporation ("Borrower"). RECITALS     Borrower and Bank are parties to that certain Loan and Security Agreement dated as of August 11, 1999, as amended from time to time (the "Agreement"). The parties desire to amend the Agreement in accordance with the terms of this Amendment.     NOW, THEREFORE, the parties agree as follows:     1.  Revolving Maturity Date.  The defined term "Revolving Maturity Date" in Section 1.1 of the Loan Agreement is hereby amended by replacing the date "May 31, 2001" set forth therein with the date "August 31, 2001."     2.  Unless otherwise defined, all capitalized terms in this Amendment shall be as defined in the Agreement. Except as amended, the Agreement remains in full force and effect.     3.  Borrower represents and warrants that the representations and warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.     4.  This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.     5.  As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:     (a) this Amendment, duly executed by Borrower; and     (b) such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.     IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.     MSC.Software Corporation     By:   /s/ LOUIS A. GRECO        Title:   Chief Financial Officer     COMERICA BANK-CALIFORNIA     By:   /s/ SCOTT LANE        Title:   Vice President -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.1 THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
Exhibit (10)(n) EXECUTIVE INCENTIVE PLAN 1. Name and Purpose   (a) Vulcan Materials Company ("Company") hereby establishes an incentive compensation plan to be known as the "Vulcan Materials Company Executive Incentive Plan" ("Plan"), as set forth herein and as it may be amended from time to time. The Plan is a successor to the Vulcan Materials Company Management Incentive Plan with respect to any senior executive of the Corporation who participates in the Plan. The purpose of the Plan is to promote the profitability of the Corporation by providing incentives and rewards for those senior executives of the Corporation who contribute to the operating progress and earning power of the Corporation, and who are potentially subject to the deduction limit in Section 162(m) of the Internal Revenue Code of 1986 ("Code").   (b) The Plan shall become effective as of January 1, 2001 ("Effective Date"), subject to the approval of the Plan by a majority of the Company's shareholders in a separate vote. The Committee may establish Award Percentages and Target Awards before the Plan has been approved by shareholders; but no award under the Plan may be paid unless and until the shareholders of the Company approve the Plan. The Plan shall remain in effect until the Board amends or terminates the Plan pursuant to Section 15 below. 2. Definitions                  As used in the Plan, unless the context otherwise requires, each of the following terms has the meaning set forth below:   (a) "Award Percentage" means the maximum percentage of the Incentive Reserve that a Covered Employee may receive for a Year in which the Covered Employee is eligible to participate in the Plan, as determined by the Committee.   (b) "Balance Sheet" means the consolidated statement of the Corporation's financial position certified by the Public Accountants and published from year to year in the Corporation's Annual Report to Shareholders.   (c) "Board of Directors" or "Board" means the Board of Directors of the Company.   (d) "Change in Control" means:               (i)  The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subparagraph (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (1), (2) and (3) of subparagraph (iii) of this Section 2(b); or               (ii)  Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or               (iii)  Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Company resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors of the Company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or               (iv)  Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.   (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time. Any references to a particular section of the Code shall be deemed to include any successor provision thereto.   (f) "Committee" means the Compensation Committee of the Board of Directors, which consists solely of two or more "outside directors" within the meaning of Section 162(m) of the Code.   (g) "Common Stock" means the common stock of the Company with a par value of $1.00 per share.   (h) "Company" means Vulcan Materials Company, a New Jersey corporation.   (i) "Consolidated Net Earnings" for any Year means the sum of (i) the amount of net earnings (before any deduction for dividends) as reported in the Statement of Earnings, except that items which are classified therein as extraordinary items shall be excluded in the computation of Consolidated Net Earnings and (ii) interest on long-term debt included in Net Capital, such interest to include charges or credits arising out of premium or discount paid or received with respect to such debt, and such interest to be adjusted for the provision for federal and state income taxes attributable thereto.   (j) "Corporation" means the Company and its Subsidiaries.   (k) "Covered Employee" means any individual who is a "covered employee" within the meaning of Section 162(m) of the Code on the last day of the Company's taxable year for which the individual is selected to participate in the Plan, and each other senior executive of the Corporation who is designated by the Committee as a Covered Employee for a particular Year.   (l) "Incentive Award" means the amount payable to a Covered Employee under the Plan, as determined by the Committee on or after the end of each Year for which the Covered Employee is eligible to participate in the Plan.   (m) "Incentive Reserve" means the amount determined under Section 5 below that is available for the payment of awards under the Plan for a Year; provided that such amount is established and maintained as a general ledger entry solely for the Company's convenience and is not intended to be a funding mechanism for awards under the Plan.   (n) "Net Capital" for any Year means the sum of (1) long-term debt (comprising bonds, debentures and promissory notes having a maturity at the time of creation of more than one year), (2) issued capital stock, (3) capital in excess of par value and (4) earnings retained in the business and reserves created by appropriations therefrom, less the cost of treasury stock, all as shown in the Balance Sheet as of the end of the preceding Year, with appropriate prorated adjustment, as approved by the Public Accountants in accordance with the Plan, for any change during the Year arising from increase or decrease of outstanding principal of long-term debt or from original issuance or redemption and retirement of capital stock.   (o) "Public Accountants" means the independent public accountants employed by the Company from year to year for the purpose of submitting an opinion on the Corporation's Statement of Earnings.   (p) "Statement of Earnings" means the consolidated statement of the Corporation's earnings certified by the Public Accountants and published from year to year in the Corporation's Annual Report to Shareholders.   (q) "Subsidiary" means any corporation, the majority of the outstanding voting stock of which is owned, directly or indirectly, by the Company, and that is not itself a publicly-held corporation within the meaning of Section 162(m) of the Code.   (r) "Target Award" means a target annual bonus established by the Committee to be paid pursuant to Section 13 in the event of Change in Control.   (s) "Year" means a fiscal year or period covered by a Statement of Earnings and for which the Plan is in effect. 3. Regulations                  The Committee shall have the power to adopt eligibility and other rules and regulations not inconsistent with the provisions of the Plan for the administration thereof, and to alter, amend or revoke any rule or regulation so adopted. 4. The Committee and Its Functions   (a) Subject to the provisions of this Plan, full power and authority to interpret and administer the Plan are vested in the Committee. The Committee shall have the discretionary authority to act with respect to each Covered Employee. The Committee is authorized to conduct such consultations with officers and other executives of the Company as it shall deem necessary or appropriate in the performance of its duties and responsibilities with respect to the Plan. The Committee's discretion in interpreting and administering the Plan with respect to Covered Employees is specifically subject to the terms and conditions of Section 7 below.   (b) Without limiting the generality of Section 4(a) above, and except as otherwise specifically provided in this Plan, the Committee shall have the exclusive authority to: (i) interpret and administer the Plan and any instrument or agreement relating to the Plan or an Incentive Award; (ii) establish, amend, suspend, or waive rules and regulations for the administration of the Plan; (iii) engage or employ from time to time such counsel, advisers, consultants, accountants, analysts and other persons as it may deem necessary or expedient for the performance of such functions; (iv) appoint such agents as it shall deem appropriate for the proper administration of the Plan; (v) determine the rights of Covered Employees in the event of death, disability, termination, Change in Control and the like; and (vi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. All designations, determinations, interpretations and other decisions by the Committee under or with respect to the Plan or any Incentive Award under the Plan shall be final, conclusive, and binding upon all persons and entities, including the Company, any Subsidiary, any employee of the Corporation, any beneficiary and any shareholder. No determination of the Committee shall be subject to de novo review if challenged in court. 5. Incentive Reserve; Annual Provision; Annual Review of Earnings Factor; Annual Awards   (a) The Corporation shall meet the performance target under the Plan for any Year if Consolidated Net Earnings exceed 6% of Net Capital for the Year. For any Year in which the Corporation meets the performance target, the Committee may establish an Incentive Reserve equal to 4% of Consolidated Net Earnings in excess of 6% of Net Capital.   (b) As promptly as practicable after the end of each Year, the Public Accountants shall determine and certify in a report to the Committee the maximum amount, as determined under Section 5(a) above, available for credit to the Incentive Reserve for the such Year.   (c) As promptly as practicable after its receipt of the report described in Section 5(b) above, the Committee shall certify in writing whether the performance target described in Section 5(a), above, was attained for the Year and, if so, shall certify in writing the Incentive Awards, if any, that will be made to Covered Employees for the Year, pursuant to Section 9 below. The Committee may, in its sole discretion, make no Incentive Awards for a particular Year. If the Committee determines that Incentive Awards shall be made under the Plan for a Year, the Committee shall make and allot such individual Incentive Awards to Covered Employees in accordance with the provisions of Section 9(a) below. 6. Change in Fiscal Year                  In the event of a change in the Corporation's fiscal year, the Plan shall apply, with prorated adjustment of Net Capital, to any intermediate period of less than 12 months, and shall then apply to each subsequent fiscal year. 7. Code Section 162(m) Compliance                  It is the intent of the Company that Incentive Awards made to persons who are "covered employees" within the meaning of Section 162(m) of the Code shall constitute "qualified performance-based compensation" satisfying the requirements of Section 162(m) of the Code. Accordingly, the provisions of the Plan shall be interpreted in a manner consistent with Section 162(m) of the Code. However, the Change in Control payments authorized under Section 13 shall be made without regard to whether the payments satisfy the requirements of Section 162(m) of the Code. If any other provision of the Plan or an Incentive Award is intended to but does not comply with, or is inconsistent with, the requirements of Section 162(m) of the Code, such provision shall be construed or deemed amended to the extent necessary to conform to and comply with such requirements. 8. Eligibility                  The Committee shall select each senior executive of the Corporation who shall be eligible to participate in the Plan for a particular Year and shall set the Award Percentage for each such senior executive for such Year. The Committee shall also establish a Target Award for each senior executive. No member of the Committee shall be eligible for an Incentive Award under the Plan. A senior executive who is eligible for an Incentive Award under the Plan for a Year shall not be eligible in the same Year for an incentive award under any other annual incentive plan maintained by the Corporation. 9. Annual Awards and Time of Payment   (a) Subject to the provisions of Section 5, above, and the provisions of this Section 9(a), a Covered Employee may be granted an Incentive Award for a particular Year in such individual amount as the Committee, in accordance with the Plan, may in its discretion determine. In selecting Covered Employees, setting Award Percentages, and fixing the amount of any Incentive Awards thereunder, the Committee shall take into consideration the Award Percentage for each Covered Employee and the present and potential contribution of each Covered Employee to the operating progress and earning power of the Corporation.   (b) If the Committee determines that it will establish an Incentive Reserve for a Year, the Committee shall set forth in writing, during the first ninety days of the Year, (i) which senior executives shall participate in the Plan as Covered Employees for the Year, and (ii) the Award Percentage for each Covered Employee. In no event shall the sum of the Award Percentages of all Covered Employees for a Year exceed 100% of the Incentive Reserve for such Year.   (c) The Committee may exercise its discretion to reduce (but not to increase) the actual Incentive Award of any Covered Employee to an amount less than the Covered Employee's Award Percentage for the Year. In no event shall a reduction in the amount awarded to one Covered Employee increase the amount that is available for awards to any other Covered Employee.   (d) Subject to this Section 9(d) and to such other conditions as the Committee may in accordance with the Plan prescribe, each Incentive Award shall be paid as promptly as reasonably practicable after the determination of the amount of such Incentive Award. The Committee may in its discretion, when it deems such action to be in the best interests of the Company, direct that the total amount of any Incentive Award be paid in such installments and at such times as it may specify.   (e) The amount of each full or installment payment of an Incentive Award shall, when paid, be subject to a deduction for any and all taxes required by any government to be withheld by the Corporation and paid over to such government for the account of the Covered Employee to whom the award was made. The payment to any such government of an amount so withheld shall, for the purposes of the Plan, be deemed a payment thereof to the employee or his or her legal representatives. 10. Awards Payable in Cash   (a) Incentive Awards under the Plan for any Year shall be paid in cash.   (b) With respect to each Incentive Award under the Plan, the amount thereof shall be held or provided by the Company or the appropriate Subsidiary (without liability for interest) for payment to the Covered Employee or his or her legal representatives, as the case may be, as provided in Section 9 above. 11. Report of Awards                  As promptly as reasonably practicable after Incentive Awards for a particular Year have been determined in accordance with the Plan, a report shall be prepared listing: (a) the names of the Covered Employees to whom Incentive Awards have been made for such Year and the amount of each such Incentive Award, and (b) if any Incentive Award is to be payable in installments under Section 10(b) above, appropriate orders and directions respecting the payment thereof. 12. Administrative Expenses                  All costs of the Plan, including such fee, retainer, or other remuneration payment to members of the Committee as may from time to time be authorized by the Board of Directors, and all expenses incurred by the Committee in interpreting and administering the Plan, shall be borne by the Corporation and not charged against the Incentive Reserve. 13. Change in Control Payments   (a) In the event of a Change in Control, Covered Employees shall be entitled to receive payment of awards under the Plan in accordance with this Section 13. Awards under this Section 13 are not required to comply with Section 7 of the Plan or with the provisions of Section 162(m) of the Code.   (b) If a Change in Control occurs after Incentive Awards for a particular Year have been determined by the Committee in accordance with the Plan, but before the payment of such awards, then such Incentive Awards shall be paid as promptly as reasonably practicable, but not more than 30 days, after such Change in Control.   (c) If a Change in Control occurs before Incentive Awards for such Year have been determined by the Committee,                (i) each individual who was a Covered Employee at the end of such Year shall be entitled to receive an award under this Section 13(c)(i) for such Year in an amount at least equal to the greater of (A) the average of such individual's bonuses under the Company's Management Incentive Plan and any comparable bonuses under any successor plan thereto (including the Plan) for each Year during the three preceding Years in which the individual participated in such plan, or (B) the Covered Employee's Target Award, and                (ii) each individual whose employment terminated during such Year as a result of retirement, disability, or death and who was a Covered Employee at the time of such termination shall be entitled to receive an award under this Section 13(c)(ii) for such partial Year in an amount at least equal to the greater of (A) the average of such individual's bonuses under the Company's Management Incentive Plan and any comparable bonuses under any successor plan thereto (including the Plan) for each Year during the three preceding Years in which the individual participated in such plan, or (B) the Covered Employee's Target Award, multiplied in either case by a fraction the numerator of which is the number of months (whole or partial) in such Year through the date of such termination and the denominator of which is 12.   (d) If such Change in Control occurs before the designation of Covered Employees for such Year, the Covered Employees designated for the previous Year as in effect at the end of such previous Year shall be applicable and shall be used in calculating awards provided for under Section 13(c).   (e) If, after the occurrence of a Change in Control, the Plan is continued in effect without material amendment and the Board of Directors and the Committee confirm that the Plan will be interpreted and administered substantially in accordance with past practices, then payment of awards to which individuals may become entitled under subparagraph (c) of this Section 13 shall be made in accordance with Section 10 above. If, however, the Plan is terminated, suspended or materially amended, or if the Board of Directors and the Committee do not so confirm after the occurrence of a Change in Control, then payment of awards to which individuals may become entitled under subparagraph (c) of this Section 13 shall be made as promptly as practicable, but not more than 30 days, after such Change in Control.   (f) In the event of a Change in Control, nothing in this Section 13 shall preclude the payment of Incentive Awards under the Plan or otherwise in an amount in excess of the amount required to be paid under this Section 13.   (g) The Company shall promptly reimburse an individual entitled to an Incentive Award or other awards under this Section 13 for all legal fees and expenses reasonably incurred in successfully seeking to obtain or enforce any right or benefit provided under this Section 13. 14. Unfunded Plan                  The Plan shall be an unfunded plan. Benefits under the Plan shall be paid from the general assets of the Corporation. The Corporation may establish a trust pursuant to a trust agreement and make contributions thereto for the purpose of assisting the Corporation in meeting its obligations hereunder. Any such trust agreement shall contain procedures to the following effect:   (a) In the event of the insolvency of the Corporation, the trust fund will be available to pay the claims of any creditor of the Corporation to whom a distribution may be made in accordance with state and federal bankruptcy laws. The Corporation shall be deemed to be "insolvent" if the Corporation is subject to a pending proceeding as a debtor under the Federal Bankruptcy Code (or any successor federal statute) or any state bankruptcy code. In the event that the Corporation becomes insolvent, the Board of Directors and chief executive officer of the Corporation shall notify the trustee of the event as soon as practicable. Upon receipt of such notice, or if the trustee receives other written allegations of the Corporation's insolvency, the trustee shall cease making payments of benefits from the trust fund, shall hold the trust fund for the benefit of the Corporation's creditors, and shall take such steps as are necessary to determine within 30 days whether the Corporation is insolvent. In the case of the trustee's actual knowledge of or other determination of the Corporation's insolvency, the trustee will deliver assets of the trust fund to satisfy claims of the Corporation's creditors as directed by a court of competent jurisdiction.   (b) The trustee shall resume payments of benefits under the trust agreement only after the trustee has determined that the Corporation is not insolvent (or is no longer insolvent, if the trustee had previously determined the Corporation to be insolvent) or upon receipt of an order of a court of competent jurisdiction requiring such payment. If the trustee discontinues payment of benefits pursuant to clause (a), above, and subsequently resumes such payment, the first payment on account of a Covered Employee following such discontinuance shall include an aggregate amount equal to the difference between the payments which would have been made on account of such Covered Employee by the Corporation during any such period of discontinuance, plus interest on such amount at a rate equivalent to the net rate of return earned by the trust fund during the period of such discontinuance. 15. Termination, Suspension and Amendment   (a) The Board of Directors may at any time and from time to time alter, amend, suspend or terminate the Plan; provided, however, that no provision of the Plan relating to a Change in Control nor any definition of a term used in any such provision may be altered, amended, suspended, or terminated after the occurrence of a Change in Control and further provided that unless the Board of Directors specifically provides otherwise, any revision or amendment that would cause the Plan to fail to comply with the requirements of any applicable law, regulation or rule if such amendment were not approved by the shareholders of the Company shall not be effective unless and until such shareholder approval is obtained.   (b) No amendment, suspension, or termination of the Plan shall adversely affect any right or obligation with respect to an Incentive Award theretofore made, or required to be made after the occurrence of a Change in Control, including without limitation, the right to receive payment of Incentive Awards in accordance with Section 13 above. 16. No Right to Employment or Participation   (a) No provision of the Plan nor any action taken by the Committee or the Company pursuant to the Plan shall give or be construed as giving any salaried employee of the Corporation any right to be retained in the employ of the Company or of any Subsidiary, or affect or limit the right of the Company to terminate such employment.   (b) No employee of the Corporation shall have the right to be selected to participate in the Plan. 17. Legal Construction   (a) If any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.   (b) The Plan and all Incentive Awards or other awards under the Plan shall be construed in accordance with and governed by the laws of the State of New Jersey (without regard to legislative or judicial conflict of law rules of any state), except to the extent superseded by federal law.                  IN WITNESS WHEREOF, the Company has caused its duly authorized officers to adopt the Vulcan Materials Company Executive Incentive Plan this 26th day of March, 2001.     VULCAN MATERIALS COMPANY By:         /s/ Donald M. James                                Donald M. James   Chairman and Chief Executive Officer ATTEST: By:         /s/ William F. Denson, III                       William F. Denson, III                         Secretary  
                    (Hong Kong S.A.R. = Hong Kong Special Administration Region)             DISTRIBUTION AGREEMENT between Siemens Aktiengesellschaft, Berlin and Munich - hereinafter referred to as "Siemens" -     and     U.S.-China Industrial Exchange, Inc., Bethesda, Maryland - hereinafter referred to as "the Distributor" -       - Siemens and the Distributor hereinafter referred to individually as "a Party" and collectively as "the Parties" - -2-   Preamble WHEREAS Siemens has appointed Siemens Ltd., China, Beijing (hereinafter referred to as SLC) the sole agent for products, systems and services of certain Siemens Groups in the People's Republic of China and WHEREAS Siemens has granted SLC the exclusive right to market and coordinate the sale of Contractual Products in the People's Republic of China, and WHEREAS the Parties agree to have certain rights exercised by the Distributor, the Parties hereby conclude the following Agreement:   1. Subject of the Agreement 1.1 Siemens hereby authorizes the Distributor to mediate and sell contractual Products in the Territory as defined below. 1.2 The Territory is the People's Republic of China excluding Hong Kong S.A.R. 1.3 Contractual Products are the products, systems and services of the Siemens Groups as listed in Annex 1 . 1.4 The rights granted for Contractual Products under Subsection 1.1 above are exclusive. Siemens retains the right to sell Contractual Products in the Territory, as provided in Subsection 8.2. 1.5 This Agreement shall neither bind Siemens in any way to accept any orders nor confer to the Distributor any right or authority to obligate Siemens to accept orders. 1.6 The Distributor shall not assume obligations in the name of or on the account of Siemens and shall not make any representations or warranties on behalf of Siemens, except as expressly authorized by Siemens in writing. 1.7 The Distributor shall be deemed at all times to be an independent contractor and nothing contained herein shall be deemed to create the relationship of employer and employee, partnership or joint venture between the Distributor and Siemens or SLC. 1.8 Distributor may appoint its wholly owned subsidiary companies to undertake Distributor's obligations pursuant to this Agreement, provided, however, that Distributor continues to remain liable for performance of its obligations under this Agreement. Siemens has to approve in written. Approval will not be unreasonably withheld. Stipulations made under this agreement also apply for Chindex's wholly owned subsidiary companies.   2. Sales Activities 2.1 The Distributor shall use its best efforts to promote, mediate and sell Contractual Products in the Territory. The Distributor shall maintain the organization necessary to ensure optimum sales activity for Contractual Products. For this purpose, the Distributor shall, among other things: 2.1.1 maintain a stock of Contractual Products for demonstration purposes commensurate with the expected business; and 2.1.2 set up maintenance workshop facilities and showrooms corresponding to the requirements of the business; 2.1.3 provide adequate technical service for regular maintenance and repair of Contractual Products in the Territory, regardless of when a how these products have been brought into the Territory, and maintain a stock of spare parts sufficient to satisfy customer demand; -3-   2.1.4 maintain adequate installation, erection and commissioning capabilities. 2.2 Siemens shall furnish the Distributor with product lists and other sales literature in appropriate quantity in English, if available. Furthermore, Siemens shall assist the Distributor, upon request, to the extent feasible in producing special sales literature according to the terms of a separate agreement. 2.3 The Parties shall agree upon a marketing and sales plan in which they shall jointly define the quarterly and annual sales targets/quotas for the Distributor in a separate written agreement which has to be duly signed by the parties until the end of September of each calendar year. At Siemens' request, such sales targets are to be reviewed on a quarterly basis.   3. Use of the Name Siemens and of the Trademark SIEMENS and other Trademarks 3.1 No reference to Siemens shall be made on the Distributor's stationery, visiting cards, sales promotional or other written material without the prior written approval of Siemens. 3.2 Subject to revocation by Siemens at any time, the Distributor shall be permitted to use the trademark SIEMENS and other trademarks registered in Siemens' name for advertising and promotional purposes, provided that the Distributor observes the applicable Siemens directives and uses only those trademark designs approved in writing in advance by Siemens. 3.3 Upon termination of this Agreement, the Distributor shall immediately cease to use in any manner whatsoever the name Siemens and the trademark SIEMENS, as well as any other trademark in which Siemens has any rights.   4. Advertising 4.1 The Distributor shall advertise and promote Contractual Products in a manner intended to achieve optimum development of the business and in accordance with Siemens' advertising directives. The Distributor shall obtain the written approval of Siemens prior to the implementation of any major advertising campaign. 4.2 Following agreement by the Parties, Siemens shall advise the Distributor concerning planning, organization and implementation of advertising for Contractual Products. In addition, at the Distributor's cost, Siemens shall supply the Distributor with sufficient samples of advertising material and other requisite material needed for the Distributor's own production of advertising material. 4.3 Siemens shall furnish the Distributor advertising material relating to Contractual Products according to terms to be agreed upon.   5. Reporting and Records 5.1 The Distributor shall make regular reports to Siemens and SLC in the manner and at the intervals requested, in any event on a quarterly basis, concerning the business with Contractual Products, target review, the market situation, business prospects, activities of competitors and other pertinent developments. In case sales performance according to paragraph 2.3 is short of expectations, Siemens, SLC and Chindex will jointly analyze reasons thereof and common corrective actions shall be designed in view of along-term cooperation. 5.2 Distributor shall maintain a complete record of all sales of Contractual Products, showing customer name, date of sale, instrument model and serial number, and copies of sales order acknowledgments and invoices for all Contractual Products. Distributor shall also maintain a complete record of all service calls relating to Contractual Products, showing customer name, date     -4- of call, instrument model and serial number, nature of call, service work performed and other information as Siemens may reasonably request. The records referred to in this Section, or copies thereof, shall be supplied to Siemens upon its request. The records may be used by Siemens for such purposes as it deems useful in its discretion.   6. Training of Personnel Subject to prior agreement concerning the number of trainees and the kind, extent, location and duration of their training, Siemens shall train suitably qualified personnel of the Distributor. Unless otherwise agreed upon, the Distributor shall bear the costs for the trainees, including travel and living expenses.   7. Inquiries 7.1 SLC shall forward direct inquiries from the Territory to the Distributor for further action. 7.2 The Distributor shall forward to Siemens any and all inquiries regarding Contractual Products that are received from countries located outside the Territory and shall forward to SLC any and all inquiries from within the Territory regarding products, systems and services not defined in Annex 1. The Distributor, however, shall have no claim to compensation from the aforementioned referrals.   8. Transactions 8.1 Transactions concerning Contractual Products shall be performed by the Distributor in its own name and on its own account or by Siemens on a commission basis. Transactions on a commission basis are those which Siemens effects in the Territory. 8.2 Siemens reserves the right to perform transactions on a commission basis, e.g., in cases involving unusual technical or financial risks, or if required by law or requested by governmental authorities or international institutions. Or if, the Contractual Products are part of an order the substantial part of which involves other products of Siemens or its affiliated companies or if the Contractual Products are sold under a Softloan other than US Exim.   9. Performance of Transactions on Distributor's Own Account, Spare Parts 9.1 Distributor shall place its orders directly with Siemens or an affiliated company designated by Siemens, and all correspondence concerning orders, deliveries and payments shall be addressed to Siemens or the aforementioned affiliated company. It is understood that the affiliated company for the purpose of this Agreement shall be Acuson Corporation at 1220 Charleston Road, Mountain View, CA 94043, United States of America as well as Siemens Ltd. China (and affiliated companies). 9.2 Prices for Contractual Products purchased by the Distributor are quoted in regularly updated price lists or in the offers made by Siemens in individual cases. 9.3 The Distributor is entitled to set its own resale prices and terms. Consistent with an optimal development of the business, taking to account market capacity and product competitiveness -5- 9.4 The delivery of Contractual Products by Siemens to the Distributor is subject to the conditions specified in Annexes 2, 3, 4 and 5, namely: * "General Conditions for the Supply and Delivery - Exports - Medical Solutions", * "General Conditions for Installation - Exports - Medical Solutions",   * "Special Warranty Terms for High-Vacuum Elements (HVE) - Export - Medical Solutions", "Supplementary Regulations for Medical Solutions - Product Safety, Product Observation and ISO Certification", Unless otherwise provided for in this Agreement or in other special conditions, as agreed upon, applicable to certain products, systems or services, types of business or special transactions. 9.5 Payment shall be remitted to Siemens in accordance with the general or special terms of payment agreed upon with the Distributor. Payment shall be deemed to have been effected on the day on which Siemens is unconditionally free to dispose of the paid amount at a paying office chosen by Siemens within or outside of the Federal Republic of Germany. Siemens shall, at any time, be entitled to assign to third parties any payment claims arising from this Agreement. The Distributor hereby agrees to such possible assignment. 9.6 Exchange parts are subject to Siemens' standard procedure, which will be provided separately.   10. Performance of Transactions on a Commission Basis 10.1 Siemens shall inform the Distributor in those instances, as described in Subsection 8.2, in which Siemens intends to perform transactions on a commission basis. 10.2 In the event transactions are performed on a commission basis, the Distributor agrees to use its best efforts to assist Siemens and to make available to Siemens its organization and connections. 10.3 In special cases where the Distributor concludes contracts or agreements on behalf of Siemens, such contracts or agreements require the prior written consent and power of attorney of Siemens.   11. Commissions, Product Support and Services 11.1 The Distributor shall receive for transactions on a commission basis a commission to be agreed upon on a case-by-case basis in accordance with the extent of its contribution, the nature and volume of the transaction and the price realized. Only insofar as the Distributor has contributed to a transaction shall a commission be allowed. No commission shall be allowed with respect to costs such as freight, packing, insurance, financing, traveling costs, daily allowances and the like. 11.2 All efforts and expenditures of the Distributor in bringing about a sale, contributing to the performance under the transaction and providing subsequent service, as well as any expenses incurred by the Distributor in connection with the performance of this Agreement, shall be deemed to be compensated by the commission. 11.3 No commission shall be allowed if Contractual Products are imported into the Territory: 11.3.1 as free-of-charge replacements; 11.3.2 for investment purposes of Siemens or its directly- or indirectly-associated companies; -6- 11.3.3 for production requirements of directly- or indirectly-associated companies of Siemens; 11.3.4 as supplies under a manufacturing license agreement; or 11.3.5 by third parties. 11.4 Unless otherwise agreed upon in individual cases, the commission shall be paid in the currency in which the order will be settled and shall become due upon complete payment of the order and after the release of all guarantees, bonds and sureties related to the order. 11.5 Irrespective of Siemens selling Contractual Products in the Territory as per Subsection 8.2. Distributor shall perform product support, technical support, service, installation, warranty, modifications and after sales support relevant for Contractual Products sold in the Territory.   12. Non-Competition 12.1 The Distributor shall not, without the prior written consent of Siemens: 12.1.1 copy Contractual Products or parts thereof; 12.1.2 develop, manufacture, act as intermediary for, or distribute products that compete directly with Contractual Products or parts thereof; 12.2 Without the prior written consent of Siemens, the Distributor shall not promote, mediate or sell Contractual Products outside the Territory.   13. Third Party Claims 13.1 The Distributor shall inform SLC and Siemens immediately in the event a third party, directly or indirectly, brings a claim against Siemens or SLC, including but not limited to claims where the Distributor intends to claim indemnification from Siemens or SLC. The Distributor shall not of its own accord acknowledge such claims by third parties. The Distributor shall assist Siemens and/or SLC in defending such claims, including but not limited to claims arising in a lawsuit, and shall act only in accordance with the written instructions of Siemens. Siemens shall reimburse the Distributor for expenses incurred in such defense. 13.2 If a third party raises well-founded claims against the Distributor on the grounds of or in connection with an infringement of intellectual property rights because of the delivery of Contractual Products, Siemens shall be obliged, at its own discretion and cost and to the exclusion of any further liability on the part of Siemens, either: 13.2.1 to acquire the rights to use from the person or entity entitled to grant such rights; or 13.2.2 to modify the infringing product parts so as not to infringe upon the said rights; or 13.2.3 to replace the infringing product parts with non-infringing parts; or 13.2.4 if the above is not reasonably achievable, to take back the products in question against reimbursement of the sales price, less depreciation. Claims shall be deemed well founded only if they are acknowledged a approach by Siemens or finally adjudicated as such in a legal proceeding defended by the Distributor at the instruction of Siemens.         -7- 14. Inventions and Intellectual Property Rights The Distributor shall ensure that Siemens is promptly informed whenever the Distributor or any of its employees acquires the right to dispose of inventions, industrial property rights or other intellectual property rights concerning Contractual Products, and the Distributor shall first offer Siemens the right to acquire the rights in such inventions, industrial property rights or other intellectual property rights.   15. Confidentiality Except as necessary for the performance of this Agreement, the Distributor shall not disclose to third parties any technical or marketing information (e.g. drawings, internal interfaces, software) of a confidential nature which it may acquire in the course of its cooperation with Siemens and/or SLC, and shall also prevent the aforementioned information from being disclosed to or used by unauthorized persons or parties. Where such information is permitted to be passed on to customers, the customer shall be bound by a substantially similar obligation. The terms of this provision shall survive the termination of this Agreement.   16. Assignability The Distributor shall neither assign, transfer nor delegate any rights arising from this Agreement to third parties without the prior written consent of Siemens except otherwise provided in this Agreement.   17. Limitation of Liability Siemens and SLC shall be liable with respect to the Contractual Products in accordance with the general terms and conditions specified in Subsection 9.4. Any further liability under this Agreement, in particular for indirect or consequential damages or loss of profit shall be excluded except where liability is legally compulsory.   18. Registration Siemens will register in its name all Contractual Products in the Territory according to Chinese legal requirements as necessary. Siemens will pay all fees and expenses, which are directly related thereto. Siemens will make registration licenses available to the Distributor.   19. Actions upon Termination 19.1 Upon termination of the Agreement, the Distributor shall return to Siemens and SLC without delay all business records and any copies thereof (in particular, but not limited to, technical data and drawings, price lists, advertising material) which have been made available to it by Siemens and SLC. Notwithstanding the foregoing, insofar as such business records remain necessary for the execution of orders already received or offers which were submitted as binding, the business records shall be handed over to SLC and Siemens immediately after the performance of said order or offer has been completed. 19.2 Upon termination of the Agreement for whatever reason, the Distributor shall be entitled to those commissions not yet due for transactions concluded before the termination date of this Agreement, to be calculated according to the extent of the Distributor's contribution a the termination date and taking into account the services that will not be rendered by the Distributor as a consequence -8- of the termination of the Agreement, to be paid according to the provisions of Subsection 11.4. Additional claims for commissions shall be excluded. 19.3 Upon termination or expiration of this Agreement, Siemens shall, at a price in U.S.Dollars equivalent to the restvalue of stocked Contractual Products repurchase from the Distributor all unsold stocked Contractual Products to which the Distributor and/or the Distributor's Subsidiaries hold title and which have been purchased pursuant to Siemens' recommendation for spare parts and demonstration stock. The amount actually paid for the stock shall be net of amounts owed for Products by Distributor. 19.4 All other claims of the Distributor arising from or in connection with the termination of this Agreement shall be excluded.   20. Duration of Agreement, Termination 20.1 This Agreement shall become effective upon its signature and shall remain in effect for a period of 5 years based upon successful completion of yearly business objectives. Unless this agreement is terminated earlier as provided herein, this agreement can be extended for an additional successive year period if the parties mutually agree. For the purpose of this section 20, SLC and Siemens shall be considered as one Party, and Siemens shall represent SLC. In the event that the distributor fails to achieve at least ninety percent (90%) of the projected annual sales amount in a given year as defined in paragraph 2.3, there will be a six (6) month probation period with specific objectives, which shall enable the distributor to implement corrective measures according to paragraph 5.1. Siemens shall have the right to terminate this Agreement prematurely upon (30) days written notice if the Distributor fails to implement the corrective measures and achieve the objectives during the 6 months probation period. 20.2 Notwithstanding the provisions of Subsection 20.1, either Party is entitled to terminate this Agreement prematurely and with immediate effect for important reasons. An important reason shall be deemed to exist, for example, if: 20.2.1 there exists a Force Majeure or other circumstance beyond a Party's reasonable control which hinders the Party's performance under this Agreement for more than six (6) months; 20.2.2 the Distributor violates the provisions of Section 12; 20.2.3 a petition is filed against a Party under the provisions of the laws of insolvency or bankruptcy; 20.2.4 the Distributor's legal or ownership status or management substantially changes in such a way that Siemens' adherence to this Agreement cannot reasonably be expected; 20.2.5 a Party is in serious arrears with respect to its payment commitments or otherwise materially breaches this Agreement so that the other Party's adherence to this Agreement cannot reasonably be expected; or 20.2.6 Siemens decides to discontinue the sale of all or individual Contractual Products prior to the end of the duration of the Agreement as per Subsection 20.1. -9- 20.3 Furthermore, Siemens shall have the right to terminate this Agreement prematurely in the event: 20.3.1 the Distributor acquires, directly or indirectly, an interest in a company competing with Siemens or concludes contracts with such company giving the Distributor a dominant influence over such company; or 20.3.2 a company competing with Siemens acquires, directly or indirectly, an interest in the Distributor. The Distributor agrees to inform Siemens immediately by registered letter of the identity of SLC competing with Siemens in which the Distributor has acquired an interest or which has acquired an interest in the Distributor, and when such interest has been acquired. In that case, Siemens shall decide whether it will continue the distributor relationship. Siemens shall notify the Distributor of its decision within a period of thirty (30) days after receipt of the letter from the Distributor. In the event Siemens decides to terminate this Agreement, the termination shall be effective as of its notification to the Distributor. 20.4 If the Distributor intends to act as agent or distributor of electric and electronic products of a third party, other than those which compete with Contractual Products, it shall immediately inform Siemens thereof. In such case, the provisions of Subsection 20.3 shall apply. 20.5 Notice of termination shall be given by registered letter. If transmittal by registered letter is not possible, any other form of transmittal shall be deemed sufficient. 20.6 The Distributor shall ensure that, upon termination of this Agreement, all sub-agreements entered into by him shall be canceled such that, to the extent feasible, they expire on the date of termination of this Agreement.   21. Notices All notices which any of the Parties is required or desires to serve upon the others pursuant to the terms of this Agreement shall be in writing and shall be delivered to the following addresses: to the Distributor: U.S.-China Industrial Exchange, Inc. 7201 Wisconsin Avenue Suite 703 Bethesda, Maryland 20814 United States of America to SLC: Siemens Ltd., China Medical Solutions 7, Wangjing Zhonghuan Nan Lu Chaoyang District P.O.B. 8543 100015 Beijing People's Republic of China to Siemens Siemens Aktiengesellschaft CD S4 Wittelsbacherplatz 2 D-80333 München Federal Republic of Germany -10- 22. Arbitration All disputes arising out of or in connection with the present Agreement, including any question regarding its existence, validity or termination, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce, Paris, by three (3) arbitrators appointed in accordance with the said Rules. Each party shall nominate one (1) arbitrator for confirmation by the competent authority under the applicable Rules (Appointing Authority). Both arbitrators shall agree on the third arbitrator within thirty (30) days. Should the two arbitrators fail, within the above time limit, to reach agreement on the third arbitrator, the latter shall be appointed by the Appointing Authority. If there are two or more defendants, any nomination of any arbitrator by or on behalf of such defendants must be by joint agreement between them. If such defendants fail, within the time limit fixed by the Appointing Authority, to agree on such joint nomination, the proceedings against each of them must be separated. The seat of arbitration shall be Zurich, Switzerland. The procedural law of this place shall apply where the Rules are silent. The language to be used in the arbitration proceeding shall be English.   23. Applicable Law The contractual relations between the Parties shall be governed by the provisions of this Agreement and its Annexes and all other agreements regarding its performance, and otherwise in accordance with the substantive law in force in the Federal Republic of Germany, excluding the provisions regulating commercial agents (section 84 through section 92c of the Handelsgesetzbuch). The application of the United Nations Convention on Contracts for the International Sale of Goods of April 11, 1980, shall be excluded. If not specified otherwise by the Parties, any trade terms used in the implementation of this Agreement shall be interpreted according to the International Terms defined by the ICC (International Chamber of Commerce, Paris) INCOTERIVIS in the version applicable at the time of the transaction.   24. Compliance with the Law The Distributor shall strictly comply with all laws and regulations regarding the performance of the activities applicable to the Distributor. Without limitation, the Distributor agrees to comply with the requirements of anti-corruption law applicable to the Parties. 25. Compliance with Export Control Regulations The Parties undertake to comply with all export control regulations of the national authorities, the authorities in the Federal Republic of Germany, in the European Community and in the United States of America. In order to conduct export control checks the Distributor, upon request by Siemens, shall provide Siemens with all information pertaining to the ultimate customer and the end use of the Contractual Products, as well as any existing export control restrictions regarding the Contractual Products. If the possibility cannot be excluded that the Contractual Products may be used in combination with arms-related goods or for the production of such goods, the Distributor shall not pursue such business. Siemens will not perform deliveries, orders and other obligations under this Agreement if that performance is hindered by the applicable export laws and regulations ions of the national authorities, the authorities of the Federal Republic of Germany, the Europe Community the United States of America or of other countries. -11- 26. Written Form Modifications of or amendments to this Agreement shall be valid only when made in writing. This procedure may only be waived by written instrument.   27. Legally Void or Unfeasible Provisions Should individual provisions of this Agreement be legally void or unfeasible, the validity of the remaining Agreement shall not be affected thereby. In such a case the Parties shall by mutual agreement substitute for the provisions concerned a provision considered substantially equivalent in economic terms. Munich, October I I, 2001 Siemens Aktiengesellschaft U.S-China Industrial Exchange, Inc.         /S/ Tobias Reisner /S/ Roberta Lipson     Acknowledged: Siemens Ltd., China, 25th of September 2001     ____________________________________________ Annexes l - 5   -12- Annex 1 to the Distribution Agreement, dated 25th of September 2001, Beijing between Siemens Aktiengesellschaft, Berlin and Munich and U.S-China Industrial Exchange, Inc., Bethesda, Maryland Contractual Products referred to in Subsection 1.3 include: * * * * * * * * * * * * The products, systems and services for Ultrasound Colourflow of the Siemens Group Medical Solutions (Med) Currently defined as: - Semolina Sienna family - Sonoline Omnia family - Sonoline Elegra family - Acuson Sequoia family - Acuson Aspen family - Acuson Cypress family
CHANGE IN CONTROL AGREEMENT FOR MICHAEL A. VOLKEMA EXHIBIT 10(q) CHANGE IN CONTROL AGREEMENT FOR MICHAEL A. VOLKEMA SEVERANCE AGREEMENT THIS AGREEMENT is entered into as of March 30, 2001, by and between Herman Miller, Inc., a Michigan corporation, and Michael A. Volkema (the “Executive”).       WHEREAS, the Executive currently serves as a key employee of the Company (as defined in Section 1) and his services and knowledge are valuable to the Company in connection with the management of one or more of the Company’s principal operating facilities, divisions, departments or subsidiaries; and       WHEREAS, the Board (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure the Executive’s continued services and to ensure the Executive’s continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 1) of the Company, without concern as to whether the Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage the Executive’s full attention and dedication to the Company, the Board has authorized the Company to enter into this Agreement.       NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and the Executive hereby agree as follows: 1.   Definitions. As used in this Agreement, the following terms shall have the respective meanings set forth below:   (a)   “Board” means the Board of Directors of the Company.     (b)   “Bonus Reserve Account” has the meaning stated in the Incentive Cash Bonus Plan.     (c)   “Cause” means (1) a material breach by the Executive of those duties and responsibilities of the Executive which do not differ in any material respect from the duties and responsibilities of the Executive during the ninety (90) day period immediately prior to a Change in Control (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on the Executive’s part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach or (2) the commission by the Executive of a felony involving moral turpitude.     (d)   “Change in Control” means:     (1)   the acquisition by any Person of beneficial ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 20 percent or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of a conversion or exchange privilege in respect of outstanding convertible or exchangeable securities unless such outstanding convertible or exchangeable securities were acquired directly from the Company), (B) any acquisition by the Company, (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the 64 --------------------------------------------------------------------------------       Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation involving the Company, if, immediately after such reorganization, merger or consolidation, each of the conditions described in clauses (i), (ii) and (iii) of subsection (3) of this Section (1)(c) shall be satisfied; and provided further that, for purposes of clause (B), if any Person (other than the Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company) shall become the beneficial owner of 20 percent or more of the Outstanding Company Common Stock or 20 percent or more of the Outstanding Company Voting Securities by reason of an acquisition by the Company and such Person shall, after such acquisition by the Company, become the beneficial owner of any additional shares of the Outstanding Company Common Stock or any additional Outstanding Company Voting Securities and such beneficial ownership is publicly announced, such additional beneficial ownership shall constitute a Change in Control;     (2)   individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided, however, that any individual who becomes a director of the Company subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board; and provided further, that no individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to have been a member of the Incumbent Board;     (3)   consummation of a reorganization, merger or consolidation unless, in any such case, immediately after such reorganization, merger or consolidation, (i) more than 60 percent of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and more than 60 percent of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation and in substantially the same proportions relative to each other as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than the Company, any employee benefit plan [or related trust] sponsored or maintained by the Company or the corporation resulting from such reorganization, merger or consolidation [or any corporation controlled by the Company] and any Person which beneficially owned, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 20 percent or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20 percent or more of the then outstanding shares of common stock of such corporation or 20 percent or more of the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of directors and (iii) at least a majority of the members of the board of 65 --------------------------------------------------------------------------------       directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such reorganization, merger or consolidation; or     (4)   consummation of (i) a plan of complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, immediately after such sale or other disposition, (A) more than 60 percent of the then outstanding shares of common stock thereof and more than 60 percent of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such sale or other disposition and in substantially the same proportions relative to each other as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan [or related trust] sponsored or maintained by the Company or such corporation [or any corporation controlled by the Company] and any Person which beneficially owned, immediately prior to such sale or other disposition, directly or indirectly, 20 percent or more of the Outstanding Company Common Stock or the Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20 percent or more of the then outstanding shares of common stock thereof or 20 percent or more of the combined voting power of the then outstanding securities thereof entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale of other disposition.     (e)   “Company” means Herman Miller, Inc., a Michigan corporation.     (f)   “Date of Termination” means (1) the effective date on which the Executive’s employment by the Company terminates as specified in a prior written notice by the Company or the Executive, as the case may be, to the other, delivered pursuant to Section 11 or (2) if the Executive’s employment by the Company terminates by reason of death, the date of death of the Executive.     (g)   “Deferred Compensation Plan” means the Herman Miller, Inc. Key Executive Deferred Compensation Plan.     (h)   “Earned Bonus” has the meaning stated in the Incentive Cash Bonus Plan.     (i)   “Exchange Act” means the Securities Exchange Act of 1934, as amended.     (j)   “Good Reason” means, without the Executive’s express written consent, the occurrence of any of the following events after a Change in Control:   (1)   any of (i) the assignment to the Executive of any duties inconsistent in any material respect with the Executive’s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control, (ii) a change in the Executive’s reporting responsibilities, titles or offices with the Company as in effect immediately prior to such Change in Control or (iii) any removal or involuntary termination of the Executive from the Company otherwise than as expressly permitted by this Agreement or any failure to re-elect the Executive to any position with the Company held by the Executive immediately prior to such Change in Control; 66 --------------------------------------------------------------------------------   (2)   a reduction by the Company in the Executive’s rate of annual base salary or annual Target Bonus as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;     (3)   any requirement of the Company that the Executive be based at a location in excess of 50 miles from the facility which is the Executive’s principal business office at the time of the Change in Control;     (4)   the failure of the Company to (i) continue in effect any employee benefit plan or compensation plan in which the Executive is participating immediately prior to such Change in Control, unless the Executive is permitted to participate in other plans providing the Executive with substantially comparable benefits, or the taking of any action by the Company which would adversely affect the Executive’s participation in or materially reduce the Executive’s benefits under any such plan, or (ii) provide the Executive and the Executive’s dependents welfare benefits (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive immediately prior to such Change in Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies; or     (5)   the failure of the Company to obtain the assumption agreement from any successor as contemplated in Section 10(b).         For purposes of this Agreement, an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive shall not constitute Good Reason.     (k)   “Incentive Cash Bonus Plan” means the Herman Miller, Inc. Incentive Cash Bonus Plan which became effective September 29, 1998.     (l)   “Nonqualifying Termination” means a termination of the Executive’s employment (1) by the Company for Cause, (2) as a result of the Executive’s death or (3) by the Company due to the Executive’s absence from his duties with the Company on a full-time basis for at least 180 consecutive days as a result of the Executive’s incapacity due to physical or mental illness. The term “Nonqualifying Termination” does not include a termination of the Executive’s employment by the Executive for any reason or no reason following a Change of Control.     (m)   “Person” means any individual, entity or group including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.     (n)   “Silver Parachute Plan” means the Herman Miller, Inc. Plan for Severance Compensation After Hostile Takeover.     (o)   “Target Bonus” has the meaning stated in the Incentive Cash Bonus Plan.     (p)   “Termination Period” means the period of time beginning with a Change in Control and ending on the earlier to occur of (1) 24 months following such Change in Control and (2) the Executive’s death. 67 -------------------------------------------------------------------------------- 2.   Obligations of the Executive.   (a)   The Executive agrees that in the event any Person attempts a Change in Control, he shall not voluntarily leave the employ of the Company without the Good Reason specified in Section 1(j)(2) until (1) such attempted Change in Control terminates or (2) if a Change in Control shall occur, 180 days following such Change in Control. For purposes of clause (1) of the preceding sentence, Good Reason shall be determined as if a Change in Control had occurred when such attempted Change in Control became known to the Board.     (b)   The following definitions apply to the remainder of this Section 2:     (1)   “Affiliate” means and includes any person or entity which controls a party, which such party controls or which is under common control with such party.     (2)   “Competing Business” means a business which engages or is making plans to engage, in whole or in part, in the manufacturing, marketing, distribution or sale of products which are competitive with any products manufactured, distributed, marketed or sold by the Company during the Restricted Period.     (3)   “Competing Products” means products manufactured by a Competing Business.     (4)   “Control” means the power, direct or indirect, to direct or cause the direction of the management and policies of a person or entity through voting securities, contract or otherwise.     (5)   “Restricted Period” means the period of the Executive’s employment with the Company and a period of three years after the Date of Termination.     (c)   Executive acknowledges and agrees that (i) through his continuing services to the Company, he will learn valuable trade secrets and other proprietary information relating to the Company’s business, (ii) the Executive’s services to the Company are unique in nature, (iii) the Company’s business is international in scope and (iv) the Company would be irreparably damaged if the Executive were to provide services to any person or entity in violation of the restrictions contained in this Section 2(c). Accordingly, as an inducement to the Company to enter into this Agreement, Executive agrees that if the Executive is entitled to and does receive a payment pursuant to Section 3(a)(2) of this Agreement, neither Executive nor any Affiliate of the Executive shall during the Restricted Period, directly or indirectly, either for himself or for any other person or entity:     (1)   anywhere in the world in which the Company is then doing business, engage or participate in, or assist, advise or be connected with (including as an employee, owner, partner, shareholder, officer, director, advisor, consultant, agent or [without limitation by the specific enumeration of the foregoing] otherwise), or permit his name to be used by or render services for, any person or entity engaged in a Competing Business; provided, however, that nothing in this Agreement shall prevent Executive from acquiring or owning, as a passive investment, up to two percent (2%) of the outstanding voting securities of an entity engaged in a Competing Business which are publicly traded in any recognized national securities market;     (2)   take any action, in connection with a Competing Business, which might divert from the Company or an Affiliate of the Company any opportunity which would be within the scope of the Company’s or such Affiliate’s then business; 68 --------------------------------------------------------------------------------   (3)   solicit or attempt to solicit any person or entity who is or has been (A) a customer of the Company at any time during the Restricted Period to purchase Competing Products from any person or entity (other than the Company) or (B) a customer, supplier, licensor, licensee or other business relation of the Company at any time during the Restricted Period to cease doing business with the Company; or     (4)   solicit or hire any person or entity who is a director, officer, employee or agent of the Company or any Affiliate of the Company to perform services for any entity other than the Company and its Affiliates.     (d)   Executive agrees that any violation by the Executive of Section 2(c) of this Agreement would be highly injurious to the Company and would cause irreparable harm to the Company. By reason of the foregoing, Executive consents and agrees that if the Executive violates any provision of Section 2(c) of this Agreement, the Company shall be entitled, in addition to any other rights and remedies that it may have, to apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any continuing violation of, the provisions of such section. In the event Executive breaches a covenant contained in Section 2(c) of this Agreement, the Restricted Period applicable to Executive with respect to such breached covenant shall be extended for the period of such breach. Executive also recognizes that the territorial, time and scope limitations set forth in Sections 2(c), are reasonable and are properly required for the protection of the Company and in the event that any such territorial, time or scope limitation is deemed to be unreasonable, by a court of competent jurisdiction, the Company and Executive agree, and Executive submits, to the reduction of any or all of said territorial, time or scope limitations to such an area, period or scope as said court shall deem reasonable under the circumstances.     (e)   Termination of the Executive’s employment shall have no effect on the continuing operation and enforceability of Sections 2(b), 2(c) or 2(d) and each such section shall continue to be fully effective and enforceable after any such termination. 3.   Obligations of the Company Upon Termination of Employment.   (a)   If during the Termination Period the employment of the Executive shall terminate, other than by reason of a Nonqualifying Termination, then the Company shall pay to the Executive (or the Executive’s beneficiary or estate) within thirty (30) days following the Date of Termination, as compensation for services to the Company;     (1)   a cash amount equal to the sum of (i) the Executive’s base salary from the Company and its affiliated companies through the Date of Termination, to the extent not theretofore paid, (ii) the Executive’s Target Bonus for the Company’s fiscal year in which the Date of Termination occurs multiplied by a fraction, the numerator of which is the number of days in that fiscal year through the Date of Termination and the denominator of which is 365 or 366, as applicable, (iii) any positive balance in the Executive’s Bonus Reserve Account; and (iv) any compensation previously deferred by the Executive other than pursuant to the Deferred Compensation Plan or any tax qualified plan (together with any interest and earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid; plus     (2)   a lump-sum cash amount (subject to any applicable payroll or other taxes required to be withheld pursuant to Section 5) in an amount equal to (i) three times the Executive’s highest annual base salary from the Company and its affiliated companies in effect during the twelve (12) month period 69 --------------------------------------------------------------------------------   prior to the Date of Termination, plus (ii) three times the higher of (a) the average of the Executive’s Earned Bonus for the three fiscal years of the Company preceding the fiscal year in which the Change in Control occurs, or (b) the Executive’s Target Bonus for the fiscal year of the Company in which the Change in Control occurs; provided, however, that any amount to be paid pursuant to this Section 3(a)(2) shall be reduced by any other amount of severance relating to salary or bonus continuation to be received by the Executive upon termination of employment of the Executive under the Silver Parachute Plan or any other severance plan, policy or arrangement of the Company and any severance payments the Company is required to make pursuant to the requirements of any U.S. or foreign law or regulation.   (b)   If during the Termination Period the employment of the Executive shall terminate, other than by reason of a Nonqualifying Termination:     (1)   In addition to the payments to be made pursuant to Section 3(a), for a period of three years commencing on the Date of Termination, the Company shall continue to keep in full force and effect all policies of medical, accident, disability and life insurance with respect to the Executive and his dependents with the same level of coverage, upon the same terms and otherwise to the same extent as such policies shall have been in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as provided generally with respect to other peer executives of the Company and its affiliated companies, and the Company and the Executive shall share the costs of the continuation of such insurance coverage in the same proportion as such costs were shared immediately prior to the Date of Termination; provided that, if the Executive cannot continue to participate in the Company plans providing such benefits, the Company shall otherwise provide such benefits on the same after-tax basis as if continued participation had been permitted. Notwithstanding the foregoing, in the event the Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of the Executive’s eligibility, but only to the extent that the Company reimburses the Executive for any increased cost and provides additional benefits necessary to give the Executive the benefits provided hereunder.     (2)   All stock options, restricted awards, other equity based awards and all stock units credited to the Executive’s account under the Deferred Compensation Plan shall be fully vested. All stock options shall remain exercisable for a period of ninety days from the Date of Termination or the earlier expiration of their initial term; provided, that, if the Executive would be prohibited from exercising any stock option due to pooling of interests or other restraints imposed under applicable accounting rules or securities laws, such option shall remain exercisable for thirty days after such restriction ceases to apply.     (3)   To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies through the Date of Termination (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”). 70 --------------------------------------------------------------------------------   (c)   If during the Termination Period the employment of the Executive shall terminate by reason of a Nonqualifying Termination, then the Company shall pay to the Executive within thirty (30) days following the Date of Termination, a cash amount equal to the sum of (1) the Executive’s full annual base salary from the Company through the Date of Termination, to the extent not theretofore paid, and (2) the Other Benefits. 4.   Certain Additional Payments by the Company.   (a)   Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company or its affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement of otherwise, but determined without regard to any additional payments required under this Section 4) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.     (b)   Subject to the provisions of Section 4(c), all determinations required to be made under this Section 4, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company’s public accounting firm (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the Person effecting the Change in Control, the Executive shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 4, shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 4(c) and the Executive thereafter is required to make a 71 --------------------------------------------------------------------------------   payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.   (c)   The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30) days period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:     (1)   give the Company any information reasonably requested by the Company relating to such claim,     (2)   take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,     (3)   cooperate with the Company in good faith in order effectively to contest such claim, and     (4)   permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 72 --------------------------------------------------------------------------------   (d)   If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 4(c), the Executive becomes entitled to receive, and receives, any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 4(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 4(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 5.   Withholding Taxes. The Company may withhold from all payments due to the Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.   6.   Reimbursement of Expenses. If any contest or dispute shall arise under this Agreement involving termination of the Executive’s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse the Executive, on a current basis, for all legal fees and expenses, if any, incurred by the Executive in connection with such contest or dispute, together with interest thereon at a rate equal to the prime rate, as published under “Money Rates” in The Wall Street Journal from time to time, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives the Executive’s statement for such fees and expenses through the date of payment thereof; provided, however, that in the event the resolution of any such contest or dispute includes a finding denying, in total, the Executive’s claims in such contest or dispute, the Executive shall be required to reimburse the Company, over a period of twelve (12) months from the date of such resolution, for all sums advanced to the Executive pursuant to this Section 6.   7.   Operative Event. Notwithstanding any provision herein to the contrary, no amounts shall be payable hereunder unless and until there is a Change in Control at a time when the Executive is employed by the Company.   8.   Termination of Agreement.   (a)   This Agreement shall be effective on the date hereof and shall continue until terminated by the Company as provided in Section 8(b); provided, however, that this Agreement shall terminate in any event upon the earlier to occur of (i) termination of the Executive’s employment with the Company prior to a Change in Control and (ii) the Executive’s death.     (b)   The Company shall have the right prior to a Change in Control, in its sole discretion, pursuant to action by the Board, to approve the termination of this Agreement, which termination shall not become effective until the date fixed by the Board for such termination, which date shall be at least 120 days after notice thereof is given by the Company to the Executive in accordance with Section 11; provided, however, that no such action shall be taken by the Board during any period of time when the Board has knowledge that any Person has taken steps reasonably calculated to effect a Change in 73 --------------------------------------------------------------------------------   Control until, in the opinion of the Board, such Person has abandoned or terminated its efforts to effect a Change in Control; and provided further, that in no event shall this Agreement be terminated in the event of a Change in Control. 9.   Scope of Agreement. Nothing in this Agreement shall be deemed to entitle the Executive to continued employment with the Company or its subsidiaries and, if the Executive’s employment with the Company shall terminate prior to a Change in Control, then the Executive shall have no further rights under this Agreement; provided, however, that any termination of the Executive’s employment following a Change in Control shall be subject to all of the provisions of this Agreement.   10.   Successors; Binding Agreement.   (a)   This Agreement shall not be terminated by any merger or consolidation of the Company whether the Company is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred.     (b)   The Company agrees that concurrently with any merger, consolidation or transfer of assets referred to in Section 10(a), it will cause any successor or transferee unconditionally to assume, by written instrument delivered to the Executive (or his beneficiary or estate), all of the obligations of the Company hereunder. Failure of the Company to obtain such assumption prior to the effectiveness of any such merger, consolidation or transfer of assets shall be a breach of this Agreement and shall entitle the Executive to compensation and other benefits from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive’s employment were terminated following a Change in Control other than by reason of a Nonqualifying Termination. For purposes of implementing the foregoing, the date on which any such merger, consolidation or transfer becomes effective shall be deemed the Date of Termination.     (c)   This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amounts would be payable to the Executive hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by the Executive to receive such amounts or, if no person is so appointed, to the Executive’s estate. 11.   Notices.   (a)   For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed (1) if to the Executive, to _______________ and if to the Company, to 855 East Main Avenue, Zeeland, MI 49464, attention General Counsel, with a copy to the Secretary, or (2) to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.     (b)   A written notice of the Executive’s Date of Termination by the Company or the Executive, as the case may be, to the other shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, 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 74 --------------------------------------------------------------------------------   (iii) specify the termination date (which date shall be not less than fifteen (15) days after the giving of such notice). The failure by the Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder. 12.   Full Settlement; Resolution of Disputes.   (a)   The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment except to the extent provided in Section 3(b)(1).     (b)   If there shall be any dispute between the Company and the Executive in the event of any termination of the Executive’s employment, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause, that the Executive terminated his employment without Good Reason, or that the Company is not otherwise obligated to pay any amount or provide any benefit to the Executive and his dependents or other beneficiaries, as the case may be, under Sections 3(a), 3(b) and 4, the Company shall pay all amounts, and provide all benefits, to the Executive and his dependents or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Sections 3(a), 3(b) and 4 as though such termination were by the Company without Cause or by the Executive with Good Reason; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this Section 12(b) except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled.   13.   Employment with Subsidiaries. Employment with the Company for purposes of this Agreement shall include employment with any corporation or other entity in which the Company has a direct or indirect ownership interest of 50 percent or more of the total combined voting power of the then outstanding securities of such corporation or other entity entitled to vote generally in the election of directors.   14.   Governing Law; Validity. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Michigan without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which other provisions shall remain in full force and effect.   15.   Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original and both of which together shall constitute one and the same instrument.   16.   Miscellaneous. No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by the Executive and by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Failure by the Executive or the Company to insist upon strict compliance with any 75 --------------------------------------------------------------------------------   provisions of this Agreement or to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any ot her provision or right of this Agreement. Except as otherwise expressly set forth in this Agreement, the rights of, and benefits payable to, the Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, the Executive, his estate or his beneficiaries under any other employee benefit plan or compensation plan, policy practice or program of the Company or any other contract or agreement with the Company. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and the Executive has executed this Agreement as of the day and year first above written. HERMAN MILLER, INC. By: EXECUTIVE Executive’s Name Michael A. Volkema 76
DEFERRAL AGREEMENT UNDER THE ALLIANCE CAPITAL MANAGEMENT L.P. ANNUAL ELECTIVE DEFERRAL PLAN FOR YEAR 2000 BONUS OR YEAR END COMMISSION PAYMENTS           This agreement (the “Plan Agreement”) is entered between Robert Joseph (“you”) and Alliance Capital Management L.P. (the “Company”) with respect to your elective deferral of a portion of your Bonus or Year End Commission Payments for the year 2000 under the Alliance Capital Management L.P. Annual Elective Deferral Plan (the “Plan”).  You have elected to defer a portion of your year 2000 Bonus or Year End Commission Payments as set forth in the Deferral Election signed by you and submitted with this Plan Agreement (your “Elective Deferral”) and in connection with that deferral you agree to the terms set forth in this Plan Agreement.  The Plan provides a description of the terms and conditions governing your Elective Deferral and all other aspects of your participation in the Plan.  If there is any inconsistency between the terms of this Plan Agreement and the terms of the Plan, the Plan’s terms completely supersede and replace the conflicting terms of this Plan Agreement.  All capitalized terms have the meanings given them in the Plan, unless specifically stated otherwise in this Plan Agreement.           1.       Crediting of Your Elective Deferral.  Your Elective Deferral will be credited to you under the Plan as of the date such amount(s) would otherwise have been paid to you absent your Deferral Election.           2.       Crediting of Your Company Matching Contribution.  As of the date that you are credited with the amount(s) constituting your Elective Deferral, you shall also be credited with an additional amount equal to 20% of those amount(s) (the “Company Matching Contribution”).           3.       Conversion to Units.  Your Elective Deferral and related Company Matching Contribution shall be converted into Units as soon as practicable after such amounts are credited to you.  The price per Unit used for such conversion shall be based on: (i) For Units purchased from one or more holders of outstanding Units, the cost paid by the Company for such Units as determined pursuant to the purchase and pricing methodologies generally used under the Partners Plan, reduced, at the discretion of the Committee, by the applicable commissions and purchase transaction fees; and     (ii) For Units newly issued and acquired directly from Holding, a price equal to the average regular session closing price of the Units reflected on the NYSE composite tape for the December 31 following the relevant Deferral Election Date (or, if such date is not a trading day on the NYSE, then the last preceding trading day).             4.       Distributions on Units.  Any quarterly or special distribution paid with respect to Units credited to you shall also be credited to you and shall be converted into additional Units at such intervals as may be established by the Committee, but in any event no less frequently that annually.  The price per Unit used for such conversion shall be based on: (i) For Units purchased from one or more holders of outstanding Units, the cost paid by the Company for such Units as determined pursuant to the purchase and pricing methodologies generally used under the Partners Plan, reduced, at the discretion of the Committee, by the applicable commissions and purchase transaction fees; and     (ii) For Units newly issued and acquired directly from Holding, a price equal to the average regular session closing price of the Units reflected on the NYSE composite tape for the date such distributions are paid.             5.       Your Account.  As of the date that you are credited with cash amounts in respect of your Elective Deferral, Company Matching Contribution or any distribution on Units credited to you in respect of your Elective Deferral or Company Matching Contribution, those amounts shall be posted to a bookkeeping account established under the Plan in your name (your “Plan Account”).  As of the date that any such amounts are converted into Units, your Plan Account shall be amended to reflect such conversion to Units.           6.       Vesting.           (a)      Elective Deferrals. Your Elective Deferral and all distributions credited with respect to Units into which your Elective Deferral has been converted, shall be 100% vested and non-forfeitable from and after the date such Elective Deferral and distributions are credited to you.            (b)     Company Match.  You shall become vested in your Company Matching Contribution and all distributions credited with respect to Units into which your Company Matching Contribution has been converted, in installments of one-third of the amount of your Company Matching Contribution and such distributions as of December 31 of each of 2001, 2002 and 2003, provided that you remain in the employ of the Company or an affiliate as of each such December 31, except that the entire amount of your Company Matching Contribution and the related distributions credited to you will fully vest if, prior to your Termination of Employment, you die, incur a Disability or attain age 62.  In the event of your Termination of Employment prior to age 62 other than due to death or Disability, to the extent that any portion of your Company Matching Contribution and related distributions is not vested as of the date of your Termination of Employment, such unvested portion shall be forfeited by you.           7.       Distribution.           (a)      Distribution Election.  You are required to complete the distribution section of your Deferral Election to designate the time and method of distribution for the amounts covered by your Deferral Election and the Company Matching Contribution and distributions relating to such amounts.  The distribution instructions set forth in your Deferral Election shall be irrevocable as to the amounts covered by such election; provided, however, that, if you so request, the Committee may, in its sole discretion, allow you to amend your distribution instructions to extend the deferral of the amounts covered by your Deferral Election and the Company Matching Contribution and related distributions, if such amendment is made at least one year prior to the scheduled distribution commencement date for such amounts and the amendment defers commencement of such distribution for at least three years beyond the scheduled distribution commencement date.           (b)      Uncertainty as to Distribution Commencement Date.  If, with respect to amounts covered by your Deferral Election, you have failed to elect a distribution commencement date or there exists any ambiguity as to the distribution commencement date you have elected, such amounts (including the relevant vested Company Matching Contribution) may be distributed to you after the earlier of the date of your Termination of Employment or the third anniversary of your Deferral Election Date, unless determined otherwise by the Committee, in its sole discretion.           (c)      Uncertainty as to Method of Payment.  If, with respect to amounts covered by your Deferral Election, you have failed to elect a method of payment or there exists any ambiguity as to the method of payment you elected, the method of payment for such amounts (including the relevant vested Company Matching Contribution) shall be lump sum, unless determined otherwise by the Committee, in its sole discretion.           (d)      Form of Distributions.  All distributions shall be paid in-kind in the form of Units.           8.       Financial Emergencies.  If you experience an Unforseeable Financial Emergency, you may petition the Committee to (i) suspend any deferrals required but not yet made under your Deferral Election and/or (ii) receive a partial or full payout of you Account Balance.  The Committee shall have complete discretion to accept or reject your petition and to determine the amounts, if any, which may be paid out to you; provided, however, that the payout shall not exceed the lesser of your Account Balance, or the amount reasonably needed to satisfy the Unforseeable Financial Emergency.           9.       Withdrawal Election.  You (or, after your death, your Beneficiary) may elect, at any time, to withdraw all of your Account Balance, less a withdrawal penalty equal to 10% of such amount.  This election can be made at any time before or after your Retirement, Disability, death or Termination of Employment, and whether or not you (or your Beneficiary) is in the process of being paid pursuant to an installment payment schedule.  No partial withdrawals of your Account Balance shall be allowed.  You (or your Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee.  Once you have withdrawn your Account Balance your participation in the Plan shall terminate and you shall not be eligible to participate in the Plan in the future.           10.     Beneficiary Designation.  You are encouraged to designate a Beneficiary to receive your Account Balance under the Plan in the event of your death.  You may do so by completing and signing a Beneficiary Designation Form provided by the Committee and returning it to the Committee.  You shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time.  Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled.  The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by you and accepted by the Committee prior to your death.  No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee or its designated agent.  In the event of your death, the amounts relating to your Elective Deferral and the related Company Matching Contribution as well as all other amounts comprising your Account Balance will be distributed in accordance with your last Beneficiary Designation Form submitted and acknowledged by the Committee.  If you fail to designate a Beneficiary by way of a properly completed Beneficiary Designation Form acknowledged by the Committee or if all your designated Beneficiaries predecease you or die prior to complete distribution of your Account Balance, then your designated Beneficiary shall be deemed to be your estate.  If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to withhold such payments until this matter is resolved to the Committee's satisfaction.           11.     Tax Withholding.  As and when any federal, state or local tax or any other charge is required by law to be withheld with respect to the vesting of amounts credited to you, the payment of distributions on any Units credited to you and the distribution of Units or other amounts from your Plan Account (a “Withholding Amount”), you agree promptly to pay the Withholding Amount to the Company in cash.  You agree that if you do not pay the Withholding Amount to the Company, the Company may withhold any unpaid portion of the Withholding Amount from any amount otherwise due to you.  Notwithstanding the foregoing, the Company may, in its sole discretion, establish and amend policies from time to time for the satisfaction of Withholding Amounts by the deduction of a portion of the Units credited to you under the Plan.           12.     Administration.  It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Plan Agreement, all of which shall be binding upon you.  The Committee is under no obligation to treat you or your interest under the Plan with the treatment provided for other participants in the Plan.           13.     Miscellaneous.           (a)      This Plan Agreement does not confer upon you any right to continuation of employment by the Company, nor does this Plan Agreement interfere in any way with the Company's right to terminate your employment at any time.           (b)      Nothing in this Plan Agreement is intended or should be construed as a guarantee or assurance that you will receive any amounts in respect of a Bonus or Year End Commission Payments or any award under the Partners Plan, and all such entitlements remain in the sole discretion of the Company.           (c)      This Plan Agreement will be governed by, and construed in accordance with, the laws of the state of New York (without regard to conflict of law provisions).           (d)      This Plan Agreement and the Plan constitute the entire understanding between you and the Company regarding your year 2000 Elective Deferral and the related Company Matching Contribution.  Any prior agreements, commitments or negotiations concerning the same are superseded.  This Plan Agreement may be amended only by another written agreement, signed by both parties.             BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.           IN WITNESS WHEREOF, the parties hereto have caused this Plan Agreement to be executed effective as of November 16, 2000.   Alliance Capital Management L.P. By:     Alliance Capital Management           Corporation, General Partner   Participant Signature:   /s/ Robert Joseph -------------------------------------------------------------------------------- Robert Joseph      
  EXHIBIT 10.5 Amendment No. 3 to Marketing Agreement THIS THIRD AMENDMENT TO THE MARKETING AGREEMENT is entered into this 29th day of October, 2001, and effective as indicated herein, by and between TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY, hereinafter referred to as “Transamerica,” a North Carolina corporation, and LEGACY MARKETING GROUP, hereinafter referred to as “LMG,” a California corporation. WHEREAS, Transamerica and LMG entered into a Marketing Agreement, dated May 29, 1998, as amended, hereinafter referred to as the “Agreement,” wherein Transamerica and LMG agreed to jointly develop proprietary annuity products, wherein LMG would market such products on behalf of Transamerica, utilizing its nationwide distribution channels of duly licensed and appointed Producers in consideration of the compensation as set forth in Appendix B of the Agreement. NOW, THEREFORE, in consideration of the foregoing recitals and mutual promises hereinafter contained and other good and valuable consideration, the parties hereto do agree to amend the Agreement as follows: 1.   Appendix A, attached hereto, is restated in its entirety as of September 1, 2001.   2.   Appendix B, attached hereto, is restated in its entirety as of September 1, 2001.   3.   Appendix D, “Schedule of Authorized Personnel,” is hereby restated in its entirety as of October 29, 2001 to read as follows:      “Representing Transamerica      *      *      *   Representing Legacy Marketing Group --------------------------------------------------------------------------------   Lynda L. Regan, Chief Executive Officer R. Preston Pitts, President Steve Taylor, Chief Financial Officer H. Lynn Stafford, Chief Information Officer Niju Vaswani, Vice President of Distribution Bill Hrabik, Chief Operation Officer Andy Chua, Vice President of Product Development Don Dady, Vice-President of Marketing” 1 --------------------------------------------------------------------------------   4.   All other provisions in the Agreement not specifically amended above remain in effect and unchanged. IN WITNESS HEREOF, the parties have hereto executed this Amendment No. 3.       LEGACY MARKETING GROUP   TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY     By: /s/ Don Dady -------------------------------------------------------------------------------- Title: Vice President -------------------------------------------------------------------------------- Date: November 5, 2001 --------------------------------------------------------------------------------   By: /s/ Karen MacDonald -------------------------------------------------------------------------------- Title: Senior Vice President -------------------------------------------------------------------------------- Date: October 29, 2001 -------------------------------------------------------------------------------- 2 --------------------------------------------------------------------------------   APPENDIX A MARKETING AGREEMENT September 1, 2001 GEOGRAPHIC TERRITORY: All states (except New York, Hawaii and Alabama) and the District of Columbia POLICY FORMS           PRODUCT NAME   POLICY FORM NUMBERS   Effective Dates --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   SelectMark® Series         SelectMark®5 75/25   *   * SelectMark® 7 75/25   *   * SelectMark® 10 75/25   *   *   SelectMark® Secure Series         SelectMark® 5 Secure (formerly known as the         SelectMark® 5 50/50)   *   * SelectMark® 7 Secure (formerly known as the         SelectMark® 7 50/50)   *   *   SelectMark® Special Edition Series         Selectmark® 5 Special Edition   *   * SelectMark® 7 Special Edition   *   * SelectMark® 7 Special Edition Equity Index Strategy   *   * SelectMark® 10 Special Edition (formerly known as         the Select Mark® 10 50/50)   *   * SelectMark® 10 Special Edition with STS   *   * SelectMark® 10 Special Edition Equity Index         Strategy   *   * SelectMark® 10 Special Edition with STS and         Equity Index Strategy   *   *   SelectMark® Elite Series         SelectMark® 5 Elite   *   * SelectMark® 7 Elite   *   * SelectMark® 10 Elite   *   *   PreferMark Series         PreferMark Platinum   *   * PreferMark Gold   *   *   Riders         Beneficiary Rider   *   * Beneficiary Rider Plus   *   * 1 --------------------------------------------------------------------------------   State required variations of the above referenced products/policy form numbers may be required. “Unique Features” The ‘Unique” features contained in the policy forms that would preclude LMG from separately selling or marketing any products which are the same as those unique products co-developed by LMG and Transamerica are as follows:      The Total Return Crediting Rate Strategy in combination with the Multiple Year Crediting Rate Strategy in a fixed annuity. The ‘Unique” features contained in the policy forms that would preclude Transamerica from separately selling or marketing any products which are the same as those unique products co-developed by LMG and Transamerica are as follows:      The Total Return Crediting Rate Strategy in combination with the Multiple Year Crediting Rate Strategy in a fixed annuity. The features described above as the “ Total Return Crediting Rate Strategy” and “Multiple Year Crediting Rate Strategy” are described in the policy forms listed in this Appendix A under the caption or headings “Total Return Strategy” and “Multiple Year Strategy.” 2 --------------------------------------------------------------------------------   Appendix B MARKETING AGREEMENT COMPENSATION September 1, 2001                                                       Compensation to Legacy                     --------------------------------------------------------------------------------                         Age Mandated Commission Reduction                                     --------------------------------------------------------------------------------                                     (b)                                             Comm.                   (g)                 POLICY FORM NUMBERS/   (a)   Reduces   (c)   (d)   (e)   (f)   LMG Trail             PRODUCT NAME   Effective Dates   Commission   @ Age   % Reduction   Trail   Mkt. Allow.   Override   Com.   Special Rules         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------         SelectMark® Series                                     SelectMark® 5 75/25   *   *   *   *   *   *   *   *     SelectMark® 7 75/25   *   *   *   *   *   *   *   *     SelectMark® 10 75/25   *   *   *   *   *   *   *   *     SelectMark® Secure Series                                     SelectMark® 5 Secure                                     (formerly known as the                                     SelectMark® 5 50/50)   *   *   *   *   *   *   *   *     SelectMark® 7 Secure                                     (formerly known as the                                     SelectMark® 7 50/50)   *   *   *   *   *   *   *   *     SelectMark® Special                                     Edition Series                                     SelectMark® 5 Special                                     Edition   *   *   *   *   *   *   *   *     SelectMark® 7 Special                                     Edition   *   *   *   *   *   *   *   *     1 --------------------------------------------------------------------------------                                                         Compensation to Legacy                     --------------------------------------------------------------------------------                         Age Mandated Commission Reduction                                     --------------------------------------------------------------------------------                                     (b)                                             Comm.                   (g)                 POLICY FORM NUMBERS/   (a)   Reduces   (c)   (d)   (e)   (f)   LMG Trail             PRODUCT NAME   Effective Dates   Commission   @ Age   % Reduction   Trail   Mkt. Allow.   Override   Com.   Special Rules         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------         SelectMark® 7 Special                                     Edition Equity Index                                     Strategy   *   *   *   *   *   *   *   *     SelectMark® 10 Special                                     Edition (formerly known                                     as the SelectMark® 10                                     50/50)   *   *   *   *   *   *   *   *     SelectMark® 10 Special                                     Edition with STS   *   *   *   *   *   *   *   *     SelectMark® 10 Special                                     Edition Equity Index                                     Strategy   *   *   *   *   *   *   *   *     SelectMark® 10 Special                                     Edition with STS and                                     Equity Index Strategy   *   *   *   *   *   *   *   *     SelectMark® Elite Series                                     SelectMark® 5 Elite   *   *   *   *   *   *   *   *     SelectMark® 7 Elite   *   *   *   *   *   *   *   *     SelectMark® 10 Elite   *   *   *   *   *   *   *   *     PreferMark Series                                     PreferMark Platinum   *   *   *   *   *   *   *   *   * PreferMark Gold   *   *   *   *   *   *   *   *   * GENERAL COMPENSATION RULES 2 --------------------------------------------------------------------------------   1. Base Commission (Column (a) above):   Transamerica will pay LMG on the last business day of the week base commissions for all premiums received in cash by LMG during that week, i.e., the prior Friday through Thursday, in the specified percentages indicated in Column (a) above. Such commissions will be paid by Transamerica to LMG by Transamerica authorizing LMG to write a check to itself against the Transamerica Disbursement account for the total weekly commission amount.     Additional premiums will be subject to the same base commission percentages noted above as the initial premium.   In addition to the base commission rates specified in Column (a) above Transamerica will pay LMG an additional commission as follows:   (1) * of all premiums received on or before August 31, 2001 by LMG for the SelectMark® 10 Special Edition (for premiums received after October 18, 1999), SelectMark® 10 Special Edition Equity Index Strategy, SelectMark® 10 STS Special Edition Equity Index Strategy and SelectMark® 10 Special Edition with STS products for applications received by Legacy for such products on or before August 31, 2001, and in the case of 1035 exchanges and other transfers between financial institutions, the application and completed exchange/transfer paperwork must be received by LMG by August 31, 2001 and the cash received by November 30, 2001 for Transamerica to pay the extra * bonus.   (2) * of all premiums received during the period September 1, 2001 and September 30, 2001 for such products for applications received by LMG for such products. In the case of 1035 exchanges and other transfers between financial institutions, the application and completed exchange/transfer paperwork must be received by LMG between September 1 and September 30th and the cash received by November 30, 2001 for Transamerica to pay the extra * bonus.   Note: As a practical matter, LMG’s administrative system will treat additional deposits on inforce policies in the same manner as cash received on 1035 exchanges and other transfers with respect to the above rules. Transamerica agrees to this treatment on additional deposits based on (1) LMG’s representation that additional deposits will not be material and (2) LMG’s agreement that this treatment on additional deposits will not be disclosed in any manner to producers or policyholders. LMG also agrees to limit disclosure of this treatment on additional deposits to LMG employees on a “need to know” basis. 2. Age Mandated Commission Reduction (Columns (b), (c) and (d) above):   The following provision applies to payment of all base commissions for all products subject to this Agreement (see below for separate rules for PreferMark Gold and PreferMark Platinum) if the issue age is greater than 79 (in the case of SelectMark® Special Edition products) and 84 for other products. The * additional commission payable for the SelectMark® 10 series products is considered part of the base commission.     If the issue age is greater than 79 or 84 as defined in the Death Benefit Proceeds provision of the applicable policy form, base commissions are reduced by *. A trail base commission is paid monthly beginning in policy year 2. Column (d) reflects the trail base commission 3 --------------------------------------------------------------------------------     percentage on an annual basis (calculated as Column (a) multiplied by the percentage in Column (c) divided by 10). This trail base commission is paid monthly (the payable amount, calculated each month, is the Column (d) annual percentage divided by 12 and multiplied by the annuity cash value). The monthly trail base commission continues to be paid until death of the annuitant, surrender of the policy or election of a settlement option.   With regard to PreferMark Gold and PreferMark Platinum, if the issue age of a policy is greater than 84 as defined in the Death Benefit Proceeds provision of such policy form the applicable base commission percentage is reduced by * for all premiums received for that policy. No monthly trail commission is payable. 3. Marketing Allowance (Column (e) above):   Transamerica will pay to LMG a Marketing Allowance for all premiums received by LMG in the specified percentages indicated in Column (e) above. LMG will bill Transamerica weekly and Transamerica will pay LMG such Marketing Allowance by wire transfer within five (5) business days of receipt of such documentation. 4. Override Commission (Column (f) above):   Transamerica will pay to LMG an override commission (on the last business day of the week) for all premiums received by LMG during that week, in the specified percentages indicated in Column (f) above.     The override commission percentages in Column (f) include * which is paid back to Transamerica by LMG at the end of each fiscal year (for this purpose each fiscal year begins on August 1 and ends on the following July 31) for the first * of aggregate premium received by LMG during that fiscal year for all (excluding PreferMark Gold and PreferMark Platinum) products (net of premiums returned to policyholders under free look provisions if the aggregate premium received by LMG for the fiscal year is less than *). LMG will retain the * on all premiums received in excess of * in each fiscal year. Notwithstanding the foregoing, LMG’s obligation to pay Transamerica the aforementioned * shall terminate upon LMG’s final payment of * for the fiscal year ending July 31, 2001.     With regard to PreferMark Gold and PreferMark Platinum, if the issue age of a policy is greater than 84 as defined in the Death Benefit Proceeds provision of such policy form the applicable override commission percentage is reduced by * for all premiums received for that policy. 5. LMG Trail Commission (Column (g) above):   Transamerica will pay LMG an annual rate, paid monthly, of * of the total Annuity Cash Value of the policies sold under this Agreement. For the purpose of the foregoing, Annuity Cash Value is the contract’s Cash Value which reflects any applicable reductions, loans and withdrawals. The commission is based on the total month end Annuity Cash Value and will be paid within six (6) business days of month end by Transamerica via wire transfer to an LMG bank account. 4
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.12.7 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CREDIT AGREEMENT among UNIVISION COMMUNICATIONS INC., THE LENDERS PARTIES HERETO, and GOLDMAN SACHS CREDIT PARTNERS, L.P. as Sole Advisor, Arranger, Book Manager, Administrative Agent and Syndication Agent Dated as of June 8, 2001 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TABLE OF CONTENTS         Page SECTION 1. DEFINITIONS   1   1.1   Defined Terms   1   1.2   Other Definitional Provisions   17 SECTION 2. AMOUNT AND TERMS OF LOANS; COMMITMENT AMOUNTS   17   2.1   Loans; Commitment Amounts   17   2.2   Optional Prepayments   19   2.3   Mandatory Prepayments   19   2.4   Conversion and Continuation Options   20   2.5   Minimum Amounts of Tranches   21   2.6   Interest Rates and Payment Dates of Principal and Interest   21   2.7   Computation of Interest and Fees   22   2.8   Inability to Determine Interest Rate   22   2.9   Pro Rata Treatment and Payments   22   2.10   Illegality   23   2.11   Increased Costs   23   2.12   Taxes   24   2.13   Indemnity   25   2.14   Fees   25   2.15   Mitigation of Costs   25 SECTION 3. REPRESENTATIONS AND WARRANTIES   25   3.1   Financial Condition   25   3.2   No Change   25   3.3   Corporate Existence; Compliance with Law   26   3.4   Corporate/Partnership Power; Authorization; Enforceable Obligations   26   3.5   No Legal Bar   26   3.6   No Material Litigation   27   3.7   Ownership of Property; Liens   27   3.8   Intellectual Property   27   3.9   Taxes   27   3.10   Federal Regulations   27   3.11   ERISA   28   3.12   Investment Company Act; Other Regulations   28   3.13   Material Agreements   28   3.14   Subsidiaries   28   3.15   Purpose of Loans   28   3.16   Environmental Matters   29   3.17   Accuracy and Completeness of Information   29   3.18   Permits, Etc.    29   3.19   Copyright Act Requirements   30   3.20   Nature of Business   30   3.21   FCC Matters; Media Licenses   30   3.22   Ranking of Loans   30   3.23   Insolvency   30   3.24   Labor Matters   31   3.25   Condemnation   31   3.26   Leases, Licenses, Permits, Site Use Agreements and Other Occupancy Agreements   31 –i– --------------------------------------------------------------------------------   3.27   Corporate Organization   31 SECTION 4. CONDITIONS PRECEDENT   31   4.1   Conditions to Closing Date   31   4.2   Conditions to Initial Loans for the USA Broadcasting Acquisition   34   4.3   Conditions to Each Loan   35 SECTION 5. AFFIRMATIVE COVENANTS   36   5.1   Financial Statements   36   5.2   Certificates; Other Information   37   5.3   Payment of Obligations   39   5.4   Conduct of Business and Maintenance of Existence   39   5.5   Maintenance of Property; Insurance   39   5.6   Inspection of Property; Books and Records; Discussions   40   5.7   Environmental Laws   40   5.8   Use of Proceeds   40   5.9   Compliance With Laws, Etc.    40   5.10   Media Licenses   41   5.11   Leases and Licenses   41   5.12   Notices   41   5.13   Security Interests   41 SECTION 6. NEGATIVE COVENANTS   42   6.1   Financial Condition Covenants   42   6.2   Limitation on Indebtedness   42   6.3   Limitation on Liens   43   6.4   Limitation on Fundamental Changes   44   6.5   Limitation on Sale of Assets   44   6.6   Limitation on Dividends   45   6.7   Limitation on Investments, Loans and Advances   45   6.8   Limitation on Modifications of Debt Instruments; Repurchase of Junior Subordinated Notes; Etc.    47   6.9   Transactions with Affiliates   47   6.10   Fiscal Year   47   6.11   Restrictions Affecting Subsidiaries   47   6.12   Lease Obligations   47   6.13   Unfunded Liabilities   47   6.14   Management Fees   47   6.15   Material Agreements   47   6.16   Limitation on Negative Pledge Clauses   48   6.17   Limitation on Modifications of USA Acquisition Agreement   48   6.18   Limitation on Equity Offerings   48   6.19   Limitation on Activities of Newco   48 SECTION 7. EVENTS OF DEFAULT   49 SECTION 8. THE ADMINISTRATIVE AGENT AND THE ARRANGER   51   8.1   Appointment   51   8.2   Delegation of Duties   51   8.3   Exculpatory Provisions   52   8.4   Reliance by Administrative Agent and Arranger   52   8.5   Notice of Default   52   8.6   Non-Reliance on Administrative Agent, Arranger and Other Lenders   53 –ii– --------------------------------------------------------------------------------   8.7   Indemnification   53   8.8   Administrative Agent and Arranger in Their Individual Capacities   53   8.9   Successor Administrative Agent or Arranger   54   8.10   Arranger   54 SECTION 9. MISCELLANEOUS   54   9.1   Amendments and Waivers   54   9.2   Notices   55   9.3   No Waiver; Cumulative Remedies   56   9.4   Survival of Representations and Warranties   57   9.5   Payment of Expenses and Taxes   57   9.6   Successors and Assigns; Participations; Purchasing Lenders   57   9.7   Adjustments; Set-Off   60   9.8   Counterparts   60   9.9   Severability   60   9.10   Integration   60   9.11   Governing Law   61   9.12   Submission to Jurisdiction; Waivers; Appointment of Process Agent   61   9.13   Acknowledgements   61   9.14   Waivers of Jury Trial, Damages Waivers   61   9.15   Headings   61   9.16   Conflict of Terms   61   9.17   Copies of Certificates, Etc.    62   9.18   Confidentiality   62   9.19   Publicity   62   9.20   Limitation of Interest   62   9.21   Margin Stock   63 Exhibits           A   Form of Note       B   Form of Assignment and Acceptance       C   Form of No Default/Representation Certificate       D   Form of Covenant Compliance Certificate       E   Form of Continuation Notice     Schedules           1.1(a)   Acquired Business       1.1(b)   First USA Acquisition Closing Subsidiaries       2.1   Commitments       3.14   Borrower Subsidiaries       3.15   Proposed and Pending Acquisitions       3.21(a)   Borrower Authorizations       3.21(b)   USA Broadcasting Authorizations       3.21(c)   Exceptions Regarding Borrower Authorizations       3.27   Corporate Organization of Borrower       6.7(f)   Borrowers' and Subsidiaries' Investments       9.2   Lender Notice Addresses     –iii– -------------------------------------------------------------------------------- CREDIT AGREEMENT     THIS CREDIT AGREEMENT, dated as of June 8, 2001, among (1) UNIVISION COMMUNICATIONS INC., a Delaware corporation (the "Borrower"), (2) the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders"), and (3) GOLDMAN SACHS CREDIT PARTNERS, L.P. ("GSCP"), as sole advisor, book manager and syndication agent, as sole lead arranger for the Lenders hereunder (in such capacity, the "Arranger") and as sole administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H:     WHEREAS, the Borrower has entered into that certain Credit Agreement dated as of October 13, 2000 with BNP Paribas and The Chase Manhattan Bank, as Joint Advisers, Joint Lead Arrangers, and Joint Book Managers, The Chase Manhattan Bank, as Administrative Agent, and the banks and other financial institutions parties thereto, as lenders (the "$100 Million Credit Agreement"), pursuant to which a credit facility in the maximum amount of $100,000,000 was made available to the Borrower;     WHEREAS, the Borrower has requested that the Lenders extend to it a multiple-draw term loan facility for use by it in, refinancing in whole the $100 Million Credit Agreement, in making certain acquisitions, and for general corporate purposes of the Borrower and its subsidiaries, in each case on the terms and conditions set forth below;     NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS     1.1  Defined Terms.  As used in this Agreement, the following terms shall have the following meanings:     "Accountants":  Arthur Andersen LLP or such other firm of independent certified public accountants of recognized national standing as shall be selected by the Borrower and satisfactory to the Arranger.     "Acquired Business":  the Subsidiaries of USA Broadcasting identified on Schedule 1.1(a) to be acquired by the Borrower pursuant to the USA Acquisition Agreement.     "Acquisitions":  (i) the acquisition by, or investment in, any Media/Communications Business by the Borrower or its Subsidiaries or (ii) the entering into by the Borrower or its Subsidiaries of any Program Services Agreement, in each case as permitted by Section 6.7(k) or (l).     "Additional Entravision Investment":  the Borrower's $110,000,000 equity investment in Entravision existing on the Closing Date (which shall be in addition to (i) the Borrower's $10,000,000 equity investment permitted by Section 6.7(j) and (ii) additional investments by the Borrower in Entravision permitted by Section 6.7(k)).     "Administrative Agent":  as defined in the preamble hereto.     "Affiliate":  as to any Person, (a) any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any Person who is a director, officer, shareholder or partner (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person described in the preceding clause (a). For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (i) vote securities having 10% or more of the ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise; provided, however, that Perenchio, his Permitted Transferees and each of their respective Affiliates shall be deemed to be Affiliates of the Borrower and each other Loan Party.     "Affiliated Stations":  those television stations and cable television systems with which Network from time to time has Affiliation Agreements. --------------------------------------------------------------------------------     "Affiliation Agreements":  the Affiliation Agreements between Network and the Affiliated Stations, as such agreements may be amended or otherwise modified from time to time.     "Aggregate Available Commitment":  the sum of the Available Commitments of each Lender.     "Aggregate Commitment":  the sum of the Commitments of each Lender, namely $500,000,000 on the Closing Date.     "Agreement":  this Credit Agreement, as amended, waived, supplemented or otherwise modified from time to time.     "Alternate Base Rate":  for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Commercial Lending Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. "Prime Commercial Lending Rate" shall mean the rate of interest per annum quoted in The Wall Street Journal as the prime rate in effect for such day. "Federal Funds Effective Rate" shall mean, for any day, 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 on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If, for any reason, the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including, without limitation, the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Commercial Lending Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Commercial Lending Rate or the Federal Funds Effective Rate, respectively.     "Alternate Base Rate Loans":  Loans the rate of interest applicable to which is based upon the Alternate Base Rate.     "Amendment to the Existing Credit Agreement":  an amendment to the Existing Credit Agreement executed and delivered by the Borrower and the requisite lenders thereunder after the Loan Commitment Date that will permit the consummation of the transactions contemplated by the USA Acquisition Agreement and the Loan Documents (including the making of the mandatory prepayments contemplated by Section 2.3(c)), in form and substance satisfactory to GSCP.     "Applicable Lending Office":  for any Lender, its offices for LIBOR Loans and Alternate Base Rate Loans specified in Schedule 9.2 or in the Assignment and Acceptance pursuant to which it became a party hereto, as the case may be, any of which offices may, upon 10 days' prior written notice to the Administrative Agent and the Borrower, be changed by such Lender.     "Applicable Margin":  (1) for each LIBOR Loan (i) for the period beginning on the third month anniversary of the Loan Commitment Date, 0.25% per annum, (ii) for the period beginning on the first day following the third month anniversary of the Loan Commitment Date, 1.00% per annum, and (iii) following the Commitment Expiration Date, such Applicable Margin as determined necessary by GSCP, in its sole and absolute discretion based upon then prevailing market conditions, to successfully syndicate the Loans; and (2) for each Alternate Base Rate Loan (i) for the period beginning on the third month anniversary of the Loan Commitment Date, 0.00% per annum, (ii) for the period beginning on the first day following the third month anniversary of the Loan Commitment Date, 0.00% per annum, and (iii) following the Commitment Expiration Date, such Applicable Margin as –2– -------------------------------------------------------------------------------- determined necessary by GSCP, in its sole and absolute discretion based upon then prevailing market conditions, to successfully syndicate the Loans.     "Arranger":  as defined in the preamble hereto.     "Asset Disposition":  the sale, sale and leaseback, transfer, conveyance, exchange, long-term lease accorded sales treatment under GAAP or similar disposition (including by means of a merger, consolidation, amalgamation, joint venture or other substantive combination) of any of the Properties, business or assets (other than marketable securities, including "margin stock" within the meaning of Regulation U, liquid investments and other financial instruments but, including, without limitation, the assignment of any lease, license or permit relating to the Properties) of the Borrower or any of its Subsidiaries to any Person or Persons other than to the Borrower or any of its Subsidiaries; provided that Asset Dispositions shall not include (i) the sale in the ordinary course of business of equipment and vehicles, the proceeds of sale of which are used within 90 days after the sale date to refinance Indebtedness (including the Loans) incurred to purchase or to commit to purchase replacement equipment and vehicles to be used in the ordinary course of business, (ii) other sales of assets in the ordinary course of business which do not have a fair market value exceeding $5,000,000 in the aggregate in any fiscal year and (iii) the disposition, pursuant to an exercise by USA Broadcasting of its remedies under the AT Pledge Agreement following the occurrence of an event of default thereunder, of (x) the Capital Stock of any Subsidiary acquired by Newco with the Net Proceeds of an AT Note or (y) the 1.0% general partnership interest of any licensee general partner in which any such Subsidiary directly owns the corresponding 99.0% general partnership interest.     "Assignment and Acceptance":  an Assignment and Acceptance in the form of Exhibit B.     "AT Note":  each promissory note to be entered into by Newco in favor of USA Broadcasting pursuant to Section 1.3 of the Second Amendment to the USA Acquisition Agreement, as in effect on the date hereof, in each case in the form attached as Exhibit E to the USA Acquisition Agreement, as in effect on the date hereof.     "AT Pledge Agreement":  the pledge agreement to be entered into by Newco in favor of USA Broadcasting pursuant to Section 1.3 of the Second Amendment to the USA Acquisition Agreement, as in effect on the date hereof, in the form attached as Exhibit F to the USA Acquisition Agreement, as in effect on the date hereof.     "Authorizations":  as defined in Section 3.21.     "Available Commitment":  with respect to each Lender, the amount by which (a) the Commitment of such Lender on such date exceeds (b) the principal sum of such Lender's Loans outstanding.     "Borrower":  as defined in the preamble hereto.     "Borrower Authorizations":  as defined in Section 3.21.     "Borrower Stock Purchase":  the purchase by the Borrower, from time to time, of shares of its common stock in accordance with the terms of this Agreement.     "Business Day":  a day other than a Saturday, Sunday or other day on which commercial banks in New York City or the State of California are authorized or required by law to close and which, in the case of a LIBOR Loan, is a Eurodollar Business Day.     "Capital Expenditures":  for any period, collectively, for any Person, the aggregate of all expenditures which are made during such period (whether paid in cash or accrued as liabilities), and all contractual commitments for such expenditures which are entered into during such period (provided that if any such commitment is included in one fiscal year, the actual payment in a later fiscal year –3– -------------------------------------------------------------------------------- shall not be included in such later fiscal year), by such Person, for property, plant or equipment and which would be reflected as additions to property, plant or equipment on a balance sheet of such Person prepared in accordance with GAAP (including, without limitation, all such property held under capital leases); provided, however, that Capital Expenditures shall exclude (i) any expenditures which arise from Program Rights Obligations and (ii) any expenditures permitted hereunder with respect to Transponder Leases.     "Capitalized Lease Obligations":  obligations for the payment of rent for any real or personal property under leases or agreements to lease that, in accordance with GAAP, have been or should be capitalized on the books of the lessee and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP; provided, that "Capitalized Lease Obligations" shall not include any such obligations relating to Transponder Leases.     "Capital Stock":  any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), any and all warrants, options or rights to purchase or any other securities convertible into any of the foregoing.     "Cash Income Taxes":  cash income taxes paid by the Borrower and its consolidated Subsidiaries during the fiscal quarter most recently ended and the immediately preceding three fiscal quarters.     "Change in Control":  (a) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (as in effect from time to time), whether or not applicable), other than Perenchio and any Person or group of Persons that are Permitted Transferees of Perenchio or are as of the date hereof Affiliates of Perenchio, is or becomes the beneficial owner, directly or indirectly, of more than 50% of the total Voting Power of the Borrower or (b) the Borrower shall cease to be the beneficial owner, directly or indirectly, of 100% of the total Voting Power of Network and each other Subsidiary set forth on Schedule 3.14 attached hereto.     "Closing Date":  the date on which the conditions precedent set forth in Section 4.1 have been satisfied.     "Code":  the Internal Revenue Code of 1986, as amended from time to time.     "Commitment":  the commitment of each Lender listed on Schedule 2.1 to make Loans hereunder through its Applicable Lending Office as set forth in Schedule 9.2, as the same may be adjusted pursuant to the provisions hereof.     "Commitment Expiration Date":  December 1, 2001 or such earlier date as the Aggregate Commitment shall expire (whether by acceleration, reduction to zero or otherwise).     "Commitment Letter":  that certain Commitment Letter, dated June 4, 2001, by and between the Lenders and the Borrower, as amended, modified or supplemented from time to time.     "Commitment Percentage":  with respect to each Lender, the percentage equivalent of the ratio which such Lender's Commitment bears to the Aggregate Commitment.     "Commonly Controlled Entity":  as to any Person, an entity, whether or not incorporated, which is under common control with such Person within the meaning of Section 4001 of ERISA or is part of a group which includes such Person and which is treated as a single employer under Section 414 of the Code.     "Communications Act":  the Communications Act of 1934, as amended, and the rules and regulations issued thereunder, as from time to time in effect. –4– --------------------------------------------------------------------------------     "Continuation Notice":  a request for continuation or conversion of a Loan as set forth in Section 2.4, substantially in the form of Exhibit E.     "Contractual Obligation":  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.     "Covenant Compliance Certificate":  a certificate of the Chief Financial Officer of the Borrower substantially in the form of Exhibit D, as modified to the extent necessary to reflect changes made pursuant to Section 6.18 in the covenants contained in Section 6.     "Default":  any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.     "Dennevar B.V.":  Dennevar B.V., a Dutch corporation wholly-owned indirectly by Venevision.     "Dollars" and "$":  lawful currency of the United States.     "EBITDA":  for any period, for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters, Net Income after eliminating extraordinary gains and losses, plus (i) provisions for taxes, (ii) depreciation and amortization (including amortization of Program Rights Payments), (iii) Interest Expense, (iv) permitted termination payments paid by the Borrower or its Subsidiaries resulting from early termination of a time brokerage agreement, local marketing agreement or similar agreement, (v) payments made pursuant to Non-Compete Agreements and (vi) other non-cash charges, all to the extent deducted in computing Net Income, but after deducting (A) Program Rights Payments made or scheduled to be made, (B) non-cash revenues (to the extent included in the calculation of Net Income) and (C) principal payments for Transponder Leases. For purposes of pro forma calculations hereunder, calculations shall be made after giving effect to acquisitions, exchanges and dispositions of assets during such period as if such acquisition, exchange or disposition had occurred on the first day of such period.     "Engagement Letter":  that certain Engagement Letter, dated June 4, 2001, by and between Goldman, Sachs & Co. and the Borrower, as amended, modified or supplemented from time to time.     "Entravision":  Entravision Communications Corporation, a Delaware corporation.     "Environmental Laws":  any and all foreign, federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or at any time hereafter in effect.     "ERISA":  the Employee Retirement Income Security Act of 1974, as amended from time to time.     "ERISA Affiliate":  as to any Person, each trade or business including such Person, whether or not incorporated, which together with such Person would be treated as a single employer under Section 4001(a)(14) of ERISA.     "Eurodollar Business Day":  shall mean any day on which banks are open for dealings in Dollar deposits in the London Interbank Market.     "Event of Default":  any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.     "Excess Cash Flow":  for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to EBITDA (provided that Program Rights Payments deducted in the calculation –5– -------------------------------------------------------------------------------- thereof shall be limited to Program Rights Payments actually made) for such period, less, during such period (in each case, without duplication), (i) Total Debt Service, (ii) Cash Income Taxes, (iii) Capital Expenditures of the Borrower and its Subsidiaries, (iv) increases (or plus decreases) in Net Working Investment and (v) Restricted Payments permitted under Section 6.6(i) and Section 6.6(ii).     "Excluded Taxes":  all taxes imposed on or by reference to the net income of the Administrative Agent, the Arranger or any Lender or its Applicable Lending Office and all franchise taxes, taxes on doing business or taxes measured by capital or net worth imposed on any Lender or its Applicable Lending Office, in each case, imposed:      (i) by the jurisdiction in which the Applicable Lending Office or other branch of such Person is located or in which such Person is organized or has its principal or registered office; or     (ii) by reason of the failure of any Lender to provide accurate documentation required to be provided by such Lender pursuant to Section 2.12(b) or Section 9.6.     "Existing Credit Agreement":  that certain Credit Agreement dated as of September 26, 1996 with BNP Paribas and The Chase Manhattan Bank, as Managing Agents, The Chase Manhattan Bank, as Administrative Agent, and the banks and other financial institutions parties thereto, as lenders, as amended by the First Amendment to Credit Agreement dated as of April 10, 1997, the Second Amendment to Credit Agreement dated as of November 6, 1998, the Third Amendment to Credit Agreement dated as of December 20, 1999, the Fourth Amendment to Credit Agreement dated as of October 10, 2000, and the Fifth Amendment to the Credit Agreement dated as of June 1, 2001, it being understood that as used herein, such term shall refer to such Agreement as in existence on the Closing Date without giving effect to any amendments, modifications or supplements thereto made on or after the Closing Date unless consented to by the Majority Lenders in writing.     "Existing Credit Agreement Closing Date":  September 30, 1996.     "FCC":  the Federal Communications Commission or any successor thereto.     "Federal Funds Effective Rate":  as defined in the definition of "Alternate Base Rate" contained in this Section 1.1.     "Fee Letter":  that certain Fee Letter, dated June 4, 2001, by and between GSCP and the Borrower, as amended, modified or supplemented form time to time.     "Financial Statements":  as defined in Section 3.1(a).     "First USA Acquisition Closing":  the first closing of the USA Broadcasting Acquisition by which the Borrower will acquire the capital stock of the companies listed on Schedule 1.1(b) pursuant to the USA Acquisition Agreement for approximately $288,000,000, in cash.     "Fixed Charge Coverage Ratio":  for the Borrower and its Subsidiaries on a consolidated basis, the ratio of EBITDA for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters to the sum of (i) Total Debt Service for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters, (ii) Capital Expenditures for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters, (iii) Cash Income Taxes for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters and (iv) Restricted Payments permitted under Section 6.6(ii) (other than those made by the Borrower to effect a Borrower Stock Purchase) paid by the Borrower or any Subsidiary for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters. –6– --------------------------------------------------------------------------------     "Funded Debt":  the sum of (x) the outstanding principal balance of all Capitalized Lease Obligations of the Borrower and its Subsidiaries and (y) all Indebtedness of the Borrower and its Subsidiaries other than Indebtedness described in clauses (f), (h), (i), (j), (k) and (l) of Section 6.2.     "GAAP":  generally accepted accounting principles in the United States in effect from time to time. If, at any time, GAAP changes in a manner which will materially affect the calculations determining compliance by the Borrower with any of its covenants in Section 6.1, such covenants shall continue to be calculated in accordance with GAAP in effect prior to such changes in GAAP.     "Governmental Authority":  any nation or government, any federal, state or other political subdivision thereof and any federal, state or local entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.     "GSCP":  as defined in the preamble hereto.     "Guarantee Obligation":  as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds for the purchase or payment of any such primary obligation or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lesser of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.     "Indebtedness":  of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than (i) current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices and (ii) current income taxes) or which is evidenced by a note, bond, debenture or similar instrument, excluding Program Rights Obligations, (b) all obligations of such Person under Capitalized Lease Obligations, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (d) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (e) all obligations of such Person, whether absolute or contingent, in respect of letters of credit opened for the account of such Person (other than any letters of credit opened for the purpose of facilitating the purchase of goods and services in the ordinary course of business and having a term of not more than 360 days), (f) all obligations of such Person under Non-Compete Agreements and Interest Rate Agreements and (g) all Guarantee Obligations of such Person in respect of any indebtedness, obligations or liabilities of any other Person of the type referred to in clauses (a) through –7– -------------------------------------------------------------------------------- (f) of this definition; provided that "Indebtedness" shall not include payments (to the extent included above) to be made by Network pursuant to the Program License Agreements or payments made to Affiliated Stations under the Affiliation Agreements.     "Insolvency":  with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.     "Insolvent":  pertaining to a condition of Insolvency.     "Intellectual Property":  as defined in Section 3.8.     "Interest Expense":  as of any date, for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters, (A) the sum of (i) the amount of all interest on Funded Debt (or, with respect to clause (y) of the definition of Funded Debt, dividends) which was paid, payable and/or accrued for such period (without duplication of previous amounts), (ii) all commitment, letter of credit or line of credit fees paid, payable and/or accrued for such period (without duplication of previous amounts) to any lender in exchange for such lender's commitment to lend or otherwise extend credit and (iii) net amounts payable (or receivable) under all Interest Rate Agreements, less (B) all interest income.     "Interest Payment Date":  (a) as to any Alternate Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is outstanding, (b) as to any LIBOR Loan, the last day of each Interest Period to occur while such Loan is outstanding, and (c) for each of (a) and (b) above, the day on which the Loans become due and payable in full or are paid or prepaid in full.     "Interest Period":  with respect to any LIBOR Loan:     (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such LIBOR Loan and ending one or three months thereafter, as selected by the Borrower in its notice of borrowing or its Continuation Notice, as the case may be, given with respect thereto; and     (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such LIBOR Loan and ending one or three months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Eurodollar Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:      (i) if any Interest Period pertaining to a LIBOR Loan 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 carry 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 would otherwise extend beyond the date final payment is due on the Loans shall end on the date of such final payment; and     (iii) any Interest Period pertaining to a LIBOR 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 a calendar month. –8– --------------------------------------------------------------------------------     "Interest Rate Agreement":  any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement under which the Borrower is a party or a beneficiary.     "International Program Rights Agreement":  the International Program Rights Agreement dated as of October 2, 1996 among the Borrower, Televisa and Venevision, as such agreement may be amended or otherwise modified from time to time in accordance with the terms hereof.     "Investment Company Act":  as defined in Section 3.12.     "Junior Subordinated Notes":  collectively, (i) those certain Subordinated Ten Year Notes due 2002 issued by Network Holding in an aggregate original amount of $61,094,000 pursuant to an Indenture dated as of December 17, 1992 executed by Network Holding to First Trust National Association, as Trustee, the obligations under which have been assumed by the Borrower and (ii) those certain Subordinated Ten Year Notes due 2002 issued by PTI Holdings in an original aggregate amount of $10,306,000 pursuant to an Indenture dated as of December 17, 1992 executed by PTI Holdings to First Trust National Association, as Trustee, as such notes and/or such Indentures may be amended or otherwise modified from time to time in accordance with the terms hereof.     "Lenders":  as defined in the preamble hereto and Section 8.8.     "LIBOR Rate":  with respect to any Interest Period for any LIBOR Loan, (a) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by GSCP to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3740 or 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) two Eurodollar Business Days prior to the first day of each Interest Period, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by GSCP to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such periods in Dollars, determined as of approximately 11:00 a.m. (London, England time) two Eurodollar Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the offered quotation rate to first class banks in the London Interbank Market as determined by GSCP for deposits (for delivery in the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of GSCP, in its capacity as a Lender, for which the LIBOR Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) two Eurodollar Business Days prior to the first day of each Interest Period."     "LIBOR Loans":  Loans the rate of interest applicable to which is based upon the LIBOR Rate.     "LIBOR Reserve Requirements":  for any day as applied to a LIBOR Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such Federal Reserve System. As at the Closing Date, there are no such reserve requirements. –9– --------------------------------------------------------------------------------     "License Fee Guaranties":  collectively, (i) the Guaranty dated as of October 1, 1996 executed by the Borrower in favor of Univisa with respect to Network's obligations under the Program License Agreement with Univisa and (ii) the Guaranty dated as of October 1, 1996 executed by the Borrower in favor of Dennevar B.V. with respect to Network's obligations under the Program License Agreement with Dennevar B.V., as such Guaranties may be amended or otherwise modified from time to time in accordance with the terms of the Loan Documents, and which Guaranties shall be unsecured.     "Lien":  any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any Capitalized Lease Obligation having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing).     "Loan":  as defined in Section 2.1(a).     "Loan Commitment Date":  the date of execution and delivery of the Commitment Letter, namely June 4, 2001.     "Loan Documents":  this Agreement, the Notes, the Security Documents, and any other agreement executed by a Loan Party in connection therewith and herewith, as such agreements and documents may be amended, supplemented and otherwise modified from time to time in accordance with the terms hereof.     "Loan Parties":  collectively, as applicable (i) the Borrower and its Subsidiaries and (ii) any other Person, if any, that is required to enter into one or more Security Documents pursuant to Section 5.13.     "Majority Lenders":  Lenders having Commitments equal to or more than 51% of the Aggregate Commitment, or, if any Commitment has terminated, with respect to such Commitment, Lenders with outstanding Loans having an unpaid principal balance equal to or more than 51% of the unpaid principal balance of all Loans outstanding, excluding from such calculation Lenders which have failed or refused to fund a Loan when required to do so.     "Margin Stock":  as defined in Regulation U.     "Material Adverse Effect":  a material adverse effect on (a) the business, operations, property, condition or prospects (financial or otherwise) of the Borrower and its Subsidiaries (including, without limitation, the Acquired Business) taken as a whole, (b) the ability of any Loan Party to perform its obligations under the Loan Documents, (c) the validity or enforceability of the Loan Documents or the rights or remedies of the Administrative Agent, the Arranger or the Lenders hereunder or thereunder or (d) from and after the Security Documents Effective Date, the validity, enforceability or priority of the Liens purported to be created by the Security Documents.     "Material Agreements":  the Program License Agreements, the Participation Agreement, the International Program Rights Agreement and the Existing Credit Agreement.     "Maturity Date":  April 1, 2004 or such earlier date as the Loans shall become due and payable (whether by acceleration or otherwise). –10– --------------------------------------------------------------------------------     "Media/Communications Business":  the ownership and operation of radio and television stations, cable networks, cable programming, television programming and syndication, interactive television, direct broadcast satellite, pay-per-view television, sports promotion and sports team ownership, home shopping, print and on-line publishing or broadcasting, billboards and recorded music and music publishing; provided that to the extent any of the foregoing involve assets located, or businesses operating, outside of the United States, aggregate EBITDA derived from such assets or businesses shall not exceed 20% of EBITDA (based on the most recently ended twelve month period) for the Borrower and its Subsidiaries on a consolidated basis; and provided, further, that acquisition of, or investment in, recorded music and/or music publishing shall not exceed $100,000,000 in the aggregate between the Existing Credit Agreement Closing Date and the Maturity Date, inclusive. With respect to an investment made by the Borrower or its Subsidiaries in the form of an equity investment (such as through the purchase of stock, partnership interests or otherwise), as opposed to acquisition of such assets or businesses directly, the calculation of EBITDA for purposes of the first proviso of this definition shall be made as if such assets and businesses were owned directly by the Borrower or its Subsidiaries.     "Media Licenses":  any franchise, license, permit, certificate, ordinance, approval or other authorization, or any renewal or extension thereof, from any federal, state or local government or governmental agency, department or body that is necessary for the broadcast or other operations of the Borrower or any of its Subsidiaries.     "Multiemployer Plan":  a plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.     "Net Income":  for the Borrower and its Subsidiaries on a consolidated basis, net income as determined in accordance with GAAP and in a manner consistent with the calculation of net income as set forth in the Financial Statements.     "Net Proceeds":  (A) with respect to any Asset Disposition, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such Asset Disposition minus the sum of (a) the reasonable fees, commissions and other out-of-pocket expenses incurred by the Borrower or any of its Subsidiaries in connection with such Asset Disposition (other than amounts payable to Affiliates of the Person making such disposition), (b) Indebtedness, other than the Loans, required to be paid as a result of such Asset Disposition and (c) federal, state and local taxes incurred and paid in connection with such Asset Disposition; and (B) with respect to any Securities Offering, the net amount equal to the aggregate amount received in cash (including any cash received by way of deferred payment pursuant to a note receivable, other non-cash consideration or otherwise, but only as and when such cash is so received) in connection with such Securities Offering minus the reasonable fees, commissions and other out-of-pocket expenses incurred by the Borrower in connection with such Securities Offering (other than amounts payable to Affiliates of the Person making such Securities Offering).     "Network":  The Univision Network Limited Partnership, a Delaware limited partnership.     "Network Holding":  The Univision Network Holding Limited Partnership, a Delaware limited partnership.     "Net Working Investment":  for the Borrower on a consolidated basis, (i) current assets (excluding cash and investments permitted under Section 6.7(b)) less (ii) current liabilities (excluding the current portion of Funded Debt). –11– --------------------------------------------------------------------------------     "Newco"  means a wholly-owned Subsidiary of the Borrower to be organized under the laws of any State of the United States of America for the sole purpose of acquiring the Capital Stock of one or more Subsidiaries of USA Broadcasting with the Net Proceeds of the AT Note(s); provided that Newco:     (1) has no Indebtedness other than Non-Recourse Indebtedness;     (2) is not party to any agreement, contract, arrangement or understanding with the Borrower or any other Subsidiary of the Borrower unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Borrower or such other Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Borrower;     (3) is a Person with respect to which neither the Borrower nor any of its other Subsidiaries has any direct or indirect obligation (a) to subscribe for additional equity interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and     (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Borrower or any of its other Subsidiaries.     "New Credit Agreement":  collectively, one or more credit facilities, including the new credit facility contemplated by the Commitment Letter, to be entered into after the Closing Date by the Borrower and/or one or more of its Subsidiaries and certain lenders, and providing for the aggregate extension of credit to the Borrower in an amount equal to not less than the sum of (i) the total obligations outstanding under the Existing Credit Agreement as of the date of this Agreement and (ii) $500,000,000.     "New Investments":  collectively, the Additional Entravision Investment and Other Media/Communications Investments, and "New Investment" means any one of the foregoing.     "Non-Compete Agreements":  all agreements pursuant to which the Borrower, any of its Subsidiaries or any Station has agreed to make payments (whether in cash or in kind) to another Person for the agreement of such Person not to compete with the Borrower, such Subsidiary or such Station in a given area.     "Non-Recourse Indebtedness"  means Indebtedness of Newco:     (1) as to which neither the Borrower nor any of its Subsidiaries (other than Newco) (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender in respect thereof;     (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against Newco) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Indebtedness created hereunder) of the Borrower or any of its Subsidiaries (other than Newco) to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its stated maturity; and     (3) as to which the lenders in respect thereof have been notified in writing that they will not have any recourse to the stock or assets of the Borrower or any of its Subsidiaries (other than the Capital Stock of each Subsidiary of USA Broadcasting acquired by Newco with the Net Proceeds of the AT Note(s)).     "Note":  as defined in Section 2.1(d).     "Obligations":  the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and interest accruing on or after the filing of any petition in –12– -------------------------------------------------------------------------------- bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding and whether or not at a default rate) the Notes and all other obligations and liabilities of the Borrower to the Administrative Agent, the Arranger and the Lenders, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, the Notes, any other Loan Document and any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all reasonable fees and disbursements of counsel, and the allocated reasonable cost of internal counsel, to the Administrative Agent, the Arranger or the Lenders that are required to be paid by the Borrower pursuant to the terms of this Agreement) or otherwise.     "Occupancy Agreements":  as defined in Section 5.11.     "Other Media/Communications Investments":  investments of the Borrower or its Subsidiaries made in businesses in the Media/Communications Business in an aggregate amount not exceeding $800,000,000 between the Existing Credit Agreement Closing Date and the Maturity Date, inclusive.     "Participation Agreement":  the Participation Agreement dated as of October 2, 1996 among the Borrower, Perenchio, Televisa, Gustavo A. Cisneros, Ricardo J. Cisneros and Venevision, as such agreement may be amended or otherwise modified from time to time in accordance with the terms hereof.     "Participant":  as defined in Section 9.6(b).     "PBGC":  the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor thereto.     "Perenchio":  A. Jerrold Perenchio.     "Permitted Transferees":  (i) Perenchio's spouse and lineal descendants, (ii) Perenchio's personal representatives and heirs, (iii) any trustee of any trust created primarily for the benefit of any, some or all of such spouse and lineal descendants or of any revocable trust created by Perenchio, (iv) following the death of Perenchio, all beneficiaries under any such trust, (v) Perenchio, in the case of a transfer from any transferee back to Perenchio and (vi) any entity, all of the equity of which is directly or indirectly owned by any of the foregoing which is not an Affiliate of any other Person.     "Person":  any individual, firm, partnership, limited liability company, joint venture, corporation, association, business enterprise trust, unincorporated organization, government or department or agency thereof or other entity, whether acting in an individual, fiduciary or other capacity.     "PIK Interest":  with respect to any Funded Debt of the Borrower, all interest on such Funded Debt which interest is paid by the issuance of additional Funded Debt (and not paid in cash) having no principal payable thereon on or before December 31, 2003.     "Plan":  as to any Person, any employee benefit plan within the meaning of Section 3(3) of ERISA maintained for employees of such Person or any ERISA Affiliate of such Person (and any such plan no longer maintained by such Person or any of such Person's ERISA Affiliates to which such Person or any of such Person's ERISA Affiliates has made or was required to make any contributions within any of the five preceding years).     "Primary Station":  any full power television station now or hereafter owned, leased or operated by the Borrower or any of its Subsidiaries; provided such term shall not include any Station, any translator or other television station owned, leased or operated by Entravision so long as Entravision is not a Subsidiary. –13– --------------------------------------------------------------------------------     "Program License Agreements":  collectively, (i) that certain Amended and Restated Program License Agreement dated as of October 1, 1996, between Univisa and Network, pursuant to which Univisa makes certain current and library programming available to Network, and the Guaranty dated as of October 1, 1996 by Televisa in favor of Network, guaranteeing the obligations of Univisa thereunder and (ii) that certain Amended and Restated Program License Agreement dated as of October 1, 1996, between Dennevar B.V. and Network, pursuant to which Dennevar makes certain current and library programming available to Network, and the Guaranty dated as of October 2, 1996 by Venevision in favor of Network, guaranteeing the obligations of Dennevar B.V. thereunder, as such Agreements and Guaranties may be amended or modified from time to time in accordance with the terms hereof.     "Program Rights Obligations":  all obligations, whether fixed or contingent, of the Borrower and its Subsidiaries in respect of the right to broadcast programs and films produced or supplied by any Person (other than a Loan Party, Televisa, Venevision or their respective Affiliates pursuant to Program License Agreements).     "Program Rights Payments":  for any period, the sum (determined on a consolidated basis and without duplication) of all payments by the Borrower and its Subsidiaries made or scheduled to be made during such period in respect of Program Rights Obligations; provided that (a) if the payment schedule for a Program Rights Obligation is modified at no cost (including, but not limited to, interest costs) to the Borrower or any of its Subsidiaries, then the payments with respect to such Program Rights Obligation shall be deemed to be scheduled to be made pursuant to such modified schedule and (b) any down payment on a Program Rights Obligation shall be equally allocated over the term of the payment period for such Program Rights Obligation in an amount per month during such payment period equal to the amount of such down payment divided by the number of months during such payment period.     "Program Services Agreements":  any local marketing agreement, time brokerage agreement, program services agreement or similar agreement providing for the Borrower or any of its Subsidiaries to program or sell advertising on all or any portion of the broadcast time of any television or radio station.     "Properties":  the collective reference to the real and personal property owned, leased, used, occupied or operated, under license or permit, by the Borrower or any of its Subsidiaries.     "PTI Holdings":  PTI Holdings, Inc., a Delaware corporation.     "Purchasing Lenders":  as defined in Section 9.6(c).     "Register":  as defined in Section 9.6(d).     "Regulation D":  Regulation D of the Board of Governors of the Federal Reserve System, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof and any successor regulation thereto.     "Regulation U":  Regulation U of the Board of Governors of the Federal Reserve System, as the same is from time to time in effect, and all official rulings and interpretations thereunder or thereof and any successor regulation thereto.     "Reorganization":  with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.     "Reportable Event":  any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under PBGC regulations. –14– --------------------------------------------------------------------------------     "Requirement of Law":  as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, determination or policy statement or interpretation of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.     "Responsible Officer":  as to any Person, the chief executive officer, the president, the vice-chairman, any executive vice president, any senior vice president or any vice president of such Person or, with respect to financial matters, the chief financial officer, treasurer or controller of such Person.     "Restricted Payments":  as defined in Section 6.6.     "Securities Offerings":  any direct or indirect public offering or private placement of any debt, equity, convertible, hybrid or other securities by the Borrower, or any Subsidiary of the Borrower.     "Security Documents":  the collective references to all pledge and security documents or mortgages or deeds of trust hereafter delivered or required to be delivered to the Administrative Agent granting, or purporting to grant, a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document (including, without limitation, under Section 5.13).     "Security Documents Effective Date":  the date on which the Existing Credit Agreement is terminated or expires.     "Senior Debt":  Funded Debt other than Subordinated Indebtedness.     "Single Employer Plan":  any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.     "Solvent":  when used with respect to any Person, that:      (i) the present fair salable value of such Person's assets is in excess of the total amount of the probable liability on such Person's liabilities;     (ii) such Person is able to pay its debts as they become due; and     (iii) such Person does not have unreasonably small capital to carry on such Person's business as theretofore operated and all businesses in which such Person is about to engage. For purposes of the definition of "Solvent", (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.     "Station":  any full power television station, any low power television station and any translator now or hereafter owned or operated by the Borrower or any of its Subsidiaries; provided such term shall not include any Station, any translator or other television station owned or operated by Entravision (or any subsidiary of Entravision) so long as Entravision is not a Subsidiary.     "Subordinated Indebtedness":  the Junior Subordinated Notes referred to in clause (i) of the definition thereof contained in Section 1.1.     "Subsidiary":  as to any Person at any time of determination, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary Voting Power (other than stock or such other ownership interests having such power only by reason of the happening of a –15– -------------------------------------------------------------------------------- contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries or Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "subsidiary" or to "subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.     "Taxes":  as defined in Section 2.12(a).     "Televisa":  Grupo Televisa S.A. de C.V.     "Termination Event":  (i) a Reportable Event, (ii) the institution of proceedings to terminate a Single Employer Plan by the PBGC under Section 4042 of ERISA, (iii) the appointment by the PBGC of a trustee to administer any Single Employer Plan or (iv) the existence of any other event or condition that would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment by the PBGC of a trustee to administer, any Single Employer Plan.     "Total Debt Ratio":  for the Borrower and its Subsidiaries on a consolidated basis, the ratio of Funded Debt outstanding at such time to EBITDA for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters.     "Total Debt Service":  as of any date, for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters, the sum of (i) all Interest Expense and (ii) all regularly scheduled principal payments due on Funded Debt (which result in permanent reductions in availability) (other than payments made pursuant to Section 2.2 and 2.3, or Section 2.5 and 2.6 of the Existing Credit Agreement).     "Total Interest Coverage Ratio":  the ratio of EBITDA to Interest Expense for the fiscal quarter most recently ended and the immediately preceding three fiscal quarters.     "Tranche":  the collective reference to LIBOR Loans the Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such LIBOR Loans shall originally have been made on the same day).     "Transferee":  as defined in Section 9.6(f).     "Transponder Leases":  collectively, the long-term capital leases for Network of satellite transponders for the distribution of programming.     "Type":  as to any Loan, its nature as an Alternate Base Rate Loan or a LIBOR Loan.     "Univisa":  Univisa, Inc., a Delaware corporation.     "USA Acquisition Agreement":  the Stock Purchase Agreement, dated as of January 17, 2001, between the Borrower and USA Broadcasting, as amended by the First Amendment to Stock Purchase Agreement dated as of May 9, 2001 and the Second Amendment to Stock Purchase Agreement dated as of June 7, 2001, as it may be further amended, modified or supplemented from time to time in accordance with the terms hereof.     "USA Broadcasting":  USA Broadcasting, Inc., a Delaware corporation.     "USA Broadcasting Acquisition":  the acquisition by the Borrower of the Subsidiaries of USA Broadcasting listed on Schedule 1.1(a) pursuant to, and in accordance with, the USA Acquisition Agreement.     "Venevision":  Corporacion Venezolana de Television (Venevision) C.A., a Venezuelan corporation. –16– --------------------------------------------------------------------------------     "Voting Power":  the aggregate number of votes of all classes of Capital Stock of such Person which ordinarily has voting power for the election of directors of such Person.     1.2  Other Definitional Provisions.  (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes, any other Loan Document or any certificate or other document made or delivered pursuant hereto or thereto.     (b) As used herein, in the Notes, in any other Loan Document, and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.     (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.     (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.     (e) The words "including" and "includes" and words of similar import when used in this Agreement shall not be limiting and shall mean "including without limitation" or "includes without limitation", as the case may be. SECTION 2. AMOUNT AND TERMS OF LOANS; COMMITMENT AMOUNTS     2.1  Loans; Commitment Amounts.  (a) Subject to the terms and conditions hereof, each Lender severally agrees to make term loans (each a "Loan" and, collectively, the "Loans") through its Applicable Lending Office to the Borrower from time to time from and including the Closing Date to but excluding the Commitment Expiration Date in accordance with the provisions of this Agreement; provided, however, that the aggregate principal amount of all Loans outstanding shall not exceed the Aggregate Commitment at any time; provided, further, that each borrowing of Loans hereunder shall be in a minimum aggregate principal amount equal to the lesser of (i) $50,000,000 or a whole multiple of $1,000,000 in excess thereof and (ii) the Aggregate Available Commitment.     (b) The principal amount of each Lender's Loan shall be in an amount equal to the product of (i) such Lender's Commitment Percentage (expressed as a fraction) and (ii) the total amount of the Loans requested; provided that in no event shall any Lender be obligated to make a Loan if after giving effect to such Loan such Lender's Loans outstanding would exceed its Commitment or if the amount of such requested Loan is in excess of such Lender's Available Commitment.     (c) Subject to Sections 2.8, 2.9 and 2.10, the Loans may from time to time be (i) LIBOR Loans, (ii) Alternate Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with either Section 2.1(d) or 2.4. Each Lender may make or maintain its Loans to or for the account of the Borrower by or through any Applicable Lending Office.     (d) The Loans made by each Lender to the Borrower shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A (a "Note"), with appropriate insertions therein as to payee, date and principal amount, payable to the order of such Lender and representing the obligation of the Borrower to pay the aggregate unpaid principal amount of all Loans made by such Lender to the Borrower pursuant to Section 2.1(a), with interest thereon as prescribed in Sections 2.6 and 2.7. Each Lender is hereby authorized (but not required) to record the date and amount of each payment or prepayment of principal of its Loans made to the Borrower, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of LIBOR Loans, the length of each Interest Period with respect thereto, in the –17– -------------------------------------------------------------------------------- books and records of such Lender, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. The failure of any Lender to make any such recordation or notation in the books and records of the Lender (or any error in such recordation or notation) shall not affect the obligations of the Borrower hereunder or under the Notes. Each Note shall (i) be dated the Closing Date, (ii) provide for the payment of interest in accordance with Sections 2.6 and 2.7 and (iii) be stated to be payable on the Maturity Date.     (e) The Borrower shall give the Administrative Agent irrevocable written notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to each proposed borrowing date or, if all or any part of the Loans are requested to be made as LIBOR Loans, three Eurodollar Business Days prior to each proposed borrowing date) requesting that the Lenders make the Loans on the proposed borrowing date and specifying (i) subject to Section 2.1(a), the aggregate amount of Loans requested to be made, (ii) subject to Section 2.1(c), whether the Loans are to be LIBOR Loans, Alternate Base Rate Loans or a combination thereof and (iii) if the Loans are to be entirely or partly LIBOR Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor. If all or any part of the requested Loans are to be used by the Borrower for a Borrower Stock Purchase, such notice shall further (i) specify (A) the amount of requested Loans to be used for such Borrower Stock Purchase, (B) the aggregate amount of Loans used for Borrower Stock Purchases since the Closing Date, (C) the aggregate consideration paid for Borrower Stock Purchases since the Closing Date, (D) the aggregate number of shares of the Borrower purchased by the Borrower since the Closing Date and (E) the total number of issued and outstanding shares of the Borrower of any class, and (ii) include a representation and warranty that the use of the requested Loans for such Borrower Stock Purchase shall not cause the aggregate consideration paid for Borrower Stock Purchases to exceed $50,000,000 or cause the aggregate percentage of such purchased stock to exceed 10% of issued common stock of the Borrower outstanding on the Closing Date. On receipt of such notice, the Administrative Agent shall promptly notify each Lender thereof not later than 11:00 A.M., New York City time on the date of receipt of such notice. On the proposed borrowing date, not later than 12:00 noon, New York City time, each Lender shall make available to the Administrative Agent at its office specified in Section 9.2 the amount of such Lender's pro rata share of the aggregate borrowing amount (as determined in accordance with the second paragraph of Section 2.1(a)) in immediately available funds. The Administrative Agent may, in the absence of notification from any Lender that such Lender has not made its pro rata share available to the Administrative Agent, on such date, credit the account of the Borrower on the books of such office of the Administrative Agent with the aggregate amount of Loans.      (f) At the Borrower's option and upon at least five Business Days' prior irrevocable written notice to the Administrative Agent, with such notice specifying the amount and the date of such reduction, the Borrower may permanently reduce the Aggregate Commitment in whole at any time or in part from time to time; provided, however, that each partial reduction of the Aggregate Commitment shall be in an aggregate amount equal to at least $5,000,000 or an integral multiple of $1,000,000. The Administrative Agent shall promptly notify each Lender (by telecopy or by telephone) of such requested Aggregate Commitment reduction.     (g) Reductions of the Aggregate Commitment pursuant to this Section 2.1 shall automatically effect a reduction of the Commitment of each Lender to an amount equal to the product of (i) the Aggregate Commitment of all Lenders, as reduced pursuant to this Section 2.1 and (ii) the Commitment Percentage of such Lender, in each case determined immediately prior to such reduction of the Aggregate Commitment on such date.     (h) Upon each reduction of the Aggregate Commitment, the Borrower shall (i) prepay the amount, if any, by which the aggregate unpaid principal amount of the Loans exceeds the amount –18– -------------------------------------------------------------------------------- of the Aggregate Commitment as so reduced, together with accrued interest on the amount being prepaid to the date of such prepayment and (ii) compensate the Lenders for their funding costs, if any, in accordance with Section 2.13.      (i) Neither the Administrative Agent, the Arranger nor any Lender shall be responsible for the obligation or Available Commitment of any other Lender hereunder, nor will the failure of any Lender to comply with the terms of this Agreement relieve any other Lender or the Borrower of its obligations under this Agreement and the Notes. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any default by such Lender hereunder.      (j) The Commitment of each Lender and the Aggregate Commitment shall terminate on the Commitment Expiration Date.     2.2  Optional Prepayments.  The Borrower may on the last day of any Interest Period with respect thereto, in the case of LIBOR Loans, or at any time and from time to time, in the case of Alternate Base Rate Loans, prepay the Loans, in whole or in part, without premium or penalty, upon at least five Days' irrevocable written notice from the Borrower to the Administrative Agent, specifying the date and amount of prepayment and whether the prepayment is of LIBOR Loans, Alternate Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable by the Borrower on the date specified therein, together with accrued interest to such date on the amount prepaid and amounts payable pursuant to Section 2.13. Amounts prepaid on account of the Loans may not be reborrowed. Partial prepayments of Loans shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000.     2.3  Mandatory Prepayments.  (a) Within one Business Day following receipt by the Borrower or the applicable Subsidiary of such Net Proceeds, the Borrower shall prepay the Loans ratably in accordance with the aggregate outstanding principal balances thereof with the Net Proceeds of (i) any Securities Offering by the Borrower or any Subsidiary issued on or after the Closing Date; and (ii) any borrowings on or after the Closing Date by the Borrower or any Subsidiary of the Borrower under any debt instrument, excluding borrowings under the Existing Credit Agreement up to $318,150,000 in the aggregate, but including borrowings under the Existing Credit Agreement in excess of $318,150,000 in the aggregate, and further excluding borrowings under any AT Note permitted under Section 6.2(l), in each case to the extent not required to be applied to the repayment of obligations outstanding under Sections 2.6(d) and 2.6(e) of the Existing Credit Agreement, as in effect as of the Loan Commitment Date.     (b) Within one Business Day following receipt by the Borrower or any applicable Subsidiary of such Net Proceeds, the Borrower shall prepay the Loans ratably in accordance with the aggregate outstanding principal balances thereof with the Net Proceeds from any Asset Disposition by the Borrower or any Subsidiary of the Borrower to the extent not required to be applied to the repayment of obligations outstanding under Section 6.5 of the Existing Credit Agreement, as in effect as of the Loan Commitment Date.     (c) Within one Business Day following receipt by the Borrower of any applicable Subsidiary of such Net Proceeds, the Borrower shall repay the Loans ratably in accordance with the aggregate outstanding principal balances thereof with the Excess Cash Flow existing at the end of any fiscal year of the Borrower in an amount equal to (x) if the Total Debt Ratio as of the end of such fiscal year is greater than or equal to 4:00:1, 662/3% of such Excess Cash Flow, or (y) if the Total Debt Ratio as of the end of such fiscal year is less than 4:00:1, 50% of such Excess Cash Flow, commencing with the year ended December 31, 2001, to the extent not required to be applied to –19– -------------------------------------------------------------------------------- the repayment of Obligations outstanding under the Existing Credit Agreement, as in effect as of the Loan Commitment Date.     (d) Notwithstanding clauses (a), (b) and (c) of this Section 2.3, from and after the first to occur of (x) the execution and delivery of such Security Documents as may be necessary to provide for the collateralization of the Obligations of the Loan Parties under the Loan Documents on a pari passu basis with the obligations under the Existing Credit Agreement, and (y) the termination or expiration of the Existing Credit Agreement, the Borrower shall prepay the Loans ratably in accordance with the aggregate outstanding principal balances thereof with (i) the Net Proceeds from any Securities Offering by the Borrower or any Subsidiary of the Borrower issued on or after such date, (ii) the Net Proceeds of any borrowings on or after such date by the Borrower or any Subsidiary of the Borrower under any debt instrument, other than borrowings under the Existing Credit Agreement and borrowings under any AT Note permitted under Section 6.2(l), (iii) the Net Proceeds of any Asset Disposition by the Borrower or any Subsidiary of the Borrower on or after the Closing Date; and (iv) Excess Cash Flow existing at the end of any fiscal year of the Borrower in an amount equal to (x) if the Total Debt Ratio as of the end of such fiscal year is greater than or equal to 4:00:1, 662/3% of such Excess Cash Flow, or (y) if the Total Debt Ratio as of the end of such fiscal year is less than 4:00:1, 50% of such Excess Cash Flow. All such mandatory prepayments shall be made within one Business Day following the end of such fiscal year or receipt by the Borrower or the applicable Subsidiary of such Net Proceeds, as applicable.     (e) Notwithstanding anything to the contrary in this Section 2.3, on the day of receipt by the Borrower or any applicable Subsidiary of such Net Proceeds, the Borrower shall repay all Obligations outstanding under this Agreement in full with the Net Proceeds from the initial borrowings under the New Credit Agreement and shall terminate the Commitments hereunder and this Agreement.      (f) Amounts prepaid on account of the Loans may not be reborrowed and the Aggregate Commitments shall be permanently reduced by the amounts of such prepayments. Each prepayment shall be accompanied by payment in full of all accrued and unpaid interest thereto and including the date of such prepayment, together with any additional amounts owing pursuant to Section 2.13.     2.4  Conversion and Continuation Options.       (a) The Borrower may elect from time to time to convert LIBOR Loans to Alternate Base Rate Loans, by the Borrower giving the Administrative Agent at least three Business Days' prior irrevocable written notice of such election pursuant to a Continuation Notice, provided that any such conversion of LIBOR Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Alternate Base Rate Loans to LIBOR Loans by the Borrower giving the Administrative Agent at least three Eurodollar Business Days' prior irrevocable written notice of such election pursuant to a Continuation Notice. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding LIBOR Loans and Alternate Base Rate Loans may be converted as provided herein, provided that (i) any such conversion may only be made if, after giving effect thereto, Section 2.5 shall not have been contravened, (ii) no Loan may be converted into a LIBOR Loan after the date that is one month prior to the Maturity Date and (iii) the Borrower shall not have the right to elect to continue at the end of the applicable Interest Period, or to convert to, a LIBOR Loan if a Default shall have occurred and be continuing. –20– --------------------------------------------------------------------------------     (b) Any LIBOR Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent thereof, provided that no LIBOR Loan may be continued as such (i) if, after giving effect thereto, Section 2.5 would be contravened, (ii) after the date that is one month prior to the Maturity Date or (iii) if a Default shall have occurred and be continuing and, provided, further, that if the Borrower shall fail to give any required notice as described above in this Section or if such continuation is not permitted pursuant to the preceding proviso, such Loans shall be automatically converted to Alternate Base Rate Loans on the last day of such then-expiring Interest Period.     2.5  Minimum Amounts of Tranches.  All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Tranche shall be equal to $1,000,000 or a whole multiple of $1,000,000 in excess thereof and, in any case, there shall not be more than 10 Tranches.     2.6  Interest Rates and Payment Dates of Principal and Interest.  (a) Each LIBOR Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the LIBOR Rate plus the Applicable Margin; provided, however, that, subject to clause (c) of this Section 2.6, the interest rate on such Loans shall in no event exceed (a) if the Borrower's long-term senior unsecured indebtedness is rated BB- or above by Standard & Poor's Rating Services and Ba3 or above by Moody's Investors Service, Inc., as of the date of issuance, the LIBOR Rate plus 800 basis points per annum, and (b) the LIBOR Rate plus 1000 basis points per annum in all other cases; provided, that GSCP shall use commercially reasonable efforts to determine the applicable interest rate after giving effect to the Applicable Margin such that the LIBOR Loans shall be syndicated at a price equal to approximately 100% of the principal amount of the LIBOR Loans; provided further, that the total principal amount and other terms and conditions of the LIBOR Loans remain unchanged.     (b) Each Alternate Base Rate Loan shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin; provided, however, that, subject to clause (c) of this Section 2.6, the interest rate on such Loans shall in no event exceed (a) if the Borrower's long-term senior unsecured indebtedness is rated BB- or above by Standard & Poor's Rating Services and Ba3 or above by Moody's Investors Service, Inc., as of the date of issuance, Alternate Base Rate plus 700 basis points per annum, and (b) Alternate Base Rate plus 900 basis points per annum in all other cases; provided, that GSCP shall use commercially reasonable efforts to determine the applicable interest rate after giving effect to the Applicable Margin such that the Alternate Base Rate Loans shall be syndicated at a price equal to approximately 100% of the principal amount of the Alternate Base Rate Loans; provided further, that the total principal amount and other terms and conditions of the Alternate Base Rate Loans remain unchanged.     (c) If any Event of Default shall have occurred and be continuing, all amounts outstanding shall bear interest at a rate per annum which is the rate described in paragraphs (a) and (b) of this Section 2.6, as applicable, plus 2% from the date of the occurrence of such Default until such Default is no longer continuing (after as well as before judgment).     (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable on demand.     (e) The principal amount of the Loans shall be payable quarterly in arrears, commencing on the last day of each March, June, September and December to occur following the Commitment Expiration Date in an amount equal, in the case of each such payment to 0.25% of the aggregate principal amount of the Loans made on or prior to the Commitment Expiration Date (without giving effect to any optional or mandatory prepayment thereof on or before such date). The remaining principal amount of the Loans shall be payable on the day on which the Loans become due and payable in full or are paid or prepaid in full. –21– --------------------------------------------------------------------------------     2.7  Computation of Interest and Fees.  (a) Interest on Alternate Base Rate Loans shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed and interest on LIBOR Loans, unused commitment fees and all other Obligations of the Borrower shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a LIBOR Rate. Any change in the interest rate on a Loan resulting from a change in the Alternate Base Rate or the LIBOR Reserve Requirements shall become effective as of the opening of business on the day on which such change in the Alternate Base Rate is announced or such change in the LIBOR Reserve Requirements becomes effective, as the case may be. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate.     (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error.     2.8  Inability to Determine Interest Rate.  In the event that prior to the first day of any Interest Period:     (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate for such Interest Period, or     (b) the Administrative Agent shall have received notice from the Majority Lenders that the LIBOR Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any LIBOR Loans requested to be made on the first day of such Interest Period shall be made as Alternate Base Rate Loans, (y) Loans that were to have been converted on the first day of such Interest period to LIBOR Loans shall be continued as Alternate Base Rate Loans, and (z) any outstanding LIBOR Loans shall be converted, on the first day of such Interest Period, to Alternate Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further LIBOR Loans shall be made or continued as such, nor shall the Borrower have the right to convert Alternate Base Rate Loans to LIBOR Loans.     2.9  Pro Rata Treatment and Payments.  Each borrowing by the Borrower from the Lenders hereunder and any reduction of the Aggregate Commitment shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal and interest amounts of such Loans then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder and under the Notes, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Administrative Agent's office specified in Section 9.2, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the applicable Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the LIBOR Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (and –22– -------------------------------------------------------------------------------- interest shall continue to accrue thereon at the applicable rate) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day.     2.10  Illegality.  Notwithstanding any other provision herein, if any change after the date of execution hereof in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender or Applicable Lending Office to make or maintain LIBOR Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans, continue LIBOR Loans as such and convert Alternate Base Rate Loans to LIBOR Loans shall forthwith be suspended during such period of illegality and (b) the Loans of such Lender or Applicable Lending Office then outstanding as LIBOR Loans, if any, shall be converted automatically to Alternate Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a LIBOR Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.13. To the extent that a Lender's LIBOR Loans have been converted to Alternate Base Rate Loans pursuant to this Section 2.10, all payments and prepayments of principal that otherwise would be applied to such Lender's LIBOR Loans shall be applied instead to its Alternate Base Rate Loans.     2.11  Increased Costs.  (a) In the event that any change after the date of execution hereof in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law but, if not having the force of law, generally applicable to and complied with by banks and financial institutions of the same general type as such Lender in the relevant jurisdiction) from any central bank or other Governmental Authority made subsequent to the date hereof:      (i) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirements against assets held by, letters of credit or guarantees issued by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender or Applicable Lending Office which is not otherwise included in the determination of the LIBOR Rate hereunder; or     (ii) shall impose on such Lender or Applicable Lending Office any other condition; and the result of any of the foregoing is to increase the cost to such Lender or Applicable Lending Office, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining LIBOR Loans, or to reduce any amount receivable hereunder in respect thereof then, in any such case, the Borrower shall immediately pay to the Administrative Agent, for its own account or on behalf of such Lender or Applicable Lending Office, as applicable, upon the demand of the Administrative Agent for itself or at the request of such Lender, as applicable, any additional amounts necessary to compensate such Lender or the Administrative Agent, as applicable, for such increased cost or reduced amount receivable. If the Administrative Agent, any Lender or any Applicable Lending Office becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower, through the Administrative Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section submitted by the Administrative Agent or such Lender or Applicable Lending Office, through the Administrative Agent, to the Borrower shall be conclusive evidence of the accuracy of the information so recorded, absent manifest error. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.     (b) If, after the date of this Agreement, the introduction of or any change in any applicable law, rule, regulation or guideline regarding capital adequacy, or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, affects the amount of capital required or expected to be maintained by any –23– -------------------------------------------------------------------------------- Lender or any corporation controlling any Lender, and such Lender (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) determines that the amount of capital maintained by such Lender or such corporation which is attributable to or based upon the Loans, the Commitments or this Agreement must be increased as a consequence of such introduction or change by an amount deemed by such Lender to be material, then, upon demand of the Administrative Agent at the request of such Lender, the Borrower shall immediately pay to the Administrative Agent on behalf of such Lender, additional amounts sufficient to compensate such Lender or such corporation for the increased costs to such Lender or corporation of such increased capital. Any such demand shall be accompanied by a certificate of such Lender setting forth in reasonable detail the computation of any such increased costs, which certificate shall be conclusive, absent manifest error. This obligation of the Borrower under this Section 2.11(b) shall survive repayment of the Loans and payment of all other amounts hereunder in full and the termination of this Agreement.     2.12  Taxes.  (a) All payments made by the Borrower in respect of the Obligations shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority or any political subdivision or taxing authority thereof or therein, other than Excluded Taxes (all such non-Excluded Taxes being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Administrative Agent, the Arranger or any Lender in respect of the Obligations, the amounts so payable to the Administrative Agent, such Arranger or such Lender shall be increased to the extent necessary to yield to the Administrative Agent, such Arranger or such Lender (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. The Administrative Agent, an Arranger or a Lender, as the case may be, shall deliver to the Borrower a certificate setting forth the amount of such Taxes, the calculation of such Taxes and an explanation of the requirement therefor, all in reasonable detail and such certificate shall be conclusive, absent manifest error. Whenever any Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Administrative Agent, for its own account or for the account of such Arranger or such Lender, as the case may be, a copy of an original official receipt received by the Borrower showing payment thereof or such other evidence of payment reasonably satisfactory to the Administrative Agent. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent, the Arranger and the Lenders for any incremental taxes, interest or penalties (and related reasonable fees and expenses of counsel) that may become payable by the Administrative Agent, the Arranger or any Lender as a result of any such failure. The agreements in this Section shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.     (b) Each Lender that is not organized under the laws of the United States of America or a state thereof agrees that it will deliver to the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-9, W-8BEN or W-8ECI (as applicable to it) or successor applicable form, as the case may be. Each such Lender also agrees to deliver to the Borrower and the Administrative Agent two further copies of the said Form W-9, W-8BEN or W-8ECI, or successor applicable forms or other manner or certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower and the Administrative Agent, and such extensions or renewals thereof as may reasonably be requested by the Borrower or the Administrative Agent, unless in any such case an event beyond the control of such Lender (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be –24– -------------------------------------------------------------------------------- required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advised the Borrower and the Administrative Agent. Each such Lender shall certify with respect to Form W-9, W-8BEN or W-8ECI, as applicable, that (i) it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) it is entitled to an exemption from United States backup withholding tax.     (c) The Borrower shall not be required to pay any additional amounts to any Person in respect of United States withholding tax pursuant to Section 2.12(a) if the obligation to pay such additional amounts would not have arisen but for a failure by such Person to comply with the requirements of Section 2.12(b) (including the accuracy of the certificate described in the final sentence thereof).     2.13  Indemnity.  The Borrower agrees to indemnify each Lender and to hold each Lender harmless from and to pay each Lender within 5 days of such Lender's demand the amount of any liability, loss or expense arising from the reemployment of funds obtained by it or from fees payable to terminate the deposits from which such funds were obtained (including reasonable fees and expenses of counsel) which such Lender may sustain or incur as a consequence of (a) default by the Borrower in payment when due of the principal amount of or interest on any LIBOR Loan, (b) default by the Borrower in making a borrowing of, conversion into or continuation of LIBOR Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (c) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (d) the making by the Borrower of a prepayment or conversion of LIBOR Loans on a day which is not the last day of an Interest Period with respect thereto. A Lender's certificate as to such liability, loss or expense shall be deemed conclusive, absent manifest error. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder.     2.14  Fees.  The Borrower agrees to pay the fees specified in the Fee Letter in accordance with the terms of the Fee Letter.     2.15  Mitigation of Costs.  If any Lender, by changing its Applicable Lending Office or taking any other reasonable action, so long as making such change or taking such other action is not, in the good faith judgment of such Lender, disadvantageous to it in any financial, regulatory or other respect, can mitigate any adverse effect on the Borrower under Section 2.10, 2.11 or 2.12, such Lender shall take such action. SECTION 3. REPRESENTATIONS AND WARRANTIES     To induce the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Administrative Agent, the Arranger and each Lender that:     3.1  Financial Condition.  The audited consolidated balance sheet of the Borrower as at December 31, 2000, and the related audited consolidated statements of operations, changes in stockholders' equity and statements of cash flows for the fiscal year ended on such date, certified by the Accountants and to the best of his knowledge by a Responsible Officer of the Borrower, copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial condition of the Borrower as at such date in all material respects, the consolidated results of its operations and consolidated cash flows for the fiscal year then ended in all material respects. The unaudited consolidated balance sheet of the Borrower as at March 31, 2001 and the related unaudited consolidated statements of operation and cash flows for the three-month period ended on such date, certified to the best of his knowledge by a Responsible Officer of the Borrower copies of which have heretofore been furnished to each Lender, present fairly the consolidated financial condition of the Borrower as at such date in all material respects, and the consolidated results of its operations and its –25– -------------------------------------------------------------------------------- consolidated cash flows for the three-month period then ended. All such financial statements (the "Financial Statements"), including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except for the absence of notes). The Borrower, on a consolidated basis, had, at the date of the most recent balance sheet referred to above, no material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto and which is material in relation to the respective consolidated financial condition of such entities at such date.     3.2  No Change.  Since December 31, 2000 there has been no event or condition resulting in a Material Adverse Effect.     3.3  Corporate Existence; Compliance with Law.  Each of the Loan Parties (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or partnership power (as applicable) and authority, and the legal right, to own and operate its Properties, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and in which it proposes to be engaged after the Closing Date, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except to the extent that the failure to comply thereunder could not, in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law and Contractual Obligations except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.     3.4  Corporate/Partnership Power; Authorization; Enforceable Obligations.  Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents and the Amendment to the Existing Credit Agreement and to obtain extensions of credit hereunder and has taken all necessary corporate action to authorize (i) the borrowings and other extensions of credit on the terms and conditions of this Agreement and the Notes and (ii) the execution, delivery and performance of the Loan Documents and the Amendment to the Existing Credit Agreement. No consent or authorization of, filing with or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings and other extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement, the Notes or the other Loan Documents or the Amendment to the Existing Credit Agreement. This Agreement has been, and each of the Notes, the other Loan Documents and the Amendment to the Existing Credit Agreement will be, duly executed and delivered on behalf of each Loan Party thereto. This Agreement constitutes, and each of the Notes, the other Loan Documents and the Amendment to the Existing Credit Agreement when executed and delivered will constitute, a legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Parties in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).     3.5  No Legal Bar.  The execution, delivery and performance of this Agreement, the Notes, the Material Agreements, the other Loan Documents and the Amendment to the Existing Credit Agreement, the borrowings hereunder and the use of the proceeds thereof will not violate (A) (i) the Existing Credit Agreement and (ii) the Junior Subordinated Notes or (B) any Requirement of Law or other Contractual Obligations of the Borrower or any of its Subsidiaries or any other Loan Party which, in the case of clause (B) only, could reasonably be expected to have a Material Adverse Effect and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation, except –26– -------------------------------------------------------------------------------- pursuant to the Loan Documents, which Lien could reasonably be expected to have a Material Adverse Effect.     3.6  No Material Litigation.  No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or any other Loan Party or against any of its or their respective properties or revenues, (a) on the Closing Date, with respect to this Agreement, the Notes or the other Loan Documents or any of the transactions contemplated hereby or thereby or (b) which could reasonably be expected to have a Material Adverse Effect.     3.7  Ownership of Property; Liens.  Each of the Borrower and its Subsidiaries and any other Loan Party shall have (i) with respect to real property interests, good record and marketable title in fee simple to, a valid leasehold interest in or rights as a permittee or licensee to and (ii) with respect to personal property interests, good title to, a valid leasehold interest in or rights as a permittee or licensee to all such personal property which is material to its business, except for those the failure of which to have good title could not reasonably be expected to have a Material Adverse Effect, and none of such property is subject to any Lien except as permitted by Section 6.3.     3.8  Intellectual Property.  The Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, trade names, patents and copyrights necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). To the Borrower's knowledge, no claim which could reasonably be expected to have a Material Adverse Effect has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim. To the Borrower's knowledge, the use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, nor, to the Borrower's knowledge, do the use by other Persons of such Intellectual Property infringe on the rights of the Borrower and its Subsidiaries, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect.     3.9  Taxes.  (a) Each of the Borrower and its Subsidiaries has filed or caused to be filed all material tax returns which are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any not yet delinquent or the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); and no tax Lien has been filed, and no claim is being asserted with respect to any such tax, fee or other charge which could reasonably be expected to have a Material Adverse Effect.     (b) There are no Taxes imposed on the Borrower or its Subsidiaries by any political subdivision or taxing authority due or payable either on or by virtue of the execution and delivery by the Borrower, the Administrative Agent, the Arranger or the Lenders of this Agreement or any other Loan Document to which the Borrower or any other Loan Party is a party or on any payment to be made by the Borrower pursuant hereto or thereto.     3.10  Federal Regulations.  No part of the proceeds of any Loans are intended to be or will be used, directly or indirectly, for any purpose which violates the provisions of the Regulations of the Board of Governors of the Federal Reserve System. If requested by any Lender, the Arranger or the Administrative Agent, and in any event upon consummation of any Acquisition involving the purchase of stock by the Borrower or any Subsidiary, the Borrower will furnish to the Administrative Agent, the –27– -------------------------------------------------------------------------------- Arranger and each Lender a statement to the foregoing effect in conformity with the requirements of Form U-1 referred to in Regulation U.     3.11  ERISA.  No Reportable Event has occurred during the five-year period prior to the date on which this representation is made with respect to any Plan which has or would likely result in a Material Adverse Effect. Each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. The present value of all accrued benefits under all Single Employer Plans maintained by the Borrower or any Commonly Controlled Entity (based on those assumptions used to fund the Single Employer Plans) did not, as of the last annual valuation date prior to the date on which this representation is made, exceed the value of the assets of such Single Employer Plans by an aggregate amount greater than $1,000,000. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan which has or would likely result in a Material Adverse Effect. The present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the liability of the Borrower and each Commonly Controlled Entity for post retirement benefits (excluding benefits required by Section 4980B of the Code) to be provided to their current and former employees under any Plans does not, in the aggregate, exceed the assets under all such Plans allocable to such benefits by an amount which has a Material Adverse Effect.     3.12  Investment Company Act; Other Regulations.  None of the Loan Parties is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act").     3.13  Material Agreements.  Each of the Material Agreements to which the Borrower or any other Loan Party is a party is a legal, valid and binding obligation of the parties thereto enforceable against such parties in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law); and neither the Borrower nor any other Loan Party is in breach or violation of or in default under any Material Agreement or the Junior Subordinated Notes in any material respect which would individually or in the aggregate have a Material Adverse Effect. Each of the Lenders, the Arranger and the Administrative Agent has received a complete and correct copy of each of the Material Agreements and the Junior Subordinated Notes (including in each case all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto, if any) and all amendments thereto and other side letters or agreements affecting the terms thereof. As of the Closing Date, neither the Borrower nor any of its Subsidiaries is party to any Program Services Agreement.     3.14  Subsidiaries.  The Subsidiaries listed on Schedule 3.14 constitute all of the direct and indirect Subsidiaries of the Borrower.     3.15  Purpose of Loans.  The proceeds of the Loans shall be used as follows: (i) to finance the purchase price of the Acquired Business and other Acquisitions by the Borrower, as set forth on Schedule 3.15 hereto, (ii) to repay the obligations outstanding under the $100 Million Credit Agreement, and (iii) for general corporate purposes of the Borrower and its Subsidiaries; provided, however, that if the initial borrowing of Loans is for a purpose other than to acquire the Acquired Business, then the Borrower shall use such initial borrowing of Loans (a) to repay all obligations, outstanding under the $100 Million Credit Agreement, (b) for the purchase price, in whole or in part, of another business or of assets to be used in the Borrower's Media/Communications Business, and (c) for general corporate purposes. The aggregate amount of the Loans used to finance Borrower Stock Repurchases shall not exceed $50,000,000 and the aggregate percentage of the stock purchased in Borrower Stock Purchases shall not exceed 10% of the issued common stock of the Borrower outstanding on the Closing Date. Notwithstanding anything to the contrary in this Agreement, no part –28– -------------------------------------------------------------------------------- of the proceeds of the Loans shall be used to finance the purchase price of any Acquisition unless (i) such Acquisition shall be consensual, (ii) prior to such Acquisition, such Acquisition shall have been approved by the board of directors of the Person to be acquired, and (iii) such approval of the board of directors shall not have been withdrawn, suspended or adversely modified and such board of directors shall not have failed upon a request by the Borrower to reaffirm publicly their approval of such Acquisition within 10 days following such request by the Borrower.     3.16  Environmental Matters.  To the Borrower's knowledge after reasonable inquiry:     (a) The Properties and all operations at the Properties are in compliance in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties, or violation of any Environmental Law with respect to the Properties or the business conducted at the Properties which involves a matter or matters which has caused or are reasonably likely to cause a Material Adverse Effect.     (b) Neither the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business conducted at the Properties which involves a matter or matters which has caused or are reasonably likely to cause a Material Adverse Effect, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened except insofar as such notice or threatened notice, or any aggregation thereof, does not involve a matter or matters that is or are reasonably likely to cause a Material Adverse Effect.     (c) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any of its Subsidiaries is named as a party with respect to the Properties or the business conducted at the Properties which involves a matter or matters which has caused or are reasonably likely to cause a Material Adverse Effect, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or such business except insofar as such proceeding, action, decree, order or other requirement, or any aggregation thereof, is not reasonably likely to cause a Material Adverse Effect.     3.17  Accuracy and Completeness of Information.  The documents furnished and the statements made in writing to the Lenders by the Borrower in connection with the negotiation, preparation or execution of this Agreement or any of the other Loan Documents taken as a whole do not contain any untrue statement of fact or omit to state any such material fact necessary in order to make the statements contained therein not misleading, in either case which has not been corrected, supplemented or remedied by subsequent documents furnished or statements made in writing to the Lenders prior to the date hereof. The projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by the Borrower to be reasonable at the time made and as of the Closing Date, it being recognized that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results.     3.18  Permits, Etc.  Each Loan Party has all permits, licenses, authorizations and approvals required for it lawfully to acquire, own, control, manage or operate each Primary Station currently owned, controlled, managed or operated by such Loan Party (including, without limitation, all Media Licenses) except for such permits, licenses, authorizations or approvals required for the lawful ownership, control, management or operation of a Primary Station, the failure to obtain or maintain which will not have a Material Adverse Effect. Each Primary Station is in compliance in all material respects with all such permits, licenses, authorizations and approvals. –29– --------------------------------------------------------------------------------     3.19  Copyright Act Requirements.  Each Loan Party that owns, manages or operates a Primary Station has recorded or deposited with and paid to the United States Copyright Office, the Registrar of Copyrights, the Patent and Trademark Office, the American Society of Composers, Authors and Publishers, Broadcast Music, Inc. and/or any other licensors of copyrighted materials, all notices, statements of account, royalty fees and other documents and instruments required under the terms and conditions of any patent, trademark, service mark, trade name and copyright used in the operation of a Primary Station and/or the Copyright Act of 1976, as amended from time to time, and the rules and regulations promulgated thereunder and, except as disclosed in writing to the Administrative Agent, is not liable to any Person for copyright infringement under any law, rule, regulation, contract or license as a result of its business operation, all except to the extent that non-compliance with the preceding requirements would not, in the aggregate, be reasonably expected to have a Material Adverse Effect.     3.20  Nature of Business.  Neither the Borrower nor any of its Subsidiaries is engaged in any material business other than the ownership and operation of (or the ownership of stock of or other interests in companies that own or operate) any Media/Communications Business.     3.21  FCC Matters; Media Licenses.  The Borrower and its Subsidiaries hold all permits, licenses, authorizations and approvals (collectively, "Authorizations") described in Schedule 3.21(a) (the "Borrower Authorizations"). USA Broadcasting holds all Authorizations described in Schedule 3.21(b) (the "USA Broadcasting Authorizations"). The Borrower Authorizations are in full force and effect, represent all the Authorizations necessary to conduct their businesses in the manner in which they are currently being conducted, and expire on the dates shown in Schedule 3.21(a). The operations of the Stations are in all material respects in compliance with the Communications Act. All reports and documents that are required by the Communications Act with respect to the ownership, management or operation of the Stations have been duly and timely filed, except for such reports or documents the failure to file which will not have a Material Adverse Effect.     As of the Closing Date, no Station is party to any time brokerage agreement. Except as described in Schedule 3.21(c), no condition exists or event has occurred which, in itself or with the giving of notice or lapse of time or both, would result in the suspension, revocation, material adverse modification, forfeiture or non-renewal of any of the Borrower Authorizations. There are no judgments, decrees, complaints, petitions, filings, orders issued or threatened by the FCC, other proceedings pending or threatened before the FCC (other than rulemakings of general applicability to the broadcast industry), or events that have occurred that could reasonably be expected to result in the imposition of any financial penalty in excess of $250,000 in the aggregate by the FCC upon the Borrower Authorizations. The FCC has granted, without the imposition of conditions outside the normal course, all consents necessary for transfer of control of the licensee subsidiaries which hold the USA Broadcasting Authorizations described in Schedule 3.21(b) hereto.     3.22  Ranking of Loans.  This Agreement and the other Loan Documents to which the Borrower is a party, when executed, and the Loans, when borrowed are and will be the direct and general obligations of the Borrower. The Borrower's obligations hereunder and thereunder rank and will rank at least pari passu in priority of payment with all other Senior Debt. The Borrower's obligations hereunder and thereunder constitute "Senior Debt" as defined in, and pursuant to, the Junior Subordinated Notes referred to in clause (i) of the definition thereof contained in Section 1.1.     3.23  Insolvency.  After giving effect to the funding of the Loans to be funded on each borrowing date (assuming borrowing of the entire Aggregate Commitment on such date), the existence of the Junior Subordinated Notes and the Existing Credit Agreement assuming, in each case, the issuance or borrowing of the entire amount of the indebtedness or commitments thereunder on such date, unless such Contractual Obligations have been terminated) and the payment of all estimated legal, investment banking, underwriting, accounting and other fees related hereto, the Borrower and each other Loan Party will be Solvent as of and on such borrowing date. –30– --------------------------------------------------------------------------------     3.24  Labor Matters.  As of the Closing Date there are no strikes or other labor disputes against the Borrower or any of its Subsidiaries pending or, to the Borrower's knowledge, threatened against any Loan Party.     3.25  Condemnation.  No taking of any of the Properties or any part thereof through eminent domain, conveyance in lieu thereof, condemnation or similar proceeding is pending or, to the knowledge of the Borrower, threatened by any Governmental Authority which would reasonably be expected to have a Material Adverse Effect.     3.26  Leases, Licenses, Permits, Site Use Agreements and Other Occupancy Agreements.  Any and all leases, licenses, permits, site use agreements and any other type of occupancy permit to which the Borrower or any Subsidiary is a party, other than the Borrower Authorizations described in Section 3.21, are in full force and effect with no material defaults existing thereunder which individually or in the aggregate would have a Material Adverse Effect.     3.27  Corporate Organization.  On the Closing Date, the corporate organization of the Borrower and its Subsidiaries, including the respective ownership interests of the Borrower in each of its Subsidiaries, is as set forth on Schedule 3.27. SECTION 4. CONDITIONS PRECEDENT     4.1  Conditions to Closing Date.  The effectiveness of this Agreement, and the agreement of each Lender to make the initial Loans on the Closing Date, are subject to the satisfaction, immediately prior to or concurrently with the making of such Loans on the Closing Date (except as otherwise expressly provided hereunder), of the following conditions precedent:     (a)  Credit Agreement.  The Administrative Agent shall have received this Agreement, executed and delivered by an officer of the Borrower as of the Closing Date, with a counterpart for each Lender, and such officer shall be covered by an incumbency certificate which shall have been executed and delivered to the Administrative Agent.     (b)  Other Loan Documents.  The Administrative Agent shall have received the Notes, executed and delivered by an officer of the Borrower, with a counterpart for each Lender, and such officer shall be covered by an incumbency certificate which shall have been executed and delivered to the Administrative Agent.     (c)  Documentation Legal Matters, etc.  The Loan Documents shall have been prepared by counsel to GSCP and shall be in form and substance satisfactory to the Lenders. All other matters relating to the Loan Documents and the Amendment to the Existing Credit Agreement, and the transactions contemplated thereby, shall be satisfactory to the Lenders in all respects.     (d)  Incumbency Certificate.  The Administrative Agent shall have received, with an executed counterpart for each Lender, an incumbency certificate of the Borrower dated the Closing Date, executed by one of its Responsible Officers or its Secretary or Assistant Secretary.     (e)  Corporate Proceedings.  The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of the Loan Documents and the Amendment to the Existing Credit Agreement, and (ii) the borrowings contemplated hereunder, certified by the Secretary or an Assistant Secretary of the Borrower, as of the Closing Date, which certificate states that the resolutions thereby certified have not been amended, modified, revoked or rescinded and are in full force and effect.     (f)  Organizational Documents.  The Administrative Agent shall have received, with a counterpart for each Lender, copies of the certificate of incorporation and by-laws of the Borrower, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the Borrower. –31– --------------------------------------------------------------------------------     (g) [Intentionally Omitted]     (h)  Legal Opinions.  The Administrative Agent shall have received, with a counterpart for each Lender, the following executed legal opinions:      (i) the executed legal opinion of O'Melveny & Myers LLP, counsel to the Borrower, in form and substance reasonably acceptable to the Arranger;     (ii) the executed legal opinion of Shaw Pittman, FCC counsel to the Borrower, in form and substance reasonably acceptable to the Arranger; and     (iii) such other legal opinions as the Arranger may reasonably request.     (i)  Material Agreements.  The Administrative Agent shall have received, with a counterpart for each Lender, copies of each of the Material Agreements, and each of the documents evidencing the Junior Subordinated Notes, all as certified as true and correct by the Borrower and all in form and substance satisfactory to the Majority Lenders.     (j)  Good Standing Certificates.  The Administrative Agent shall have received a certificate, dated a recent date, of the Secretary of State of the States of Delaware, California and each other jurisdiction where the Borrower is required to be qualified to do business under such jurisdiction's law, certifying as to the existence and good standing of, and the payment of taxes by, the Borrower in such state and listing all charter documents of the Borrower on file with such officials.     (k)  Tax and Legal Structure; Litigation.  The Arranger shall have reviewed, and be reasonably satisfied with, (i) the state and federal tax assumptions of the Borrower and each Subsidiary, (ii) the ownership, capital, organizational and legal structure of the Borrower and its Subsidiaries and (iii) the nature and status of any litigation affecting the Borrower and its Subsidiaries and/or this Agreement and any other Loan Document and the transactions contemplated hereby.     (l)  No Default/Representations.  No Default shall have occurred and be continuing on the Closing Date or would occur after giving effect to the Loans requested to be made on the Closing Date, and the representations and warranties contained in this Agreement and each other Loan Document and certificate or other writing delivered to the Lenders in satisfaction of the conditions set forth in this Section 4.1 prior to or on the Closing Date shall be correct in all material respects on and as of the Closing Date, and the Administrative Agent shall have received a certificate of the Borrower to such effect in the form of Exhibit C, dated as of the Closing Date and executed by a Responsible Officer of the Borrower.     (m)  Existing Credit Agreement.  The Administrative Agent shall have received evidence satisfactory to it that each of the Loans is permitted under the Existing Credit Agreement.     (n)  Solvency Certificate.  The Administrative Agent shall have received for distribution to the Lenders a certificate of the Chief Financial Officer of the Borrower to the effect that each Borrower is Solvent after giving effect to the funding of the Loans on the Closing Date (assuming borrowing of the entire Aggregate Commitment on such date), the existence of the Junior Subordinated Notes and the Existing Credit Agreement (assuming in each case the issuance or borrowing of the entire amount of the indebtedness or commitment on such date), and the payment of all estimated legal, investment banking, accounting, underwriting and other fees related hereto and thereto.     (o)  Insurance Policies.  [Intentionally omitted.]     (p)  Operational Consents.  The Administrative Agent shall have received evidence, in form and substance reasonably satisfactory to the Administrative Agent that (i) the Borrower and its Subsidiaries have obtained all FCC consents and licenses required by law or necessary for the operation of the Borrower and its Subsidiaries and (ii) the Borrower and its Subsidiaries have –32– -------------------------------------------------------------------------------- obtained all other consents and licenses required by law or necessary for the operation of the Borrower and its Subsidiaries, the failure of which to obtain would have a Material Adverse Effect. In particular, without limiting the generality of the above, the FCC shall have granted its consent for the USA Broadcasting Acquisition without conditions outside the normal course.     (q)  Approvals and Consents.  All Governmental Authority, shareholder and third-party approvals and consents necessary or desirable applicable to the application of the use of proceeds of the initial borrowing of Loans and any other financing arrangements in connection with any business or assets to be acquired with the proceeds of the initial borrowing of Loans shall have been received and shall be in full force and effect.     (r)  Financial Certificates.  The Administrative Agent shall have received a certificate, signed by a Responsible Officer of the Borrower and in form, substance and detail acceptable to the Administrative Agent indicating that the Financial Statements accurately reflect the financial condition and performance of the Borrower and its Subsidiaries (i) for fiscal year ending December 31, 2000 and (ii) the fiscal quarter ended March 31, 2001 in each case in accordance with GAAP consistently applied.     (s)  Non-Foreign Entity; Tax Identification Number.  The Administrative Agent shall have received, reviewed and approved a certificate from the Borrower regarding such entity's domestic status, which certificate shall also include such entity's tax identification number.     (t)  No Material Adverse Change.  No material adverse change shall have occurred, as determined in the sole discretion of the Arranger, in respect of the condition (financial or otherwise), business, operations, assets (including Media Licenses), nature of assets, liabilities or prospects of the Borrower and its Subsidiaries.     (u)  Concurrent Transactions.  There shall not exist (pro forma for the application of the use of proceeds of the Loans) any default or event of default under the Existing Credit Agreement, this Agreement or any of the other Loan Documents, or under any other material indebtedness of the Borrower or its Subsidiaries.     (v)  Absence of Certain Changes.  No change in the capital stock or long-term debt of the Borrower, or any of its Subsidiaries, or any adverse change, or any development involving a prospective adverse change, in or affecting the general affairs, management, financial position, stockholders' equity, results of operations or prospects of the Borrower or any business or assets to be acquired with the proceeds of the initial borrowing of Loans, considered as a whole, shall have occurred since December 31, 2000, and no material inaccuracy in such financial statements shall exist. The Borrower shall have no material liabilities, determined on a consolidated basis, except those set forth on the audited balance sheets dated December 31, 2000 included in the Financial Statements and those incurred in the ordinary course of business since such date in amounts that are consistent with past practice.     (w)  Market Disruption.  Since the Loan Commitment Date, there shall not have occurred any disruption or adverse change, as determined by the Arranger in its sole discretion, in the financial or capital markets generally, or in the markets for commercial banking, bridge loan syndication, high yield debt or equity securities in particular or affecting the syndication or funding of commercial loans or bridge loans (or the refinancing thereof) that may have an adverse impact on the ability to syndicate the Loans.     (x)  Financial Statements.  The Arranger shall have received audited financial statements for the three-year period immediately preceding the initial borrowing of Loans and any appropriate unaudited financial statements for any interim period or periods of the Borrower and, to the extent available, all recent, probable or pending acquisitions (including pro forma financial statements, if any, applicable to any business or assets to be acquired with the proceeds of the –33– -------------------------------------------------------------------------------- initial borrowing of Loans), all meeting the requirements of Regulation S-X for registration statements on Form S-1 promulgated by the United States Securities and Exchange Commission, and all such financial statements shall be satisfactory in form and substance to GSCP.     (y)  Litigation, etc.  There shall not exist any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any Governmental Authority that, in the opinion of the Arranger, affects the application of the proceeds from the initial borrowing of Loans, the financing of the transaction contemplated thereby or any of the other transactions contemplated hereby, or that could have a material adverse effect on the Borrower or any of the transactions contemplated hereby or by the USA Acquisition Agreement.     (z)  Liquidity and Capital Resources.  After giving effect to the use of the proceeds of the initial borrowings of Loans, and subject to the closing of the New Credit Agreement with initial available borrowing capacity of not less than $1.5 billion, the Borrower shall have sufficient liquidity and capital resources, to finance the Borrower's continuing operations following the funding of the Loans, including the payment due in connection with the USA Broadcasting Acquisition on the First USA Acquisition Closing; provided that if the initial borrowing of Loans is not made to finance the First USA Acquisition Closing, then the borrowing availability under this Agreement, after giving effect to the initial Loans, shall not be less than $300,000,000.     (aa)  Payment of Fees and Expenses.  All fees, costs, expenses and taxes accrued and unpaid and otherwise due and payable to any of GSCP, Goldman, Sachs & Co., the Arranger and the Administrative Agent on or before the Loan Commitment Date in connection with the Loans, pursuant to the Commitment Letter, the Fee Letter, the Engagement Letter or otherwise shall have been paid in full in immediately available funds.     (bb)  $100 Million Credit Agreement.  The Administrative Agent shall have received evidence satisfactory to it that the $100 Million Credit Agreement shall be simultaneously terminated and all amounts thereunder shall be simultaneously paid in full.     (cc)  Additional Proceedings.  The Administrative Agent shall have received such other approvals, opinions and documents as any Lender, through the Administrative Agent, may reasonably request and all legal matters incident to the making of such Loans shall be reasonably satisfactory to the Administrative Agent and the Arranger.     4.2  Conditions to Initial Loans for the USA Broadcasting Acquisition.  The agreement of each Lender to make initial Loans to finance the USA Broadcasting Acquisition on or after the Closing Date is subject to the satisfaction, immediately prior to or concurrently with the making of such Loans (except as otherwise expressly provided hereunder), of the following conditions precedent:     (a)  Concurrent Transactions.  All conditions precedent to the First USA Acquisition Closing shall have been satisfied or, with the prior approval of each of the parties to the USA Acquisition Agreement, and Arranger, waived. All matters relating to the USA Broadcasting Acquisition and the USA Acquisition Agreement, and, if not in effect prior to any previous borrowing of Loans and the Amendment to the Existing Credit Agreement shall be satisfactory in all respects to the Arranger and its counsel and the Arranger shall have received such additional certificates, legal and other opinions and such other documentation as it may request. There shall not exist (pro forma for the USA Broadcasting Acquisition and the financing thereof) any default or event of default under the Existing Credit Agreement, this Agreement or any of the other Loan Documents or under any other material indebtedness of the Borrower or its Subsidiaries.     (b)  Absence of Certain Changes; Compliance Certificate.  The Arranger shall not have become aware of any information relating to conditions or events not previously disclosed to the Arranger or constituting new information or additional developments concerning conditions or events previously disclosed to the Arranger which the Arranger, in its judgment, believes may have –34– -------------------------------------------------------------------------------- a material adverse effect on the condition (financial or otherwise), assets, liabilities (contingent or otherwise), properties, solvency, business, management or prospects of the Borrower and the Acquired Business considered as a whole. If any borrowing of Loans to fund the USA Broadcasting Acquisition is not the initial borrowing of Loans, the Arranger shall have received from the Borrower a compliance certificate stating that the Borrower is in compliance with all of the representations, warranties and covenants contained in the Loan Documents.     (c)  Financial Statements.  To the extent available to the Borrower, the Arranger shall have received financial statements and financial information of the Acquired Business for the three-year period immediately preceding the USA Broadcasting Acquisition and any appropriate unaudited financial statements for any interim period or periods, all meeting, to the extent reasonably practicable, the requirements of Regulation S-X for registration statements on Form S-1 promulgated by the United States Securities and Exchange Commission.     (d)  Approvals and Consents.  All Governmental Authority, shareholder and third-party approvals and consents necessary or desirable in connection with the First USA Acquisition Closing and the financing thereof shall have been received and shall be in full force and effect.     (e)  Litigation, etc.  There shall not exist any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any Governmental Authority that, in the opinion of the Arranger, affects or could have a material adverse affect on the USA Broadcasting Acquisition, the financing thereof or any of the other transactions contemplated hereby or by the USA Acquisition Agreement.     (f)  Liquidity and Capital Resources.  After giving effect to the consummation of transactions contemplated by the USA Broadcasting Acquisition, and subject to the closing of the New Credit Agreement with available borrowing capacity of not less than $1.5 billion, the Borrower shall have sufficient liquidity and capital resources to finance the Borrower's continuing operations following the First USA Acquisition Closing.     4.3  Conditions to Each Loan.  The agreement of each Lender to make each Loan requested to be made by it is subject to the satisfaction, immediately prior to or concurrently with the making of such Loan, of the following conditions precedent:     (a)  Representations and Warranties; No Default.  The following statements shall be true and correct and the Borrower shall deliver to the Administrative Agent a compliance certificate signed by a Responsible Officer of the Borrower on the date of such Loan stating that:      (i) The representations and warranties contained in this Agreement and in each other Loan Document and certificate or other writing delivered to the Lenders prior to, on or after the Closing Date pursuant hereto and on or prior to the date for such Loan are true and correct on and as of such date in all material respects as though made on and as of such date except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct on and as of such earlier date in all material respects;     (ii) No Default has occurred and is continuing or would result from the making of the Loan to be made on such date; and     (iii) If the First USA Acquisition Closing has not then occurred and such Loan is not being made to finance the First USA Acquisition Closing, the requirements as to liquidity and capital resources contained in Section 4.1(z) with respect to the initial Loan are satisfied with respect to, and after giving effect to, the making of the Loan to be made on such date.     (b)  Legality.  The making of such Loan shall not contravene any law, rule or regulation applicable to any Lender or the Borrower or any other Loan Party. –35– --------------------------------------------------------------------------------     (c)  Borrowing Notice.  The Administrative Agent shall have received a borrowing notice pursuant to the provisions of this Agreement from the Borrower.     (d)  Approvals.  With respect to a borrowing in connection with an Acquisition of television or radio stations, the Administrative Agent shall have received copies of all FCC and regulatory approvals and licenses necessary in connection with any such Acquisition and all shareholder approvals necessary in connection with any such Acquisition. SECTION 5. AFFIRMATIVE COVENANTS     The Borrower hereby agrees that from and after the Closing Date, so long as any Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to any Lender, the Administrative Agent or the Arranger hereunder:     5.1  Financial Statements.  The Borrower shall furnish to the Administrative Agent (for distribution to each Lender):     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the consolidated and consolidating balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidated and consolidating statements of operations and retained earnings, stockholders' equity and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, audited without a "going concern" or like qualification or exception, or other qualification arising out of the scope of the audit, by the Accountants;     (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated and consolidating balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated and consolidating statements of operations, retained earnings, stockholders' equity and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer of the Borrower as being fairly stated in all material respects (subject to normal year-end audit adjustments);     (c) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a certificate from the Accountants verifying compliance by the Borrower and its Subsidiaries on a consolidated basis with each financial covenant set forth in Section 6.1 and, based on their review of the financial reports of the Borrower and its Subsidiaries on a consolidated basis, an opinion of the Accountants that no Default shall have occurred under any Loan Document; provided, that the Accountants shall not be required, as a result of delivering such opinion, to undertake any special investigation in addition to their normal audit examination; and     (d) as soon as available, but in any event within 45 days after the end of each fiscal quarter of the Borrower, financial reports, consistent with the internal reporting practices of the Borrower and its Subsidiaries as in effect on the Closing Date, relating to the operations of each Primary Station as at the end of such quarter and the portion of the fiscal year through the end of such quarter, certified by a Responsible Officer of the Borrower as being fairly stated in all material respects (subject to normal year-end audit adjustments); all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by the Accountants or Responsible Officer, as the case may be, and disclosed therein). –36– --------------------------------------------------------------------------------     5.2  Certificates; Other Information.  The Borrower shall:     (a) furnish to the Administrative Agent (for distribution to each Lender) concurrently with the delivery of the financial statements referred to in Sections 5.1(a) and 5.1(b), a certificate of a Responsible Officer of the Borrower stating that, (i) to the best of such Responsible Officer's knowledge, the Borrower during such period has observed or performed all of its covenants (including calculations substantially in the form of Exhibit D regarding all financial covenants) and other agreements, and satisfied every condition, contained in this Agreement and in the Notes and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default except as specified in such certificate and (ii) to the best of such Responsible Officer's knowledge, no Default has occurred and the Borrower is in compliance with its covenants in the Loan Documents;     (b) at least once during each fiscal year of the Borrower, convene a bank meeting among the Lenders upon reasonable notice to the Lenders, or attend such a meeting convened by the Arranger, and present cash flow projections for the forthcoming year and a report discussing the views of the Borrower concerning the recent performance and near and intermediate term prospects of (i) the businesses in which the Borrower and its Subsidiaries are principally engaged and (ii) trends concerning assets under management, advisory fees, competition and strategic initiatives by the Borrower and its Subsidiaries;     (c) furnish to the Administrative Agent (for distribution to each Lender) within five days after the same are filed, copies of all financial statements and reports which the Borrower or any Subsidiary may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority;     (d) furnish to the Administrative Agent (for distribution to each Lender) promptly but, in any event, within five Business Days, after receipt thereof, copies of all financial reports (including, without limitation, management letters), if any, submitted to the Borrower or any of its Subsidiaries by the Accountants in connection with any annual or interim audit of the books thereof;     (e) furnish to the Administrative Agent (for distribution to each Lender) as soon as available and in any event not later than January 31 of each year, commencing with the fiscal year ending on December 31, 2001, a copy of the annual operating budgets for the Borrower and its Subsidiaries for such fiscal year, detailed by quarter and a copy of the three-year annual operating budgets for the Borrower and its Subsidiaries for such three-year period;      (f) furnish to the Administrative Agent (for distribution to each Lender) as soon as possible and in any event within five days after the occurrence of a Default or, in the good faith determination of a Responsible Officer of the Borrower, a Material Adverse Effect, the written statement by a Responsible Officer of the Borrower, setting forth the details of such Default or Material Adverse Effect and the action which the Borrower proposes to take with respect thereto;     (g) furnish to the Administrative Agent (for distribution to each Lender) promptly but, in any event, within five Business Days, after the same become available, copies of all statements, reports and other information which the Borrower or any of its Subsidiaries sends to any holders, as holders, of its Indebtedness or its securities;     (h) furnish to the Administrative Agent (for distribution to each Lender) (A) as soon as possible and in any event within 30 days after the Borrower knows or has reason to know that any Termination Event with respect to any Plan has occurred, a statement of a Responsible Officer of the Borrower describing such Termination Event and the action, if any, which the Borrower proposes to take with respect thereto, (B) promptly and in any event within ten Business Days after receipt thereof by the Borrower or any of its ERISA Affiliates from the PBGC, copies of –37– -------------------------------------------------------------------------------- each notice received by the Borrower or any of its ERISA Affiliates of the PBGC's intention to terminate any Plan or to have a trustee appointed to administer any Plan, (C) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan maintained for or covering employees of the Borrower or any of its Subsidiaries if the present value of the accrued benefits under the Plan exceeds its assets by an amount in excess of $1,000,000 and (D) promptly and in any event within fifteen Business Days after receipt thereof by the Borrower or any of its ERISA Affiliates from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice received by the Borrower or any of its ERISA Affiliates concerning the imposition or amount of withdrawal liability under Section 4202 of ERISA or indicating that such Multiemployer Plan may enter reorganization status under Section 4241 of ERISA;      (i) furnish to the Administrative Agent (for distribution to each Lender) promptly after the commencement thereof, but in any event not later than five Business Days after service of process with respect thereto on, or the obtaining of knowledge by, the Borrower or any of its Subsidiaries, notice of each action, suit or proceeding before any court or governmental authority or other regulatory body or any arbitrator as to which there is a reasonable possibility of a determination that would have a Material Adverse Effect;      (j) furnish to the Administrative Agent (for distribution to each Lender) promptly after the sending or filing thereof, but in any event not later than ten Business Days following such sending or filing, copies of (A) all Ownership Reports on FCC Form 323 (or any similar form which may be adopted by the FCC from time to time) and any supplements thereto, and (B) all statements, reports and other information filed by or on behalf of the Borrower or any of its Subsidiaries with the FCC if such statement, report or other information indicates a material change in the condition, financial or otherwise, or operations of the Borrower or any of its Subsidiaries;     (k) furnish to the Administrative Agent (for distribution to each Lender) promptly upon receipt thereof, but in any event not later than five Business Days following such receipt, copies of (i) all notices and other communications that the Borrower or any of its Subsidiaries shall have received from the FCC relating to any adjudicatory hearing before the FCC as to which the Borrower or any of its Subsidiaries is a party, (ii) any petition, complaint, notice of violation or notice of apparent liability made with the FCC or received from the FCC relating to any proceeding involving the Borrower or any of its Subsidiaries which, if determined adversely to the Borrower or its Subsidiaries, could result in the rescission, non-renewal, revocation or materially adverse modification of any Media License and (iii) any cease and desist order or similar directive from the FCC, if compliance with such cease and desist order for an indefinite period or for the period set forth in such order could reasonably be expected to have a Material Adverse Effect or if the Borrower or any of the Subsidiaries of the Borrower against which such order is issued is unable to comply with such order within the time period provided in such order and such failure or the continuation of such failure could reasonably be expected to have a Material Adverse Effect;      (l) furnish to the Administrative Agent (for distribution to each Lender) no later than ten days prior to the formation or acquisition of any Subsidiary of the Borrower or a Subsidiary of a Subsidiary, a supplement to Schedule 3.14, setting forth the information with respect to each such Subsidiary reasonably required by the Majority Lenders;     (m) furnish to the Administrative Agent (for distribution to each Lender) no later than 30 days prior to the acquisition of a Media License or Primary Station by the Borrower or any Subsidiary, a supplement to Schedule 3.21, setting forth the information with respect to each Primary Station or Media License reasonably required by the Majority Lenders; –38– --------------------------------------------------------------------------------     (n) furnish to the Administrative Agent (for distribution to each Lender) promptly (and in any event prior to the execution and delivery of each AT Note) notice of (i) the delivery by USA Broadcasting to the Borrower or any of its Subsidiaries (including Newco) of an AT Notice (as defined in the Second Amendment to the USA Acquisition Agreement, as in effect on the date hereof), and (ii) the principal amount of such AT Note; and     (o) furnish to the Administrative Agent (for distribution to each Lender) promptly such additional financial and other information as any Lender, through the Administrative Agent, may from time to time reasonably request.     5.3  Payment of Obligations.  The Borrower shall, and shall cause each of its Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the failure to so satisfy such obligations would not have a Material Adverse Effect or except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be.     5.4  Conduct of Business and Maintenance of Existence.  The Borrower shall, and shall cause each of its Subsidiaries to, continue to engage in business of the same general type as conducted by the Borrower and its Subsidiaries as of the Closing Date and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, registrations, licenses, privileges and franchises necessary or desirable in the normal conduct of its business, except to the extent that a failure to maintain such rights, registrations, licenses, privileges and franchises would not have a Material Adverse Effect or except as otherwise permitted pursuant to Section 6.5, and comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith would not, in the aggregate, have a Material Adverse Effect.     5.5  Maintenance of Property; Insurance.  The Borrower shall, and shall cause each of its Subsidiaries to, keep all Property useful or necessary in its business in good working order and condition (ordinary wear and tear excepted); maintain with financially sound and reputable insurance companies or associations insurance on such of its Property in at least such amounts and against such risks as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent, upon written request, full information as to the insurance carried. From and after the Security Documents Effective Date, all such policies of liability insurance on the property of the Borrower and the Subsidiaries and all such property and casualty insurance policies shall contain an endorsement, in form and substance reasonably satisfactory to the Administrative Agent in its sole discretion, showing the Administrative Agent, on behalf of the Lenders, as additional insured, or as its interests appear, or as loss payee. Such endorsement, or an independent instrument furnished to the Administrative Agent, shall provide that the insurance companies will give the Administrative Agent at least 30 days' prior written notice before any such policy or policies of insurance shall be altered or canceled. All policies of insurance required to be maintained under this Agreement shall be in customary form and with insurers recognized as adequate by the Administrative Agent and all such policies shall be in such amounts as shall be customary for similar companies in the same or similar business in the same geographical area. The Borrower and its Subsidiaries shall deliver to the Administrative Agent insurance certificates certified by the Borrower's or such Subsidiary's insurance brokers, as to the existence and effectiveness of each policy of insurance and evidence of payment of all premiums then due and payable therefor. In addition, the Borrower shall notify the Administrative Agent promptly of any occurrence causing a material loss of any insured Property and the estimated (or actual, if available) amount of such loss.      (i) Each policy for liability insurance shall provide for all losses to be paid on behalf of the Administrative Agent and the Borrower or its Subsidiary (as the case may be), as their respective interests may appear. –39– --------------------------------------------------------------------------------     (ii) Reimbursement under any liability insurance maintained by the Borrower or its Subsidiaries pursuant to this Section 5.5 may be paid directly to the Person who shall have incurred liability covered by such insurance.     5.6  Inspection of Property; Books and Records; Discussions.  The Borrower shall, and shall cause each of its Subsidiaries to, keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all material dealings and transactions in relation to its business and activities; and upon reasonable notice and at such reasonable times during usual business hours, permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its Accountants (as long as a member of senior management of the Borrower is present during such discussion).     5.7  Environmental Laws.  The Borrower shall, and shall cause each of its Subsidiaries to:     (a) Comply with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so could not be reasonably expected to have a Material Adverse Effect;     (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings; and     (c) Defend, indemnify and hold harmless the Administrative Agent, the Arranger and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Borrower or any of its Subsidiaries, or the Borrower's or any of its Subsidiaries' interest in Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. This indemnity shall continue in full force and effect regardless of the termination of this Agreement.     5.8  Use of Proceeds.  The Borrower will use, and cause its Subsidiaries to use, the proceeds of the Loans as set forth in Section 3.15 and in compliance with Section 3.10.     5.9  Compliance With Laws, Etc.  Except as set forth in Section 5.7 relating specifically to Environmental Laws, the Borrower shall comply, and shall cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders except where noncompliance would not reasonably be expected to have a Material Adverse Effect, such compliance to include, without limitation (i) paying before the same become delinquent all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any of its Properties and (ii) paying all lawful claims which if unpaid might become a Lien upon any of its Properties; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as (A) the validity or applicability thereof is being contested in good faith by appropriate proceedings or the –40– -------------------------------------------------------------------------------- failure to pay such tax, assessment, charge, levy or claim would not have a Material Adverse Effect and (B) the Borrower or such Subsidiary shall, to the extent required by GAAP, have set aside on its books adequate reserves with respect thereto.     5.10  Media Licenses.  The Borrower will obtain, maintain and preserve, and cause each of its Subsidiaries to obtain, maintain and preserve, all Media Licenses, including without limitation, by filing with the FCC (i) those of the Loan Documents required to be filed under the FCC's rules and regulations within 30 days after the Closing Date, and (ii) all reports (including Ownership Reports on Form 323) and other documents required to be filed by the Communications Act in connection with the transactions contemplated hereby and maintaining public records and files in accordance with the Communications Act and the rules and regulations of the FCC, except for such Media Licenses in respect of the Primary Stations the failure of which to obtain, maintain or preserve will not have a Material Adverse Effect.     5.11  Leases and Licenses.  The Borrower shall or shall cause its Subsidiaries to perform and carry out all of the provisions of all of the leases, licenses, permits and any other occupancy agreements relating to real property or real property interests (the "Occupancy Agreements") to be performed by the Borrower or any of its Subsidiaries and shall appear in and defend any action in which the validity of any of the Occupancy Agreements relating to any real property or real property interests is at issue and shall commence and maintain any action or proceeding necessary to establish or maintain the validity of any of such Occupancy Agreements and to enforce the provisions thereof.     5.12  Notices.  The Borrower will provide, and will cause its Subsidiaries to provide to the Arranger, within 5 days following receipt by the Borrower or such Subsidiary, copies of all notices received by the Borrower or such Subsidiary (i) under any Material Agreement, relating to any default, any claimed force majeure or any other material provision thereof and (ii) from the Internal Revenue Service or other taxing authority relating to any dispute regarding deductions, audits or any other material matter which, if adversely determined against the Borrower or such Subsidiary, would have a Material Adverse Effect.     5.13  Security Interests.  (a) From and after the Security Documents Effective Date, the Obligations shall be secured by Liens, in favor of the Administrative Agent for the benefit of the Lenders, granted by any Person that, as of the Loan Commitment Date or thereafter, granted a Lien to secure any of the obligations or liabilities under the Existing Credit Agreement or any loan document entered into in connection therewith. The collateral subject to such Liens in favor of the Administrative Agent shall consist of (i) the property and assets of the Borrower secured on the Loan Commitment Date by the Liens in favor of the lenders under the Existing Credit Agreement or one or more representatives of such lenders, and (ii) any and all property and assets acquired by any Loan Party following the Loan Commitment Date (including, without limitation, the Acquired Business); provided, however, that such collateral shall not include at any time any license granted by the FCC to the extent, but only to the extent, that the Borrower is prohibited at that time from granting a security interest therein in favor of the Administrative Agent pursuant to the Communications Act.     (b) The Borrower shall, and shall cause the Loan Parties, as applicable, to execute and deliver to the Administrative Agent, on or before the Security Documents Effective Date, and such Security Documents as are necessary or reasonably requested by the Administrative Agent to effectively grant, and maintain the perfection and priority of, the Liens in favor of the Administrative Agent described in Section 5.13(a), all in such form as shall be satisfactory to the Administrative Agent. –41– --------------------------------------------------------------------------------     (c) From and after the Security Documents Effective Date, the Borrower shall, and shall cause each of its Subsidiaries to, take any action which the Administrative Agent may reasonably request in order to obtain from the FCC (and any other applicable Governmental Authority) such approval as may be necessary to enable the Administrative Agent and the Lenders to exercise and enjoy the full rights and benefits granted to them by this Agreement, including the use of each Grantor's best efforts to assist in obtaining the approval of the FCC for any action or transaction contemplated by this Agreement for which such approval is required by law or is asserted by the FCC to be required by law. SECTION 6. NEGATIVE COVENANTS     The Borrower hereby agrees that from and after the Closing Date, so long as any Commitments remain in effect, any Note remains outstanding and unpaid or any other amount is owing to any Lender, the Arranger or the Administrative Agent hereunder:     6.1  Financial Condition Covenants.  The Borrower shall not:     (a)  Maximum Total Debt Ratio.  Permit the Total Debt Ratio at any time (provided that EBITDA shall be calculated as of the end of the last fiscal quarter for which financial statements under Section 5.1(b) shall have been required to be delivered, unless a Covenant Compliance Certificate together with financial statements for the relevant period shall have been delivered to the Lenders for a more recent period, in which case EBITDA set forth therein shall be used for calculating this ratio) of the Borrower and its Subsidiaries on a consolidated basis to exceed 4.00:1.     (b)  Minimum Total Interest Coverage Ratio.  Permit the Total Interest Coverage Ratio as of the end of any fiscal quarter of the Borrower and its Subsidiaries to be less than 2.60:1; provided that Interest Expense, as used in the Total Interest Coverage Ratio, shall exclude all PIK Interest.     (c)  Minimum Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Borrower and its Subsidiaries to be less than 1.10:1; provided that Interest Expense, as used in Total Debt Service as used in Fixed Charge Coverage Ratio, shall exclude all PIK interest.     (d)  Calculation of Financial Condition Covenants, etc.  Notwithstanding anything to the contrary in this Agreement, for purposes of determining compliance with Sections 6.1(a), (b) and (c), Section 6.6(ii) and Section 6.7(k) only, Newco shall be deemed not to be a Subsidiary of the Borrower so long as all of the Indebtedness of Newco created under each AT Note constitutes Non-Recourse Indebtedness.     6.2  Limitation on Indebtedness.  The Borrower shall not create, incur, assume or suffer to exist any Indebtedness, and shall not permit any of its Subsidiaries to create, incur, assume or suffer to exist any Indebtedness, except, subject to Section 6.19, for:     (a) Indebtedness created hereunder and under the Notes;     (b) Indebtedness (not referred to in any other clause of this Section 6.2) of the Borrower or any of its Subsidiaries secured by Liens permitted with respect to the Borrower or its Subsidiaries by Section 6.3; provided that the aggregate amount of any such Indebtedness that is not rated as investment grade by at least one of Standard & Poor's Ratings Services and Moody's Investors Service, Inc. and not rated with at least the highest non-investment grade ranking by the other such rating agency shall not exceed $100,000,000;     (c) Indebtedness under the Existing Credit Agreement in an aggregate principal amount not exceeding $318,150,000, less the principal amount of mandatory repayments and prepayments made thereunder from time to time on and after the Closing Date;     (d) [Intentionally Omitted]; –42– --------------------------------------------------------------------------------     (e) Indebtedness of a Person which becomes a Subsidiary after the date hereof, provided that (i) such Indebtedness existed at the time such Person became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such Person by the Borrower or any existing Subsidiary no Default shall have occurred and be continuing;      (f) unsecured Indebtedness of any Subsidiary owing to the Borrower or any other wholly-owned Subsidiary or secured Indebtedness of any Subsidiary that is not a wholly-owned Subsidiary owing to the Borrower or any wholly-owned Subsidiary;     (g) the License Fee Guaranties and the Junior Subordinated Notes, in amounts in existence on the Existing Credit Agreement Closing Date;     (h) Indebtedness (i) under any Interest Rate Agreement required by the Existing Credit Agreement, (ii) evidenced by performance bonds or letters of credit issued in the ordinary course of business or reimbursement obligations in respect thereof, (iii) evidenced by a letter of credit facility related to insurance associated with claims for work-related injuries or (iv) for bank overdrafts incurred in the ordinary course of business that are promptly repaid;      (i) trade credit incurred to acquire goods, supplies, services and incurred in the ordinary and normal course of business;      (j) Capitalized Lease Obligations of the Borrower and its Subsidiaries in an aggregate amount not exceeding $50,000,000 between the Existing Credit Agreement Closing Date and the Maturity Date, inclusive;     (k) all deferred taxes (where such deferral is otherwise permitted under the terms of this Agreement and under applicable law); and      (l) Non-Recourse Indebtedness of Newco to USA Broadcasting created under any AT Note in an aggregate principal amount not to exceed the lesser of (i) the portion of the purchase price allocable to the Capital Stock of each Subsidiary of USA Broadcasting acquired by Newco with the Net Proceeds of such AT Note, pursuant to Section 1.3 of the Second Amendment to the USA Acquisition Agreement, as in effect on the date hereof, and (ii) $835,000,000.     6.3  Limitation on Liens.  The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except, subject to Section 6.19, for:     (a) Liens created under the Existing Credit Agreement or under any of the other Loan Documents (as defined in the Existing Credit Agreement);     (b) Liens existing on any Property at the time of its acquisition after the date hereof not created in anticipation of such acquisition and limited solely to the Property acquired;     (c) Liens arising pursuant to any order of attachment, distraint or similar legal process arising in connection with court proceedings so long as the execution or other enforcement thereof is effectively stayed and claims secured thereby are being contested in good faith by appropriate proceedings;     (d) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;     (e) Liens created by operation of law not securing the payment of Indebtedness for money borrowed or guaranteed, including carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue –43– -------------------------------------------------------------------------------- for a period of more than 45 days or which are being contested in good faith by appropriate proceedings;      (f) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements;     (g) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;     (h) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and not otherwise referred to in any clause of this Section 6.3 which, in the aggregate, would not cause a Material Adverse Effect;      (i) [Intentionally Omitted];      (j) Liens on the Property or assets of a Person which becomes a Subsidiary after the date hereof securing Indebtedness permitted by Section 6.2(e), provided that (i) such Liens existed at the time such Person became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of such Person after the time such Person becomes a Subsidiary and (iii) the amount of Indebtedness secured thereby is not increased;     (k) Liens on Property or assets securing leases permitted pursuant to Section 6.12;      (l) Liens created under the Security Documents; and     (m) Liens granted by Newco in favor of USA Broadcasting pursuant to the AT Pledge Agreement securing Non-Recourse Indebtedness permitted pursuant to Section 6.2(l); provided that such Liens attach only to (i) the Capital Stock of each Subsidiary of USA Broadcasting acquired by Newco with the Net Proceeds of an AT Note, pursuant to Section 1.3 of the Second Amendment to the USA Acquisition Agreement, as in effect on the date hereof, and (ii) the 1.0% general partnership interest of any licensee general partnership in which any such Subsidiary of USA Broadcasting directly owns the corresponding 99.0% general partnership interest.     6.4  Limitation on Fundamental Changes.  The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, except, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, and provided that the Existing Credit Agreement has not expired or terminated.     (a) upon at least 15 days' prior notice to the Arranger, any Subsidiary of the Borrower (other than Newco) may merge into the Borrower (provided that the Borrower is the survivor thereof), provided that the obligations of the merging entity are assumed by the Borrower; and     (b) any Subsidiary of the Borrower (other than Newco) may merge or consolidate with any Person to consummate any New Investment or Acquisition permitted by Section 6.7; provided that the survivor of that merger or consolidation is a wholly-owned Subsidiary of the Borrower.     6.5  Limitation on Sale of Assets.  The Borrower shall not, and shall not permit any of its Subsidiaries to, make any Asset Disposition, unless such Asset Disposition shall be for fair market value. Fair market value shall be determined by the Board of Directors of the Borrower or its management committee, in the case of Asset Dispositions relating to assets having a book value of $10,000,000 or less, and by an independent appraisal firm reasonably satisfactory to the Majority Lenders, in the case of Asset Dispositions relating to assets having a book value over $10,000,000. In –44– -------------------------------------------------------------------------------- any case, the Borrower may not sell, and will not permit any of its Subsidiaries to sell, any Primary Station or the Media Licenses therefor.     6.6  Limitation on Dividends.  The Borrower shall not, and shall not permit any of its Subsidiaries to, (a) if a corporation, declare or pay any dividend (other than dividends payable solely in common stock of the Borrower or its Subsidiaries) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or its Subsidiaries or any warrants or options to purchase any such Capital Stock, whether now or hereafter outstanding (except only such dividends, payments or other amounts payable to the Borrower or a wholly-owned Subsidiary of the Borrower), and (b) if a partnership, make any distribution with respect to the ownership interests therein, or, in either case, any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (except distributions to the Borrower or any wholly-owned Subsidiary of the Borrower) (such declarations, payments, setting apart, purchases, redemptions, defeasance, retirements, acquisitions and distributions being herein called "Restricted Payments"), except for:      (i) Restricted Payments paid by the Borrower to PTI Holdings for the repurchase of its Junior Subordinated Note in accordance with Section 6.8; and     (ii) such other Restricted Payments as the Borrower or its Subsidiaries may elect to make, provided that (x) the Total Debt Ratio as of the date of the most recent quarterly or annual financial statements delivered pursuant to Section 5.1 after giving effect to the making of such Restricted Payment is less than 3.50:1, (y) no Default has occurred and is continuing or would result from the making of such Restricted Payment, and (z) the Borrower is in compliance with the Fixed Charge Coverage Ratio (calculated on a basis so as to include such Restricted Payments as a fixed charge, except for such Restricted Payments relating to Borrower Stock Purchases) as of the date thereof; provided, further, that notwithstanding anything to the contrary in this Agreement, for purposes of determining compliance with Sections 6.1(a), (b) and (c), Section 6.6(ii) and Section 6.7(k) only, Newco shall be deemed not to be a Subsidiary of the Borrower so long as all of the Indebtedness of Newco created under each AT Note constitutes Non-Recourse Indebtedness. Notwithstanding anything herein to the contrary, the Borrower shall not permit (i) the aggregate amount of Restricted Payments for Borrower Stock Purchases to exceed $150,000,000 or (ii) the aggregate percentages of such purchased shares to exceed 10% of the issued common stock of the Borrower.     6.7  Limitation on Investments, Loans and Advances.  The Borrower shall not, and shall not permit any of its Subsidiaries to, suffer to exist, make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in (any of the foregoing, an "investment"), any Person, except, subject to Section 6.19, for:     (a) the Borrower's ownership interest in its Subsidiaries and certain Subsidiaries' ownership interests in certain other Subsidiaries, in each case on or prior to the Closing Date and as set forth in Section 3.27;     (b) investments in marketable debt securities, liquid investments in debt securities and other debt instruments that are acquired for investment purposes and that have a value which may be readily established and which are investment grade, including any such investment that may be readily sold or otherwise liquidated;     (c) extensions of trade credit in the ordinary course of business; –45– --------------------------------------------------------------------------------     (d) advances to employees of the Borrower and its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business;     (e) investments constituting non-cash consideration received in connection with an Asset Disposition, provided that such non-cash consideration shall not exceed 15% of the aggregate consideration received for such Asset Disposition; and provided further that the aggregate amount of any such non-cash consideration with respect to all Asset Dispositions shall not exceed $5,000,000 at any one time outstanding;      (f) investments in existence as of the Closing Date, as set forth on Schedule 6.7(f);     (g) [Intentionally omitted;]     (h) investments permitted under Section 6.2(f);      (i) investments not otherwise referred to in this Section 6.7 in an aggregate amount not to exceed $50,000,000 between the Existing Credit Agreement Closing Date and the Maturity Date, inclusive, provided that no such investment shall be permitted if at the time of the making thereof a Default has occurred and is continuing or would result from the making of such investment;      (j) investments in Entravision permitted by Section 6.7(j) of the Existing Credit Agreement in an amount not to exceed $10,000,000 between the Existing Credit Agreement Closing Date and the Maturity Date, inclusive;     (k) New Investments; provided that (i) no Default has occurred and is continuing or would result from the consummation of such New Investment (and the Borrower shall have delivered a Covenant Compliance Certificate showing pro forma calculations assuming such New Investment had been consummated on the first day of the applicable measurement period to the Administrative Agent); (ii) the New Investment (if in a radio or television station), has received (if such investment shall require FCC approval) final FCC approval and evidence thereof satisfactory to the Administrative Agent has been provided to the Administrative Agent; (iii) Majority Lenders shall have received and reviewed and approved the form of all documents setting forth the terms of, effecting or otherwise relating to, such New Investment; and (iv) the Borrower shall be in compliance with the Total Debt Ratio on a pro forma basis assuming such New Investment had been consummated on the first day of the applicable measurement period; provided, further, that notwithstanding anything to the contrary in this Agreement, for purposes of determining compliance with Sections 6.1(a), (b) and (c), Section 6.6(ii) and Section 6.7(k) only, Newco shall be deemed not to be a Subsidiary of the Borrower so long as all of the Indebtedness of Newco created under each AT Note constitutes Non-Recourse Indebtedness;      (l) an investment by the Borrower and its Subsidiaries in a joint venture for the purpose of establishing and operating pay television channels in the United States; provided that the Borrower's (or its Subsidiaries') investment therein shall not exceed $10,000,000 between the Existing Credit Agreement Closing Date and the Maturity Date inclusive, in the aggregate (exclusive of all general and administrative expenses and affiliate sales and promotion expenses contributed by Borrower (or any such Subsidiary) in the ordinary course of business); and provided, further that (i) no Default has occurred and is continuing or would result from the consummation of such investment; and (ii) Majority Lenders shall have received and reviewed and approved the form of all documents setting forth the terms of, effecting or otherwise relating to, such investment;     (m) to the extent constituting an investment, the acquisition by Newco of the Capital Stock of one or more Subsidiaries of USA Broadcasting with the Net Proceeds of the Non-Recourse Indebtedness of Newco permitted pursuant to Section 6.2(l); and –46– --------------------------------------------------------------------------------     (n) investments by the Borrower in Newco in the form of one or more cash capital contributions (i) in an amount not to exceed the principal amount of any AT Note then due and payable in accordance with the terms of such AT Note so long as each amount so contributed to Newco is forthwith applied by Newco to the repayment of such AT Note, and (ii) in an aggregate amount not to exceed $100,000.     6.8  Limitation on Modifications of Debt Instruments; Repurchase of Junior Subordinated Notes; Etc.  (a) The Borrower shall not, and shall not permit any Subsidiary to, amend the subordination provisions of the Subordinated Indebtedness or any guarantee thereof.     (b) Notwithstanding anything to the contrary contained herein, the Borrower shall not repurchase, or permit PTI Holdings to repurchase, any Junior Subordinated Note if the aggregate purchase price paid for the Junior Subordinated Notes would exceed the accreted value thereof or if any Default has occurred and is continuing, or would result from such repurchase.     6.9  Transactions with Affiliates.  The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate or any Subsidiary less than wholly-owned, directly or indirectly, by the Borrower, unless such transaction (i) is otherwise permitted under this Agreement or (ii) is in the ordinary course of the Borrower's or such Subsidiary's business and is upon terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person not an Affiliate or (iii) is pursuant to any Material Agreement or (iv) is a New Investment or an investment in a pay television joint venture permitted by Section 6.7(k) or 6.7(l), respectively.     6.10  Fiscal Year.  The Borrower shall not permit the fiscal year of the Borrower or any of its consolidated Subsidiaries to end on a day other than December 31, except with the consent of the Majority Lenders (which consent shall not be unreasonably withheld and which consent may be conditioned upon adjusting the covenants in a manner to give each of the parties hereto substantially the same protection and benefits as were in effect prior to any such change in the fiscal year of the Borrower or any of its consolidated Subsidiaries).     6.11  Restrictions Affecting Subsidiaries.  The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into, or suffer to exist, any agreement (other than this Agreement and the Existing Credit Agreement) with any Person other than the Lenders which prohibits or limits the ability of any Subsidiary to (a) pay dividends or make other distributions or pay any Indebtedness owed to the Borrower or any other Subsidiary, (b) make loans or advances to the Borrower or any other Subsidiary or (c) transfer any of its properties or assets to the Borrower or any other Subsidiary.     6.12  Lease Obligations.  The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, assign or otherwise transfer any of its Properties, rights or assets (whether now owned or hereafter acquired) to any Person and thereafter directly or indirectly lease back the same or similar property.     6.13  Unfunded Liabilities.  The Borrower shall not permit unfunded liabilities for any and all Plans maintained for or covering employees of the Borrower or any Subsidiary to exceed $5,000,000 at any time; provided that the Borrower shall not permit Newco to maintain any such Plans.     6.14  Management Fees.  The Borrower shall not, and shall not permit any of its Subsidiaries to, pay any management fees for services rendered other than (i) management fees to Persons not Affiliates for services rendered and incurred in an arm's length transaction and in the ordinary course of the Borrower's or such Subsidiaries' business and (ii) management fees payable by Subsidiaries of the Borrower to the Borrower or a wholly-owned Subsidiary of the Borrower.     6.15  Material Agreements.  The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or permit (i) any termination of the Material Agreements (except as such agreements may –47– -------------------------------------------------------------------------------- terminate in accordance with their terms), (ii) any modification or amendment of any provision of any Material Agreement, which modification or amendment would have a Material Adverse Effect, (iii) any modification or amendment of the Program License Agreements which would change the terms of any payment thereunder, which would decrease the availability of programming thereunder, which would be adverse to the Lenders or which would be material or (iv) any other modification or amendment of any provision of any Material Agreement (provided, that the Borrower shall give the Arranger (who shall, in turn, promptly notify the Lenders), at least 10 days' prior notice of all such proposed modifications and amendments under this clause (iv) and if the Majority Lenders do not vote to disapprove such proposed modification or amendments within such 10-day notice period, the Lenders shall be deemed to have approved such proposed modifications or amendments).     6.16  Limitation on Negative Pledge Clauses.  The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure the Obligations, other than (a) the Existing Credit Agreement, this Agreement and the other Loan Documents and (b) any agreements governing any purchase money Liens or Capitalized Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby).     6.17  Limitation on Modifications of USA Acquisition Agreement.  The Borrower shall not, and shall not permit any of its Subsidiaries to, amend, modify or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the USA Acquisition Agreement in a manner that could reasonably be expected to materially adversely affect the Lenders, unless consented to in writing by Majority Lenders.     6.18  Limitation on Equity Offerings.  The Borrower shall not, and shall not permit any of its Subsidiaries to, consummate, agree to consummate, or enter into any underwriting agreement or similar agreement for any Equity Offering of the Capital Stock of the Borrower or any Subsidiary except equity offerings in which 100% of the Net Proceeds thereof are used to make the payment required by Section 2.6(d) and 2.6(e) of the Existing Credit Agreement, as in effect on the Loan Commitment Date, and then to repay the Obligations then outstanding under this Agreement and the Notes; provided that the Borrower shall not permit Newco to consummate, agree to consummate, or enter into any underwriting agreement or similar agreement for any Equity Offering of its Capital Stock.     6.19  Limitation on Activities of Newco.  Notwithstanding anything to the contrary herein or in any other Loan Document, the Borrower shall not permit Newco to (a) create, incur, assume or suffer to exist any Indebtedness or liabilities other than the incurrence and repayment of the Non-Recourse Indebtedness permitted under Section 6.2(l), (b) 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 Liens expressly permitted under Section 6.3(m), (c) suffer to exist, make or purchase any investment, other than investments expressly permitted under Section 6.7(m), (d) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to (i) Newco's ownership of the Capital Stock of any Subsidiary of USA Broadcasting acquired by Newco with the Net Proceeds of the Non-Recourse Indebtedness permitted pursuant to Section 6.2(l), (ii) the incurrence and repayment of the Non-Recourse Indebtedness permitted under Section 6.2(l), and (iii) the granting of the Liens permitted under Section 6.3(m), (e) own, lease, manage or otherwise operate any properties or assets other than the ownership of shares of Capital Stock of any Subsidiary of USA Broadcasting permitted to be acquired pursuant to clause (d) of this Section 6.19, (f) create or form any Subsidiaries, other than any Subsidiary of USA Broadcasting acquired by Newco with the Net Proceeds of an AT Note in accordance with Section 6.7(m), or (g) fail to comply with any of the provisions of clauses (1) through (4), inclusive, of the proviso to the definition of "Newco". –48– -------------------------------------------------------------------------------- SECTION 7.EVENTS OF DEFAULT     If any of the following events shall occur and be continuing:     (a) The Borrower shall fail to pay any principal on any Note when due or the Borrower shall fail to pay any interest on any Note within two Business Days after any such interest becomes due in accordance with the terms thereof and hereof or the Borrower shall fail to pay any other amount payable hereunder within five Business Days after any such other amount becomes due; or     (b) Any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or     (c) The Borrower shall default in the observance or performance of any agreement contained in Section 5.2(f), 5.3, 5.4, 5.8, 5.9, 5.10, or 5.13 or any provision of Section 6; or     (d) Any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or the other Loan Documents (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) notice thereof from the Administrative Agent to the Borrower and (ii) actual knowledge thereof by a senior officer of such Loan Party or any provision of any Loan Document shall at any time for any reason be declared null and void, or the validity or enforceability of any Loan Document shall at any time be contested by any Loan Party, or a proceeding shall be commenced by any Loan Party, or by any Governmental Authority or other Person having jurisdiction over any Loan Party, seeking to establish the invalidity or unenforceability thereof, or any Loan Party shall deny that it has any liability or obligation purported to be created under any Loan Document; or     (e) (a) The Borrower or any other Loan Party shall (i) (except as set forth in (b) below) default in any payment of principal or interest, regardless of the amount, due in respect of any (A) Indebtedness (other than the Notes or any AT Note) issued under an indenture or other agreement, if the original principal amount of Indebtedness covered by such indenture or agreement is $5,000,000 or greater or (B) any Guarantee Obligation with respect to an amount of $5,000,000 or greater, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created, whether or not such default has been waived by the holders of such Indebtedness or Guarantee Obligation; or (ii) (except as set forth in (b) below) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (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 become due prior to its stated maturity or such Guarantee Obligation to become payable or such Indebtedness to be required to be defeased or purchased; or (b) any Event of Default (as defined in the Existing Credit Agreement) shall occur; or      (f) (i) The Borrower or any other Loan Party shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other –49– -------------------------------------------------------------------------------- relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Borrower or any other Loan Party shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any other Loan Party any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged, unstayed or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any other Loan Party any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any other Loan Party shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any other Loan Party shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due or there shall be a general assignment for the benefit of creditors; or     (g) (i) Any Person shall engage in any non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee would reasonably be expected to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA (other than a standard termination) or (v) the Borrower or any Commonly Controlled Entity would reasonably be expected to incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan; and in each case regarding clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to subject the Borrower or any other Loan Party to any tax, penalty or other liabilities in the aggregate to exceed $5,000,000; or     (h) One or more judgments or decrees shall be entered against the Borrower or any other Loan Party involving in the aggregate a liability (not paid or fully covered by insurance) of $5,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof or in any event five days before the date of any sale pursuant to such judgment or decree or any non-monetary judgment or order shall be entered against the Borrower or any other Loan Party that is reasonably likely to have a Material Adverse Effect and either (i) enforcement proceedings shall have been commenced by any Person upon such judgment which has not been stayed pending appeal or (ii) there shall be any period of 10 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      (i) There shall occur any default in the material observance or material performance of any Material Agreement or any such Material Agreement shall terminate or otherwise no longer be in full force and effect; or      (j) Any Media License required for the lawful ownership, lease, control, use, operation, management or maintenance of a Primary Station or any Media License, the loss of which would have a Material Adverse Effect, shall be canceled, terminated, rescinded, annulled, revoked, suspended or limited, or amended or otherwise modified in any material adverse respect, or shall fail to be renewed for any reason whatsoever, shall no longer be in full force and effect; or the FCC shall have designated such Media License for hearing seeking revocation, suspension or –50– -------------------------------------------------------------------------------- material adverse modification; or the grant of any such Media License, the loss of which would have a Material Adverse Effect, shall have been stayed, vacated or reversed, or modified in any material adverse respect, by judicial or administrative proceedings; or     (k) Any material provision of any Loan Document (including, without limitation, the grant of a security interest under any Security Document), after delivery thereof pursuant to the provisions hereof, shall, for any reason other than an act or omission by the Administrative Agent, cease to be valid or enforceable in accordance with its terms; or      (l) A Change in Control shall have occurred; or     (m) Any provision of the Fee Letter or the Engagement Letter shall, for any reason other than an act or omission by the Arranger, cease to be valid or enforceable in accordance with its terms; or     (n) The subordination provisions of the Subordinated Indebtedness shall for any reason cease to be valid or enforceable in accordance with their terms; then, and in any such event, (A) if such event is an Event of Default specified in paragraph (f) above, automatically the Commitments to the Borrower shall immediately terminate and the Loans made to the Borrower hereunder (with accrued interest thereon) and all other Obligations shall immediately become due and payable, and (B) if such event is any other Event of Default, with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, take any or all of the following actions: (i) by notice to the Borrower declare the Commitments to the Borrower to be terminated forthwith, whereupon such Commitments shall immediately terminate; and (ii) by notice of default to the Borrower, declare the Loans (with accrued interest thereon) and all other Obligations under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. In all cases, with the consent of the Majority Lenders, the Administrative Agent may enforce any or all of rights and remedies created pursuant to any Loan Document or available at law or in equity. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower. SECTION 8. THE ADMINISTRATIVE AGENT AND THE ARRANGER     8.1  Appointment.  Each Lender hereby irrevocably designates and appoints GSCP as Administrative Agent and as Arranger, for such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes GSCP, as the Administrative Agent and as the Arranger, for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent or the Arranger, as the case may be, by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither the Administrative Agent nor the Arranger shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent or the Arranger in such respective capacities.     8.2  Delegation of Duties.  The Administrative Agent and the Arranger may execute any of their respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Administrative Agent or the Arranger shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. –51– --------------------------------------------------------------------------------     8.3  Exculpatory Provisions.  None of the Administrative Agent, the Arranger or any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct as finally judicially determined by a court of competent jurisdiction) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any Subsidiary or any other Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent or the Arranger under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes or any other Loan Document or for any failure of the Borrower or any Subsidiary or any other Loan Party to perform its obligations hereunder or thereunder. None of the Administrative Agent or the Arranger shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower or any Subsidiary or any other Loan Party.     8.4  Reliance by Administrative Agent and Arranger.  The Administrative Agent and the Arranger shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by any of them to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), the Accountants and independent accountants and other experts selected by the Administrative Agent or the Arranger. The Administrative Agent and the Arranger may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent or the Arranger shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders or all Lenders, as it deems appropriate, or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense (except those incurred solely as a result of the Administrative Agent's or the Arranger's gross negligence or willful misconduct as finally judicially determined by a court of competent jurisdiction) which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent and the Arranger shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the Notes and the other Loan Documents in accordance with a request of the Majority Lenders or all Lenders, as may be required, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes.     8.5  Notice of Default.  None of the Administrative Agent or the Arranger shall be deemed to have knowledge or notice of the occurrence of any Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Arranger and the Lenders. The Administrative Agent shall take such action with respect to such Default as shall be reasonably directed by the Majority Lenders or all Lenders as appropriate; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders or as the Administrative Agent shall believe necessary to protect the Lenders' interests under the Loan Documents. –52– --------------------------------------------------------------------------------     8.6  Non-Reliance on Administrative Agent, Arranger and Other Lenders.  Each Lender expressly acknowledges that none of the Administrative Agent, the Arranger or any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent or the Arranger hereafter taken, including any review of the affairs of the Borrower or any Subsidiary or any other Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent or the Arranger to any Lender. Each Lender represents to the Administrative Agent and the Arranger that it has, independently and without reliance upon the Administrative Agent or the Arranger or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower or any Subsidiary or any other Loan Party and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or the 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 analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries and any other Loan Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent or the Arranger hereunder, the Administrative Agent and the Arranger shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower or any Subsidiary or any other Loan Party which may come into the possession of the Administrative Agent or the Arranger or any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates.     8.7  Indemnification.  The Lenders agree to indemnify the Administrative Agent and the Arranger in their respective capacities as such (to the extent not reimbursed by or on behalf of the Borrower and without limiting the obligation of the Borrower to do so), ratably according to the respective amounts of their Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs (including, without limitation, the allocated reasonable cost of internal counsel), expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Administrative Agent or the Arranger, in their respective capacities as Administrative Agent and Arranger, but not as Lenders hereunder, in any way relating to or arising out of this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent or the Arranger under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's or the Arranger's gross negligence or willful misconduct as finally judicially determined by a court of competent jurisdiction. The agreements in this Section shall survive the payment of the Notes and all other amounts payable hereunder.     8.8  Administrative Agent and Arranger in Their Individual Capacities.  The Administrative Agent, the Arranger and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and any Subsidiary as though the Administrative Agent and such Arranger were not the Administrative Agent and an Arranger, respectively, hereunder and under the other Loan Documents. With respect to the Administrative Agent or the Arranger the Loans made by the Administrative Agent or such Arranger, as applicable, and any Note issued to any of the Administrative Agent or the Arranger, as the case may be, shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent or an Arranger, as the case may be, and the –53– -------------------------------------------------------------------------------- terms "Lender" and "Lenders" shall include the Administrative Agent and the Arranger in their individual capacities.     8.9  Successor Administrative Agent or Arranger.  The Administrative Agent or the Arranger may resign as Administrative Agent or Arranger, respectively, upon 30 days' notice prior to the Commitment Expiration Date and upon five Business Days' notice from and after the Commitment Expiration Date to the Lenders and the Majority Lenders may at any time remove the Administrative Agent or the Arranger. If the Administrative Agent or the Arranger shall be removed or shall resign as Administrative Agent or Arranger under this Agreement and the other Loan Documents, then (i) prior to the Commitment Expiration Date, the Majority Lenders and (ii) on and after the Commitment Expiration Date, the Administrative Agent or the Arranger, as applicable, shall appoint from among the Lenders a successor administrative agent or arranger, as the case may be, for the Lenders, which successor administrative agent or arranger, as the case may be, shall be approved by the Borrower (which consent shall not be unreasonably withheld or delayed and which shall not be required if an Event of Default under Section 7.1(a) shall have occurred and is continuing), whereupon such successor administrative agent or arranger, as the case may be, shall succeed to the rights, powers and duties of the Administrative Agent and an Arranger and the term "Administrative Agent" or "Arranger" shall mean such successor administrative agent or Arranger, as the case may be, effective upon its appointment, and the former Administrative Agent's or Arranger's rights, powers and duties as the Administrative Agent or Arranger, as the case may be, shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or Arranger or any of the parties to this Agreement or any holders of the Notes. Notwithstanding anything to the contrary, after any retiring Administrative Agent's or Arranger's removal or resignation as Administrative Agent or Arranger, the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent or Arranger, as the case may be, under this Agreement and the other Loan Documents. Further, if the Administrative Agent or the Arranger no longer has any Loans or Commitments hereunder, the Administrative Agent or such Arranger shall immediately resign and shall be replaced, and have the benefits, as set forth in this Section 8.9.     8.10  Arranger.  Without limiting any provision contained in this Section 8, (i) no Lender identified in this Agreement as an "Arranger" shall have, except as and to the limited extent expressly provided herein, any obligation, responsibility or duty under this Agreement other than those applicable to all Lenders as such and (ii) advisor, book manager syndication agent hereunder shall have no obligation, responsibility or duty whatsoever under this Agreement. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. SECTION 9. MISCELLANEOUS     9.1  Amendments and Waivers.  Neither this Agreement, any Note, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section. With the prior written consent of the Majority Lenders and the Borrower, the Borrower may, from time to time, enter into written amendments, supplements or modifications hereto and to the Notes and the other Loan Documents for the purposes of adding any provisions to this Agreement or the Notes or the other Loan Documents or changing in any manner the rights of the Lenders, the Borrower or any other Loan Party hereunder or thereunder or waiving, on such terms and conditions as may be specified in such instrument, any of the requirements of this Agreement or the Notes or the other Loan Documents or any Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) (a) reduce the amount or extend the maturity of any Note or any installment due thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce the amount or extend the time of payment of any fee, indemnity or reimbursement payable to any Lender hereunder, or change the amount or maturity of any Lender's Commitment, in each case without the written consent of the Lender affected thereby; or –54– -------------------------------------------------------------------------------- (b) amend, modify or waive any provision of this Section 9.1 or reduce the percentage specified in or otherwise modify the definition of Majority Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents (except as permitted under Section 6.4); or (c) release the Borrower from any liability under the Loan Documents; or (d) amend, modify or waive, directly or indirectly, any of the provisions of Section 2.1(h) or 2.9; or (e) amend, modify or waive, directly or indirectly, any provision of this Agreement requiring the consent or approval or notification of all Lenders, in each case set forth in clauses (i)(b) through (i)(e) above without the written consent of all the Lenders; or (ii) amend, modify or waive any provision of Section 8 without the written consent of the then Administrative Agent and the then Arranger. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent, the Arranger and all future holders of the Notes. In the case of any waiver, the Borrower, the Lenders, the Arranger and the Administrative Agent shall be restored to their former position and rights hereunder and under the outstanding Notes and any other Loan Documents, and any Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default, or impair any right consequent thereon.     9.2  Notices.  All notices, requests and demands or other communications to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the United States mail, certified and postage prepaid and return receipt requested, or, in the case of telecopy notice, when received, in each case addressed as follows in the case of the Borrower, the Arranger and the Administrative Agent, and as set forth in Schedule 9.2, or in the Assignment and Acceptance pursuant to which a Person becomes a party –55– -------------------------------------------------------------------------------- hereto, in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Borrower:   Univision Communications Inc. 1999 Avenue of the Stars Suite 3050 Los Angeles, California 90067 Attention: General Counsel Telecopy: (310) 556-3568     with copies to:     Univision Communications Inc. Glenpointe Centre West 500 Frank W. Burr Boulevard 6th Floor Teaneck, New Jersey 07666 Attention: George W. Blank Telecopy: (201) 287-9578     Univision Communications Inc. 1999 Avenue of the Stars Suite 3050 Los Angeles, California 90067 Attention: Andrew Hobson Telecopy: (310) 556-7615 GSCP, as Arranger and Administrative Agent   Goldman Sachs Credit Partners, L.P. c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Attention: Lisa M. Perrotto-Murray Telecopy: (212) 346-2608     with a copy to:     Latham & Watkins 633 West Fifth Street, Suite 4000 Los Angeles, California 90071 Attention: J. Scott Hodgkins           Neil Cummings Telecopy: (213) 891-8763 ; provided that any notice, request or demand to or upon the Administrative Agent, the Arranger or the Lenders pursuant to Section 2.1, 2.2, 2.4, 2.8 or 2.11 or any notice to the Borrower pursuant to Section 7 shall not be effective until received.     9.3  No Waiver; Cumulative Remedies.  No failure to exercise and no delay in exercising, on the part of the Administrative Agent, the Arranger or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. –56– --------------------------------------------------------------------------------     9.4  Survival of Representations and Warranties.  All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes (but shall not be deemed to be restated unless otherwise expressly provided for).     9.5  Payment of Expenses and Taxes.  The Borrower agrees (a) to pay or reimburse the Administrative Agent and the Arranger for all their reasonable costs and out-of-pocket expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the Notes and the other Loan Documents and any other documents prepared in connection herewith or therewith, any syndication of the Loans and/or the Commitments, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent and the Arranger, (b) after the occurrence and during the continuance of a Default, to pay or reimburse the Arranger, the Administrative Agent and each Lender, for all their reasonable costs and out-of-pocket expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes, the other Loan Documents and any such other documents or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceeding, including, without limitation, reasonable legal fees and disbursements of counsel to the Administrative Agent, the Arranger and each Lender and the allocated reasonable cost of internal counsel to the Arranger, the Administrative Agent and each Lender, (c) to pay, and indemnify and hold harmless each Lender, the Arranger and the Administrative Agent from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes, the other Loan Documents and any such other documents and (d) to pay, and indemnify and hold harmless each Lender, the Arranger and the Administrative Agent from and against, any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs (including, without limitation, the allocated reasonable cost of internal counsel and the reasonable legal fees and disbursements of outside counsel to the Lenders, the Arranger and the Administrative Agent), expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Notes, the other Loan Documents or the use of the proceeds of the Loans and any such other documents (all the foregoing, collectively, the "indemnified liabilities"), provided, that the Borrower shall have no obligation hereunder to the Administrative Agent, the Arranger or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Administrative Agent, such Arranger or such Lender or their agents or attorneys-in-fact as finally judicially determined by a court of competent jurisdiction. The agreements in this Section shall survive repayment of the Notes and all other amounts payable hereunder. The Administrative Agent, the Arranger and the Lenders agree to provide reasonable details and supporting information concerning any costs and expenses required to be paid by the Borrower pursuant to the terms hereof.     9.6  Successors and Assigns; Participations; Purchasing Lenders.       (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Arranger, the Administrative Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrower may not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of each Lender.     (b) Any Lender may, in the ordinary course of its commercial banking or finance business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Note held by such –57– -------------------------------------------------------------------------------- Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents; provided that the holder of any such participation, other than an Affiliate of such Lender, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting the extension of the maturity of any portion of the principal amount of a Loan or Commitment or any portion of interest or fees related thereto or a reduction of the principal amount or principal payment amount of or the rate of interest payable on the Loans or any fees related thereto or any increase in participation amounts. In the event of any such sale by a Lender of participating interests to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement and the other Loan Documents, and the Borrower, the Arranger and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. The Borrower agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or any Note, provided that such Participant shall only be entitled to such right of setoff if it shall have agreed in the agreement pursuant to which it shall have acquired its participating interest to share with the Lenders the proceeds thereof as provided in Section 9.7. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.9, 2.11, 2.12, 2.13 and 9.5 with respect to its participation in the Commitments and the Loans outstanding from time to time; provided, that no Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.     (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to any of its Affiliates or to any Lender, any Affiliate thereof or to one or more additional lenders or financial institutions, which additional lenders shall be subject to the consent of the Borrower, such consent not to be unreasonably withheld and not to be required if a Default has occurred and is continuing ("Purchasing Lenders") all or any part of its rights and obligations under this Agreement, the Notes and the other Loan Documents pursuant to an Assignment and Acceptance substantially in the form of Exhibit B, executed by such Purchasing Lender and such transferor Lender and delivered to the Administrative Agent for its acceptance and recording in the Register (as defined in (d) below), provided, that any such sale must result in the Purchasing Lender having at least $5,000,000 in aggregate amount of obligations under this Agreement, the Notes and the other Loan Documents. Upon such execution, delivery, acceptance and recording, from and after the transfer effective date determined pursuant to such Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the transferor Lender thereunder shall, to the extent of such assigned portion and as provided in such Assignment and Acceptance, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of a transferor Lender's rights and obligations under this Agreement, such transferor Lender shall cease to be a party hereto). Such Assignment and Acceptance shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment Percentages arising from the purchase by such Purchasing Lender of all or a portion of the rights and obligations of such –58– -------------------------------------------------------------------------------- transferor Lender under this Agreement, the Notes and the other Loan Documents. On or prior to the transfer effective date determined pursuant to such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note a new Note to the order of such Purchasing Lender in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance, and if the transferor Lender has retained a Commitment hereunder a new Note to the order of the transferor Lender in an amount equal to the Commitment retained by it hereunder. Such new Note shall be dated the Closing Date and shall otherwise be in the form of the Note replaced thereby. The Note surrendered by the transferor Lender shall be returned by the Administrative Agent to the Borrower marked "canceled."     (d) The Administrative Agent shall maintain at its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent, the Arranger and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loans recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.     (e) Upon its receipt of an Assignment and Acceptance executed by a transferor Lender and Purchasing Lender (and, in the case of a Purchasing Lender that is not then a Lender or an Affiliate thereof, by the Borrower and the Administrative Agent), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Borrower.      (f) The Borrower authorizes each Lender to disclose to any Participant or Purchasing Lender (each, a "Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Borrower and its Subsidiaries and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or any other Loan Document or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Subsidiaries and its Affiliates prior to becoming a party to this Agreement; provided that such Transferee or prospective Transferee agrees to maintain the confidentiality of such information in accordance with the provisions of Section 9.18 unless specifically prohibited by applicable law or court order.     (g) If, pursuant to this Section, any interest in this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any state thereof, the transferor Lender shall cause such Transferee concurrently with the effectiveness of such transfer, (i) to represent to the transferor Lender and the Administrative Agent (for the benefit of the transferor Lender, the Administrative Agent, the Arranger and the Borrower) that under applicable law and treaties no taxes will be required to be withheld by the Administrative Agent, the Arranger, the Borrower, if applicable, or the transferor Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Lender and the Administrative Agent (and, in the case of any Purchasing Lender registered in the Register, the Administrative Agent and the Borrower) U.S. Internal Revenue Service Form W-9, W-8BEN or W-8ECI (as applicable to it) (wherein such Transferee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Lender and the Administrative Agent, the Arranger and the Borrower) to provide the transferor Lender and the Administrative Agent (and, in the case of any Purchasing Lender registered in the Register, the Administrative –59– -------------------------------------------------------------------------------- Agent and the Borrower) a new Form W-9, W-8BEN or W-8ECI (as applicable to it) upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption.     (h) Nothing herein shall prohibit any Lender from pledging or assigning any of its rights under its Note to any Federal Reserve Bank in accordance with applicable law.     9.7  Adjustments; Set-Off.       (a) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or fees, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(f), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, or fees, such benefitted Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Loans or fees, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loan may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.     (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, exercisable upon the occurrence and during the continuance of an Event of Default and acceleration of the Obligations pursuant to Section 7, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, to set-off and appropriate and apply against any such Obligations any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof or bank controlling such Lender to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.     9.8  Counterparts.  This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.     9.9  Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.     9.10  Integration.  This Agreement represents the entire agreement of the Borrower, the Administrative Agent, the Arranger and the Lenders with respect to the subject matter hereof, and –60– -------------------------------------------------------------------------------- there are no promises, undertakings, representations or warranties by the Administrative Agent, the Arranger or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.     9.11  GOVERNING LAW.  THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES).     9.12  Submission to Jurisdiction; Waivers; Appointment of Process Agent.  (a) The Borrower to the extent permitted by applicable law, hereby irrevocably and unconditionally:      (i) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the States of California and New York, the courts of the United States of America for the Central District of California and the Southern District of New York, and appellate courts from any thereof;     (ii) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding in any such court was brought in an inconvenient court and agrees not to plead or claim the same; and     (iii) agrees that nothing herein shall affect the right to effect service of process in any manner permitted by law or shall limit the right to sue in any other jurisdiction.     9.13  Acknowledgements.  The Borrower hereby acknowledges that:     (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the Notes and the other Loan Documents;     (b) none of the Administrative Agent, the Arranger or any Lender has any fiduciary relationship to the Borrower solely by virtue of any of the Loan Documents, and the relationship pursuant to the Loan Documents between the Administrative Agent, the Arranger and the Lenders, on one hand, and the Borrower on the other hand, is solely that of creditor and debtor; and     (c) no joint venture exists among the Lenders or among the Borrower and the Lenders.     9.14  WAIVERS OF JURY TRIAL, DAMAGES WAIVERS.  THE BORROWER, THE ADMINISTRATIVE AGENT, THE ARRANGER AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. EACH PARTY HERETO WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THAT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, DIRECT, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.     9.15  Headings.  Section headings herein are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.     9.16  Conflict of Terms.  Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control. –61– --------------------------------------------------------------------------------     9.17  Copies of Certificates, Etc.  Whenever the Borrower is required to deliver notices, certificates, opinions, statements or other information hereunder to the Administrative Agent or to the Arranger for delivery to any Lender, it shall do so in such number of copies as the Administrative Agent or the Arranger shall reasonably specify (provided, that if, for any reason, the Administrative Agent or the Arranger do not deliver such notices, certificates, opinions, statements or other information to any Lender, the Borrower shall deliver such items to such Lender upon the request of such Lender). Whenever the Administrative Agent or the Arranger receives from the Borrower notices, certificates, opinions, statements or other information hereunder or under any other Loan Document for delivery to the Lenders, the Administrative Agent or the Arranger shall promptly deliver such items to each Lender, unless the Borrower is required by the terms hereof to deliver such items to such Lender itself.     9.18  Confidentiality.  The Lenders shall take normal and reasonable precautions to maintain the confidentiality of all non-public information obtained pursuant to the requirements of this Agreement which has been identified as such by the Borrower but may, in any event, make disclosures (i) reasonably required by any bona fide transferee, assignee or participant in connection with the contemplated transfer or assignment of any of the Commitments or Loans or participations therein or (ii) as required or requested by any governmental agency or representative thereof or as required pursuant to legal process or (iii) to its attorneys and accountants or (iv) as required by law or (v) in connection with litigation involving any Lender; provided that (a) such transferee, assignee or participant agrees to comply with the provisions of this Section 9.18 unless specifically prohibited by applicable law or court order, (b) each Lender shall use its best efforts to notify the Borrower of any requirement or request by any governmental agency or representative thereof (other than any such request in connection with an examination of such Lender by such governmental agency) and any requirement pursuant to legal process of or for disclosure of such information (other than in connection with litigation between the Borrower and any Lender) and (c) in no event shall any Lender, bona fide transferee, assignee or participant be obligated or required to return any materials furnished by the Borrower and its Subsidiaries or Affiliates.     9.19  Publicity.  The Arranger shall have the right to review and approve (such approval not to be unreasonably withheld or delayed), in advance, any public announcements (in any form) and any filings describing or quoting from the credit arrangements reflected in this Agreement and the other Loan Documents, provided, however, that the Borrower (i) shall be permitted to file copies of any Loan Document with the SEC, the FCC or any other governmental agency as required by law and (ii) shall also be permitted to disclose information concerning the Loan Documents if the Borrower's attorneys reasonably believe that such disclosure is required by law.     9.20  Limitation of Interest.  It is the intent of the Borrower and the Lenders in the execution and performance of this Agreement and all matters incidental and related hereto and the other Loan Documents or any agreement or instrument executed in connection herewith or therewith or with any Indebtedness of the Borrower to the Lenders to remain in strict compliance with all laws applicable to the Lenders from time to time in effect, including, without limitation, usury laws. In furtherance hereof, the Borrower and the Lenders stipulate and agree that none of the terms and provisions contained in or pertaining to this Agreement or in the other Loan Documents or any other agreement or instrument ("Other Agreement") executed in connection herewith or with any Indebtedness of the Borrower to the Lenders shall ever be construed to create a contract to pay for the use, forbearance or detention of money with interest at a rate or in an amount in excess of the maximum amount of interest permitted to be charged by the Lenders under all laws in effect and applicable to the Lenders (the "Maximum Rate"). For purposes of this Agreement and the Notes, "interest" shall include the aggregate of all amounts which constitute or are deemed to constitute interest under the respective laws in effect and applicable to the Lenders that are contracted for, chargeable, receivable (whether received or deemed to have been received) or taken under this Agreement or the Notes or any Other Agreement. The –62– -------------------------------------------------------------------------------- Borrower shall not be required to pay interest hereunder or on any Note or any Other Agreement at a rate or in an amount in excess of the Maximum Rate with respect to the Lenders or the maximum amount of interest that may be lawfully charged by the Lenders under any law which is in effect and applicable to the Lenders, and the provisions of this Section 9.20 shall control over all other provisions of this Agreement and the Notes or any Other Agreement which may be in apparent conflict herewith. If the effective rate or amount of interest which would otherwise be payable under this Agreement or any Note or any Other Agreement, or all of them, would exceed the Maximum Rate for the Lenders or the maximum amount of interest the Lenders or any holder of any Note or any Other Agreement is allowed by the relevant applicable law to charge, contract for, take or receive or in the event the Lenders or any holder of any Note or any Other Agreement shall charge, contract for, take or receive monies that are deemed to constitute interest which could, in the absence of this provision, increase the effective rate or amount of interest payable under this Agreement or any Note or any Other Agreement, or all of them, to a rate or amount in excess of that permitted to be charged, contracted for, taken or received under the applicable laws then in effect with respect to the Lenders, then the principal amount of the Notes or the obligations of the Borrower to the Lenders under this Agreement, the Notes or any Other Agreement or the amount of interest which would otherwise be payable to or for the account of the Lenders under this Agreement or the Notes or any Other Agreement or all of them, shall be reduced to the amount allowed under said laws as now or hereafter construed by the courts having jurisdiction, and all such monies so charged, contracted for, or received that are deemed to constitute interest in excess of the Maximum Rate for the Lenders or maximum amount of interest permitted by the relevant applicable laws shall be immediately returned to or credited to the account of the Borrower upon such determination. In determining whether the interest paid or payable under any specific contingency exceed the Maximum Rate, the Borrower and the Lenders shall, to the maximum extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee (excluding attorneys' and accountants' fees) or premium rather than interest and (ii) amortize, prorate, allocate and spread, in equal parts during the full term of the relevant Note, all interest at any time contracted for, charged or received in connection with the relevant Note.     9.21  Margin Stock.  In connection with each Loan extended hereunder, each Lender represents that it, in good faith, has not relied upon Margin Stock as collateral in extending or maintaining such Loan. (signature page follows) –63– --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.     UNIVISION COMMUNICATIONS INC.     By:   /s/ C. DOUGLAS KRANWINKLE    --------------------------------------------------------------------------------         Name:   C. Douglas Kranwinkle         Title:   Executive Vice President     GOLDMAN SACHS CREDIT PARTNERS, L.P., as Administrative Agent, as Arranger and as a Lender     By:   /s/ ROBERT WARNER    --------------------------------------------------------------------------------         Name:   Robert Warner         Title:   Authorizied Signatory –64– -------------------------------------------------------------------------------- EXHIBIT A     TO CREDIT AGREEMENT FORM OF NOTE     Los Angeles, California $                           , 2001     FOR VALUE RECEIVED, the undersigned, UNIVISION COMMUNICATIONS INC., a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of                      (the "Lender"), in lawful money of the United States and in immediately available funds, the aggregate unpaid principal amount of the Loans made by the Lender to the undersigned pursuant to Section 2.1 of the Credit Agreement (as hereinafter defined), in installments and in amounts in accordance with, and subject to, the provisions of Section 2.6(e) of the Credit Agreement and on the Maturity Date. Such payment shall be made for the account of the Lender at the office of the Administrative Agent initially designated for such purpose at 85 Broad Street, New York, New York 10004 or at such other office as the holder of this Note may notify the undersigned and as agreed to by the Administrative Agent. The undersigned further agrees to pay interest in like money at such office or such other office on the unpaid principal amount hereof from time to time from the date hereof at the rates per annum and on the dates specified in Sections 2.6 and 2.7 of the Credit Agreement until paid in full (both before and after judgment to the extent permitted by law).     This Note is one of the Notes referred to in the Credit Agreement dated as of June 8, 2001 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the undersigned, the Lender, the other Lenders parties thereto, and Goldman Sachs Credit Partners, L.P., as Arranger and Administrative Agent, is entitled to the benefits thereof and of the other Loan Documents and is subject to optional and mandatory prepayment in whole or in part as provided therein. Capitalized terms used herein which are defined in the Credit Agreement shall have such meanings unless otherwise defined herein or unless the context otherwise requires.     Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein.     This Note may be secured as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest may be granted, the nature and extent of the security, the terms and conditions upon which the security interests may be granted and the rights of the holder of this Note in respect thereof.     All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.     NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9.6 OF THE CREDIT AGREEMENT. --------------------------------------------------------------------------------     THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES). UNIVISION COMMUNICATIONS INC. By: __________________________________________ Name: _______________________________________ Title: ________________________________________ -------------------------------------------------------------------------------- EXHIBIT B     TO CREDIT AGREEMENT ASSIGNMENT AND ACCEPTANCE Date:                              Reference is made to that certain Credit Agreement dated as of June 8, 2001 (as it may be amended, modified or supplemented from time to time, the "Credit Agreement"), by and among UNIVISION COMMUNICATIONS INC., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Goldman Sachs Credit Partners, L.P. as arranger (the "Arranger") and administrative agent (the "Administrative Agent"). Terms defined and the rules of interpretation contained in the Credit Agreement have the same meanings and application herein.                          (the "Assignor") is a Lender under the Credit Agreement and agrees with                      (the "Assignee") as follows:     1.  As of the Effective Date (as defined below), the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, [a  % interest in and to] all of the Assignor's rights and obligations under the Credit Agreement and the other Loan Documents (which assignment will result in the Assignee having (i) a Commitment Percentage of  % and (ii) a Commitment of $                     in respect of (a) the Assignor's Commitments as in effect on the Effective Date (as set forth in the Schedule attached hereto and without giving effect to other assignments thereof which have become or will be effective as of the Effective Date), (b) the Loans owing to the Assignor on the Effective Date (as set forth in the Schedule attached hereto and without giving effect to other assignments thereof which have become or will be effective as of the Effective Date), and (c) all amounts payable to the Assignor under the Loan Documents, including the Assignor's Notes. The Assignee hereby appoints and authorizes the Administrative Agent and the Arranger, as applicable, to exercise such powers as are delegated to the Administrative Agent and the Arranger, respectively, by Section 8 of the Credit Agreement and by the other Loan Documents.     2.  The Assignor (i) represents and warrants that as of the Effective Date its Commitments, Commitment Percentages and Loans (without giving effect to other assignments thereof which have become or will be effective as of the Effective Date or any funding or repayment on the Effective Date) are as set forth in the Schedule attached hereto; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (iii) represents and warrants that it has full power and authority and has taken all action necessary to execute and deliver this Assignment and any and all other documents required or permitted to be executed or delivered by it in connection herewith and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment, and no governmental authorizations or other authorizations are required in connection therewith; (iv) represents and warrants that this Assignment constitutes the legal, valid and binding obligation of the Assignor; (v) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or any other instrument or document furnished pursuant thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant thereto; and (vi) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any other Loan Party, or the performance or observance by the Borrower or any other Loan Party, as the case may be, of any of their obligations under the Loan Documents or any other instrument or document furnished thereto.     3.  The Assignee (i) confirms that it has received copies of such of the Loan Documents and other documents delivered pursuant to Section 4 of the Credit Agreement as it has requested, together with a copy of the most recent financial statements of the Borrower received by the Administrative Agent pursuant to Section 5.1 of the Credit Agreement, and such other documents and information as -------------------------------------------------------------------------------- it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Arranger, 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; (iii) agrees that 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; (iv) specifies as its Applicable Lending Offices the offices set forth beneath its name on the signature pages hereof; [(3)(v) represents and warrants, for the benefit of the Assignor, the Administrative Agent, the Arranger and the Borrower, that under applicable law and treaties no United States federal income taxes will be required to be withheld by the Administrative Agent, the Arranger, the Borrower or the Assignor with respect to any payments to be made to Assignee with respect to the Loans; (vi) attaches U.S. Internal Revenue Service Form W-9, W-8BEN or W8ECI (as applicable to it) certifying as to the Assignee's entitlement to claim complete exemption from United States backup withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement (and the Notes held by it); (vii) agrees, for the benefit of the Assignor, the Administrative Agent, the Arranger and the Borrower, that it will provide to the Assignor (and, in the event the Assignee becomes a Lender registered in the Register, the Administrative Agent and the Borrower) a new Form W-9, W-8BEN or Form W8ECI (as applicable to it) upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by Assignee, and that it will comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption;] (viii) represents and warrants that it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment, and any and all other documents required or permitted to be executed or delivered by it in connection with this Assignment and to fulfill its obligations under, and to consummate the transactions contemplated by, this Assignment, and no governmental authorizations or other authorizations are required in connection therewith; and (ix) represents and warrants that this Assignment constitutes the legal, valid and binding obligation of the Assignee. (3)Bracketed provisions to be included if Assignee is organized under the laws of any jurisdiction other than the United States or any state thereof.     4.  The effective date for this Assignment shall be              (the "Effective Date"). Following the execution of this Assignment, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent and, if applicable, for acceptance by the Borrower.     5.  Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment, shall have the rights and obligations of a Lender thereunder and under the other Loan Documents and (ii) the Assignor shall, to the extent provided in this Assignment, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents.     6.  Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the other Loan Documents in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the other Loan Documents for periods prior to the Effective Date, as the case may be, directly between themselves.     7.  The Assignor and the Assignee agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment, and the Assignor specifically agrees to cause the delivery of two original counterparts of this Assignment to the Administrative Agent for the purpose of registration of the Assignee as a "Lender" pursuant to Section 9.6 of the Credit Agreement.     8.  This Assignment shall be governed by, and construed in accordance with, the laws of the State of New York. -------------------------------------------------------------------------------- _____________________________________________ as Assignor By: __________________________________________ Name: _______________________________________ Title: _______________________________________ _____________________________________________ as Assignee By: __________________________________________ Name: _______________________________________ Title: ________________________________________ APPLICABLE LENDING OFFICES: LIBOR LOANS Address: _____________________________________________ _____________________________________________ _____________________________________________ ALTERNATE BASE RATE LOANS Address: _____________________________________________ _____________________________________________ _____________________________________________ ADDRESS FOR NOTICES: _____________________________________________ _____________________________________________ _____________________________________________ Telephone No.: _______________________________ Telecopier No.: _______________________________ Attention: ____________________________________ -------------------------------------------------------------------------------- [Consented to as of the        day of             ,       . UNIVISION COMMUNICATIONS INC. By: __________________________________________ Name: _______________________________________ Title: ________________________________________(4)] -------------------------------------------------------------------------------- (4)To be included if required by Section 9.6(c). -------------------------------------------------------------------------------- SCHEDULE ASSIGNOR'S COMMITMENTS     Commitment   $             ASSIGNOR'S COMMITMENT PERCENTAGES     Commitment Percentage         % ASSIGNOR'S LOANS     Loans   $             -------------------------------------------------------------------------------- EXHIBIT C     TO CREDIT AGREEMENT FORM OF NO DEFAULT/REPRESENTATION CERTIFICATE                  the              of UNIVISION Communications Inc, a Delaware corporation (the "Borrower") hereby certifies in connection with the Credit Agreement dated as of June 8, 2001 among Goldman Sachs Credit Partners, L.P. as arranger and administrative agent, the lenders parties thereto and the Borrower (such Credit Agreement, as it may be amended, modified or supplemented from time to time, the "Credit Agreement"), as of the date set forth below, that the undersigned is a Responsible Officer (as defined in the Credit Agreement) of the Borrower and that: (i)the representations and warranties contained in the Credit Agreement and in each other Loan Document and each certificate or other writing delivered to the Lenders prior to, on or after the Closing Date (as defined in the Credit Agreement) pursuant to the Credit Agreement and on or prior to the date of the Loan (as defined in the Credit Agreement) requested in connection herewith, are true and correct on and as of the date of the making of such Loan in all material respects as though made on and as of such date except to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct on and as of such earlier date in all material respects; (ii)no Default (as defined in the Credit Agreement) has occurred or is continuing or would result from the making of the Loan requested in connection herewith; and (iii)if the First USA Acquisition Closing has not yet occurred and such Loan is not being made to finance the First USA Acquisition Closing, the requirements as to liquidity and capital resources contained in Section 4.1(aa) of the Credit Agreement with respect to the initial Loan are satisfied with respect to, and after giving effect to, the making of the Loan to be made on such date. DATED: As of               , 200   _____________________________________________ Name: Title: -------------------------------------------------------------------------------- EXHIBIT D     TO CREDIT AGREEMENT FORM OF COVENANT COMPLIANCE CERTIFICATE     The undersigned,             , the Chief Financial Officer of Univision Communications Inc., a Delaware corporation (the "Borrower"), refers to that certain Credit Agreement dated as of June 8, 2001, among Goldman Sachs Credit Partners, L.P., as arranger and administrative agent, the lenders party thereto and Univision Communications Inc. (such Credit Agreement, as it may be amended, modified or supplemented from time to time, the "Credit Agreement"; capitalized terms used herein and not defined shall have the meanings assigned to them in the Credit Agreement), and certifies as to the accuracy of the following figures for the period ending                ,       :   1. MAXIMUM TOTAL DEBT RATIO           a. Funded Debt for Borrower and Subsidiaries             A. Capitalized Lease Obligations   $                 B. Indebtedness (other than Indebtedness described in clauses (f), (h), (j) and (k) of Section 6.2 of the Credit Agreement   $                 C. A + B   $               b. EBITDA for Borrower and Subsidiaries             A. Net Income (after eliminating extraordinary gains and losses)   $                 B. provision for taxes   $                 C. depreciation and amortization   $                 D. Interest Expense               (i)   interest (dividends) on Funded Debt   $                   (ii)   commitment, L/C and line of credit fees   $                   (iii)   net amounts payable (or receivable) under Interest Rate Agreements   $                   (iv)   interest income   $                   (v)   (i) + (ii) + [or -] (iii) - (iv)   $                 E. termination payments   $                 F. payments under Non-Compete Agreements   $                 G. other non-cash changes   $                 H. Program Rights Payments actually made or scheduled to be made   $                 I. non-cash revenues   $                 J. principal payments for Transponder Leases   $                 K. A + B + C + D + E + F + G - H - I - J   $               c. Ratio of (a) to (b):           to 1   2. MINIMUM TOTAL INTEREST COVERAGE RATIO           a. EBITDA (see 1(b)(K) above)   $           --------------------------------------------------------------------------------     b. Interest Expense (see 1(b)(D)(v) above)   $               c. Ratio of (a) to (b):           to 1   3. MINIMUM FIXED CHARGE COVERAGE RATIO           a. EBITDA (see 1(b)(K) above)   $               b. Total Debt Service/Capital Expenditures/Cash Income Taxes/ Restricted Payments   $                 (i) Total Debt Service               A.   Interest Expense (see 1(b)(D)(v) above)   $                   B.   regularly scheduled principal payments on Funded Debt (which result in permanent reduction in availability) (see Modesto Station provisions)   $                   C.   A + B   $                 (ii) Capital Expenditures made or committed to be made by Borrower and its Subsidiaries (including property held under capital leases but excluding expenditures arising from Program Rights Obligations and expenditures under Transponder Leases)   $                 (iii) Cash Income Taxes   $                 (iv) Restricted Payments permitted under Section 6.6 (iii) of the Credit Agreement   $                 (v) (i)(C) + (ii) + (iii) + (iv)   $               c. Ratio of (a) to (b):           to 1   4. LIMITATION ON INDEBTEDNESS           a. Indebtedness not satisfying the rating agency requirements pursuant to Section 6.2(b) of the Credit Agreement (cannot exceed $100,000,000)   $               b. Capitalized Lease Obligations permitted under Section 6.2(j) of the Credit Agreement (cannot exceed $50,000,000)   $             5. LIMITATION ON INVESTMENTS           a. non-cash consideration received re: Asset Dispositions permitted under Section 6.7(e) of the Credit Agreement (cannot exceed $5,000,000 at any time)   $               b. Investments made pursuant to Section 6.7(i) of the Credit Agreement (cannot exceed $50,000,000 between the Existing Credit Agreement Closing Date and the Maturity Date)   $               c. Investments in Entravision permitted under Section 6.7(j) of the Credit Agreement (cannot exceed $10,000,000 between the Existing Credit Agreement Closing Date and the Maturity Date)   $             6. LIMITATION ON UNFUNDED LIABILITIES           a. unfunded liabilities of Plans of Borrower and Subsidiaries permitted under Section 6.13 of the Credit Agreement (cannot exceed $5,000,000)   $           --------------------------------------------------------------------------------     IN WITNESS WHEREOF, I HAVE HEREUNTO SIGNED MY NAME, AS THE CHIEF FINANCIAL OFFICER OF UNIVISION COMMUNICATIONS INC., AS OF THIS        DAY OF                   , 200  : _____________________________________________ Name: _______________________________________ Title: Chief Financial Officer -------------------------------------------------------------------------------- EXHIBIT E     TO CREDIT AGREEMENT FORM OF CONTINUATION NOTICE Date:              To: Goldman Sachs Credit Partners, L.P., as Administrative Agent 85 Broad Street New York, New York 10004 Attention: [            ]     Re: Univision Communications Inc.     We refer to that certain Credit Agreement dated as of June 8, 2001 (as it may be amended, modified or supplemented from time to time, the "Credit Agreement"), by and among UNIVISION COMMUNICATIONS INC., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Goldman Sachs Credit Partners, L.P. as arranger (the "Arranger") and administrative agent (the "Administrative Agent"). Terms defined and the rules of interpretation contained in the Credit Agreement have the same meanings and application herein.     [Option A: Pursuant to Section 2.4(a) of the Credit Agreement, the undersigned elects to convert the following LIBOR Loans to Alternate Base Rate Loans at the end of the current Interest Period for such LIBOR Loans: LIBOR LOAN AMOUNT --------------------------------------------------------------------------------   LAST DAY OF CURRENT INTEREST PERIOD -------------------------------------------------------------------------------- 1.     2.     3. [and so on]   ]     [Option B: Pursuant to Section 2.4(a) of the Credit Agreement, the undersigned elects to convert Alternate Base Rate Loans in the aggregate amount of $            to LIBOR Loan(s) with a one month or three month Interest Period as follows: LIBOR LOAN AMOUNT --------------------------------------------------------------------------------   DESIRED DATE OF CONVERSION --------------------------------------------------------------------------------   LENGTH OF INTEREST PERIOD -------------------------------------------------------------------------------- 1.       [1 month]/[3 month] 2.         3. [and so on]             [Option C: Pursuant to Section 2.4(b) of the Credit Agreement, the undersigned elects to continue the Interest Periods with respect to the following LIBOR Loans for the following additional one month or three month Interest Period as follows: LIBOR LOAN AMOUNT --------------------------------------------------------------------------------   LAST DAY OF CURRENT INTEREST PERIOD --------------------------------------------------------------------------------   LENGTH OF CONTINUED INTEREST PERIOD -------------------------------------------------------------------------------- 1.       [1 month]/[3 month] 2.         3. [and so on]         -------------------------------------------------------------------------------- Sincerely, UNIVISION COMMUNICATIONS INC. By: __________________________________________ Name: _______________________________________ Title: _________________________________________ -------------------------------------------------------------------------------- SCHEDULE 1.1(a) ACQUIRED BUSINESS Company Acquisitions 1.  USA Station Group, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 1% general partner of each of the 11 licensee general partnerships. 2.  USA Station Group of Dallas, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership of Dallas, the licensee of KSTR-TV. 3.  USA Station Group of Houston, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership of Houston, the licensee of KHSH-TV. 4.  USA Station Group of Illinois, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership of Illinois, the licensee of WEHS-TV. 5.  USA Station Group of Atlanta, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership of Atlanta, the licensee of WHOT-TV. 6.  USA Station Group of Massachusetts, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership Massachusetts, the licensee of WHUB-TV. 7.  USA Station Group of New Jersey, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership of New Jersey, the licensee of WHSE-TV and WHSI-TV. 8.  USA Station Group of Ohio, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership of Ohio, the licensee of WQHS-TV. 9.  USA Station Group of Vineland, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and a 99% general partner of USA Station Group Partnership of Vineland, the licensee of WHSP-TV. 10.  USA Station Group of Southern California, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., which is: a 99% general partner of USA Station Group Partnership of Southern California, the licensee of KHSC-TV; and owner of 100% of the stock of USA Station Group of Hollywood, Florida, Inc., which in turn, is a 99% general partner of USA Station Group Partnership of Hollywood, Florida, the licensee of WAMI-TV; and owner of 100% of the stock of USA Station Group of Tampa, Inc., which in turn, is a 99% general partner of USA Station Group Partnership of Tampa, the licensee of WBHS-TV. 11.  Miami USA Broadcasting Station Productions, Inc., a wholly owned subsidiary of Miami USA Broadcasting, Inc., a wholly owned subsidiary of USA Broadcasting Productions, Inc., a wholly owned subsidiary of USA Broadcasting, Inc. 12.  USA Station Group of Florida, Inc., a wholly owned subsidiary of USA Station Group Communications, Inc., a wholly owned subsidiary of USA Station Group Communications, LLC, a wholly owned subsidiary of USA Broadcasting, Inc., which is the owner of 100% of the stock of USA Station Group of Melbourne, Inc., the licensee of WBSF-TV. 13.  Station Works LLC, a Delaware LLC, which is essentially a technical facility supporting the stations. -------------------------------------------------------------------------------- Minority Interests 14.  Silver King Capital Corporation, Inc., which is a wholly owned subsidiary of USA Broadcasting, Inc., and owns: a 45% non-voting common stock interest in Roberts Broadcasting Company, the licensee of WHSL(TV), East St. Louis, MO; a 45% non-voting stock interest in Roberts Broadcasting Company of Denver, licensee of KTVJ(TV), Boulder, CO; and a 49% non-voting common stock interest in Golden Link TV, Inc. (f/k/a Channel 66 of Vallejo, California, Inc.), the licensee of KPST-TV, Vallejo, California. 15.  USA Station Group of Virginia, Inc., which is a wholly owned subsidiary of USA Station Group of Atlanta, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., and owns: a 45% non-voting stock interest in Channel 14 of Urban Broadcasting Corporation, the licensee of WTMW(TV), Arlington, VA. -------------------------------------------------------------------------------- SCHEDULE 1.1(b) FIRST USA ACQUISITION CLOSING Company Acquisitions 1.  USA Station Group of Dallas, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership of Dallas, the licensee of KSTR-TV.1 2.  USA Station Group of Atlanta, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., is a 99% general partner of USA Station Group Partnership of Atlanta, the licensee of WHOT-TV.2 3.  Miami USA Broadcasting Station Productions, Inc., which in turn, is a wholly owned subsidiary of Miami USA Broadcasting, Inc., which in turn, is a wholly owned subsidiary of USA Broadcasting Productions, Inc., which in turn, is a wholly owned subsidiary of USA Broadcasting, Inc.3 4.  USA Station Group of Hollywood, Florida, Inc., which in turn, is a 99% general partner of USA Station Group Partnership of Hollywood, Florida, the licensee of WAMI-TV. 5.  Station Works LLC, a Delaware LLC, which is essentially a technical facility supporting the stations. Purchase of Minority Interests Univision is also acquiring the stock of companies holding minority interests in the following full-power stations: 1.  Silver King Capital Corporation, Inc., which is a wholly owned subsidiary of USA Broadcasting, Inc., and owns: •a 45% non-voting common stock interest in Roberts Broadcasting Company, the licensee of WHSL(TV), East St. Louis, MO; •a 45% non-voting stock interest in Roberts Broadcasting Company of Denver, licensee of KTVJ(TV), Boulder, CO; and •a 49% non-voting common stock interest in Golden Link TV, Inc. (f/k/a Channel 66 of Vallejo, California, Inc.), the licensee of KPST-TV, Vallejo, California. 2.  USA Station Group of Virginia, Inc., which is a wholly owned subsidiary of USA Station Group of Atlanta, Inc., which in turn, is a wholly owned subsidiary of USA Broadcasting, Inc., owns: •a 45% non-voting stock interest in Channel 14 of Urban Broadcasting Corporation, the licensee of WTMW(TV), Arlington, VA. -------------------------------------------------------------------------------- 1The 1% general partner interest for Dallas will be transferred to Dallas Station LLC, a wholly-owned subsidiary of the USA Station Group of Dallas, Inc. 2The 1% general partner interest for Atlanta will be transferred to Atlanta Station LLC, a wholly-owned subsidiary of the USA Station Group of Atlanta, Inc. 3The 1% general partner interest for Miami will be transferred to Miami Station LLC, a wholly-owned subsidiary of the USA Station Group of Miami, Inc. -------------------------------------------------------------------------------- SCHEDULE 2.1 COMMITMENTS Lender --------------------------------------------------------------------------------   Commitment -------------------------------------------------------------------------------- GSCP   $ 500 million Total   $ 500 million     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCHEDULE 3.14 Subsidiaries of Univision Communications Inc. PTI Holdings, Inc., a Delaware Corporation Univision Television Group, Inc., KWEX License Partnership, G.P., a California general partnership KUVN License Partnership, G.P., a California general partnership KMEX License Partnership, G.P., a California general partnership KDTV License Partnership, G.P., a California general partnership KFTV License Partnership, G.P., a California general partnership KTVW License Partnership, G.P., a California general partnership KXLN License Partnership, G.P., a California general partnership WGBO License Partnership, G.P., a California general partnership WXTV License Partnership, G.P., a California general partnership WLTV License Partnership, G.P., a California general partnership KUVS License Partnership, G.P., a California general partnership KUVI License Partnership, G.P., a California general partnership The Univision Network Limited Partnership Galavision, Inc. Sunshine Acquisition, Limited Partnership Sunshine Acquisition Corp. Univision Online, Inc. Vision Latina, S.A. de C.V. Creaciones Calientes, S.A. de C.V. Univision—EV Holdings, LLC Univision Sports, LLC Univision Music, Inc. Univision Music LLC -------------------------------------------------------------------------------- SCHEDULE 3.15 PROPOSED AND PENDING ACQUISITIONS Subsidiaries of USA Broadcasting, Inc. to be acquired by the Borrower pursuant to the USA Acquisition Agreement: 1.  USA Station Group, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 1% general partner of each of the 11 licensee general partnerships. 2.  USA Station Group of Dallas, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership of Dallas, the licensee of KSTR-TV. 3.  USA Station Group of Houston, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership of Houston, the licensee of KHSH-TV. 4.  USA Station Group of Illinois, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership of Illinois, the licensee of WEHS-TV. 5.  USA Station Group of Atlanta, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership of Atlanta, the licensee of WHOT-TV. 6.  USA Station Group of Massachusetts, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership Massachusetts, the licensee of WHUB-TV. 7.  USA Station Group of New Jersey, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership of New Jersey, the licensee of WHSE-TV and WHSI-TV. 8.  USA Station Group of Ohio, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., a 99% general partner of USA Station Group Partnership of Ohio, the licensee of WQHS-TV. 9.  USA Station Group of Vineland, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., is a 99% general partner of USA Station Group Partnership of Vineland, the licensee of WHSP-TV. 10.  USA Station Group of Southern California, Inc., a wholly owned subsidiary of USA Broadcasting, Inc., which is: •a 99% general partner of USA Station Group Partnership of Southern California, the licensee of KHSC-TV; •owner of 100% of the stock of USA Station Group of Hollywood, Florida, Inc., which in turn, is a 99% general partner of USA Station Group Partnership of Hollywood, Florida, the licensee of WAMI-TV; •owner of 100% of the stock of USA Station Group of Tampa, Inc., which in turn, is a 99% general partner of USA Station Group Partnership of Tampa, the licensee of WBHS-TV. 11.  Miami USA Broadcasting Station Productions, Inc., a wholly owned subsidiary of Miami USA Broadcasting, Inc., a wholly owned subsidiary of USA Broadcasting Productions, Inc., a wholly owned subsidiary of USA Broadcasting, Inc. 12.  USA Station Group of Florida, Inc., a wholly owned subsidiary of USA Station Group Communications, Inc., a wholly owned subsidiary of USA Station Group Communications, LLC, a wholly owned subsidiary of USA Broadcasting, Inc., the owner of 100% of the stock of USA Station Group of Melbourne, Inc., the licensee of WBSF-TV. 13.  Station Works LLC, a Delaware LLC, which is essentially a technical facility supporting the stations. -------------------------------------------------------------------------------- Minority Interests to be acquired: 14.  Silver King Capital Corporation, Inc., which is a wholly owned subsidiary of USA Broadcasting, Inc., and owns: •a 45% non-voting common stock interest in Roberts Broadcasting Company, the licensee of WHSL(TV), East St. Louis, MO; •a 45% non-voting stock interest in Roberts Broadcasting Company of Denver, licensee of KTVJ(TV), Boulder, CO; and •a 49% non-voting common stock interest in Golden Link TV, Inc. (f/k/a Channel 66 of Vallejo, California, Inc.), the licensee of KPST-TV, Vallejo, California. 15.  USA Station Group of Virginia, Inc., which is a wholly owned subsidiary of USA Station Group of Atlanta, Inc., which in turn, is a wholly owned subsidiary of USA Broadcasting, Inc., and owns: •a 45% non-voting stock interest in Channel 14 of Urban Broadcasting Corporation, the licensee of WTMW(TV), Arlington, VA. Equity Broadcasting Acquisitions 16.  Purchase of 19.9% of the outstanding common stock of Equity Broadcasting Corporation 17.  Purchase of substantially all of the assets of the following six stations: KBPX(TV), Flagstaff, Arizona KBGF(TV), Douglas, Arizona KDTP-LP, Phoenix, Arizona KTAZ-LP, Tucson, Arizona KDWX-LP, San Antonio, Texas K45DX, Floresville, Texas 18.  Acquisition of WTMW(TV), Arlington, Virginia -------------------------------------------------------------------------------- SCHEDULE 3.21(a) KDTV(TV), San Francisco, California, Channel 14 Licensee:   KDTV License Partnership, G.P. Renewal Expiration:   12/1/2006 KDTV-LP, Santa Rosa, California, Channel 28 Licensee:   KDTV License Partnership, G.P. Renewal Expiration:   12/1/2006 KFTV(TV), Hanford, California, Channel 21 Licensee:   KFTV License Partnership, G.P. Renewal Expiration:   12/1/2006 KABE-LP, Bakersfield, California, Channel 391 Licensee:   KFTV License Partnership, G.P. Renewal Expiration:   12/1/2006 KMEX-TV, Los Angeles, California, Channel 342 Licensee:   KMEX License Partnership, G.P. Renewal Expiration:   12/1/2006 KTVW-TV, Phoenix, Arizona, Channel 33 Licensee:   KTVW License Partnership, G.P. Renewal Expiration:   10/1/2006 KUVE-LP, Tucson, Arizona, Channel 523 Licensee:   KTVW License Partnership, G.P. Renewal Expiration:   10/1/2006 K48GX, Tucson, Arizona, Channel 484 Licensee:   KTVW License Partnership, G.P. Renewal Expiration:   N/A KUVI(TV), Bakersfield, California, Channel 45 Licensee:   KUVI License Partnership, G.P. Renewal Expiration:   12/1/2006 KUVN(TV), Garland, Texas, Channel 23 Licensee:   KUVN License Partnership, G.P. Renewal Expiration:   8/1/2006 KUVN-LP, Fort Worth, Texas, Channel 315 Licensee:   KUVN License Partnership, G.P. Renewal Expiration:   8/1/2006 KUVS(TV), Modesto, California, Channel 19 Licensee:   KUVS License Partnership, G.P. Renewal Expiration:   12/1/2006 i -------------------------------------------------------------------------------- KWEX-TV, San Antonio, Texas, Channel 41 Licensee:   KWEX License Partnership, G.P. Renewal Expiration:   8/1/2006 K31FM, Austin, Texas, Channel 31 Licensee:   KWEX License Partnership, G.P. Renewal Expiration:   8/1/2006 KXLN-TV, Rosenberg, Texas, Channel 45 Licensee:   KXLN License Partnership, G.P. Renewal Expiration:   8/1/2006 WGBO-TV, Joliet, Illinois, Channel 66 Licensee:   WGBO License Partnership, G.P. Renewal Expiration:   12/1/2005 WLTV(TV), Miami, Florida, Channel 23 Licensee:   WLTV License Partnership, G.P. Renewal Expiration:   2/1/2005 WXTV(TV), Paterson, New Jersey, Channel 41 Licensee:   WXTV License Partnership, G.P. Renewal Expiration:   6/1/2007 WXTV-LP, Philadelphia, Pennsylvania, Channel 28 Licensee:   WXTV License Partnership, G.P. Renewal Expiration:   8/1/2007 W47AD, Hartford, Connecticut, Channel 476 Licensee:   WXTV License Partnership, G.P. Renewal Expiration:   4/1/2007 -------------------------------------------------------------------------------- 1On June 1, 1998, KFTV License Partnership, G.P. filed an application seeking displacement relief to change the channel of operation of KABE-LP from Channel 39 to Channel 31 due to the impact of full power television station digital operations. This application was mutually exclusive with another low power television applicant seeking similar displacement relief. On November 25, 1998, a Joint Request for Approval of Settlement Agreement was filed with the FCC seeking the FCC's consent to a Settlement Agreement whereby KABE-LP would be awarded the construction permit for Channel 31. On January 16, 2001, a minor amendment to the displacement application was filed. This application, amendment and Joint Request for Approval of Settlement Agreement are currently pending. 2On October 28, 1999, KMEX License Partnership, G.P. filed an application for KMEX-TV seeking consent to the construction of a new digital facility on Channel 35. The application was granted on March 16, 2001. The construction permit will expire on May 1, 2002. On April 26, 2001, ABC Holding Company, licensee of KABC-TV, Los Angeles, California filed a Petition for Reconsideration of the grant. The petitioner has requested dismissal of the Petition pursuant to a settlement agreement. 3On June 1, 1998, KTVW License Partnership, G.P. filed an application seeking displacement relief to change the channel of operation of KUVE-LP from Channel 52 to Channel 38 due to the ii -------------------------------------------------------------------------------- impact of full power television station digital operations. The application was granted on January 22, 2001. The construction permit will expire on January 22, 2004. 4On June 14, 1988, KTVW License Partnership, G.P. filed an application seeking a new low power television station on Channel 48 at Tucson, Arizona. The application was granted on January 29, 2001. The construction permit will expire on January 29, 2004. 5On June 1, 1998, KUVN License Partnership, G.P. filed an application seeking displacement relief to change the channel of operation of KUVN-LP from Channel 31 to Channel 47 due to the impact of full power television station digital operations. The application was granted on September 29, 2000. The construction permit will expire on September 29, 2003. 6On June 1, 1998, WXTV License Partnership, G.P. filed an application seeking displacement relief to change the channel of operation of W47AD from Channel 47 to Channel 28 due to the impact of full power television station digital operations. This application was mutually exclusive with other low power television applicants seeking similar displacement relief. The application was granted on February 1, 2001. The construction permit will expire on February 1, 2004. On March 2, 2001, Paging Associates filed a Petition for Reconsideration of the grant. On March 15, 2001, W47AD filed an Opposition to Petition for Reconsideration. On March 27, 2000, Paging Associates filed a Reply to Opposition to Petition for Reconsideration. This matter is pending. iii -------------------------------------------------------------------------------- SCHEDULE 3.21(b) KSTR-TV, Irving, Texas, Channel 49 Licensee:   USA Station Group Partnership of Dallas Renewal Expiration:   8/1/2006 WAMI-TV, Hollywood, Florida, Channel 69 Licensee:   USA Station Group Partnership of Hollywood, Florida Renewal Expiration:   2/1/2005 WHOT-TV, Athens, Georgia, Channel 34 Licensee:   USA Station Group Partnership of Atlanta Renewal Expiration:   4/1/2005 iv -------------------------------------------------------------------------------- SCHEDULE 3.21(c) 1.On June 1, 1998, KFTV License Partnership, G.P. filed an application seeking displacement relief to change the channel of operation of KABE-LP from Channel 39 to Channel 31 due to the impact of full power television station digital operations. This application was mutually exclusive with another low power television applicant seeking similar displacement relief. On November 25, 1998, a Joint Request for Approval of Settlement Agreement was filed with the FCC seeking the FCC's consent to a Settlement Agreement whereby KABE-LP would be awarded the construction permit for Channel 31. On January 16, 2001, a minor amendment to the displacement application was filed. This application, amendment and Joint Request for Approval of Settlement Agreement are currently pending. 2.On October 28, 1999, KMEX License Partnership, G.P. filed an application for KMEX- TV seeking consent to the construction of a new digital facility on Channel 35. The application was granted on March 16, 2001. The construction permit will expire on May 1, 2002. On April 26, 2001, ABC Holding Company, licensee of KABC-TV, Los Angeles, California filed a Petition for Reconsideration of the grant. The petitioner has requested dismissal of the Petition pursuant to a settlement agreement. 3.On June 1, 1998, WXTV License Partnership, G.P. filed an application seeking displacement relief to change the channel of operation of W47AD from Channel 47 to Channel 28 due to the impact of full power television station digital operations. This application was mutually exclusive with other low power television applicants seeking similar displacement relief. The application was granted on February 1, 2001. The construction permit will expire on February 1, 2004. On March 2, 2001, Paging Associates filed a Petition for Reconsideration of the grant. On March 15, 2001, W47AD filed an Opposition to Petition for Reconsideration. On March 27, 2000, Paging Associates filed a Reply to Opposition to Petition for Reconsideration. This matter is pending. -------------------------------------------------------------------------------- SCHEDULE 3.27 UNIVISION GROUP STRUCTURE     As of 31-May-01 CHART [g44170.jpg] -------------------------------------------------------------------------------- SCHEDULE 6.7(f) BORROWERS' AND SUBSIDIARIES' INVESTMENTS Entravision Communications Corporation—32.03% equity interest Cocorojo LLC—49% equity interest Ask Jeeves En Espanol, Inc.—50% equity interest -------------------------------------------------------------------------------- SCHEDULE 9.2 LENDER NOTICE ADDRESSES Goldman Sachs Credit Partners, L.P. c/o Goldman, Sachs & Co. 85 Broad Street, 27th Floor New York, New York 10004 Attention: Lisa M. Perrotto-Murray Phone: (212) 357-6708 Fax: (212) 346-2608 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.12.7 TABLE OF CONTENTS CREDIT AGREEMENT EXHIBIT A FORM OF NOTE EXHIBIT B ASSIGNMENT AND ACCEPTANCE EXHIBIT C FORM OF NO DEFAULT/REPRESENTATION CERTIFICATE EXHIBIT D FORM OF COVENANT COMPLIANCE CERTIFICATE EXHIBIT E FORM OF CONTINUATION NOTICE SCHEDULE 1.1(a) ACQUIRED BUSINESS SCHEDULE 1.1(b) FIRST USA ACQUISITION CLOSING SCHEDULE 2.1 COMMITMENTS SCHEDULE 3.14 SCHEDULE 3.15 PROPOSED AND PENDING ACQUISITIONS SCHEDULE 3.21(a) SCHEDULE 3.21(b) SCHEDULE 3.21(c) SCHEDULE 3.27 UNIVISION GROUP STRUCTURE SCHEDULE 6.7(f) BORROWERS' AND SUBSIDIARIES' INVESTMENTS SCHEDULE 9.2 LENDER NOTICE ADDRESSES
  [TD WATERHOUSE LOGO] [TD WATERHOUSE LETTERHEAD] Exhibit 10.10   October 1, 1999 Richard Rzasa 211 Third Street - #2 Hoboken, NJ 07030 Dear Mr. Rzasa:       TD Waterhouse Group, Inc. (the “Company”) hereby offers to employ you upon the following terms and conditions: 1.  Position, Duties and Responsibilities.       a.  The Company shall employ you in the position of Executive Vice President. You shall perform your assigned duties at the Company or at one of its subsidiaries or affiliates. You shall devote your full time and efforts to the performance of all of the duties associated with that position as well as any and all other duties Company management may from time to time designate or assign.       b.  During your employment, you may not, without prior written consent of the Company, accept an appointment, whether or not for remuneration, as Director, Officer, Manager, Employee or Consultant of a company or business that is not affiliated with the Company. 2.  Employment.       This Agreement shall become effective, and your employment as provided shall commence, on October 1, 1999 (the “Effective Date”) and shall continue through the third anniversary of the Effective Date (such period hereinafter referred to as the “Term”), subject to earlier termination as provided in Section 6 hereof. Notwithstanding the preceding sentence, commencing with October 1, 2002 and on each October 1 thereafter (each an “Extension Date”), the Term shall be automatically extended for an additional one-year-period, unless the Company or you provide the other party hereto 90 days’ prior written notice before the next Extension Date -------------------------------------------------------------------------------- 2   that the Term shall not be so extended. For the avoidance of doubt, “Term” shall include any extension that becomes applicable pursuant to the preceding sentence. 3.    Compensation.       a.    Base Salary. You will receive a base salary at the rate of $250,000 per annum (“Base Salary”), payable in accordance with the Company’s prevailing payroll practices. You shall be entitled to such increases in Base Salary, if any, as may be determined from time to time in the sole discretion of the Management Resources and Compensation Advisory Committee of the Board of Directors of the Company (the “Committee”).       b.    Annual Bonus. You will be eligible to participate in the Company’s annual performance-based bonus program for each calendar year of service during the Term. Such Annual Bonus shall be established by the Committee in its sole discretion and payable in accordance with Company practices.       c.    Stock-Based Awards. You will be eligible to participate in stock-based compensation plans of the Company or any affiliate as determined by the Committee. 4.    Benefits.       The Company shall provide you, in accordance with the terms of the Company’s employee benefit plans in effect from time to time, health and short and long term disability coverage, retirement benefits and fringe benefits (collectively “Employee Benefits”) on the same basis as those benefits are generally made available to employees of similar position. 5.    Expenses.       All documented and verified, reasonable and necessary expenses which you incur in connection with the performance of your duties hereunder shall be reimbursed in accordance with the Company’s general policies. 6.    Termination of Employment.       Your employment hereunder may be terminated by either party at any time and for any reason other than death or retirement upon 30 days advance written notice; provided that the Company may immediately terminate your employment for Cause. Notwithstanding any other provision of this Agreement, the provisions of this Section 6 shall exclusively govern your rights upon termination of employment.       a.    Death or Disability. Your employment shall terminate on your death, and the Company may terminate your employment on account of your Disability. Upon termination under this Section 6(a), you or your estate (i) shall be entitled to receive only that portion of your Base Salary earned, but unpaid, as of the date of termination [and (ii) a pro rata portion of any Annual Bonus that you would have been entitled to receive pursuant to Section 3(b) hereof in such year based upon the percentage of the calendar year that shall have elapsed through the date -------------------------------------------------------------------------------- 3 of your termination of employment, payable when such Annual Bonus would have otherwise been payable had your employment not terminated.] Benefits shall cease in accordance with the terms of the applicable Company policies or plans. As used herein, “Disability” shall mean your inability to perform in all material respects your duties and responsibilities to the company, or any affiliate of the Company, by reason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutive months or (ii) such shorter period as the Committee may reasonably determine in good faith. The Disability determination shall be in the sole discretion of the Committee and your (or your representative) shall furnish the Committee with medical evidence documenting your disability or infirmity which is satisfactory to the Committee.      b.     With Cause.     The Company shall have the right to terminate your employment for Cause (as defined below). Upon the effective date of a termination under this Section 6(b), you (i) shall be entitled to receive only that portion of your Base Salary earned, but unpaid, as of the date of termination and (ii) shall not be entitled to any unpaid Annual Bonus. Benefits shall cease or be paid in accordance with the terms of the applicable Company policies or plans.      c.     Without Cause.     The Company, in its discretion, shall have the right to terminate your employment without Cause. Upon your termination without Cause you shall be entitled to, subject to your continued compliance with the provisions of Sections 7, 8, 9 and 10, (upon your execution of a General Release in the standard form used by the Company) (i) Base Salary earned to the date of termination, (ii) continued payment of Base Salary and your average Annual Bonus (calculated based on the prior 2 years) until 24 months after your termination of employment (the "Severance Period"). All other benefits shall cease or be paid based on your date of termination in accordance with applicable Company policies or plans. No benefit accruals based on service, including, but not limited to, vacation benefits, shall accrue beyond the effective date of termination.      d.     Voluntary Resignation.     You shall have the right to resign from your employment and if the Company, elects in its sole discretion, you shall be entitled to, subject to your continued compliance with the provisions of Sections 7, 8, 9 and 10, (upon your execution of a General Release in the standard form used by the Company) (i) Base Salary earned to the date of termination, (ii) continued payment of Base Salary and average Annual Bonus (calculated based on the prior 2 years) until 12 months after your termination of employment (the "Severance Period") and (iii) employee health benefits continuation for the Severance Period. All other benefits shall cease or be paid based on your date of termination in accordance with applicable Company policies or plans. No benefit accruals based on service, including, but not limited to, vacation benefits, shall accrue beyond the effective date of termination. In event that Company fails to notify you in writing of the foregoing election within 10 business days of receipt of your notice of resignation, Company shall have waived its right to such election.      e.     As used herein, “Cause” shall mean:     (i)  your continued failure to substantially perform your duties hereunder (other than as a result of total or partial incapacity due to physical or --------------------------------------------------------------------------------   mental illness) for a period of 10 days following written notice by the Company to you of such failure or upon such written notice if, in the good faith judgment of the Company, you would not be able to rectify such failure within 10 days;         (ii)  dishonesty in the performance of your duties hereunder;           (iii)  an act or acts on your part constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor involving dishonesty, breach of trust or moral turpitude;           (iv)  your willful malfeasance or willful misconduct in connection with your duties hereunder or any act or omission which is materially injurious to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates; or           (v)  your breach of the provisions of Sections 7, 8, 9 or 10 of this Agreement. 7.  Non-Competition.       You acknowledged and recognize the highly competitive nature of the discount broker business of the Company and its affiliates and accordingly agree that while you are employed with the Company, and for a period of 12 months following the termination of your employment by the Company or, if elected pursuant to Section 6(d), your resignation of employment (the “Restricted Period”), you will not directly or indirectly, (i) engage in any business that competes with the discount broker business of the Company or its affiliates (including, without limitation, discount broker businesses which the Company or its affiliates have specific plans to conduct in the future and as to which you are aware of such planning), (ii) enter the employ of, or render any services to, any person engaged in any discount broker business that competes with the discount broker business of the Company or its affiliates, (iii) acquire a financial interest in, or otherwise become actively involved with, any person engaged in any discount broker business that competes with the discount broker business of the Company or its affiliates, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant, or (iv) interfere with business relationships (whether formed before or after the date of this Agreement) between the Company or any of its affiliates and customers, suppliers, partners, members or investors of the Company or its affiliates.       Notwithstanding anything to the contrary in this Agreement, you may, directly or indirectly own, solely as an investment, securities of any person engaged in the discount broker business of the Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if you (i) are not a controlling person of, or a member of a group which controls, such person and (ii) do not, directly or indirectly, own 1% or more of any class of securities or such person. 4 -------------------------------------------------------------------------------- 5   8.  Non-Solicitation.       While you are employed with the Company, and during the Restricted Period:       (a)  you will not recruit or hire any current employee or consultant of the Company (or any person who was an employee or consultant of the Company within the prior 12 month), or otherwise solicit or induce, directly or indirectly, or cause other persons to solicit or induce, any such employee or consultant to leave the employment or service of the Company, to become an employee of or otherwise be associated with you or any company or business with which you are or may become associated or to encourage or assist in the hiring process or any employee or consultant of the Company or in the modification of any such employee’s or consultant’s relationship with the Company; and       (b)  you will not, directly or indirectly, solicit the trade or business of any clients or customers of the Company, regardless of location, with respect to any such client or customer as of the time of termination.   9.  Non-Disclosure of Confidential Information.       You will not at any time, whether during your employment or following the termination of your employment, for any reason whatsoever, and forever hereafter, directly or indirectly disclose or furnish to any firm, corporation or person, except as otherwise required by law, any confidential or proprietary information of the Company with respect to any aspect of its operations or affairs. “Confidential or proprietary information” shall mean information generally unknown to the public to which you gain access by reason of your employment by the Company and includes, but is not limited to, information relating to business and marketing plans, sales, trading and financial data and strategies, salaries and employees benefits and operational costs. 10.  Return of Company Property and Company Work Product.       All records, files, memoranda, reports, customer information, client lists, documents, equipment, and the like, relating to the business of the Company, which you shall use, prepare, or come into contact with, shall remain the sole property of the Company. You agree that on request of the Company, and in any event upon the termination of your employment, you shall turn over to the Company all documents, papers, or other material in your possession and under your control which may contain or be derived from confidential information, together with all documents, notes, or other work product which is connection with or derived from your services to the company whether or not such material is in your possession. You agree you shall have no proprietary interest in any work product developed or used by you and arising out of employment by the Company. 11.  Right to Injunctive Relief.       The undertaking in Section 7 (Non-Competition), Section 8 (Non-Solicitation), Section 9 (Non Disclosure of Confidential Information) and Section 10 (Return of Company -------------------------------------------------------------------------------- Property and Work Product) hereof shall survive the termination of your employment with the Company for any reason whatsoever. You acknowledge that the Company will suffer irreparable injury, not readily susceptible of valuation in monetary damages, if you breach any of your obligations under Sections 7, 8, 9 or 10. Accordingly, in addition to any other rights and remedies which the Company may have, you agree that the Company will be entitled to injunctive relief against any breach or prospective breach by you of your obligations under Sections 7, 8, 9 or 10 in any federal or state court of competent jurisdiction located in New York State. You hereby submit to the jurisdiction of said courts for the purpose of any actions or proceedings instituted by the Company to obtain such injunctive relief, and agree that process may be served on you by registered mail at your last address known to the Company, or in any other manner authorized by law, and that you will pay the Company’s costs and reasonable attorney’s fees in the event the Company is required to initiate a proceeding for injunctive relief to enforce the provisions hereof, and such an injunction is issued. 12.  Notices.       Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or to such other address as such party may designate in writing:               To:   Richard Rzasa   To:   TD Waterhouse Group, Inc.     211 Third Street – #2       100 Wall Street     Hoboken, NJ 07030       New York, NY 10005       Any notice delivered personally under this Section shall be deemed given on the date delivered, and any notice sent be certified mail, postage prepaid, return receipt requested, shall be deemed given on the date mailed. 13.  Savings.       Should any provision herein be rendered or declared legally invalid or unenforceable by a court of competent jurisdiction or by the decision of an authorized governmental agency, such invalidation of such part shall not invalidate the remaining portions thereof. 14.  Other Agreements.       You represent and warrant that you are not a party to any agreement or bound by any obligation which would prohibit you from accepting and agreeing hereto or fully performing the obligation hereunder. 15.  Complete Agreement.       The provisions herein contain the entire agreement and understanding of the parties and fully supersede any and all prior agreements or understandings between them pertaining to the subject matter hereof. There have been no representations, inducements, -------------------------------------------------------------------------------- 7 promises or agreements of any kind which have been made by either party, or by any person acting on behalf of either party, which are not embodied herein. The provisions hereof may not be changed or altered except in writing duly executed by you and a duly authorized agent of the Company. 16.  Withholding Taxes.       The Company may withhold from any amounts payable under this Agreement, such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation. 17.  Applicable Law.       The interpretation and application of the terms herein shall be governed by the laws of the State of New York without regard to principles of conflict of laws. 18.  Consent to Jurisdiction.       The sole jurisdiction and venue for actions related to the subject matter of this Agreement shall be the courts of the State of New York, the court of the United States of America for the Southern District of New York, and appellate courts from any of the foregoing. 19.  No Waiver.       Any failure by either party to exercise its rights to terminate this Agreement or to enforce any of its provisions shall not prejudice such party’s rights of termination or enforcement for any subsequent or further violation or defaults by the other party. 20.  Titles.       Titles to the sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section. 21.  Counterparts.       This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.       If the foregoing terms of employment are acceptable, please so indicate in the space provided below.   Sincerely,   By:  /s/ A. WAYNE KYLE --------------------------------------------------------------------------------   Name:  A. Wayne Kyle   Title:  Executive Vice President     Human Resources AGREED AND ACCEPTED: Signed:  /s/ RICHARD J. RZASA -------------------------------------------------------------------------------- Printed:  Richard J. Rzasa Date: 12/7/99 --------------------------------------------------------------------------------
EXHIBIT 10.2 SECOND EXTENSION AND MODIFICATION OF EMPLOYMENT AGREEMENT              THIS SECOND EXTENSION AND MODIFICATION OF EMPLOYMENT AGREEMENT (the "Extension") is entered into as of April 30, 2001 by and between California Coastal Communities, Inc., a Delaware corporation ("Employer"), and RAYMOND J. PACINI ("Executive"). W I T N E S S E T H:              WHEREAS, Executive and Employer have entered into an Employment Agreement dated as of May 1, 1998 and Extension and Modification of Employment Agreement dated December 7, 1999 (collectively, the "Employment Agreement") through which Executive has provided various executive capacities to Employer and Employer has obtained various executive services by Executive; and              WHEREAS, Employer desires to obtain the benefit of continued service from Executive by extending the Employment Agreement, and Executive desires to render continued services to Employer by extending the Employment Agreement pursuant to the terms and conditions of this Extension;              NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises and covenants herein contained, the parties agree as follows:              SECTION 1.     CONTINUING EFFECTIVENESS OF EMPLOYMENT AGREEMENT.  Except to the extent of any modification made pursuant to the terms of this Extension, the Employment Agreement shall continue to remain in full force and effect following the date hereof.              SECTION 2.     EXTENSION OF TERM.  Employer and Executive hereby agree to extend the term of the Employment Agreement until April 30, 2003.              SECTION 3.     BASE SALARY.  From the date hereof and until the expiration of the term set forth in Section 2 above, Employer agrees to pay Executive a base salary of at least Two Hundred and Seventy-Five Thousand Dollars ($275,000) per year in semi–monthly installments on the same dates the other senior officers of Employer are paid.                IN WITNESS WHEREOF, the parties have executed this Extension as of the date first above written. "EMPLOYER" CALIFORNIA COASTAL COMMUNITIES, INC. By /s/  SANDRA G. SCIUTTO --------------------------------------------------------------------------------   Sandra G. Sciutto   Chief Financial Officer "EXECUTIVE"        /s/  RAYMOND J. PACINI -------------------------------------------------------------------------------- Raymond J. Pacini  
Exhibit 10.24 FIRST AMENDMENT TO THE AGREEMENT BETWEEN INTRABIOTICS PHARMACEUTICALS, INC. AND ALBANY MOLECULAR RESEARCH, INC. FIRST AMENDMENT TO THE RESEARCH AND TECHNOLOGY AGREEMENT BETWEEN INTRABIOTICS PHARMACEUTICALS, INC. AND NEW CHEMICAL ENTITIES, INC.              THIS FIRST AMENDMENT TO THE RESEARCH AND TECHNOLOGY AGREEMENT is entered into as of the 13th day of April, 2001, (“Amendment Effective Date”) by and among INTRABIOTICS PHARMACEUTICALS, INC., a Delaware corporation (“INTRABIOTICS”) and ALBANY MOLECULAR RESEARCH, a Delaware corporation (“AMRI”).              RECITALS              WHEREAS, INTRABIOTICS and New Chemical Entities, Inc. (NCE) entered into a Research and Technology Agreement dated January 24, 2001 (the “Original Agreement”) for the screening of NCE’s proprietary natural product libraries by INTRABIOTICS and its contractors;              WHEREAS, AMRI acquired NCE subsequent to the execution of the Original Agreement and is the successor in interest to NCE with respect to the Original Agreement;              WHEREAS, to carry out certain parts of the Research Program, INTRABIOTICS intends to enter into a Screening Agreement with Cetek Corporation (“Cetek”) pursuant to which Cetek will utilize Cetek technology to screen the Screening Libraries licensed by AMRI to INTRABIOTICS; and              WHEREAS, INTRABIOTICS and AMRI desire to amend and clarify their respective rights under the Agreement to provide, among other things, that Cetek will own the Cetek Technology.              NOW, THEREFORE, in consideration of the foregoing and the covenants and promises contained in this Amendment, INTRABIOTICS and AMRI hereby amend the Agreement as follows:              1.          Unless otherwise expressly provided herein, defined terms used in this First Amendment shall have the same meaning as set forth in the Original Agreement, and all terms herein shall be incorporated into the Original Agreement.  From and after the Amendment Effective Date, all reference to the “Research and Technology Agreement” in all other documents delivered in connection with the Research and Technology Agreement shall refer to the Research and Technology Agreement, as amended hereby.              2.          All references to “New Chemical Entities” shall be replaced with “Albany Molecular Research” and all references to “NCE” shall be replaced with “AMRI”.              3.          Section 1.14 shall be amended to read as follows: 1.14       "AMRI Research Program Technology" means all information, know-how, trade secrets, inventions and data that are made during the course of the parties’ performance under the Research Program that are not Exclusive Research Program Technology, Cetek Technology or Other Technology.              4.          A new Section 1.33 shall be inserted as follows: 1.33       “Other Technology” means all information, know-how, trade secrets, inventions and data that are made or discovered during the course of the INTRABIOTICS’ performance under the Research Program, whether performed by INTRABIOTICS or a contractor of INTRABIOTICS set forth in Appendix C other than Cetek, which relate to the screening, isolation or ranking of compounds that associate with proteins or macromolecular targets, including, but not limited to any screening assay, the Targets and any data relating thereto. Other Technology shall not include: the Cetek Technology, the Screening Libraries, and  Structure Technology. 5.          A new Section 1.34 shall be inserted as follows: 1.34       “Cetek Technology” means all know-how, trade secrets, inventions, data, processes, procedures, devices, methods, formulas, reagents and protocols and other information, including improvements thereon, whether or not patentable, now or hereafter owned or controlled by Cetek or developed or discovered by Cetek in the course of screening the Screening Libraries, for the screening or isolation or ranking of compounds that associate with proteins or macromolecular targets, including, but not limited to, any capillary electrophoresis assay. Cetek Technology shall not include:  (1) the Screening Libraries and any data relating thereto, (2) the Targets and any data relating thereto, (3) Screening Data, and (4) the Structure Technology.              6.          Section 6.1 shall be amended to read as follows: 6.1       Inventorship of any inventions arising out of the Research Program shall be determined according to U.S. patent law.  AMRI shall own all right, title and interest in the AMRI Research Program Patents, Exclusive Research Program Patents, Exclusive Research Program Technology, AMRI Research Program Technology and Structure Technology in each case, regardless of inventorship.  INTRABIOTICS shall own all Other Technology and all intellectual property rights related thereto and all Screening Data.  Cetek shall own all Cetek Technology. 7.          Section 6.2 shall be amended to read as follows: 6.2       Each party shall continue to own all intellectual property owned by such party prior to the Effective Date.  Such intellectual property shall be referred to herein as such party’s “Background Technology”. 8.          A new Section 6.9 shall be added as follows: 6.9       The parties acknowledge and agree that each of them is conducting research and development of its respective Background Technology on an ongoing basis.  In the event that any resulting improvements to such Background Technology or other resulting inventions or developments include know-how, trade secrets, inventions, data, processes, procedures, devices, methods, formulas, reagents, protocols and other information which (i) are already known or in a party’s possession, other than under an obligation of confidentiality to the other party, or (ii) are developed independently by an employee of a party without benefit of the other party’s confidential information or technology, or (iii) become generally available to the public other than as a result of a disclosure by a party or such party’s directors, officers, employees, agents or advisors, or (iv) become available to a party on a non-confidential basis from a source other than the other party or its advisors, provided that such source is not known by the receiving party to be bound by a confidentiality agreement with or other obligation of secrecy to the other party or another party (“Intellectual Property”), ownership of such Intellectual Property shall be determined according to applicable law.  As used in this Section 6.9 the term “party” shall mean a party to this agreement and its sublicensees.              9.          A new Section 1.35 shall be added as follows: 1.35       “Structure Technology” shall mean any inventions or discoveries made by Cetek in the course of screening the Screening Libraries which relate specifically to the making, using or composition of a particular Active Structure, Target or Sample and have little or no utility for natural product extracts and protein or macromolecular targets generally. 10.        Section 2.6 shall be amended to read as follows: In the event that INTRABIOTICS desires to isolate and/or identify the chemical structure of a compound within a Screening Library, INTRABIOTICS agrees, except to the extent permitted under Section 2.5, that it will not attempt to perform such separation and/or identification itself, and will not request any person or entity other than AMRI to perform such separation or identification.  In the event that INTRABIOTICS is unable to transfer or cause to be transferred to AMRI a bio-assay to guide fractionation and dereplication experiments, INTRABIOTICS may request that Cetek perform fractionation to separate or identify the active fractions and Cetek may perform such fractionation only as permitted under this Section 2.6.  Upon the request of the RMC, Cetek will supply such fractionated material to AMRI for dereplication studies.  Using the fractionated material, Cetek may perform studies to evaluate reversibility of binding. 11.        Section 1.30 shall be amended to read as follows: 1.30        “Target” means INTRABIOTICS’ targets of interest as listed in Appendix B, as may be amended from time to time by INTRABIOTICS during the Research Program.  A Target may be proprietary to third parties other than those consultants of INTRABIOTICS listed in Appendix C, or in the public domain. 12.        Except as otherwise amended herein, the Agreement shall remain in full force and effect.              13.        This First Amendment may be executed in counterparts and by facsimile. This Amendment shall be effective as of the date first written above.              IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment. INTRABIOTICS PHARMACEUTICALS, INC. ALBANY MOLECULAR RESEARCH, INC.         By: /s/  Kenneth J. Kelley By: /s/  Donald E. Kuhla   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Title: President and Chief Executive Officer Title: President and Chief Operating Officer   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------      
Exhibit (10)(i) AMENDED AND RESTATED CREDIT AGREEMENT Dated as of September 1, 2000 By and Among COOPER TIRE & RUBBER COMPANY as the Borrower and THE FINANCIAL INSTITUTIONS PARTY HERETO as the Banks and PNC BANK, NATIONAL ASSOCIATION as the Agent and PNC CAPITAL MARKETS, INC., as Sole Arranger   -------------------------------------------------------------------------------- TABLE OF CONTENTS                   Page -------------------------------------------------------------------------------- INDEX OF EXHIBITS  iv INDEX OF SCHEDULES  iv ARTICLE I.  DEFINITIONS   1 1.1 Defined Terms   1 1.2 Accounting Terms 19 1.3 Construction 19 ARTICLE II.  THE LOANS 20 2.1 Long Term Revolving Credit Commitment 20 2.2 Short Term Revolving Credit Commitment 22 2.3 Disbursements and Repayments 23 2.4 Reduction of Long Term Revolving Credit Commitment or Short Term Revolving Credit Commitment 24 2.5 Bid Rate Loans 25 2.6 Long Term Revolving Credit Loan and Short Term Revolving Credit Loan Interest Rates 28 2.7 Special Provisions Relating to Euro-Rate Options and Bid Rate Loans 30 2.8 Utilization of Commitments in Optional Currencies 33 2.9 Capital Adequacy 35 2.10 Swingline Loans 35 2.11 Letter of Credit Subfacility 37 2.12 Method of Disbursements and Payments 42 2.13 Interest Payment Dates 43 2.14 Calculation of Interest and Facility Fee 43 2.15 Loan Account 43 2.16 Fees 43 2.17 Currency Repayments 44 2.18 Optional Currency Amounts 45 2.19 Currency Fluctuations 45 2.20 Interbank Market Presumption 45 2.21 Taxes 46 2.22 Judgment Currency 46 ARTICLE III.  REPRESENTATIONS AND WARRANTIES 47 3.1 Corporate Existence 47 3.2 Corporate Authority 47 3.3 Validity of this Agreement and the Notes 48 3.4 Financial Statements 48 3.5 Litigation; Title to Properties 48 3.6 Encumbrances 48 3.7 ERISA Compliance 48 3.8 Tax Returns and Payments 49 3.9 Regulations G, T, U and X 49 -i- --------------------------------------------------------------------------------                   Page -------------------------------------------------------------------------------- 3.10 Investment Company Act; Public Utilities Holding Company Act 49 3.11 Environmental Matters 49 3.12 No Restrictions 49 3.13 Compliance with Applicable Laws 50 3.14 Governmental Approval 50 3.15 No Event of Default; Compliance with Instruments 50 3.16 Employment Matters 50 3.17 Patents, Trademarks, Copyrights, Licenses, Etc. 50 3.18 Year 2000 Problem 51 3.19 Solvency 51 3.20 Material Contracts; Burdensome Restrictions 51 3.21 Disclosure 51 ARTICLE IV.  AFFIRMATIVE COVENANTS 51 4.1 Use of Proceeds 52 4.2 Furnishing Information 52 4.3 Preservation of Existence 53 4.4 Payment of Taxes and Fees 53 4.5 Insurance 53 4.6 ERISA Reports 54 4.7 Environmental Matters 54 4.8 Senior Debt Status 55 4.9 Y2K Preparedness 55 ARTICLE V.  NEGATIVE COVENANTS 55 5.1 Percentage of Consolidated Indebtedness to Consolidated Capitalization 55 5.2 Fixed Charge Coverage Ratio 55 5.3 Creation of Encumbrances 55 5.4 Limitation on Mergers 56 ARTICLE VI.  CONDITIONS PRECEDENT 56 6.1 All Disbursements 56 6.2 Conditions Precedent for Closing 57 ARTICLE VII.  EVENTS OF DEFAULT 59 7.1 Immediate Defaults 59 7.2 Defaults at Option of Banks 59 7.3 Remedies upon Default 61 7.4 Cash Collateral 61 ARTICLE VIII.  AGENT 62 8.1 Appointment and Grant of Authority 62 8.2 Non-Reliance on Agent 62 8.3 Responsibility of the Agent and Other Matters 62 8.4 Action on Instructions 63 8.5 Action in Event of Default 63 8.6 Indemnification 63 8.7 Agent’s Rights as a Bank 64 -ii- --------------------------------------------------------------------------------                   Page -------------------------------------------------------------------------------- 8.8 Loan Advances 64 8.9 Payment to Banks 65 8.10 Notice of Event of Default 65 8.11 Equalization of Banks 65 8.12 Successor Agent 66 ARTICLE IX.  GENERAL PROVISIONS 66 9.1 Waiver of Rights of Set-Off 66 9.2 Amendments 66 9.3 No Implied Waiver; Cumulative Remedies 67 9.4 Certain Taxes 67 9.5 Notices 67 9.6 Costs 68 9.7 Severability 68 9.8 Covenants to Survival 68 9.9 Investment 68 9.10 Holiday Payments 68 9.11 Governing Law 69 9.12 Successors, Assigns and Participations 69 9.13 Counterparts 70 9.14 Funding by Branch, Subsidiary or Affiliate 70 9.15 Tax Withholding Forms 71 9.16 Amendment and Restatement of Original Credit Agreement 71 9.17 Joinder to Agreement; Assignment of Interests under the Original Credit Agreement 72 -iii- -------------------------------------------------------------------------------- INDEX OF EXHIBITS                                   Principal Section Exhibit Reference Exhibit Reference Page -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- A Long Term Revolving Credit Note 2.1d 22 B Short Term Revolving Credit Note 2.2d 23 C Request for Disbursement 2.3b 24 D-1 Bid Rate Note (Long Term Revolving Credit Commitment) 2.5c 25 D-2 Bid Rate Note (Short Term Revolving Credit Commitment) 2.5c 26 E Swingline Note 2.10 36 F Compliance Certificate 4.2 52 G Opinion of Counsel 6.2 (xiv) 59 INDEX OF SCHEDULES                                   Schedule Reference Schedule Principal Section Reference Page -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 3.6 Encumbrances 3.6 48 -iv- -------------------------------------------------------------------------------- AMENDED AND RESTATED CREDIT AGREEMENT       THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 1, 2000, by and among COOPER TIRE & RUBBER COMPANY, as the Borrower (the “Borrower”), the FINANCIAL INSTITUTIONS PARTY hereto, as the lenders (individually a “Bank” and collectively the “Banks”), and PNC BANK, NATIONAL ASSOCIATION, as the agent for the Banks (the “Agent”). WITNESSETH:       WHEREAS, the Borrower, the Agent and certain lenders from time to time party thereto are parties to that certain Credit Agreement entered into as of September 1, 1999 (as amended or otherwise modified from time to time prior to the date hereof, the “Original Credit Agreement”);       WHEREAS, the Borrower has requested that the Agent and the Banks amend and restate the Original Credit Agreement as provided for herein;       WHEREAS, the Borrower desires to obtain loans from the Banks pursuant to this Agreement in an aggregate amount not to exceed $350,000,000 at any one time outstanding;       WHEREAS, the Agent and the Banks are willing to amend and restate the Original Credit Agreement and the Banks are willing to make loans and other financial accommodations available to the Borrower, and the Agent is willing to act as agent in connection therewith, in each case on the terms and subject to the conditions set forth herein; and       WHEREAS, the Borrower, the Agent and the Banks agree that they are willing to have PNC Capital Markets (“PNC Capital”) act as the sole arranger for the amendment and restatement of the Original Credit Agreement and that, PNC Capital’s role as sole arranger for the amendment and restatement of the Original Credit Agreement notwithstanding, PNC Capital is not and shall not be a party this Agreement.       NOW, THEREFORE, in consideration of mutual promises contained herein and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and with the intent to be legally bound hereby, the parties hereto agree as follows: ARTICLE I. DEFINITIONS. 1.1 Defined Terms. As used herein the following terms shall have the meaning specified unless the context otherwise requires:       “Affiliate” shall mean any Person directly or indirectly Controlling, Controlled by, or under common Control of the Borrower.       “Agent” shall mean PNC Bank, National Association in its capacity as Agent or its successor appointed pursuant to Section 8.12 hereof and as the issuer of Letters of Credit.   --------------------------------------------------------------------------------       “Agent’s Fee” shall mean the annual fee payable by the Borrower to the Agent as compensation for acting as Agent hereunder all as more fully set forth in the Agent’s Letter.       “Agent’s Letter” shall mean the letter from the Agent to the Borrower dated as of September 1, 2000, as the same may from time to time be amended or otherwise modified or supplemented.       “Agreement” shall mean this Amended and Restated Credit Agreement as the same may from time to time be amended or otherwise modified or supplemented.       “Applicable Long Term Margin” shall mean for each Long Term Revolving Credit Loan the rate per annum determined from time to time based upon the Ratings in effect by S&P and Moody’s set forth under the relevant column heading below opposite such Ratings:                   -------------------------------------------------------------------------------- RATINGS -------------------------------------------------------------------------------- Applicable Long Term Margin (in basis points per annum) S&P/Moody's Euro-Rate Option -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- A+/A1 or higher 17.0 A/A2 or higher but less than A+/A1 28.5 A-/A3 or higher but less than A/A2 40.0 BBB+/Baa1 or higher but less than A-/A3 50.0 BBB/Baa2 or higher but less than BBB+/Baa1 60.0 BBB-/Baa3 or lower 70.0 provided that, in the event that the Ratings of S&P and Moody’s do not coincide, the Applicable Long Term Margin set forth above opposite the higher of such Ratings will apply; and provided further, in the event that one Rating is in effect, the Applicable Long Term Margin set forth above for such Rating will apply. Notwithstanding the foregoing, in the event that no Ratings are in effect at such time of determination, the Applicable Margin will be determined in a manner to be mutually agreed upon by the Agent and the Borrower and consented to by the Banks.       “Applicable Short Term Margin” shall mean for each Short Term Revolving Credit Loan the rate per annum determined from time to time based upon the Ratings in effect by S&P and Moody’s set forth under the relevant column heading below opposite such Ratings: -2- --------------------------------------------------------------------------------                   -------------------------------------------------------------------------------- RATINGS -------------------------------------------------------------------------------- Applicable Short Term Margin (in basis points per annum) S&P/Moody's Euro-Rate Option -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- A+/A1 or higher 18.5 A/A2 or higher but less than A+/A1 30.0 A-/A3 or higher but less than A/A2 41.5 BBB+/Baa1 or higher but less than A-/A3 52.5 BBB/Baa2 or higher but less than BBB+/Baa1 62.5 BBB-/Baa or lower 72.5 provided that, in the event that the Ratings of S&P and Moody’s do not coincide, the Applicable Short Term Margin set forth above opposite the higher of such Ratings will apply; and provided further, in the event that one Rating is in effect, the Applicable Short Term Margin set forth above for such Rating will apply. Notwithstanding the foregoing, in the event that no Ratings are in effect at such time of determination, the Applicable Margin will be determined in a manner to be mutually agreed upon by the Agent and the Borrower and consented to by the Banks.       “Authorized Officer” shall mean the Chief Executive Officer, the President, any Vice President, Controller, the Treasurer or the Assistant Treasurer of the Borrower. The Agent shall be entitled to rely on the incumbency certificates delivered pursuant to Subsection 6.2(xii) hereof for the initial designation of each Authorized Officer. Additions or deletions to the list of Authorized Officers may be made by the Borrower at any time by delivering to the Agent a revised incumbency certificate.       “Bank” shall mean any of the several financial institutions party to this Agreement.       “Bank Indebtedness” shall mean (i) the Loans then outstanding, together with all increases or refinancings thereof, (ii) the aggregate stated amount of Letters of Credit outstanding hereunder, (iii) the aggregate amount of unreimbursed draws on Letters of Credit issued hereunder, (iv) all interest, fees and any other amounts due hereunder by reason of advances by the Banks, made to, or for the account of, the Borrower pursuant to this Agreement, and (v) all reasonable out-of-pocket expenses incurred by the Banks and the Agent (including but not limited to fees and expenses of counsel).       “Base Rate” shall mean the higher of (i) Agent’s Prime Rate or (ii) the sum of (A) the Federal Funds Effective Rate plus (B) fifty (50) basis points (1/2%). -3- --------------------------------------------------------------------------------       “Base Rate Option” shall mean the interest rate options, as applicable, described in Subsections 2.6a(i)(A) or 2.6a(ii)(A) of this Agreement.       “Base Rate Portion” shall mean the Loans bearing interest under the Base Rate Option.       “Base Rate Segment” shall mean each Loan bearing interest under the Base Rate Option.       “Bid Rate” shall mean the rate or rates of interest from time to time in effect pursuant to agreements reached between the Borrower and any or all of the Banks pursuant to Section 2.5.       “Bid Rate Administration Fee” shall mean the fee described in the Agent’s Letter relating to the administrative fee for Bid Rate Loan transactions.       “Bid Rate Bank” shall mean a Bank which, at the Date of Determination, has extended a Bid Rate Loan to the Borrower.       “Bid Rate Interest Period” shall mean any individual period of seven (7) to three hundred sixty-four (364) days commencing on the date of the extension of the relevant Bid Rate Loan; provided, however, that no Bid Rate Interest Period shall extend beyond the Business Day immediately preceding (A) the Termination Date in the case of a Disbursement under the Long Term Revolving Credit Commitment or (B) the Payment Date in the case of a Disbursement under the Short Term Revolving Credit Commitment.       “Bid Rate Loan” shall mean a Disbursement by any Bank pursuant to Section 2.5.       “Bid Rate Loan Request” shall mean the written request of the Borrower for a Bid Rate Loan delivered to the Banks in accordance with the provisions of Subsection 2.5d, which request shall contain the following information: (i) the date of the proposed Bid Rate Loan, (ii) the principal amount of the proposed Bid Rate Loan and (iii) the maturity date for repayment thereof, (iv) whether such Bid Rate Loan is under the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment, (v) the interest payment dates, and (vi) any other terms which the Borrower wishes to request.       “Bid Rate Note” shall mean an evidence of Indebtedness substantially in the form of Exhibit “D-1” or “D-2” hereto and all extensions, renewals, amendments, substitutions and replacements thereto and thereof.       “Bid Rate Option” shall mean the interest rate option that may be agreed upon between the Borrower and one or more of the Banks pursuant to Section 2.5 hereof.       “Borrower” shall have the meaning ascribed to it in the preamble hereto. -4- --------------------------------------------------------------------------------       “Business Day” shall mean, (a) when used in any context other than in reference to or in connection with Euro-Rate Segments, any day, other than a Saturday or Sunday, on which the Banks are open for business in Pittsburgh, Pennsylvania and New York, New York, (b) when used in the context of a Euro-Rate Segment, any day, other than a Saturday or Sunday, on which (i) commercial banks are open for business in Pittsburgh, Pennsylvania and New York, New York and (ii) dealings in foreign currencies and exchange and eurodollar funding between banks may be carried on at the location at which each of the Banks transacts its eurodollar funding and the Target (the Transeuro real time gross settlement system) is operating, and (c) when used with respect to advances or payments of Loans or any other matters relating to Loans denominated in an Optional Currency, such day also shall be a day on which dealings in deposits in the relevant Optional Currency are carried on in the applicable interbank market or on which all applicable banks into which Loan proceeds may be deposited are open for business and foreign exchange markets are open for business in the principal financial center of the country of such currency.       “Capital Compensation Amount” shall have the meaning given it in Section 2.9.       “Capital Stock” shall mean any and all shares, of any class (however designated) of capital stock of a corporation.       “Capitalized Lease” shall mean a lease under which the obligations of the lessee would, in accordance with GAAP, be included in determining total liabilities as shown on the liability side of a balance sheet of the lessee.       “Capitalized Lease Obligations” shall mean the portion of the obligations under a Capitalized Lease which would be shown as a liability on a balance sheet in accordance with GAAP.       “Cash Collateral Account” shall have the meaning given it in Section 7.4.       “Change in Law” shall have the meaning given it in Section 2.9.       “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation thereto, together with all regulations promulgated and rulings issued thereunder.       “Commercial Letter of Credit” shall mean any letter of credit directly related to the purchase of goods or to a similar transaction in which it is intended by the account party and the beneficiary that payment will be made, in the ordinary course, by a draw on the Letter of Credit in accordance with its terms.       “Commitment” shall mean, as to any Bank, the sum of the Dollar amount set forth opposite such Bank’s name on its signature page hereto (i) under the heading “Maximum Dollar Amount of Long Term Revolving Credit Commitment” plus (ii) under the heading “Maximum Dollar Amount of Short Term Revolving Credit Commitment”, as adjusted pursuant to Subsection 2.5 at such times as Bid Rate Loans are outstanding. -5- --------------------------------------------------------------------------------       “Compliance Certificate” shall mean the compliance certificate in substantially the form of Exhibit “F” hereto, which shall be delivered by the Borrower to the Banks in accordance with Section 4.2 hereof.       “Computation Date” shall have the meaning assigned to that term in Subsection 2.8a.       “Consolidated” shall mean the consolidation of accounts of two or more Persons in accordance with GAAP.       “Consolidated Indebtedness” shall mean the Indebtedness of the Borrower and its Subsidiaries determined on a Consolidated basis in accordance with GAAP, consistently applied.       “Consolidated Net Income” shall mean the total net income (or deficit) of the Borrower and its Subsidiaries for the period in question (taken as a cumulative whole) determined in accordance with GAAP on a consolidated basis, consistently applied.       “Consolidated Net Income Available for Fixed Charges” shall mean the Consolidated Net Income for any period after adding back Fixed Charges and provisions for taxes in respect of or measured by income or excess profits, all in the respective amounts theretofore deducted in determining Consolidated Net Income for such period.       “Consolidated Rentals” shall mean the aggregate of the Rentals of the Borrower and its Subsidiaries payable during a specified period in accordance with GAAP.       “Consolidated Stockholders’ Equity” shall mean the total of those items enumerated under the heading “Stockholders’ Equity” in the Borrower’s then current balance sheet determined on a Consolidated basis in accordance with GAAP, consistently applied.       “Consolidated Subsidiary” shall mean any Subsidiary which shall, during any relevant period be Consolidated with the Borrower in any Consolidated financial statement furnished to the Banks.       “Consolidated Total Assets” shall mean the assets of the Borrower and its Subsidiaries, determined on a Consolidated basis in accordance with GAAP consistently applied.       “Control (and its derivatives)”: Either (i) the ownership of twenty percent (20%) or more of any class of voting securities, partnership interests or other equity interests of a Person, or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, partnership interests or other equity interests, by contract or otherwise, including without limitation the power to elect a majority of the directors of a corporation or trustees of a trust, as the case may be. -6- --------------------------------------------------------------------------------       “Date of Determination” shall mean each date as of which any test to be made or applied under this Agreement is made or applied.       “Default Letter of Credit Fee” shall have the meaning assigned to it in Section 2.11c.       “Disbursement” shall mean an advance of proceeds to the Borrower made pursuant to any or all of Sections 2.1, 2.2, 2.5 or 2.10.       “Disclosure Letter” shall mean that certain letter dated on or prior to the Restatement Closing Date delivered by the Borrower to the Agent for redelivery to the Banks that discusses certain pending legal matters.       “Dollar” or “$” shall mean the legal tender of the United States of America.       “Dollar Equivalent” shall mean, with respect to any amount of any currency, the Equivalent Amount of such currency expressed in Dollars.       “Drawing Date” shall have the meaning assigned to it in Section 2.11d(B).       “Encumbrance” shall mean any encumbrance, mortgage, lien, charge, pledge, security interest, priority payment, conditional sales agreement right, or other title retention agreement right (including any Capitalized Lease) in, upon or against any asset of the Borrower except for a pledge of the stock of Cooper-Avon Tyres Limited in favor of the Borrower.       “Environmental Law” shall mean any and all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or the Release of any Hazardous Substances into the environment.       “Equivalent Amount” shall mean, at any time, as determined by the Agent (which determination shall be conclusive absent manifest error), with respect to an amount of any currency (the “Reference Currency”) which is to be computed as an equivalent amount of another currency (the “Equivalent Currency”): (i) if the Reference Currency and the Equivalent Currency are the same, the amount is such Reference Currency; or (ii) if the Reference Currency and the Equivalent Currency are not the same, the amount is such Equivalent Currency converted from such Reference Currency at the Agent’s spot selling rate (based on the market rates then prevailing and available to the Agent) for the sale of such Equivalent Currency for such Reference Currency at a time determined by the Agent on the second Business Day immediately preceding the event for which such calculation is made.       “Equivalent Currency” shall have the meaning assigned to such term in the definition of Equivalent Amount. -7- --------------------------------------------------------------------------------       “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as now in effect and as hereafter from time to time amended, or any successor statute, and the rules and regulations promulgated thereunder, as from time to time in effect.       “ERISA Affiliate” shall mean as of any relevant time any Person subject to ERISA which is a member of a Controlled group of corporations of which the Borrower is a member, and any trade or business which is subject to ERISA (whether or not incorporated) under common Control with the Borrower, and all other entities which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code.       “Euro-Rate” shall mean: (A) with respect to any Loans denominated in Dollars comprising any Segment to which the Euro-Rate Option applies for any Euro-Rate Interest Period, the interest rate per annum determined by the Agent by dividing (the resulting quotient rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the Agent in accordance with its usual procedures (which determination shall be conclusive and binding upon the Borrower, absent manifest error on the part of the Agent) to be the average of London interbank offered rates for U.S. Dollars quoted by the British Bankers Association as set forth on Dow Jones Markets Service (formerly known as Telerate) (or appropriate successor or, if British Banker’s Association or its successor ceases to provide such quotes a comparable replacement determined by the Agent) display page 3750 (or such other display page on the Dow Jones Markets Service system replacing page 3750) at approximately 9:00 A.M., Pittsburgh, Pennsylvania time, two (2) Business Days prior to the first day of such Euro-Rate Interest Period for an amount comparable to such Segment and having a borrowing date and a maturity comparable to such Euro-Rate Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. Such Euro-Rate may also be expressed by the following formula:                       Euro-Rate = Average of London interbank offered rates quoted by BBA as shown on Dow Jones Markets Service display page 3750 or appropriate successor -------------------------------------------------------------------------------- 1.00 - Euro-Rate Reserve Percentage       (B) with respect to any Loans denominated in Optional Currency comprising any Segment to which the Euro-Rate Option applies for any Interest Period, the interest rate per annum determined by Agent by dividing (the resulting quotient rounded upward to the nearest 1/16th of 1% percent per annum) (i) the rate of interest per annum determined by Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the rate of interest per annum for deposits in the relevant Optional Currency quoted by the British Banker’s Association which appears on the relevant Dow Jones Markets Service display page (or, if no such quotation is available on such Dow Jones Markets Service display age, on the appropriate Reuters Screen) at approximately 9:00 A.M., Pittsburgh, Pennsylvania time, two (2) Business Days prior to the first day of such Interest Period for delivery on the first day of such Interest Period for a period, and in an amount, comparable to such Interest Period and principal amount of such Disbursement (“LIBO Rate”) by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. Such Euro-Rate may also be expressed by the following formula:                       Euro-Rate = LIBO Rate -------------------------------------------------------------------------------- 1 - Euro-Rate Reserve Percentage -8- -------------------------------------------------------------------------------- The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The Agent shall give prompt notice to the Borrower of the Euro-Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error. The Euro-Rate for any Loans shall be based upon the Euro-Rate for the currency in which such Loans are requested.       “Euro-Rate Interest Period” shall mean any individual period of one month, two months, three months or six months or other period then available up to a maximum of twelve months; provided, however, that the availability of a period in excess of six months is subject to the express approval of the Required Banks, commencing on the borrowing date, conversion date or renewal date of the Euro-Rate Segment to which such period shall apply; provided, however, that any Euro-Rate Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next Business Day unless such Business Day falls in the succeeding calendar month in which case such Euro-Rate Interest Period shall end on the next preceding Business Day; and provided further that any Euro-Rate Interest Period which begins on the last day of a calendar month or on a day for which there is no numerically corresponding day in the subsequent calendar month during which such Euro-Rate Interest Period is to end shall end on the last Business Day of such subsequent month.       “Euro-Rate Option” shall mean the ability of the Borrower to have all or any Segment of the Loans then outstanding bear interest at a fixed rate of interest related to the Euro-Rate, all as more fully set forth in Subsections 2.6a(i)(B) or 2.6a(ii)(B).       “Euro-Rate Portion” shall mean the Loans then outstanding bearing interest under the Euro-Rate Option.       “Euro-Rate Reserve Percentage” shall mean, for each Euro-Rate Interest Period, that percentage (expressed as a decimal), as determined by the Agent as to the Euro-Rate Segment as to which the rate is then being set, which is in effect on the first day of such Euro-Rate Interest Period, (i) as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the maximum reserve requirements (including without limitation supplemental, marginal or emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”) of a member bank in such system; and (ii) to be maintained by a Bank as required for reserve liquidity, special deposit, or a similar purpose by any governmental or monetary authority of any country or political subdivision thereof (including any central bank), against (A) any category of liabilities that includes deposits by reference to which a Euro-Rate is to be determined, or (B) any category of extension of credit or other assets that includes Loans or Segments to which a Euro-Rate applies. The Euro-Rate shall be adjusted automatically with respect to any Euro-Rate Segment outstanding on the effective date of any change in the Euro-Rate Reserve Percentage, as of such effective date. -9- --------------------------------------------------------------------------------       “Euro-Rate Segment” shall mean each Loan bearing interest under the Euro-Rate Option for a discrete Interest Period.       “Event of Default” shall mean an occurrence of events or the existence of conditions described in Sections 7.1 through 7.2 inclusive, and any continuance thereof.       “Existing Banks” shall mean each of PNC Bank, National Association; National City Bank; Bank One, Michigan; The Chase Manhattan Bank; The Bank of New York; and Bank of America, N.A.       “Facility Fee” shall mean as of any Date of Determination the sum of (i) the Long Term Facility Fee Rate multiplied by the Long Term Revolving Credit Commitment and (ii) the Short Term Facility Fee Rate multiplied by the Short Term Revolving Credit Commitment.       “Federal Funds Effective Rate” shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it.       “Fiscal Quarter” shall mean each successive three-month period from January 1 to and including March 31, April 1 to and including June 30, July 1 to and including September 30, and October 1 to and including December 31.       “Fiscal Year” shall mean each successive 12-month period from January 1 to and including December 31.       “Fixed Assets” shall mean tangible assets (real, personal or mixed) material to the ongoing business operations of the Borrower on a Consolidated basis.       “Fixed Charges” shall mean the aggregate interest charges (including the portion of payments under Capitalized Leases attributable to interest) and Rentals payable by the Borrower and its Subsidiaries for any period with respect to Indebtedness and lease obligations existing at any time during such period, after eliminating all inter-company items in accordance with GAAP.       “Fronting Fee” shall have the meaning assigned to it in Section 2.11b.       “GAAP” shall mean generally accepted accounting principles in effect in the United States which shall include, but not be limited to, the official interpretations thereof as defined by the Financial Accounting Standards Board, its predecessors and its successors.       “Governmental Acts” shall have the meaning assigned to it in Section 2.11i. -10- --------------------------------------------------------------------------------       “Governmental Person” means the government of the United States or the government of any state or locality therein, or any foreign country, any political subdivision or any governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, or other regulatory bureau, authority, body or entity of the United States or any state or locality therein, including the Federal Deposit Insurance Company, the Comptroller of the Currency or the Board of Governors of the Federal Reserve System, any central bank of any foreign country or any comparable authority.       “Granting Bank” shall have the meaning assigned to that term in Section 9.12(a)(ii).       “Guarantee” or “Guaranty” shall mean any obligation, direct or indirect, by which a Person undertakes to guaranty, assume or remain liable for the payment or performance of another Person’s obligations, including but not limited to (i) endorsements of negotiable instruments (except for endorsements for deposit or collection in the ordinary course of business), (ii) discounts with recourse, (iii) agreements to pay or perform upon a second Person’s failure to pay or perform, (iv) remaining liable on obligations assumed by a second Person, (v) except for the Borrower’s obligations pursuant to Section 2.9, agreements to maintain the capital, working capital solvency or general financial condition of a second Person and (vi) agreements for the purchase or other acquisition of products, materials, supplies or services, if in any case payment therefor is to be made regardless of the non-delivery of such products, materials or supplies or the non-furnishing of such services.       “Hazardous Substances” shall mean (i) any hazardous, toxic or polluting substance regulated by any Environmental Law and (ii) any petroleum products.       “Indebtedness” shall mean as applied to any Person, without duplication, all liabilities of such Person for borrowed money, direct or contingent, whether evidenced by a bond, note, debenture, Capitalized Lease Obligation, deferred purchase price arrangement, title retention device, reimbursement agreement (except as any such reimbursement agreement relates to the issuance of a letter of credit to support a surety or performance bond which is a performance guaranty), Guaranty, book entry or otherwise.       “Interest Period” shall mean either a Bid Rate Interest Period, a Base Rate Segment or a Euro-Rate Interest Period.       “Letter of Credit” shall have the meaning assigned to that term in Section 2.11a.       “Letter of Credit Borrowing” shall mean an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made and shall not have been converted into a Long Term Revolving Credit Loan under Section 2.11d(B).       “Letter of Credit Fee” shall have the meaning assigned to that term in Section 2.11b. -11- --------------------------------------------------------------------------------       “Letters of Credit Outstanding” shall mean at any time the sum of (i) the aggregate undrawn face amount of outstanding Letters of Credit and (ii) the aggregate amount of all unpaid and outstanding Reimbursement Obligations.       “Loan” shall mean an advance of funds made by the Banks or the Agent to the Borrower under this Agreement as evidenced by the Notes; collectively the “Loans”.       “Loan Account” shall mean the account maintained by the Agent pursuant to Section 2.15.       “Loan Documents” shall mean this Agreement, the Notes, the Agent’s Letter and the Requests for Disbursement.       “Long Term Facility Fee Rate” shall mean the rate per annum determined from time to time based upon the Ratings in effect by S&P and Moody’s set forth under the relevant column heading below opposite such Ratings:                   -------------------------------------------------------------------------------- RATINGS -------------------------------------------------------------------------------- Long Term Facility Fee Rate S&P/Moody's (in basis points per annum) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- A+/A1 or higher 8.0 A/A2 or higher but less than A+/A1 9.0 A-/A3 or higher but less than A/A2 10.0 BBB+/Baa1 or higher but less than A-/A3 12.5 BBB/Baa2 or higher but less than BBB+/Baa1 15.0 BBB-/Baa3 or lower 17.5 provided that, in the event that the Ratings of S&P and Moody’s do not coincide, the Long Term Facility Fee Rate set forth above opposite the higher of such Ratings will apply; and provided further, in the event that one Rating is in effect, the Long Term Facility Fee Rate set forth above for such Rating will apply. Notwithstanding the foregoing, in the event that no Ratings are in effect at such time of determination, the Long Term Facility Fee Rate will be determined in a manner to be mutually agreed upon by the Agent and the Borrower and consented to by the Banks. The Long Term Facility Fee Rate shall be adjusted if necessary as of the date of any change in the Ratings.       “Long Term Revolving Credit Commitment” shall mean the several obligations of the Banks, each in accordance with its Long Term Revolving Credit Commitment Percentage, to make available to the Borrower the Long Term Revolving Credit Loans, all as set forth in Section 2.1. -12- --------------------------------------------------------------------------------       “Long Term Revolving Credit Commitment Percentage” shall mean as to any Bank, the percentage set forth opposite such Bank’s name on its signature page hereto under the caption “Long Term Revolving Credit Commitment Percentage”.       “Long Term Revolving Credit Loan” shall mean Disbursements made by the Banks under the Long Term Revolving Credit Commitment, which Disbursements in the aggregate shall not exceed more than $150,000,000 at any one time outstanding.       “Long Term Revolving Credit Note” shall mean the evidence of Indebtedness substantially in the form of Exhibit “A” hereto and all extensions, renewals, amendments, substitutions and replacements thereto and thereof.       “Margin Stock” shall be defined herein as defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System as such regulation is now in effect and may hereafter be amended.       “Material Adverse Effect” means, any change or effect that is materially adverse to the assets, liabilities, results of operations or financial condition of the Borrower and its Consolidated Subsidiaries taken as a whole.       “Maturity Date” shall mean (i) August 31, 2001 (ii) such later date as is agreed to by the Banks pursuant to Section 2.2c hereof, (iii) such earlier date on which the Short Term Revolving Credit Commitment shall terminate pursuant to Section 2.4 or (iv) such earlier date when, pursuant to Article VII hereof, the Short Term Revolving Credit shall terminate.       “Moody’s” shall mean Moody’s Investors Service, Inc.       “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions or has within any of the preceding five plan years made or accrued an obligation to make contributions.       “Note” shall mean any of the Long Term Revolving Credit Notes, the Short Term Revolving Credit Notes, the Bid Rate Notes or the Swingline Notes.       “Option” shall mean any of the Base Rate Option, the Euro-Rate Option or the Bid Rate Option.       “Optional Currency” shall mean any of the following currencies: (a) the British Pound Sterling, (b) the French Franc, (c) the Swiss Franc, (d) the Deutsche Mark or (e) the Euro, and any other freely convertible foreign currency listed on currency codes in effect from time to time under ISO International Standard 4217 or any successor thereto and approved by Agent and all of the Banks pursuant to Section 2.8d.       “Original Closing Date” shall mean September 1, 1999. -13- --------------------------------------------------------------------------------       “Original Currency” shall have the meaning assigned to such term in Section 2.22a.       “Other Currency” shall have the meaning assigned to such term in Section 2.22a.       “Other Taxes” shall have the meaning assigned to it in Section 2.21b.       “Overnight Rate” shall mean for any day with respect to any Loans in an Optional Currency, the rate of interest per annum as determined by the Agent at which overnight deposits in such currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day in the applicable offshore interbank market.       “Participant” shall mean any financial institution or other entity which purchases a Participation in any Loan hereunder from any Bank.       “Participation” shall mean the sale, pursuant to Subsection 9.12b, by any Bank to any Participant of an undivided interest in all or any part of the Loans or any Commitment under the Long Term Revolving Credit Commitment and/or the Short Term Revolving Credit Commitment.       “Participation Advance” shall mean, with respect to any Bank, such Bank’s payment in respect of its participation in a Letter of Credit Borrowing according to its Pro Rata share pursuant to Section 2.11d.       “Payment Date” shall mean (i) the first day of March immediately succeeding the Maturity Date or (ii) such earlier date when pursuant to Article VII the Short Term Revolving Credit Notes are due and payable.       “PBGC” shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.       “Permitted Encumbrances” shall mean those Encumbrances allowed pursuant to Section 5.3 hereof.       “Person” shall mean any individual, corporation, association, trust, firm, partnership, joint venture, unincorporated organization, limited liability company, or other entity or enterprise or any government or any political subdivision, department, agency or instrumentality thereof.       “Plan” shall mean at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 302 of ERISA and Section 412 of the Internal Revenue Code and either (i) is maintained by a Borrower and/or any ERISA Affiliate for employees of a Borrower and/or any ERISA Affiliate or (ii) has at any time within the preceding five years been maintained by a Borrower and/or any ERISA Affiliate for employees of a Borrower and/or any ERISA Affiliate. -14- -------------------------------------------------------------------------------- For purposes of this Agreement, the term “Plan(s)” shall not include a terminated employee pension benefit plan for which final distribution of assets has been made in full compliance with the provisions of Section 4041(b) of ERISA prior to the date of this Agreement, and for which the Internal Revenue Service has issued a favorable determination letter regarding termination of such plan.       “PNC” shall mean PNC Bank, National Association, a national banking association.       “Portion” shall mean any Euro-Rate Portion, any Base Rate Portion or any Bid Rate Portion.       “Prime Rate” shall mean the rate of interest announced from time to time by PNC at its principal office as its prime rate, which rate may not be the lowest interest rate then being charged commercial borrowers by the Agent.       “Pro Rata” shall mean (i) as to amounts due to or from any Bank (A) with respect to advances from or repayments to the Banks under the Long Term Revolving Credit Commitment, each such Bank’s Long Term Revolving Credit Commitment Percentage of such advances or repayments, (B) with respect to advances from or repayment to the Banks under the Short Term Revolving Credit Commitment, each such Bank’s Short Term Revolving Credit Commitment Percentage of such advances or repayments, and (C) with respect to the advances from or repayments to Bid Rate Banks their respective proportionate shares of each such Bid Rate Loan and (ii) with respect to all fees or costs due the Banks hereunder, an amount equal to each such Bank’s (A) Long Term Revolving Credit Commitment Percentage at the Date of Determination, or (B) Short Term Revolving Credit Commitment Percentage at the Date of Determination as the case may be.       “Ratings” shall mean the senior unsecured long term debt ratings of the Borrower in effect from time to time by Moody’s or S&P.       “RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq. and the regulations adopted pursuant thereto, as the same may be amended.       “Reference Currency” shall have the meaning assigned to such term in the definition of Equivalent Amount.       “Reimbursement Obligation” shall have the meaning assigned to such term in Section 2.11d(B).       “Release” or “Released” shall mean any release, spill, discharge, leak or disposal of any Hazardous Substance which occurs in a manner which is not in compliance with an Environmental Law.       “Rentals” shall mean all amounts (whether or not designated as rentals) payable by a lessee under any lease (other than a Capitalized Lease) during a specific period after -15- -------------------------------------------------------------------------------- eliminating all inter-company items in accordance with GAAP. If and to the extent the amount of any Rentals during any future period is not definitely determinable under the lease in question, the amount of such Rentals shall be estimated in such reasonable manner as the Board of Directors of the affected Borrower may in good faith determine.       “Reportable Event” shall mean a “reportable event” described in Section 4043(b) of ERISA and the regulations thereunder other than an event described in 29 C.F.R. Part 2615.14 for which the 30-day notice to the PBGC is waived.       “Request for Disbursement” shall mean the request for Disbursement in substantially the form of Exhibit “C” hereto, which shall be delivered to the Banks by the Borrower in accordance with Subsection 2.3b.       “Required Banks” shall mean Banks which in the aggregate hold at least 51% of the sum of (i) the Long Term Revolving Credit Commitment and (ii) the Short Term Revolving Credit Commitment or if any such Commitment has terminated, at least 51% of the Loans (including Participation Advances) then outstanding.       “Restatement Closing Date” shall mean the date on which each of the conditions precedent set forth in Section 6.2 is satisfied.       “S&P” shall mean Standard & Poor’s Rating Group, a division of McGraw-Hill, Inc.       “SEC” shall mean the Securities and Exchange Commission or any successor agency.       “Segment” shall mean each individual part of the Loans having a separate Interest Period and bearing interest under the Euro-Rate Option or the Bid Rate Option.       “Short Term Facility Fee Rate” shall mean the rate per annum determined from time to time based upon the Ratings in effect by S&P and Moody’s set forth under the relevant column heading below opposite such Ratings:                   -------------------------------------------------------------------------------- RATINGS -------------------------------------------------------------------------------- Short Term Facility Fee Rate S&P/Moody's (in basis points per annum) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- A+/A1 or higher 6.5 A/A2 or higher but less than A+/A1 7.5 A-/A3 or higher but less than A/A2# 8.5 BBB+/Baa1 or higher but less than A-/A3 10.0 BBB/Baa2 or higher but less than BBB+/Baa1 12.5 BBB-/Baa3 or lower 15.0 -16- -------------------------------------------------------------------------------- provided that, in the event that the Ratings of S&P and Moody’s do not coincide, the Short Term Facility Fee Rate set forth above opposite the higher of such Ratings will apply; and provided further, in the event that one Rating is in effect, the Short Term Facility Fee Rate set forth above for such Rating will apply. Notwithstanding the foregoing, in the event that no Ratings are in effect at such time of determination, the Short Term Facility Fee Rate will be determined in a manner to be mutually agreed upon by the Agent and the Borrower and consented to by the Banks. The Short Term Facility Fee Rate shall be adjusted if necessary as of the date of any change in the Ratings.       “Short Term Revolving Credit Commitment” shall mean the several obligations of the Banks, each in accordance with its Short Term Revolving Credit Commitment Percentage, to make available to the Borrower the Short Term Revolving Credit Loans, all as set forth in Section 2.2.       “Short Term Revolving Credit Commitment Percentage” shall mean as to any Bank, the percentage set forth opposite such Bank’s name on its signature page hereto under the caption “Short Term Revolving Credit Commitment Percentage.”       “Short Term Revolving Credit Loans” shall mean Disbursements made by the Banks under the Short Term Revolving Credit Commitment which Disbursements in the aggregate shall not exceed more than $200,000,000 at any one time outstanding.       “Short Term Revolving Credit Note” shall mean the evidence of Indebtedness substantially in the form of Exhibit “B” hereto and all extensions, renewals, amendments, substitutions and replacements thereto and thereof.       “Solvent” shall mean, with respect to any Person on a particular date, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, (ii) the present fair salable value of the assets 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, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) 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 (v) 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 after giving due consideration to the prevailing practice in the industry in which such Person is engaged or proposes to engage. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, 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. -17- --------------------------------------------------------------------------------       “SPC” shall have the meaning given it in Section 9.12a(ii).       “Standby Letter of Credit” shall mean a Letter of Credit issued to support obligations of the Borrower, contingent or otherwise, which finance the working capital and business needs of the Borrower incurred in the ordinary course of its business and which is not a Commercial Letter of Credit.       Swingline Loan shall mean a disbursement made by the Agent to the Borrower pursuant to Section 2.10.       Swingline Loan Account shall mean the sub-account opened and maintained by the Agent in the name of the Borrower pursuant to Section 2.15 and Section 2.10g.       Swingline Note shall mean the promissory note of the Borrower evidencing Indebtedness of the Borrower under the Swingline Option which note is substantially in the form of Exhibit “E” to the Agreement, together with all extensions, renewals, amendments, modifications, substitutions and replacements thereto and thereof.       Swingline Option shall mean the loan option between the Borrower and the Agent pursuant to Section 2.10.       “Subsidiary” of any Person at any time shall mean (i) any corporation or trust of which 51% or more (by number of shares or number of votes) of the outstanding Capital Stock or shares of beneficial interest normally entitled to vote for the election of one or more directors or trustees (regardless of any contingency which does or may suspend or dilute the voting rights) is at such time owned directly or indirectly by such Person or one or more of such Person’s Subsidiaries, (ii) any partnership of which such Person is a general partner or of which 51% or more of the partnership interests is at the time directly or indirectly owned by such Person or one or more of such Person’s Subsidiaries, or (iii) any limited liability company of which such Person is a member or of which 51% or more of the limited liability company interests is at the time directly or indirectly owned by such Person or one or more of such Person’s Subsidiaries.       “Taxes” shall have the meaning given it in Section 2.21a.       “Termination Date” shall mean (i) August 31, 2005, (ii) such earlier date on which the Long Term Revolving Credit Commitment shall terminate pursuant to Section 2.4 and the Long Term Revolving Credit Loans then outstanding shall be paid in full in accordance with Section 2.1e, (iii) such later date as is agreed to by the Borrower and the Banks pursuant to Subsection 2.1c hereof at which time the Long Term Revolving Credit Commitment shall terminate and the Long Term Revolving Credit Loans then outstanding shall be paid in full in accordance with Section 2.1e, or (iv) such date when, pursuant to Article VII hereof, the Long Term Revolving Credit Commitment shall terminate.       “Termination Event” shall mean (i) a Reportable Event with respect to a Plan (or an event described in Section 4068(f) of ERISA with respect to a Plan), or (ii) the withdrawal of -18- -------------------------------------------------------------------------------- the Borrower from a Plan during a plan year in which the Borrower was a “substantial employer”, as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower under Section 4064 of ERISA upon the termination of a Plan, or (iii) the distribution of a notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other event or condition which might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.       “Voting Stock” shall mean stock of any class or classes (however designated) the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of a majority of directors (or persons performing similar functions) of the issuer thereof even though the right so to vote has been suspended by the happening of such a contingency.       “Withdrawal Liability” shall mean “withdrawal liability” as defined by the provisions of Part 1 of Subtitle E to Title IV of ERISA.       “Year 2000 Problem” shall have the meaning ascribed to it in Section 3.18. 1.2 Accounting Terms. All accounting terms used in this Agreement and not otherwise defined herein shall have the respective meanings given to such terms under GAAP, and shall be construed in accordance with GAAP. 1.3 Construction. Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreement and each of the other Loan Documents:         (i) Number: Inclusion. References to the plural include the singular, the singular the plural and the part the whole, “or” has the inclusive meaning represented by the phrase “and/or,” and “including” has the meaning represented by the phrase “including without limitation.”           (ii) Determination. References to “determination” of or by the Agent or the Banks shall be deemed to include good faith estimates by the Agent or the Banks (in the case of quantitative determinations) and good faith beliefs by the Agent or the Banks (in the case of qualitative determinations) and such determination shall be conclusive absent manifest error.           (iii) Discretion and Consent. Whenever the Agent or the Banks are granted the right herein to act in its or their sole discretion or to grant or withhold consent such right shall be exercised in good faith.           (iv) Documents Taken as a Whole. The words “hereof,” “herein,” “hereunder”, “hereto” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole and not to any particular provision of this Agreement or such other Loan Document. -19- --------------------------------------------------------------------------------         (v) Headings. The article, section and other headings contained in this Agreement or such other Loan Documents and the Table of Contents (if any) preceding this Agreement or such other Loan Document are for reference purposes only and shall not control or affect the construction of this Agreement or such other Loan Document or the interpretation thereof in any respect.           (vi) Implied References. Article, section, subsection, item, clause, schedule and exhibit references are to this Agreement or to such other Loan Document, as the case may be, unless otherwise specified.           (vii) Persons. Reference to any Person includes such Person’s successors and assigns, but, if applicable, only if such successors and assigns are permitted by this Agreement or another Loan Document, as the case may be, and reference to a Person in a particular capacity excludes such Person in any other capacity.           (viii) Government Acts and Agreements. Reference to any Governmental Acts, agreement or contract includes such Governmental Acts, agreement or contract as the same may be amended, supplemented, modified, extended, waived, consolidated, replaced or renewed from time to time, but only to the extent permitted by, and effected in accordance with, the terms thereof and of this Agreement and the other Loan Documents.           (ix) From, To and Through. Relative to the determination of any period of time, “from” means “from and including”, “to” means “to but excluding”, and “through” means “through and including”.           (x) Shall; Will. References to “shall” and “will” are intended to have the same meaning.           (xi) Writing; Written. References to “writing” include printing, typing, lithography and other means of reproducing words in a tangible visible form. References to “written” include “printed”, “typed”, “lithographed” and other adjectives relating to words reproduced in a tangible visible form consistent with the preceding sentence and also include electronic images and images stored on computer disks, magnetic tape and like media.           (xii) “To Borrower’s knowledge” means the actual knowledge of the corporate officers of the Borrower whose offices are in Findlay, Ohio. ARTICLE II. THE LOANS. 2.1 Long Term Revolving Credit Commitment. 2.1a Long Term Revolving Credit Loans. The Banks severally agree, subject to the terms and conditions hereof and relying upon the representations and warranties herein set forth, -20- -------------------------------------------------------------------------------- that the Borrower shall have the right to borrow, repay and reborrow from the Restatement Closing Date until the Termination Date in either Dollars or an Optional Currency an aggregate principal amount not to exceed the Dollar Equivalent amount of $150,000,000 at any one time outstanding less Letters of Credit Outstanding. Each Bank, from time to time from the Restatement Closing Date to the Termination Date severally will lend to the Borrower at the principal office of the Agent in Pittsburgh, Pennsylvania, or at such location as the Agent may direct, amounts not exceeding the Dollar or Dollar Equivalent amount or percentage set forth in Subsection 2.1b opposite such Bank’s name minus such Bank’s Pro Rata share of the Letters of Credit Outstanding; provided, however, in no event (except as to Bid Rate Loans made pursuant to Section 2.5 hereof) shall any Bank be required to advance an amount in excess of the Dollar or Dollar Equivalent amount or percentage set forth opposite such Bank’s name on such Bank’s signature page hereto; and provided, further, that if any Bank fails to advance to the Borrower that Bank’s Pro Rata share of any Disbursement, the remaining Banks shall not be required to advance to the Borrower the defaulting Bank’s Pro Rata share of such Disbursement. 2.1b Individual Long Term Revolving Credit Loan Commitments. Subject to the provisions of Sections 2.4 and 2.5b hereof, each Bank shall be individually committed to the Borrower for each Bank’s Long Term Revolving Credit Commitment Percentage as set forth opposite such Bank’s name on the signature page hereto for such Bank, as adjusted from time to time to reflect any assignment made pursuant to Section 9.12(a)(i). 2.1c Extension of the Term of the Long Term Revolving Credit Commitment. The Borrower, prior to June 30, 2001, and prior to each subsequent June 30 during the term of the Long Term Revolving Credit Commitment, when the remaining term of the Long Term Revolving Credit Commitment (whether the original term as set forth in Subsection 2.1a or any extended term as provided hereby) is approximately fifty (50) months, may request, by written notice executed by an Authorized Officer and delivered to the Agent, an extension or further extension of the Long Term Revolving Credit Commitment for an additional one-year period and a corresponding alteration of the Termination Date. The Agent, upon receiving any request referred to above, shall immediately forward such request to each of the Banks. If all of the Banks agree to the requested extension of the Long Term Revolving Credit Commitment, the Agent shall communicate this information to the Borrower in writing no later than August 15th of the year in which such request was received. Each extension of the Long Term Revolving Credit Commitment shall be effective only for an additional one-year period from August 31st to the succeeding August 30th. If the Borrower has made its request for an extension of the Long Term Revolving Credit Commitment in a timely manner and the Borrower has not received an affirmative response by August 15th of the year in which such request is made, such request shall be deemed denied. The foregoing sentence notwithstanding, the Agent agrees that it shall endeavor to communicate a negative response to any such request to the Borrower within five (5) Business Days after the Agent knows that any such request has been denied. 2.1d Long Term Revolving Credit Notes. The obligation of the Borrower to repay on or before the Termination Date the aggregate unpaid principal amount of the Long Term Revolving Credit Loans and interest thereon shall be evidenced by the Long Term Revolving Credit Notes, substantially in the form of Exhibit “A” attached hereto and drawn by the Borrower to the order of each Bank in the maximum amount of the Bank’s Long Term Revolving Credit -21- -------------------------------------------------------------------------------- Commitment. The principal amount actually due and owing to each Bank at any one time shall be the aggregate unpaid principal amount of all Disbursements made by such Bank pursuant to its Long Term Revolving Credit Commitment, all as shown on the Loan Account established pursuant to Section 2.15 hereof. Each Long Term Revolving Credit Note shall be dated the Restatement Closing Date and shall be delivered to the Agent on behalf of the Banks on such date. The outstanding Long Term Revolving Credit Loans shall bear interest in accordance with the provisions of Section 2.6. 2.1e Repayment. On the Termination Date, the Borrower shall repay in full all amounts outstanding under the Long Term Revolving Credit Commitment together with all interest thereon to the date of such repayment and all costs and fees and costs due hereunder in respect of the Long Term Revolving Credit Commitment. 2.2 Short Term Revolving Credit Commitment. 2.2a Short Term Revolving Credit Loans. The Banks severally agree, subject to the terms and conditions hereof and relying on the representations and warranties set forth herein, that the Borrower shall have the right to borrow, repay and reborrow from the Restatement Closing Date until the Maturity Date in Dollars an aggregate principal amount not to exceed $200,000,000 at any one time outstanding less Swingline Loans outstanding. Each Bank from time to time from the Restatement Closing Date to the Maturity Date, severally will lend to the Borrower at the principal office of the Agent in Pittsburgh, Pennsylvania, amounts not exceeding the amount (less such Bank’s pro rata share of Swingline Loans outstanding) or percentage opposite such Bank’s name on such Bank’s signature page hereto; provided, however, in no event (except as to Bid Rate Loans made pursuant to Section 2.5 hereof) shall any Bank be required to advance an amount in excess of the Dollar amount set forth in Subsection 2.2b opposite such Bank’s name (less such Bank’s pro rata share of Swingline Loans outstanding); and provided, further, that if any Bank fails to advance to the Borrower that Bank’s Pro Rata share of any Disbursement, the remaining Banks shall not be required to advance to the Borrower the defaulting Bank’s Pro Rata share of such Disbursement. 2.2b Individual Short Term Revolving Credit Commitments. Subject to the provisions of Section 2.4 and 2.5b hereof, each Bank shall be individually committed to the Borrower for each Bank’s Short Term Revolving Credit Commitment Percentage as set forth opposite such Bank’s name on the signature page hereto for such Bank as adjusted from time to time to reflect any assignment made pursuant to Section 9.12(a)(i). 2.2c Extension of Maturity Date. (i) The Borrower, prior to June 30, 2001, and prior to each subsequent June 30 thereafter during the term of the Short Term Revolving Credit Commitment, when the remaining term of the Short Term Revolving Credit Commitment (whether the original term or any extended term as provided hereby) is approximately two (2) months, may request, by written notice executed by an Authorized Officer and delivered to the Agent, an extension or further extension of the Short Term Revolving Credit Commitment for an additional period of one day less than a year and a corresponding alteration of the Maturity Date. The Agent, upon receiving any request referred to above, shall immediately forward such request to each of the Banks. If all of the Banks agree to the requested extension of the Short Term -22- -------------------------------------------------------------------------------- Revolving Credit Commitment and the corresponding alteration of the Maturity Date, the Agent shall communicate this information to the Borrower in writing not earlier than thirty (30) days nor later than fifteen (15) days prior to the Maturity Date of the year in which such request was received.       (ii) The failure of the Borrower to request or to be granted the extension of the Short Term Revolving Credit Commitment shall automatically terminate the Short Term Revolving Credit Commitment as of the Maturity Date then in effect. The foregoing sentence notwithstanding, the Agent agrees that it shall endeavor to communicate a negative response to any such request to the Borrower within five (5) Business Days after the Agent knows that any such request has been denied. 2.2d Short Term Revolving Credit Notes. The obligation of the Borrower to repay the aggregate unpaid principal amount of the Short Term Revolving Credit Loans and interest thereon shall be evidenced by the Short Term Revolving Credit Notes, in substantially the form of Exhibit “B” attached hereto drawn by the Borrower to the order of each Bank in the maximum amount of such Bank’s Short Term Revolving Credit Commitment. The principal amount actually due and owing to a Bank at any one time shall be the aggregate unpaid principal amount of all Disbursements made by such Bank pursuant to the Short Term Revolving Credit Commitment, all as shown on the Loan Account established pursuant to Section 2.15 hereof. Each Short Term Revolving Credit Note shall be dated the Restatement Closing Date and shall be delivered to the Agent on behalf of the Banks on such date. The outstanding Short Term Revolving Credit Loans shall bear interest in accordance with the provisions of Section 2.6. 2.2e Repayment. On the Payment Date, the Borrower shall repay in full all amounts outstanding under the Short Term Revolving Credit Commitment, together with all interest thereon to the date of such repayment and all fees and costs due hereunder in respect of the Short Term Revolving Credit Commitment. 2.3 Disbursements and Repayments. 2.3a Borrowings. Each Disbursement of the Long Term Revolving Credit Loans or the Short Term Revolving Credit Loans, as the case may be, repayment thereof and subsequent reborrowing shall be made from or to the Banks ratably in proportion to their respective Commitments set forth in Subsections 2.1b and 2.2b (except as provided in Section 2.11d(B) and shall be in an aggregate Dollar amount of $1,000,000 or if in excess of $1,000,000 in integral multiples of $1,000,000; provided, however, that if a Disbursement is to bear interest at the Euro-Rate Option then such Disbursement must be in the amounts required by Subsection 2.6d. 2.3b Disbursement Request. Each request for a Disbursement under Section 2.1 or 2.2 shall be made to the Agent by an Authorized Officer of the Borrower orally or in writing pursuant to the execution and delivery by the Borrower to the Agent of a Request for Disbursement, substantially in the form of Exhibit “C” hereto, (A) except for any Request for Disbursement made pursuant to Subsection 2.5d hereof, by 10:00 A.M. (Pittsburgh, Pennsylvania time) on the date of the proposed Disbursement if the Disbursement is initially to bear interest at the Base Rate Option, (B) by 10:00 A.M. (Pittsburgh, Pennsylvania time) at least three (3) -23- -------------------------------------------------------------------------------- Business Days prior to the proposed Disbursement with respect to Loans made in Dollars if the Disbursement or any part thereof is to initially bear interest at the Euro-Rate Option, or (C) by 10:00 A.M. (Pittsburgh, Pennsylvania time) at least four (4) Business Days prior to the proposed Disbursement with respect to Long Term Revolving Credit Loans funded in an Optional Currency (which Loans must bear interest at the Euro-Rate Option), in each case specifying whether the Disbursement is under the Long Term Revolving Credit Commitment or the Short Term Revolving Credit, as applicable, the proposed borrowing date and the Dollar or Dollar Equivalent (if applicable) amount thereof, selecting the interest rate Option therefor pursuant to Subsection 2.6 hereof, if appropriate, selecting the Interest Period therefor and for Long Term Revolving Credit Loans to be funded in an Optional Currency, the currency in which the Disbursement is to be funded. Any oral request for a Disbursement hereunder shall be followed immediately by the Borrower’s written Request for Disbursement. A request from the Borrower pursuant to this Section 2.3b with respect to a Disbursement or any part thereof which is initially to bear interest at the Euro-Rate Option, shall irrevocably commit the Borrower to accept such Disbursement on the date specified in such request. Promptly upon receipt of such notice, the Agent shall notify each Bank of the Borrower’s request and the amount of such requested Disbursement which is to be advanced by such Bank. Each such Bank shall make its Pro Rata share of such Disbursement available at the Agent’s principal office in immediately available funds no later than 3:00 p.m. (Pittsburgh, Pennsylvania time) on the date of the requested Disbursement. 2.3c Repayments. Each repayment of the Long Term Revolving Credit Loans or the Short Term Revolving Credit Loans (other than a repayment which entirely repays all such Loans then outstanding, whether on the Termination Date, the Payment Date or otherwise) shall be in the Dollar or Dollar Equivalent amount of $1,000,000 or if in excess of $1,000,000, in integral multiples of $1,000,000, all in the currency in which such Loan was made; provided, however, if such repayment is to repay Long Term Revolving Credit Loans or the Short Term Revolving Credit Loans bearing interest at the Euro-Rate Option then such repayment must be in the amounts required by Subsection 2.6d. 2.4 Reduction of Long Term Revolving Credit Commitment or Short Term Revolving Credit Commitment. At any time and from time to time upon at least five (5) Business Days’ prior written notice to the Agent, the Borrower may terminate, in whole or in part, without penalty, the then unused portion of the Long Term Revolving Credit Commitment and/or the Short Term Revolving Credit Commitment, thereby causing a corresponding abatement of the relevant Facility Fee; provided, however, that (i) the Borrower may not terminate an unused portion of the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment, as the case may be, such that the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment is reduced below the principal amount of any Bid Rate Loans then outstanding under the applicable Commitment, (ii) the Borrower may not terminate an unused portion of the Long Term Revolving Credit Commitment such that the Long Term Revolving Credit Commitment is reduced below the Letters of Credit Outstanding, and (iii) the Long Term Revolving Credit Commitment and/or the Short Term Revolving Credit Commitment shall terminate without the necessity for further action on behalf of the Borrower, the Agent or the Banks if such commitment is reduced to $0. Each such reduction shall be in a minimum principal amount of $10,000,000 or, if in excess of $10,000,000, in integral multiples -24- -------------------------------------------------------------------------------- of $1,000,000. The relevant Facility Fee shall cease to accrue with respect to the portion of the relevant Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment so terminated five (5) Business Days after receipt of such notice or the date of such reduction whichever is later. Notice of termination once given shall be irrevocable and the portion of the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment so terminated shall not be available for borrowing once such notice has been given under the terms hereof. The Agent shall promptly notify each Bank of its Pro Rata share of such terminated unused portion and the date of each such termination. 2.5 Bid Rate Loans. 2.5a Bid Rate. Subject to the provisions of this Section 2.5, each Bank agrees the Borrower may request from any Bank Bid Rate Loans, in an aggregate amount at any one time outstanding not to exceed $350,000,000, bearing interest at the Bid Rate Option. No Bid Rate Loan shall be made in an Optional Currency. 2.5b Reduction of Available Commitments. While each such Bid Rate Loan is outstanding hereunder, the outstanding principal amount thereof shall reduce correspondingly availability under either or both of (i) the Long Term Revolving Credit Commitment and (ii) the Short Term Revolving Credit Commitment, as applicable, and shall reduce, as to each Bank availability under either or both of (i) that Bank’s Long Term Revolving Credit Commitment or (ii) that Bank’s Short Term Revolving Credit Commitment, as applicable, by an amount equal to such Bank’s Pro Rata share of the aggregate outstanding principal balance of Bid Rate Loans issued by any Bank. 2.5c Limitations on and Evidence of Bid Rate Loans. Except as provided under Section 2.5d(iii)(B) hereof, each Bid Rate Loan or repayment of a Bid Rate Loan must be in the minimum principal amount of $5,000,000 or, if in excess of $5,000,000, in integral multiples of $1,000,000. The obligation of the Borrower to repay, on the Termination Date (if the Borrower has requested a Disbursement under the Long Term Revolving Credit Commitment), the aggregate unpaid principal amount of such Bid Rate Loans advanced by each Bank shall be evidenced by the Bid Rate Notes substantially in the form of Exhibit “D-1” hereto, one made payable to each Bank in the amount of $150,000,000. The obligation of the Borrower to repay, on the Payment Date (if the Borrower has requested the Disbursement under the Short Term Revolving Credit Commitment), the aggregate unpaid principal amount of such Bid Rate Loans advanced by each Bank shall be evidenced by the Bid Rate Notes substantially in the form of Exhibit “D-2” hereto, one made payable to each Bank in the amount of $200,000,000. The Borrower shall have, with the prior written consent of the Bank making such Bid Rate Loan, the right to prepay any Bid Rate Loan prior to the end of the relevant Bid Rate Interest Period. The Borrower shall repay each individual Bid Rate Loan, together with interest thereon on the last day of the Bid Rate Interest Period applicable to it. The principal amount actually due and owing each Bank shall be the aggregate unpaid principal amount of all Disbursements of Bid Rate Loans made by such Bank, all as shown on the Loan Account established pursuant to Section 2.15 hereof. -25- -------------------------------------------------------------------------------- 2.5d Bid Rate Loan Procedure.       (i) The Borrower may request Bid Rate quotations by delivering to the Agent in writing a Bid Rate Loan Request before 12:00 Noon (Pittsburgh, Pennsylvania time) at least one (1) Business Day prior to the date of the proposed Disbursement.       (ii) Each Bank, if in its sole discretion it elects to do so, shall irrevocably offer to make one or more Bid Rate Loans at a rate or rates of interest specified by such Bank for such Bid Rate Interest Period by notifying the Borrower and the Agent before 10:00 A.M. (Pittsburgh, Pennsylvania time) on the date of the proposed Disbursement; provided, however any offer made by PNC shall be submitted by 9:45 P.M. (Pittsburgh, Pennsylvania time).       (iii) The Borrower, as soon as possible but in any event before 11:00 A.M. (Pittsburgh, Pennsylvania time) on the date of such proposed Bid Rate Loan specified in the applicable Bid Rate Loan Request shall either:         (A) cancel such Bid Rate Loan Request by giving the Agent notice to that effect; or           (B) accept one or more of the offers made by any Bank or Banks pursuant to clause (ii) above, by giving notice to the Agent of each Bid Rate Loan, including the amount (which amount shall be equal to or less than the maximum amount offered by each such Bank or Banks), type of Commitment to be borrowed against, rate and maturity thereof, and reject any remaining offers made pursuant to clause (ii) above by giving the Agent notice to that effect; provided, however, (1) each offer shall be accepted in order of ascending Bid Rate applicable to such Bid Rate Loans and (2) if two or more Banks submit offers at identical terms and conditions and the Borrower accepts any such offers, but does not wish to borrow the total amount offered by such Banks, the Borrower shall accept offers from all such Banks on amounts allocated among them proportionately according to the amounts offered by such Banks. If the Borrower does not notify the Agent of its decision under item (i) or (ii) above by 11:00 A.M. (Pittsburgh, Pennsylvania time), such failure shall be deemed a cancellation of such Bid Rate Request.       (iv) If the Borrower notifies the Agent that such Bid Rate Loan Request is cancelled pursuant to clause (iii)(A) above, the Agent shall give prompt notice thereof to the Banks and the Bid Rate Loans requested thereby shall not be made.       (v) If the Borrower accepts one or more of the offers made by any Bank pursuant to clause (iii)(B) above, the Agent shall in turn promptly notify (A) each Bank of the date of such Bid Rate Loan, and the aggregate amount, interest rate, type of Commitment to be borrowed against and maturity of such Bid Rate Loan and whether or not any offer or offers made by such Bank pursuant to clause (ii) above have been accepted by the Borrower and (B) each Bank which is to make a Bid Rate Loan, of the amount of each Bid Rate Loan to be made -26- -------------------------------------------------------------------------------- by such Bank. Each Bank which is to make a Bid Rate Loan shall, before 1:00 p.m. (Pittsburgh, Pennsylvania time) on the date of such Bid Rate Loan specified in the notice received from the Agent pursuant to clause (A) of the preceding sentence or any later time when such Bank shall have received notice from the Agent pursuant to clause (B) of the preceding sentence, make available to the Agent such Bank’s Bid Rate Loan, in immediately available funds. Promptly after 1:00 p.m. (Pittsburgh, Pennsylvania time) and in any event before 3:00 p.m. (Pittsburgh, Pennsylvania time) on each date of the making of Bid Rate Loans, the Agent shall make the aggregate amount available to the Borrower. 2.5e Bid Rate Loan Interest. Interest on the Bid Rate Loans shall accrue at the rate per annum agreed upon between the Bank or Banks making such Bid Rate Loans and the Borrower pursuant to the Bid Rate selection procedures set forth in Subsection 2.5d above. Upon the occurrence of an Event of Default under Section 7.1, and during the continuance of such Event of Default, the interest rate on outstanding Bid Rate Loans shall be adjusted in accordance with the provisions of Subsection 2.6b. The Agent shall provide the Borrower with written notice of the effectiveness of such increased rate of interest based on the occurrence of an Event of Default as soon as practicable thereafter, but the failure of the Agent to provide such notice shall not negate the effectiveness of such increased rate. 2.5f Bid Rate Option Borrowing in Event of Bid Rate Loan. Following each Bid Rate Loan Request accepted pursuant to Section 2.5d and each Bid Rate Loan made pursuant thereto, the Borrower may not submit another Bid Rate Loan Request for a period of four (4) Business Days from the date of Disbursement of each Bid Rate Loan which period shall include the date of Disbursement. 2.5g Base Rate Option Borrowing in Event of Cancelled Bid Rate Loan Request. In the event of cancellation by the Borrower of a Bid Rate Loan Request pursuant to item (iii)(A) of Subsection 2.5d, the Borrower may, before 11:00 A.M. (Pittsburgh, Pennsylvania time) on the day of such cancellation, submit to the Agent a request for a Disbursement under the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment to be made on the day of such cancellation and to bear interest at the Base Rate Option. The Agent shall use its best efforts to notify the Banks of each such request for a Disbursement, and the Banks shall use their best efforts to make their respective Pro Rata shares of such Disbursement available at the office of the Agent prior to 12:00 Noon (Pittsburgh, Pennsylvania time) on the date of such Disbursement. 2.5h Maximum Bid Rate Amount. The total amount of Bid Rate Loans outstanding at any one time plus (i) all outstanding and unpaid Disbursements and (ii) Letters of Credit Outstanding shall not exceed in the aggregate at any one time outstanding of $350,000,000. -27- -------------------------------------------------------------------------------- 2.6 Long Term Revolving Credit Loan and Short Term Revolving Credit Loan Interest Rates. 2.6a Interest Rate Options.       (i) Long Term Revolving Credit Loans. During the term hereof and prior to the Termination Date, in accordance with the provisions of Subsections 2.6c and 2.6d, the Borrower shall have the option of electing from time to time one or more of the interest rate formulas set forth below to be applied by the Banks to amounts then outstanding under Long Term Revolving Credit Loans. In addition, prior to the Termination Date, the Borrower shall have the right to implement the Bid Rate Loan procedure set forth in Section 2.5 hereof. The actual interest rates hereunder shall also be adjusted in accordance with Section 2.6b hereof.         (A) Base Rate Option. Interest under this Option shall accrue at a rate per annum equal to the Base Rate. The actual interest rate in effect under this Option shall be adjusted on the effective date of any change in the Base Rate. The Base Rate Option is not available for Optional Currency Loans.           (B) Euro-Rate Option. Interest under this Option shall accrue for any Euro-Rate Interest Period selected at a rate per annum equal to the sum of the Euro-Rate plus the Applicable Long Term Margin, and shall be adjusted as of the date of any change of Ratings, if necessary.       (ii) Short Term Revolving Credit Loans. During the term hereof and prior to the Payment Date, in accordance with the provisions of Subsections 2.6c and 2.6d, the Borrower shall have the option of electing from time to time one or more of the interest rate formulas set forth below to be applied by the Banks to amounts then outstanding under Short Term Revolving Credit Loans. In addition, prior to the Maturity Date, the Borrower shall have the right to implement the Bid Rate Loan procedure set forth in Section 2.5 hereof. The actual interest rates hereunder shall also be adjusted in accordance with Section 2.6b hereof.         (A) Base Rate Option. Interest under this Option shall accrue at a rate per annum equal to the Base Rate. The actual interest rate in effect under this Option shall be adjusted on the effective date of any change in the Base Rate.           (B) Euro-Rate Option. Interest under this Option shall accrue for any Euro-Rate Interest Period selected at a rate per annum equal to the sum of the Euro-Rate plus the Applicable Short Term Margin, and shall be adjusted as of the date of any change of Ratings, if necessary. -28- -------------------------------------------------------------------------------- 2.6b Interest Rate Upon Default.       (i) (A) Upon the occurrence of an Event of Default under Section 7.1, and during the continuance of such Event of Default, or (B) upon the acceleration of the Bank Indebtedness for any reason hereunder, interest under the Base Rate Option, the Euro-Rate Option, the Bid Rate Option or the Swingline Loan Option shall be 2% per annum (200 basis points) in excess of the applicable interest rate then in effect.       (ii) Upon receipt by the Borrower of notice from the Agent of the occurrence of an Event of Default under Section 7.2 and during the continuance of such Event of Default, interest under the Base Rate Option, the Euro-Rate Option, the Bid Rate Option or the Swingline Loan Option shall be 2% per annum (200 basis points) in excess of the applicable interest rate then in effect.       (iii) The provisions of the immediately preceding items (i) and (ii) to the contrary notwithstanding, if (A) the Borrower has not given notice to the Banks of an Event of Default in accordance with the provisions of Section 9.5 and (B) the Banks, after becoming aware of such Event of Default and based on such Event of Default, wish to impose the default rate of interest in accordance with either of the preceding items (i) and (ii), such default rate of interest shall be effective as of the first day on which such default rate would have been in effect had the Borrower given such notice in accordance with the provisions of Section 9.5. 2.6c Interest Rate Option Elections. The Borrower shall have the option to elect to have all or any Portion of the Dollar funded Long Term Revolving Credit Loans or the Short Term Revolving Credit Loans bear interest at either the Base Rate Option or the Euro-Rate Option, subject, however to the other provisions of this Agreement. Notice of the Borrower’s election shall be made to the Agent orally or in writing by 10:00 A.M. (Pittsburgh, Pennsylvania time) at least (i) except as set forth in Subsection 2.5g hereof, on the proposed effective date of such election, if such election is the election of the Base Rate Option; and, (ii) three (3) Business Days prior to the proposed effective date of such election, if such election is the election of the Euro-Rate Option. Each such notice of election shall specify the Option and the amount of the Long Term Revolving Credit Loans or Short Term Revolving Credit Loans to bear interest at such Option, and in the case of the selection of the Euro-Rate Option, the Interest Period therefor. Upon receipt of each such notice from the Borrower, the Agent shall promptly notify each of the Banks. Any oral notice of election hereunder shall be followed immediately by the Borrower’s written confirmation of such interest rate election. Elections of or conversions to the Base Rate Option shall continue in effect until converted as herein set forth. Elections of, conversions to or renewals of the Euro-Rate Option shall expire as to each such Option at the expiration of the applicable Interest Period; provided, however, that in relation to any Long Term Revolving Credit Loans, no Interest Period for the Euro-Rate Option may be elected, converted or renewed if such Interest Period will extend beyond the Termination Date or so long as an Event of Default has occurred and is continuing; and provided further, that in relation to any Short Term Revolving Credit Loans, no Interest Period for the Euro-Rate Option may be elected, converted or renewed if such Interest Period will extend beyond the Payment Date or so long as an Event of Default has occurred and is continuing. Any Portion of any Dollar funded Loan outstanding for which no Interest Rate Option election has been made shall bear interest at the Base Rate Option. -29- -------------------------------------------------------------------------------- Any Segment of any Loan bearing interest at the Euro-Rate, for which no Euro-Rate Interest Period has been made shall have a Euro-Rate Interest Period of one month. Each Segment of each Optional Currency funded Long Term Revolving Credit Loan shall bear interest at the Euro-Rate Option, subject, however, to the other provisions of this Agreement. 2.6d Limitation on Election of Euro-Rate Options. Each election of the Euro-Rate Option for a Portion of the Long Term Revolving Credit Loans or Short Term Revolving Credit Loans bearing interest at the Euro-Rate Option must be in the minimum principal amount of $5,000,000 (or, in the case of Long Term Revolving Credit Loans funded in an Optional Currency, the Dollar Equivalent thereof) or, if in excess of $5,000,000 (or the Dollar Equivalent thereof), in integral multiples of $1,000,000 (or the Dollar Equivalent thereof). Any minimum amount of an election of the Euro-Rate Option hereunder may be comprised, in whole or in part, of (i) existing Long Term Revolving Credit Loans or Short Term Revolving Credit Loans bearing interest at the Base Rate Option or the Euro-Rate Option (provided the Interest Period relating thereto shall expire immediately prior to the commencement of the new Interest Period), (ii) the previously undisbursed portion of the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment or (iii) any combination of the amounts described in the immediately preceding items (i) and (ii). At no time during the term hereof may there be more than six (6) separate Interest Periods in effect relating to Long Term Revolving Credit Loans and no more than six (6) separate Interest Periods for Short Term Revolving Credit Loans. 2.7 Special Provisions Relating to Euro-Rate Options and Bid Rate Loans. 2.7a Euro-Rate Unascertainable. In the event that on any date on which a Euro-Rate would otherwise be set, the Agent shall have determined in good faith (which determination shall be final and conclusive) that by reason of circumstances affecting the interbank Eurodollar or eurocurrency market adequate and reasonable means do not exist for ascertaining the Euro-Rate, the Agent shall give prompt notice of such determination to the Borrower and the Banks, and until the Agent notifies the Borrower and the Banks that the circumstances giving rise to such determination no longer exist, the right of the Borrower to borrow under or renew such affected Option shall be suspended. Any notice of borrowing under or renewal of such affected Option which was to become effective during the period of such suspension shall be treated as a request to borrow under or renew the Base Rate Option with respect to the principal amount therein specified; subject, however, to the right of the Borrower to borrow or renew such amount at any other Option if then available, pursuant to Section 2.6. 2.7b Illegality of Offering Euro-Rate. If any Bank shall determine in good faith (which determination shall be final and conclusive) that compliance by such Bank with any applicable law, treaty or governmental rule, regulation, guideline, order, request or directive (whether or not having the force of law), or the interpretation or application thereof by any governmental or monetary authority, adopted after the Original Closing Date, has made it unlawful for such Bank to make or maintain its Loans under the Euro-Rate Option, such Bank shall give notice of such determination to the Borrower and the Agent. Notwithstanding any provision of this Agreement to the contrary, unless and until such Bank shall have given notice that the circumstances giving rise to such determination no longer apply: -30- --------------------------------------------------------------------------------       (i) with respect to any Euro-Rate Interest Periods, thereafter commencing, interest on such Bank’s Pro Rata share of the corresponding Euro-Rate Portion shall be computed and payable in Dollars under the Base Rate Option; and       (ii) on such date, if any, as shall be required by law, such Bank’s Pro Rata share of any Euro-Rate Portions, then outstanding shall be automatically renewed at the Base Rate Option in Dollars and the Borrower shall pay to such Bank the accrued and unpaid interest on such Portions to (but not including) such renewal date.       The Borrower shall pay any Bank any additional amounts reasonably necessary to compensate such Bank (on an after-tax basis) for any out-of-pocket costs incurred by such Bank as a result of any renewal pursuant to clause (ii) above on a day other than the last day of the relevant Interest Period, including, but not limited to, any interest or fees payable by such Bank to lenders of funds obtained by it to loan or maintain the lending of the Loans so converted. Such Bank shall furnish to the Borrower and the Agent a certificate showing the calculation of the amount necessary to compensate such Bank (on an after-tax basis) for such costs (which certificate, in the absence of manifest error, shall be conclusive), and the Borrower shall pay such amount to such Bank, as additional consideration hereunder, within ten (10) days of the Borrower’s receipt of such certificate. 2.7c Inability to Offer Euro-Rate. In the event that any Bank shall determine, in its reasonable discretion, that it is unable to obtain deposits in the interbank eurodollar market in sufficient amounts and with maturities related to such Euro-Rate Portions which would enable such Bank to fund such Euro-Rate Portions, then such Bank shall immediately notify the Agent of such inability. The Agent, upon receipt of such notice, shall notify the Borrower that the right of the Borrower to borrow under, convert to or renew the Euro-Rate Option or select an Optional Currency from such Bank shall be suspended. Following notification of the suspension of the Euro-Rate Option with respect to any Bank, the Borrower agrees to negotiate with such Bank for a modified Euro-Rate which will allow such Bank to realize its anticipated and bargained for yield. In the event that the Borrower and the affected Bank cannot agree on a modified Euro-Rate, any notice of borrowing under, conversion to or renewal of the Euro-Rate Option which was to become effective during the period of suspension shall be treated as a request to borrow under, convert to or renew the Base Rate Option in Dollars with respect to the principal amount specified therein attributable to the affected Bank. The affected Bank shall notify the Agent as to whether such Bank and the Borrower have agreed on a modified Euro-Rate. 2.7d Yield Protection. If any law, rule, regulation, treaty or official directive or the interpretation or application thereof by any Governmental Person charged with the administration thereof or the compliance with any guideline or request from any central bank or other Governmental Person, adopted after the Original Closing Date, (whether or not having the force of law):       (i) subjects any Bank to any tax, levy, impost, charge, fee, duty, deduction or withholding of any kind hereunder (other than any tax imposed or based upon the income of such Bank and payable to any governmental or taxing authority in the United States of America or any state thereof or any foreign jurisdiction) or changes the basis of taxation of such Bank with -31- -------------------------------------------------------------------------------- respect to payments by the Borrower of principal, interest or other amounts due from the Borrower hereunder (other than any change which affects, and to the extent that it affects, the taxation by the United States or any state thereof or any foreign jurisdiction of the total net income of such Bank), or       (ii) imposes, modifies or deems applicable any reserve, special deposit, special assessment or similar requirements against assets held by, deposits with or for the account of or credit extended by such Bank (other than such requirements which are included in the determination of the Euro-Rate hereunder), or       (iii) imposes upon such Bank any other condition with respect to this Agreement, and the result of any of the foregoing is to increase the cost to such Bank, reduce the income receivable by such Bank, reduce the rate of return on such Bank’s capital, or impose any expense upon such Bank with respect to any Euro-Rate Portion of the Loans, or any Bid Rate Loan by an amount which such Bank in its sole but reasonable discretion deems to be material, such Bank shall from time to time notify the Borrower and the Agent of the amount determined by such Bank (which determination, absent error, shall be conclusive) to be reasonably necessary to compensate such Bank (on an after-tax basis) for such increase in cost, reduction in income, reduction in rate of return, or additional expense, setting forth the calculations therefor, and the Borrower shall pay such amount to such Bank, as additional consideration hereunder, within ten (10) days of the Borrower’s receipt of such notice. 2.7e Breakage Costs. In addition to the provisions of Subsections 2.7b and 2.7d hereof, the Borrower hereby agrees to reimburse each Bank against any loss or expense which such Bank may sustain or incur as a consequence of any default by the Borrower (i) in failing to accept any Bid Rate Loan or any borrowing or renewal hereunder to bear interest at the Euro-Rate Option on the scheduled date, or (ii) in failing to make when due (whether by declaration, acceleration or otherwise) any payment of any Euro-Rate Portion of the Loans or any Bid Rate Loan or (iii) in making any payment or prepayment of any Euro-Rate Portion of the Loans or any Bid Rate Loan or any part thereof on any day other than the last day of the relevant Interest Period; including, in each case, but not limited to, any loss of profit, premium or penalty incurred by such Bank in respect of funds borrowed by it for the purpose of making or maintaining any Loan or any Portion thereof as determined by such Bank in the exercise of its sole but reasonable discretion. The affected Bank shall furnish to the Borrower and the Agent a certificate showing the calculation of the amount of any such loss or expense (which certificate, absent error, shall be conclusive), and the Borrower shall pay such amount in the currency in which such Loan was made to the affected Bank within ten (10) days of the Borrower’s receipt of such certificate. 2.7f Method of Calculation. In determining the amount due each Bank hereunder by reason of the application of this Section 2.7, each Bank may use any reasonable averaging or attribution method; provided, however, each Bank must use reasonable efforts to minimize such losses and costs. -32- -------------------------------------------------------------------------------- 2.8 Utilization of Commitments in Optional Currencies. 2.8a Periodic Computations of Dollar Equivalent Amounts of Loans and Letters of Credit Outstanding. The Agent will determine the Dollar Equivalent amount of (i) proposed Long Term Revolving Credit Loans or Letters of Credit to be denominated in an Optional Currency as of the date of the requested Disbursement or date of issuance, as the case may be, (ii) outstanding Long Term Revolving Credit Loans or Letters of Credit Outstanding denominated in an Optional Currency as of the last Business Day of each month, and (iii) outstanding Long Term Revolving Credit Loans denominated in an Optional Currency as of the end of each Interest Period (each such date under clauses (i) through (iii), a “Computation Date”). 2.8b Notices From Banks That Optional Currencies Are Unavailable To Fund New Loans. The Banks shall be under no obligation to make the Long Term Revolving Credit Loans or issue the Letters of Credit requested by the Borrower which are denominated in an Optional Currency if any Bank notifies the Agent by 5:00 p.m. (Pittsburgh, Pennsylvania time) four (4) Business Days prior to the borrowing or issuance date for such Long Term Revolving Credit Loans or Letters of Credit that such Bank cannot provide its share of such Long Term Revolving Credit Loans in such Optional Currency. In the event the Agent timely receives a notice from a Bank pursuant to the preceding sentence, the Agent will notify the Borrower no later than 12:00 Noon (Pittsburgh, Pennsylvania time) three (3) Business Days prior to the Disbursement for such Long Term Revolving Credit Loans or the issuance of such Letter of Credit that the Optional Currency is not then available for such Long Term Revolving Credit Loans or such Letters of Credit, and the Agent shall promptly thereafter notify the Banks of the same. If the Borrower receives a notice described in the preceding sentence, the Borrower may, by notice to the Agent not later than 5:00 p.m. (Pittsburgh, Pennsylvania time) three (3) Business Days prior to the Disbursement or Letter of Credit Borrowing for such Long Term Revolving Credit Loans or such Letters of Credit, withdraw the Request for Disbursement for such Long Term Revolving Credit Loans or the issuance of such Letters of Credit. If the Borrower withdraws such Request for Disbursement, the Agent will promptly notify each Bank of the same and the Banks shall not make such Loans or issue such Letters of Credit. If the Borrower does not withdraw such Request for Disbursement before such time, (i) the Borrower shall be deemed to have requested that (a) the Long Term Revolving Credit Loans referred to in its Request for Disbursement shall be made in Dollars in an amount equal to the Dollar Equivalent amount of such Long Term Revolving Credit Loans and shall bear interest under the Base Rate Option and (b) the Letters of Credit referred to in its Request for Disbursement shall be issued in Dollars in an amount equal to the Dollar Equivalent amount of such Letters of Credit, and (ii) the Agent shall promptly deliver a notice to each Bank stating: (A) that such Long Term Revolving Credit Loans or such Letters of Credit shall be made in Dollars and shall bear interest under the Base Rate Option, (B) the aggregate amount of such Long Term Revolving Credit Loans or such Letters of Credit, and (C) such Bank’s Pro Rata share of such Long Term Revolving Credit Loans or such Letters of Credit. 2.8c Notices From Banks That Optional Currencies Are Unavailable to Fund Renewals of Euro-Rate Option Loans. If the Borrower delivers a Request for Disbursement requesting that the Banks renew the Euro-Rate Option with respect to an outstanding Segment of -33- -------------------------------------------------------------------------------- Long Term Revolving Credit Loans or Letters of Credit denominated in an Optional Currency, the Banks shall be under no obligation to renew such Euro-Rate Option if any Bank delivers to the Agent a notice by 5:00 p.m. (Pittsburgh, Pennsylvania time) four (4) Business Days prior to effective date of such renewal that such Bank cannot continue to provide Long Term Revolving Credit Loans or Letters of Credit in such Optional Currency. In the event the Agent timely receives a notice from a Bank pursuant to the preceding sentence, the Agent will notify the Borrower no later than 12:00 Noon (Pittsburgh, Pennsylvania time) three (3) Business Days prior to the renewal date that the renewal of such Long Term Revolving Credit Loans or such Letters of Credit in such Optional Currency is not then available, and the Agent shall promptly thereafter notify the Banks of the same. If the Agent shall have so notified the Borrower that any such continuation of Long Term Revolving Credit Loans denominated in an Optional Currency or Letters of Credit issued in an Optional Currency is not then available, any notice of renewal with respect thereto shall be deemed withdrawn, and such Long Term Revolving Credit Loans denominated in an Optional Currency or Letters of Credit issued in an Optional Currency shall be redenominated into Base Rate Loans or Letters of Credit in Dollars with effect from the last day of the Interest Period with respect to any such Long Term Revolving Credit Loans denominated in an Optional Currency or upon the reissuance, renewal or extension of Letters of Credit initially issued in an Optional Currency. The Agent will promptly notify the Borrower and the Banks of any such redenomination, and in such notice, the Agent will state the aggregate Dollar Equivalent amount of the redenominated Long Term Revolving Credit Loans initially denominated in an Optional Currency or Letters of Credit initially issued in an Optional Currency as of the Computation Date with respect thereto and such Bank’s Pro Rata share thereof. 2.8d Requests for Additional Optional Currencies. The Borrower may deliver to the Agent a written request that Long Term Revolving Credit Loans hereunder also be permitted to be made in any other lawful currency (other than Dollars), in addition to the currencies specified in the definition of “Optional Currency” herein provided that such currency must be a freely convertible foreign currency listed on currency codes in effect from time to time under ISO International Standard 4217 or any successor thereto. The Agent will promptly notify the Banks of any such request promptly after the Agent receives such request. Each Bank may grant or accept such request in its sole discretion. The Agent will promptly notify the Borrower of the acceptance or rejection by each of the Bank of the Borrower’s request. The requested currency shall be approved as an Optional Currency hereunder only if all of the Banks approve of the Borrower’s request. 2.8e Long Term Revolving Credit Loan Optional Currency Sub-Limit. In no event shall the sum of the Dollar Equivalent of all then outstanding Long Term Revolving Credit Loans funded in Optional Currencies exceed the lesser of (i) $100,000,000 or (ii) the Long Term Revolving Credit Commitment. 2.8f European Monetary Union.       (i) If, as a result of the implementation of the European monetary union, (A) any Optional Currency ceases to be lawful currency of the nation issuing the same and is replaced by a European common currency (the “Euro”) or (B) any Optional Currency and the Euro are at the same time recognized by any governmental authority of the nation issuing such currency as -34- -------------------------------------------------------------------------------- lawful currency of such nation and the Required Banks shall so request in a notice delivered to the Borrower, then any amount payable hereunder by any party hereto in such Optional Currency shall instead be payable in the Euro and the amount so payable shall be determined by translating the amount payable in such Optional Currency to the Euro at the exchange rate recognized by the European Central Bank for the purpose of implementing the European monetary union. Prior to the occurrence of the event or events described in clause (A) or (B) of the preceding sentence, each amount payable hereunder in any Optional Currency will, except as otherwise provided herein, continue to be payable only in that Optional Currency.       (ii) The Borrower agrees, at the request of any Bank, to compensate such Bank for any loss, cost, expense or reduction in return that such Bank shall reasonably determine shall be incurred or sustained by such Bank as a result of the implementation of the European monetary union and that would not have been incurred or sustained but for the transactions provided for herein. A certificate of the Bank setting forth the Bank’s determination of the amount or amounts necessary to compensate such Bank shall be delivered to the Borrower, and shall be conclusive absent manifest error so long as such determination is made on a reasonable basis. The Borrower shall pay such Bank the amount shown as due on any such certificate within ten (10) days after receipt thereof.       (iii) No Bank shall require payment by the Borrower of amounts due under this Subsection 2.8f unless it as a matter of ordinary business practice imposes such similar charges on its other customers in comparable transactions. 2.9 Capital Adequacy. If (i) any adoption of or any change in or in the interpretation of any law, rule or regulation, or (ii) compliance with any guideline, request or directive of any United States Governmental Person or United States quasi-governmental authority exercising control over banks or financial institutions generally, including but not limited to regulations set forth at 12 C.F.R. Part 208 (Appendix A) and 12 C.F.R. Part 225 (Appendix A), or any court requires that the Commitments of any Bank hereunder (including, without limitation, commitments and obligations in respect of revolving loans) or the obligation to issue, maintain or participate in any Letter of Credit be treated as an asset or otherwise be included for purposes of calculating the appropriate amount of capital to be maintained by such Bank or any corporation controlling such Bank (a “Change in Law”), the result of which is to reduce the rate of return on such Bank’s capital as a consequence of such commitments to a level below that which such Bank could have achieved but for such Change in Law, taking into consideration such Bank’s policies with respect to capital adequacy, by an amount which such Bank deems to be material, such Bank shall deliver to the Borrower a statement of the amount necessary to compensate such Bank for the reduction in the rate of return on its capital attributable to such commitments (the “Capital Compensation Amount”). Such Bank shall determine the Capital Compensation Amount in good faith, using reasonable attribution and averaging methods. Such Bank shall from time to time notify the Borrower of the amount so determined. Such amount shall be due and payable by the Borrower to such Bank ten (10) Business Days after such notice is given. 2.10 Swingline Loans. -35- -------------------------------------------------------------------------------- 2.10a Swingline Option. Subject to the provisions of this Section 2.10, the Agent agrees that the Borrower may request Swingline Loans, in an aggregate amount at any one time outstanding not to exceed the lesser of (i) $20,000,000 or (ii) an amount which, when added to the aggregate principal amount of (A) all other Loans then outstanding, and (B) the Letters of Credit Outstanding does not exceed $200,000,000.00, provided, however, anything to the contrary notwithstanding, the right of the Borrower to request Swingline Loans shall terminate: (i) upon the occurrence of an Event of Default under Section 7.1, and during the continuance of such Event of Default; (ii) upon receipt by the Borrower of notice from the Agent of the occurrence of an Event of Default under Section 7.2 and during the continuance of such Event of Default; (iii) in the event that Borrower has not given notice to the Banks of an Event of Default in accordance with the provisions of Section 9.5, effective upon the first day on which such Event of Default occurred; or (iv) upon the acceleration of the Bank Indebtedness for any reason hereunder. 2.10b Reduction of Available Short Term Revolving Commitments. While each such Swingline Loan is outstanding hereunder, the outstanding principal amount thereof shall correspondingly reduce availability under the Short Term Revolving Credit Commitment and shall reduce, as to each Bank availability under the Bank’s Short Term Revolving Credit Commitment by an amount equal to such Bank’s Pro Rata share of the aggregate outstanding principal balance of Swingline Loans issued by the Agent. 2.10c Limitations on and Evidence of Swingline Loans. Each Swingline Loan or repayment of a Swingline Loan must be in the minimum principal amount of $1,000,000 or, if in excess of $1,000,000 in integral multiples of $100,000. The obligation of the Borrower to repay, on or prior to the Maturity Date, the aggregate unpaid principal amount of such Swingline Loans advanced by the Agent shall be evidenced by the Swingline Note substantially in the form of Exhibit “E” hereto. The principal amount actually due and owing the Agent shall be the aggregate unpaid principal amount of all disbursements of Swingline Loans made by the Agent, all as shown on such Swingline Loan Account established and maintained by the Agent pursuant to Sections 2.10g and 2.15. 2.10d Swingline Procedure. The Borrower may from time to time from the Restatement Closing Date to the Business Day prior to the Maturity Date, subject to the provisions of Section 2.10c, request a Swingline Loan. Such request shall be made not later than Noon (Pittsburgh Time) on the date of the proposed Swingline Loan. Such request may be made to the Agent orally or in writing and, if orally, confirmed in writing. The Agent shall make the Swingline Loan available to the Borrower not later than 3:00 P.M. Pittsburgh Time on the same Business Day such Swingline Loan is requested. 2.10e Swingline Loan Interest. Subject to Section 2.6d hereof, interest on the Swingline Loans shall accrue at the rate of interest offered by the Agent in its sole and absolute discretion for such interest periods as offered by the Agent in its sole and absolute discretion. 2.10f Risk Participation. Upon the disbursement of each Swingline Loan and without any further action by or on behalf of such Bank, each Bank hereby agrees to purchase, upon the occurrence of an Event of Default, an undivided full risk non-recourse participation in such -36- -------------------------------------------------------------------------------- Swingline Loan, in an amount equal to (i) such Bank’s Short Term Revolving Credit Commitment Percentage as set forth on such Bank’s signature page attached hereto (ii) multiplied by the outstanding principal amount of such Swingline Loan on the date of the Event of Default; provided, however, no Bank shall participate in any Swingline Loan which Swingline Loan is made after a notice of an Event of Default has been given. If and to the extent the Agent receives payment of principal or interest on a participated Swingline Loan, the Agent shall deliver to each Bank such Bank’s pro rata share of such payment. 2.10g Swingline Loan Account. The Agent shall maintain on its books as a sub-account of the Loan Account, a Swingline Loan Account in the name of the Borrower with respect to any Swingline Loans made, repayments and prepayments of the principal thereof, and the computation and payment of interest thereon. Upon the request of the Borrower to the Agent, the Agent shall promptly furnish to the Borrower a statement of the Swingline Loan Account. The failure to record any such amount shall not limit or otherwise affect the obligations of the Borrower hereunder or under the Swingline Notes to repay all amounts owed hereunder and thereunder together with all interest accrued thereon and all other fees and charges provided herein and therein. Except in the case of manifest error, the Swingline Loan Account shall be conclusive evidence as to the amount at any time due to the Agent from the Borrower under the Swingline Notes. 2.11 Letter of Credit Sub-facility. 2.11a Issuance of Letters of Credit. The Borrower may request the issuance of a letter of credit (each a “Letter of Credit”) by delivering to the Agent a completed application and agreement for letters of credit in such form as the Agent may specify from time to time by no later than 10:00 A.M., Pittsburgh, Pennsylvania time, at least five (5) Business Days, or such shorter period as may be agreed to by the Agent, in advance of the proposed date of issuance. Each Letter of Credit shall be a Standby Letter of Credit and may be denominated in either Dollars or an Optional Currency. Subject to the terms and conditions hereof and in reliance on the agreements of the other Banks set forth in this Section 2.11, the Agent will issue a Letter of Credit provided that each Letter of Credit shall (A) have a maximum maturity of twenty-four (24) months from the date of issuance, and (B) in no event expire later than ten (10) Business Days prior to the Termination Date and providing that in no event shall the Dollar and Dollar Equivalent amount of Letters of Credit Outstanding exceed, at any one time, the lesser of (i) $25,000,000 or (ii) the Long Term Revolving Credit Commitment minus the sum of the Dollar and Dollar Equivalent amounts of all Long Term Revolving Credit Loans then outstanding and the Dollar and Dollar Equivalent amounts of Letters of Credit Outstanding. 2.11b Letter of Credit Fees. The Borrower shall pay in Dollars to the Agent for the ratable account of the Banks a fee (the “Letter of Credit Fee”) equal to the Applicable Long Term Margin (computed on the basis of a year of 360 days and actual days elapsed), which fees shall be computed on the daily average Dollar and Dollar Equivalent amounts of the Letters of Credit Outstanding and shall be payable quarterly in arrears commencing with the last Business Day of each March, June, September and December following issuance of each Letter of Credit. The Borrower shall also pay to the Agent in Dollars for the Agent’s sole account (i) 1/8 percent (.125%) of the amount of any Letters of Credit Outstanding (the “Fronting Fee”) quarterly in -37- -------------------------------------------------------------------------------- arrears, and (ii) as incurred the Agent’s then current customary fees and administrative expenses payable with respect to the Letters of Credit as the Agent may generally charge or incur from time to time in connection with the issuance, maintenance, modification (if any), assignment or transfer (if any), negotiation, and administration of Letters of Credit. 2.11c Letter of Credit Fees Upon Default.       (i) (A) Upon the occurrence of an Event of Default under Section 7.1, and during the continuance of such Event of Default, or (B) upon the acceleration of the Bank Indebtedness for any reason hereunder, the Letter of Credit Fee shall be 2% per annum (200 basis points) in excess of the applicable Letter of Credit Fee then in effect (the “Default Letter of Credit Fee”).       (ii) Upon receipt by the Borrower of notice from the Agent of the occurrence of an Event of Default under Section 7.2 and during the continuance of such Event of Default, the Default Letter of Credit Fee shall be in effect.       (iii) The provisions of the immediately preceding items (i) and (ii) to the contrary notwithstanding, if (A) the Borrower has not given notice to the Banks of an Event of Default in accordance with the provisions of Section 9.5 and (B) the Banks, after becoming aware of such Event of Default and based on such Event of Default, wish to impose the Default Letter of Credit Fee in accordance with either of the preceding items (i) and (ii), such Default Letter of Credit Fee shall be effective as of the first day on which such Default Letter of Credit Fee would have been in effect had the Borrower given such notice in accordance with the provisions of Section 9.5. 2.11d Disbursements, Reimbursement.       (A) Immediately upon the issuance of each Letter of Credit, each Bank shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Bank’s Pro Rata share of the maximum amount available to be drawn under such Letter of Credit and the amount of such drawing, respectively.       (B) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Agent will promptly notify the Borrower of the amount of such drawing and the date such payment shall be made. The Borrower shall reimburse (such obligation to reimburse the Agent shall sometimes be referred to as a “Reimbursement Obligation”) the Agent in Dollars for any amount paid by the Agent under any Letter of Credit (each such date of a payment by the Agent under a Letter of Credit, a “Drawing Date”) in an amount equal to the Dollar Equivalent amount so paid by the Agent. Such Reimbursement Obligation shall be paid prior to 12:00 Noon, Pittsburgh, Pennsylvania time, on the Drawing Date. In the event the Borrower fails to reimburse the Agent for the full Dollar Equivalent amount of any drawing under any Letter of Credit by 12:00 Noon, Pittsburgh, Pennsylvania time, on the Drawing Date, the Agent will promptly notify each Bank thereof, and the Borrower shall be deemed to have requested that Long Term Revolving Credit Loans be made by the Banks in -38- -------------------------------------------------------------------------------- Dollars under the Base Rate Option to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the Long Term Revolving Credit Commitment and subject to the conditions set forth in Section 6.1 other than any notice requirements. Any notice given by the Agent pursuant to this Section 2.11d(B) may be oral 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.       (C) Each Bank shall upon any notice pursuant to Section 2.11d(B) make available to the Agent an amount in Dollars in immediately available funds equal to its Pro Rata share of the Dollar Equivalent amount of the drawing, whereupon the participating Banks shall (subject to Section 2.11d(D)) each be deemed to have made a Long Term Revolving Credit Loan in Dollars under the Base Rate Option to the Borrower in that amount. If any Bank so notified fails to make available in Dollars to the Agent for the account of the Agent the amount of such Bank’s Pro Rata share of such Dollar Equivalent amount by no later than 2:00 p.m., Pittsburgh, Pennsylvania time on the Drawing Date, then interest shall accrue on such Bank’s obligation to make such payment, from the Drawing Date to the date on which such Bank makes such payment (i) at a rate per annum equal to the Federal Funds Effective Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Long Term Revolving Credit Loans under the Base Rate Option on and after the fourth day following the Drawing Date. The Agent will promptly give notice of the occurrence of the Drawing Date to each Bank, but failure of the Agent to give any such notice on the Drawing Date or in sufficient time to enable any Bank to effect such payment on such date shall not relieve such Bank from its obligation under this Section 2.11d(C).       (D) With respect to any unreimbursed drawing that is not converted into Long Term Revolving Credit Loans under the Base Rate Option to the Borrower in whole or in part as contemplated by Section 2.11d(B), because of the Borrower’s failure to satisfy the conditions set forth in Section 6.1 other than any notice requirements or for any other reason, the Borrower shall be deemed to have incurred from the Agent a Letter of Credit Borrowing in Dollars or the Dollar Equivalent amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to the Long Term Revolving Credit Loans under the Base Rate Option as adjusted to reflect the default rate provisions set forth in Subsection 2.6b. Each Bank’s payment to the Agent pursuant to Section 2.11d(C) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a Participation Advance from such Bank in satisfaction of its participation obligation under this Section 2.11d. The provisions of this Subsection (D) are solely for the benefit of the Agent, as issuer of the Letters of Credit, and shall not be deemed to excuse, waive or consent to an Event of Default under Section 7.2a arising from an unreimbursed drawing giving rise to a Participation Advance. 2.11e Repayment of Participation Advances.       (A) Upon (and only upon) receipt by the Agent for its account of immediately available funds from the Borrower (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Bank has made a Participation Advance to the Agent, or (ii) in payment of interest on such a payment made by the Agent under such a Letter of -39- -------------------------------------------------------------------------------- Credit, the Agent will pay to each Bank, in the same funds as those received by the Agent, the amount of such Bank’s Pro Rata share of such funds, except the Agent shall retain the amount of the Pro Rata share of such funds of any Bank that did not make a Participation Advance in respect of such payment by Agent.       (B) If the Agent is required at any time to return to the Borrower, or to a trustee, receiver, liquidator, custodian, or any official in any proceeding described in Section 7.1a, any portion of the payments made by the Borrower to the Agent pursuant to Section 2.11d(B) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Bank shall, on demand of the Agent, forthwith return to the Agent the amount of its Pro Rata share of any amounts so returned by the Agent plus interest thereon from the date such demand is made to the date such amounts are returned by such Bank to the Agent, at a rate per annum equal to the Federal Funds Effective Rate in effect from time to time. 2.11f Documentation. The Borrower agrees to be bound by the terms of the Agent’s application and agreement for letters of credit and the Agent’s written regulations and customary practices relating to letters of credit, though such interpretation may be different from the Borrower’s own. In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of negligence or willful misconduct, the Agent shall not be liable for any error and/or mistakes, whether of omission or commission, in following the Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto. 2.11g Determinations to Honor Drawing Requests. In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit. 2.11h Nature of Participation and Reimbursement Obligations. Each Bank’s obligation in accordance with this Agreement to make the Long Term Revolving Credit Loans or Participation Advances, as contemplated by Section 2.11d, as a result of a drawing under a Letter of Credit, and the obligation of the Borrower to reimburse the Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.11 under all circumstances, including the following circumstances:         (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Agent, the Borrower or any other Person for any reason whatsoever;           (ii) the failure of the Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in Sections 2.1, 2.3, 2.6, 2.8, 2.9 or 6.1 or as otherwise set forth in this Agreement for the making of a Long Term Revolving Credit Loan, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Banks to make -40- --------------------------------------------------------------------------------   Participation Advances under Section 2.11d; provided, however the aggregate amount thereof shall in no event exceed the unutilized Long Term Revolving Credit Commitment;           (iii) any lack of validity or enforceability of any Letter of Credit;           (iv) the existence of any claim, set-off, defense or other right which the Borrower or any Bank may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), the Agent or any Bank or any other Person or, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between the Borrower and the beneficiary for which any Letter of Credit was procured);           (v) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect even if the Agent has been notified thereof;           (vi) payment by the Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;           (vii) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of the Borrower;           (viii) any breach of this Agreement or any other Loan Document by any party thereto;           (ix) the occurrence or continuance of any proceeding described in Section 7.1a with respect to the Borrower;           (x) the fact that an Event of Default shall have occurred and be continuing;           (xi) the fact that the Termination Date shall have passed or this Agreement or the Commitments hereunder shall have been terminated; and           (xii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. 2.11i Indemnity. In addition to amounts payable as provided in Section 8.6, the Borrower hereby agrees to protect, indemnify, pay and save harmless the Agent from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit, other than as a result of (A) negligence or willful misconduct of -41- -------------------------------------------------------------------------------- the Agent as determined by a final judgment of a court of competent jurisdiction or (B) subject to the following clause (ii), the wrongful dishonor by the Agent of a proper demand for payment made under any Letter of Credit, or (ii) the failure of the Agent to honor a drawing under any such 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 United States Governmental Person (all such acts or omissions herein called “Governmental Acts”). 2.11j Liability for Acts and Omissions. As between the Borrower and the Agent, the Borrower assumes all risks of the acts and omission of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, the Agent shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such 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) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of the Borrower against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of the Agent, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of the Agent’s rights or powers hereunder. Nothing in the preceding sentence shall relieve the Agent from liability for the Agent’s negligence or willful misconduct in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. 2.12 Method of Disbursements and Payments. All Disbursements under the Loans shall be made by the Agent (i) making a wire transfer of such funds to the account designated in the Borrower’s Request for Disbursement in Dollars or the Optional Currency, as applicable or (ii) transferring such funds into such accounts maintained with the Agent designated in the Borrower’s Request for Disbursement. All payments of principal, interest or other costs relating to the Loans, the Agent’s Fee, the Bid Rate Administration Fee, the Letter of Credit Fee, the Fronting Fee, the Optional Currency Fee and the Facility Fee shall be made by the Borrower to the Agent at the Agent’s principal office or at such location as the Agent may direct by 12:00 Noon (Pittsburgh, Pennsylvania time) on the due date. All funds shall be immediately available funds when either transferred via wire transfer into the account designated by the Borrower or delivered by the Borrower to the Agent. Except as otherwise provided herein, interest on the principal amount of each Loan made in an Optional Currency shall be paid by the Borrower in such Optional Currency. -42- -------------------------------------------------------------------------------- 2.13 Interest Payment Dates. Interest due on all outstanding Long Term Revolving Credit Loans, Short Term Revolving Credit Loans and Bid Rate Loans hereunder shall be payable in arrears: (i) with respect to each Base Rate Segment, (A) on the last Business Day of each March, June, September and December, (B) at maturity whether by acceleration or otherwise and (C) after maturity, on demand until paid in full; (ii) with respect to each Euro-Rate Segment, (A) on the last day of each Euro-Rate Interest Period (provided, however, if the Interest Period chosen for any Euro-Rate Segment exceeds three (3) months, interest on that Euro-Rate Segment shall be due and payable every three (3) months during such Interest Period and on the last day of such Interest Period), (B) at maturity, whether by acceleration or otherwise, (C) on the Termination Date or the Payment Date, as applicable, including amounts, if any, due pursuant to Section 2.7e hereof and (D) after maturity, on demand until paid in full; and (iii) with respect to each Bid Rate Loan, (A) on the last day of the Bid Rate Interest Period (provided, however, if the Interest Period chosen for any Bid Rate Loan exceeds ninety (90) days, interest on that Bid Rate Loan shall be due and payable every ninety (90) days during such Interest Period), (B) at maturity, whether by acceleration or otherwise and (C) after maturity, on demand until paid in full. 2.14 Calculation of Interest and Facility Fee . The interest rate calculated pursuant to the Base Rate Option shall be calculated on the basis of the actual number of days elapsed using (i) a year of 365-366 days if the Base Rate is calculated utilizing the Prime Rate or (ii) a year of 360 days if the Base Rate is calculated utilizing the Federal Funds Effective Rate, as the case may be. The interest rate calculated pursuant to the Euro-Rate Option and Bid Rate Option and the Facility Fee shall be calculated on the basis of the actual number of days elapsed using a year of 360 days; provided that, for Loans made in an Optional Currency for which a 365-day basis is the only market practice available to the Agent, such rate shall be calculated on the basis of a year of 365 or 366 days, as the case may be, for the actual days elapsed 2.15 Loan Account. The Agent shall open and maintain on its books a Loan Account in the name of the Borrower, with respect to Disbursements made, repayments, the computation and payment of interest, the Facility Fee, the Agent’s Fee, the Bid Rate Administration Fee, the Letter of Credit Fee, the Fronting Fee, the Optional Currency Fee and the computation of other amounts due and sums paid to the Banks and the Agent pursuant to this Article II. Except in the case of manifest error in computation, such Loan Account shall be conclusive and binding on the Borrower as to the amount at any time due to the Banks and the Agent from the Borrower pursuant to this Article II. 2.16 Fees. 2.16a Agent’s Fee. The Borrower shall pay to the Agent the Agent’s Fee in accordance with the term’s of the Agent’s Letter. Any accrued and unpaid Agent’s Fees under the Original Credit Agreement existing on the Restatement Closing Date shall be due and payable on the Restatement Closing Date. 2.16b Facility Fee. The Borrower shall pay to the Agent, for the benefit of the Banks, (i) on September 30, 2000, and quarterly in arrears thereafter on the last day of each March, June, -43- -------------------------------------------------------------------------------- September and December prior to the Termination Date, and on the Termination Date, the Facility Fee at the Long Term Facility Fee Rate on the entire amount of the Long Term Revolving Credit Commitment and (ii) on September 30, 2000, and on the last day of each March, June, September and December prior to the Maturity Date and on the Maturity Date, the Facility Fee at the Short Term Facility Fee Rate on the entire amount of the Short Term Revolving Credit Commitment. The first payment hereunder shall be only for the actual number of days elapsed between the Restatement Closing Date and September 30, 2000. Any accrued and unpaid Facility Fees under the Original Credit Agreement existing on the Restatement Closing Date shall be due and payable on the Restatement Closing Date. 2.16c Bid Rate Administration Fee. The Borrower shall pay to the Agent simultaneously with each Bid Rate Loan Request made pursuant to item (i) of Section 2.5d, a Bid Rate Administration Fee. Each Bid Rate Administration Fee shall be for the Agent’s own account. Any accrued and unpaid Bid Rate Administration Fees under the Original Credit Agreement existing on the Restatement Closing Date shall be due and payable on the Restatement Closing Date. 2.16d Letter of Credit Fee and Fronting Fee. The Borrower shall pay to the Agent, from time to time, for the benefit of the Banks, the Letter of Credit Fee as set forth in Section 2.11b. The Borrower shall pay to the Agent, from time to time, for its sole account, the Fronting Fee as set forth in Section 2.11b. Any accrued and unpaid Letter of Credit Fees and Fronting Fees under the Original Credit Agreement existing on the Restatement Closing Date shall be due and payable on the Restatement Closing Date. 2.16e Optional Currency Fee. The Borrower shall pay to the Agent in Dollars for its sole account the customary fees of the Agent then in effect and its administrative expenses payable with respect to Long Term Revolving Credit Loans denominated in an Optional Currency or Letters of Credit issued in an Optional Currency as the Agent may generally charge or incur in connection with the funding, maintenance, modification (if any), assignment or transfer (if any), negotiation, and administration of Long Term Revolving Credit Loans denominated in an Optional Currency or Letters of Credit issued in an Optional Currency (the “Optional Currency Fee"). Any accrued and unpaid Optional Currency Fees under the Original Credit Agreement existing on the Restatement Closing Date shall be due and payable on the Restatement Closing Date. 2.17 Currency Repayments. Notwithstanding anything contained herein to the contrary, the entire amount of principal of and interest on any Loan made in an Optional Currency shall be repaid in the same Optional Currency in which such Loan was made, provided, however, that if it is impossible or illegal for the Borrower to effect payment of a Loan in the Optional Currency in which such Loan was made, or if the Borrower defaults in its obligations to do so, the Required Banks may at their option permit such payment to be made (i) at and to a different location, subsidiary, affiliate or correspondent of the Agent, or (ii) in the Equivalent Amount of Dollars or (iii) in an Equivalent Amount of such other currency (freely convertible into Dollars) as the Required Banks may solely at their option designate. Upon any events described in (i) through (iii) of the preceding sentence, the Borrower shall make such payment and the Borrower agrees to hold each Bank harmless from and against any loss incurred by any -44- -------------------------------------------------------------------------------- Bank arising from the cost to such Bank of any premium, any costs of exchange, the cost of hedging and covering the Optional Currency in which such Loan was originally made, and from any change in the value of Dollars, or such other currency, in relation to the Optional Currency that was due and owing. Such loss shall be calculated for the period commencing with the first day of the Interest Period for such Loan and continuing through the date of payment thereof. Without prejudice to the survival of any other agreement of the Borrower hereunder, the Borrower’s obligations under this Section 2.17 shall survive termination of this Agreement. 2.18 Optional Currency Amounts. Notwithstanding anything contained herein to the contrary, the Agent may, with respect to notices by the Borrower for Loans in an Optional Currency or voluntary prepayments of less than the full amount of an Optional Currency Disbursement, engage in reasonable rounding of the Optional Currency amounts requested to be loaned or repaid; and, in such event, the Agent shall promptly notify the Borrower and the Banks of such rounded amounts and the Borrower’s request or notice shall thereby be deemed to reflect such rounded amounts. 2.19 Currency Fluctuations. If on any Computation Date (a) the sum of the Dollar Equivalent amount of the Long Term Revolving Credit Loans denominated in an Optional Currency is greater than $100,000,000, (b) the sum of the Dollar Equivalent amount of the Letters of Credit Outstanding issued in an Optional Currency is greater than $25,000,000 or (c) the sum of the Dollar Equivalent of all Long Term Revolving Credit Loans and all Letters of Credit Outstanding is greater than the Long Term Revolving Credit Commitment, as a result of a change in exchange rates between one (1) or more Optional Currencies and Dollars, then the Agent shall notify the Borrower of the same. Within one (1) Business Day after receiving such notice, the Borrower shall pay or prepay (subject to the Borrower’s indemnity obligations under this Agreement) Long Term Revolving Credit Loans denominated in an Optional Currency and Letters of Credit issued in an Optional Currency in amounts such that (x) the sum of the Dollar Equivalent amount of the Long Term Revolving Credit Loans denominated in an Optional Currency shall not exceed $100,000,000, (y) the sum of the Dollar Equivalent amount of the Letters of Credit Outstanding issued in an Optional Currency shall not exceed $25,000,000 and (z) the sum of the Dollar Equivalent of all Long Term Revolving Credit Loans and all Letters of Credit Outstanding does not exceed the Long Term Revolving Credit Commitment, all after giving effect to such payments or prepayments 2.20 Interbank Market Presumption. For all purposes of this Agreement and each Note with respect to any aspects of the Euro-Rate, any Loan under the Euro-Rate Option or any Optional Currency Loan, each Bank and the Agent shall be presumed to have obtained rates, funding, currencies, deposits, and the like in the applicable interbank market regardless whether it did so or not; and, each Bank’s and the Agent’s determination of amounts payable under, and actions required or authorized by this Agreement shall be calculated, at each Bank’s and the Agent’s option, as though each Bank and the Agent funded each Segment of Loans under the Euro-Rate Option through the purchase of deposits of the types and maturities corresponding to the deposits used as a reference in accordance with the terms hereof in determining the Euro-Rate applicable to such Loans, whether in fact that is the case. 2.21 Taxes. -45- -------------------------------------------------------------------------------- 2.21a No Deductions. All payments made by the Borrower hereunder and under each Note shall be made free and clear of and without deduction for any present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding taxes imposed on the net income of any Bank and all income and franchise taxes applicable to any Bank organized and existing under the United States or any state thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as “Taxes”). If the Borrower shall be required by Law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.20a) each Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant tax authority or other authority in accordance with applicable law. 2.21b Stamp Taxes. In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies which arise from any payment made hereunder or from the execution, delivery, or registration of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as “Other Taxes”). 2.21c Indemnification for Taxes Paid by a Bank. The Borrower shall indemnify each Bank for the full amount of Taxes or Other Taxes (including without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.20c) paid by any Bank 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 from the date a Bank makes written demand therefor. 2.21d Certificate. Within 30 days after the date of any payment of any Taxes by the Borrower, the Borrower shall furnish to each Bank, at its address referred to herein, the original or a certified copy of a receipt evidencing payment thereof. If no Taxes are payable in respect of any payment by the Borrower, the Borrower shall, if so requested by a Bank, provide a certificate of an officer of the Borrower to that effect. 2.21e Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 2.20 shall survive the payment in full of principal and interest hereunder and under any instrument delivered hereunder. 2.22 Judgment Currency. 2.22a Currency Conversion Procedures for Judgments. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder or under a Note in any currency (the “Original Currency”) into another currency (the “Other Currency”), the parties hereby agree, to the fullest extent permitted by Law, that the rate of exchange used shall be that at which in accordance with normal banking procedures each Bank could purchase the -46- -------------------------------------------------------------------------------- Original Currency with the Other Currency after any premium and costs of exchange on the Business Day preceding that on which final judgment is given. 2.22b Indemnity in Certain Events. The obligation of the Borrower in respect of any sum due from the Borrower to any Bank hereunder shall, notwithstanding any judgment in an Other Currency, whether pursuant to a judgment or otherwise, be discharged only to the extent that, on the Business Day following receipt by any Bank of any sum adjudged to be so due in such Other Currency, such Bank may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due to such Bank in the Original Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment or payment, to indemnify such Bank against such loss. ARTICLE III. REPRESENTATIONS AND WARRANTIES.       To induce the Agent and the Banks to enter into this Agreement and to make the Loans, and to issue, renew or extend the Letters of Credit, herein provided for, the Borrower represents and warrants to the Agent and the Banks that: 3.1 Corporate Existence. 3.1a The Borrower’s Corporate Existence. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and it is duly qualified and in good standing as a foreign corporation, authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required. 3.1b Subsidiaries’ Corporate Existence. Each Subsidiary, is a corporation, partnership, limited liability company or business trust duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is qualified or licensed as a foreign corporation partnership, limited liability company or business trust authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the activities conducted makes such qualification or licensing necessary, and has all requisite power and authority to own and operate its properties and to carry on its business as now conducted. All of the issued and outstanding shares of Capital Stock of each Subsidiary are validly issued and outstanding and fully paid and nonassessable. 3.2 Corporate Authority. The Borrower is duly authorized to execute and deliver this Agreement and the Notes; all necessary corporate action to authorize the execution and delivery of this Agreement and the Notes has been properly taken; and it is and will continue to be duly authorized to borrow hereunder and to execute and deliver the Notes and to perform all of the other terms and provisions of this Agreement. 3.3 Validity of this Agreement and the Notes. The execution and delivery of this Agreement does not, and the borrowings under this Agreement, the execution and delivery of the Notes with respect thereto, and the performance by the Borrower of its obligations under this -47- -------------------------------------------------------------------------------- Agreement and the Notes will not contravene any provision of law, of the Borrower’s Restated Certificate of Incorporation or Bylaws, or the provisions of any agreement to which the Borrower is a party or by which the Borrower is bound; this Agreement constitutes the legal, valid and binding obligation of the Borrower enforceable in accordance with its terms; and the Notes, when duly executed on behalf of the Borrower and delivered in accordance with this Agreement will constitute the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms. 3.4 Financial Statements. Copies of the Borrower’s consolidated audited financial statements as at December 31, 1999, certified by independent certified public accountants and prepared in conformity with GAAP applied on a basis consistent with that of the preceding fiscal year and period, and its unaudited consolidated financial statement as at March 31, 2000, have been furnished to each of the Banks, and each statement presents fairly (a) the consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the results of their operations for the period then ended and (b) transactions in its Consolidated stockholders’ equity accounts, including changes in net unrealized appreciation for the period then ended. There are no material liabilities, direct or indirect, fixed or contingent, of the Borrower or its Subsidiaries as of December 31, 1999 which are not reflected therein or noted thereon. Since December 31, 1999, there has been no material adverse change in the financial condition of the Borrower. 3.5 Litigation; Title to Properties. Except as set forth in Forms 10-K, 10-Q, 8-K or S-4 most recently filed with the SEC and the Disclosure Letter, to the Borrower’s knowledge, after diligent inquiry, there is no litigation or governmental proceedings pending or threatened against the Borrower or any Subsidiary the results of which might materially affect the Borrower’s or such Subsidiary’s financial condition or operations. The Borrower and each Subsidiary has good title to its respective properties and assets except for defects in title which taken as a whole are not material to the Borrower or the Subsidiary. Other than any liability provided for or disclosed in this Section 3.5 or in the financial statements referred to in Section 3.4, neither the Borrower nor any Subsidiary has any material contingent liabilities. 3.6 Encumbrances. None of the assets of the Borrower or any Subsidiary is subject to any Encumbrance, except for (a) current taxes not delinquent and (b) such mortgages, security interests and Encumbrances which are listed on Schedule 3.6 hereto or permitted pursuant to Section 5.3 hereof. 3.7 ERISA Compliance. The Borrower and each ERISA Affiliate is in compliance with the provisions of ERISA relating to minimum funding requirements. Neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC with respect to any Plan. To the best of the Borrower’s knowledge, all Plans and trusts maintained by the Borrower and its ERISA Affiliates are intended to qualify under Code Section 401(a) and Code Section 501(a) and to the best of the Borrower’s knowledge, no event has occurred which would cause them not to qualify. To the best of the Borrower’s knowledge, all Plans have been maintained in compliance with the requirements of ERISA and the Code. 3.8 Tax Returns and Payments. The Borrower and its Subsidiaries have filed all tax returns required by law to be filed and have paid all taxes, assessments and other governmental -48- -------------------------------------------------------------------------------- charges levied upon the Borrower and its Subsidiaries or any of their respective properties, assets, income or franchises which are due and payable other than (a) those presently payable without penalty or interest or (b) those which are deemed by it to be unlawful or excessive in whole or in part and which are being contested or will be in a timely manner contested in good faith by appropriate proceedings or (c) those which would not, in the aggregate, have a Material Adverse Effect on the financial condition, business operations or assets of the Borrower and its Subsidiaries; and as to which the Borrower or the affected Subsidiary shall have set aside on its books reserves for such claim as are determined to be adequate by application of GAAP consistently applied. The Borrower has disclosed all disputed items on tax returns filed by the Borrower or any of its Subsidiaries which, if settled adversely to the Borrower or the affected Subsidiary, would have a Material Adverse Effect upon the financial condition, business operations or assets of the Borrower and its Subsidiaries. The Internal Revenue Service has examined and settled the Federal income tax liability of the affiliated group of companies, including that of the Borrower and its domestic Subsidiaries, for all taxable years up to and including the taxable year ended December 31, 1995. The charges, accruals and reserves on the books of the affiliated group of companies, including the Borrower and its Subsidiaries, in respect of Federal and state income taxes for all fiscal periods to date are adequate, and the Borrower knows of no unpaid assessments for additional Federal or state income taxes for any such fiscal period or any basis therefor. 3.9 Regulations T, U and X, Ineligible Securities. The Borrower’s execution and delivery of this Agreement and the Notes do not directly or indirectly violate or result in a violation of Regulations T, U and X of the Board of Governors of the Federal Reserve System. The Borrower is not engaged in the business of purchasing or selling Margin Stock or extending credit to others for the purpose of purchasing or carrying Margin Stock and no part of the proceeds of any borrowing hereunder will be used to purchase or carry any Margin Stock or for any other purpose which would violate any of the regulations of such Board of Governors. 3.10 Investment Company Act; Public Utilities Holding Company Act. The Borrower is not an “investment company” as that term is defined in the Investment Company Act of 1940, as amended from time to time. The Borrower is not a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended. 3.11 Environmental Matters. To the Borrower’s knowledge, except as set forth in the Forms 10-K, 10-Q, 8-K or S-4 most recently filed by the Borrower with the SEC, the Borrower and its Subsidiaries are in material compliance with all Environmental Laws. 3.12 No Restrictions. Neither the execution and delivery of this Agreement, the Notes and the other Loan Documents to which it is or will become a party, the consummation of the transactions herein contemplated nor compliance with the terms and provisions hereof or of the Notes, will conflict with or result in a breach of any of the terms, conditions or provisions of the certificate of incorporation or the by-laws of the Borrower or of any law or of any regulation, order, writ, injunction or decree of any court or governmental agency or of any agreement, indenture or other instrument to which the Borrower is a party or by which any of them is bound or to which it is subject, or constitute a default thereunder or result in the creation or imposition -49- -------------------------------------------------------------------------------- of any Encumbrance of any nature whatsoever upon any of the property or assets of the Borrower pursuant to the terms of any agreement, indenture or other instrument. 3.13 Compliance with Applicable Laws. The Borrower and each Subsidiary, to the best of the Borrower’s knowledge, (i) is not in default with respect to any order, writ, injunction or decree of any court or of any Federal, state, municipal or other Governmental Person; and (ii) is substantially complying with all applicable statutes and regulations of each Governmental Person having jurisdiction over its activities; except for those orders, writs, injunctions, decrees, statutes and regulations, non-compliance with which would not reasonably be likely to have a Material Adverse Effect. 3.14 Governmental Approval. No order, authorization, consent, license, validation or approval of, or notice to, filing, recording, or registration with, any Governmental Person, or exemption by any Governmental Person, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Agreement or the Notes or (ii) the legality, binding effect or enforceability of this Agreement or the Notes. 3.15 No Event of Default; Compliance with Instruments. No event has occurred and is continuing and no condition exists or will exist after giving effect to the borrowings to be made on the Restatement Closing Date under the Loan Documents which constitutes an Event of Default. The Borrower is not in violation of (i) any term of its certificate of incorporation, by-laws or other organizational documents or (ii) any material agreement or instrument to which it is a party or by which it or any of its properties may be subject or bound where such violation would be reasonably likely to have a Material Adverse Effect. 3.16 Employment Matters. The Borrower and each Subsidiary are in compliance with all employee benefit plans, employment agreements, collective bargaining agreements and labor contracts and all applicable federal, state and local labor and employment laws including, but not limited to, those related to equal employment opportunity and affirmative action, labor relations, minimum wage, overtime, child labor, medical insurance continuation, worker adjustment and relocation notices, immigration controls and worker and unemployment compensation, except where the failure to comply would not be reasonably likely to have a Material Adverse Effect. There are no outstanding grievances, arbitration awards or appeals therefrom arising out of the several agreements referred to above or current or, to the knowledge of the Borrower, threatened strikes, picketing, handbilling or other work stoppages or slowdowns at facilities of the Borrower or any Subsidiary which in any case would reasonably be likely to have a Material Adverse Effect. All payments due from the Borrower or any Subsidiary on account of employee health and welfare insurance which could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Borrower or such Subsidiary. 3.17 Patents, Trademarks, Copyrights, Licenses, Etc. The Borrower and each other Subsidiary of the Borrower owns or possesses all the material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operate its properties and to carry on its business as presently conducted and planned to be conducted by the Borrower, without known alleged or actual conflict with the rights of others, which conflict would be reasonably likely to result in a Material Adverse Effect. -50- -------------------------------------------------------------------------------- 3.18 Year 2000 Problem. The Borrower and each Subsidiary have reviewed areas within their respective businesses and operations which have been, or could be, adversely affected by, and have developed or are developing a program to address on a timely basis, the risk that certain computer applications used by the Borrower or its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and after December 31, 1999 (the “Year 2000 Problem”). The Year 2000 Problem has not resulted in, and will not be reasonably likely to result in, a Material Adverse Effect. 3.19 Solvency. On the Restatement Closing Date, and on each date of a Disbursement or the issuance, renewal or extension of a Letter of Credit, the Borrower is, on a Consolidated basis, Solvent. 3.20 Material Contracts; Burdensome Restrictions. All material contracts relating to the business operations of the Borrower and each Subsidiary are valid, binding and enforceable upon such Person and each of the other parties thereto in accordance with their respective terms, and there is no default thereunder with respect to the Borrower or Subsidiary party thereto which would be reasonably likely to have a Material Adverse Effect, and there is no default thereunder, to the Borrower’s knowledge, with respect to parties other than the Borrower or Subsidiary party thereto which would be reasonably likely to have a Material Adverse Effect. No contract, lease, agreement or other instrument to which the Borrower or any Subsidiary is a party or is bound and no provision of any applicable Law or governmental regulation would reasonably be expected to have a Material Adverse Effect. 3.21 Disclosure. Neither this Agreement nor any other document, certificate or statement furnished to the Banks by or on behalf of the Borrower pursuant to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact known to the Borrower which materially and adversely affects or in the future may (so far as the Borrower now foresees) materially and adversely affect the business, operations, affairs, condition, prospects, properties or assets of the Borrower or any of its Subsidiaries which has not been set forth in this Agreement or in the other documents, certificates and statements (financial or otherwise) furnished to the Banks by or on behalf of the Borrower prior to or on the Restatement Closing Date. ARTICLE IV. AFFIRMATIVE COVENANTS.       From the Restatement Closing Date and thereafter until the termination of the Long Term Revolving Credit Commitment and the Short Term Revolving Credit Commitment and until the Notes and the other liabilities of the Borrower hereunder are paid in full, the Borrower agrees that: 4.1 Use of Proceeds. Proceeds of the Loans will be used by the Borrower for general corporate purposes, including the repurchase of the Borrower’s Capital Stock; provided, however, the proceeds of Loans may not be used to fund in whole or in part any acquisition of or merger with another Person, which is contested by such Person and which has not been approved by -51- -------------------------------------------------------------------------------- such Person’s board of directors or other governing body; and provided, further, that should all or any part of the Loans be deemed to be a “purpose loan” which is “directly or indirectly secured” (as those terms are defined in Regulation U of the Board of Governors of the Federal Reserve System) by Margin Stock, no proceeds of the Loans may be used for the purchase or carrying of any Margin Stock which would cause the Loans then outstanding to be in violation of Regulation U of the Board of Governors of the Federal Reserve System as the same is now in effect or may hereafter be amended. 4.2 Furnishing Information. 4.2a Quarterly Reports. The Borrower will furnish to each of the Banks, as soon as practicable but in any event within sixty (60) days after the end of each Fiscal Quarter its Form 10-Q filed with the SEC. Each such report shall be certified, subject to ordinary and usual year end adjustments, as true, complete and correct pursuant to a Compliance Certificate substantially in the form of Exhibit “F” hereto. 4.2b Annual Report. The Borrower will furnish to each of the Banks, as soon as practicable but in any event within ninety (90) days after the end of each Fiscal Year, a copy of its Form 10-K filed with the SEC including therein its Consolidated financial statements certified without qualification by a nationally recognized independent public accountant selected by the Borrower. Such annual audited financial statements shall be certified as true, complete and correct pursuant to the Compliance Certificate, substantially in the form of Exhibit “F” hereto.       In addition, the Borrower will cause to be delivered to each of the Banks a statement by the independent certified public accountants made in connection with the preparation of the annual audited consolidated financial statements of the Borrower and its Subsidiaries stating (i) that the examination has included a review of the terms of the Agreement and the Notes, (ii) whether their examination has disclosed the existence, during the Fiscal Year covered by such financial statements, of any condition or event which constitutes an Event of Default hereunder, or under any of the instruments, as executed, annexed as exhibits hereto, or which, after notice or the lapse of time or both, would constitute an Event of Default, and, if their examination has disclosed such an event or condition, specifying the nature and period of existence thereof, and (iii) that they have examined such Compliance Certificate delivered pursuant to the foregoing paragraph and confirm the computations set forth therein. 4.2c General Information. The Borrower will deliver to the Banks such additional financial statements, reports and other information (which shall include, without limitation, any commercial paper dealer arrangements, any note purchase agreements or private placements or documents equivalent thereto and all regular and periodic reports filed with the SEC) as the Agent shall reasonably request. Borrower shall also deliver to the Agent, within ten (10) days of the receipt of the same, any reports, including management letters, submitted to the Borrower by an independent certified public accountant in connection with any annual, interim or special audit. Further, Borrower will maintain, and will cause its Subsidiaries to maintain, proper books of record and account in accordance with sound accounting practice in which full, true and correct entries shall be made of all of their respective properties and assets and their respective dealings and business affairs. Borrower will permit, and will cause its Subsidiaries to permit, -52- -------------------------------------------------------------------------------- each of the Banks to have access, at any time and from time to time, upon reasonable notice and during normal business hours to visit any of their respective properties, to examine any of their respective books of record and account and such reports and returns as Borrower or any of its Subsidiaries may file with any governmental department or agency, and to discuss any of Borrower’s or any Subsidiary’s affairs and accounts with, and be advised about them by, the officers of Borrower or the Subsidiary as the case may be. 4.3 Preservation of Existence. At its own cost and expense, the Borrower will do, and subject to the provisions of Section 5.4 hereof, the Borrower will cause its Subsidiaries to do, all things necessary to preserve and keep in full force and effect their respective existence and qualification under the laws of the jurisdictions of their respective organization, except that the corporate existence of any Subsidiary may be terminated, or any of its rights or franchises abandoned if, in the good faith judgment of the Board of Directors of the Borrower, such termination or abandonment is in the best interest of the Borrower and is not disadvantageous to the Banks. Further, the Borrower will substantially comply, and will cause each Subsidiary incorporated or formed in the United States of America to substantially comply, with all applicable laws, statutes and regulations of the United States of America and of any state or municipality, or of any agency or department of any of the above in respect of the conduct of their respective businesses. The Borrower will further cause any Subsidiary not incorporated or formed in the United States of America to comply, in all material respects, with all laws, statutes and regulations of the nation in which such Subsidiary is incorporated or formed or any nation which, due to the nature of its business, is subject to the laws of or of any region, state or municipality or of any agency or department of any of the foregoing in respect to the conduct of such Subsidiary’s Business. 4.4 Payment of Taxes and Fees. The Borrower will promptly pay, and discharge, and the Borrower will cause each Subsidiary to promptly pay and discharge, all taxes, assessments and governmental charges and levies upon them or upon any of their respective income, profits or property; provided, however, that, for purposes of this Agreement, the Borrower or the affected Subsidiary shall not be required to pay any tax, assessment, charge or levy (a) which it deems to be unlawful or excessive in whole or in part and the payment of which is being contested, or will be in a timely manner contested, in good faith by appropriate proceedings, and (b) as to which the Borrower or the affected Subsidiary shall have set aside on its books reserves for such claim as are determined to be adequate by the application of generally accepted accounting principles consistently applied. 4.5 Insurance. The Borrower will keep and maintain, and the Borrower will cause each Subsidiary to keep and maintain, insurance with responsible insurance companies, satisfactory to the Agent, on such of their respective properties, in such amounts and against such risks as is customarily maintained by similar businesses similarly situated and owning, leasing or operating similar properties. The Borrower will furnish to the Agent on December 31 of each year during the term hereof a certificate of the Authorized Officer of the Borrower certifying that such insurance is in force, is adequate in nature and amount and complies with the Borrower’s and each Subsidiary’s obligations under this Section 4.5. -53- -------------------------------------------------------------------------------- 4.6 ERISA Reports. The Borrower will (a) notify the Agent as soon as possible, and in any event no later than the date notification is sent to the PBGC, of any Reportable Event and action which is proposed to be taken with respect thereto, (b) send to the Agent, if so requested by the Agent, copies of each annual and other report with respect to each Plan filed with the United States Secretary of Labor or the PBGC, (c) send to the Agent, concurrent with the filing thereof, a copy of any request to United States Secretary of the Treasury for a waiver or variance of the minimum funding standards of Section 302 of ERISA and Section 412 of the Code with respect to any Plan, (d) send to the Agent, promptly, but in any event within ten (10) calendar days after the date notification is sent to the PBGC, a copy of any notice of failure to make a required installment or other payment, and (e) send to the Agent promptly after receipt thereof, a copy of any notice the Borrower or any ERISA Affiliate may receive from the PBGC relating to the intention of the PBGC (i) to terminate any Plan, (ii) to appoint a trustee to administer any such Plan or (iii) to assess withdrawal liability. 4.7 Environmental Matters. The Borrower shall and the Borrower shall cause each Subsidiary to:         (i) comply in all material respects with all Environmental Laws;           (ii) not place or permit to be placed any Hazardous Substances on any of its business premises except as allowed pursuant to Environmental Law;           (iii) employ appropriate technology as the Borrower determines is reasonably necessary to comply with Environmental Law;           (iv) dispose of any and all Hazardous Substances only at facilities and with carriers that maintain valid permits under applicable Environmental Law;           (v) defend and indemnify the Banks and the Agent and hold the Banks and the Agent harmless from and against all loss, liability, damage and expense, claims, costs, fines, penalties, including any interest, assessments or attorney’s fees, suffered or incurred by the Agent or any Bank, which arise, result from or in any way relate to a breach or violation of any Environmental Law by the Borrower or any Subsidiary or any Person acting for or on behalf of the Borrower or any Subsidiary. The Borrower’s and the Subsidiaries’ obligation hereunder shall survive the termination of this Agreement; and           (vi) provide to the Agent for redistribution to the Banks, notice of: (A) any material reportable Release of Hazardous Substances; (B) any notification that Borrower or any Subsidiary is alleged to be a “potentially responsible party” under any Environmental Law; or (C) with respect to Borrower’s operations, any material noncompliance with the Environmental Law; provided the actions referred to in (A), (B) or (C) immediately above might materially affect the Borrower’s financial condition or operations. Such notice shall be given within a reasonable period after an Authorized Officer receives knowledge of such Release or noncompliance. -54- -------------------------------------------------------------------------------- 4.8 Senior Debt Status. The Bank Indebtedness shall rank at least pari passu in priority of payment with all other Indebtedness of the Borrower, except Indebtedness of the Borrower secured by Encumbrances pursuant to Section 5.3. 4.9 Y2K Preparedness. The Borrower shall cause its Subsidiaries to take all commercially reasonable action necessary and appropriate so that they shall have developed all programs necessary to address, on a timely basis, the Year 2000 Problem as it affects their respective accounting, information services, sales and manufacturing operations. ARTICLE V. NEGATIVE COVENANTS.       From the Restatement Closing Date and thereafter until the later of the termination of the Long Term Revolving Credit Commitment, the Short Term Revolving Credit Commitment and the payment in full of the Bank Indebtedness and the other liabilities of the Borrower hereunder, the Borrower agrees that: 5.1 Percentage of Consolidated Indebtedness to Consolidated Capitalization. The Borrower shall not, at any time, allow its Consolidated Indebtedness to be greater than: (a) from the Restatement Closing Date through December 31, 2000, sixty-five percent (65%) of the sum of (i) Consolidated Indebtedness plus (ii) Consolidated Stockholder’s Equity; (b) from January 1, 2001 through December 31, 2002, sixty percent (60%) of the sum of (i) Consolidated Indebtedness plus (ii) Consolidated Stockholder’s Equity and (c) from January 1, 2003 and thereafter, fifty-five percent (55%) of the sum of (i) Consolidated Indebtedness plus (ii) Consolidated Stockholder’s Equity. 5.2 Fixed Charge Coverage Ratio. The Borrower shall not incur or remain liable for Consolidated Indebtedness owing to any Person if (a) the incurrence of such Consolidated Indebtedness (after giving effect thereto) would cause the Borrower to be in violation of any provision of this Agreement or (b) the Borrower’s Consolidated Net Income Available for Fixed Charges for the period of the four (4) Fiscal Quarters immediately preceding the Date of Determination is equal to or less than two hundred percent (200%) of all Fixed Charges payable, in respect of such period. 5.3 Creation of Encumbrances. The Borrower shall not create, assume, incur or suffer to exist, nor will the Borrower allow any Subsidiary to create, assume, incur or suffer to exist, any Encumbrance upon any of their respective properties, whether now owned or hereafter acquired, nor acquire nor agree to acquire any kind of property subject to an Encumbrance; provided, however, that the foregoing restrictions shall not prevent the Borrower or any of its Subsidiaries from creating, assuming, incurring or suffering to exist Encumbrances, including but not limited to the Encumbrances set forth on Schedule 3.6 hereto, which secure Indebtedness or obligations which do not exceed, in the aggregate, at any one time outstanding, twenty percent (20%) of the Borrower’s Consolidated Total Assets. 5.4 Limitation on Mergers. The Borrower will not, nor will the Borrower allow any Subsidiary to, directly or indirectly, sell, lease or otherwise dispose of all or substantially all of its -55- -------------------------------------------------------------------------------- properties or assets, or consolidate with, or merge into any other entity or permit any entity to merge into it; provided however,         (i) any Subsidiary may sell or otherwise transfer its assets to the Borrower or to a Subsidiary;           (ii) any Subsidiary may merge into or consolidate with the Borrower or any other Subsidiary so long as the affected Borrower or other Subsidiary is the surviving entity; or           (iii) the Borrower may be consolidated with any other corporation, or permit any other corporation to be merged into the Borrower, if         (A) the surviving corporation shall be the Borrower and immediately after such consolidation or merger a majority of the Borrower’s properties and assets will be located, and a majority of its business will be conducted, in North America, and           (B) immediately after giving effect to such transaction, no condition or event shall exist which constitutes an Event of Default or which, after notice or lapse of time or both, would constitute an Event of Default.       In addition, the Borrower will not, nor will the Borrower allow any of its Subsidiaries to acquire all or a substantial part of the assets or Capital Stock of any other entity if, after giving effect to such acquisition, a condition or event shall exist which constitutes an Event of Default or which, after the giving of notice or the lapse of time or both, would constitute an Event of Default. ARTICLE VI. CONDITIONS PRECEDENT. 6.1 All Disbursements. In addition to the satisfaction of the conditions precedent set forth in Section 6.2, the obligation of each Bank to make each Disbursement under its Long Term Revolving Credit Commitment or its Short Term Revolving Credit Commitment and the obligation of the Agent to issue, renew or extend Letters of Credit is subject to the performance by the Borrower of all of its obligations under this Agreement and to the satisfaction of each of the following conditions precedent:         (i) Receipt by the Agent of a Request for a Disbursement or an application for the issuance, renewal or extension of a Letter of Credit, as the case may be;           (ii) The fact that, at the time of each Disbursement or issuance, renewal or extension of a Letter of Credit, as the case may be, no Event of Default and no event which, with the giving of notice or lapse of time or both would become such an Event of Default, shall have occurred and be continuing; -56- --------------------------------------------------------------------------------         (iii) The fact that, at the time of each Disbursement or issuance, renewal or extension of a Letter of Credit, as the case may be, the Borrower is in compliance with each of the financial covenants set forth in Sections 5.1 and 5.2 then applicable; and           (iv) The fact that at the time of each Disbursement or issuance, renewal or extension of a Letter of Credit, as the case may be, the representations and warranties contained in this Agreement are true and correct in all material respects on and as of the date of such Disbursement or such issuance, renewal or extension of a Letter of Credit, as the case may be. Each borrowing by the Borrower and each issuance, renewal or extension of a Letter of Credit hereunder shall be deemed to be, as of the date of such borrowing or such issuance, renewal or extension of a Letter of Credit, as the case may be, a representation and warranty by the Borrower as to the facts specified in items (ii), (iii) and (iv) of this Section 6.1. 6.2 Conditions Precedent for Closing. The obligation of each Bank to accept delivery of the Notes is subject to the satisfaction of each of the following conditions precedent:         (i) Agreement. Receipt by the Agent for redelivery to the Banks of fully executed counterpart originals of this Agreement.           (ii) Long Term Revolving Credit Notes. Receipt by the Agent for redelivery to the Banks of a fully executed Long Term Revolving Credit Note made payable to each Bank.           (iii) Short Term Revolving Credit Notes. Receipt by the Agent for redelivery to the Banks of a fully executed Short Term Revolving Credit Note made payable to each Bank.           (iv) Bid Rate Notes. Receipt by the Agent for redelivery to the Banks of fully executed Bid Rate Notes made payable to each Bank.           (v) Swingline Note. Receipt by the Agent of the fully executed Swingline Note made payable to PNC Bank, National Association.           (vi) Closing Fee. Receipt by the Agent of the closing fee due each Bank in an amount equal to five (5) basis points multiplied by the Bank’s Long Term Revolving Credit Commitment.           (vii) Payment to Banks. Payment to the Agent for the benefit of the applicable parties of all accrued and unpaid fees, if any, under the Original Credit Agreement.           (viii) Closing Certificate. The Borrower shall have delivered to the Agent for redelivery to each Bank a certificate stating (a) the representations and warranties made by the Borrower are true and correct on the Restatement Closing Date, (b) that as of the Restatement Closing Date the Borrower is in compliance with the covenants set forth in -57- --------------------------------------------------------------------------------         Articles IV and V hereof, and (c) as of the Restatement Closing Date no Event of Default or no event which, with the giving of notice or passage of time would become an Event of Default, has occurred and is continuing.           (ix) Material Adverse Effect. No event has occurred to the Borrower which would reasonably be likely to have a Material Adverse Effect on the Borrower.           (x) Material Litigation. Except for those matters previously disclosed to the Agent and the Banks pursuant to Section 3.5, no action or proceeding has been instituted before any Governmental Person which, if adversely determined, would reasonably be likely to have a Material Adverse Effect on the Borrower.           (xi) Insurance. Receipt by the Agent of evidence that the Borrower’s insurance coverage, as required by Section 4.5, is in effect.           (xii) Borrower’s Resolutions. The Borrower shall have delivered to the Agent for redelivery to each Bank a copy, duly certified as of the Restatement Closing Date by the secretary or assistant secretary of the Borrower, of (a) the organizational documents of the Borrower, (b) the Bylaws of the Borrower, (c) the resolutions of the Borrower’s Board of Directors authorizing the borrowings hereunder and the execution and delivery of this Agreement and the Notes, (c) all documents evidencing other necessary corporate action and (e) all approvals or consents, if any, with respect to this Agreement and the Notes.           (xiii) Borrower’s Incumbency Certificate. The Borrower shall have delivered to the Agent for redelivery to each Bank a certificate of its secretary or assistant secretary, certifying the names and offices of the officers of the Borrower authorized to sign this Agreement, the Notes and all other documents or certificates to be delivered hereunder, together with the true signatures of such officers.           (xiv) Disclosure Letter. The Borrower shall have delivered to the Agent for redelivery to each Bank an executed copy of the Disclosure Letter.           (xv) Opinion of Counsel. The Borrower shall have delivered to the Agent for redelivery to each of the Banks the favorable opinion of Richard D. Teeple, Esquire, General Counsel of the Borrower (a) as to the action which has been taken to authorize the making and performance by the Borrower of this Agreement and the Notes issued under this Agreement, (b) as to the due authorization, execution, delivery and validity of this Agreement and the Notes to be issued under this Agreement and (c) as to such other matters as the Agent may reasonably require substantially in the form of Exhibit “G” hereto. -58- -------------------------------------------------------------------------------- ARTICLE VII.EVENTS OF DEFAULT. 7.1 Immediate Defaults. If one or more of the following Events of Default occur: 7.1a Insolvency.         (i) Involuntary Proceedings. A proceeding shall have been instituted in a court having jurisdiction seeking a decree or order for relief in respect of the Borrower or any Subsidiary in an involuntary case under federal or foreign bankruptcy laws, or any other similar applicable federal, state, or foreign law, now or hereafter in effect, or for the appointment of a receiver, liquidator, trustee, sequestrator or similar official for the Borrower or the affected Subsidiary or for a substantial part of its property, or for the winding up or liquidation of its affairs, and such shall result in the entry of an order for relief or remain undismissed or unstayed and in effect for a period of sixty (60) days; or           (ii) Voluntary Proceedings. The Borrower or any Subsidiary shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under federal or foreign bankruptcy laws, or any other similar applicable federal, state or foreign law now or hereinafter in effect, or shall consent or acquiesce in or to the filing of any such petition or shall consent to or acquiesce in the appointment of a receiver, liquidator, trustee, sequestrator or similar official for the Borrower or any Subsidiary or for a substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or action shall be taken by the Borrower or any Subsidiary in furtherance of any of the aforesaid purposes; or 7.1b Dissolution. Except as permitted by Section 5.4 hereof, the existence of the Borrower or any Subsidiary is terminated; then, upon the happening of an event described in this Section 7.1, the Long Term Revolving Credit Commitment and the Short Term Revolving Credit Commitment shall immediately terminate and all Notes then outstanding and all Letters of Credit Outstanding shall automatically become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived, and the Agent shall not be under any obligation to issue or amend a Letter of Credit; further during the sixty (60) day period referred to in Section 7.1a (i) the Banks shall be under no obligations to make Loans and the Agent shall be under no obligation to issue or amend a Letter of Credit. The Agent shall promptly advise the Borrower, and each of the Banks, of the occurrence, and the consequences, of the Event of Default; provided, however, that failure to give notice to the Borrower shall not impair the effect of such Event of Default. 7.2 Defaults at Option of Banks. If one or more of the following Events of Default occur: -59- -------------------------------------------------------------------------------- 7.2a Payment. Default in the payment of (i) principal of or interest on any Note, and continuance thereof for five (5) days, or (ii) any Facility Fee, any Bid Rate Administrative Fee, any Letter of Credit Fee, any Fronting Fee, any Optional Currency Fee or any Agent’s Fee and continuance thereof for ten (10) days; or 7.2b Agreements. Default in the performance of any of the Borrower’s agreements (including but not limited to those set forth in Articles IV and V hereof) herein set forth (and not constituting an Event of Default under any of the preceding subsections of this Article VII) and continuance of such default for thirty (30) days after notice thereof to the Borrower from the Agent or any Bank; or 7.2c Other Indebtedness. Default by the Borrower in the payment when due, of any obligation in an amount in excess of $10,000,000 for money borrowed or guaranteed, (whether by acceleration or otherwise) or default by the Borrower in the performance of any agreement under which any such obligation is created if the effect of such default is to cause such obligation to become, or to permit the holder or holders of such obligations to declare such obligation, due prior to its expressed maturity; or 7.2d Misrepresentation. Any representation or warranty made by the Borrower herein is untrue in any material respect, or any schedule, statement, report, notice or writing furnished by the Borrower or on behalf of the Borrower to the Agent or the Banks is untrue in any material respect on the dates as of which the facts set forth are stated or certified; or 7.2e Monetary Judgments. A final uninsured judgment which, with other outstanding final judgments against the Borrower and its Subsidiaries, exceeds the aggregate amount of $10,000,000 shall be rendered against the Borrower or any Subsidiary and if, within sixty (60) days after entry thereof, such judgment shall not have been vacated or discharged, written agreement shall not have been reached with the plaintiff in such action providing for the payment of any monetary award set forth in such judgment, or execution thereof shall not have been stayed pending appeal, or if, within sixty (60) days after the expiration of any such stay, such judgment shall not have been discharged or a written agreement shall not have been reached with the plaintiff in such action providing for the payment of any monetary award set forth in such judgment; or 7.2f Litigation. Notice is given to the Borrower by the Agent or any Bank that, in the opinion of the Agent or such Bank, any litigation or governmental proceeding which has been instituted against the Borrower or any Subsidiary will reasonably be likely to have a Material Adverse Effect, and within thirty (30) days after such notice (i) such litigation or proceeding is not dismissed or (ii) an opinion of the Borrower’s or the affected Subsidiary’s trial counsel shall not have been received by each Bank, in form and substance satisfactory to each Bank, that the Borrower or the affected Subsidiary has a meritorious position and will ultimately prevail in the proceedings; or 7.2g Change of Control. Any Person or group of Persons (within the meaning of Sections 13(d) or 14(d)(2) of the Securities and Exchange Act of 1934), other than the then current officers or directors of the Borrower or an underwriter which obtains such ownership as a -60- -------------------------------------------------------------------------------- result of effecting a firm commitment underwriting of a secondary offering of the Borrower’s voting stock on behalf of such officers or directors, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of twenty percent (20%) or more of the voting stock of the Borrower; then, if any such event described in this Section 7.2 shall be continuing, the Agent may, and upon request of the Required Banks will, declare the Long Term Revolving Credit Commitment and the Short Term Revolving Credit Commitment to be terminated and all Notes then outstanding and all Letters of Credit Outstanding to be due and payable, whereupon the Long Term Revolving Credit Commitment and the Short Term Revolving Credit Commitment shall immediately terminate, the Agent shall not be under any obligation to issue or amend a Letter of Credit, and all then outstanding Notes, Letters of Credit Outstanding and Participation Advances shall become immediately due and payable, all without presentment, demand, protest or further notice of any kind, all of which are hereby waived. 7.3 Remedies upon Default. In case any one or more Events of Default shall occur and be continuing, the Agent on behalf of the Banks may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein in the Notes held by it or in any Letter of Credit, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law. No right, power or remedy conferred by this Agreement or by any Note upon any Bank shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. 7.4 Cash Collateral. Upon the occurrence of any Event of Default described in Section 7.1 or upon the declaration by the Required Banks of any other Event of Default and the termination of the Long Term Revolving Credit Commitment, the obligation of the Agent to issue or amend Letters of Credit shall terminate, and an amount equal to the maximum amount which may at any time be drawn under the Letters of Credit then outstanding (whether or not any beneficiary of such Letters of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit) shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Borrower; provided that the foregoing shall not affect in any way the obligations of the Banks to purchase from the Agent participations in the unreimbursed amount of any drawings under the Letters of Credit issued by it as provided in Section 2.11d. So long as the Letters of Credit shall remain outstanding, any amounts declared due pursuant to this Section 7.4 with respect to the outstanding Letters of Credit when received by the Agent shall be deposited and held by the Agent in an interest bearing account denominated in the name of the Agent for the benefit of the Agent and the Banks over which the Agent shall have sole dominion and control of withdrawals (the “Cash Collateral Account”) as cash collateral for the obligation of the Borrower to reimburse the Agent in the event of any drawing under the Letters of Credit and upon any drawing under such Letters of Credit in respect of which the Agent has deposited in the Cash Collateral Account any amounts declared due pursuant to this Section 7.4, the Agent shall apply such amounts held by the Agent to reimburse the Agent for the amount of such drawing. In the -61- -------------------------------------------------------------------------------- event that any Letter of Credit in respect of which the Agent has deposited in the Cash Collateral Account any amounts described above is cancelled or expires or in the event of any reduction in the maximum amount available at any time for drawing under any of the Letters of Credit outstanding, the Agent shall apply the amount then in the Cash Collateral Account designated to reimburse the Agent for any drawings under the Letters of Credit issued by it less the maximum amount available at any time for drawing under the Letters of Credit remaining outstanding immediately after such cancellation, expiration or reduction, if any, to the payment in full of the outstanding Bank Indebtedness, and second, to the payment of any excess, to the Borrower. ARTICLE VIII. AGENT. 8.1 Appointment and Grant of Authority. The Banks hereby appoint PNC Bank, National Association, and PNC Bank, National Association hereby agrees to act, as the Agent under this Agreement. The Agent shall have and may exercise such powers under this Agreement as are specifically delegated to the Agent by the terms hereof, together with such other powers as are incidental thereto. 8.2 Non-Reliance on Agent. Each Bank agrees that it has, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. The Agent shall not be required to keep informed as to the performance or observance by the Borrower of this Agreement or any other document referred to or provided for herein or to inspect the properties or books of the Borrower or any of its Subsidiaries. The Agent shall use its best efforts to relay to each Bank any information pertaining to the Borrower or its Subsidiaries which comes into the possession of the Agent’s Corporate Banking Division; provided however, that except for notices, reports and other documents and information expressly required to be furnished to each Bank by the Agent hereunder, the Agent, in the absence of negligence or willful misconduct, shall not be liable to any Bank for its failure to relay or furnish to any Bank any information. 8.3 Responsibility of the Agent and Other Matters. 8.3a Ministerial Nature of Duties. As between the Banks and itself, the Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and those duties and liabilities shall be subject to the limitations and qualifications set forth in this Article VIII. The duties of the Agent shall be ministerial and administrative in nature. 8.3b Limitation of Liability. As between the Banks and itself, neither the Agent nor any of its directors, officers, employees or agents shall be liable, except for negligence or willful misconduct, for any action taken or omitted (whether or not such action taken or omitted is within or without the Agent’s responsibilities and duties expressly set forth in this Agreement) under or in connection with this Agreement or any other instrument or document in connection herewith. Without limiting the foregoing, neither the Agent nor any of its directors, officers, -62- -------------------------------------------------------------------------------- employees or agents shall be responsible for, or have any duty to examine (i) the genuineness, execution, validity, effectiveness, enforceability, value or sufficiency of (A) this Agreement or the Notes or (B) any document or instrument furnished pursuant to or in connection with this Agreement or the Notes, (ii) the collectibility of any amounts owed by the Borrower, (iii) the truthfulness of any recitals or statements or representations or warranties made to the Agent in connection with this Agreement or the Notes, (iv) any failure of any party to this Agreement to receive any communication sent, including any telegram, telex, teletype, facsimile transmission, bank wire, cable, radiogram or telephone message sent or any writing, application, notice, report, statement, certificate, resolution, request, order, consent letter or other instrument or paper or communication entrusted to the mails or to a delivery service, or (v) the assets or liabilities or financial condition or results of operations or business or credit worthiness of the Borrower. 8.3c Reliance. The Agent shall be entitled to act, and shall be fully protected in acting upon, any telegram, telex, telecopy, bank wire or cable or any writing, application, notice, report, statement, certificate, resolution, request, order, consent, letter or other instrument or paper or communication believed by the Agent in good faith to be genuine and correct and to have been signed or sent or made by a proper Person. The Agent may consult counsel and shall be entitled to act, and shall be fully protected in any action taken in good faith, in accordance with advice given by counsel. The Agent may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such agents or attorneys-in-fact selected by the Agent with reasonable care. The Agent shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, provisions or conditions of this Agreement or the Notes on the part of the Borrower. 8.4 Action on Instructions. The Agent shall be entitled to act or refrain from acting, and in all cases shall be fully protected in acting or refraining from acting, under this Agreement or the Notes or any other instrument or document in connection herewith or therewith in accordance with instructions in writing or by telegraph from the appropriate number of Banks, as the case may be. 8.5 Action in Event of Default. If an Event of Default has occurred, the Banks shall immediately consult with one another in an attempt to agree upon a mutually acceptable course of conduct. Failing unanimous agreement upon a course of conduct and if the appropriate number of Banks wish to declare an Event of Default or exercise their rights hereunder, the Agent will exercise the rights of the Banks hereunder as directed by the appropriate number of Banks. 8.6 Indemnification. To the extent the Borrower does not reimburse and save harmless the Agent according to the terms hereof for and from all costs, expenses and disbursements in connection herewith, such costs, expenses and disbursements, shall be borne by the Banks on a Pro Rata basis. Each Bank hereby agrees on such basis (a) to reimburse Agent for all such costs, expenses and disbursements on request and (b) to the extent of each such Bank’s pro rata share, to indemnify and save harmless the Agent against and from any and all losses, obligations, penalties, actions, judgments and suits and other costs, expenses and disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent, other than as a consequence of actual negligence or willful misconduct on the part of the -63- -------------------------------------------------------------------------------- Agent, arising out of or in connection with this Agreement or the Notes or any agreement, instrument or document in connection herewith or therewith, or any request of the Banks. Such indemnification of the Agent shall include, without limitation, reimbursement for the costs, expenses and disbursements in connection with defending itself against any claim or liability, or answering any subpoena, related to the exercise or performance of any of its powers or duties under this Agreement or the taking of any action under or in connection with this Agreement or the Notes. 8.7 Agent’s Rights as a Bank. With respect to (a) the commitment of the Agent as a Bank hereunder and any Loans of the Agent under this Agreement, (b) any Note and any interest of the Agent in any Note, (c) any amount due the Agent pursuant to Article II hereof not evidenced by a Note and (d) other amounts due the Agent hereunder, the Agent shall have the same rights and powers under this Agreement and any such Note as any other Bank and may exercise the same as though it were not the Agent. The Agent may accept deposits from, lend money to, and generally engage, and continue to engage, in any kind of business with the Borrower and any of its Subsidiaries as if it were not the Agent. 8.8 Loan Advances. 8.8a Loan Advances by Agent Pursuant to the Agreement. Except as otherwise provided in Section 8.8b hereof, unless the officers of the Agent responsible for administering this Agreement shall have been notified in writing by a Bank prior to the date of any Disbursement that such Bank will not make the amount which would constitute its Pro Rata share of the Disbursement available to the Agent on the date of such Disbursement, the Agent may (but shall not be required to) assume that such Bank has made such amount available to the Agent in the applicable currency on the date of such advance and the Agent, in reliance upon such assumption, may make available to the Borrower a corresponding amount in the applicable currency. If such Pro Rata share is made available to the Agent on a date after the date of such Disbursement, such Bank shall pay to the Agent on demand an amount in the applicable currency equal to the product of (i) during each day included in the period referred to in (iii) below, (a) for each Dollar funded Loan, the Federal Funds Effective Rate or (b) for each Optional Currency funded Loan, the Euro-Rate, during each day included in such period, multiplied by (ii) the amount of such Bank’s Pro Rata share of such Disbursement, multiplied by (iii) a fraction, the numerator of which is the number of days that elapse from and including the date of such Disbursement to the date on which such Pro Rata share of such Disbursement shall become immediately available to the Agent and the denominator of which is 360. A statement of the Agent submitted to such Bank with respect to any amounts owing under this Section 8.8a shall be prima facie evidence as to the amount owed by such Bank to the Agent. If such Bank’s Pro Rata share is not in fact made available to the Agent by such Bank within three (3) Business Days of such borrowing date, the Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to the Base Rate Option during such period, on demand, from such Bank. 8.8b Bid Rate Loans. Unless the officers of the Agent responsible for administering this Agreement shall have been notified by any Bank making a Bid Rate Loan pursuant to Section 2.5 hereof that such Bank will not make the amount of such Bid Rate Loan available to -64- -------------------------------------------------------------------------------- the Agent prior to 3:00 p.m. (Pittsburgh, Pennsylvania time) on the date of such Bid Rate Loan, the Agent may (but shall not be required to) assume that such Bank has made such amount available to the Agent prior to such time on the date of such Bid Rate Loan and the Agent, in reliance upon such assumption, may make available to the Borrower a corresponding amount. If such Bid Rate Loan amount is made available to the Agent on a date after the date of such Bid Rate Loan, such Bank shall pay to the Agent on demand an amount equal to the product of (i) during each day included in the period referred to in item (iii) below, the sum of (a) the Federal Funds Effective Rate during each day included in such period plus (b) one hundred (100) basis points (1.0%) multiplied by (ii) the amount of the Bid Rate Loan advanced, multiplied by (iii) a fraction, the numerator of which is the number of days that elapse from and including the date of such Bid Rate Loan to the date on which the corresponding amount shall become immediately available to the Agent and the denominator of which is 360. A statement of the Agent submitted to such Bank with respect to any amounts owing under this Subsection 8.8b shall be prima facie evidence as to the amount owed by such Bank to the Agent. If such amount is not in fact made available to the Agent by such Bank within three (3) Business Days of such borrowing date, the Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to the Base Rate Option plus one hundred (100) basis points (1.0%) during such period, on demand, from such Bank. 8.9 Payment to Banks. Upon receipt by the Agent of any payment from the Borrower in respect of such Banks’ obligations, the Agent shall promptly deliver to each Bank its Pro Rata share of such payment. When possible, such delivery shall be accomplished in such a manner so as to allow each Bank to receive its Pro Rata share of such payment in immediately available funds on the same day that the funds representing payment due from the Borrower are collected funds in the possession of the Agent. It is understood that the Borrower has no obligation to the Banks to ensure that the Agent forwards to each Bank its Pro Rata share of any such payment. 8.10 Notice of Event of Default. Each Bank shall use its best efforts to notify immediately in writing the other Banks of any Event of Default of which it becomes aware. 8.11 Equalization of Banks. The Banks agree among themselves that, with respect to all amounts received by any Bank for application on any obligation hereunder, or on the Notes (excluding any payments on Bid Rate Notes), equitable adjustment will be made in the manner stated in the next succeeding sentence so that, in effect, all such amounts will be shared pro rata among the Banks, whether received by realization upon security, by the exercise of the right of set-off or banker’s lien, by counterclaim or cross action or from any other non-pro rata source. Any Bank receiving any such amount shall purchase for cash from the other Banks an interest in their Long Term Revolving Credit Notes and Short Term Revolving Credit Notes in such amount as shall result in a pro rata participation by each of the Banks in the aggregate unpaid amount of all outstanding Notes then held by the Banks; provided that if all or any portion of such amount is hereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery without interest except as required by law or by any judgment or settlement relating to such recovery. -65- -------------------------------------------------------------------------------- 8.12 Successor Agent. The Agent may resign upon sixty (60) days’ prior notice to the Banks and the Borrower. If such notice shall be given, the Agent shall use reasonable commercial efforts during such sixty (60) day period to procure a successor satisfactory to the Banks and reasonably satisfactory the Borrower to serve as agent hereunder and under the Notes. If at the end of such sixty (60) day period, the Agent shall be unable to procure such a successor, the Banks shall appoint from among the Banks a successor agent for the Banks. Any such successor agent shall succeed to the rights, powers and duties of the Agent. Upon the appointment of such successor agent or upon the expiration of such sixty (60) day period (or any longer period to which the Agent has agreed), the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement; provided, however, the retiring Agent shall continue to hold as custodian any collateral in its possession until such time as it can deliver such collateral to the successor agent. After any retiring Agent’s resignation hereunder, the provisions of this Article VIII shall inure to the benefit of such retiring Agent as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE IX. GENERAL PROVISIONS. 9.1 Waiver of Rights of Set-Off. Except for the Cash Collateral Account, the Banks waive any and all rights of banker’s lien, counterclaim and recoupment and any and all right to set-off against the unpaid balance of the Notes or any participation therein as to any debt owing to the Borrower by the Banks, including, without limitation, any funds in any deposit account (general or special) maintained by the Borrower with the Banks. 9.2 Amendments. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure therefrom by the Borrower shall be effective unless the same shall be in writing and signed by the Borrower, the Agent and the Required Banks, and then such amendment, 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, unless in writing and signed by the Agent and all of the Banks, shall do any of the following: (a) increase the Long Term Revolving Credit Commitment of any Bank or the maximum aggregate principal amount of the Long Term Revolving Credit Notes, (b) increase the Short Term Revolving Credit Commitment of any Bank or the maximum aggregate principal amount of the Short Term Revolving Credit Notes, (c) reduce the principal of, alter the formulas for calculating interest on, the Notes or reduce any fees hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Notes, any Facility Fee, any Letter of Credit Fee, any Fronting Fee, any Optional Currency Fee, the Agent’s Fee, the Bid Rate Administration Fee, or any of the obligations of the Borrower set forth in Article II, (e) amend the definition of Required Banks, (f) amend this Section 9.2 or (g) amend any section hereof which by its terms requires consent of all of the Banks. No amendment modification or waiver which would adversely affect the interest rights or obligation of the Agent shall be made without the consent of the Agent. In the case of any waiver or consent relating to any provision of this Agreement, the parties shall be restored to their former positions and rights hereunder (unless otherwise expressly set forth therein), and the Event of Default so waived or consented to shall be deemed to be cured and not continuing; but no such waiver or consent shall extend to any subsequent or other Event of Default or impair any right consequent thereon. -66- -------------------------------------------------------------------------------- 9.3 No Implied Waiver; Cumulative Remedies. 9.3a No Implied Waiver. No delay on the part of Agent or any Bank in the exercise of any power or right shall operate as a waiver thereof, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right. 9.3b Cumulative Remedies. No delay or failure of the Agent or the Banks in exercising any right, power or remedy under this Agreement shall operate as a waiver hereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The rights and remedies in this Agreement are cumulative and not exclusive of any rights or remedies (including, without limitation, the right of specific performance) which the Agent or the Banks would otherwise have. 9.4 Certain Taxes. The Borrower agrees to pay, and save the Agent and the Banks harmless from, all liability for any stamp or other taxes which may be payable with respect to the execution or delivery of this Agreement, the Long Term Revolving Credit Notes, the Short Term Revolving Credit Notes, the Bid Rate Notes, the Letters of Credit or any other documents, instruments or transactions pursuant to or in connection herewith or therewith, which obligation shall survive the termination of this Agreement. 9.5 Notices.       Any notice, request, demand, direction or other communication (for purposes of this Section 9.5 only, a “Notice”) to be given to or made upon any party hereto under any provision of this Agreement shall be given or made by telephone or in writing (which includes by means of electronic transmission (i.e., “e-mail”) or facsimile transmission or by setting forth such Notice on a site on the World Wide Web (a “Website Posting”) if Notice of such Website Posting (including the information necessary to access such site) has previously been delivered to the applicable parties hereto by another means set forth in this Section 9.5) in accordance with this Section 9.5. Any such Notice must be delivered to the applicable parties hereto at the addresses and numbers set forth under their respective signatures hereto on or to an assignment and assumption executed by such Bank or in accordance with any subsequent unrevoked Notice from any such party that is given in accordance with this Section 9.5. Any Notice shall be effective:       (i) In the case of hand-delivery, when delivered;       (ii) If given by mail, four days after such Notice is deposited with the United States Postal Service, certified or registered mail postage prepaid, return receipt requested;       (iii) In the case of a telephonic Notice, when a party is contacted by telephone, if delivery of such telephonic Notice is confirmed no later than the next Business Day by hand delivery, a -67- -------------------------------------------------------------------------------- facsimile or electronic transmission, a Website Posting or an overnight courier delivery of a confirmatory Notice (received before the close of business on such next Business Day);       (iv) In the case of a facsimile transmission, when sent to the applicable party’s facsimile machines telephone number, if the party sending such Notice receives confirmation of the delivery thereof from its own facsimile machine;       (v) In the case of electronic transmission, when actually received;       (vi) In the case of a Website Posting, upon delivery of a Notice of such posting (including the information necessary to access such site) by another means set forth in this Section 9.5; and       (vii) If given by any other means (including by overnight courier), when actually received. Any Bank giving a Notice to the Borrower shall concurrently send a copy thereof to the Agent, and the Agent shall promptly notify the other Banks of its receipt of such Notice. 9.6 Costs. The Borrower will pay all reasonable out-of-pocket costs and expenses of (i) the Agent (including without limitation the reasonable fees and disbursements of the Agent and the Agent’s special counsel) in connection with the preparation, of the Loan Documents and waivers or amendments thereto and (ii) the Agent and the Banks and their respective counsel in connection with the enforcement of the Loan Documents. 9.7 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or enforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 9.8 Covenants to Survival. Until payment in full of the Bank Indebtedness and the termination of the Long Term Revolving Credit Commitment and the Short Term Revolving Credit Commitment and the expiration or cancellation of all Letters of Credit, all representations, warranties, covenants and agreements of the Borrower contained herein or made in writing in connection herewith shall survive the advances of money made by the Banks to the Borrower hereunder and the delivery of the Long Term Revolving Credit Notes, the Short Term Revolving Credit Notes, the Bid Rate Notes or the Letters of Credit and all such representations, warranties, covenants and agreements shall inure to the benefit of the successors and assigns of the Banks and the Agent, whether or not so expressed. 9.9 Investment. Each Bank represents that it is the present intention of such Bank to acquire each Note made to its order for its own account for the purpose of investment and not with a view to the distribution or sale thereof, subject, nevertheless, to the necessity that such Bank remain in control at all times of the disposition of property held by it for its own account; it being understood that the foregoing representation shall not affect the character of the Loans as commercial lending transactions. 9.10 Holiday Payments. If any payments to be made by the Borrower hereunder shall become due on a date not a Business Day, such payments shall be made on the next succeeding -68- -------------------------------------------------------------------------------- Business Day and such extension of time shall be included in computing any interest in respect of such payment. 9.11 Governing Law. This Agreement, each Long Term Revolving Credit Note, each Short Term Revolving Credit Note and each Bid Rate Note shall each be a contract made under and governed by the laws of the Commonwealth of Pennsylvania. 9.12 Successors, Assigns and Participations. 9.12a Successors and Assigns.       (i) This Agreement shall be binding upon the Borrower, the Banks and the Agent and their respective successors and assigns, and shall inure to the benefit of the Borrower, the Banks and the Agent and the successors and assigns of the Banks and the Agent. The foregoing sentence notwithstanding, the Borrower may not, without the consent of all of the Banks, nor shall any Bank without the consent of the Borrower and the Agent, such consent not to be unreasonably withheld, assign or transfer its rights or duties hereunder; provided however that at any time that an Event of Default exists the Borrower’s consent to any assignment by a Bank of its rights and duties hereunder shall not be required. Further, no consent shall be required for assignments to the Federal Reserve Bank of New York or for assignments described in Section 9.12(a) (ii). Each assignment by a Bank (A) shall be in a minimum amount of $5,000,000; and (B) shall be evidenced in a manner in form and substance reasonably satisfactory to the Agent. The Agent shall be entitled to receive, from the assigning Bank, a fee of $3,500.00 at the time of each assignment for processing such assignment.       (ii) Notwithstanding anything to the contrary contained herein, any Bank (a “Granting Bank”) may grant to a special purpose funding Person (an “SPC”) the option to fund all or any part of any Loan that such Granting Bank would otherwise be obligated to fund pursuant to this Agreement; provided, however, that (A) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (B) if an SPC elects not to exercise such option or otherwise fails to fund all or any part of such Loan, the Granting Bank shall be obligated to fund such Loan pursuant to the terms hereof; and, provided, further, (A) all credit decisions relating to any such funding by the SPC shall be made by the Granting Bank for and on behalf of the SPC, (B) the SPC shall have no voting rights under any of the Loan Documents, and (C) except for the payment of principal, interest and fees, if any, the Agent shall be entitled to treat the Granting Bank as the Bank for all purposes hereunder as if the SPC had made no funding of any Loan. The funding of a Loan by an SPC hereunder shall utilize the Long Term Revolving Credit Commitment or the Short Term Revolving Credit Commitment of the Granting Bank to the same extent, and as if, such Loan were funded by such Granting Bank. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or payment under this Agreement for which a Bank would otherwise be liable for so long as, and to the extent, the Granting Bank provides such indemnity or makes such payment. Notwithstanding anything to the contrary contained in this Agreement, any SPC may disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or guarantee to such SPC. This Section may not be amended without the -69- -------------------------------------------------------------------------------- prior written consent of each Granting Bank, all or any part of whose Loan is being funded by an SPC at the time of such amendment. 9.12b Participations. Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more Participants participating interests in any Long Term Revolving Credit Loan, Short Term Revolving Credit Loan, Bid Rate Loan or Letter of Credit owing to such Bank, the interest of such Bank in any Long Term Revolving Credit Note, Short Term Revolving Credit Note, Bid Rate Note or Letter of Credit of such Bank, or any other interest of such Bank hereunder. In the event of any such sale by a Bank of participating interests to a Participant, such Bank’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Long Term Revolving Credit Note, Short Term Revolving Credit Note, Bid Rate Note or Letter of Credit for all purposes under this Agreement (including voting rights hereunder), and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank’s rights and obligations under this Agreement. As between any Bank and its Participant, the Participant’s ability to direct such Bank to vote shall be limited to (i) an increase in the Long Term Revolving Credit Commitment or Short Term Revolving Credit Commitment, (ii) a reduction in the interest rate or fees due the Banks, and (ii) a postponement of the scheduled payments of principal or interest. 9.13 Counterparts. This Agreement may be executed in as many identical counterparts as shall be convenient and by the different parties hereto on separate counterparts. This Agreement shall become binding when each of the Agent, the Banks and the Borrower has executed at least one counterpart. Immediately after the execution of counterparts and solely for the convenience of the parties hereto, the Agent, the Borrower and the Banks will execute sufficient counterparts so that the Borrower shall have counterparts executed by each of the Banks and the Agent and the Banks shall have counterparts executed by the Agent, the Borrower and the Banks. All counterparts shall constitute but one and the same instrument. 9.14 Funding by Branch, Subsidiary or Affiliate.       (a) Notional Funding. Each Bank shall have the right from time to time, without notice to the Borrower, to deem any branch, Subsidiary or Affiliate (which for the purposes of this Section 9.14 shall mean any corporation or association which is directly or indirectly controlled by or is under direct or indirect common control with any corporation or association which directly or indirectly controls such Bank) of such Bank to have made, maintained or funded any Loan in Dollars or in any Optional Currency to which the Euro-Rate Option applies at any time, provided that immediately following (on the assumption that a payment was then due from the Borrower to such other office) and as a result of such change the Borrower would not be under any greater financial obligation than it would have been in the absence of such change. Notional funding offices may be selected by each Bank without regard to the Bank’s actual methods of making, maintaining or funding the Loans or any sources of funding actually used by or available to such Bank. -70- --------------------------------------------------------------------------------       (b) Actual Funding. Each Bank shall have the right from time to time to make or maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such Bank to make or maintain such Loan subject to the last sentence of this Section 9.14(b). If any Bank causes a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such part of the Loans to the same extent as if such Loans were made or maintained by such Bank, provided that in no event shall any Bank’s use of such a branch, Subsidiary or Affiliate to make or maintain any part of the Loans hereunder cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or expenses payable by the Borrower hereunder or require the Borrower to pay any other compensation to any Bank which would otherwise not be incurred. 9.15 Tax Withholding Forms. Each Bank or assignee or participant of a Bank that is not incorporated under the Laws of the United States of America or a state thereof agrees that it will deliver to each of the Borrower and the Agent two (2) duly completed copies of the following: (i) Internal Revenue Service Form W-9, 4224 or 1001, or other applicable form prescribed by the Internal Revenue Service, certifying that such Bank, assignee or participant is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes, or is subject to such tax at a reduced rate under an applicable tax treaty, or (ii) Internal Revenue Service Form W-8 or other applicable form or a certificate of the Bank, assignee or participant indicating that no such exemption or reduced rate is allowable with respect to such payments. Each assignee or participant shall deliver such form or certificate on or before the effective date of such assignment or participation. Each Bank, assignee or participant which so delivers a Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of the Borrower and the Agent two (2) additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it, and such amendments thereto or extensions or renewals thereof as may be reasonably requested by the Borrower or the Agent, either certifying that such Bank, assignee or participant is entitled to receive payments under this Agreement and the other Loan Documents without deduction or withholding of any United States federal income taxes or is subject to such tax at a reduced rate under an applicable tax treaty or stating that no such exemption or reduced rate is allowable. The Agent shall be entitled to withhold United States federal income taxes at the full withholding rate unless the Bank, assignee or participant establishes an exemption or that it is subject to a reduced rate as established pursuant to the above provisions. 9.16 Amendment and Restatement of Original Credit Agreement. This Agreement is intended to amend and restate the provisions of the Original Credit Agreement and, as of the Restatement Closing Date, except as expressly modified herein: (a) all of the terms and provisions of the Original Credit Agreement shall continue to apply for the period prior to the Restatement Closing Date, including any determinations of payment dates, interest rates, Events of Default or any amount that may be payable to Agent or any Bank, and (b) the Bank Indebtedness (as defined in the Original Credit Agreement) under the Original Credit Agreement shall continue to be paid or prepaid in accordance with the Original Credit Agreement on or prior to the Restatement Closing Date and shall from and after the Restatement Closing Date continue -71- -------------------------------------------------------------------------------- to be owing and be subject to the terms of this Agreement. All references in any or all of the Loan Documents to the Original Credit Agreement shall be deemed to be a reference to this Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time, and such Loan Documents are hereby amended to reflect such reference. Bank Indebtedness (as defined in the Original Credit Agreement) shall be governed by this Agreement from and after the Restatement Closing Date. On the Restatement Closing Date, the Existing Banks shall deliver to the Agent all existing Long Term Revolving Credit Notes, Short Term Revolving Credit Notes and Bid Rate Notes and shall authorize the Agent to mark such notes as “paid by substitution”. Upon receipt of all existing Long Term Revolving Credit Notes, Short Term Revolving Credit Notes and Bid Rate Notes, the Agent shall mark such notes as “paid by substitution” and shall deliver them to the Borrower. The Borrower, in accordance with Section 6.2 hereof, shall, on the Restatement Closing Date, deliver to the Agent new fully executed Long Term Revolving Credit Notes, Short Term Revolving Credit Notes and Bid Rate Notes. 9.17 Joinder to Agreement; Assignment of Interests under the Original Credit Agreement. (a) By executing and delivering this Agreement, each of Fifth Third Bank, Northwestern Ohio, N.A., and SunTrust Bank (each a “Joining Bank”) hereby agrees to be bound by the terms and conditions of the Original Credit Agreement, as amended hereby. Each Joining Bank hereby acknowledges and agrees that each of its Long Term Revolving Credit Commitment, Short Term Revolving Credit Commitment and Pro Rata share is set forth opposite its signature to this Agreement.       (b) By executing and delivering this Agreement, the Borrower, the Agent and the Existing Banks consent to the joinder of each of the Joining Banks as a party to this Agreement as a lender and each of the Joining Banks shall have the full benefits of this Agreement. On and after the Restatement Closing Date, the term “Bank” shall include each of the Joining Banks and their successors and assigns.       (c) On and as of the Restatement Closing Date, each of the Existing Banks (on a pro rata basis) hereby agrees to sell without recourse, and each of the Joining Banks hereby agrees to purchase without recourse, such an interest in the outstanding Long Term Revolving Credit Loans, outstanding Short Term Revolving Credit Loans and the Commitments (as such terms are defined in the Original Credit Agreement) as is required to give each of the Joining Banks its Pro Rata share of the Long Term Revolving Credit Loans, Short Term Revolving Credit Loans and the Commitments existing on or as of the opening of business on the Restatement Closing Date. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -72- --------------------------------------------------------------------------------       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 written above.       ATTEST/WITNESS: COOPER TIRE & RUBBER COMPANY   ____________________________ Name:_______________________ Title:________________________ By ___________________________ Name:_________________________ Title:__________________________   By ___________________________ Name:_________________________ Title:__________________________   PNC BANK, NATIONAL ASSOCIATION as Agent   By ___________________________ Name:_________________________ Title:__________________________   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term NATIONAL CITY BANK Revolving Credit Commitment $27,857,142.86 Long Term Revolving Credit Commitment Percentage By:_______________________ 18.5714285714% Name: Terri L. Cable Maximum Dollar Amount of Short Term Revolving Credit Commitment Title: Senior Vice President $37,142,857.14 Short Term Revolving Credit Commitment Percentage 18.5714285714%   Address for notice purposes:   National City Bank 1900 East Ninth Street, 7th Floor LOC 2077 Cleveland, OH 44114 Attention: Terri L. Cable Title: Senior Vice President Telephone: (216) 575-3354 Facsimile: (216) 222-0003   Address for Euro-Rate Funding if different from above:   National City Bank 1900 East Ninth Street, 7th Floor LOC 2077 Cleveland, OH 44114 Attention: Terri L. Cable Title: Senior Vice President Telephone: (216) 575-3354 Facsimile: (216) 222-0003   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term Revolving BANK ONE, MICHIGAN Credit Commitment $19,285,714.29 Long Term Revolving Credit Commitment Percentage By:_______________________ 12.8571428571% Name: William C. Goodhue Maximum Dollar Amount of Short Term Revolving Credit Commitment Title: Managing Director $25,714,285.71 Short Term Revolving Credit Commitment Percentage 12.8571428571%   Address for notice purposes:     Bank One, Michigan 611 Woodward Avenue Detroit, MI 48226 Attention: William C. Goodhue Title: Managing Director Telephone: (313) 225-2227 Facsimile: (313) 226-0855   Address for Euro-Rate Funding if different from above:   ______________________________ ______________________________ ______________________________ Telephone:_____________________ Facsimile:______________________ Telex:_________________________   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term PNC BANK, NATIONAL ASSOCIATION Revolving Credit Commitment $32,142,857.13 Long Term Revolving Credit Commitment By:_______________________ Percentage Name: Joseph G. Moran 21.4285714286% Title: Vice President Maximum Dollar Amount of Short Term Revolving Credit Commitment $42,857,142.87 Short Term Revolving Credit Commitment Percentage 21.4285714286%   Address for notice purposes:   PNC Bank, NA 249 Fifth Avenue P2 – PTPP-03-1 Pittsburgh, PA 15222 Attention: Peggy Collier Title: Telephone: (412) 762-7946 Facsimile: (412) 768-4586       Address for Euro-Rate Funding if different from above:   ______________________________ ______________________________ ______________________________ Telephone:_____________________ Facsimile:______________________ Telex:_________________________   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term Revolving THE CHASE MANHATTAN BANK Credit Commitment $12,857,142.86 Long Term Revolving Credit Commitment Percentage By:_______________________ 8.5714285714% Name: Henry W. Centa Maximum Dollar Amount of Short Term Revolving Credit Commitment Title: Vice President $17,142,857.14 Short Term Revolving Credit Commitment Percentage 8.5714285714%   Address for notice purposes:   The Chase Manhattan Bank 250 West Huron Road Cleveland, OH 44113-1451 Attention: Henry W. Centa Title: Vice President Telephone: (216) 479-2534 Facsimile: (216) 479-2732       Address for Euro-Rate Funding if different from above:   The Chase Manhattan Bank ______________________________ ______________________________ Attention:______________________ Title:__________________________ Telephone:_____________________ Facsimile:______________________   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term Revolving THE BANK OF NEW YORK Credit Commitment $12,857,142.86 Long Term Revolving Credit Commitment Percentage By:_______________________ 8.5714285714% Name: Edward J. Dougherty Maximum Dollar Amount of Short Term Revolving Credit Commitment Title: Vice President $17,142,857.14 Short Term Revolving Credit Commitment Percentage 8.5714285714%   Address for notice purposes:   The Bank of New York One Wall Street Automotive Division, 22nd Floor New York, NY 10286     Attention: Edward J. Dougherty Title: Vice President Telephone: (212) 635-7842 Facsimile: (212) 635-6434       Address for Euro-Rate Funding if different from above:   ______________________________ ______________________________ ______________________________ Telephone:_____________________ Facsimile:______________________ Telex:_________________________   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term Revolving BANK OF AMERICA, N.A. Credit Commitment $27,857,142.86 Long Term Revolving Credit Commitment Percentage By:_______________________ 18.5714285714% Name: Matthew J. Reilly Maximum Dollar Amount of Short Term Revolving Credit Commitment Title: Vice President $37,142,857.14 Short Term Revolving Credit Commitment Percentage 18.5714285714%   Address for notice purposes:   Bank of America, N.A. 231 South LaSalle Street Chicago, IL 60697 Attention: Matthew J. Reilly Title: Vice President Telephone: (312) 828-7131 Facsimile: (312) 987-0303   Address for Euro-Rate Funding if different from above:   Bank of America Credit Services 101 North Tryon Street Charlotte, NC 28255 Attention: Carole Greene Title: Customer Service Representative Telephone: (704) 386-9875 Facsimile: (704) 409-0069   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term Revolving FIFTH THIRD BANK, NORTHWESTERN Credit Commitment OHIO, N.A. $8,571,428.57 Long Term Revolving Credit Commitment Percentage By:_______________________ 5.7142857143% Name: Jeffery C. Shrader Maximum Dollar Amount of Short Term Revolving Credit Commitment Title: Vice President $11,428,571.43 Short Term Revolving Credit Commitment Percentage 5.7142857143%   Address for notice purposes:   337 South Main Street Findlay, Ohio 45840 Attention: Jeffery C. Shrader Title: Vice President Telephone: (419) 424-8504 Facsimile: (419) 424-8547       Address for Euro-Rate Funding if different from above:   ______________________________ ______________________________ ______________________________ Telephone:_____________________ Facsimile:______________________ Telex:_________________________   --------------------------------------------------------------------------------       IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned Bank has caused this Agreement by and among COOPER TIRE & RUBBER COMPANY as the Borrower, the Financial Institutions Party thereto, as the Banks, and PNC BANK, NATIONAL ASSOCIATION, as the Agent, to be executed by its duly authorized officers as of the date first above written.       Maximum Dollar Amount of Long Term Revolving SunTrust Bank Credit Commitment $8,571,428.57 Long Term Revolving Credit Commitment Percentage By:_______________________ 5.7142857143% Name: William Humphries Maximum Dollar Amount of Short Term Revolving Credit Commitment Title: Director $11,428,571.43 Short Term Revolving Credit Commitment Percentage 5.7142857143%   Address for notice purposes:   SunTrust Bank 303 Peachtree Street 3rd Floor, Mail Code: 1928 Atlanta, GA 30308 Attention: William Humphries Title: Director Telephone: (404) 724-3931 Facsimile: (404) 588-8505   Address for Euro-Rate Funding if different from above:       ______________________________ ______________________________ ______________________________ Telephone:_____________________ Facsimile:______________________ Telex:_________________________  
EXHIBIT 10.22 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT Effective Date:  July 13, 2001              This Second Amendment to the Employment Agreement (the “Second Amendment”) is entered into as of the date all necessary regulatory approvals are received and between BYL BANK GROUP, a California banking corporation, with its headquarters office located at 1875 North Tustin Street, Orange, California (“Bank”), and Gary R. Strachn, PO Box 91703, Long Beach, Ca. (“Employee”). RECITALS              A.         The Bank and Employee previously entered into an Employment Agreement dated December 22, 1999 (the “Employment Agreement”) that specified the terms of Employee’s employment by Bank as its Senior Vice President and Chief Financial Officer;              B.          Following receipt of all necessary regulatory consents, the Bank and Employee entered into the First Amendment dated December 20, 2000 in order to provide for constructive termination provisions and other provisions if the proposed acquisition of BYL Bancorp (“BYL”) and the Bank by PBOC Holdings, Inc. (“PBOC”) and People’s Bank of California (“People’s”) consummates.              C.          The acquisition was terminated on May 2, 2001, and as a result, the First Amendment to Employee’s employment agreement did not become effective.              D.         Upon receipt of all necessary regulatory approvals, the Board of Directors of the Bank and Employee desire to further amend Employee’s employment agreement to provide for constructive termination provisions and other provisions, as described herein.              NOW, THEREFORE, on the basis of foregoing facts and in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:              1.          The first paragraph in Section 1(a) is hereby amended in full as follows:   (a) Subject to the provisions below, the Bank agrees to continue to employ Employee, and Employee agrees to be employed by the Bank, subject to the terms and conditions of this Agreement for the period ending on March 31, 2002.                2.          The first paragraph in Section 1(b) is hereby amended in full as follows:   (b) Subject to the notice provisions set forth in this paragraph, the term of this Agreement shall automatically be extended for one (1) additional year on April 1 of each calendar year after the expiration of the term described in Paragraph 1(a).  The term shall not be automatically extended as provided in this paragraph if either party shall give written notice to the other, on or before December 31 of each year that the Agreement shall not be automatically renewed on the next April 1.  In the event either party shall give the other written notice as provided in this paragraph, the term of this Agreement shall thereafter terminate on the agreement termination date.              3.          The second paragraph in Section 9.(b) is hereby amended in full as follows: “However, if Employee’s employment is terminated by the Bank or the Bank’s successor pursuant to this Section 9 within 12 months as a result of the consummation of a plan of dissolution or liquidation of the Bank, or consummation of a plan or reorganization, merger or consolidation of the Bank with one or more corporations or associations, as a result of which the Bank is not the surviving corporation, or upon the sale of all or substantially all of the assets of the Bank to another corporation, or the acquisition of stock representing more than 50% of the voting power of the Bank by another corporation or person (the above transaction collectively referred to as “Change of Control”), or the Employee terminates employment with the Bank or the Bank’s successor for “Good Reason” within 12 months following a Change of Control as described above, the Bank or the Bank’s successor shall pay to Employee on the effective date of termination an amount equal to twenty-four (24) months of base salary, auto allowance, vacation pay, and insurance benefits, as severance pay in lieu of and in substitution for any other claims for salary and continued benefits hereunder (based on Employee’s base salary and benefits prevailing at the time of termination).  Such severance payment shall be in addition to all sums owing to Employee as accrued vacation pay. Following a Change of Control, “Good Reason” shall mean the following:   (i) Without the Executive's express written consent, the failure to elect or to re-elect or to appoint or to re-appoint the Executive to the Executive's current or comparable office of the Bank, or a material adverse change made by the Bank in the Executive's functions, duties or responsibilities as Senior Vice President and Chief Financial Officer;         (ii) Without Executive's express written consent, a reduction by either of the Bank in the Executive's base salary, bonus or other benefits as the same may be increased from time to time;         (iii) The location of the Executive's office shall be more than a 35 mile radius from the location of the Bank's current principal executive office, except for required travel on business of the Bank to an extent substantially consistent with the Executive's present business travel obligations;         (iv) Any purported termination of the Executive's employment for disability which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph 10; or         (v) The failure any acquiror of BYL and/or the Bank to obtain the assumption of and agreement to perform this Agreement by any successor of any acquiror of BYL and/or the Bank.”              4.          Capitalized terms used herein and not otherwise defined shall have the same meaning as set forth in the Employment Agreement.              5.          This Second Amendment may be entered into in one or more counterparts, all of which shall be considered one in the same instrument, and it shall become effective when one or more counterparts have been signed by each of the Bank and the Employee and delivered to the other Party, it being understood that all Parties need not sign the same counterpart.              6.          Except as herein amended, the Employment Agreement shall remain in full force and effect.              7.          This Second Amendment shall be governed by and construed in accordance with the laws of the State of California.              8.          The terms and conditions of this Second Amendment are subject to the approval of any necessary regulatory agency.              IN WITNESS WHEREOF, the Bank has caused this Second Amendment to be executed by its duly authorized officers, and Employee has executed this Agreement to be effective as of the day and year written above. BANK: BYL BANK GROUP         By: /s/ H. Rhoads Martin     --------------------------------------------------------------------------------       H. Rhoads Martin     Chairman of the Board       EMPLOYEE: /s/ Gary R. Strachn   --------------------------------------------------------------------------------     Gary R. Strachn  
-------------------------------------------------------------------------------- EXHIBIT 10.61 AGREEMENT FOR PURCHASE AND SALE OF ASSETS      THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS (the “Agreement”) is made and entered into this 4th day of December, 2001, by and between Vision-R eTechnologies, Inc., an Ontario provincial corporation (“Vision-R”) and Group 1 Software, Inc., a Delaware corporation (“Group 1”), regarding the acquisition by Group 1 of certain of the assets of Vision-R and other transactions described below.      In consideration of the premises and the mutual promises, representations, warranties and covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Vision-R and Group 1 intending to be legally bound hereby agree as follows:      1. The Assets.      a) Group 1 shall acquire at Closing sole and exclusive right, title and interest, free and clear of any and all claims, liens, encumbrances, security interests, pledges or any other clouds on title of any nature whatsoever, to all of the assets of Vision-R that are used in the development, marketing, support, distribution and licensing of the archival and retrieval Software described herein, including, without limitation, the following:        (i)      all computer programming and all derivative works, customizations, supplemental works, interim works, works in progress rendered into tangible form for all of the computer programs developed or owned by Vision-R, including, without limitation, the computer programs identified in Exhibit 1.1, hereto, and all development tools for such software (collectively the “Software”), and all of Vision-R’s rights with respect to all intellectual property rights and portions thereof, attendant to the Software (including, without limitation, all copyrights and applications for such, rights with respect to patents and applications for such, moral rights, inventions, original works of authorship, discoveries, concepts, data, processes, ideas and know-how contained therein or associated therewith);        (ii)     all installation, technical, functional or user documentation or specifications for the Software (the “Documentation”) regardless of the media on which the Documentation is contained;        (iii)    the list of customers of, and prospective (as of Closing) customers for, the Software and related professional services;        (iv)     all trademarks, service marks and trade names related to the Software, including, without limitation, those set out in Exhibit 1.2, hereto (the “Trademarks”);        (v)      all URLs, domain names and other Internet address identifiers and all website(s) design and implementation methods and other technology, including, without limitation, those set out in Exhibit 1.3;        (vi)     the financial, production, marketing and sales books and records of Vision-R related to the transactions contemplated herein (including, without limitation, all notes, records and books regarding the warranty/software performance, credit and payment history of all past, current and prospective customers of any of the Software);        (vii)    all of Vision-R’s right, title and interest under the agreements identified in Exhibit 4.1, and all other development, escrow, license and maintenance agreements for the Software;        (viii)    the cash and cash equivalents in the amounts set out in Exhibit 1.4, hereto;        (ix)      all prepaid items pro-rated through Closing, including, but not limited to, those set out in Exhibit 1.5, hereto, and deposits (including but not limited to security deposits paid with respect to any leases);        (x)       the accounts receivable identified in Exhibit 1.6, hereto; 1 --------------------------------------------------------------------------------        (xi)      the equipment, furniture fixtures and other tangible assets as identified in Exhibit 1.7, hereto;        (xii)    all inventory, including documentation and media of the Software and Documentation; and        (xiii)   all other assets of Vision-R, whether real property or personnel property, tangible or intangible, used in the conduct of developing, supporting and maintaining the Software (the “Business”) as of Closing ((i)-(xiii), collectively, the “Assets”).      b) The Software shall be delivered at Closing in object code, and as fully commented source code as exists. The Software includes, without limitation, all APIs, DLLs and other programming by which the Software integrates or communicates with other software and/or hardware/equipment. The Software includes, without limitation, all definition of files, fields of files, variables, details, parameters, installation and maintenance specifications, inputs and outputs (including codes and acronyms), program descriptions, file descriptions, formats and layouts, report descriptions and layouts, screen descriptions and layouts, graphical and non-graphical interfaces, input documents, data elements, paper processing flowcharts, computer processing flowcharts, processing narratives, editing rules, password development and protection rules, telecommunications requirements, glossaries and manual procedures with respect to the aforesaid computer programming. Rights to the Software conveyed to Group 1 hereunder include rights with respect to all computer platforms and configurations, known or unknown (e.g., Internet/WEB PC, midrange, LAN, WAN, client server, mini, mainframe). Rights to the Software include the rights to use, reproduce, make derivative works of, modify, enhance, sell, license, sublicense, display, exhibit, perform, transmit and otherwise exploit the intellectual property rights of Vision-R attendant to the Software in, on and through any medium or means of processing, display or transmission now known or hereafter developed, including, without limitation, the Internet and/or satellite transmission.      c) Vision-R hereby agrees, effective on and after Closing, to unconditionally and irrevocably waive any and all moral rights, including, without limitation, any right to identification of authorship, rights of approval on modifications or limitation on subsequent modifications, which Vision-R has or may have in the Software or the Documentation.      d) Vision-R represents and warrants to Group 1 that the CD, to be delivered to Group 1 at Closing (pursuant to Section 25(a)(vii), below) shall contain a true and complete copy of the Software, as of the date closest to Closing as is practicable.      2. Purchase Price.      a) The total purchase price for the Assets and the consideration for all of the other non-employment transactions described herein shall be:        (i) Two Hundred and Fifty Thousand US Dollars ($250,000 US), in cash or cash equivalent, paid at Closing to Vision-R and/or its nominees and/or nominees in trust; plus        (ii) Seven Hundred and Fifty Thousand US Dollars ($750,000 US), in cash or cash equivalent, paid on January 4, 2002 to Vision-R and/or its nominees and/or nominees in trust, plus        (iii) the Earn-Out Payments, in cash or cash equivalent, to Vision-R and/or its nominees and/or nominees in trust. 2 --------------------------------------------------------------------------------      b) Each Earn-Out Payment shall consist of twenty-five percent (25%) of the revenue recognized in accordance with generally accepted accounting principles (consistently applied) in each of the applicable measurement periods (“MPs”), with respect to sales (direct or through distribution) of the following: (i) licenses for the Software and other software to the extent it constitutes a derivative work of the Software, plus (ii) ASP-type services delivered by Group 1 with respect to the Software and other software to the extent it constitutes a derivative work of the Software, plus (iii) support/maintenance services delivered by Group 1 with respect to the Software and other software to the extent it constitutes a derivative work of the Software. The revenue upon which Earn-Out Payments are to be calculated shall, however, exclude: (A) amounts earned by third parties who act as channel partners (e.g. VARS, OEMs, distributors) with respect to the Software or its derivative works, (B) amounts earned by third parties who act as suppliers, consultants, project management or the like with respect to the Software or its derivative works, (C) returns, refunds, discounts, bad debts, freight, shipping and handling, and (D) taxes, including income taxes, customs and other charges imposed by any governmental authority and directly related to the sale of license or other rights or the providing of related services. If a sale that is subject to the Earn-Out Payment is made in conjunction with the sale of other Group 1 software or services (not subject to the Earn-Out Payment) and a bundled price is paid for all the software and/or services, the revenue from such sale shall be subject to the Earn-Out Payment shall be determined as follows: the list price for the Software/derivative works and related services is divided by the list price for all of the products and services involved in the sale; this fraction is then multiplied by the total price of that sale.      c) The MP for the Earn-Out Payments shall be:      January 1, 2002 through March 31, 2002 (audited results) (“MP 1”),      April 1, 2002 through March 31, 2003 (audited results) (“MP 2”) ,      April 1, 2003 through March 31, 2004 (audited results) (“MP 3”) and      April 1, 2004 through December 31, 2004 (audited results) (“MP 4”).      d) Earn-Out Payments shall made as follows:      On January 2, 2003 — Four Hundred and Sixteen Thousand, Six Hundred and Sixty-Seven US Dollars ($416,667 US), then      Within ten (10) business days after completion of Group 1’s audit for its Fiscal Year ending March 31, 2003 — the total of the Earn-Out Payments paid for MP 1 and MP 2, minus Four Hundred and Sixteen Thousand, Six Hundred and Sixty-Seven US Dollars ($416,667 US), then      On January 2, 2004 — the difference between the total Earn-Out Payments previously paid and Eight Hundred and Thirty-Three Thousand, Three Hundred and Thirty-Four US Dollars ($833,334 US), but only up to a maximum of Four Hundred and Sixteen Thousand, Six Hundred and Sixty-Seven US Dollars ($416,667 US), then      Within ten (10) business days after completion of Group 1’s audit for its Fiscal Year ending March 31, 2004 — the Earn-Out Payments previously paid for MP 1, MP 2 and MP 3 to the extent they exceed Eight Hundred and Thirty-Three Thousand, Three Hundred and Thirty-Four US Dollars ($833,334 US), then      On January 2, 2005 — the difference between the total Earn-Out Payments previously paid and One Million, Two Hundred and Fifty Thousand US Dollars ($1,250,000 US) but only up to a maximum of Four Hundred and Sixteen Thousand, Six Hundred and Sixty-Seven US Dollars ($416,667 US), then      Within ten (10) business days after completion of Group 1’s audit for its Fiscal Year ending March 31, 2005 — the Earn-Out Payment paid on December 31, 2004 with respect to MP 4 to the extent it together with the Earn-Out Payments previously paid with respect to MP 1, MP 2 and MP 3 exceed One Million, Two Hundred and Fifty Thousand US Dollars ($1,250,000 US) but in no event to exceed Two Million, Two Hundred and Fifty Thousand US Dollars ($2,250,000 US).      Any payment made in any MP shall not entitle Group 1 to a refund of that amount due solely to the level of Earn-Out generating revenue in any subsequent. For example, payment of the first minimum payment cannot be recouped by Group 1 in MP 3 due solely and exclusively to the fact that there has been absolutely no Software related revenue in a subsequent MP. 3 --------------------------------------------------------------------------------      e) Notwithstanding the foregoing provisions of this Section 2: the first twelve (12) months of Earn-Out Payments shall be contingent upon, among other conditions, each of Messrs. Boyle, Linov, Radojkovic, Tian and Wood (who shall agree at Closing to employment with Group 1, as described in Section 7, below), signing a one-year employment contract with Group 1 and remaining employed with Group 1 consistent with the terms of their respective employment agreement through December 31, 2002; and the Earn-Out Payment for MP 3 shall be contingent upon, among other conditions, each of Messrs. Boyle, Linov, Radojkovic and Wood remaining employed with Group 1 through December 31, 2003. The employment conditions set out in this Section 2(e) shall, however, be waived by Group 1 to the extent that the employment of any of these persons is either terminated due to his death, total disability or involuntary termination by Group 1 without cause, or in the event Vision-R provides a reasonably acceptable to Group 1, equivalent replacement professional, which acceptance by Group 1 not to be arbitrarily withheld.      f) The total purchase price for the Assets shall not, in any event, exceed Three Million, Two Hundred and Fifty Thousand US Dollars ($3,250,000 US).      g) Each payment hereunder shall be made by US federal wire transfer, in accordance with the wire instructions set out in Exhibit 2.1, hereto, or any further instructions as may be given by Vision-R in writing to Group 1, from time to time .      h) From Closing until the last month during which payment may acrue to Vision-R pursuant to Sections 2(a) or (b), above, Group 1 agrees to market the Software through Group 1’s worldwide sales force, as an integral part of the DOC1 suite of software products; provided, however, that the extent of Group 1’s efforts shall take into account: (i) the financial and technical performance of the Software as compared to the performance in these respects of other products and services of Group 1, and (ii) Group 1’s good faith determination of market opportunities and conditions.      i) The allocation of the Assets is set out in Exhibit 2.2, hereto.      3. Right of Offset. Vision-R acknowledges and agrees that, notwithstanding the provisions set out in Section 2, above, Group 1 shall have the right to withhold and to offset any payments, otherwise to be made to Vision-R under this Agreement, in the event and to the extent of damages arising out of any material breach by Vision-R of any representation, warranty, covenant or agreement set out or referenced herein or in any Exhibit or other instrument executed pursuant to this Agreement (exclusive, however, of the employment agreements identified in Section 7(a), below).      4. Liabilities of Vision-R; Assigned Agreements.      a) Except as expressly assumed under Sections 4(b), (f) and (g), below, Group 1 shall assume no liabilities or obligations whatsoever of Vision-R or any entity owned by, owning or under common ownership (an “Affiliate”) with respect to Vision-R, regardless of whether such arise or are required to be performed before or after Closing (regardless of whether such liabilities have been disclosed to Group 1), including, without limitation: (i) liabilities or obligations of Vision-R or any Affiliate thereof accruing or required to be performed before or after Closing; (ii) liabilities or obligations of or claims against Vision-R or any Affiliate thereof arising out of any action, suit, proceeding, arbitration, investigation, hearing or notice of hearing arising out of, or relating to, in any manner, the operation of the Business by Vision-R before Closing; (iii) liabilities or obligations of any kind to any employees, vendors or customers of Vision-R, including, but not limited to, liabilities under any employee retirement, savings, vacation and other leave, pension or other employee benefit plan, scheme or regulation, severance payments, or any employment practices of Vision-R; (iv) liabilities or obligations of Vision-R arising from any breach of a covenant, agreement, representation or warranty of Vision-R contained herein or arising from, out of or in connection with the transactions contemplated by this Agreement including the fees and expenses of Vision-R’s counsel, accountants and other advisers and representatives; or (v) liabilities for defects in performance, workmanship or materials in products or services of Vision-R.      b) Group 1 shall assume only the liabilities of Vision-R that directly arise, on or after Closing, out of the agreements identified in Exhibit 4.1, hereto (collectively, the “Assigned Agreements”) and only after the receipt of consents/estoppels/assignments as such conditions of receipt are described below, in this Section 4. Vision-R represents and warrants to Group 1 that Exhibit 4.1, hereto, constitutes: (i) all of the license, maintenance, escrow, support and professional services and other agreements by which any party has been granted any rights to the Software (or any portion thereof) or has received services from any of Messrs. Boyle, Linov, Radojkovic, Tian or Wood with regard to the Software (or any portion thereof), (ii) the lease for premises at 8500 Leslie Street, Suite 570, Thornhill, Ontario, Canada, (iii) all of the agreements between Vision-R, and any contractor or third party, which grant to Vision-R any ownership, license or other intellectual property right of any nature whatsoever in the Software or the Documentation (or portions thereof), (iv) all other obligations which shall be assumed by Group 1 hereunder. At Closing Vision-R shall transfer and assign to Group 1 all of the rights, title and interests of Vision-R or any Affiliate of Vision-R under the Assigned Agreements and Group 1 shall assume the obligations arising under the Assigned Agreements. Group 1 agrees to discharge in a reasonable manner the obligations under the Assigned Agreements to be performed after Closing. 4 --------------------------------------------------------------------------------      c) Vision-R represents and warrants to Group 1 that from the date first written above until and including Closing: (i) it is not and shall not be in default under any of the Assigned Agreements, (ii) there is not and shall not be any facts or circumstances which given only the passage of time would become defaults under any of the Assigned Agreements, (iii) all of the computer programming and other deliverables and services to be provided under any of the Assigned Agreements up through Closing have been timely delivered in full and have been fully accepted by the customer. Vision-R agrees that any other representations, warranties, covenants and agreements made in this Agreement shall not be diminished, conditioned or otherwise limited by any provision in any of the Assigned Agreements.      d) Vision-R represents and warrants to Group 1 that, to the best of Vision-R’s knowledge: (i) no party to any Assigned Agreement is in default under any of the Assigned Agreements and (ii) no facts or circumstances exist which given only the passage of time would become defaults by any party to any Assigned Agreement under any Assigned Agreement.      e) Vision-R warrants, represents, covenants and agrees that: (i) there is not, and there will not be through Closing, any liability, accrued or accruable for federal, provincial or municipal income, sales, use, excise, property, goods and services, VAT/ad valorem or other taxes, assessments or charges arising out of or attributable to the licensing to end users, prior to Closing, of the Software or the Documentation or providing services related thereto or the Business; (ii) there are no stamp, sales, transfer or other taxes imposed in respect to any of the transactions to be consummated hereunder; (iii) it shall fully and timely comply with all of the requirements and provisions of any applicable Bulk Sales Act, or similar statute, ordinance or regulation.      f) Vision-R has signed an agreement dated February 13, 2001 with Call-Net Technology Services, Inc. (the “Call-Net Agreement”), under which Vision-R has agreed to license to Call-Net various modules of the Software, to provide development services and deliverables to Call-Net with respect to the Software and to provide support and Software upgrades to Call-Net. With respect to the Call-Net Agreement, Vision-R represents and warrants to Group 1 that: (i) Vision-R is not in default thereunder, (ii) there are not any facts or circumstances which given only the passage of time would become defaults, (iii) all of the computer programming and other deliverables and services to be provided by Vision-R thereunder up through Closing have been timely delivered in full and have been fully accepted by Call-Net. Group 1 agrees to provide to Vision-R support and Software upgrades as described in Section 5(a) and 5(c) of the Call-Net Agreement, giving reasonable commercial efforts. Group 1 shall receive all of the payments made by Call-Net after Closing under the Call-Net Agreement. Group 1 and Vision-R agree that it is in their mutual best interests to, as soon as reasonably practical after Closing, arrange to have Group 1 execute an agreement with Call-Net to replace the Call-Net Agreement, upon terms and conditions generally used by Group 1 to license its other software products. Until such time, Vision-R shall maintain the Call-Net Agreement in full force and effect, shall fully enforce its rights thereunder, subject to Group 1’s performance of its obligations with respect to the Call-Net Agreement.      g) Group 1 shall assume the obligations of Vision-R under the Assigned Agreements with respect to Enbridge Gas, The Toronto-Dominion Bank and The Prudential Company of America only after the date on which Group 1 receives the respective estoppel/consent as required under Section 5(c), below, and shall receive all of the payments made thereunder after Closing by these customers. Group 1 agrees to provide to Vision-R support and Software upgrades for Enbridge Gas and The Toronto-Dominion Bank and The Prudential Company of America, as set forth in their respective Assigned Agreements until the sooner of January 31, 2002 as to Enbridge Gas and The Toronto-Dominion Bank and as to The Prudential Company of America, February 28, 2002, or the receipt by Group 1 of the required estoppel/consent. If Vision-R fails to deliver the required estoppel/consent by January 31, 2002, Group 1 may elect, in its sole discretion, to suspend performance of support and Software enhancement, as described above, until Group 1 receives the required estoppel/consent. Until such time as the appropriate estoppel, consent or release is received by Group 1, Vision-R shall maintain the agreements with the Consumer’s Gas, The Toronto-Dominion Bank and The Prudential Company of America in full force and effect, shall fully enforce its rights thereunder, subject to Group 1’s performance of its obligations as set forth in this Section 4(g). 5 --------------------------------------------------------------------------------      h) Vision-R covenants and agrees that until Group 1 receives the consent/estoppel from The Prudential Company of America referenced in Exhibit 4.1 hereto: Group 1 shall receive either directly from The Prudential Company or America or from Vision-R all of the payment Vision-R receives from Prudential with respect to its Assigned Agreement, which sum is currently sixty-seven percent (67%)of the amount to be paid by The Prudential Company of America under its Assigned Agreement (i.e., currently $94,000 US annualized).      5. Estoppels, Releases, Consents.      a) Vision-R represents and warrants to Group 1 that the only security interests, liens or encumbrances (either perfected or otherwise) that exist as to any of the Assets or the Business are, and shall be up until Closing, those identified in Exhibit 5.1, hereto.      b) Vision-R covenants and agrees, as a condition of Closing, to deliver to Group 1 at Closing: (i) complete and unconditional releases, in forms reasonably acceptable to Group 1 and forms suitable for filing in the appropriate jurisdictions, with regard to any security interest in or lien on any of the Assets, including, without limitation, the security interests identified on Exhibit 5.1, hereto, (ii) a fully executed assignment agreement from Shatsford Development in the form agreed upon by Group 1 and Vision-R and (iii) such other releases, estoppels and consents otherwise reasonably determined necessary by Group 1 in order to consummate the transaction described herein upon the terms and conditions set out herein.      c) Vision-R shall use reasonable best efforts to deliver at Closing all of the required consents/estoppels from the Consumers’ Gas, The Toronto-Dominion Bank and The Prudential Company of America. Failing delivery of such at Closing, Vision-R covenants and agrees to deliver to Group 1 before January 31, 2002, all of the required consents/estoppels for the Consumers’ Gas and The Toronto-Dominion Bank, and February 28, 2002 with respect to the The Prudential Company of America.      6. Condition of the Assets.      a) Vision-R represents, warrants, covenants and agrees that: (i) it and MIPPS have, and at all times have had, the unqualified right to develop the Software, Documentation, Trademarks and its website; (ii) at Closing it shall have the unqualified right to grant to Group 1 any and all rights it has in and to the Software, Documentation, Trademarks and its website, as contemplated hereunder; and (iii) neither the rights granted to Group 1 hereunder, nor the exercise of such rights by Group 1, do or will infringe upon or conflict with the rights held by any third party under any patent, trademark, copyright, license, trade secret or other proprietary right. Vision-R represents and warrants to Group 1 that Vision-R has taken reasonable steps to protect and preserve any trade secrets which help make up the Software or Documentation.      b) After Closing, Vision-R agrees that Group 1’s rights to the Software, Documentation and Trademarks shall include the unrestricted right, without payment of any additional consideration to any party whatsoever, to own, make, use, sell, have made, rent, lease, lend, license, enhance, modify, amend, copy and prepare derivative works and customizations thereof, and to display publicly the Software, Documentation and Trademarks and to otherwise exploit fully the processes, products, software, and services derived from any discoveries, concepts, ideas and improvements to existing technology, whether or not patentable or copyrightable, which are within the scope of the Software and Documentation.      c) Vision-R represents and warrants that the Software, Documentation and Trademarks are subject to no registrations or applications, including registrations or applications Vision-R has initiated, for registration with respect to any governmental entity, except for the registrations and applications identified on Exhibit 6.1, hereto. 6 --------------------------------------------------------------------------------      d) Vision-R represents and warrants to Group 1 that it has not received any notice of any violations of, and is not violating, the rights of persons in their personal data, trademarks, trade names, service marks, domain names, URLs, copyrights, patents, licenses, trade secrets, know-hows (application thereto, as applicable) or other intangible asset arising out of its development, marketing, licensing, sale or use of the Software, Documentation or Trademarks; provided, however, that the foregoing representation and warranty shall not diminish Vision-R’s obligation: (i) to convey free and clear title to the Software, Documentation and Trademarks as described herein, or (ii) Group 1’s remedies against Vision-R for failure to convey such free and clear title.      e) Vision-R represents and warrants to Group 1 that at Closing each of the Assets will be in good and operating condition, and as to the Software, it shall perform all of its intended functions and shall perform in accordance with its technical and user documentation and design specifications.      f) Vision-R represents and warrants to Group 1 that the Software as delivered to Group 1 shall be free of any undocumented remote or automatic disabling or recapture devices, passwords, keys, security devices or trap doors and Computer Viruses. For the purposes of this Agreement, Computer Viruses means any computer instructions (including, but not limited to, computer instructions commonly referred to as Trojan Horses, anomalies, worms, self-destruct mechanisms or time/logic bombs) which do not provide the functionality clearly described in the standard user documentation for the Software and which interfere with the use of the Software, any portion thereof, or other software, firmware or computer hardware.      g) Group 1 shall have the right to use the whole of the Software, any part of parts thereof, or none of the work, as it sees fit. Group 1 may alter the Software, add to it, combine it with any other work or works, at its sole discretion. No rights are reserved by Vision-R or MIPPS.      h) Vision-R represents and warrants to Group 1 that other than pursuant to this Agreement, neither Vision-R nor MIPPS is a party to any contract or obligation whereby an absolute or contingent right to purchase, obtain or acquire any rights in any of the Assets and none has been granted to anyone, except for the Call Net Agreement and the end user licenses to the Software granted in the ordinary course of Vision-R’s business and identified in Exhibit 4.1.      i) Vision-R represents and warrants that the Software and Documentation (and all predecessor versions) and all portions thereof, the Trademarks and Vision-R’s website have been developed exclusively by and through the persons identified on Exhibit 6.2, hereto (the “Development Personnel”); and that none of the Development Personnel has any proprietary rights in the Software, Documentation, Trademarks or website. Vision-R represents and warrants that all Development Personnel participated in the development of the Software, Documentation, Trademarks and website while regularly employed/retained by Vision-R or MIPPS Systems Solutions, Inc. (“MIPPS”) and were fully paid for their services; all Development Personnel performed, at all times, such development of the Software, Documentation and Trademarks within the normal scope of their employment with Vision-R or MIPPS; none of the Development Personnel has made any claim of ownership (including, without limitation, copyrights or patent rights) regarding the Software, Documentation, Trademarks or website, or any portion thereof, nor has any Development Personnel a colorable claim of right to such. Vision-R hereby grants to Group 1 the right to seek enforcement, either in its own name, as a third party beneficiary, or in Vision-R’s name as a delegate of Vision-R, with respect to any agreement with any Development Personnel by which any Development Personnel has agreed to maintain the confidentiality of any information and/or has agreed that the intellectual property rights to any works such agreement are owned by Vision-R or MIPPS.      j) Vision-R represents and warrants to Group 1 that: (i) no copies of the source code for the Software have been provided to any third party except as identified in Exhibit 6.3, hereto, (ii) no license or other rights to use have been granted for any of the Trademarks (or variations thereof) and (iii) no rights to any third party other than limited license rights in the Software and Documentation set out in the Assigned Agreement, have been granted by Vision-R.      k) Vision-R represents and warrants to Group 1 that there are no third parties whatsoever who are entitled to any payments or proceeds, including, without limitation, royalties with respect to the sale, licensing, sublicensing or other granting of rights with respect to the Software, Documentation, Trademarks or any portion thereof. 7 --------------------------------------------------------------------------------      l) Vision-R has provided to Group 1 true and complete copies of all agreements entered into with any person or entity who contributed to the development of the Software, Documentation or Trademarks.      m) Vision-R represents and warrants to Group 1 that no software (other than the software identified in Exhibit 6.4, hereto, (collectively, the “Third Party Software”)) is necessary or desirable in order for the Software to perform in accordance with its documentation. Vision-R represents and warrants to Group 1 that no Third Party Software is provided by Vision-R to its customers in conjunction with any licensing of the Software. In furtherance of the representation and warranty set out directly above, Vision-R represents and warrants to Group 1 that no compilers for any third party computer language or other processing methodology including but not limited to compilers for PHP, Perl or PYTHON have been delivered by Vision-R and that any and all compilers necessary or advantageous for the installation and use of the Software have been obtained by the customer, independent of Vision-R. Also, in furtherance of the representation and warranty set out above, Vision-R represents and warrants to Group 1 that each client obtains a license to the Unisys LZW compression routines.      n) Vision-R represents and warrants to Group 1 that neither Vision-R or any of its Affiliates has: (i) collected any personal data from any third parties; (ii) has acquired personal data from any other third party; (iii) has licensed, sold, provided or otherwise transferred or made available any personal data to any third party. The preceding sentence shall not apply to personal data on Vision-R’s own employees.      7. Employment Contracts.      a) At the Closing, Messrs. Grant Boyle, Michael Linov, Ronald Radojkovic, Jack Tian and Michael Wood shall each enter into an employment contract with Group 1 under the terms set forth in Exhibits 7.1.1, 7.1.2, 7.1.3, 7.1.4 and 7.1.5, hereto, respectively.      b) Mr. Sol Prizant shall enter into a consulting agreement with Group 1 at Closing in the form set out in Exhibit 7.2, hereto. This Agreement shall provide that, among other things, Mr. Prizant shall provide his services to Group 1 as a consultant on a twenty-five (25) hour per week basis, for one (1) year after Closing (and such additional periods as he and Group 1 may agree upon) at the rate of Eleven Thousand Canadian Dollars ($11,000 CN) per month. His responsibilities shall include those as delegated to him by DOC1’s President. He shall report directly to DOC1’s President.      8. Due Diligence/Employment Matters.      a) Through Closing, Vision-R shall allow Group 1, its employees, consultants and other representatives full access to, and the right to inspect all its financial, marketing, sales, support, maintenance and enhancements documents and records and source and object code, software documentation and logs, books, records, files, contracts, agreements and other information relating to the Assets, or the transactions contemplated hereunder which may be reasonably requested by Group 1. Group 1 shall have the right to inspect, observe and test the operations of the Software. Group 1 shall conduct any investigation in a manner which will not unreasonably interfere with Vision-R’s operations. Group 1’s investigations as of the date first set forth above have not interfered with Vision-R’s operations.      b) Vision-R shall be responsible for termination from its employ of Messrs. Boyle, Linov, Tian, Radojkovic and Wood, as they become employed by Group 1 at Closing. Vision-R shall be solely responsible for payment of all: (i) wages, salary, benefits, other compensation and bonuses, (ii) compensation claims, premiums and other payments, (iii) severance pay and (iv) any other loans, obligations or liabilities, including, without limitation, retirement or other benefit plan liabilities arising under applicable federal, provincial or municipal law or contracts, arising out of or in connection with employment (including the termination thereof) or retention of any of these five (5) persons by Vision-R or any Affiliate thereof.      c) All payments due from Vision-R on account of employee health and welfare insurance have been or will be paid by Vision-R. 8 --------------------------------------------------------------------------------      9. Change of Name; Office Services; Premises.      a) Within thirty (30) days of Closing, Vision-R shall cause the corporate name of Vision-R eTechnologies, Inc. to be changed to a name which is not confusingly similar to that name. Vision-R agree that it shall not subsequently amend its Articles of Incorporation to change its name to any corporate name which includes the term Vision-R eTechnologies or any derivative of it. Vision-R agrees that it will not organize or beneficially own any of the equity of any entity whose name includes the term Vision-R eTechnologies or any derivative of it.      b) Vision-R agrees to provide the following office-related services to Group 1 for so long as Group 1 shall occupy office space at 8500 Leslie Street, Suite 570, Thornhill, Ontario: (i) use, on an as-needed basis with reasonable advance notice, of the board room/conference room in Suite 570, (ii) receptionist services (for so long as a receptionist is retained by MIPPS) at the receptionist desk in Suite 570, (iii) use, on an as-needed basis, to fax and copier machines during normal business hours, maintained in Suite 570 by MIPPS in the common area in Suite 570 and (iv) use of the common area kitchen facility in Suite 570. The services described in the preceding sentence shall be offered to Group 1 at no additional cost to it.      c) Vision-R and Group 1 contemplate that on and after Closing Group 1 and MIPPs shall share the undivided space identified with Suite 570, which Suite Group 1 shall inhabit on and after Closing pursuant to the lease assumption described herein. Vision-R covenants and agrees to cause MIPPs to: (1) refrain from assigning or subletting all or any portion of its space in such premises, (2) to fully comply with all of its obligations under the MIPPs lease for the shared office suite, and to (3) maintain in full force and effect the MIPPs lease for such premises for so long as Group 1 and MIPPs share such premises. Vision-R covenants and agrees to cause MIPPs afford Group 1 full access to 2167 usable square feet in Suite 570 for so long as Group 1 and MIPPs shall coinhabit such premises.      10. Organization and Standing.      a) Vision-R warrants and represents that, at all times material hereto, it has been and shall be a corporation duly incorporated and organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has and will have the full power and authority (corporate and otherwise) to carry on the Business as it is now being conducted, and to own and lease the properties and assets which it now owns or leases. Vision-R warrants and represents that, at all times material hereto, it has been and shall be duly qualified and/or licensed to transact business and in good standing as a foreign corporation in all jurisdictions in which it is obligated to so do, and the character of the property owned or leased by Vision-R and the nature of the business conducted by it do not require such qualification and/or licensing in any other jurisdiction.      b) Vision-R represents and warrants to Group 1 that: the corporation was originally named Vision-R Limited subsequently renamed Vision-R Canada, Inc., and most currently renamed Vision-R eTechnologies, Inc.; it has had and currently has only one (1) shareholder, Mr. Sol Prizant.      c) Vision-R represents and warrants to Group 1 that Mr. Sol Prizant has at all times been the sole shareholder of MIPPS Systems Solutions, Inc., MIPPS Enterprises and MIPPS Net On-Line 1998, Inc.      d) Vision-R represents and warrants to Group 1 that Vision-R is incorporated and existing under the Business Corporations Act [Ontario] and is not a non-resident under Section 116 of the Income Tax Act [Canada].      11. Vision-R’s Authority and Status; Other Representations and Warranties.      a) Vision-R warrants and represents to Group 1 that at all times material hereto, it had and shall have the capacity and authority to execute and deliver this Agreement, to perform hereunder, and to consummate the transactions contemplated hereby without the necessity of any act or consent, in addition to such consent as contemplated hereunder, of any other person or corporation; that the execution, delivery and performance under this Agreement and each and every agreement, document and instrument applicable to it, made in connection herewith shall be duly authorized and approved by the Vision-R Board of Directors and sole shareholder; and that this Agreement and each and every agreement, document and instrument to be executed, delivered and performed by Vision-R in connection herewith, will, when executed and delivered, constitute the valid and legally binding obligations of Vision-R, except as enforceability may be limited by applicable equitable principles or judicial discretion, or by bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to time in effect affecting the enforcement of creditors’ rights generally. 9 --------------------------------------------------------------------------------      b) Vision-R represents and warrants to Group 1 that, there are no authorizations, consents, approvals, licenses, exemptions from or filings with, or registrations with any governmental, quasi-governmental or non-governmental regulatory agency or authority, necessary on its part for, or in connection with, the transactions contemplated hereunder. Vision-R covenants and agrees that if at any time any of the aforesaid authorizations, consents, approvals, licenses, exemptions or filings shall be required, Vision-R shall take all such actions necessary to either immediately obtain the appropriate authorization, consent, approval, license, or exemptions, or take all actions necessary to cure the facts and circumstances which prevent the issuance or obtaining of such authorization, consent, approval, license or exemption.      c) Vision-R represents and warrants to Group 1 that it: (i) does not have any obligation, contingent or otherwise under, nor any commitment or agreement to enter into, and no employee of Vision-R is covered with respect to his employment by, an employment contract, employee profit-sharing plan, employee stock purchase plan, or other similar agreement or plan and (ii) is not subject to any grievance proceeding, material controversy with any employee, material claim or proceeding under any labor law, equal employment opportunity law, or occupational safety health law.      d) Vision-R represents and warrants to Group 1 that no officer or director, and no employee or consultant of Vision-R is known by it to be, or is now expected to be, in violation of any term of any employment contract, proprietary information agreement, non-disclosure agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant related to the right of any such officer, employee or consultant to be employed by Vision-R or related to the use of the Assets, trade secrets or proprietary information of Vision-R or others.      e) Vision-R has delivered to Group 1 a consolidated Financial Statements (i.e., balance sheet, income statement, cash flow statement) and notes thereto, dated December 31, 2000 and unaudited Financial Statements, and notes thereto, dated for the nine (9) months ended September 30, 2001 (the “Financial Statements”), copies of which are attached hereto as Exhibit 11.1 (collectively, the “Financial Statements”). The Financial Statements fully and fairly set forth the consolidated financial condition of Vision-R as of the dates indicated, and the results of its operations for the periods indicated, in accordance with generally accepted accounting principles consistently applied, except as expressly noted therein and in the related reports of independent auditors. Vision-R have no liabilities or obligations whatsoever, either accrued, absolute, contingent or otherwise which are not clearly and accurately reflected or provided for in the Financial Statements except (A) those arising after the date of the Balance Sheet which are in the ordinary course of the Business, in each case a normal amount and none of which is materially adverse, and (B) as to the extent specifically described in schedules thereto.      f) Vision-R represents and warrants to Group 1 that Vision-R shall deliver to Group 1 before January 31, 2002 the pro forma Income Statement for the year ending December 31, 2001. Such statements shall be prepared consistent with the financial statements previously provided to Group 1 by Vision-R.      12. Opinion of Counsel. At Closing, Vision-R shall deliver to Group 1 an opinion of its legal counsel, Bernie Katchen, in the form set out in Exhibit 12.1, hereto.      13. Certain Taxes and Governmental Royalties.      a) Vision-R represents and warrants that from December 31, 1997 until Closing it has filed and will file all returns required of it with respect to any governmental entity as to sales or licenses of the Assets or copies thereof, the filing of which returns or the failure to do so may affect the Assets. 10 --------------------------------------------------------------------------------      b) There are no tax liens on any of the Assets, and Vision-R is not delinquent in the payment of any municipal, provincial, federal or foreign income, sales, employment, VAT/ad valorem, withholding or other taxes (including interest and penalties thereon), the liability for which might impose a lien or encumbrance on any of the Assets or the Business. The provisions for taxes shown in the Financial Statements are and will be adequate to cover the aggregate liability of Vision-R as of Closing for all taxes, duties and charges based on the income, purchases, sales, business, capital stock or surplus, or assets of Vision-R; and Vision-R has incurred or will incur no liability for any taxes, duties or charges for the period from date of balance sheet, through Closing. No taxing authority has indicated to Vision-R any intent to conduct an audit or other investigation or asserted any unresolved deficiencies with respect to tax liabilities of Vision-R for any period. Vision-R has received no deficiency letter or similar notice from any taxing authority for any open tax year. Vision-R hereby confirms to Group 1 Vision-R’s sole responsibility for, and agreement to pay when due, any and all taxes, duties or charges based on the Assets, Vision-R’s income or sales, employees’ compensation or otherwise, incurred or accrued on or prior to the Closing.      14. Absence of Changes. Vision-R represents, warrants, covenants and agrees that from the date first written above until Closing it shall not:      a) transfer, assign, convey or liquidate any of the Assets or enter into any transaction or incurred any liability or obligation which affect the Assets, other than transactions occurring in the ordinary course of the Business;      b) suffer any change in the Business which might have an adverse effect on the Assets;      c) permit or incur the imposition of any lien, charge, judgement, encumbrance (which as used herein includes, without limitation, any mortgage, deed of trust, conveyance to secure debt or security interest or claim) with respect to the Assets or the Business;      d) commit, suffer, permit or incur any default in any liability or obligation which, in the aggregate, might have a material adverse effect upon the Assets or the Business; or      e) make or agree to any change in the terms of any contract or instrument to which it is a party which might have a material adverse effect on the Assets or the Business.      15. Litigation. Vision-R represents and warrants to Group 1 that there have not been any suits, actions, proceedings, claims or investigations instituted against the Assets or Business.      16. Licenses and Permits; Compliance With Law. Vision-R represents and warrants to Group 1 that it:      a) holds all licenses, certificates, permits, franchises and rights from all appropriate federal, provincial, municipal and other public authorities necessary for the conduct of the Business and the use of the Assets, including, without limitation, any relating to wages; hours; hiring; promotion; retirement; working conditions; nondiscrimination; health; safety; pensions; employee benefits; the production, processing, advertising or sale of products; trade regulation; anti-kickback; export licensing.      b) has not received any notice of any sort of alleged violation of any such statute, order, rule, regulation or requirement.      17. Contracts, Etc. Vision-R warrants and represents to Group 1 that except for copies of the contracts, agreements and other instruments relating to the Assets produced by Vision-R to Group 1 during due diligence, Vision-R is, to the best of its knowledge after diligent inquiry, not a party or subject to, whether oral or written, any of the following which would singly or in the aggregate, have an adverse impact upon the Assets or the Business:      a) any contract or commitment directly related to the Software or Documentation which requires services to be provided or performed by Vision-R or which authorized others to perform services for, through or on behalf of Vision-R;      b) any contract or commitment not disclosed to Group 1 during due diligence involving an obligation related to the Assets which cannot, or in reasonable probability will not, be performed or terminated within thirty (30) days from the date as of which these representations are made; 11 --------------------------------------------------------------------------------      c) any contract or commitment providing for payments to third parties based in any manner upon the sales, purchases, receipts, income or profits of Vision-R; and      d) any contract, agreement, understanding or arrangement, restricting Group 1 from fully and duly enjoying sole and exclusive rights to the Assets.      18. Conduct of the Business of Vision-R Prior to the Closing. Except as may be required to effect the transactions contemplated by this Agreement, Vision-R warrants, represents, covenants and agrees that until Closing, that it shall:      a) use its best efforts to preserve the Business;      b) not enter into any agreement to provide any goods or services except on terms consistent with comparable contracts entered into on or after January 1, 2001;      c) promptly notify Group 1 of any material developments relating to the Assets or the Business;      d) perform in the ordinary course of business all of its obligations under lease instruments and other agreements relating to or affecting the Assets or the Business;      e) not increase present salaries, commission levels or bonus programs for any employees and agents except in the ordinary course of business, consistent with past practice or as required by contract or law (and any permitted increase to be promptly noticed to Group 1);      f) maintain compliance in all material respects with all material permits, rules, laws and regulations, consent orders and the like;      g) conduct the Business in the ordinary course, and not make or commit to, except as otherwise provided in this Agreement, any material changes in its: (A) sales, pricing, credit terms, methods or practices, (B) customer service terms, methods or practices of the Software, or (C) methods of management or operation;      h) maintain the Assets in, at a minimum, the same working order and condition as such Assets were in on October 1, 2001, ordinary wear and tear excepted; and      i) promptly advise Group 1 in writing of any matters arising or discovered after the date of execution of this Agreement which, if existing or known at the date of this Agreement, would be required to be set forth or described in this Agreement or the Exhibits hereto. Vision-R and Group 1 are anxious to immediately progress towards mutually agreeable development efforts with respect to the Software and Documentation. Accordingly, Vision-R agrees that it will consider suggestions made by Group 1 prior to Closing to further develop the Software and Documentation. The results of any such suggestions adopted by Vision-R shall belong to Vision-R if Closing does not occur for any reason other than Vision-R’s default hereunder; if Closing occurs, the results of any adopted suggestions shall be conveyed to Group 1 as part of the Assets. In any event, Vision-R hereby acknowledges and agrees that any decisions to undertake development efforts upon the suggestion of Group 1 prior to Closing are made totally voluntarily by Vision-R and if Closing does not occur due to no failure of Vision-R, such efforts shall inure to the significant benefit of Vision-R.      19. Disclosure and Absence of Undisclosed Liabilities.      a) This Agreement, the Exhibits attached hereto, and the documentation provided in the course of due diligence, disclose all facts material to the Assets and the Business. Vision-R represents and warrants that no statement contained herein or in any certificate, schedule, list, exhibit or other instrument or document furnished to Group 1 pursuant to the provisions hereof intentionally contains or, to the best knowledge of Vision-R after diligent inquiry, shall contain any untrue statement of a material fact, or intentionally omits or, to the best knowledge of Vision-R after diligent inquiry, shall omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. 12 --------------------------------------------------------------------------------      b) Vision-R acknowledges and agrees that in addition to the representations and warrantees set out herein, Group 1 has materially relied upon the “Actual Monthly Operating Expenses” schedule of Vision-R transmitted by it to Group 1 on or about November 12, 2001.      c) Vision-R represents and warrants to Group 1 that (i) with respect to the accounts receivables shown on Vision-R’s Balance Sheet as of Closing, net of appropriate reserves, the accounts receivable described therein will be collectible in the ordinary course of the Business.      20. Group 1’s Authority and Status. Group 1 represents and warrants that it is a corporation in good standing under the laws of the state of its incorporation and it has the capacity and authority to execute and deliver this Agreement, to perform hereunder and to consummate the transactions contemplated hereby without the necessity of any act or consent of any other person whomsoever. The execution, delivery and performance by Group 1 of this Agreement and each and every agreement, document and instrument provided for herein have been duly authorized and approved by its Board of Directors. This Agreement, and each and every other agreement, document and instrument to be executed, delivered and performed by Group 1 in connection herewith, constitutes or will, when executed and delivered, constitute the valid and legally binding obligation of Group 1, enforceable against Group 1 in accordance with their respective terms, except as enforceability may be limited by applicable equitable principles or judicial discretion, or by bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to time in effect affecting the enforcement of creditors’ rights generally.      21. Agreement Does Not Violate Other Instruments. Group 1 represents and warrants that the execution and delivery of this Agreement by Group 1 does not, and the consummation of the transactions contemplated hereby will not, violate any provisions of the Certificate of Incorporation, as amended, or Bylaws, as amended, of Group 1.      22. Conditions Precedent to Obligation of Group 1 to Close. The obligation of Group 1 to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing, of each and every one of the following conditions, all or any of which may be waived in writing, in whole or in part, by Group 1 for purposes of consummating such transactions, but without prejudice to any other right or remedy which Group 1 may have hereunder as a result of any misrepresentation by, or breach of any covenant, representation or warranty of Vision-R contained in this Agreement or any other certificate or instrument furnished by Vision-R hereunder:      a) The representations and warranties made by Vision-R in this Agreement, and the Exhibits hereto, and in the documents and instruments to be delivered to Group 1 or its representatives pursuant to Section 25(a), below, or otherwise at the Closing, shall be true and correct in all material respects as of the Closing with the same force and effect as though such representations and warranties have been made on and as of such time, except for changes contemplated by this Agreement.      b) Vision-R shall have duly performed all of the covenants, acts and undertakings to be performed by it as of or prior to the Closing.      c) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or arises out of the Assets or the Business, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Group 1, would make it inadvisable to consummate such transactions.      d) Vision-R shall have received consents, certifications, estoppels and opinions required for the execution of this Agreement and the consummation of the transactions contemplated hereby.      e) Satisfaction of the employment and consulting matters described in Section 7, above. 13 --------------------------------------------------------------------------------      f) Group 1 shall have completed, to Group 1’s reasonable satisfaction, its due diligence examination of Vision-R.      23. Conditions Precedent to the Obligations of Vision-R to Close. The obligations of Vision-R to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by Vision-R but without prejudice to any other right or remedy which it may have hereunder as a result of any misrepresentation by, or breach of any covenant or warranty of Group 1 contained in this Agreement, or any certificate or instrument furnished by it hereunder.      a) The representations and warranties made by Group 1 in this Agreement, and in the documents and instruments to be delivered to Vision-R or its representatives pursuant to Section 25(b), below, or otherwise at the Closing, shall be true and correct in all material respects with the same force and effect as though such representations and warranties had been made on and as of such time.      b) Group 1 shall have duly performed all of the covenants, acts and undertakings to be performed by it as of or prior to the Closing.      c) No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Vision-R would make it inadvisable to consummate such transactions.      d) The execution and the delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been approved by all authorities whose approvals are required by law.      24. Time and Place of Closing. Closing shall be completed as soon as practicable but no later than January 7, 2002, and shall occur at the offices of Group 1, 4200 Parliament Place, Suite 600, Lanham, Maryland 20706-1844.      25. Transactions at and after Closing. At and after the Closing, each of the following transactions shall occur:      a) Vision-R’s Performance. At the Closing, Vision-R shall deliver, fully executed, notarized and attested to where applicable, to Group 1, the following:        i) such good and sufficient bill of sale (Exhibit 26.1, assignment of copyright suitable for filing in the USA and Canada (in the form set out in Exhibit 26.2), assignment of trademarks suitable for filing in USA and Canada (in the form set out in Exhibit 26.3), and other good and sufficient instruments of sale, conveyance, transfer and assignment — such as an assignment from MIPPs to Vision-R as to any rights MIPPs may have to any of the Assets — as shall be required or as may be appropriate in order to effectively vest in Group 1 good and marketable title to the Assets free and clear of all liens, security interests and encumbrances of whatever nature, except as expressly accepted by Group 1, as described in Section 4, above;        (ii) copies of all books of account (excluding minute books and stock books of Vision-R), contracts, files and other data and documents pertaining to the Assets or the Business        (iii) all records on all current end user license, subscription or maintenance agreements for the Software;        (iv) certified copies of resolutions of the Board of Directors of Vision-R approving the transactions set forth in this Agreement;        (v) certified copies of resolutions of the stockholder of Vision-R, approving the transactions set forth in this Agreement; 14 --------------------------------------------------------------------------------        (vi) opinion of counsel in the form set out in Exhibit 12.1, hereto;        (vii) physical possession of the Assets, including the copy of the Software described in Section 1(d), above;        (viii) complete releases, in forms suitable for filing in the appropriate jurisdiction and reasonably acceptable to Group 1, from any holder of a security interest in the Assets;        (ix) Certificate of Status or Good-Standing as of the most recent practicable date from the province of Ontario with respect to Vision-R;        (x) the lease amendment from Shatsford Developments Inc. in the form agreed upon by Vision-R and Group 1;        (xi) releases from Messrs. Boyle, Linov, Radojkovic, Tian and Wood in the form set out in Exhibit 26.4; hereto;        (xii) employment contracts from Messrs. Boyle, Linov, Radojkovic, Tian and Wood in the forms set out in Exhibits 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.5, hereto;        (xiii) consulting Agreement from Mr. Prizant as set out in Exhibit 7.2, hereto; and        (xiv) such other evidence of the performance of all covenants and satisfaction of all conditions required of parties to this Agreement, other than Group 1, at or prior to the Closing, as Group 1 or its counsel may reasonably require.      b) Performance by Group 1. At the Closing, Group 1 shall deliver payment and documents to Vision-R, fully executed, notarized and attested to where applicable as follows:        (i) payment to be made at Closing as required in Section 2(a)(i), above;        (ii) employment contracts of Messrs. Boyle, Linov, Radojkovic, Tian and Wood in the form set out in Exhibits 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.5, hereto; and such other evidence of the performance of all the covenants and satisfaction of all the conditions required of Group 1 by this Agreement at or before the Closing as Vision-R may reasonably require.      c) Certain Vision-R Performances After Closing. No later January 31, 2002 (and February 28, 2002 as to Prudential), Vision-R shall deliver to Group 1 fully-executed, notarized and attested to where applicable, the following:        (i) the consents/estoppels set forth in Exhibits 5.2.1, 5.2.2, 5.2.3, 5.2.4, not previously delivered to Group 1, and        (ii) pro forma income statements for the year ending December 31, 2001.      26. Indemnification.      a) Vision-R and Group 1 each agrees to indemnify, defend and hold harmless the other and their respective current and past officers, directors, employees, agents and representatives from all losses, damages, liabilities, costs (including reasonable attorneys’ and experts’ fees) and expenses (collectively, the “Losses”) incurred by the party being indemnified (the “Indemnified Party”) from any claim by the other party hereto or any third party arising from or related to any actions taken by the indemnifying party and related to this Agreement; any material breach, misrepresentation in or material omission with respect to any provisions of this Agreement including without limitation any certificate or other instrument furnished or to be furnished hereunder; any suit, action or investigation, pending or threatened, against or affecting the Assets or the Business, regardless of whether it has been disclosed; any claim for a debt, obligation or liability which is not specifically assumed by Group 1 pursuant to this Agreement including without limitation any claim or right, or any alleged claim by any Vision-R customer, employee, contractor, former employee or former contractor which might affect the transactions contemplated under this Agreement; representations or warranties as to the condition of the Assets, or otherwise which may be asserted against or in relation to any of the Assets, the Business and/or the transactions contemplated hereunder. 15 --------------------------------------------------------------------------------      b) The Indemnified Party shall have the right to approve the selection of any counsel selected by the indemnifying party to defend hereunder, which approval shall not be unreasonably conditioned, delayed or denied. The indemnifying party shall not enter into any settlement with respect to the matters indemnified hereunder which may adversely affect any interest of the Indemnified Party without first obtaining the written consent of the Indemnified Party, which consent shall not be unreasonably conditioned, delayed or denied. The indemnifying party agrees to reimburse the Indemnified Party promptly for all such Losses as they are incurred by the Indemnified Party; provided, however, that with respect to any expenses reimbursed to the Indemnified Party in advance of the final disposition of any such proceeding covered by this indemnification, the Indemnified Party shall have delivered to the indemnifying party an undertaking to repay to the indemnifying party the amounts so advanced if it shall ultimately be determined that the Indemnified Party is not entitled to be indemnified hereunder.      27. Survival of Representations and Warranties; Limitation of Liabilities; Limitation of Liabilities.      a) All representations, warranties, agreements, covenants and obligations made or undertaken by Group 1 in this Agreement or in any document or instrument executed and delivered pursuant hereto have been relied upon by Vision-R and shall survive the Closing hereunder and shall not merge in the performance of any obligation by any party hereto.      b) All representations, warranties, agreements, indemnities and covenants made or undertaken by Vision-R in this Agreement or in any document or instrument executed and delivered pursuant hereto have been relied upon by Group 1 and shall survive the Closing hereunder and shall not merge in the performance of any obligations by any party hereto.      c) In no event shall the total liability of Vision-R to Group 1 hereunder exceed the greater of: (i) the amount paid to Vision-R hereunder or (ii) One Million, Five Hundred Thousand US Dollars ($1,500,000 US). In no event shall the total liability of Group 1 to Vision-R arising hereunder exceed the greater of: (i) the amount paid to Vision-R hereunder or (ii) One Million, Five Hundred Thousand US Dollars ($1,500,000 US).      28. Payment of Fees and Expenses. Vision-R and Group 1 each agrees that regardless of whether the transactions contemplated hereunder close, to pay its own fees and expenses, including the fees and expenses of its respective counsel, accountants, brokers, advisors, employees and other agents, if any, incurred in connection with the transactions contemplated here, unless expressly agreed to otherwise in the Agreement.      29. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered by hand or overnight, receipted courier (e.g., Federal Express), addressed as follows:      a) If to Vision-R:   Vision-R 8500 Leslie Street, Suite 570 Thornhill, Ontario CANADA L3T 7M8 Attention: Mr. Sol Prizant 16 --------------------------------------------------------------------------------   If to Group 1:   Group 1 Software, Inc. 4200 Parliament Place Suite 600 Lanham, Maryland 20706-1844 Attention: General Counsel      b) Any party hereto may change its address specified for notices herein by designating a new address by notice in accordance with this Section 29.      30. Termination.      a) This Agreement may be terminated and abandoned at any time prior to the Closing by: (i) mutual written consent of Vision-R and Group 1; (ii) after January 7, 2002, if Group 1 has not by that date completed its due diligence to its satisfaction; (iii) either party if the Closing has not been consummated by close of business January 7, 2002; (iv) by Vision-R after January 7, 2002, if any of the conditions set forth in Section 23(b) hereof, to which its obligations are subject, have not been fulfilled or waived, unless such fulfillment has been frustrated or made impossible by any act or failure to act of any of Vision-R; (v) by Group 1 after January 7, 2002, if any of the conditions set forth in Section 23(a) hereof, to which the obligations of Group 1 are subject, have not been fulfilled or waived, unless such fulfillment has been frustrated or made impossible by any act or failure to act of Group 1; or (vi) at any time until Closing if either party has committed a material default hereunder, which default has not been cured within seven (7) days of written notice by the other party of such default.      b) In the event of a termination of this Agreement pursuant to this Section 30, each party shall pay the costs and expenses incurred by it in connection with this Agreement, and no party (or any of its officers, directors, employees, agents, representatives or shareholders) shall be liable to any other party for any costs, expenses, damage or loss of anticipated profits hereunder; provided, however, if such termination is due to the breach by a party of any covenant, agreement, warranty or representation contained herein (a “Breaching Party”), then such Breaching Party shall be solely responsible for the costs and expenses incurred by the other party in connection with the due diligence efforts and the preparation and review of this Agreement.      31. Brokers.      a) Group 1 represents and warrants to Vision-R, that other than InvestTech, Inc., no broker or finder has acted for it or them or any entity controlling, controlled by or under common control with it or them in connection with this Agreement. Group 1 shall be solely responsible for any fees or costs payable to InvestTech and related to the transactions that are contemplated in this Agreement.      b) Vision-R represents and warrants to Group 1 that no broker or finder has acted for it or for any Affiliate of Vision-R in connection with this Agreement.      32. Further Assurances. Each party covenants that at no additional expense, at any time, and from time to time after the Closing, it will execute and deliver (or cause to be so done) such additional instruments and take such actions as may be reasonably requested by the other parties to confirm or perfect or otherwise to carry out the intent and purposes of this Agreement. Each party covenants and agrees to execute and deliver (or cause to be so done) to Group 1, at no additional expense to Group 1, any instruments or documents that Group 1 requests in order to register or otherwise protect or preserve any rights (trademark, copyright or otherwise) that Group 1 has or shall have in and to the Software or the Documentation.      33. No Third Party Beneficiaries. Nothing contained herein shall be construed to afford any rights or benefits to any person or entity affiliated with, employed by or retained by Vision-R. Any implication of rights grant to any such party is hereby expressly disclaimed. 17 --------------------------------------------------------------------------------      34. Risk of Loss. Vision-R assumes all risk of theft or casualty of loss or damage regarding the Assets from the date of this Agreement up to the Closing. If such loss or damage to the Assets is material and does not result from Group 1’s breach hereunder, Group 1 shall have the right to: (i) require Vision-R, at Vision-R’s expense, to reproduce such Assets as are lost or (ii) to terminate this Agreement.      35. Miscellaneous.      a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, executors and administrators, and permitted successors and assigns. No delegation, transfer or assignment of any rights or obligations under this Agreement is permitted without the prior consent of the other party hereto, not to be unreasonably conditioned, delayed or denied. Any attempted transfer or assignment without such prior consent shall be void ab initio. Notwithstanding the foregoing, Group 1’s right, title, interest and remedies hereunder are freely assignable to any Affiliate of Group 1 or to an entity which purchases all or substantially all of the assets or capital stock of Group 1 either through asset acquisition, stock sale or a corporate merger (wherein Group 1 is not the surviving entity). Notwithstanding the foregoing, the restrictions on assignment and transfer set out in this Section 35(a) as applied to Group 1 shall cease effective January 5, 2005.      b) The section and other headings in this Agreement are inserted solely as a matter of convenience and for reference, and are not a part of this Agreement.      c) This Agreement together with the documents executed concurrently herewith or at the Closing constitute the entire agreement among the parties hereto with respect to the transactions contemplated hereby and supersedes and cancels any prior agreements (including, without limitation, the Letter Agreement of October 24, 2001 between the parties), representations, warranties, or communications, whether oral or written, among the parties hereto relating to the transactions contemplated hereby.      d) This Agreement shall be governed by and enforced in accordance with the laws of the State of Maryland, principles of conflicts of law notwithstanding.      e) Vision-R expressly agrees that jurisdiction over it with respect to any action brought under or in connection with this Agreement by Group 1 shall appropriately lie in the State of Maryland and that appropriate and convenient venue lies in Prince George’s County, Maryland. Vision-R hereby consents to the assertion over it of personal jurisdiction in accordance with the relevant portions of the immediately preceding sentence.      f) Any failure on the part of any party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived by any other party to whom such compliance is owed. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an agreement in writing signed by the party against whom or which the enforcement of such change, waiver, discharge or termination is sought.      g) 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.      h) All pronouns used herein shall be deemed to refer to the masculine, feminine or neuter gender as the context requires. References herein to the plural shall include the singular, or vice versa, as context requires.      i) All Exhibits attached hereto are incorporated herein by reference, and all blanks in such Exhibits, if any, will be filled in as required in order to consummate the transactions contemplated herein and in accordance with this Agreement.      j) In the event that any provision of this Agreement or any word, phrase, clause, sentence or other portion thereof shall be held to be unenforceable or invalid for any reason, such provision or portion thereof shall be modified or deleted in such a manner so as to effect the agreement of the parties under this Agreement, as modified, to the fullest extent permitted under law. 18 --------------------------------------------------------------------------------      k) Vision-R hereby grants to Group 1 the right to seek enforcement, either in its own name, as a third party beneficiary, or in Vision-R’s name as a designee or delegatee of Vision-R, with respect to any agreement with any Development Personnel (which agreements are identified on Exhibit 6.3, hereto) by which any Development Personnel has agreed to maintain the confidentiality of any information and/or has agreed that the intellectual property rights to any works such agreement are owned by Vision-R.      l) Les parties déclaranet par les présentes qu’ elles ont expressément souhaité et exigé que la présente entente et tout document quis’y rattache ou en découle, y compris, notamment, le ca échéant, tous les bons de commande, factures, et reçus à ou découlant de la présente entente, soient rédigés en langue anglaise.      IN WITNESS WHEREOF, each party hereto has executed or caused this Agreement to be executed on its behalf, all on the day and year first above written. Vision-R eTechnologies, Inc. By:      /s/ -------------------------------------------------------------------------------- Its:     -------------------------------------------------------------------------------- Group 1 Software, Inc. By:      /s/ -------------------------------------------------------------------------------- Its: --------------------------------------------------------------------------------      Accepted and Agreed as to Sections 1(b) and (c), 4(b) (next to last sentence), 4(c) and (d), 6(a)(i) and (ii), 6(b), (c), (d), (g), (h), (i), (l), (m) and (p), and 9(c). MIPPS Systems Solutions, Inc. By:           /s/ -------------------------------------------------------------------------------- Its: -------------------------------------------------------------------------------- 19
CESKA SPORITELNA, A.S.   GENERAL TERMS AND CONDITIONS FOR THE PROVISION OF LOANS, INCLUDING MORTGAGE LOANS, TO LEGAL ENTITIES AND INDIVIDUALS - ENTREPRENEURS   I. INTRODUCTION 1. General Principles. These General Loan Terms and Conditions shall govern the rights and obligations of each of the Bank, the Client, and the Guarantor arising under or in connection with the execution of the Loan Agreement and the Guarantee Agreement, and the provision of Loans. 2. General Loan Terms and Conditions as an Integral Part of Loan Agreement and Guarantee Agreement. The General Loan Terms and Conditions constitute an integral part of each Loan Agreement if so provided for in the Loan Agreement. The Client's acceptance of the General Loan Terms and Conditions is a prerequisite for drawing of any Advance by the Client. The Loan Agreement must be prepared in a written form. If the terms of the applicable Loan Agreement differ from or conflict with the General Loan Terms and Conditions, the terms of the Loan Agreement shall prevail. The General Loan Terms and Conditions shall also govern the rights and obligations of the Bank and the Guarantor arising under or in connection with the execution of the Guarantee Agreement, if so provided for in the Guarantee Agreement. If the terms of the applicable Guarantee Agreement differ from or conflict with the General Loan Terms and Conditions, the terms of the Guarantee Agreement shall prevail. 3. Changes and Amendments to the General Loan Terms and Conditions. The Bank notifies the Client and the Guarantor of any changes in, or amendments to, the General Loan Terms and Conditions by a written notice of (i) the Announcement of Changes and (ii) the date of Announcement of Changes sent to the correspondence address of the Client specified in the Loan Agreement, and the correspondence address of the Guarantor specified in the Guarantee Agreement, respectively. Any such changes in, or amendments to, the General Loan Terms and Conditions shall become effective in respect of the legal relationship between the Bank and the Client or the Guarantor as of the thirtieth (30th) day following the date of the applicable Announcement of Changes, unless the Client or Guarantor has delivered to the Bank its written disagreement with such change in, or amendment to, the General Loan Terms and Conditions within five (5) Business Days prior to the expiration of such thirty-day period. 4. Definitions. The capitalized terms used in the General Loan Terms and Conditions, the Loan Agreement and the Guarantee Agreement shall have the meanings ascribed to them in Article 65 unless otherwise defined in the Loan Agreement or the Guarantee Agreement.   II. GENERAL PROVISIONS 5. Basic Provision. By entering into a Loan Agreement, the Bank agrees to provide to the Client funds up to the Loan Facility and the Client agrees to repay the Loan and pay any interest accrued thereon to the Bank in accordance with the General Loan Terms and Conditions and the Loan Agreement. The Loan Agreement stipulates, in particular, the purpose of the Loan, the Loan Facility, the applicable interest rate of the Loan or the method of calculation thereof, Interest Period, Draw-Down Period, procedure and terms of drawing of Advances, procedure and dates for repayment of the Loan and payment of any interest accrued thereon. 6. Loan Currency. The Loan Agreement shall specify a Loan Currency. Unless the Loan Agreement provides otherwise, the Client shall repay the Loan and pay all interest accrued thereon to the Bank in the Loan Currency. 7. More Clients or Guarantors. If more than one Client concludes the relevant Loan Agreement with the Bank, all such Clients shall be jointly and severally liable for any and all obligations towards the Bank arising under such Loan Agreement or in connection therewith. If more than one Guarantor provides guarantee for the obligations of the Client, all such Guarantors shall be jointly and severally liable for their obligations towards the Bank.   III. INTEREST AND CHARGES 8. Interest 8.1 Interest Rate in the Loan Agreement. The Loan Agreement shall specify the interest rate or the method of calculation thereof. The Bank and the Client may agree in the Loan Agreement upon a fixed interest rate, a Variable Rate, or a Floating Rate. Unless the Loan Agreement provides otherwise, the Client shall pay to the Bank the interest accrued on the Loan on the last day of each Interest Period in the manner specified in Article 16. 8.2 Interest Period. Interest shall accrue on the Loan on daily basis from the date on which the Loan or any part thereof was drawn (inclusive) by the Client to the date preceding the date of repayment of the Loan (inclusive). The first Interest Period shall commence on the date of drawing of the first Advance. The Client shall pay the accrued interest on the last day of the current Interest Period for each day of such Interest Period commencing on the later of: the last day of the preceding Interest Period (inclusive), or the date of drawing of the first Advance (inclusive), and ending on the earlier of: the day preceding the last day of such Interest Period (inclusive), or the day preceding the repayment of the Loan (inclusive). If the last day of the Interest Period is not a Business Day, the last day of such Interest Period shall be deemed to be the immediately following Business Day and the Interest Period shall be extended to such day. The subsequent Interest Period shall be shortened so as to end on its originally scheduled last day. 8.3 Interest Calculation Basis. Unless agreed otherwise in the Loan Agreement, the Bank shall calculate interest on the basis of the actual number of days and a year of 360 days. 8.4 Base Rate. The Client and the Bank may agree in the Loan Agreement that the applicable interest rate shall be the Bank's Base Rate. The Bank shall announce any changes of the Base Rate by displaying its new amount on the Bank's premises. The change of amount of the Base Rate shall become effective on the date when the new amount of the Base Rate is announced by displaying on the Bank's premises. 8.5 Interest Rate Period. The first Interest Rate Period shall commence on the date when the first Advance is drawn. If the last day of the Interest Rate Period is not a Business Day, the last day of the current Interest Rate Period shall be the immediately following Business Day and the current Interest Rate Period shall be extended to such day. The subsequent Interest Rate Period shall be shortened so as to end on its originally scheduled last day. 8.6 Variable Rate. The Client and the Bank may agree in the Loan Agreement that the applicable interest rate shall be a Variable Rate the amount of which shall be fixed for each Interest Rate Period. The Variable Rate shall be effective from the first day of each Interest Rate Period (inclusive) to the last day of such Interest Rate Period (inclusive). If, under the applicable Loan Agreement, the Variable Rate is based on the Reference Rate, the Bank shall determine the amount of Variable Rate in respect of each new Interest Rate Period on the Calculation Day as a sum of the amount of the Reference Rate on the Calculation Day and a margin specified in the Loan Agreement. The Bank shall otherwise notify the Client of the amount of Variable Rate in writing prior to the beginning of the new Interest Rate Period. 8.7 Calculation Source Termination. If the Reference Rate is not announced by the appropriate source on the Calculation Day, instead of the Reference Rate, the Bank shall use for the calculation of the amount of Variable Rate in respect of the new Interest Rate Period the Bank's Base Rate effective on the Calculation Day. In such case, the Bank shall promptly notify the Client in writing of the termination of the calculation source and of the amount of Variable Rate calculated on the basis of the Base Rate. The amount of Variable Rate calculated on the basis of the Base Rate shall then apply until the Bank and the Client agree on the amount or method of calculation of the Variable Rate. 8.8 Default Interest. If the Client fails to duly and timely repay the Loan including any agreed prepayments, the Client shall in addition to, and not in lieu of, any interest accruing on the Loan in accordance with the Loan Agreement also pay default interest to the Bank. Default interest shall accrue in respect of any overdue amounts on daily basis from the first day of default (inclusive) to the day immediately preceding the day of repayment of such overdue amounts (inclusive). The Bank shall calculate the amount of default interest on the basis of default interest rate applicable to any overdue Loan specified in the List of Fees and Charges effective on the date on which the Client is in default. If the Client fails to duly and timely pay any amount of interest accrued on the Loan, contractual penalties, Charges, Fees, damages and costs incurred by the Bank or any other monetary obligations of the Client, the Bank shall also be entitled to receive default interest from the Client. Default interest shall accrue in respect of any overdue amounts on daily basis from the first day of default (inclusive) to the day immediately preceding the day of repayment of such overdue amounts (inclusive). The Bank shall calculate the amount of default interest on the basis of the default interest rate applicable to any overdue interest accrued on the Loan, contractual penalties, Charges, Fees, damages and costs incurred by the Bank or any other monetary obligations of the Client specified in the List of Fees and Charges effective on the date on which the Client is in default. 8.9 Payment of Default Interest. Any and all amounts of default interest shall be payable on daily basis and shall be paid by the Client to the Bank in the manner specified in Article 16. The amounts of default interest shall not be set-off against the Client's obligation to reimburse to the Bank any damages that the Client shall have caused to the Bank. 9. Charges and Fees 9.1 Arrangement Fee. In consideration for the Bank's acceptance of obligation to provide to the Client funds up to the Loan Facility, the Client shall within three (3) Business Days of the execution of the Loan Agreement pay an Arrangement Fee to the Bank. The amount of the Arrangement Fee is specified in the Loan Agreement. 9.2 Commitment Fee. If the Loan Agreement provides for the obligation of the Client to pay the Commitment Fee, the Client shall pay such Commitment Fee to the Bank in the manner specified in Article 16. The rate of the Commitment Fee is specified in the Loan Agreement. The amount of the Commitment Fee is calculated on daily basis throughout the Draw-Down Period from the difference between the Loan Facility and the Loan using the rate of the Commitment Fee. Unless otherwise provided in the Loan Agreement, the payment of the Commitment Fee shall be due on the last day of each calendar month. If such day is not a Business Day, the maturity date for the payment of the Commitment Fee shall be the immediately following Business Day. On the maturity date for the payment of the Commitment Fee, the Client shall pay the Commitment Fee for the time period commencing on the later of: the maturity date for the payment of the preceding Commitment Fee (inclusive), or the first day of the Draw-Down Period (inclusive), and ending on the earlier of: the day preceding the maturity date for the payment of such Commitment Fee (inclusive), or the day preceding the last day of the Draw-Down Period (inclusive). 9.3 Other Fees and Charges. The Client shall pay to the Bank any and all Fees and Charges pursuant to the Loan Agreement, the General Loan Terms and Conditions, and the List of Fees and Charges. The Guarantor shall pay to the Bank any and all Fees and Charges pursuant to the Guarantee Agreement, the General Loan Terms and Conditions and the List of Fees and Charges. Unless otherwise provided in the Loan Agreement and provided that no currency is specified for the payment of any Charges and Fees in the List of Fees and Charges, both the Client and the Guarantor shall pay all Charges and Fees in the Loan Currency. 9.4 Changes and Amendments to the List of Fees and Charges. The Bank may at any time and repeatedly change and amend the List of Fees and Charges. Any such changes in or amendments to the List of Fees and Charges shall be announced by displaying the revised List of Fees and Charges on the Bank's premises. Any such change in or amendment to the List of Fees and Charges shall become effective on the date when displayed on the Bank's premises. 9.5 Cost Reimbursement. The Client shall reimburse the Bank for (i) any and all reasonable and adequate costs and expenses that the Bank may incur in connection with the contractual relationship between the Bank and the Client, and (ii) any and all costs and expenses related to the preparation and completion of the documentation of the contractual relationships between the Bank and the Client including any amendments thereto. The Guarantor shall reimburse the Bank for (i) any and all reasonable and adequate costs and expenses that the Bank may incur in connection with the contractual relationship between the Bank and the Guarantor, and (ii) any and all costs and expenses related to the preparation and completion of the documentation of the contractual relationships between the Bank and the Guarantee including any amendments thereto.   IV. DRAW-DOWN OF LOAN 10. Draw-Down Period. The Client shall be entitled to draw any Advances only during the Draw-Down Period. If no Draw-Down Period is specified in the applicable Loan Agreement, the Draw-Down Period shall be deemed to be a time period of ninety (90) days following the effective date of the Loan Agreement. The Client shall deliver to the Bank a written request for drawing of any Advance no later than by 10:00 a.m. on the third (3rd) Business Day prior to the expiration of the Draw-Down Period. 11. Late Drawing of Advance. If the Client delivers to the Bank a draw-down request after the expiration of the Draw-Down Period and the Bank decides to provide to the Client the Loan Facility or any part thereof, the Draw-Down Period shall be deemed to be extended by an agreement between the Bank and the Client until such date when the Advance is actually drawn. The Client shall pay to the Bank a Commitment Fee and a Reservation Fee for such extended period, provided that the Commitment Fee and Reservation Fee were agreed in the Loan Agreement. If the Client fails to draw any Advance during the Draw-Down Period and the Bank does not permit drawing of any Advance after the expiration of the Draw-Down Period in accordance with this Article, the contractual relationship between the Client and the Bank under the Loan Agreement shall terminate on the thirtieth (30th) day following the last day of the Draw-Down Period. The foregoing shall not affect the obligation of the Client to discharge in full all monetary obligations of the Client to the Bank which have arisen prior to the date of termination of the legal relationship between the Bank and the Client. 12. Draw-Down Conditions. Unless otherwise agreed in the Loan Agreement, the Bank shall provide to the Client the funds up to the Loan Facility pursuant to a request for drawing of Advance made by the Client, provided that (a) on or prior to the date of drawing of any Advance, no Event of Default or any other circumstance occurred or is threatening that would permit the Bank to rescind the Loan Agreement, terminate by notice the provision of the Loan Facility, or declare the Loan immediately due and payable in accordance with the provisions of Article 44 hereof, (b) the Client opened a current account to which the Bank shall transfer the funds in accordance with the Loan Agreement, (c) as of the date of drawing of any Advance, the Bank shall have received from the Client any and all documents, approvals and other materials that the Bank shall have requested in connection with drawing of such Advance, (d) all applicable conditions to drawing of such Advance specified in the Loan Agreement shall have been satisfied, and (e) by the Bank's making the payments to the third party bank accounts from the current account specified in the Loan Agreement in accordance with the payment orders of the Client, the purpose of the Loan specified in the Loan Agreement shall have been complied with. The Loan Agreement may specify the minimum Advance amount that shall be drawn by the Client. Unless otherwise agreed between the Client and the Bank, the Bank shall (i) debit the funds representing any Advance from the Loan Account after it has received from the Client a respective request for drawing of Advance in accordance with the General Loan Terms and Conditions and the Loan Agreement, (ii) transfer such funds to the current account specified in the Loan Agreement, and (iii) transfer the funds from such current account to the third party bank account or accounts pursuant to the payment orders of the Client to the Bank in accordance with Article 13(c). 13. Draw-Down Request. The Client shall be bound by any request for drawing of Advance delivered to the Bank and shall not be permitted to withdraw such request or change or amend the terms and conditions thereof without the prior written consent of the Bank. Unless otherwise agreed in the Loan Agreement, the Client shall deliver a request for drawing of any Advance on the form of the Bank. Each request for drawing of Advance shall specify: a) the date of drawing of Advance, which shall be a Business Day within the Draw-Down Period not occurring prior to the second Business Day following the date of delivery of the applicable request for drawing of Advance to the Bank; b) the amount of Advance which (i) shall comply with the terms and conditions of the General Loan Terms and Conditions and the Loan Agreement, and (ii) shall not, together with all other Advances drawn by the Client under the Loan Agreement, exceed the aggregate amount of the Loan Facility; c) with each request for drawing of Advance, the Client shall enclose (i) duly completed payment order instructing the Bank to transfer funds representing such Advance from the current account specified in the Loan Agreement to a third party bank account or accounts in accordance with the purpose of the Loan defined in the Loan Agreement and specifying a payment date that is the date of the drawing of Advance, and (ii) all documents required under the Loan Agreement which confirm that all payments made by the Bank in accordance with the above described payment orders delivered by the Client to the Bank shall comply with the purpose of the Loan defined in the Loan Agreement. 14. Failure to Draw Entire Loan Facility. If the Client has drawn any Advance during the Draw-Down Period but failed to draw the Loan Facility in full, the Client shall repay the Loan by making installments in accordance with the Loan Agreement, provided that the last installment shall be reduced by the amount of Loan Facility which was not drawn by the Client. If the amount of Loan Facility which was not drawn by the Client exceeds the amount of the last installment specified in the Loan Agreement, the last installment shall be canceled and immediately preceding installment shall be reduced by the amount of Loan Facility not drawn by the Client which exceeds the amount of the last installment pursuant to the Loan Agreement. Should the amount of Loan Facility, which was not drawn by the Client, exceed the sum of the two last installments under the Loan Agreement, the same procedure shall be applied beginning with the latest installment and ending with the earliest installment pursuant to the Loan Agreement. If the Loan Agreement provides for the obligation of the Client to repay the Loan by a lump-sump repayment, such lump-sum repayment shall be reduced by the amount of Loan Facility, which was not drawn by the Client. If the Loan Agreement provides for repayment of the Loan by annuity installments, the failure to draw the Loan Facility in full shall be reflected by modifying the amount of such annuity installments on the date of the first modification of the applicable interest rate in accordance with the Loan Agreement. The Client's failure to draw the Loan Facility in full shall not in any respect affect its obligation to pay the full amount of the Arrangement Fee.   V. LOAN REPAYMENT 15. Loan Repayment. The Client shall repay the Loan and pay any interest accrued thereon in the manner and at dates specified in the Loan Agreement. 16. Due Date Set-Off, Sufficient Balance. The Client and the Bank agree that the Client shall repay the Loan and pay any and all of its other obligations to the Bank arising under and in connection with the Loan Agreement by the Bank setting-off, on their respective due dates, all of its due receivables against the Client against the funds of the Client deposited in the current account designated for such purpose in the Loan Agreement. In case that the due date scheduled for the payment of any such receivables shall be a day other than a Business Day, the Bank shall set off such receivables against the funds deposited in the current account on the immediately following Business Day. The Client shall ensure that sufficient funds be available on its current account for the payment of any such receivable no later than on the due date scheduled for the payment thereof. If such account is maintained in a currency other than the currency in which such receivable shall be paid, the Client shall ensure that sufficient funds be available in such account no later than two (2) Business Days prior to the due date scheduled for the payment of such receivable by the Client to the Bank. If the funds deposited in the Client's current account are not sufficient for the payment of all due obligations of the Client to the Bank, such funds shall be set-off against the due claims that the Bank may have against the Client in the following order: 1) payment of contractual penalties and default interest; 2) reimbursement for losses suffered and costs incurred by the Bank; 3) payment of any Charges; 4) payment of any Fees; 5) payment of interest accrued on the Loan; and 6) repayment of the Loan (if the Loan is repaid by installments, commencing with the installment of oldest maturity and ending with the most recent installment). If the Bank has due claims against the Client arising under or in connection with more Loan Agreements, the Bank may use the funds deposited in the current account to set-off its due claims arising under or in connection with any such Loan Agreement in the order determined by the Bank at its sole discretion. 17. Determination of Terms and Conditions Applicable to Subsequent Interest Rate Periods. If the Loan Agreement provides that the applicable interest rate in respect of the Loan is a Variable Rate whose amount (but not the structure) is determined only for the first Interest Rate Period and the amount of interest rate in respect of each subsequent Interest Rate Period shall be notified to the Client by the Bank in writing not later than thirty (30) Business Days prior to the end of the current Interest Rate Period, the Client shall be entitled to prepay the Loan or any part thereof pursuant to Client's written notice delivered to the Bank within fifteen (15) days following receipt by the Client of a Bank's notice indicating the amount of interest rate applicable to the subsequent Interest Rate Period. Such Client's notice of a prepayment of the Loan or any part thereof to the Bank shall specify the amount of such prepayment and the prepayment shall be made by the Client not later than on the fourth (4th) Business Day preceding the last day of the current Interest Rate Period. If the Loan is not prepaid in full, the Bank shall not later than on the last day of the current Interest Rate Period notify the Client in writing of the new amount and new maturity dates in respect of the installments of the Loan. 18. Repayment by Annuity Installments. For the period commencing on the date of drawing of first Advance and ending on the last day of the Interest Period immediately preceding the Interest Period in which the first annuity installment shall become due and payable, the Client shall pay any applicable interest in respect of the Loan in accordance with the General Loan Terms and Conditions (i.e., not as part of annuity installments of the Loan and any interest accrued thereon). 19. Payment from Other Accounts. If the funds deposited in the current account designated for the purpose of repayment of the Loan in the Loan Agreement are not sufficient for the full satisfaction of any and all due receivables of the Bank from the Client arising under or in connection with the Loan Agreement, the Bank may set-off such due receivables against the funds deposited in any other account of the Client maintained with the Bank, or refuse to execute any Client's instruction to the Bank in respect of such funds, or otherwise restrain the Client from disposing with the funds deposited in any of such Client's accounts. If the funds deposited in the Client's accounts are not sufficient for the payment of any and all due receivables of the Bank from the Client, such funds shall be set-off against the due receivables of the Bank in the order specified in Article 16. 20. Prepayment of Loan. Except as provided in Article 17, the Client shall not be allowed to prepay the Loan or any part thereof prior to its maturity date specified in he Loan Agreement without the prior express written consent of the Bank. Should the Bank consent to such prepayment of the Loan or any part thereof, the Client shall (i) reimburse the Bank for any and all costs and expenses that the Bank may incur in connection with such prepayment, and (ii) pay to the Bank a Charge for prepayment of the Loan in the amount specified in the List of Fees and Charges. Any prepayment of the Loan shall first be set-off against any of the Bank's past due receivables from the Client and, thereafter, against any of the Bank's receivables against the Client not yet due and payable. The provisions of Articles 14 and 16 shall accordingly apply to such prepayment unless otherwise provided in the Loan Agreement. 21. Loan Prepayment Procedure. If the Bank agrees with a prepayment of the Loan by the Client pursuant to Article 20, the Bank shall specify in its written consent the due date and amount of such prepayment of the Loan. The Client shall prepay the specified amount of the Loan on the date specified by the Bank.   VI. REPRESENTATIONS 22. Representations. Unless otherwise provided in the Loan Agreement, the Client hereby makes in favor of the Bank as of the date of execution of the Loan Agreement and thereafter as of each following day until the full satisfaction of any and all obligations of the Client arising under or in connection with the Loan Agreement the following representations. Unless otherwise provided in the Guarantee Agreement, the Guarantor hereby makes in favor of the Bank as of the date of execution of the Loan Agreement and the Guarantee Agreement and thereafter as of each following day until the satisfaction in full of any and all obligations of the Guarantor arising under or in connection with the Guarantee Agreement the following representations: a) the Client is an individual - entrepreneur having unlimited capacity to perform his/her rights and obligations and to take any legal action, including, without limitation, to enter into the Loan Agreement and other contractual relationships related to the Loan Agreement, and to perform his/her obligations under the Loan Agreement, the General Loan Terms and Conditions and other contractual relationships related to the Loan Agreement. The execution of the Loan Agreement and other contractual relationships related to the Loan Agreement, and the performance by the Client of any and all obligations thereunder have been duly authorized by the Client. The Client has obtained any and all necessary authorizations and licenses permitting the Client to carry on his/her business as it is now being conducted by the Client; or the Client is a legal entity duly organized, incorporated, and existing under the laws of the jurisdiction of its incorporation, having the full power and authority to perform its rights and obligations and to take any legal action, including, without limitation, to enter into the Loan Agreement and other contractual relationships related to the Loan Agreement, and to perform its obligations under the Loan Agreement, the General Loan Terms and Conditions and other contractual relationships related to the Loan Agreement. The execution of the Loan Agreement and other contractual relationships related to the Loan Agreement, and the performance by the Client of any and all obligations thereunder have been duly authorized by the relevant corporate organs of the Client. The Client has obtained any and all necessary authorizations and licenses permitting the Client to carry on its business as it is now being conducted by the Client; b) the Guarantor is an individual - entrepreneur having unlimited capacity to perform his/her rights and obligations and to take any legal action, including, without limitation, to enter into the Guarantee Agreement and to perform his/her obligations under the Guarantee Agreement and the General Loan Terms and Conditions. The execution of the Guarantee Agreement and the performance by the Guarantor of any and all of his/her obligations thereunder have been duly authorized by the Guarantor. The Guarantor has obtained any and all necessary authorizations and licenses permitting the Guarantor to carry on his/her business as it is now being conducted by the Guarantor; or the Guarantor is a legal entity duly organized, incorporated, and existing under the laws of the jurisdiction of its incorporation, having the full power and authority to perform its rights and obligations and to take any legal action, including, without limitation, to enter into the Guarantee Agreement, and to perform its obligations under the Guarantee Agreement and the General Loan Terms and Conditions. The execution of the Guarantee Agreement and the performance by the Guarantor of any and all of its obligations thereunder have been duly authorized by the relevant corporate organs of the Guarantor. The Guarantor has obtained any and all necessary authorizations and licenses permitting the Guarantor to carry on its business as it is now being conducted by the Guarantor; c) the Loan Agreement and other contractual documents related to the Loan have been duly and validly executed by the Client or its duly authorized representatives, who acted within the scope of their authorization. Any and all obligations of the Client arising under or in connection with the Loan Agreement and the other contractual documents related to the Loan Agreement are valid and enforceable against the Client. The Client has duly complied, or is prepared to comply, with any and all of its obligations arising under or in connection with the Loan Agreement and the other contractual documents related to the Loan Agreement; d) the Guarantee Agreement has been duly and validly executed by the Guarantor or its duly authorized representatives, who acted within the scope of their authorization. Any and all obligations of the Guarantor arising under or in connection with the Guarantee Agreement are valid and enforceable against the Guarantor. The Guarantor has duly complied, or is prepared to comply, with any and all of its obligations arising under or in connection with the Guarantee Agreement; e) each Collateral constitutes a valid and enforceable obligation of the person providing such Collateral and such person has duly complied, or is prepared to duly comply, with any and all of its obligations arising under or in connection with the Collateral; f) the Client has obtained any and all permits and approvals from any competent governmental entity or any other third party which are for any reason whatsoever necessary for (i) the valid execution of the Loan Agreement and other contractual documents related to the Loan Agreement, (ii) the drawing of Advance, and (iii) the performance by the Client of any of its obligations arising under or in connection with the Loan Agreement and the other contractual documents related to the Loan Agreement, and any and all such permits and approvals are in full force and effect; g) the Guarantor has obtained any and all permits and approvals from any competent governmental entity or any other third party which are for any reason whatsoever necessary for (i) the valid execution of the Guarantee Agreement, and (ii) the performance by the Guarantor of any of its obligations arising under or in connection with the Guarantee Agreement and any and all other related arrangements, and any and all such permits and approvals are in full force and effect; h) neither the execution of the Loan Agreement and the entering into other contractual relationships related to the Loan Agreement by the Client or any of the Client's Affiliates, nor the performance of any obligations hereunder and thereunder and the drawing of Advance (i) violates the provisions of the constitutive or any other organizational documents of the Client or any of the Client's Affiliates, (ii) is in contravention with any agreement, document, court resolution, arbitration award, and/or administrative decision, regardless of whether in force and effect or not, binding on the Client or any of the Client's Affiliates and/or affecting the rights and obligations of the Client or any of the Client's Affiliates and/or the condition of its or their assets, or (iii) is in breach of applicable law; i) neither the execution of the Guarantee Agreement nor the performance of any obligations hereunder and thereunder (i) violates the provisions of the constitutive or any other organizational documents of the Guarantor, (ii) is in contravention with any agreement, document, court resolution, arbitration award, and/or administrative decision, regardless of whether in force and effect or not, binding on the Guarantor and/or affecting the rights and obligations of the Guarantor and/or the condition of its assets or (iii) is in breach of applicable law; j) neither the execution of the Loan Agreement and the drawing of Advance, nor the performance by the Client of any of its obligations to the Bank arising under or in connection with the Loan Agreement, the General Loan Terms and Conditions, and other contractual relationships related to the Loan Agreement will cause or result in an Event of Default; k) neither the execution of the Guarantee Agreement, nor the performance by the Guarantor of any of its obligations to the Bank arising under or in connection with the Guarantee Agreement and the General Loan Terms and Conditions will cause or result in an Event of Default; l) to the best knowledge of each of the Client and the Guarantor, no petition has been filed in relation to either of them for issuing a decision or instituting any court, arbitration, or administrative proceedings (such as petition to declare either of the Client and the Guarantor bankrupt, petition for composition, petition for issuing an injunction, or a petition for enforcement of court decision) nor have any such proceedings been instituted that might adversely affect the legal, financial, or economic situation of the Client or Guarantor or the ability of the Client to perform any of its obligations arising under or in connection with the Loan Agreement, the General Loan Terms and Conditions, and other contractual relationships related to the Loan Agreement, or the ability of the Guarantor to perform any of its obligations arising under or in connection with the Guarantee Agreement and the General Loan Terms and Conditions and, to the best knowledge of either of the Client and the Guarantor, no such petition or proceedings are threatening; m) since the execution of the Loan Agreement, there has been no material adverse change affecting the legal, financial, or economic situation or operations of the Client, or its ability to perform any of its obligations arising under or in connection with the Loan Agreement, the General Loan Terms and Conditions, and other contractual relationships related to the Loan Agreement. The Client is not insolvent or overburdened with debt within the meaning of applicable law; n) since the execution of the Loan Agreement and the Guarantee Agreement, there has been no material adverse change affecting the legal, financial, or economic situation or operations of the Guarantor or its ability to perform any of its obligations arising under or in connection with the Guarantee Agreement and the General Loan Terms and Conditions. The Guarantor is not insolvent or overburdened with debt within the meaning of applicable law; o) any and all documents and other information, oral or written, provided or disclosed to the Bank in connection with the conclusion of the Loan Agreement, the Guarantee Agreement, or any other related agreement, or in connection with drawing of any Advance were as of the respective dates of the provision or disclosure thereof true, complete, correct and not misleading in any material respect. Since the date of disclosure or provision of any such documents and other information to the Bank, there have been no material adverse changes in the matters to which such information relate or in the business of the Client or any of the Client's Affiliates; p) neither the Client nor the Guarantor is a person having a non-standard relationship to the Bank within the meaning of applicable law; q) neither the Client nor the Guarantor is in default (as recorded by applicable authorities) in respect of any payment in connection with tax duties, the public health insurance, social security, contributions to the state employment policy, and custom duties. 23. Changes to Representations. If the Bank issues its written consent with a change of any representation made by the Client or the Guarantor in the Loan Agreement, the Guarantee Agreement, or the General Loan Terms and Conditions, any such representation shall be deemed changed from (and including) the date of delivery of a written notice of such change by the Client or the Guarantor to the Bank. From the date of delivery, the representations of the Client and the Guarantor shall continue to refer to the facts and/or circumstances consented to by the Bank in writing pursuant to this Article. VII. COVENANTS 24. Reporting Duty. The Client shall, at dates specified below and in form and substance acceptable to the Bank, provide the Bank with the following information and/or documents. The same duty shall be separately performed by the Guarantor. The information and/or the documents to be submitted by the Client and the Guarantor shall include, without limitation, the following: a) within two (2) Business Days from the date on which it knew or may have known such fact or circumstance, information that any representation made by the Client or the Guarantor in the Loan Agreement, the Guarantee Agreement or the General Loan Terms and Conditions (including, without limitation, Article 22 and Article 23) or any other document furnished to the Bank in connection with the Loan Agreement is false, incomplete, incorrect and/or misleading in any material respect; b) within two (2) Business Days from the date on which it knew or may have known such fact or circumstance, information about any changes (i) in the organizational and/or legal structure of the Client or the Guarantor, whether proposed or effected (such as transformation pursuant to the Commercial Code), (ii) in the relevant entries in the Trade Registry or the Commercial Registry, (iii) in the personal data, (iv) in the permanent residence, and any other changes that might adversely affect the Bank as lender; c) within ten (10) days following the date on which any such reporting duty under the applicable law arose, if it is an issuer of any registered securities or securities registered with any competent foreign authority supervising the securities market, any and all documents and information which have been provided or which are required to be provided by it to the Czech Securities Commission (in Czech: Komise pro cenne papiry Ceske republiky) or any competent foreign authority supervising the securities market in order to comply with any reporting duty under applicable law; d) within ten (10) days following the date on which any such reporting duty under the applicable law arose, if it is an issuer of any securities listed on the Prague Securities Exchange (in Czech: Burza cennych papiru Praha, a.s.) or any other Czech or foreign securities exchange or other organized securities market, any and all documents and information which have been provided or which are required to be provided to any such securities exchange or securities market by it in order to comply with any reporting duty under applicable law; e) within ten (10) days from their actual publication, disclosure, or provision or the date on which such documents or information should have been published, disclosed, or provided, if it is a legal entity, any and all documents and information required under applicable law or decision of any competent authority to be published, disclosed and/or provided to its members, partners or shareholders, bondholders, participation certificates owners or owners of its interim certificates; f) without any delay following their completion but no later than within one hundred and eighty (180) days following the end of the relevant calendar year, if it is a person which prepares or is required to prepare pursuant to applicable law or at the Bank's request pursuant to the Loan Agreement, the Guarantee Agreement, the General Loan Terms and Conditions, or other agreements in connection with the Loan Agreement, audited financial statements or audited consolidated financial statements, the audited financial statements and the audited consolidated financial statements including the annual report for the relevant accounting period, report from the auditor and all reports or documents prepared by the auditor for it. At the Bank's request, the Client shall also provide such information in respect of any of the Client's Affiliates if it is a person required to prepare audited financial statements or the audited consolidated financial statements pursuant to applicable law or, at the Bank's request, pursuant to any contractual relationship related to the Loan Agreement; g) within one month following the end of the relevant calendar quarter, if it is a person which is required to prepare quarterly financial statements on a regular basis (pursuant to, for example, "The Terms and Conditions for Acceptance of a Security for Trading on the Prague Securities Exchange") or at the Bank's request pursuant to the Loan Agreement, the Guarantee Agreement, the General Loan Terms and Conditions, or other agreements in connection with the Loan Agreement, the quarterly financial statements; h) report of occurrence of an Event of Default. Such report including the detailed description of the Event of Default and proposed remedy thereof by the Client shall be provided to the Bank without any delay but no later than three (3) Business Days following occurrence of such Event of Default; i) without any delay, but in any event no later than three (3) Business Days following the occurrence of any such fact or circumstance, (i) any information regarding any and all facts and circumstances which it knew or may have known that adversely affect or might adversely affect the ability of the Client, the Guarantor, and/or any third party to perform their respective obligations arising under or in connection with the Loan Agreement, the Guarantee Agreement, the General Loan Terms and Conditions, and other agreements in connection with the Loan Agreement including, without limitation, their ability to duly and timely repay the Bank's receivables and to perform their respective obligations under any Collateral, and (ii) information that any document or any other information, oral or written, provided or disclosed to the Bank in connection with the execution of the Loan Agreement, the Guarantee Agreement, or any other agreement in connection with the Loan Agreement or drawing of any Advance is false, incomplete, incorrect, or misleading in any material respect; j) within fifteen (15) days following the Bank's request, any documents evidencing the financial and economic situation of the Client, the Guarantor, or any of the Client's Affiliates in form and substance determined by the Bank; k) on or prior to the date of execution of the Loan Agreement and, thereafter, promptly after any change in the information provided to the Bank, any and all information relating to (i) the identity of each of the Client's Affiliates, and (ii) the relations between or among such persons and, to the extent such information differs from the information provided to the Bank in accordance with the provisions of the foregoing sentence, also (iii) any and all information relating to the identity of persons forming with the Client the affiliated group of persons within the meaning of the decrees published by the Czech National Bank, and (iv) information about the relations between or among such persons (including, without limitation, any controlling relations); l) if it is a person having a non-standard relation with the Bank within the meaning of applicable law, information about such relation promptly after any change in the information provided to the Bank; m) within ten (10) days following the date on which any such filing was or should have been made copies of all filings with the relevant tax authorities in respect of income tax payment; n) within ten (10) days following the date on which the respective obligation arose, information about (i) its obligation to file a document or amendment thereto in the collection of documents which forms a part of the Czech Commercial Registry or any other registry provided for in applicable law, or (ii) actual filing of such document or amendment thereto in the collection of documents which forms a part of the Czech Commercial Registry or any other registry provided for in applicable law, unless such document or amendment thereto was delivered to the Bank pursuant to other provisions of the General Loan Terms and Conditions. At the Bank's request, it shall provide the Bank with a certified (notarized) copy of any such document within ten (10) days. These obligations shall also apply in relation to any of the Client's Affiliates; o) within fifteen (15) days following the receipt of the Bank's request, any and all additional information and documents reasonably necessary to assess its legal, financial, or economic situation and to confirm any information provided by it to the Bank or that the Bank received from any third party. These obligations shall also apply in relation to any of the Client's Affiliates; p) no later than within fifteen (15) days following the Bank's request, certificates issued by the relevant authorities confirming that it is not in default with the payment of any amounts in respect of (i) any tax, (ii) the public health insurance, (iii) social security, (iv) contributions to the state employment policy, and (v) custom duties as recorded in the files of such authorities; q) promptly after adopting such intention, information about its intention to create any pledge or other collateral over any of its assets or revenues in order to secure obligations of any third party. This obligation shall also apply in relation to any of the Client's Affiliates; r) within seven (7) Business Days prior to the occurrence of such change, information about (i) any change of data and information contained in the Loan Agreement, the Guarantee Agreement, the General Loan Terms and Conditions, or any other agreement in connection with the Loan Agreement or any documents and information provided thereunder, and (ii) any changes affecting its identification, legal status, or the authority to sign on its behalf. Within the same term, it shall at its own cost provide the Bank with documents evidencing such changes and any additional information that the Bank may reasonably request. The Client shall be liable for any and all consequences arising under or in connection with the breach by the Client of any of its obligations hereunder. Within ten (10) Business Days of the Bank's demand to that effect, the Client shall reimburse the Bank for any and all loss, costs and expenses, without any limitation on the scope of such reimbursement and regardless of whether such damage was foreseeable or not. Such obligation shall also apply to the Guarantor; s) promptly after adopting such intention, information about its intention to assume any obligation to any third party under any loan, guarantee, or otherwise. This obligation shall also apply in relation to any of the Client's Affiliates; t) no later than within fifteen (15) days of the Bank's request, information about its accounts maintained with, and its use of services provided by, other banks; u) no later than within fifteen (15) days of the Bank's request, information from the files of the relevant tax authority. Within three (3) Business Days following receipt of the Bank's request specifying the purpose and scope of any information requested, it shall release, in compliance with applicable law, such tax authority from its confidentiality obligation for the purpose and to the extent specified in the Bank's request; v) if it is a municipality, region, or other corporation governed by public law, within thirty (30) days of the end of each calendar month, information in respect of (i) the annual budget approved by such municipality, region, or other corporation, (ii) the relevant performance statement, and (iii) any modifications, proposed or effected, including, without limitation, any changes in the budget for the applicable year, organizational structure, legal position, statutory organs, and the persons authorized to act on such organs' behalf. It shall provide such information without delay, in each case no later than within three (3) Business Days following the occurrence of any such fact or circumstance. 25. Remedies. If the Bank determines on the basis of any information obtained in the course of the evaluation of the Client or a compliance check pursuant to the Loan Agreement or the General Loan Terms and Conditions, or on the basis of information obtained from the Client, the Guarantor, or any of Client's Affiliates or otherwise that any change occurred that may have a material adverse effect on the Client's ability to perform any of its obligations under the Loan Agreement or the General Loan Terms and Conditions, the Bank may request the Client to take certain actions proposed by the Bank in order to remedy such situation and/or provide additional security for due and timely payment of its obligations. The Client shall take such action or provide such Collateral within the time limit specified by the Bank in the proposal of such remedies and/or the request for the provision of additional security for due and timely payment of the Client's obligations. The time limit within which the Client will be required to adopt any remedial action or to provide additional security for due and timely payment of its obligations shall be no less than ten (10) Business Days following the delivery to the Client of the above specified proposal or request. 26. Maximum Indebtedness. Overall Indebtedness of the Client may not exceed the maximum Indebtedness amount determined in the Loan Agreement. Overall Indebtedness of the Guarantor may not exceed the maximum Indebtedness amount determined in the Guarantee Agreement. 27. Rights of Third Parties. If any right in rem or contractual right is created in respect of any of the assets or revenues of the Client or the Guarantor, the Bank may request the provision of an additional adequate security for due and timely payment of the Client's obligations. 28. Asset Disposal. Unless otherwise provided in the Loan Agreement, the Client may not, without the prior written consent of the Bank and whether in one or more transactions, transfer, lease or otherwise dispose of any part of its assets or revenues the value of which exceeds fifteen (15%) percent of the value of the Client's assets, or permit the creation of any rights of third parties to such assets (including assumption of guarantee obligations, accession to obligations, or assumption of third party obligations) other than (a) in the ordinary course of its business (in the case of entrepreneurs), or (b) an asset disposal in exchange for a performance of at least same value. Unless otherwise provided in the Guarantee Agreement, the Guarantor may not, without the prior written consent of the Bank and whether in one or more transactions, transfer, lease or otherwise dispose of any part of its assets or revenues the value of which exceeds fifteen (15%) percent of the value of the Guarantor's assets, or permit the creation of any rights of third parties to such assets (including assumption of guarantee obligations, accession to obligations, or assumption of third party obligations) other than (a) in the ordinary course of its business (in the case of entrepreneurs), or (b) an asset disposal in exchange for a performance of at least same value. 29. Corporate Changes. Without the prior written notice delivered to the Bank no less than thirty (30) days prior to the date scheduled for adoption of a decision in that matter, the Client - if a legal entity and/or the Guarantor - if a legal entity shall not resolve on its winding-up with or without liquidation, any change in its legal form, any purchase, sale, or lease of its enterprise or any part thereof, any change in the amount of its registered capital, any change in the composition of its statutory or supervisory bodies or appointment or removal of managers directly appointed by its statutory or supervisory bodies, or any other matter that, pursuant to any applicable foreign law, might have effect similar to that of the above described corporate changes. 30. Collateral for Obligations of Client. To secure any and all obligations of the Client arising under or in connection with the Loan Agreement, and regardless of whether due or not and conditional or not, the Client shall provide to the Bank at its request adequate Collateral. The Client shall inform the Bank of its intention to transfer, lease, and/or lend its assets or any part thereof in respect of which any contractual right or right in rem was created in favor of the Bank. Without the prior written consent of the Bank, the Client and the Guarantor shall not create, or permit the creation of, (i) a pledge or other encumbrance as a security for the obligations of third persons, or (ii) any right of third person to claim the creation of any such pledge or other encumbrance, in respect of assets or revenues of the Client, the Guarantor or any of the other Client's Affiliates. Should any assets or a part thereof in respect of which any contractual rights or rights in rem were created in favor of the Bank be transferred or leased or any pledge, encumbrance or similar rights in respect of such property be created, the Bank shall be entitled to request additional adequate Collateral. 31. Replenishment of Collateral. If, prior to the payment by the Client in full of any and all receivables of the Bank under or in connection with the Loan Agreement, the value of any assets, receivables or other security instruments which secure the payment of the Bank's receivables from the Client is reduced or such assets, receivables or other security instruments cease to exist, the Client shall, upon the Bank's first demand, provide additional adequate Collateral to the extent determined by the Bank. The Client shall pay any and all expenses incurred by the Bank in connection with such replenishment of Collateral. 32. Collateral Valuation. The Bank may conduct, or designate a third person to conduct, the Collateral Valuation, or accept the Collateral Valuation conducted by a third party at the sole cost of the Client. During each Collateral Valuation, the Client shall provide the Bank or such third party conducting the Collateral Valuation with all necessary cooperation, or procure the cooperation of any third parties providing the Collateral, and pay any and all expenses incurred in connection with the Collateral Valuation. 33. Insurance. At the Bank's request and to its satisfaction, the Client shall insure, within the time limit determined by, and with an insurer acceptable to, the Bank all insurable risks relating to its property, assets acquired or improved with the proceeds of the Loan or any assets securing the Client's obligations to the Bank under the Loan Agreement. At the Bank's request and to its satisfaction, the Guarantor shall insure, within the time limit determined by, and with an insurer acceptable to, the Bank all insurable risks relating to its assets securing the Guarantor's obligations to the Bank under the Guarantee Agreement. The Client - if an individual - shall at the Bank's request and to its satisfaction, conclude within the time limit determined by, and with an insurer acceptable to, the Bank a life insurance and any other appropriate insurance that the Bank may require. The Guarantor - if an individual - shall at the Bank's request and to its satisfaction, conclude within the time limit determined by, and with an insurer acceptable to, the Bank a life insurance satisfactory to the Bank and any other appropriate insurance that the Bank may require. The Bank may also accept the above specified insurance if concluded in favor of the Client or the Guarantor by a third party. To the extent the insurance concluded in favor of the Client or the Guarantor is not deemed sufficient by the Bank, the Client and/or the Guarantor shall within a time limit set therefor arrange for a sufficient additional insurance. The Client and/or the Guarantor shall provide the Bank with documents evidencing the establishment of such insurance in form and substance acceptable to the Bank. 34. Due Payment of Insurance Premium. Until the payment in full of any and all receivables of the Bank against the Client under or in connection with the Loan Agreement, the Client shall (i) duly and timely pay, or ensure the due and timely payment by third parties of, all insurance premiums, and (ii) comply with all other obligations under all applicable insurance policies. Unless otherwise agreed in the Loan Agreement, the Client shall furnish to the Bank evidence of the payment of the premiums and due maintenance of the insurance, in form and substance satisfactory to the Bank. Furthermore, the Client shall cause the insurer to inform the Bank of any default in payment of any amounts in respect of insurance premium and provide the Bank with evidence of such duty being accepted by the insurer. In the event of default in payment of any amounts in respect of insurance premium or any part thereof, the Bank may debit any applicable amounts due to the insurer to any account of the Client. 35. Pledge of Receivables arising under Insurance Policies. Unless otherwise provided in the Loan Agreement, the Client shall within five (5) Business Days following the execution of the Loan Agreement pledge, or cause to be pledged, in favor of the Bank any receivables arising under or in connection with any applicable insurance policies. At the Bank's request, instead of pledging, the Client shall assign, or cause to be assigned, such receivables to the Bank. The Client shall deliver, or cause to be delivered, to the Bank the copies of any and all correspondence between the insurer and the Client or the policyholder if he is a person different from the Client. 36. Increased Costs. To the extent the Bank incurs any additional or increased costs or expenses in connection with the administration of the Loan as a result of a change in laws or regulations applicable to the Bank or due to a material change on the market, the Client shall within ten (10) Business Days following the Bank's first demand reimburse the Bank for any and all such additional or increased costs or expenses without any restrictions on the amount of such reimbursement and regardless of whether any such additional or increased costs or expenses were foreseeable or not. The Bank's demand shall be in written form and shall contain appropriate explanation.   VIII. EVENTS OF DEFAULT 37. Events of Default. Unless otherwise agreed between the Bank and the Client, each of the following events or circumstances shall be deemed to constitute an Event of Default (an Event of Default shall also be each event or circumstance described as such in the Loan Agreement): a) the Client is in default with the repayment of the Loan or any part thereof and/or the payment of any accrued interest; b) the Client uses the Loan or any part thereof for a purpose other than that specified in the Loan Agreement; c) the Client and/or any of the Client's Affiliates is in default with the performance of any monetary and/or non-monetary obligation towards the Bank or is otherwise in breach of any of its obligations towards the Bank arising under or in connection with any contractual arrangement with the Bank (including any agreed prepayment) or the generally binding legal regulations; d) the Client and/or any of the Client's Affiliates is in default with the performance of any monetary and/or non-monetary obligation towards any third party arising under or in connection with any contractual arrangement with the Bank or such third party or the generally binding legal regulations; e) any third party declares any monetary obligation of the Client and/or any of the Client's Affiliates towards such third party immediately due and payable or payable at demand due to the failure of the Client and/or any of the Client's Affiliates to perform any of its obligations; f) the Client or any person providing the Collateral fails to provide and/or replenish the Collateral as the Bank may request or fails to comply with and observe the terms and conditions applicable to providing collateral in respect of any of the Bank's receivables; g) any person providing the Collateral is in default with the performance of any of its monetary and/or non-monetary obligations towards the Bank, and/or any representations or warranties made by any person providing the Collateral in the applicable agreement pursuant to or in connection which such Collateral was created is false, incorrect, incomplete or misleading; h) the Client or Guarantor fails to comply, in a due and timely fashion, with any of its notification or reporting duties provided for in the Loan Agreement, the Guarantee Agreement, the General Loan Terms and Conditions, any other agreement or arrangement with the Bank, or applicable law; i) any representations made by the Client or the Guarantor in the Loan Agreement, the Guarantee Agreement, the General Loan Terms and Conditions (including, without limitation, Article 22 and 23), or in any other document delivered to the Bank in connection with the Loan Agreement proves to be false, incorrect, incomplete or misleading, even if the Client or the Guarantor notifies the Bank of any change in or amendment to such representations provided that the Bank does not grant its consent to such change or amendment pursuant to Article 23; j) the Client or any of the Client's Affiliates breaches any of its obligations specified in Article IX, including, without limitation, its obligation to provide cooperation, or to cause the provision thereof, pursuant to Articles 41 and 42; k) within the meaning of applicable Czech or foreign law, the Client or any of the Client's Affiliates is insolvent or overburdened with debt or a petition for declaration of bankruptcy, composition with creditors, or instituting of other similar proceedings is filed in relation to the Client or any of the Client's Affiliates; l) the Client and/or any of the Client's Affiliates announces its intention to suspend the performance of any of its obligations or commences negotiations with any of its creditors with objective to restructure its obligations; m) any competent governmental authority, including, without limitation, any administrative authority, court, arbitration tribunal or an arbitrator determines that the Client and/or Guarantor have breached any legal obligation and the Bank considers such breach as having an adverse affect on the ability of the Client and/or of the Guarantor to perform their obligations pursuant to the Loan Agreement, the Guarantee Agreement, or the General Loan Terms and Conditions; n) the Client or the Guarantor or any competent body thereof breaches its obligation not to dispose without the consent of the Bank of any assets pursuant to Article 28, or resolves without a prior notice to the Bank on any changes in its status pursuant to Article 29, or resolves on its winding-up with or without liquidation, any change in its legal form, any purchase, sale, or lease of its enterprise or any part thereof, any change in the amount of its registered capital, any change in the composition of its statutory or supervisory bodies or appointment or removal of managers directly appointed by its statutory or supervisory bodies, or any other matter that, pursuant to any applicable foreign law, might have an effect similar to that of the above described corporate changes, or makes the above specified changes in its corporate status regardless of the Bank having expressed in writing its disagreement therewith; o) any entity or entities "controlling", within the meaning of the Commercial Code, as of the date of execution of the Loan Agreement the Client and/or the Guarantor, cease to be such controlling persons; p) any entity or entities not "controlling", within the meaning of the Commercial Code, as of the date of execution of the Loan Agreement the Client and/or the Guarantor, become such controlling persons; q) the Client's and/or the Guarantor's business authorization or any other authorization that is in the opinion of the Bank substantial for the conduct of the business or the performance of any obligations arising under or in connection with the Loan Agreement, the Guarantee Agreement, or the General Loan Terms and Conditions is withdrawn, suspended, or otherwise limited, or any event occurs which (i) may serve as a ground for the winding-up of the Client and/or the Guarantor as a legal entity, (ii) constitutes the grounds for such winding-up pursuant to applicable law; r) an event occurs which, in the opinion of the Bank, (i) might have a material adverse effect on the business operations or financial situation of the Client or the Guarantor, and/or (ii) has a material adverse effect on the ability of the Client and/or the Guarantor to perform any of their obligations pursuant to the Loan Agreement, the Guarantee Agreement, or the General Loan Terms and Conditions; s) the Client unreasonably delays or refuses to grant its consent with assumption by a third party of any obligation of the Bank towards such Client in compliance with Article 59. IX. CLIENT EVALUATION AND CHECK OF COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE LOAN 38. Right of the Bank to Evaluate. Until the satisfaction in full of any and all of its claims arising under or in connection with the Loan Agreement, the Bank may evaluate the Client's ability to repay the Loan and to perform any of its other obligations towards the Bank. The Bank shall also be entitled to evaluate the Client's Affiliates. If a consent of any of the Client's Affiliates may be necessary for such evaluation, the Client shall promptly procure such consent. 39. Obligation to Permit Compliance Check. At the Bank's request, the Client shall permit a check of its compliance with the terms and conditions of the Loan Agreement, the General Loan Terms and Conditions, and any and all other documents which, in the opinion of the Bank, relate to the provision of the Loan Facility or any part thereof or affect the Client's ability to repay the Loan and to perform any of its other obligations towards the Bank at dates and in the manner determined by the Bank. 40. Third Party Information. The Bank may in connection with such evaluation of the Client or check of its compliance with the terms and conditions pursuant to this Part IX demand and obtain any and all information relating to the Client that the Bank may deem necessary for such purposes including any third party information and the third parties concerned shall be entitled to provide to the Bank any information that it may request. The Bank may authorize a third party to conduct such evaluation of the Client or check of its compliance with the terms and conditions pursuant to this Part IX. 41. Cooperation of Client. The Client shall permit the Bank to exercise, and shall at its sole cost ensure the appropriate conditions for the exercise by the Bank of, its rights under this Part IX, including, without limitation, (i) permit the authorized representatives or designated employees of the Bank access to the premises and facilities of the Client and any of the Client's Affiliates, (ii) make available any and all accounting and other materials or documents of the Client and of any of the Client's Affiliates on information carriers of any kind and nature, and (iii) provide such information through its officers and the officers of the Client's Affiliates. In this connection, the Client shall also provide the Bank with any and all cooperation that the Bank may request, including, without limitation, any cooperation requested from the statutory and the other bodies of the Client and/or any of the Client's Affiliates and the members of such statutory and other bodies, other officers, employees and other persons (including auditors and legal counsel) having a contractual relationship with the Client or any of the Client's Affiliates, including, without limitation, such persons that provide professional services to the Client and/or any of the Client's Affiliates. The Client shall reimburse the Bank for any and all reasonable costs that the Bank may incur in the exercise of any of its rights under this Part IX. 42. Cooperation of Third Parties. The Client shall ensure the cooperation of third parties in the exercise by the Bank of its rights under this Part IX. To the extent it may be required in this connection, the Client shall at the Bank's request promptly issue to the Bank or a third party a power-of-attorney or other authorization permitting the Bank to the exercise of any of its rights under this Part IX.   X. SANCTIONS 43. Termination by Notice of Provision of Loan Facility; Rescission of the Loan Agreement. The provision of the Loan Facility may only be noticed and the Loan Agreement rescinded in instances and subject to the conditions stipulated by the General Loan Terms and Conditions or the Loan Agreement. 44. Right of Bank to Notice the Provision of Loan Facility, Rescind the Loan Agreement, and/or Declare the Loan Immediately Due and Payable. The Bank may terminate by notice the provision of the Loan Facility, or rescind the Loan Agreement with effect as of the delivery to the Client of a written notice of termination or rescission and/or declare the Loan and any and all of the other obligations of the Client immediately due and payable, provided, that the Loan and any and all of the other obligations of the Client shall become due and payable as of the Pre-Payment Day, if: a) the Client or the Guarantor disagrees with an amendment to the General Loan Terms and Conditions within the time limit specified in Article 3; b) an Event of Default occurs; c) the provision of the Loan Facility, drawing of any Advance, or performance of any obligation of the Bank would result in a breach of applicable law regulating obligations of the Bank or having impact on the economic management and/or legal status of the Bank, including, without limitation, any law, decree, and/or provision of the Czech National Bank; d) between the date of execution of the Loan Agreement and the date on which an Advance is requested, any change occurs affecting the Client, including, without limitation, a change in its economic situation which, in the opinion of the Bank, might have a material adverse effect on the Client's ability to perform any of its obligations arising under or in connection with the Loan Agreement, the General Loan Terms and Conditions, or other contractual relationships between the Client and the Bank relating to the Loan Agreement; e) within the time-limits specified by the Bank in the proposal of such remedial actions and/or the request for the provision of additional Collateral, the Client fails to (i) take the remedial actions proposed by the Bank pursuant to Article 25, or (ii) provide the additional Collateral requested by the Bank under Articles 25, 27, 30 or 31; f) the applicable Reference Rate was not announced on the Calculation Day and the Client fails to reach an agreement with the Bank on the amount or method of calculation of the Variable Rate pursuant to Article 8.7 within one (1) month following such Calculation Day. 45. Implications of Loan Being Declared Immediately Due and Payable. If the Bank declares the Loan and any other obligations of the Client towards the Bank immediately due and payable, the Client shall on the Pre-Payment Day (i) repay the Loan, (ii) pay any interest accrued thereon as of the Pre-Payment Day, and (iii) comply with the other obligations of the Client arising under or in connection with the Loan Agreement or the General Loan Terms and Conditions. 46. Implications of Rescission of the Loan Agreement. Upon rescission of the Loan Agreement, all of the rights and obligations of each of the Bank and the Client shall terminate except for the rights and obligations specified in this Article. If the Bank rescinds the Loan Agreement, the Client shall within five (5) Business Days following the delivery of the applicable notice of rescission (i) repay the Loan, (ii) pay any interest accrued thereon as of date of such repayment, and (iii) satisfy all other monetary obligations of the Client arising under or in connection with the Loan Agreement and the General Loan Terms and Conditions (including, without limitation, any contractual penalties, default interest, reimbursement for damages and costs incurred by the Bank, Charges, and Fees). Rescission of the Loan Agreement shall not affect any provisions concerning the choice of law and the resolution of disputes between the Bank and the Client and any security for payment of the Bank's receivables arising under or in connection with the Loan Agreement. 47. Contractual Penalty. If the Bank rescinds the Loan Agreement, and/or terminates by notice the provision of the Loan Facility, and/or declares the Loan and any and all other obligations of the Client immediately due and payable pursuant to Article 44, it may request the payment of a contractual penalty amounting to the aggregate amount of interest accrued on the Loan Facility calculated by applying the interest rate specified in the Loan Agreement effective on (i) the Pre-Payment Day, if it declares the Loan immediately due and payable, or (ii) the date of delivery of the applicable notice of rescission, if it rescinds the Loan Agreement, or (iii) the date of delivery of the applicable notice of termination, if it terminates by notice the provision of the Loan Facility, for the time period from the Pre-Payment Day or the date of delivery of the applicable notice of termination or notice of rescission to the final repayment date in respect of the Loan pursuant to the Loan Agreement. 48. Obligation to Reimburse Bank for Costs and Damages. If the Bank rescinds the Loan Agreement, and/or terminates by notice the provision of the Loan Facility, and/or declares the Loan and any and all other obligations of the Client immediately due and payable, it may request from the Client reimbursement for any and all damages that the Bank may incur in connection with such rescission of the Loan Agreement, such termination by notice of the provision of the Loan Facility, and/or such declaration of immediate maturity. The term "damage(s)" as used herein shall mean and include, without limitation, any lost profits and actual damage (in Czech: usly zisk a skutecna skoda). The term "damage(s)" shall also mean any loss and costs incurred by the Bank in connection with its rescission of the Loan Agreement, termination by notice of the provision of the Loan Facility or declaration of the Loan immediately due and payable. Furthermore, the Bank may request from the Client or the Guarantor reimbursement for any and all costs and expenses incurred by the Bank in connection with the enforcement of any of the claims that the Bank may have against the Client or the Guarantor (including, without limitation, any expenses of the Bank, costs of representation, and any costs and expenses incurred by its counsel in connection with the enforcement of claims, court, administrative, arbitration, or other proceedings, administrative charges, etc.) or in connection with each such individual case in which the Bank may rescind the Loan Agreement, terminate by notice the provision of the Loan Facility, or declare the Loan and any and all other obligations of the Client immediately due and payable pursuant to Article 44. The Bank may further request from the Client or the Guarantor reimbursement for any and all costs that the Bank may incur in connection with its acting as a party in any court, administrative, arbitration or other adversary proceedings between the Client or the Guarantor and a third party.   XI. OTHER PROVISIIONS 49. Legal Capacity; Identification; Representation pursuant to Power-of-Attorney 49.1 Legal Capacity, Identification. Prior to entering into any contractual relationship with the Bank in connection with the Loan, at the Bank's request, the Client shall furnish to the Bank evidence of its legal capacity and establish its identity. The term "establish identity" as used herein shall mean (a) with respect to Clients - individuals - providing evidence of certain data and information relating to such individual, including, without limitation, his/her first and last name(s), birth number or date of birth, permanent residential address or place of business, commercial name and identification number, and (b) with respect to Clients - legal entities - (i) providing evidence of certain data and information relating to such entity, including, without limitation, its commercial name or name, registered address, company identification number (as abbreviated in Czech: IČ), and (ii) establishing the identity of the individual authorized to act on behalf of the Client in connection with the Loan. With respect to Clients - legal entities - legal capacity is typically evidenced and identity established by (i) a valid excerpt from the Commercial Registry not older than thirty (30) days or an officially certified (notarized) copy thereof or other similar certificate of incorporation in the applicable public registry, and (ii) a valid personal identification card or a valid passport of the person authorized to act on behalf of the Client in connection with the Loan Agreement. With respect to Clients - individuals - identity is typically established by the presentation of a valid personal identification card or a valid passport. 49.2 Power-of-Attorney. Each power-of-attorney granted by the Client to a third party (the "Attorney") shall be in writing and sufficiently specific and duly executed by the Client and, at the Bank's request, shall contain the acceptance thereof by the Attorney. The Bank may in each case request the extension or specification in further detail of its contents and the Client is obliged to comply with such request. The signature of the Client must be officially certified (notarized) (see also Article 52). The Bank may request the Attorney to provide evidence of his/her legal capacity and establish his/her identity in accordance with the Article 49.1. The Client shall without delay and in each case no later than seven (7) Business Days prior to such change, expiration or termination notify the Bank in writing of any change or expiration and/or termination of the power-of-attorney granted to the Attorney. The Client shall be liable for any and all consequences resulting from the Client's breach of its obligation to notify the Bank within the above specified time limit of any change, expiration or termination of the power-of-attorney. Specifically, the Client shall reimburse the Bank for any and all damage and costs and expenses, without any limitation on the extent of such reimbursement and regardless of whether such damage was foreseeable or not. 49.3 Authentication of Signatures. The Bank may examine the authenticity of all signatures affixed to any and all written instruments and documents executed for or on behalf of Client. If, in its opinion, the Bank reasonably believes that any such signature is not valid, genuine, or authentic, the Bank may reject such instrument or document or refuse to execute such instruction received from the Client and shall notify the Client of such rejection or refusal. 50. Set-Off 50.1 Set-Off of Receivables. Without prejudice to the provisions of Section 360 of the Commercial Code, the Bank may at any time set off any of its due receivables against the Client against any receivables of the Client against the Bank regardless of (i) whether any such receivables of the Client against the Bank are due and payable or not, (ii) the currency in which such receivables are denominated, and (iii) the legal relationship under which such receivables arise. The Bank may in the same manner set off any of its matured receivables against the Guarantor against any receivables of the Guarantor against the Bank. 50.2 Contractual Set-Off. The Bank may at any time use for the satisfaction of any of its due receivables against the Client the funds deposited in any of the Client's accounts maintained with the Bank, irrespective of whether the Client's receivable in respect of the payment of funds from the applicable account are due or not. The Bank may use such funds at any time after its receivable against the Client has become due and payable by debiting the Client's account with the applicable amount without prior notice to the Client. If the funds on such accounts are not sufficient for the payment of all due receivables of the Bank and the payments to be made pursuant to Client's instructions, the Bank shall be entitled to perform first the payment in respect of its due receivables. The Bank may in the same manner use the funds deposited in any account of the Guarantor maintained with the Bank for the satisfaction of any due and payable receivable of the Bank against the Guarantor. 50.3 Section 361 of Commercial Code. It is agreed and acknowledged that the provisions of Section 361 of the Commercial Code shall not apply to any contractual relationship between the Client and the Bank.   51. Exchange Rate 51. Exchange Rate. Unless in specific cases agreed otherwise between the Bank and the Client, the Bank will in connection with any payment or other operation (e.g., mutual claims set-off) apply non-cash foreign exchange rate for the sale or purchase (in Czech: devizy-prodej or devizy-nákup) determined by the Bank two (2) Business Days prior to the day scheduled for performing such payment or other operation. If the exchange rate determined in the above specified manner may not be applied, the applicable exchange rate shall be the rate determined by the Bank as of the Business Day immediately preceding the above specified day. The Bank will only perform payment or any other operation requiring the application of foreign exchange rate on a day, which is a Business Day in respect of all currencies involved. If, in the above specified cases, the payment or any other operation is made in cash and unless otherwise agreed between the Bank and the Client, the Bank will apply the cash foreign exchange rate for the sale or purchase (in Czech: valuta-nákup or valuta-prodej) determined by the Bank for the day when such payment or other operation is performed. Such payment or other operation may only be performed on a day, which is a Business Day in respect of all currencies involved.   52. Communications with Bank 52.1 Notices Confirmed in Writing. The Client and the Bank may in their mutual communication (pursuant to a particular mutual agreement) use telephone, registered mail, personal delivery, facsimile, tested telex, coded SWIFT or other electronic communication facilities. The Bank may request a written confirmation of certain communications transmitted via telephone, facsimile, telex, or other electronic communication facilities within three (3) Business Days. If the Client fails to make such written confirmation, the Bank may, but shall not be obliged to, execute the instruction and/or act in accordance with the notice concerned. 52.2 Form, Language and Manner of Instruction. The Bank may condition the execution of any instruction of the Client by the presentation thereof to the Bank in a form, language, or the manner of delivery thereof specified by the Bank. 52.3 Notarized and Apostilled Documents. The Bank may require any copy of an original document submitted to the Bank to be notarized or otherwise authenticated by the appropriate authority. With respect to foreign documents submitted by the Client to the Bank, the Bank may require such documents to be superlegalized or, as appropriate, apostilled pursuant to the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents of 1961. 52.4 Certified Translation. The Bank may require the Client to provide the Bank with a certified Czech translation of any document submitted by the Client to the Bank in any language other than Czech. 52.5 Addresses. The Client shall inform the Bank of the contact numbers and/or addresses to which all notices and documents addressed to the Client shall be delivered, including, without limitation, the address, telephone number, facsimile number, and telex number, or the numbers and/or addresses of other electronic communication facilities that the Client may provide to the Bank for such purpose and of any change to such contact addresses or numbers. If the Client fails to provide the Bank with such information, it is agreed and acknowledged that any and all documents and notices to the Client have been duly delivered to the Client if delivered at the address specified as the registered address or place of business of the Client in the appropriate agreement or arrangement between the Client and the Bank, or if delivered at numbers of electronic communication facilities, that were most recently notified by the Client. All notices and documents from the Client shall be sent to the appropriate branch of the Bank handling the affairs relating to the business relationship between the Client and the Bank, as such branch is specified in the appropriate agreement or arrangement between the Client and the Bank. 52.6 Notices Delivered by Courier. Any notices delivered to the Client by courier shall be deemed delivered when received by the Client or any of its employees. Any notices delivered by courier to the Bank shall be deemed delivered when received by the designated employee of the branch of the Bank handling the business relationship between the Client and the Bank. 52.7 Presumption of Delivery. Any notices mailed by the Bank to the Client by registered mail, sent by courier or in a similar manner and returned to the Bank as undelivered shall be deemed to have been delivered at the time of its return regardless of whether the addressee had knowledge of such shipment or not. 52.8 Discovery of Errors. If the Bank discovers an error in any communication, statement of account, notice or any other information or statement it has provided to the Client, the Bank shall promptly notify the Client thereof. The Client shall examine and review statements of accounts, notices, and/or any other communications and information sent to the Client by the Bank immediately upon the delivery thereof, and promptly notify the Bank of any and all discrepancies it has discovered or, at the Bank's request, confirm that the Bank duly executed any and all orders and instructions received from the Client. If the Client discovers any error in the performance by the Bank of any of its orders or instructions, it shall promptly notify the Bank thereof. If the Bank discovers an error in any statement of account, notice or any other communication or in the execution by the Bank of any order or instruction received from the Client or, if any such error is notified to the Bank by the Client, the Bank shall remove any such error without unnecessary delay.   53. Liability of Bank 53. Risk of Loss of Property. The Client shall be liable for risk of damage to the property that may occur as a result of sending money, documents, or other shipments by the Bank to the Client or third parties pursuant to an order received from the Client.   54. Taxes 54.1 Tax Gross-Up. All payments to be made by the Client in favor of the Bank hereunder or under any agreement or other arrangement between the Bank and the Client shall be made without any deduction or withholding on account of tax or other obligations unless the Client is required by applicable law to make such payment subject to the deduction or withholding of tax. If such deduction or withholding is required, the sum payable by the Client shall be increased to the extent that, after making of the required deduction or withholding, the Bank receives and is entitled to retain, free of any obligation to make such deduction or withholding, a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required. 54.2 Tax Deductions. The Bank makes deductions on account of the appropriate taxes in accordance with applicable laws and regulations as in effect in the Czech Republic, unless an applicable international double taxation treaty provides otherwise and the Client submits to the Bank an evidence of its tax domicile covered by such treaty. Such evidence must be in form and substance, which is sufficient in the opinion of the Bank. In connection therewith, the Bank may require from the Client such other documents as it deems reasonably necessary.   XII. APPLICATION OF GENERAL LOAN TERMS AND CONDITIONS MUTATIS MUTANDIS 55. Other Obligations of Guarantor. The provisions of Part IX, Part XI, and Part XIII shall apply mutatis mutandis to the mutual rights and obligations of the Guarantor and the Bank. For the avoidance of doubt, it is agreed and acknowledged that, for the purposes of the provisions enumerated above, the Guarantor shall be deemed to be the Client and the Guarantee Agreement shall be deemed to be the Loan Agreement.   XIII. FINAL PROVISIONS 56. Communication Recording and Archiving. The Client expressly agrees and consents that the Bank may record any communication between the Bank and the Client by any technical means available to it and archive any such records as well as any other information or documents received from the Client or third parties in accordance with the Loan Agreement or the General Loan Terms and Conditions. 57. Confidentiality of Information. The Bank is entitled to use any Confidential Information for the purposes of management of the contractual relationship between the Client and the Bank under the Loan Agreement and for all other purposes related to the business activity of the Bank, including, without limitation, evaluation of creditworthiness of the Client, mailing of offers to provide goods or services to the Client and processing of Confidential Information for such purposes. Furthermore, the Bank is entitled to provide the Confidential Information to (i) the Bank's Affiliates, (ii) any third person authorized by the Bank to perform any of its legal or contractual obligations, (iii) any third person to whom the Bank intends to transfer or assign its receivables against the Client, and (iv) any other banks, foreign banks, branches of foreign banks, insurance companies and other financial institutions for the purposes of evaluation of the creditworthiness of the Client. 58. Protection of Personal Data. Without prejudice to the foregoing provisions, the Client - individual hereby agrees, consents and acknowledges that the Bank may in accordance with the Loan Agreement and the General Loan Terms and Conditions or in connection with the legal relationship arising thereunder collect his/her personal data protected under applicable law (including, without limitation, its name, surname, address, telephone and fax numbers, e-mail addresses, birth date, birth number, information regarding status of property and liabilities, personal status, income, and credit history), and use and treat such data in the same manner as Confidential Information in accordance with the provision of Article 57 of the General Loan Terms and Conditions, including their use and processing for the purposes set forth in Article 57 of the General Loan Terms and Conditions. Furthermore, the Client agrees, consents and acknowledges that the Bank may process any of such personal data (including, without limitation, collecting, combining, archiving, saving to data carriers, providing, modifying, accessing, using, disclosing, publishing, classifying, blocking and liquidating of the personal data) irrespective of the purpose for which such data has been collected, enable the processing of such personal data by third parties (including any parties having their registered office in jurisdictions other than the Czech Republic) pursuant to an agreement on personal data processing, merge such personal data with personal data that were collected for different purposes and freely transfer such personal data to any of the Bank's Affiliates. The Bank's Affiliates receiving such information shall be entitled to process such personal data in the extent of the Bank's authorization hereunder. Furthermore, the Bank shall be entitled to store and archive such data until the termination of the legal relationship established under the Loan Agreement and thereafter for an additional period of ten (10) years. The Client acknowledges that the provision of his/her personal data to the Bank, irrespective of whether such provision is made by the Client and/or any third party in accordance with the General Loan Terms and Conditions, is purely voluntary. The Client acknowledges his/her rights to gain, subject to statutory limitations, access to personal data collected and processed by the Bank in accordance with this Article, and furthermore his right to contact the Office for Personal Data Protection and/or to claim statutory remedies (including, without limitation, apology, abstention from, and remedy of, the unlawful activities, satisfaction, blocking and liquidation of concerned personal data, correction and completion of incorrect or inaccurate personal data, pecuniary compensation and recovery of sustained damages), should the Bank breach any of its relevant statutory duties with respect to personal data processing and protection. 59. Assignment. The Client shall not assign any of its rights, receivables or obligations under the General Loan Terms and Conditions, the Loan Agreement or any other arrangement between the Bank and the Client without a prior written consent of the Bank. The Client acknowledges and agrees that the Bank may at any time, at its sole discretion, assign any of its rights or receivables under the General Loan Terms and Conditions, the Loan Agreement or any other arrangement between the Bank and the Client. Should the Bank intend to transfer any of its obligations under the General Loan Terms and Conditions, the Loan Agreement or any other arrangement between the Client and the Bank to any third person, the Client shall not unreasonably withhold or delay its consent with such transfer. 60. Contractual Penalty. Any exercise by the Bank of its right to request from the Client the payment of contractual penalty in accordance with the Loan Agreement or with the General Loan Terms and Conditions shall not in any manner affect or limit any of the other rights or remedies available to the Bank under the Loan Agreement, the General Loan Terms and Conditions, any agreements establishing the Collateral, or any other arrangement between the Bank and the Client and applicable law. Any circumstances excluding the liability or lack of fault on the part of the Client shall not affect the right of the Bank to claim contractual penalty. The right of the Bank to request contractual penalty shall to no extent affect the claim of the Bank to receive damages for the breach of contractual obligations. The Client shall perform any of its obligation the performance of which is secured by such contractual penalty regardless of whether such contractual penalty was paid or not. 61. Governing Law. The contractual relationship between the Bank and the Client shall be governed by the laws of the Czech Republic, especially, without limitation, the applicable provisions of the Commercial Code. 62. Severability. If any provision of the General Loan Terms and Conditions or the Loan Agreement is, becomes or is determined to be invalid or unenforceable, such invalidity or unenforceability shall not (to the maximum extent permitted by applicable law) invalidate or render unenforceable the remaining provisions of the General Loan Terms and Conditions and the Loan Agreement. In such event, the Bank and the Client shall replace the invalid or unenforceable provision with a valid and enforceable provision, which will achieve, to the maximum extent permitted by law, the same result and effect as contemplated by the provision to be replaced. 63. Force and Effect. The General Loan Terms and Conditions shall take force and effect on the date they are signed by the Bank and the Client. 64. Amendments to Former General Loan Terms and Conditions 64.1 Replacement of Former General Loan Terms and Conditions. Except for the provisions of this Article, the General Loan Terms and Conditions shall fully supersede the Former General Loan Terms and Conditions. The Bank shall notify this fact to the Clients whose legal relationship with the Bank is regulated by any of the Former General Loan Terms and Conditions by a written notice of displaying the General Loan Terms and Conditions on the Bank's premises or otherwise as the Bank may select in its sole discretion mailed to the correspondence address of the Client specified in the Loan Agreement. 64.2 Exceptions from Replacement. Unless otherwise agreed between the Bank and the Client, the following provisions of the Former General Loan Terms and Conditions shall remain in full force and effect and any conflicting provisions of the General Loan Terms and Conditions shall not apply to the relationship between the Bank and the Client in each case until the delivery by the Bank to the Client of a written notice informing the Client that any specific provisions of the Former General Loan Terms and Conditions cease to be valid. 64.3 Effect of Replacement of the Former General Loan Terms and Conditions. With respect to the legal relationship between the Bank and the Client regulated by the Former General Loan Terms and Conditions, the General Loan Terms and Conditions shall become effective as of the date the new General Loan Terms and Conditions are signed by the Bank and the Client, to the extent the Client shall have not rejected in writing the effect of the General Loan Terms and Conditions on its legal relationship with the Bank governed by the Former General Loan Terms and Conditions prior to the General Loan Terms and Conditions becoming effective. 65. Definition of Terms. a) "Advance" shall mean each drawing by the Client of specific amount of funds denominated in Czech crowns or a foreign currency in accordance with the Loan Agreement. b) "Announcement of Changes" shall mean the displaying of the full text of the amended General Loan Terms and Conditions on the Bank's premises or in other appropriate manner as the Bank may determine in its sole discretion. c) "Arrangement Fee" shall mean the fee provided for in Article 9.1. d) "Bank" shall mean Ceska sporitelna, a.s., IC (Company Id.No.): 45244782. e) "Bank's Affiliates" shall mean and include (i) all companies holding an ownership interest in the Bank in excess of twenty-five (25) percent of the Bank's registered capital, and (ii) all companies in which any of the companies referred to above holds an ownership interest in excess of twenty-five (25) percent of their registered capital and, if any such company creates no registered capital, a share in excess of twenty-five (25) percent of such company's voting rights. Bank's Affiliates further include all companies, in which the Bank holds an ownership interest in excess of twenty-five (25) percent of such companies' registered capital and, if any such company creates no registered capital, a share in excess of twenty-five (25) percent of such company's voting rights. f) "Banking Act" shall mean Czech Act No. 21/1992 Coll., on banks, as amended. g) "Base Rate" shall mean a floating interest rate determined by the Bank depending on the development on financial markets. h) "Business Day" shall mean a day on which banks are generally open for business and interbank transactions are settled in the Czech Republic. If such reference relates to a date for the payment of a sum which is denominated in a currency other than Czech Crowns, a Business Day shall mean any day on which banks are generally open for business and interbank transactions are settled in the Czech Republic and in the principal financial center in respect of the currency in which such sums payable are denominated. For the purposes hereof, the term "principal financial center" shall mean the marketplace on which interest rates are primarily listed for, and transactions primarily settled in, such other currency. i) "Calculation Day" shall mean the date occurring two (2) Business Days prior to the first day of the subsequent Interest Rate Period, on which the Bank identifies the value of the Reference Rate and determines, on the basis of such value, the value of the Variable Rate applicable for the calculation of interest to accrue on the Loan during the subsequent Interest Rate Period. j) "Charges" shall mean the charges provided for in the Loan Agreement, the General Loan Terms and Conditions, the List of Fees and Charges and any other arrangements between the Bank and the Client. k) "Client" shall mean a legal entity or an individual - entrepreneur as borrower with whom the Bank as lender concluded the Loan Agreement. For the avoidance of doubt, the Client shall also mean any municipality or region as a legal entity (a corporation under public law) pursuant to applicable law, which is the borrower due to its entering into the Loan Agreement with the Bank as lender. l) "Client's Affiliates" shall mean any and all entities that are controlled, pursuant to the applicable provisions of the Commercial Code, by the Client, that are controlling, pursuant to the applicable provisions of the Commercial Code, the Client and/or that are with the Client under the common control. For the purposes of the General Loan Terms and Conditions, Client's Affiliates shall also include the Guarantor. m) "Collateral" shall mean any and all contractual or other arrangements and other instruments established as a security for the due and timely payment by the Client of any claims that the Bank may have against the Client under the Loan Agreement and the General Loan Terms and Conditions. n) "Collateral Valuation" shall mean an expert appraisal of value of Collateral conducted in accordance with the General Loan Terms and Conditions, the Loan Agreement and the related agreements. o) "Commercial Code" shall mean the Czech Act No. 513/1991 Coll., the Commercial Code, as amended. p) "Commitment Fee" shall mean the fee provided for in Article 9.2. q) "Confidential Information" shall mean any and all information relating to the Client provided or disclosed to the Bank pursuant to the Loan Agreement and/or the General Loan Terms and Conditions and which are the subject of trade or banking secrecy or which are confidential on the statutory or contractual basis. r) "Deed of Guarantee" shall mean the declaration contained in the Guarantee Agreement issued by the Guarantor in favor of the Bank in which the Guarantor specifically agrees to satisfy any and all claims that the Bank may have against the Client under the Loan Agreement, if such claims are not satisfied by the Client. s) "Draw-Down Period" shall mean a time period or time limit agreed between the Client and the Bank in the Loan Agreement, within which time period or time limit the Client may submit a request for a drawing of any Advance and draw the Loan Facility or any part thereof. t) "Event of Default" shall mean and include each of the events defined in Article 37 hereof or in the Loan Agreement. u) "Fees" shall mean the fees provided for in the Loan Agreement, the General Loan Terms and Conditions, the List of Fees and Charges and any other agreement between the Bank and the Client. v) "Floating Rate" shall mean a rate used for the calculation of interest, fees and charges, as defined in the Loan Agreement and whose amount may recurrently change in irregular intervals during the term of the Loan Agreement. w) "Former General Loan Terms and Conditions" shall mean the Business Terms of Ceska sporitelna, a.s. for the provision of mortgage loans, supplementary and building loans and the Business Terms of Ceska sporitelna, a.s., for the provision of mortgage loans and supplementary loans denominated in foreign currencies and combined mortgage loans. x) "Ge neral Loan Terms and Conditions" shall mean these General Terms and Conditions of Ceska sporitelna, a.s., for the Provision of Loans, including Mortgage Loans, to Legal Entities and Individuals - Entrepreneurs. y) "Guarantee Agreement" shall mean the guarantee agreement between the Bank and the Guarantor in respect of the rights and duties of the Bank and the Guarantor arising in connection with the issuance by the Client of the Deed of Guarantee. The Deed of Guarantee forms an integral part of the Guarantee Agreement. For the avoidance of doubt, it is agreed and acknowledged that any provisions of the General Loan Terms and Conditions referring to the Guarantee Agreement shall accordingly apply to the Deed of Guarantee. z) "Guarantor" shall mean any person providing, in form of a guarantee, a security for the due and timely payment by the Client of its obligations to the Bank arising under or in connection with the Loan Agreement. aa) "Indebtedness" shall mean the sum of any and all obligations, whether actual or contingent, whether incurred in one or more transactions, including, without limitation, any loan, note, bond, debenture, letter of credit, guarantee, indemnity or deferred payment scheme. bb) "Interest Period" shall mean a time period identified as an interest period in the Loan Agreement. The Client shall pay to the Bank interest accrued on the Loan for each Interest Period. cc) "Interest Rate Period" shall mean a time period for which the amount of a Variable Rate in respect of the Loan is fixed. The duration of each Interest Rate Period or the mechanism of determination thereof is agreed between the Client and the Bank in the Loan Agreement. dd) "List of Fees and Charges" shall mean the applicable list of fees and charges of Ceska sporitelna, a.s. ee) "Loan" shall mean the funds denominated in Czech crowns or a foreign currency actually drawn and not yet repaid to the Bank by the Client in accordance with the Loan Agreement. ff) "Loan Account" shall mean an account maintained by the Bank to evidence drawing of any Advances and repayment of the Loan. The Loan Account is specified in the Loan Agreement or otherwise. gg) "Loan Agreement" shall mean any agreement between the Bank and the Client in which the Bank agrees to provide funds up to certain amount to the Client and the Client agrees to return such funds and pay interest thereon to the Bank. hh) "Loan Currency" shall mean the currency or currencies in which the Client shall be entitled to draw and shall repay the Loan to the Bank and shall pay any interest accrued thereon to the Bank. ii) "Loan Facility" shall mean an amount specified in the Loan Agreement up to which the Bank agreed to provide funds to the Client. jj) "Pre-Payment Day" shall mean the fifth (5) calendar day following the delivery by the Bank to the Client of a notice pursuant to the General Loan Terms and Conditions or the Loan Agreement declaring the Loan and any and all related obligations of the Client to the Bank immediately due and payable. If such notice is returned to the Bank as undelivered, the date when the notice is returned shall be deemed to be the Pre-Payment Day. kk) "Reference Rate" shall mean a rate whose amount is announced and by reference to which the Bank may structure the applicable interest rate in the Loan Agreement. ll) "Reservation Fee" shall mean a fee defined in the Loan Agreement payable by the Client to the Bank for raising and reserving funds up to the amount of the Loan Facility. mm) "Variable Rate" shall mean a rate used for the calculation of interest, fees and charges, as defined in the Loan Agreement and whose amount is fixed for the term of each Interest Rate Period.   Ceska sporitelna, a.s. :   By : /s/ Josef Suryn By : /s/ Jaroslav Jirát Name : Josef Suryn Name : Jaroslav Jirát Title : Head of Section 1263 - Big Corporations Title : Disponent, Section 1263 Date : October 5, 2001 Date : October 5, 2001       CME Media Enterprises B.V.   By : /s/ Frederic Thomas Klinkhammer Name : Frederic Thomas Klinkhammer Title : Director A Date : October 2, 2001
EXHIBIT 10.107 MARINER POST-ACUTE NETWORK, INC. SPECIAL RETENTION BONUS PLAN FOR KEY EXECUTIVES SECTION 1 ESTABLISHMENT OF SPECIAL RETENTION BONUS PLAN         1.1  MARINER POST-ACUTE NETWORK, INC. (“Mariner”) and certain of its affiliated entities are currently Chapter 11 debtors and debtors in possession in the United States Bankruptcy Court for the District of Delaware.         1.2  Mariner desires to establish a special retention bonus plan for certain of its key executives and certain key executives of Affiliates. Such key executives must meet certain criteria and must remain employees of Mariner or Affiliates through the effective date of a plan of reorganization for Mariner.         1.3  Except as otherwise provided, this Special Retention Bonus Plan (“Retention Plan”) is separate and distinct from the Mariner Post-Acute Network, Inc. Severance Plan for Employees. SECTION 2 DEFINITIONS         2.1  “Affiliate” means a direct or indirect wholly-owned subsidiary of Mariner, other than Mariner Health Group, Inc. and its direct and indirect subsidiaries.         2.2  “Board of Directors” means the Board of Directors of Mariner.         2.3  “Bonus Pool” means the amount available for distribution to Eligible Executives entitled to participate in the Retention Plan. The size of the Bonus Pool will vary depending upon the Effective Date of Mariner’s Plan. See Exhibit A which specifies amounts available for the Bonus Pool.         2.4  “Chief Executive Officer” means the Chief Executive Officer of Mariner.         2.5  “Chief Restructuring Officer” means the Chief Restructuring Officer of Mariner.         2.6  “Distribution Date” means the first business day that is at least 31 days after the Effective Date.         2.7  “Effective Date” means the date Mariner’s Plan becomes effective.         2.8  “Eligible Executive” means an Executive who has met the eligibility requirements of Section 4.1.         2.9  “Executives” means the key executive level employees of the Mariner Debtors as identified by the Chief Executive Officer and Chief Restructuring Officer on a list to be maintained by them and amended from time to time. Approximately 30 individuals may be listed at any time.         2.10  “Mariner” means Mariner Post-Acute Network, Inc.         2.11  “Mariner Debtors” means Mariner and its Affiliates.         2.12  “Plan” means a Chapter 11 plan of reorganization for Mariner. Plan shall not mean a plan providing for liquidation or if the Chapter 11 cases are converted to Chapter 7.         2.13  “Retention Bonus” is the bonus paid to Eligible Executives as described in Section 5.1.         2.14  “Retention Plan” means this Special Retention Bonus Plan for Key Executives. 1 -------------------------------------------------------------------------------- SECTION 3 PARTICIPATION         This Retention Plan covers Eligible Executives. SECTION 4 CONDITIONS FOR PAYMENT         4.1  Executives (i) who are employed by one or more of the Mariner Debtors on the Effective Date of the Plan, (ii) who have satisfactory job performances, and (iii) who have assisted the Mariner Debtors in one or more of the steps necessary to effectuate a plan of reorganization shall be eligible to participate in the Bonus Pool and are entitled to a Retention Bonus on the terms and conditions set forth herein. Steps necessary to effectuate a Plan include the divestiture of certain nursing facilities, the divestiture of pharmacy and long term acute care operations, achieving a global settlement with the Health Care Finance Administration, and reducing the overhead for Mariner Debtors.         4.2  Individuals who are no longer employed by the Mariner Debtors on the Effective Date of the Plan shall not be considered Eligible Executives. Lack of eligibility under this Retention Plan will not affect an individual’s eligibility for severance plans offered by Mariner.         4.3  The Chief Executive Officer and the Chief Restructuring Officer, subject to the supervision of the Board of Directors, shall designate the key executive level employees who are defined as Executives under this Retention Plan, as follows: The Chief Executive Officer and Chief Restructuring Officer shall establish an initial list of approximately 30 Executives to be covered by the Retention Plan and will make an initial allocation of a portion of the Bonus Pool as among the listed Executives, with additional allocations being within the discretion of the Chief Executive Officer and the Chief Restructuring Officer. Should any listed Executive leave the Mariner Debtors before the Effective Date of a Plan, the Chief Executive Officer and Chief Restructuring Officer may, in their sole discretion, reallocate all, some, or none of the departing Executive’s allocated amount of the Bonus Pool to others on the list or to any newly listed Executive or Executives. Other than in these circumstances, the Chief Executive Officer and Chief Restructuring Officer will not have discretion to modify the names and initial allocations stated on the initial list. The determination of whether an Executive has met the eligibility requirements of Sections 4.1 and 4.2 shall be made by the Chief Executive Officer and the Chief Restructuring Officer in their sole discretion. SECTION 5 AMOUNT OF BONUS AND PAYMENT         5.1  The Chief Executive Officer and Chief Restructuring Officer (with the advice and consent of the Board of Directors as to the three highest paid Executives) shall determine the amount of Retention Bonus each Eligible Executive shall receive from the Bonus Pool as set forth in Section 4 above.         5.2  Retention Bonuses shall be paid to Eligible Executives on the Distribution Date. 2 -------------------------------------------------------------------------------- EXHIBIT A Effective Date Bonus Pool On or before March 31, 2001 $5,000,000 On or before April 30, 2001 $4,900,000 On or before May 31, 2001 $4,700,000 On or before June 1, 2001 or thereafter $4,500,000 3
July 18, 2001   Lennart Mengwall 20 Shady Acres Darien, CT  06820   Dear Lennart:   This Letter Agreement (“Agreement”) is intended to memorialize the understanding between you (“you” or “Employee”) and Primix Solutions Inc., a Delaware corporation (together with its successors, the “Company”), regarding certain compensation arrangements established to provide an incentive for the continuation of your employment with the Company.  This Agreement in no way establishes an employment contract.   1.     Severance Benefits In the event that Employee’s employment with the Company is terminated by the Company without Cause (as defined in Section 4 hereof) or by Employee for Good Reason (as defined in Section 4 hereof) (in each such case, a “Qualified Termination Event”) at any time on or after the date hereof, Employee shall be entitled to the following severance and benefits: (a)           Severance Payment.  Employee shall be entitled to a severance payment equal to the sum of (x) $150,000 plus (y) $25,000, in each case, less all applicable federal, state and local taxes and withholdings (the sum of (x) and (y), the “Severance Payment”).  The Severance Payment will be payable in equal bi-weekly installments over a period of six (6) months (the “Severance Period”) in accordance with the Company’s normal payroll schedule. (b)           Health Insurance.  Provided that Employee timely and properly elects to continue to receive group health insurance pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the Company will for the Severance Period pay the share of the premium for such health insurance coverage that is paid by the Company as of the Termination Date for active and similarly-situated employees who receive the same type of coverage (the “COBRA Payments”).  The remaining balance of any premium costs during the Severance Period and all premium costs after the Severance Period shall be paid by Employee for so long as, and to the extent that, Employee remains eligible for COBRA continuation coverage. Notwithstanding the foregoing, the Company’s obligation to pay the Severance Payment and the COBRA Payments shall be conditioned upon, and subject to, the execution and delivery by Employee of a termination agreement, including a general release of claims, in form and substance reasonably acceptable to the Company. 2.     Qualified Stock Options Upon the occurrence of a Transaction (as defined in Section 4 hereof) or a Qualified Termination Event occurring prior to the Closing Date, Employee shall be entitled to the following treatment of stock options to purchase shares of common stock of the Company (“Common Stock”) heretofore granted to him under the Company’s 1995 Stock Plan or 1996 Stock Plan, each as amended (the “Stock Plans”), that have not been terminated, cancelled or otherwise surrendered (collectively, the “Qualified Stock Options”): (a)           Any and all such Qualified Stock Options shall become fully vested as of, and subject to, the closing date of the Transaction (the “Closing Date”) or Termination Date of such Qualified Termination Event, as applicable; and (b)           Subject to earlier termination in accordance with the terms of the stock option agreements and the Stock Plans pursuant to which the Qualified Stock Options were granted, Employee shall be entitled to exercise the Qualified Stock Options for a period of five (5) years after the earlier to occur of (i) the Closing Date and (ii) the Termination Date of such Qualified Termination Event; provided that the foregoing provision shall in no way affect the terms of a Qualified Stock Option if such terms would otherwise provide for a longer period to exercise such Qualified Stock Options. Employee acknowledges that from and after the date hereof certain of the Qualified Stock Options (or portions thereof) may no longer qualify as an incentive stock option within the meaning of the Internal Revenue Code of 1986, as amended.  Except as expressly provided in this Section 2, all other provisions of the stock option agreements and the Stock Plans pursuant to which the Qualified Stock Options were granted shall continue to govern the terms of the Qualified Stock Options. For purposes of this Section 2, the term “Qualified Stock Options” shall (i) include the additional stock options to purchase shares of Common Stock to be granted to Employee under the Stock Plans on or around the date hereof as identified under the heading “Refresher Options” on Schedule A attached and (ii) exclude the additional stock options to purchase shares of Common Stock to be granted to Employee under the Stock Plans on or around the date hereof as identified under the heading “Long-Term Options” on Schedule A attached hereto. 3.     Transaction Success Bonus In consideration of and subject to the continuation of employment with the Company by Employee and his contribution toward the consummation of a Transaction, in the event that a Transaction is consummated on or prior to January 18, 2003 (a “Qualified Transaction”), the Employee shall be entitled to an additional cash bonus amount (the “Success Bonus”) equal to 1.25% of the amount by which the Aggregate Net Proceeds (as hereinafter defined) exceeds the Premium Price (as defined in Schedule B attached hereto).  In the event that a Qualified Transaction is consummated within forty-five (45) days after a Qualified Termination Event, Employee shall be entitled to receive 100% of the Success Bonus.  The Success Bonus (less all applicable federal, state and local taxes and withholdings) shall be payable in cash to Employee within thirty (30) days after the Closing Date. As used herein “Aggregate Net Proceeds” shall mean the total amount of cash paid or payable and the fair market value of all property transferred or transferable directly or indirectly by an acquiring Person to the Company or its stockholders in connection with a Qualified Transaction.  Any securities or other non-cash consideration to be delivered to the Company or its stockholders in connection with a Qualified Transaction shall be valued in accordance with the terms of the definitive document executed by the acquiring Person and the Company or, if such terms are not set forth in such definitive agreement, as otherwise reasonably determined in good faith by the Board of Directors of the Company. 4.     Definitions As used herein, the following capitalized terms shall have the respective meanings set forth in this Section 4: “Cause” shall mean conduct of Employee involving one or more of the following: (i) the substantial and continuing failure of Employee, after notice thereof, to render services to the Company in accordance with the terms or requirements of his employment; (ii) disloyalty, gross negligence, willful misconduct, dishonesty, fraud or breach of fiduciary duty to the Company which results in, or is reasonable likely to result in, a material financial detriment to the Company or substantially harms the Company’s reputation; (iii) deliberate disregard of the rules or policies of the Company which results in a material financial detriment to the Company or substantially harms the Company’s reputation; (iv) breach of an employment-related agreement or other agreement with the Company, including, without limitation, a breach of covenants not to compete, covenants not to solicit employees or customers of the Company and covenants relating to the protection of trade secrets or confidential information of the Company; or (v) Employee’s conviction (including any pleas of guilty or nolo contendre) of any crime (other than ordinary traffic violations) which impairs Employee’s ability to perform his duties.  For purposes of this Agreement, a termination of Employee’s employment for Cause shall not take effect unless the Company gives Employee written notice stating in detail the particular act(s) or failure(s) to act that constitute the grounds on which the proposed termination for Cause is based and Employee is given ten (10) days after the date that such written notice is received in which to cure such conduct, to the extent such cure is possible. “Fair Market Value” of one share of Common Stock on a given date shall mean the numerical average of the fair market value per share of Common Stock over a period of twenty (20) business days prior to and including such date.  For the purposes of determining the Fair Market Value:  (i) the fair market value per share of Common Stock for any day shall mean the average of the closing prices of the Company’s Common Stock sold on all securities exchanges on which the Common Stock may at the time be listed or as quoted on the Nasdaq National Market, or, if there have been no sales on any such exchange or any such quotation on any day, the average of the highest bid and lowest asked prices on all such exchanges or such systems at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the Nasdaq systems as of 4:00 p.m., Boston, Massachusetts time, or, if on any day that the Common Stock is not quoted in the Nasdaq system, the average of the highest bid and lowest asked price on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization; and (ii) if at any time the Common Stock is not listed on any securities exchange or quoted in the Nasdaq system or the over-the-counter market, the fair market value per share of Common Stock for any such day shall be determined in good faith by the Board of Directors of the Company. “Good Reason” shall mean: (A)  for periods prior to the Closing Date and after the first (1st) anniversary of the Closing Date, the occurrence of any of the following events:  (i) a substantial adverse change in the nature or scope of Employee’s responsibilities, authorities, powers, functions or duties; (ii) a reduction in Employee’s annual base salary or bonus compensation (subject to applicable performance requirements with respect to the actual amount of bonus compensation earned) as in effect on the date hereof or as the same may be increased from time to time; (iii) the Company's requirement that Employee relocate his principal place of service to the Company to a location that is more than fifty (50) miles from his current principal place of service to the Company; and (B) for the period commencing on the Closing Date and ending on the first (1st) anniversary of the Closing Date, any of the following actions taken without Employee's consent: (i) an unwelcome change in the nature or scope of Employee’s responsibilities, authorities, powers, functions or duties as in effect immediately prior to the Closing Date, (ii) a reduction by the Company in the Employee's annual base salary or bonus compensation (subject to applicable performance requirements with respect to the actual amount of the bonus compensation earned) as in effect immediately prior to the Closing Date; (iii) a substantial reduction in the value of Employee's benefit package and/or perquisites from the value of Employee's benefit package and/or perquisites as in effect immediately prior to the Closing Date; (iv) the Company's requirement that the Employee relocate his principal place of service to the Company to a location that is more than fifty (50) miles from his principal place of service to the Company as in effect immediately prior to the Closing Date, or the imposition of travel requirements substantially more demanding of the Employee than such travel requirements as in effect immediately prior to the Closing Date; (v) any material breach by the Company of this Agreement that is not remedied by the Company within thirty (30) days of written notice of such breach by Employee, or (vi) the failure of the Company to assign this Agreement in connection with a Transaction to a successor to the Company or the failure of a successor to the Company to explicitly assume and agree to be bound by this Agreement. “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company owns stock or other interests possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. “Person” shall mean any individual, corporation, partnership (limited or general), limited liability company, association, trust, joint venture, unincorporated organization or any other entity or organization, governmental or otherwise. “Subsidiary” shall mean any corporation (other than the Company) in any unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. “Transaction” shall mean (i) a merger, reorganization or consolidation between the Company and another Person (other than a Parent or Subsidiary of the Company) as a result of which the holders of the Company’s outstanding voting stock immediately prior to the transaction hold less than a majority of the outstanding voting stock of the surviving entity immediately after the transaction, (ii) the sale of all or substantially all of the assets of the Company to an unrelated Person, (iii) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than a majority of all of the outstanding voting stock of the Company to an unrelated Person as a result of which the holders of the Company’s outstanding voting stock immediately prior to the transaction hold, directly or indirectly, less than a majority of the outstanding voting stock of the Company immediately after the transaction, or (iv) a single or a series of related transactions by the Company and/or its stockholders with an unrelated Person or Persons as a result of which such Person or Persons acting in concert have the right to control or elect a majority of the Board of Directors of the Company. 5.     Notices, Acknowledgements and Other Terms You are advised to consult with an attorney before signing this Agreement.  This Agreement is the entire agreement between you and the Company and, with the exception of any employee agreements between you and the Company (which shall remain in full force and effect), all previous agreements, or promises between you and the Company are superseded, null, and void. By signing this Agreement, you acknowledge that you are doing so voluntarily.  You also acknowledge that you are not relying on any representations by any representative of the Company concerning the meaning of any aspect of this Agreement. In the event of any dispute, this Agreement will be construed as a whole, will be interpreted in accordance with its fair meaning, and will not be construed strictly for or against either you or the Company.  The law of The Commonwealth of Massachusetts will govern any dispute about this Agreement, including any interpretation or enforcement of this Agreement, without giving effect to the conflict of laws principles thereof.  In the event that any provision or portion of a provision of this Agreement shall be determined to be unenforceable, the remainder of this Agreement shall be enforced to the fullest extent possible as if such provision or portion of a provision were not included.  This Agreement may be modified only by a written agreement signed by you and an authorized representative of the Company. This Agreement shall be effective as of the date first set forth above. [END OF TEXT]   COMPANY:   PRIMIX SOLUTIONS INC.     By: /s/ David Chapman     Name: David Chapman     Title: Chief Financial Officer           ACKNOWLEDGED AND AGREED:       EMPLOYEE:     By: /s/ Lennart Mengwall     Signature           Lennart Mengwall     Print Name           Chief Executive Officer     Title           SCHEDULE A   Refresher Options:   Option Grant Date   Number of Shares of Common Stock   Exercise Price Per Share   Applicable Stock Plan   July 18, 2001   292,104   $ 0.5500   1996   July 18, 2001   32,896   $ 0.5500   1995       Long-Term Options:     Option Grant Date   Number of Shares of Common Stock   Exercise Price Per Share   Applicable Stock Plan   -- None --     SCHEDULE B     As used in this Agreement, “Premium Price” shall mean 120% of the product of (x) the Fair Market Value (as defined in Section 4 hereof) as determined on the date hereof and (y) the total number of shares of Common Stock outstanding on the date hereof; provided that in the event that a Qualified Transaction of the type described in clause (iii) of the definition of such term is consummated, then the Premium Price shall mean 120% of the product of (A) the Fair Market Value as determined on the date hereof and (B) the total number of shares of Common Stock sold or exchanged in connection with such Qualified Transaction.      
  Exhibit 10.3   CHANGE OF CONTROL AGREEMENT                   THIS CHANGE OF CONTROL AGREEMENT (the "Agreement") is made as of August 23, 2001 between DOT HILL SYSTEMS CORP., a [Delaware] corporation (the "Company"), and Preston Romm ("Employee").                   WHEREAS, in order to provide an incentive for Employee to participate actively in the affairs and maximize the value of the Company, the Company is willing to provide Employee with certain benefits on the terms and conditions set forth below.                   NOW THEREFORE, for good and valuable consideration, the sufficiency of which is hereby acknowledged, Employee and the Company (each, a "Party," and collectively, the "Parties") agree as follows:   1.             BENEFITS IN THE EVENT OF A CHANGE OF CONTROL.                   (a)           If a Change of Control (defined below) occurs then, without further action by Employee or the Company, Employee shall be entitled to the benefits set forth below:                                   (i) As of immediately prior to such Change of Control, the vesting applicable to all options to purchase shares of the Company's capital stock ("Options") and all shares of the Company's capital stock which are subject to the Company's right to repurchase such shares ("Restricted Stock") held by Employee as of the effective date of such Change of Control shall be accelerated in full such that Employee shall have the right to exercise in accordance with the terms thereof all or any portion of such Options (notwithstanding any vesting schedule set forth in such Options) and any such Company repurchase rights with respect to such Restricted Stock shall lapse in full; and                                   (ii) Employee shall be entitled to a lump sum cash payment in an amount equal to one hundred twenty-five percent (125%) of Employee's annual base salary in effect as of the date of such Change of Control (the "Lump Sum Payment"), subject to applicable withholdings as required by applicable law, payable on the Effective Date specified in a Release delivered by Employee to the Company following such Change of Control in the form attached hereto as Exhibit A.   2.             DEFINITION.  For purposes of this Agreement, "Change of Control" shall mean: (1) a dissolution or liquidation of the Company; (2) any sale or transfer of all or substantially all of the assets of the Company; (3) any merger, consolidation or similar transaction in which the holders of the Company's outstanding voting securities immediately prior to such transaction do not hold, immediately following such transaction, securities representing fifty percent (50%) or more of the combined voting power of the outstanding securities of the surviving entity; or (4) the acquisition by any person (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in a single transaction or series of related transactions, of beneficial ownership (within the meaning of Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing fifty percent (50%) or more of the combined voting power of the then-outstanding securities of the Company, excluding in any case shares of capital stock of the Company purchased from the Company in a transaction the principal purpose of which is to raise capital for the Company.     3.             GOLDEN PARACHUTE TAXES.  In the event that any payment or distribution by the Company, or the grant of any benefit by the Company, to or for the benefit of Employee (whether paid or payable, distributed or distributable or granted or to be granted pursuant to the terms of this Agreement or otherwise) (collectively, "Benefits") would be nondeductible by the Company for federal income tax purposes because of Section 280G of the Internal Revenue Code (the "Code") and/or would cause Employee to be liable for an excise tax pursuant to Section 4999 of the Code, then the Benefits paid, distributed or granted to Employee under this Agreement shall equal (i) the full amount of such Benefits or (ii) the Reduced Amount (as defined below), whichever of the foregoing amounts is determined by the Company to result, on an after-tax basis, in the receipt by Employee of the greatest amount of such Benefits, notwithstanding that all or some portion of the Benefits may be taxable under Section 4999 of the Code. In making its determination pursuant to the preceding sentence, the Company shall take into account all applicable Federal, state, and local employment and income taxes, as well as the excise tax imposed by Section 4999 of the Code. For purposes of this Section 4, the "Reduced Amount" shall be the maximum amount payable to Employee that would result in no portion of the Benefits being (i) nondeductible by the Company under Section 280G of the Code or (ii) subject to an excise tax liability under Section 4999 of the Code. Notwithstanding the foregoing and any other provision contained herein, in the event (as a result of Benefits to be received under this Agreement or any other plan or arrangement between the Employee and the Company) of any required reduction, as a result of Section 4999 of the Code, of Benefits to be received by Employee, reduction shall be made from such other plan or arrangement prior to any reduction relating to Benefits to be received by Employee under this Agreement.   4.             GENERAL PROVISIONS.                   (a)           This Agreement shall be governed by the laws of the State of California (without regard to principles of conflict of laws).                   (b)           Any notice, demand or request required or permitted to be given by either the Company or Employee pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at such addresses as have been previously furnished by the Parties or such other address as a Party may request by notifying the other in writing.                   (c)           The rights and obligations of Employee under this Agreement may not be transferred or assigned without the prior written consent of the Company.                   (d)           This Agreement is meant to supplement the terms of stock option agreement(s) or other agreement(s) pursuant to which Employee acquired the Options, as well as any written employment agreement between the Company and Employee. To the extent that the terms and conditions of this Agreement are inconsistent with those found in such stock option agreement(s) or other agreement(s) (employment or otherwise), the terms and conditions of this Agreement shall be controlling.                     (e)           Any Party's failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent any Party from thereafter enforcing each and every other provision of this Agreement. The rights granted the Parties herein are cumulative and shall not constitute a waiver of any Party's right to assert all other legal remedies available to it under the circumstances.                   (f)            Employee agrees upon request to execute any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement.                   (g)           In case any provision of 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.                   (h)           This Agreement, in whole or in part, may be modified, waived or amended upon the written consent of the Company and Employee.                   (i)            This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall constitute one instrument.       [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]                       IN WITNESS WHEREOF, the undersigned have set their hand as of the date first above written.     EMPLOYEE             DOT HILL SYSTEMS CORP.                                                 /s/Preston Romm             /s/James L. Lambert Preston Romm             By:    James L. Lambert               President and Chief Executive Officer       EXHIBIT A   RELEASE AND WAIVER OF CLAIMS                   In consideration of the payments and other benefits set forth in the Change of Control Agreement dated August 23, 2001, between Dot Hill Systems Corp. (the "Company") and Preston Romm ("Employee"), to which this form is attached, Employee hereby furnishes the Company with the following release and waiver.                   Employee hereby releases, and forever discharges the Company, its officers, directors, agents, employees, stockholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising at any time prior to and including Employee's employment termination date with respect to any claims relating to Employee's employment and the termination of Employee's employment, including but not limited to, claims pursuant to any federal, state or local law relating to employment, including, but not limited to, discrimination claims, claims under the California Fair Employment and Housing Act, and the Federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"), the Federal Americans with Disabilities Act ("AD") or claims for wrongful termination, breach of the covenant of good faith, contract claims, tort claims, and wage or benefit claims, including but not limited to, claims for salary, bonuses, commissions, stock, stock options, vacation pay, fringe benefits, severance pay or any form of compensation.                   Employee also acknowledges that Employee has read and understood Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Employee hereby expressly waives and relinquishes all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to any claims Employee may have against the Company.                   Employee acknowledges that, among other rights, Employee is waiving and releasing any rights Employee may have under ADEA, that this waiver and release is knowing and voluntary, and that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled as an employee of the Company.  Employee further acknowledges that Employee has been advised, as required by the Older Workers Benefit Protection Act, that:  (a) the waiver and release granted herein does not relate to claims which may arise after this release and waiver is executed; (b) Employee has the right to consult with an attorney prior to executing this release and waiver (although Employee may choose voluntarily not to do so); and (c) if on the date of execution of this release and waiver Employee is age 40 or older, then (I) Employee has twenty-one (21) days from the date Employee receives this release and waiver, in which to consider this release and waiver (although Employee may choose voluntarily to execute this release and waiver earlier); and (II) Employee has seven (7) days following the execution of this release and waiver to revoke Employee's consent to this release and waiver. This release and waiver shall be effective as of the date of execution hereof; provided that if on the date of execution of this release and waiver Employee is age 40 or older, then this release and waiver shall not be effective until the foregoing seven (7) day revocation period has expired. The date as of which this release and waiver is effective as aforesaid shall be deemed the "Effective Date" hereof.     Date:     By:         Preston Romm          
Use these links to rapidly review the document CONFORMED COPY CONFORMED COPY -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- DAL-TILE INTERNATIONAL INC., as Holdings DAL-TILE GROUP INC., as the Borrower -------------------------------------------------------------------------------- $325,000,000 AMENDED AND RESTATED CREDIT AND GUARANTEE AGREEMENT October 26, 2001 -------------------------------------------------------------------------------- CREDIT LYONNAIS NEW YORK BRANCH, FIRST UNION NATIONAL BANK and MIZUHO FINANCIAL GROUP as Co-Documentation Agents BANK OF AMERICA, N.A. as Syndication Agent THE CHASE MANHATTAN BANK as Administrative Agent -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- J.P. MORGAN SECURITIES INC., as Sole Advisor, Lead Arranger and Bookrunner -------------------------------------------------------------------------------- TABLE OF CONTENTS       SECTION 1 .  DEFINITIONS 1 .1 Defined Terms 1 .2 Other Definitional Provisions; Financial Calculations SECTION 2 .  AMOUNT AND TERMS OF TERM LOAN COMMITMENTS 2 .1 Term Loans 2 .2 Procedure for Term Loan Borrowing 2 .3 Repayment of Term Loans 2 .4 Evidence of Term Loan Debt SECTION 3 .  AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS 3 .1 Revolving Credit Commitments 3 .2 Procedure for Revolving Credit Borrowing 3 .3 Commitment Fee 3 .4 Termination or Reduction of Commitments 3 .5 Repayment of Revolving Credit Loans; Evidence of Debt 3 .6 Swing Line Commitment 3 .7 Repayment of Swing Line Loans; Evidence of Debt 3 .8 Procedure for Borrowing Swing Line Loans 3 .9 Swing Line Loan Participations 3 .10 L/C Commitment 3 .11 Procedure for Issuance of Letters of Credit 3 .12 Fees, Commissions and Other Charges 3 .13 L/C Participations 3 .14 Reimbursement Obligation of the Borrower 3 .15 Obligations Absolute 3 .16 Letter of Credit Payments 3 .17 Application 3 .18 Certain Reporting Requirements SECTION 4 .  GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT 4 .1 Optional and Mandatory Prepayments 4 .2 Conversion and Continuation Options 4 .3 Minimum Amounts and Maximum Number of Tranches 4 .4 Interest Rates and Payment Dates 4 .5 Computation of Interest and Fees 4 .6 Inability to Determine Interest Rate 4 .7 Pro Rata Treatment and Payments 4 .8 Illegality 4 .9 Requirements of Law 4 .10 Taxes 4 .11 Indemnity 4 .12 Change of Lending Office; Filing of Certificates or Documents 4 .13 Replacement Lenders i -------------------------------------------------------------------------------- SECTION 5 .  REPRESENTATIONS AND WARRANTIES 5 .1 Financial Condition 5 .2 No Change 5 .3 Corporate Existence; Compliance with Law 5 .4 Corporate Power; Authorization; Enforceable Obligations 5 .5 No Legal Bar 5 .6 No Material Litigation 5 .7 No Default 5 .8 Ownership of Property; Liens 5 .9 Intellectual Property 5 .10 No Burdensome Restrictions 5 .11 Taxes 5 .12 Federal Regulations 5 .13 ERISA 5 .14 Investment Company Act; Other Regulations 5 .15 Subsidiaries 5 .16 Purpose of Loans 5 .17 Environmental Matters 5 .18 Accuracy of Information 5 .19 Solvency 5 .20 Labor Matters 5 .21 Security Documents SECTION 6 .  CONDITIONS PRECEDENT 6 .1 Conditions to Term Loans 6 .2 Conditions to Each Extension of Credit SECTION 7 .  AFFIRMATIVE COVENANTS 7 .1 Financial Statements 7 .2 Certificates; Other Information 7 .3 Payment of Obligations 7 .4 Conduct of Business and Maintenance of Existence 7 .5 Maintenance of Property; Insurance 7 .6 Inspection of Property; Books and Records; Discussions 7 .7 Notices 7 .8 Environmental Laws 7 .9 Additional Collateral 7 .10 Consummation of Permitted Securitization Transaction ii -------------------------------------------------------------------------------- SECTION 8 .  NEGATIVE COVENANTS 8 .1 Financial Condition Covenants 8 .2 Limitation on Indebtedness 8 .3 Limitation on Liens 8 .4 Limitation on Guarantee Obligations 8 .5 Limitation on Fundamental Changes 8 .6 Limitation on Sale of Assets 8 .7 [Intentionally Omitted.] 8 .8 Limitation on Restricted Payments 8 .9 Limitation on Capital Expenditures 8 .10 Limitation on Investments, Loans and Advances 8 .11 Limitation on Transactions with Affiliates 8 .12 Limitation on Sales and Leasebacks 8 .13 Limitation on Changes in Fiscal Year 8 .14 Limitation on Certain Clauses 8 .15 Limitation on Lines of Business 8 .16 Amendments to Permitted Securitization Transaction 8 .17 Limitation on Optional Payments and Modifications of Debt Instruments SECTION 9 .  NEGATIVE COVENANTS OF HOLDINGS 9 .1 Limitation on Holdings' Activities 9 .2 Restricted Payments 9 .3 Equity Net Proceeds 9 .4 Dividends SECTION 10 . GUARANTEE 10 .1 Guarantee 10 .2 No Subrogation, Contribution, Reimbursement or Indemnity 10 .3 Amendments, etc. with respect to the Obligations; Waiver of Rights 10 .4 Guarantee Absolute and Unconditional 10 .5 Reinstatement 10 .6 Payments SECTION 11 . EVENTS OF DEFAULT SECTION 12 . THE ADMINISTRATIVE AGENT 12 .1 Appointment 12 .2 Delegation of Duties 12 .3 Exculpatory Provisions 12 .4 Reliance by Administrative Agent 12 .5 Notice of Default 12 .6 Non-Reliance on Administrative Agent and Other Lenders 12 .7 Indemnification 12 .8 Administrative Agent in Its Individual Capacity 12 .9 Successor Administrative Agent 12 .10 Issuing Bank; Swing Line Lender 12 .11 Annual Administration Fee iii -------------------------------------------------------------------------------- SECTION 13 . MISCELLANEOUS 13 .1 Amendments and Waivers 13 .2 Notices 13 .3 No Waiver; Cumulative Remedies 13 .4 Survival of Representations and Warranties 13 .5 Payment of Expenses and Taxes 13 .6 Successors and Assigns; Participations and Assignments 13 .7 Adjustments; Set-off 13 .8 Counterparts 13 .9 Severability 13 .10 Integration 13 .11 GOVERNING LAW 13 .12 Submission To Jurisdiction; Waivers 13 .13 Acknowledgements 13 .14 WAIVERS OF JURY TRIAL 13 .15 Confidentiality 13 .16 Usury Savings Clause 13 .17 Release of Collateral 13 .18 Effect of Agreement iv -------------------------------------------------------------------------------- ANNEXES: Annex A  Pricing Grid SCHEDULES:     Schedule 1.1(a)   Commitments, Addresses and Lending Offices Schedule 1.1(b)   Mortgaged Properties Schedule 3.10   Continuing Letters of Credit Schedule 5.15   Subsidiaries of Holdings and the Borrower Schedule 5.21(a)   UCC Financing Statement Filing Jurisdictions Schedule 5.21(b)   Mortgage Filing Jurisdictions Schedule 8.2(e)   Existing Indebtedness Schedule 8.3(g)   Existing Liens Schedule 8.4(a)   Existing Guarantee Obligations Schedule 8.10   Existing Investments Schedule 8.11   Existing Transactions with Affiliates EXHIBITS:     Exhibit A-1   Form of Subsidiaries' Guarantee Exhibit A-2   Form of Borrower Domestic Subsidiary Stock Pledge Agreement Exhibit A-3   Form of Borrower Foreign Subsidiary Stock Pledge Agreement Exhibit A-4   Form of Borrower Security Agreement Exhibit A-5   Form of Collateral Agreement Exhibit A-6   Form of Holdings Pledge Agreement Exhibit B   Form of Swing Line Loan Participation Certificate Exhibit C   Form of Term Note Exhibit D   Form of Revolving Credit Note Exhibit E   Form of Swing Line Note Exhibit F   Form of Closing Certificate Exhibit G   Form of Opinion of Fried, Frank, Harris, Shriver & Jacobson Exhibit H   Form of Assignment and Acceptance Exhibit I   Form of Exemption Certificate Exhibit J   Form of Issuing Bank Agreement Exhibit K   Form of Mortgage v --------------------------------------------------------------------------------     AMENDED AND RESTATED CREDIT AND GUARANTEE AGREEMENT, dated as of August 14, 1996, as amended and restated as of October 26, 2001, among: (1)DAL-TILE INTERNATIONAL INC, a Delaware corporation ("Holdings"); (2)DAL-TILE GROUP INC., a Delaware corporation (the "Borrower"); (3)THE SEVERAL BANKS, FINANCIAL INSTITUTIONS AND OTHER ENTITIES from time to time parties to this Agreement (collectively, the "Lenders"; individually, a "Lender"); (4)CREDIT LYONNAIS NEW YORK BRANCH, FIRST UNION NATIONAL BANK and MIZUHO FINANCIAL GROUP, each as a Co-Documentation Agent (in such capacity, the "Co-Documentation Agents"); (5)BANK OF AMERICA, N.A., as Syndication Agent (in such capacity, the "Syndication Agent"); and (6)THE CHASE MANHATTAN BANK, a New York banking corporation, as Administrative Agent (as hereinafter defined) for the Lenders hereunder (together with the Syndication Agent and the Co-Documentation Agents, the "Managing Agents"). W I T N E S S E T H:     WHEREAS, the Borrower desires to amend and restate the Credit Agreement dated as of August 14, 1996, as amended (as so amended prior to the date hereof, the "Existing Credit Agreement"), among Holdings, the Borrower, the several banks and other financial institutions from time to time parties thereto, Credit Suisse First Boston, as documentation agent, and The Chase Manhattan Bank, as administrative agent, in accordance with the terms and conditions set forth in this Agreement; and     WHEREAS, all the obligations of the Borrower hereunder will be secured by among other things, (i) a perfected lien on and security interest in certain collateral described in the Security Agreements, including without limitation, a pledge of all the issued and outstanding Capital Stock of the Borrower and each of the other direct and indirect Domestic Subsidiaries of the Borrower (other than any Receivables Subsidiary) and 65% of the issued and outstanding Capital Stock of each of the direct Foreign Subsidiaries of the Borrower and its Domestic Subsidiaries and (ii) unconditional guarantees by each of the Guarantors;     NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS     1.1  Defined Terms.   As used in this Agreement, the following terms shall have the following meanings:     "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit to debtors); and "Federal Funds Effective Rate" shall mean, for any day, 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 on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Rate or 1 -------------------------------------------------------------------------------- the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.     "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR.     "Adjustment Date": the first Business Day following receipt by the Administrative Agent of both (i) the financial statements required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as the case may be, for the most recently completed fiscal period and (ii) the certificate required to be delivered pursuant to subsection 7.2(b) with respect to such fiscal period, provided that April 30, 2002 shall be the first Adjustment Date.     "Administrative Agent": Chase, together with its affiliates, as the administrative agent for the Lenders under this Agreement and the other Loan Documents, and any successor thereto pursuant to subsection 12.9.     "Affiliate": as to any Person, any other Person (other than a Subsidiary), which, directly or indirectly, is in Control of, is Controlled by, or is under common Control with, such Person.     "Aggregate Revolving Credit Outstandings": as to any Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Revolving Credit Lender then outstanding plus (b) such Revolving Credit Lender's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding plus (c) such Revolving Credit Lender's Revolving Credit Commitment Percentage of all Swing Line Loans then outstanding.     "Agreement": this Amended and Restated Credit and Guarantee Agreement, as amended, supplemented or otherwise modified from time to time.     "Annual Administration Fee": as defined in subsection 12.11.     "Applicable Margin": with respect to any Revolving Credit Loan or Term Loan (i) if such Revolving Credit Loan or Term Loan, as the case may be, is an ABR Loan, 0.625% and (ii) if such Revolving Credit Loan or Term Loan, as the case may be, is a Eurodollar Loan, 1.625%, provided that the Applicable Margin for Revolving Credit Loans and Term Loans will be adjusted, if required, on each Adjustment Date, to the Applicable Margin set forth on Annex A hereto opposite the Leverage Ratio Level of the Borrower in effect on such Adjustment Date, provided further that, in the event that the financial statements required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the related certificate required pursuant to subsection 7.2(b), are not delivered when due, then, during the period from the date upon which such financial statements were required to be delivered until one Business Day following the date upon which they actually are delivered, the Applicable Margin for Revolving Credit Loans and Term Loans which are ABR Loans shall be 1.125% and the Applicable Margin for Revolving Credit Loans and Term Loans which are Eurodollar Loans shall be 2.125%.     "Application": an application, in such form as the relevant Issuing Bank may specify from time to time, requesting such Issuing Bank to open a Letter of Credit.     "Arranger": J.P. Morgan Securities Inc., in its capacity as sole advisor, lead arranger and bookrunner.     "Asset Sale": as to any Person, any sale or other disposition (including any sale or other disposition in connection with a Sale/Leaseback Transaction and any mortgage (other than the Mortgages) or lease of real property) subsequent to the Original Closing Date of any property of such Person (except sales or other dispositions permitted under subsection 8.6(a) through 8.6(f) and subsection 8.6(h) through 8.6(k)).     "Assignee": as defined in subsection 13.6(c).     "Available Revolving Credit Commitment": as to any Revolving Credit Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Revolving Credit Lender's Revolving 2 -------------------------------------------------------------------------------- Credit Commitment at such time over (b) such Revolving Credit Lender's Aggregate Revolving Credit Outstandings at such time; collectively, as to all the Revolving Credit Lenders, the "Available Revolving Credit Commitments".     "Board of Governors": the Board of Governors of the Federal Reserve System and any Governmental Authority which succeeds to the powers and functions thereof.     "Borrower": as defined in the Preamble to this Agreement.     "Borrower Pledge Agreements": collectively, (i) the Amended and Restated Borrower Domestic Subsidiary Stock Pledge Agreement, dated as of August 14, 1996, as amended and restated as of the date hereof, made by the Borrower in favor of the Administrative Agent, substantially in the form of Exhibit A-2, and (ii) each Amended and Restated Borrower Foreign Subsidiary Stock Pledge Agreement, dated as of October 4, 1996, as amended and restated as of the date hereof, made by the Borrower in favor of the Administrative Agent, substantially in the form of Exhibit A-3, and in each case as the same may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time after the Closing Date.     "Borrower Security Agreement": the Amended and Restated Security Agreement, dated as of June 19, 1997, as amended and restated as of the date hereof, executed and delivered by the Borrower in favor of the Administrative Agent, substantially in the form of Exhibit A-4, and as the same may be further amended, restated, amended and restated, supplemented or otherwise modified from time to time after the Closing Date.     "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.2, 3.2 or 3.8 as a date on which the Borrower requests the Lenders to make Loans or the Swing Line Lender to make Swing Line Loans hereunder.     "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.     "Capital Expenditures": as to any Person for any period, the aggregate amount of all expenditures by such Person and its Subsidiaries (other than any such expenditures in respect of the purchase price of Investments permitted under subsection 8.10(f) and 8.10(g)) for the rental, lease, purchase (including by way of the acquisition of securities of a Person), construction or use of any property during such period, which, in accordance with GAAP, are or should be included in "capital expenditures" or similar items in such Person's consolidated statement of cash flows for such period, excluding (a) any such expenditure in respect of any Replacement Asset (other than capital expenditures for ordinary maintenance purposes), (b) any such expenditure made to restore, replace or rebuild property to the condition of such property immediately prior to a Casualty Event with respect to such property, to the extent such expenditure is made with the Net Proceeds from such Casualty Event, (c) any such expenditure which represents capitalized interest in respect of the financing of any such expenditures and (d) any such expenditures made with the proceeds of sales or dispositions of assets permitted under Section 8.6(e).     "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing.     "Cash Equivalents": (a) securities issued or directly and fully guaranteed or insured by the United States Government, or any agency or instrumentality thereof, having maturities of not more than one year from the date of acquisition, (b) marketable general obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition thereof, having a credit rating of "A" or better from either S&P or Moody's; (c) certificates of deposit, time deposits, eurodollar time deposits, overnight bank deposits or bankers' acceptances having maturities of 3 -------------------------------------------------------------------------------- not more than one year from the date of acquisition thereof of any Lender, or of any domestic commercial bank the long-term debt of which is rated at the time of acquisition thereof at least A or the equivalent thereof by S&P, or A or the equivalent thereof by Moody's, and having capital and surplus in excess of $300,000,000, (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a), (b) and (c) entered into with any bank meeting the qualifications specified in clause (c) above, (e) commercial paper rated at the time of acquisition thereof at least A-2 or the equivalent thereof by S&P or P-2 or the equivalent thereof by Moody's, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of investments, and in either case maturing within 270 days after the date of acquisition thereof, (f) other investment instruments approved in writing by the Required Lenders and offered by any Lender or by any financial institution which has a combined capital and surplus of not less than $100,000,000 or (g) short-term investments (not exceeding 30 days) in loans made to obligors having an investment grade rating from each of S&P and Moody's.     "Casualty Event": with respect to any property of any Person, the receipt by such Person of insurance proceeds, or proceeds of a condemnation award or other compensation in connection with any loss of or damage to, or any condemnation or other taking of, such property.     "Change in Control": (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof), of shares representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of Holdings; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of Holdings or the Borrower by Persons who were neither (i) nominated by the board of directors of Holdings or the Borrower, as applicable, nor (ii) appointed by directors so nominated; or (c) Holdings shall not own 100% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Borrower.     "Chase": The Chase Manhattan Bank, a New York banking corporation.     "Closing Date": the date on which the conditions precedent set forth in subsection 6.1 shall be satisfied or waived (but in no event later than November 30, 2001).     "Code": the Internal Revenue Code of 1986, as amended from time to time.     "Co-Documentation Agents": as defined in the Preamble to this Agreement.     "Collateral": all assets (other than any Excluded Property) of the Loan Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document.     "Collateral Agreement": the Amended and Restated Collateral Agreement, dated as of June 19, 1997, as amended and restated as of the date hereof, executed and delivered by each Guarantor (other than Holdings), substantially in the form of Exhibit A-5, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.     "Commercial Letter of Credit": as defined in subsection 3.10(b)(i)(2).     "Commitment": with respect to any Lender, the collective reference to such Lender's Term Loan Commitment and/or Revolving Credit Commitment; collectively, as to all the Lenders, the "Commitments".     "Commitment Fee Rate": as defined in subsection 3.3.     "Commitment Percentage": as to any Lender (a) at any time prior to the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) such Lender's Revolving Credit Commitment plus (y) such Lender's Term Loan Commitment (or, after the Term Loans are made, the outstanding principal amount of such Lender's Term Loan) then constitutes of (ii) the sum of (x) the Revolving Credit Commitments of all the Lenders plus (y) the Term Loan Commitments of 4 -------------------------------------------------------------------------------- all the Lenders (or, after the Term Loans are made, the aggregate principal amount of Term Loans of all the Lenders then outstanding), and (b) at any time after the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) the principal amount of such Lender's Loans (other than Swing Line Loans) then outstanding plus (y) the product of such Lender's Revolving Credit Commitment Percentage times the sum of (I) the L/C Obligations then outstanding and (II) the Swing Line Loans then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Loans of all the Lenders then outstanding plus (y) the aggregate L/C Obligations of all the Lenders then outstanding.     "Common Stock": the Common Stock of Holdings, par value $.01 per share.     "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of determining liability under Section 412 of the Code, which is treated as a single employer under Section 414 (b), (c), (m) or (o) of the Code.     "Conduit Lender": any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 4.9, 4.10, 4.11 or 13.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.     "Consolidated Capitalization": at any date of determination, the sum of (a) Consolidated Total Debt at such date of determination plus (b) Consolidated Net Worth at such date of determination, all as determined on a consolidated basis in accordance with GAAP.     "Consolidated EBITDA": for any period, the Consolidated Net Income for such period, plus, to the extent deducted in determining such Consolidated Net Income, (a) Consolidated Interest Expense, (b) depreciation, (c) amortization and (d) all Federal, state, local and foreign income taxes, all as determined on a consolidated basis in accordance with GAAP.     "Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.     "Consolidated Interest Expense": for any period, an amount equal to the sum of, without duplication, (a) the amount of interest expense (net of interest income), both expensed and capitalized, of Holdings (or, if the Merger is consummated, the Borrower) and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP and (b) an amount equal to the interest (or other fees or other amounts in the nature of interest or discount accrued and paid or payable in cash for such period) in respect of the Permitted Securitization Transaction.     "Consolidated Lease Expense": for any period, the aggregate amount of fixed and contingent rentals payable by Holdings (or, if the Merger is consummated, the Borrower) and its Subsidiaries for such period with respect to leases of real and personal property, determined on a consolidated basis in accordance with GAAP.     "Consolidated Leverage Ratio": for any period, the ratio of (a) Consolidated Total Debt at the last day of such period to (b) Consolidated EBITDA for such period.     "Consolidated Net Income": for any period, the net income of Holdings (or, if the Merger is consummated, the Borrower) and its Subsidiaries for such period as determined on a consolidated basis 5 -------------------------------------------------------------------------------- in accordance with GAAP, but excluding from the determination thereof (without duplication) (a) any extraordinary gains or losses, (b) any restructuring charges or non-recurring gains or losses in an aggregate amount not to exceed $50,000,000, with no more than $10,000,000 of such $50,000,000 to be in cash, in each case, during any four-quarter period, (c) gains or losses from the proposed or actual disposition of material assets, (d) goodwill and intangible asset write-downs (but deducting from the determination of Consolidated Net Income for any period, cash payments made during such period in respect of any goodwill and intangible asset write-downs recorded after the Closing Date), (e) non-cash charges resulting from the vesting or exercise of stock options or stock appreciation rights granted to management of the Borrower and (f) non-cash gains or losses which are specific to hedge transactions which are disallowed hedge accounting treatment under the Statements of Financial Accounting Standards numbers 133 and 138.     "Consolidated Net Revenue": of any Person for any period, the net revenue of such Person and its consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.     "Consolidated Net Worth": at any date of determination, all items which would, in accordance with GAAP, be included under shareholders' equity on a consolidated balance sheet of Holdings (or, if the Merger is consummated, the Borrower) and its Subsidiaries at such date of determination, but excluding from the determination thereof (without duplication) the effect of (a) any foreign currency translation adjustments, (b) any extraordinary gains or losses, (c) any restructuring charges or non-recurring gains or losses in an aggregate amount not to exceed $200,000,000, with no more than $50,000,000 of such $200,000,000 to be in cash, in each case, during the term of this Agreement, (d) gains or losses taken in accordance with the Statements of Financial Accounting Standards numbers 133 and 138 adjustments, (e) stock repurchases and dividends consummated in accordance with subsection 8.8(d), (f) non-cash intangible and material write-downs of assets (but deducting from the determination of Consolidated Net Worth for any period, cash payments made during such period in respect of any write-downs recorded after the Closing Date) and (g) non-cash charges resulting from the vesting or exercise of stock options or stock appreciation rights granted to management of the Borrower.     "Consolidated Total Assets": of any Person at any date of determination, the total assets of such Person and its consolidated Subsidiaries at such date of determination, determined on a consolidated basis in accordance with GAAP.     "Consolidated Total Debt": at any date of determination, an amount equal to the sum of, without duplication, (a) all Indebtedness of Holdings (or, if the Merger is consummated, the Borrower) and its consolidated Subsidiaries at such date of determination as determined on a consolidated basis in accordance with GAAP and (b) the aggregate cash proceeds received by the Borrower and its Subsidiaries (net of amounts repaid) from the financing of then outstanding Receivables pursuant to a Permitted Securitization Transaction at such date of determination.     "Continuing Letter of Credit": any Existing Letter of Credit issued by a Lender.     "Contractual Obligation": 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": of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.     "Currency Rate Protection Agreements": as to any Person, all foreign exchange contracts, currency swap agreements or other similar agreements or arrangements entered into in the ordinary course of business by such Person designed to protect such Person against fluctuations in currency values. 6 --------------------------------------------------------------------------------     "De Minimus Asset Sale": as defined in subsection 4.1(b).     "Default": any of the events specified in Section 11, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.     "Dollars" and "$": dollars in lawful currency of the United States of America.     "Domestic Subsidiary": any Subsidiary of the Borrower other than a Foreign Subsidiary.     "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.     "Environmental Permits": all permits, licenses, registrations, notifications, exemptions, and other authorizations required under Environmental Laws.     "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.     "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors 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 of Governors) maintained by a member bank of the Federal Reserve System.     "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the "Eurodollar Base Rate" shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offering Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein.     "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate.     "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/1,000th of 1%): Eurodollar Base Rate -------------------------------------------------------------------------------- 1.00—Eurocurrency Reserve Requirements     "Event of Default": any of the events specified in Section 11, provided that all requirements for the giving of notice, the lapse of time, or both, have been satisfied. 7 --------------------------------------------------------------------------------     "Excess Securitization Amount": an amount equal to the aggregate cash proceeds received by the Borrower and its Subsidiaries (net of amounts repaid) in excess of $100,000,000 from the financing of then outstanding Receivables pursuant to a Permitted Securitization Transaction.     "Excluded Property": for so long as any Permitted Securitization Transaction is in effect (whether before or after termination of any other Permitted Securitization Transaction) and to the extent such property described below is subject to a Permitted Securitization Transaction, all right, title and interest of the Seller in and to: (i) all Securitization Receivables; (ii) all Related Security; (iii) with respect to each Securitization Receivable, all cash collections and other cash proceeds of such Securitization Receivable, including all cash proceeds of Related Security with respect to such Securitization Receivable, and all funds deemed to have been received as a collection as a result of dilution or a breach of representations; (iv) each bank account maintained by the Seller to the extent such account contains cash collections or other cash proceeds of Securitization Receivables or cash proceeds of any Related Security with respect to Securitization Receivables, together with all funds in each such account to the extent such funds constitute cash collections or other cash proceeds of Securitization Receivables or cash proceeds of any Related Security with respect to Securitization Receivables and (v) to the extent not included in the foregoing, all proceeds of any and all of the foregoing.     "Existing Letter of Credit": at any date, any letter of credit issued and outstanding under the Existing Credit Agreement.     "Existing Credit Agreement": as defined in the Preamble to this Agreement.     "Extension of Credit": with respect to any Lender, the making of a Loan by such Lender, and, if such Lender is a Revolving Credit Lender, the issuance of a Letter of Credit; with respect to all the Lenders, the "Extensions of Credit".     "FDIC": the Federal Deposit Insurance Corporation and any Governmental Authority which succeeds to the powers and functions thereof.     "Federal Funds Effective Rate": as defined in the definition of ABR contained in this subsection 1.1.     "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.     "Financing Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any Financing Lease; the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.     "Foreign Holding Company": any Subsidiary organized under the laws of the United States of America or any State thereof the principal assets of which consist of the Capital Stock of one or more Foreign Subsidiaries or other Foreign Holding Companies.     "Foreign Subsidiary": (a) any Subsidiary of the Borrower organized under the laws of any jurisdiction outside the United States of America and (b) any Foreign Holding Company.     "GAAP": generally accepted accounting principles in the United States of America in effect from time to time.     "Governmental Authority": any nation 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.     "Guarantee": the guarantee contained in Section 10 or in the Subsidiaries' Guarantee.     "Guarantee Obligation": as to any Person (the "Guaranteeing Person"), any obligation of (a) the Guaranteeing Person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the Guaranteeing Person has issued a reimbursement, counter 8 -------------------------------------------------------------------------------- indemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend or other obligation (the "Primary Obligations") of any other third Person (the "Primary Obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the Guaranteeing Person, whether or not contingent, (i) to purchase any such Primary Obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such Primary Obligation or (2) to maintain working capital or equity capital of the Primary Obligor or otherwise to maintain the net worth or solvency of the Primary Obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such Primary Obligation of the ability of the Primary Obligor to make payment of such Primary Obligation or (iv) otherwise to assure or hold harmless the owner of any such Primary Obligation against loss in respect thereof, provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any Guaranteeing Person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the Primary Obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such Guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such Primary Obligation and the maximum amount for which such Guaranteeing Person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such Guaranteeing Person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.     "Guarantors": Holdings and each Subsidiary Guarantor.     "Hazardous Materials": any petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos and asbestos-containing materials, pollutants, contaminants, and all other materials and substances including but not limited to radioactive materials regulated pursuant to any Environmental Laws or that could result in liability under any Environmental Law.     "Holdings": as defined in the Preamble to this Agreement.     "Holdings Pledge Agreement": the Pledge Agreement, dated as of August 14, 1996, as amended and restated as of the date hereof, made by Holdings in favor of the Administrative Agent, substantially in the form of Exhibit A-6, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.     "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade payables or liabilities and deferred payment for services to employees and former employees incurred in the ordinary course of business and payable in accordance with customary practices and other deferred compensation practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (e) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder and (f) all indebtedness of others of the types described in (a) through (d) above secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof (the amount of such indebtedness with respect to such Person being deemed to be the lesser of the value of such property or the amount of indebtedness of others so secured), but in any event excluding customer deposits in the ordinary course of business.     "Index Debt": the senior unsecured, long-term, non-credit enhanced debt rating of the Borrower.     "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. 9 --------------------------------------------------------------------------------     "Insolvent": pertaining to a condition of Insolvency.     "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, trademark applications, service marks, service mark licenses, service mark applications, domain names, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.     "Interest Payment Date": (a) as to ABR Loans, the last day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period and (c) as to any Eurodollar Loan having an Interest Period longer than three months, each day which is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period.     "Interest Period": with respect to any Eurodollar Loan:      (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and     (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:     (1) if any Interest Period pertaining to a Eurodollar Loan 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 carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;     (2) no Interest Period that would otherwise extend beyond the Revolving Credit Termination Date or beyond the date final payment is due on the Term Loans shall be selected by the Borrower;     (3) any Interest Period pertaining to a Eurodollar 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 a calendar month; and     (4) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Eurodollar Loan.     "Interest Rate Protection Agreements": as to any Person, all interest rate swaps, caps or collar agreements or similar arrangements entered into by such Person providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies.     "Investment": as defined in subsection 8.10.     "Issuing Bank": (a) with respect to Letters of Credit (other than Continuing Letters of Credit), Chase, any of its Affiliates or any other Lender (designated as an Issuing Bank in an Issuing Bank Agreement executed by such Lender, the Borrower and the Administrative Agent), in each case in its capacity as issuer of any Letter of Credit and (b) with respect to Continuing Letters of Credit, the Lender which issued such Continuing Letter of Credit under the Existing Credit Agreement. 10 --------------------------------------------------------------------------------     "Issuing Bank Agreement": an agreement, substantially in the form of Exhibit J, executed by a Lender, the Borrower, and the Administrative Agent (which consent shall not be unreasonably withheld) pursuant to which such Lender agrees to become an Issuing Bank hereunder.     "Joint Venture": (i) any joint venture arrangement, including interests in business units, formed after the Closing Date to engage in a Related Business in which the Borrower or any of its Subsidiaries owns an equity interest not in excess of 50% of the equity interest of all joint venturers thereof, and which is not controlled by or under common control with the Borrower or such Subsidiary, whether such joint venture is structured as a corporation, partnership, trust, limited liability company or any other Person or (ii) if clause (i) above is not applicable, any joint venture arrangement, including interests in business units, formed after the Closing Date, that by the terms of such joint venture's organizational documents may not be a Subsidiary Guarantor hereunder.     "L/C Commitment": $35,000,000.     "L/C Fee Payment Date": the last day of each March, June, September and December.     "L/C Fee Percentage": as defined in subsection 3.12(b).     "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of then unpaid Reimbursement Obligations.     "L/C Participants": collectively, all the Revolving Credit Lenders.     "Lenders": as defined in the Preamble to this Agreement; provided, that unless the context otherwise requires, each reference herein to the Lenders shall be deemed to include any Conduit Lender.     "Lender Affiliate": (a) any Affiliate of any Lender, (b) any Person that is administered or managed by any Lender or any Affiliate of any Lender and that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and (c) with respect to any Lender which is a fund that invests in commercial loans and similar extensions of credit, any other fund that invests in commercial loans and similar extensions of credit and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such Lender or investment advisor.     "Letters of Credit": collectively, Commercial Letters of Credit and Standby Letters of Credit.     "Leverage Ratio Level": as to the Borrower, the existence of Leverage Ratio Level I, Leverage Ratio Level II, Leverage Ratio Level III, Leverage Ratio Level IV, or Leverage Ratio Level V, as the case may be.     "Leverage Ratio Level I": as to the Borrower, shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to such Adjustment Date is equal to or greater than 3.00 to 1.00.     "Leverage Ratio Level II": as to the Borrower, shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to such Adjustment Date is less than 3.00 to 1.0, but greater than or equal to 2.50 to 1.0.     "Leverage Ratio Level III": as to the Borrower, shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to such Adjustment Date is less than 2.50 to 1.0, but greater than or equal to 1.50 to 1.0. 11 --------------------------------------------------------------------------------     "Leverage Ratio Level IV": as to the Borrower, shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to such Adjustment Date is less than 1.50 to 1.0, but greater than or equal to 1.00 to 1.0.     "Leverage Ratio Level V": as to the Borrower, shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the period of four consecutive fiscal quarters ending on the last day of the period covered by the financial statements relating to such Adjustment Date is less than 1.00 to 1.0.     "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing), except for the filing of financing statements in connection with obligations under leases other than Financing Leases incurred by the Company or its Subsidiaries to the extent that such financing statements relate to the property subject to such lease obligations.     "Loan": any Term Loan, Revolving Credit Loan or Swing Line Loan.     "Loan Documents": this Agreement, any Notes, the Guarantees, the Applications and the Security Documents.     "Loan Participant": as defined in subsection 13.6(b).     "Loan Parties": the Borrower, Holdings and each Subsidiary of the Borrower that is a party to a Loan Document.     "Managing Agents": as defined in the Preamble to this Agreement.     "Material Adverse Effect": a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder.     "Material Subsidiary": any Subsidiary (a) the Consolidated Total Assets of which exceed 5% of the Consolidated Total Assets of the Borrower and its consolidated Subsidiaries as of the end of the most recently completed fiscal year or (b) the Consolidated Net Revenue of which exceeds 5% of the Consolidated Net Revenue of the Borrower and its consolidated Subsidiaries as of the end of the most recently completed fiscal year.     "Merger": the merger of the Borrower with and into Holdings, with Holdings as the surviving corporation.     "Mexican Subsidiary": Dal-Tile of Mexico, S.A. de C.V.     "Moody's": Moody's Investors Service, Inc., and its successors.     "Mortgaged Properties": the real properties listed on Schedule 1.1(b), as to which the Administrative Agent for the benefit of the Lenders has been (or will be) granted a Lien pursuant to the Mortgages.     "Mortgages": the collective reference to the mortgages, deeds of trust and other similar documents executed and delivered from time to time by the Borrower and the Guarantors in favor of the Administrative Agent pursuant to this Agreement, substantially in the form of Exhibit K or, if such Exhibit is not appropriate under applicable law in the jurisdiction in which the relevant real property is located, in such other form as shall be reasonably satisfactory to the Borrower and the Administrative Agent, as each of the same may be amended, restated, supplemented or otherwise modified from time to time. 12 --------------------------------------------------------------------------------     "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.     "Net Proceeds": as to any Person, (a) with respect to any Asset Sale by such Person, the cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale net of (i) attorneys' fees, accountants' fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Asset Sale (other than any Lien in favor of the Administrative Agent for the benefit of the Lenders) or to the satisfaction of other amounts owing under Contractual Obligations which become payable as a result of such Asset Sale and were not incurred in contemplation thereof and brokerage, consultant and other customary fees and expenses actually incurred in connection therewith, (ii) taxes attributable thereto and, in the case of any Asset Sale in a foreign jurisdiction, any taxes reasonably attributable to the repatriation of the proceeds of such Asset Sale reasonably estimated by such Person to be payable, and (iii) the aggregate amount of reserves required in the reasonable judgment of such Person to be maintained on the books of such Person in order to pay contingent obligations in respect of agreements entered into in connection with such Asset Sale, provided, that amounts deducted from aggregate proceeds pursuant to this clause (iii) and not actually paid by such Person in liquidation of such contingent obligations shall be deemed to be Net Proceeds at such time as such contingent obligations shall cease to be obligations of such Person or to the extent such amounts are no longer required in the reasonable judgment of such Person as a reserve with respect to such contingent obligations, and (b) with respect to any Casualty Event, the aggregate amount of proceeds of insurance, condemnation awards and other compensation received by the Borrower and its Subsidiaries in respect of such Casualty Event net of (i) reasonable expenses incurred by the Borrower and its Subsidiaries in connection therewith, (ii) amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any property which is the subject of such Casualty Event (other than any Lien in favor of the Administrative Agent for the benefit of the Lenders) and (iii) amounts applied or that such Person intends with reasonable promptness and diligence to apply to repair or replace the property subject to the Casualty Event, provided that amounts deducted from aggregate proceeds pursuant to this clause (iii) shall be Net Proceeds at such time as such proceeds are, in such Person's good faith judgment, no longer required for such repair or replacement and (c) with respect to any Subordinated Debt, the cash proceeds (including Cash Equivalents) received by the Borrower or any of its Subsidiaries from the issuance or incurrence of such Subordinated Debt net of all investment banking fees, legal fees, accountants fees, underwriting discounts and commissions and other customary fees and expenses, actually incurred by the Borrower or any of its Subsidiaries and documented in connection therewith.     "New Lending Office": as defined in subsection 4.10(b)(i)(A).     "Non-Excluded Taxes": as defined in subsection 4.10(a).     "Non-Recourse Indebtedness": Indebtedness of the Borrower or any of its Subsidiaries in respect of which the holders of such Indebtedness agree in writing that they will look solely to the property securing such Indebtedness for payment in full of the principal thereof and interest thereon and outstanding fees and costs associated therewith or are not legally entitled to enforce such Indebtedness against the Borrower or any of its Subsidiaries.     "Notes": collectively, the Swing Line Note, Revolving Credit Notes, and Term Notes, if any.     "Obligations": the unpaid principal of and interest on the Loans and the Reimbursement Obligations and all other obligations and liabilities of the Borrower to the Administrative Agent and the Lenders (or, in the case of Specified Hedge Agreements, any Lender Affiliate) (including, without limitation, interest accruing at the then applicable rate provided in this Agreement after the maturity of 13 -------------------------------------------------------------------------------- the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, the other Loan Documents, any Specified Hedge Agreement or any other document made, delivered or given in connection herewith or therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of this Agreement, any other Loan Document or any Specified Hedge Agreement).     "Obsolete Property": any property of the Borrower or any of its Subsidiaries which is obsolete, outdated or worn out or the useful life of which has ended, in each case in the good faith determination of the Borrower or any applicable Subsidiary.     "Original Closing Date": August 14, 1996.     "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any Governmental Authority which succeeds to the powers and functions thereof.     "Permitted Securitization Transaction": a transaction or series of related transactions pursuant to which a Receivables Subsidiary incurs obligations or issues interests, the proceeds of which are used to finance Receivables of the Borrower and its Subsidiaries on terms and conditions satisfactory to the Administrative Agent.     "Person": an individual, partnership, corporation, business trust, joint stock company, limited liability company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.     "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.     "Pledge Agreements": collectively, the Borrower Pledge Agreements and the Holdings Pledge Agreement.     "Prepayment Account": as defined in subsection 4.1(d).     "Primary Obligation": as defined in the definition of "Guarantee Obligation" contained in this subsection 1.1.     "Properties": as defined in subsection 5.17.     "Receivables": all accounts (as defined in the Uniform Commercial Code in effect in the State of New York on the date hereof) and accounts receivable of the Borrower or any of its Subsidiaries (including any thereof constituting or evidenced by chattel paper, instruments or general intangibles), and all proceeds thereof and rights (contractual and other) and collateral related thereto. Receivables shall include any and all Securitization Receivables.     "Receivables Obligor": a Person obligated to make payments pursuant to a Securitization Contract.     "Receivables Subsidiary": any special purpose, bankruptcy-remote Subsidiary of the Borrower that acquires, on a revolving basis, Receivables generated by the Borrower or any of its Subsidiaries and that engages in no operations or activities other than those related to Permitted Securitization Transactions.     "Register": as defined in subsection 13.6(d). 14 --------------------------------------------------------------------------------     "Regulation U": Regulation U of the Board of Governors as in effect from time to time.     "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Bank pursuant to subsection 3.14(a) for amounts drawn under Letters of Credit.     "Related Business": any business in which the Borrower or any of its Subsidiaries is engaged on the date hereof or which is reasonably related thereto.     "Related Security": with respect to each Securitization Receivable, (i) all of the Seller's interest in any merchandise (including returned merchandise) the sale of which gives rise to such Securitization Receivable; (ii) all security interests or liens and property subject thereto from time to time purporting to secure payment of such Securitization Receivable, whether pursuant to a Securitization Contract or otherwise, together with all financing statements signed by a Receivables Obligor describing any collateral securing such Securitization Receivable; (iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Securitization Receivable whether pursuant to a Securitization Contract or otherwise; and (iv) each Securitization Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and similar property and rights) but solely to the extent relating to such Securitization Receivable and the related Receivables Obligor.     "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.     "Replacement Asset": any property acquired by the Borrower or any of its Subsidiaries subsequent to the Closing Date which replaces Obsolete Property of the same type and utility as the property acquired.     "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. § 2615.     "Required Lenders": at any time, Lenders the Commitment Percentages of which aggregate more than 50%.     "Required Revolving Credit Lenders": at any time, Revolving Credit Lenders the Revolving Credit Commitment Percentages of which aggregate more than 50%.     "Required Term Loan Lenders": at any time, Term Loan Lenders the Term Loan Commitment Percentages of which aggregate more than 50%.     "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, 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.     "Responsible Officer": as to any Person, the chief executive officer and the president of such Person or, with respect to financial matters, the chief financial officer of such Person or, in either case, such other executive officers as may be designated from time to time by such Person in writing to the Administrative Agent.     "Restricted Payments": as defined in subsection 8.8.     "Revolving Credit Commitment": with respect to any Lender, its obligation to make Revolving Credit Loans and/or issue or participate in Letters of Credit issued on behalf of the Borrower and/or make or participate in Swing Line Loans made to the Borrower in an aggregate amount not to exceed the amount set forth opposite such Lender's name on Schedule 1.1(a) under the heading "Revolving 15 -------------------------------------------------------------------------------- Credit Commitment", as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted from time to time pursuant to subsection 13.6; collectively, as to all such Lenders, the "Revolving Credit Commitments". The aggregate Revolving Credit Commitments initially shall be $200,000,000.     "Revolving Credit Commitment Percentage": as to any Revolving Credit Lender (a) at any time prior to the termination of the Revolving Credit Commitments, the percentage of the Revolving Credit Commitments then constituted by such Revolving Credit Lender's Revolving Credit Commitment and (b) at any time after the termination of the Revolving Credit Commitments, the percentage which (i) the sum of (x) such Revolving Credit Lender's Revolving Credit Loans then outstanding plus (y) the product of such Revolving Credit Lender's Revolving Credit Commitment Percentage immediately prior to the termination of the Revolving Credit Commitments (after giving effect to any permitted assignment pursuant to subsection 13.6) times the sum of (I) the L/C Obligations then outstanding and (II) the Swing Line Loans then outstanding then constitutes of (ii) the sum of (x) the aggregate principal amount of Revolving Credit Loans of all the Revolving Credit Lenders then outstanding plus (y) the aggregate L/C Obligations then outstanding plus (z) the aggregate principal amount of Swing Line Loans then outstanding.     "Revolving Credit Commitment Period": the period from and including the Closing Date to but not including the Revolving Credit Termination Date or such earlier date on which the Revolving Credit Commitments shall terminate as provided herein.     "Revolving Credit Lender": any Lender with an unused Revolving Credit Commitment hereunder and/or any Revolving Credit Loans outstanding hereunder; collectively, the "Revolving Credit Lenders".     "Revolving Credit Loans": as defined in subsection 3.1(a).     "Revolving Credit Note": as defined in subsection 3.5(e).     "Revolving Credit Termination Date": October 26, 2006.     "RISA": Recubrimientos Interceramic, S.A. de C.V., a Mexican corporation.     "S&P": Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., and its successors.     "Sale/Leaseback Transaction": as defined in subsection 8.12     "SEC": the Securities and Exchange Commission or any Governmental Authority which succeeds to the powers and functions thereof.     "Securitization Contract": an agreement between the Seller and a Receivables Obligor, substantially in the form of one of the written contracts or (in the case of any open account agreement) one of the invoices approved by DTSC, Inc. (or its successor or assignee), pursuant to or under which such Receivables Obligor shall be obligated to pay for merchandise or services from time to time.     "Securitization Receivables": all existing and hereafter arising accounts (as defined in the Uniform Commercial Code in effect in the State of New York on the date hereof), payment intangibles and other indebtedness of any Receivables Obligor (other than a Receivables Obligor which is an affiliate of Dal-Tile International Inc. or the Seller) resulting from the provision of services or the sale of merchandise or services by the Seller or any other Subsidiary of the Borrower to such Receivables Obligor pursuant to a Securitization Contract, including the right to payment of any interest or finance charges and other obligations of such Receivables Obligor with respect thereto; provided, however, that any such indebtedness created by the Corporate Strategic Business Unit or the R&M Strategic Business Unit of the Seller shall not be included in Securitization Receivables.     "Security Agreements": the collective reference to the Borrower Security Agreement and the Collateral Agreement. 16 --------------------------------------------------------------------------------     "Security Documents": the collective reference to the Mortgages, the Security Agreements, the Pledge Agreements and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrower hereunder and under any of the other Loan Documents or to secure any guarantee of any such obligations and liabilities.     "Seller": Dal-Tile Corporation, a Pennsylvania corporation and a wholly owned Subsidiary of the Borrower.     "Significant Subsidiaries": at any date of determination, any Subsidiary the Consolidated Assets of which exceed $1,000,000 at such date of determination.     "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.     "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount that will be required to pay all "liabilities of such Person, contingent or otherwise", as of such date (as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors) as such debts become absolute and matured, (b) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (c) such Person will be able to pay its debts as they mature, taking into account the timing of and amounts of cash to be received by such Person and the timing of and amounts of cash to be payable on or in respect of indebtedness of such Person; in each case after giving effect to (A) as of the Closing Date, the making of the extensions of credit to be made on the Closing Date and to the application of the proceeds of such extensions of credit and (B) on any date after the Closing Date, the making of any extension of credit to be made on such date, and to the application of the proceeds of such extension of credit. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.     "Specified Hedge Agreements": collectively, any Currency Rate Protection Agreements, Interest Rate Protection Agreements, production hedge agreements and any other hedge agreements not entered for speculative purposes (hedge agreements existing on the Closing Date will be deemed not to be speculative), in each case, entered into by the Borrower and any Lender or Lender Affiliate.     "Standby Letter of Credit": as defined in subsection 3.10(b)(i)(1).     "Subordinated Debt": any unsecured Indebtedness of the Borrower: no part of the principal of which is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to October 31, 2007; the payment of the principal of and interest on which and other obligations of the Borrower in respect thereof are subordinated to the prior payment in full of the principal of and interest (including post-filing or post-petition interest, whether or not a claim for post-filing or post-petition interest is allowed in any bankruptcy, insolvency, reorganization or like proceeding) on the Loans and all other obligations (including the Obligations) and liabilities of the Borrower to the Administrative Agent and the Lenders (and, in the case of Specified Hedge Agreements, the Lender Affiliates) hereunder on terms and conditions satisfactory to the Required Lenders; and all other terms and conditions of which are reasonably satisfactory in form and substance to the Required Lenders.     "Subsidiaries' Guarantee": the Amended and Restated Subsidiaries' Guarantee, dated as of August 14, 1996, as amended and restated as of the date hereof, executed and delivered by each 17 -------------------------------------------------------------------------------- Subsidiary Guarantor in favor of the Administrative Agent, substantially in the form of Exhibit A-1, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.     "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower or Holdings, as the context may require.     "Subsidiary Guarantor": each Subsidiary of the Borrower set forth on Schedule 5.15 under the heading "Initial Subsidiary Guarantors", together with each other Subsidiary of the Borrower other than (i) any Foreign Subsidiary, (ii) any Joint Venture and (iii) any Receivables Subsidiary.     "Swing Line Commitment": $25,000,000.     "Swing Line Lender": as defined in subsection 3.6.     "Swing Line Loan Participation Certificate": a certificate substantially in the form of Exhibit B.     "Swing Line Loans": as defined in subsection 3.6.     "Swing Line Note": as defined in subsection 3.7(e).     "Swing Line Participation Amount": as defined in subsection 3.9(b).     "Syndication Agent": as defined in the Preamble to this Agreement.     "Term Loan": as defined in subsection 2.1.     "Term Loan Commitment": as to any Lender, its obligation to make a Term Loan to the Borrower in an amount equal to the amount set forth opposite such Lender's name in Schedule 1.1(a) under the heading "Term Loan Commitment", as such amount may be reduced from time to time pursuant to this Agreement or as such amount may be adjusted from time to time pursuant to subsection 13.6; collectively, as to all such Lenders, the "Term Loan Commitments". The initial aggregate Term Loan Commitments shall be $125,000,000.     "Term Loan Commitment Percentage": as to any Term Loan Lender at any time, the percentage of the Term Loan Commitments then constituted by such Term Loan Lender's Term Loan Commitment (or, after the Term Loans are made, the percentage of the aggregate Term Loans then constituted by such Term Loan Lender's Term Loan).     "Term Loan Lender": any Lender with an unused Term Loan Commitment hereunder and/or any Term Loans outstanding hereunder; collectively, the "Term Loan Lenders".     "Term Note": as defined in subsection 2.4(d).     "Tranche": collectively, Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "Eurodollar Tranches".     "Transferee": as defined in subsection 13.6(f).     "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.     "UCC Filing Collateral": Collateral (other than fixtures) as to which filing financing statements under the uniform commercial code of the applicable jurisdiction is an appropriate method of perfection of a security interest in such Collateral. 18 --------------------------------------------------------------------------------     "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time.     "Voting Stock": Capital Stock, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (in the case of a corporation) or to appoint Persons performing similar functions (in the case of entities which are not corporations).     1.2  Other Definitional Provisions; Financial Calculations.   (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.     (b) As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to Holdings, the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.     (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.     (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.     (e) Notwithstanding anything to the contrary herein, for purposes of making all calculations in connection with the covenants contained in Section 9, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP consistently applied as in effect on the date of this Agreement. In the event of any material difference at any time between GAAP in effect on the date of this Agreement and GAAP from time to time in effect, the certificate of a Responsible Officer required pursuant to subsection 7.2(b)(ii) shall include a reconciliation of the calculations required thereby with the financial statements being delivered with such certificate. 19 -------------------------------------------------------------------------------- SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS     2.1  Term Loans.   Subject to the terms and conditions hereof, each Term Loan Lender severally and not jointly agrees to make a term loan (a "Term Loan") to the Borrower on the Closing Date in an amount equal to the Term Loan Commitment of such Term Loan Lender. The Term Loans may from time to time be (a) Eurodollar Loans, (b) ABR Loans or (c) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 4.2.     2.2  Procedure for Term Loan Borrowing.   The Borrower hereby requests a Term Loan borrowing on the Closing Date in an amount equal to the aggregate amount of the Term Loan Commitments of the Term Loan Lenders. The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, three Business Days prior to the Closing Date), if all or any part of the Term Loans are to be initially Eurodollar Loans, specifying (a) the amount of Term Loans which are initially to be Eurodollar Loans and (b) the respective amounts thereof and the lengths of the initial Interest Periods therefor. To the extent that the Borrower does not deliver a notice pursuant to the immediately preceding sentence, the Term Loans shall initially be ABR Loans. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Term Loan Lender thereof. Each Term Loan Lender will make the amount of its pro rata share of the Term Loans available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 13.2 prior to 11:00 A.M., New York City time, on the Closing Date in Dollars and in funds immediately available to the Administrative Agent. The Administrative Agent shall credit the account of the Borrower by 12:00 Noon, New York City time, on the Closing Date on the books of such office of the Administrative Agent or such other account as may be specified by the Borrower with the aggregate of the amounts made available to the Administrative Agent by the Term Loan Lenders and in like funds as received by the Administrative Agent.     2.3  Repayment of Term Loans.   The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the Term Loan Lenders the principal amount of the Term Loans made by such Term Loan Lenders in twenty consecutive quarterly installments, payable as 20 -------------------------------------------------------------------------------- follows (or on such earlier date on which the Term Loans become due and payable pursuant to Section 11): Year --------------------------------------------------------------------------------   Amount -------------------------------------------------------------------------------- January 31, 2002   3,750,000 April 30, 2002   3,750,000 July 31, 2002   3,750,000 October 31, 2002   3,750,000 January 31, 2003   3,750,000 April 30, 2003   3,750,000 July 31, 2003   3,750,000 October 31, 2003   3,750,000 January 31, 2004   5,000,000 April 30, 2004   5,000,000 July 31, 2004   5,000,000 October 31, 2004   5,000,000 January 31, 2005   6,250,000 April 30, 2005   6,250,000 July 31, 2005   6,250,000 October 31, 2005   6,250,000 January 31, 2006   12,500,000 April 30, 2006   12,500,000 July 31, 2006   12,500,000 October 31, 2006   12,500,000 The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Term Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.4.     2.4  Evidence of Term Loan Debt.   (a) Each Term Loan Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Term Loan Lender from time to time in respect of the Term Loan of such Term Loan Lender, including the amounts of principal and interest payable and paid to such Term Loan Lender in respect of such Term Loan from time to time under this Agreement.     (b) The Administrative Agent shall record in the Register, with separate subaccounts therein for each Term Loan Lender, (i) the amount of each Term Loan, the Type thereof and, in the case of Eurodollar Loans, each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Term Loan Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Term Loan Lender's share thereof, if any.     (c) The entries made in the Register and the accounts of each Term Loan Lender maintained pursuant to subsections 2.4(a) and 2.4(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the Obligations of the Borrower therein recorded, provided, however, that the failure of any Term Loan Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Term Loans in accordance with the terms of this Agreement.     (d) The Borrower agrees that, upon the request to the Administrative Agent by any Term Loan Lender, which request is communicated to the Borrower, the Borrower will execute and deliver to such 21 -------------------------------------------------------------------------------- Term Loan Lender, a promissory note of the Borrower dated the Closing Date evidencing the Term Loan of such Term Loan Lender, substantially in the form of Exhibit C (a "Term Note"), payable to the order of such Term Loan Lender and in a principal amount equal to the lesser of (A) the initial Term Loan Commitment of such Term Loan Lender or (B) the unpaid principal amount of the Term Loan of such Term Loan Lender. Each Term Loan Lender is hereby authorized to record the date, Type and amount of the Term Loan of such Term Loan Lender, the date and amount of each payment or prepayment of principal thereof, each continuation of all or a portion thereof as the same Type, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the length of each Interest Period and Eurodollar Rate with respect thereto, on the schedule (or any continuation of the schedule) annexed to and constituting a part of its Term Note and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation (or any error therein) shall not affect the obligation of the Borrower to repay (with applicable interest) the Term Loans in accordance with the terms of this Agreement. SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS     3.1  Revolving Credit Commitments.   (a) Subject to the terms and conditions hereof, each Revolving Credit Lender severally and not jointly agrees to make revolving credit loans ("Revolving Credit Loans") to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Revolving Credit Lender's Revolving Credit Commitment Percentage of (i) the then outstanding Swing Line Loans and (ii) the then outstanding L/C Obligations, does not exceed the amount of such Revolving Credit Lender's Revolving Credit Commitment. During the Revolving Credit Commitment Period, the Borrower may use the Revolving Credit Commitments by borrowing, prepaying and reborrowing Revolving Credit Loans, all in accordance with the terms and conditions hereof.     (b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 3.2 and 4.2, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Credit Termination Date.     3.2  Procedure for Revolving Credit Borrowing.   The Borrower may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurodollar Loans, or (b) prior to 12:00 Noon, New York City time, one Business Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the respective amounts of each such Type of Loan and the lengths of the initial Interest Periods therefor. Each borrowing under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of ABR Loans, $3,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then Available Revolving Credit Commitments are less than $3,000,000, such lesser amount) and (y) in the case of Eurodollar Loans, $3,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof. Each Revolving Credit Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 13.2 prior to 11:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office prior to 12:00 Noon, New York City time, on such 22 -------------------------------------------------------------------------------- Borrowing Date with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.     3.3  Commitment Fee.   The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to the Revolving Credit Termination Date, computed at the rate of 0.375% per annum (the "Commitment Fee Rate") on the average daily amount of the unused Revolving Credit Commitment (it being understood that for purposes of this subsection 3.3, any outstanding Swing Line Loans shall not be deemed to be utilization of the Revolving Credit Commitment) of such Revolving Credit Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Credit Termination Date or such earlier date as the Revolving Credit Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof, provided that, from and after March 31, 2002, the Commitment Fee Rate will be adjusted, if required, on each Adjustment Date, to the rate set forth on Annex A hereto opposite the Leverage Ratio Level of the Borrower in effect on such Adjustment Date and provided, further, that, in the event that the financial statements required to be delivered pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the related certificate required pursuant to subsection 7.2(b), are not delivered when due, then, during the period from the date upon which such financial statements were required to be delivered until one Business Day following the date upon which they actually are delivered, the Commitment Fee Rate shall be 0.50%.     3.4  Termination or Reduction of Commitments.   The Borrower shall have the right, upon not less than one Business Day's prior notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments, provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans and Swing Line Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans then outstanding, when added to the then outstanding L/C Obligations and Swing Line Loans, would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Revolving Credit Commitments then in effect. The Revolving Credit Commitments are also subject to reduction as provided in subsection 4.1.     3.5  Repayment of Revolving Credit Loans; Evidence of Debt.   (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Revolving Credit Lender the then unpaid principal amount of each Revolving Credit Loan of such Revolving Credit Lender on the Revolving Credit Termination Date (or such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 11). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Revolving Credit Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.4.     (b) Each Revolving Credit Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Revolving Credit Lender from time to time in respect of each Revolving Credit Loan of such Revolving Credit Lender, including the amounts of principal and interest payable and paid to such Revolving Credit Lender in respect of such Revolving Credit Loans from time to time under this Agreement.     (c) The Administrative Agent shall record in the Register, with separate subaccounts for each Revolving Credit Lender, (i) the amount and Borrowing Date of each Revolving Credit Loan, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Revolving Credit Lender hereunder 23 -------------------------------------------------------------------------------- and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Revolving Credit Lender's share thereof, if any.     (d) The entries made in the Register and the accounts of each Revolving Credit Lender maintained pursuant to subsections 3.5(a) and 3.5(b) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded, provided, however, that the failure of any Revolving Credit Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Revolving Credit Loans in accordance with the terms of this Agreement.     (e) The Borrower agrees that, upon the request to the Administrative Agent by any Revolving Credit Lender, which request is communicated to the Borrower, the Borrower will execute and deliver to such Revolving Credit Lender a promissory note of the Borrower, dated the Closing Date, evidencing the Revolving Credit Loans of such Revolving Credit Lender, substantially in the form of Exhibit D (a "Revolving Credit Note"), payable to the order of such Revolving Credit Lender and in a principal amount equal to the lesser of (A) the Revolving Credit Commitment of such Revolving Credit Lender and (B) the aggregate unpaid principal amount of Revolving Credit Loans of such Revolving Credit Lender. Each Revolving Credit Lender is hereby authorized to record the date, Type and amount of each Revolving Credit Loan of such Revolving Credit Lender, the date and amount of each payment or prepayment of principal thereof, each continuation of all or a portion thereof as the same Type, each conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the length of each Interest Period and Eurodollar Rate with respect thereto, on the schedule (or any continuation of the schedule) annexed to and constituting a part of its Revolving Credit Note, and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation (or any error therein) shall not affect the obligation of the Borrower to repay (with applicable interest) the Revolving Credit Loans in accordance with the terms of this Agreement.     3.6  Swing Line Commitment.   Subject to the terms and conditions hereof, Chase (in such capacity, the "Swing Line Lender") agrees to make a portion of the Revolving Credit Commitments available to the Borrower during the Revolving Credit Commitment Period by making swing line loans ("Swing Line Loans") to the Borrower in an aggregate principal amount not to exceed at any one time outstanding the Swing Line Commitment, provided that (a) the aggregate principal amount of Swing Line Loans outstanding at any time shall not exceed the Revolving Credit Commitments at such time and (b) the Borrower shall not request, and the Swing Line Lender shall not make, any Swing Line Loan if, after giving effect to the making of such Swing Line Loan, the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders at such time would exceed the Revolving Credit Commitments at such time. During the Revolving Credit Commitment Period, the Borrower may use the Swing Line Commitment by borrowing, repaying and reborrowing Swing Line Loans all in accordance with the terms and conditions hereof. Swing Line Loans may be ABR Loans only.     3.7  Repayment of Swing Line Loans; Evidence of Debt.   (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of the Swing Line Lender the then unpaid principal amount of the Swing Line Loans on the Revolving Credit Termination Date (or such earlier date on which the Swing Line Loans become due and payable pursuant to Section 11). The Borrower hereby further agrees to pay interest on the unpaid principal amount of the Swing Line Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 4.4.     (b) The Swing Line Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower from time to time in respect of the Swing Line Loans made hereunder, including the amounts of principal and interest payable and paid in respect of such Swing Line Loans from time to time under this Agreement. 24 --------------------------------------------------------------------------------     (c) The Administrative Agent shall record in the Register (i) the amount and Borrowing Date of each Swing Line Loan, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower in respect thereof and (iii) the amount of any sum received by the Administrative Agent hereunder in respect of Swing Line Loans.     (d) The entries made in the Register pursuant to subsection 3.7(c) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded, provided, however, that the failure of the Swing Line Lender or the Administrative Agent to maintain the Register, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Swing Line Loans in accordance with the terms of this Agreement.     (e) The Borrower agrees that, upon the request to the Administrative Agent by the Swing Line Lender, which request is communicated to the Borrower, the Borrower will execute and deliver to the Swing Line Lender a promissory note of the Borrower, dated the Closing Date, evidencing the Swing Line Loans of the Swing Line Lender, substantially in the form of Exhibit E (a "Swing Line Note"), and in a principal amount equal to the lesser of (A) the Swing Line Commitment and (B) the aggregate unpaid principal amount of Swing Line Loans. The Swing Line Lender is hereby authorized to record the date and amount of each Swing Line Loan of the Swing Line Lender and the date and amount of each payment or prepayment of principal thereof on the schedule annexed to and constituting a part of the Swing Line Note, and any such recordation shall, to the extent permitted by applicable law, constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure to make any such recordation (or any error therein) shall not affect the obligation of the Borrower to repay (with applicable interest) the Swing Line Loans in accordance with the terms of this Agreement.     3.8  Procedure for Borrowing Swing Line Loans.   Whenever the Borrower desires that the Swing Line Lender make Swing Line Loans under subsection 3.6, it shall give the Swing Line Lender irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by the Swing Line Lender not later than 1:00 P.M., New York City time, on the proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date (which shall be a Business Day during the Revolving Credit Commitment Period). Each borrowing under the Swing Line Commitment shall be in a minimum amount of $500,000. Not later than 2:00 P.M., New York City time, on the Borrowing Date specified in a notice in respect of Swing Line Loans, the Swing Line Lender shall make available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 13.2 an amount in immediately available funds equal to the amount of the Swing Line Loan to be made by the Swing Line Lender. The Administrative Agent shall make the proceeds of such Swing Line Loan available to the Borrower not later than 3:00 p.m., New York City time, on such Borrowing Date by crediting the account of the Borrower, on the books of such office, in like funds as received by the Administrative Agent.     3.9  Swing Line Loan Participations.   (a) Notwithstanding anything herein to the contrary, the Swing Line Lender shall not, unless otherwise requested by the Required Lenders, make any Swing Line Loans if a Default or an Event of Default shall have occurred and be continuing.     (b) If prior to the repayment of any Swing Line Loan, one of the events described in subsection 11(f) shall have occurred, or at any time as the Swing Line Lender shall request, each Revolving Credit Lender shall purchase an undivided participating interest in an amount equal to such Revolving Credit Lender's Revolving Credit Commitment Percentage of the aggregate principal amount of Swing Line Loans then outstanding (the "Swing Line Participation Amount"). On the date of such purchase, each Revolving Credit Lender shall transfer to the Swing Line Lender, in immediately available funds, such Revolving Credit Lender's Swing Line Participation Amount and upon receipt thereof the Swing Line Lender shall deliver to such Revolving Credit Lender a Swing Line Loan Participation Certificate dated the date of receipt by the Swing Line Lender of such funds and in an amount equal to such Revolving Credit Lender's Swing Line Participation Amount. 25 --------------------------------------------------------------------------------     (c) Whenever, at any time after the Swing Line Lender has received from any Revolving Credit Lender such Revolving Credit Lender's Swing Line Participation Amount, the Swing Line Lender receives any payment on account of the Swing Line Loans, the Swing Line Lender will distribute to such Revolving Credit Lender its pro rata share of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Revolving Credit Lender's participating interest was outstanding and funded), provided, however, that in the event that such payment received by the Swing Line Lender is required to be returned, such Revolving Credit Lender will return to the Swing Line Lender any portion thereof previously distributed to it by the Swing Line Lender.     (d) Each Revolving Credit Lender's obligation to purchase participating interests pursuant to subsection 3.9(b) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Revolving Credit Lender or the Borrower may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other Loan Document by any of the Loan Parties or any other Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.     3.10  L /C Commitment.   (a) Subject to the terms and conditions hereof, each Issuing Bank, in reliance on the agreements of the other Revolving Credit Lenders set forth in subsection 3.13(a), agrees to issue Letters of Credit for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the relevant Issuing Bank, provided that no Issuing Bank shall have any obligation to, and shall not, issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the lesser of (A) the L/C Commitment and (B) the Revolving Credit Commitments at such time or (ii) the Aggregate Revolving Credit Outstandings of all the Revolving Credit Lenders at such time would exceed the Revolving Credit Commitments at such time. Any Continuing Letter of Credit, including those set forth on Schedule 3.10, shall be deemed to be issued under this Agreement on the Closing Date and shall be a Letter of Credit for all purposes hereof (other than subsection 3.11).     (b) Each Letter of Credit shall:      (i) be denominated in Dollars and shall be either (1) a standby letter of credit issued to support obligations of the Borrower, contingent or otherwise, in connection with the working capital and business needs of the Borrower in the ordinary course of business (a "Standby Letter of Credit") or (2) a commercial letter of credit issued in respect of the purchase of goods or services by the Borrower and its Subsidiaries in the ordinary course of business (a "Commercial Letter of Credit"); and     (ii) expire no later than the earlier of (A) five Business Days prior to the Revolving Credit Termination Date and (B) one year after the date of issuance thereof (or, with respect to Letters of Credit the L/C Obligations in respect of which do not in the aggregate exceed $10,000,000 at any time, two years after the date of issuance thereof), provided that, subject to clause (A) above and subsection (d) below, any such Letter of Credit with an expiration date on or prior to the first anniversary of the date of issuance thereof may, at the request of the Borrower as set forth in the applicable Application or prior to expiration thereof, be automatically renewed on each anniversary of the issuance thereof for an additional period of one year unless the relevant Issuing Bank shall have given 60 days prior written notice to the Borrower and the beneficiary of such Letter of Credit that such Letter of Credit will not be renewed.     (c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. 26 --------------------------------------------------------------------------------     (d) No Issuing Bank shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Bank or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. The Issuing Banks and the Lenders agree that if the Required Lenders otherwise direct during the existence of a Default or Event of Default, each Issuing Bank shall take appropriate steps to prevent the automatic extension of any Letter of Credit described in clause (b)(ii) above.     3.11  Procedure for Issuance of Letters of Credit.   The Borrower may from time to time request that an Issuing Bank issue a Letter of Credit by delivering to such Issuing Bank at its address for notices specified in its Issuing Bank Agreement an Application therefor, completed to the reasonable satisfaction of such Issuing Bank, and such other certificates, documents and other papers and information as such Issuing Bank may reasonably request. The relevant Issuing Bank shall notify the Revolving Credit Lenders promptly of the receipt of any request pursuant to the immediately preceding sentence. Upon receipt of any Application, the relevant Issuing Bank will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall such Issuing Bank be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by such Issuing Bank and the Borrower. The relevant Issuing Bank shall furnish a copy of such Letter of Credit to the Administrative Agent and the Borrower promptly following the issuance thereof.     3.12  Fees, Commissions and Other Charges.   (a) The Borrower shall pay to the Administrative Agent, for the account of each Issuing Bank, a fronting fee with respect to each Letter of Credit, computed for the period from the date of issuance of such Letter of Credit or the immediately preceding L/C Fee Payment Date, as the case may be, to the next L/C Fee Payment Date to occur thereafter at the rate of 0.25% per annum (or such lower rate agreed between the Borrower and the relevant Issuing Bank in its Issuing Bank Agreement), calculated on the basis of a 360-day year for actual days elapsed, of the aggregate amount available to be drawn under such Letter of Credit during the period for which such fee is calculated. Such fronting fee shall be payable in arrears on each L/C Fee Payment Date to occur after the issuance of such Letter of Credit and on the Revolving Credit Termination Date and shall be nonrefundable.     (b) The Borrower shall pay to the Administrative Agent, for the account of the L/C Participants, a letter of credit commission with respect to each Letter of Credit, computed for the period from the date of issuance of such Letter of Credit or the immediately preceding L/C Fee Payment Date, as the case may be, to the next L/C Fee Payment Date to occur thereafter at the rate of 1.625% per annum (the "L/C Fee Percentage"), calculated on the basis of a 360-day year for actual days elapsed, of the aggregate amount available to be drawn under such Letter of Credit during the period for which such fee is calculated, to be shared ratably among the L/C Participants in accordance with their respective Revolving Credit Commitment Percentages, provided, that from and after March 31, 2002, the L/C Fee Percentage shall be equal to the Applicable Margin for Eurodollar Loans in effect from time to time. Such commissions shall be payable in arrears on each L/C Fee Payment Date to occur after the issuance of such Letter of Credit and on the Revolving Credit Termination Date and shall be nonrefundable.     (c) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse each Issuing Bank for such normal and customary costs and expenses as are incurred or charged by such Issuing Bank in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. 27 --------------------------------------------------------------------------------     (d) The Administrative Agent shall, promptly following its receipt thereof, distribute to each Issuing Bank and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection.     3.13  L/C Participations.   (a) Each Issuing Bank irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce each Issuing Bank to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from each Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in such Issuing Bank's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by such Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Bank that, if a draft is paid under any Letter of Credit for which the relevant Issuing Bank is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to such Issuing Bank upon demand at such Issuing Bank's address for notices specified in its Issuing Bank Agreement an amount equal to such L/C Participant's Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.     (b) If any amount required to be paid by any L/C Participant to any Issuing Bank pursuant to subsection 3.13(a) in respect of any unreimbursed portion of any payment made by such Issuing Bank under any Letter of Credit is paid to such Issuing Bank within three Business Days after the date such payment is due, such L/C Participant shall pay to such Issuing Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate, during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Bank, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to subsection 3.13(a) is not in fact made available to the relevant Issuing Bank by such L/C Participant within three Business Days after the date such payment is due, such Issuing Bank shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans hereunder. A certificate of the relevant Issuing Bank submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.     (c) Whenever, at any time after an Issuing Bank has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.13(a), such Issuing Bank receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of Collateral applied thereto by such Issuing Bank), or any payment of interest on account thereof, such Issuing Bank will distribute to such L/C Participant its pro rata share thereof, provided, however, that in the event that any such payment received by such Issuing Bank shall be required to be returned by such Issuing Bank, such L/C Participant shall return to such Issuing Bank the portion thereof previously distributed by such Issuing Bank to it.     3.14  Reimbursement Obligation of the Borrower.   (a) Each Issuing Bank shall notify the Borrower promptly of each drawing under a Letter of Credit. The Borrower agrees to reimburse the relevant Issuing Bank on the Business Day immediately following each date on which such Issuing Bank notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by such Issuing Bank for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by such Issuing Bank in connection with such payment. Each such payment shall be made to the relevant Issuing Bank at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. 28 --------------------------------------------------------------------------------     (b) Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this subsection 3.14 (i) from the date the draft presented under the affected Letter of Credit is paid to the date on which the Borrower is required to pay such amounts pursuant to paragraph (a) of this subsection at the rate which would then be payable on ABR Loans and (ii) thereafter, until payment in full at the rate which would be payable on any ABR Loans which were then overdue.     (c) Each drawing under any Letter of Credit shall constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to subsection 3.2 of ABR Loans in the amount of such drawing (but without any requirement for compliance with the conditions set forth in subsection 6.2). The Borrowing Date with respect to such borrowing shall be the Business Day immediately following the date of such drawing and each Revolving Credit Lender shall make its Revolving Credit Commitment Percentage of such borrowing available to the Administrative Agent on such date to be used to repay the Reimbursement Obligation created by such drawing. The relevant Issuing Bank shall notify the Revolving Credit Lenders promptly of each drawing under a Letter of Credit to be reimbursed pursuant to this subsection 3.14(c). The application of such Loans shall satisfy the Borrower's Obligations under subsection 3.14(a) in the amount thereof.     3.15  Obligations Absolute.   (a) The Borrower's Obligations under subsection 3.14 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against any Issuing Bank, any Lender or any beneficiary of a Letter of Credit.     (b) The Borrower also agrees with the Issuing Banks and the Lenders that no Issuing Bank nor any Lender shall be responsible for, and the Borrower's Reimbursement Obligations under subsection 3.14(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee.     (c) No Issuing Bank shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors, omissions, interruptions or delays caused by such Issuing Bank's gross negligence or willful misconduct.     (d) The Borrower agrees that any action taken or omitted by any Issuing Bank under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Customs, and to the extent not inconsistent therewith, the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of such Issuing Bank to the Borrower.     3.16  Letter of Credit Payments.   If any draft shall be presented for payment under any Letter of Credit, the relevant Issuing Bank shall, within a reasonable time after its receipt thereof, examine all documents purporting to represent a demand for payment under such Letter of Credit to ascertain that the same appear on their face to be in conformity with the terms and conditions of such Letter of Credit. The relevant Issuing Bank shall also promptly notify the Borrower of the date and amount thereof. The responsibility of the relevant Issuing Bank to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment appear on their face to be in conformity with such Letter of Credit.     3.17  Application.   To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. 29 --------------------------------------------------------------------------------     3.18  Certain Reporting Requirements.   Each Issuing Bank will report in writing to the Administrative Agent (i) on the first Business Day of each week, the aggregate stated amount of Letters of Credit issued by it and outstanding as of the last Business Day of the preceding week and (ii) on or prior to each Business Day on which an Issuing Bank expects to issue or amend any Letter of Credit, the date of such issuance or amendment and the aggregate stated amount of Letters of Credit to be issued by it and outstanding after giving effect to such issuance or amendment (and such Issuing Bank shall advise the Administrative Agent on such Business Day whether such issuance or amendment occurred and whether the amount thereof changed). SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT     4.1  Optional and Mandatory Prepayments.   (a) The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice to the Administrative Agent prior to 11:00 a.m., New York City time, one Business Day prior to such prepayment, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each, provided that, if such prepayment is of Term Loans, such prepayment shall be applied to prepay the remaining installments of the Term Loans in the scheduled order of maturity. Upon receipt of any such notice the Administrative Agent shall notify each affected Lender thereof on the date of receipt of such notice. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 4.11 and, in the case of prepayments of the Term Loans, accrued interest to such date on the amount prepaid. Amounts prepaid on account of the Term Loans may not be reborrowed. Partial prepayments shall be in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.     (b) Unless the Required Lenders otherwise agree, the Term Loans shall be prepaid and the Revolving Credit Commitments shall be permanently reduced (and, in connection with any such reduction, the Swing Line Loans and Revolving Credit Loans shall be prepaid and/or the Letters of Credit shall be cash collateralized as provided in subsection 4.1(c)) as set forth in subsection 4.1(c) in an amount equal to 100% of (i) the Excess Securitization Amount, (ii) the Net Proceeds of any Asset Sale by Holdings, the Borrower or any of their Subsidiaries, provided that, if the Net Proceeds realized from any such Asset Sale (or series of related Asset Sales) is equal to or less than $1,000,000 (each such Asset Sale or series of related Asset Sales, a "De Minimus Asset Sale"), such Net Proceeds shall not result in any prepayment or reduction pursuant to this subsection, provided, further, if the aggregate Net Proceeds realized from De Minimus Asset Sales are equal to or greater than $5,000,000, such Net Cash Proceeds shall be subject to prepayment or reduction under this subsection and (iii) the Net Proceeds of any Casualty Event suffered by the Borrower or any of its Subsidiaries. Notwithstanding anything to the contrary contained in this subsection 4.1(b), so long as no Default or Event of Default has occurred or is continuing or would result therefrom, the Borrower may elect, by notice to the Administrative Agent, to retain, without compliance with respect thereto with this subsection 4.1(b), up to $20,000,000 in the aggregate of Net Proceeds from Asset Sales and Casualty Events occurring after the Closing Date which the Borrower would otherwise be required to apply to prepayment of the Term Loans and the reduction of the Revolving Credit Commitments (and, in connection with any such reduction, the prepayment of Swing Line Loans and Revolving Credit Loans and/or the cash collateralization of Letters of Credit as provided in subsection 4.1(c)). Unless the Required Lenders otherwise agree, the Term Loans shall be prepaid and the Revolving Credit Commitments shall be permanently reduced (and, in connection with any such reduction, the Swing Line Loans and Revolving Credit Loans shall be prepaid and/or the Letters of Credit shall be cash collateralized as provided in subsection 4.1(c)) as set forth in subsection 4.1(c) in an amount equal to 100% of the Net Proceeds of any Subordinated Debt issued or incurred by the Borrower, provided, if the Consolidated Leverage Ratio (calculated on a pro forma basis to give effect to such issuance or incurrence of Subordinated 30 -------------------------------------------------------------------------------- Debt) is less than 2.5 to 1.0, but greater than 2.0 to 1.0 at the time of such issuance or incurrence, the percentage of Net Proceeds to be applied in accordance with this sentence shall be 50%, provided, further, if the Consolidated Leverage Ratio (calculated on a pro forma basis to give effect to such issuance or incurrence of Subordinated Debt) is less than 2.0 to 1.0 at the time of such issuance or incurrence, the percentage of Net Proceeds to be applied in accordance with this sentence shall be 0%. Except as otherwise provided in this subsection 4.1(b), each prepayment required pursuant to this subsection 4.1(b) shall be made, and each reduction of Revolving Credit Commitments pursuant to this subsection shall be effective, on the third Business Day following receipt of any Excess Securitization Amount, the Net Proceeds from the relevant Asset Sale or Casualty Event or the issuance or incurrence of the relevant Subordinated Debt.     (c) All mandatory prepayments of Loans and all reductions of Revolving Credit Commitments pursuant to subsection 4.1(b) shall be made in the following order of priority: first the Term Loans shall be prepaid (with the amount of such prepayment being applied to prepay the remaining installments of the Term Loans in the scheduled order of maturity), and second, after the Term Loans shall have been prepaid in full, the Revolving Credit Commitments shall be reduced (and, to the extent that there are any Swing Line Loans and Revolving Credit Loans outstanding, the Swing Line Loans and the Revolving Credit Loans shall be prepaid (with the Swing Line Loans to be prepaid first)) in an aggregate amount equal to the lesser of (i) the amount of such reduction and (ii) the aggregate principal amount of then outstanding Swing Line Loans and Revolving Credit Loans, provided, that no further reduction of the Revolving Credit Commitments shall be required pursuant to this subsection 4.1 once the Revolving Credit Commitments have been reduced to $50,000,000.     (d) Amounts to be applied pursuant to this subsection 4.1 to the prepayment of Term Loans and Revolving Credit Loans shall be applied first to reduce outstanding Term Loans and Revolving Credit Loans which are ABR Loans. Any amounts remaining after such application shall be applied to prepay Term Loans and Revolving Credit Loans which are Eurodollar Loans immediately and/or shall be deposited in the Prepayment Account (as defined below). The Administrative Agent shall apply any cash deposited in the Prepayment Account (i) allocable to Term Loans to prepay Term Loans which are Eurodollar Loans and (ii) allocable to Revolving Credit Loans to prepay Revolving Credit Loans which are Eurodollar Loans, in each case on the last day of the respective Interest Periods therefor (or, at the direction of the Borrower, on any earlier date) until all outstanding Term Loans and/or Revolving Credit Loans which are Eurodollar Loans have been prepaid or until all cash on deposit in the Prepayment Account with respect to such Loans has been exhausted. For purposes of this Agreement, the term "Prepayment Account" shall mean an account established by the Borrower with the Administrative Agent and over which the Administrative Agent shall have control, including the right of withdrawal for application in accordance with this subsection 4.1(d). The Administrative Agent will, at the request of the Borrower, invest amounts on deposit in the Prepayment Account in Cash Equivalents that mature prior to the last day of the applicable Interest Periods of the Eurodollar Loans to be prepaid, provided that (i) the Administrative Agent shall not be required to make any investment that, in its sole judgment, would require or cause the Administrative Agent to be in, or would result in any, violation of any Requirement of Law and (ii) the Administrative Agent shall have no obligation to invest amounts on deposit in the Prepayment Account if a Default or Event of Default shall have occurred and be continuing. The Borrower shall indemnify the Administrative Agent for any losses relating to the investments so that the amount available to prepay Eurodollar Loans on the last day of the applicable Interest Periods therefor is not less than the amount that would have been available had no investments been made. Other than any interest earned on such investments, the Prepayment Account shall not bear interest. Interest or profits, if any, on such investments shall be deposited and reinvested and disbursed as described above. The Borrower hereby grants to the Administrative Agent, for its benefit and the benefit of the Lenders, a security interest in the Prepayment Account and in any Cash Equivalents in which the Administrative Agent has invested any amounts in the Prepayment Account and in the proceeds of each thereof to secure the Obligations. 31 --------------------------------------------------------------------------------     4.2  Conversion and Continuation Options.   (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent at least one Business Day's prior irrevocable notice of such election, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto (or on any other day if on the date of such conversion the Borrower pays to the Administrative Agent for the account of the applicable Lenders accrued interest on such Eurodollar Loans to the date of such conversion together with all amounts payable under subsection 4.11). The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each affected Lender thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Term Loan Lenders or the Required Revolving Credit Lenders, as the case may be, have determined that such a conversion is not appropriate and (ii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Revolving Credit Termination Date (in the case of conversions of Revolving Credit Loans) or the date of the final installment of principal of the Term Loans (in the case of conversions of Term Loans).     (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Term Loan Lenders or the Required Revolving Credit Lenders, as the case may be, have determined that such a continuation is not appropriate or (ii) after the date that is one month prior to the Revolving Credit Termination Date (in the case of continuations of Revolving Credit Loans) or the date of the final installment of principal of the Term Loans (in the case of continuations of Term Loans) and provided, further, that if the Borrower shall fail to give such notice or if such continuation is not permitted the affected Eurodollar Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period.     4.3  Minimum Amounts and Maximum Number of Tranches.   All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $3,000,000 or a whole multiple of $1,000,000 in excess thereof. In no event shall there be more than 12 Eurodollar Tranches outstanding at any time.     4.4  Interest Rates and Payment Dates.   (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin.     (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin.     (c) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise, but taking into account any applicable grace period under subsection 11(a)), such overdue amount shall bear interest at a rate per annum which is (x) in the case of overdue principal, the rate that would otherwise be applicable thereto pursuant to subsection 4.4(a) or (b), as the case may be, plus 2% or (y) in the case of overdue interest, commitment fees or other amounts due and payable hereunder, the rate described in subsection 4.4(b) 32 -------------------------------------------------------------------------------- plus 2%, in each case from the date of such non-payment until such amount is paid in full (after as well as before judgment).     (d) Interest shall be payable in arrears on each applicable Interest Payment Date and the Revolving Credit Termination Date, provided that interest accruing pursuant to subsection 4.4(c) shall be payable from time to time on demand.     4.5  Computation of Interest and Fees.   (a) Commitment fees and interest shall be calculated on the basis of a 360-day year for the actual days elapsed, except that whenever interest is calculated on the basis of the Prime Rate, interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable, notify the Borrower and the affected Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirement shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall, as soon as practicable, notify the Borrower and the affected Lenders of the effective date and the amount of each such change in interest rate.     (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 4.4(a).     4.6  Inability to Determine Interest Rate.   If prior to the first day of any Interest Period:     (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or     (b) the Administrative Agent shall have received notice from the Required Term Loan Lenders or the Required Revolving Credit Lenders, as appropriate, that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the affected Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent or the Required Term Loan Lenders or the Required Revolving Credit Lenders, as the case may be, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert ABR Loans to Eurodollar Loans.     4.7  Pro Rata Treatment and Payments.   (a) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:30 P.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the Revolving Credit Lenders or the Term Loan Lenders, as the case may be, at the Administrative Agent's office specified in subsection 13.2, in Dollars and in immediately available funds. Payments received by the Administrative Agent after such time shall be deemed to have been received on the next Business Day. The Administrative Agent shall distribute such payments to the Lenders entitled to receive the same promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes 33 -------------------------------------------------------------------------------- due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest shall be payable thereon at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day.     (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its portion of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender's portion of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Borrower, without prejudice to any right or claim the Borrower may have against such Lender.     (c) Each borrowing by the Borrower of Term Loans and Revolving Credit Loans shall be made ratably from the Term Loan Lenders and Revolving Credit Lenders, respectively, in accordance with their respective Term Loan Commitment Percentages and Revolving Credit Commitment Percentages. Any reduction of the Revolving Credit Commitments shall be made ratably among the Revolving Credit Lenders, in accordance with their respective Revolving Credit Commitment Percentages.     4.8  Illegality.   Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be suspended until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Loans as contemplated by this Agreement and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 4.11.     4.9  Requirements of Law.   (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the date hereof:      (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes and changes in the rate of tax on the overall net income of such Lender); 34 --------------------------------------------------------------------------------     (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or     (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall, within 10 Business Days after receipt by the Borrower of such Lender's written demand (with a copy to the Administrative Agent), pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. If any Lender has demanded compensation under this subsection 4.9(a) with respect to any Eurodollar Loan, the Borrower shall have the option to convert immediately such Eurodollar Loan into an ABR Loan until the circumstances giving rise to such demand for compensation no longer apply, provided, that (i) no such conversion shall affect the Borrower's obligation to pay compensation as provided herein which is due with respect to the period prior to such conversion and (ii) on the date of such conversion the Borrower shall pay to the Administrative Agent for the benefit of the relevant Lender accrued interest on such Eurodollar Loan to the date of conversion, together with any amounts payable pursuant to subsection 4.11.     (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority, in each case made subsequent to the date hereof, shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 10 Business Days after receipt by the Borrower of such Lender's written demand (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction.     (c) If any Lender becomes entitled to claim any additional amounts pursuant to subsection 4.9(a) or (b), it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The Borrower shall not be obligated to compensate any Lender pursuant to this subsection 4.9 for amounts accruing prior to the date which is 180 days (provided, if the circumstances giving rise to such claim have a retroactive effect, then such 180 day period shall be extended to include the period of such retroactive effect) before the date such Lender notifies the Borrower of the event by reason of which it has become entitled to additional amounts pursuant to subsection 4.9(a) or (b), provided that such notice need not include a computation of amounts in respect thereof. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.     4.10  Taxes.   (a) Except as required by law, all payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any 35 -------------------------------------------------------------------------------- Governmental Authority, excluding taxes imposed on the Administrative Agent or any Lender (or Transferee) as a result of any future, present or former connection between the Administrative Agent or such Lender (or Transferee) and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender (or Transferee) having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender (or Transferee) hereunder or under any Note, the amounts so payable to the Administrative Agent or such Lender (or Transferee) shall be increased ("increased amounts") to the extent necessary to yield to the Administrative Agent or such Lender (or Transferee) (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to pay any increased amounts in the circumstances described in subparagraph (c) of this subsection. Whenever any Non-Excluded Taxes are payable by the Borrower under the provisions of this subsection 4.10, the Borrower shall (i) pay such Taxes when due and (ii) promptly send to the Administrative Agent for its own account or for the account of such Lender (or Transferee), as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof or other evidence of remittance of Non-Excluded Taxes reasonably acceptable to the Administrative Agent. If the Borrower fails to comply with clauses (i) or (ii) of the previous sentence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure including the amount of Non-Excluded Taxes paid by such Lender (or Transferee) or the Administrative Agent, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. The agreements in this subsection 4.10 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.     (b) Each Lender (and each Transferee) that is not incorporated or organized under the laws of the United States of America or a state thereof shall:      (i) in the case of a Lender or Assignee that is a "bank" under Section 881(c)(3)(A) of the Code, or any Loan Participant;     (A) on or before the date it becomes a party to this Agreement (or, in the case of a Loan Participant, on or before the date such Loan Participant becomes a Loan Participant hereunder) and on or before the date, if any, such Lender (or Transferee) changes its applicable lending office by designating a different lending office (a "New Lending Office") deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which such participation was acquired) two properly completed and duly executed copies of United States Internal Revenue Service Form W-8ECI or W-8BEN, or successor applicable form, as the case may be;     (B) deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, the Lender from which such participation was acquired) two further properly completed and duly executed copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower (or, in the case of a Participant, the Lender from which such participation was acquired) or upon the request of the Borrower or the Administrative Agent (or, in the case of a Participant, the Lender from which such participation was acquired); and 36 --------------------------------------------------------------------------------     (C) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the Borrower (or, in the case of a Participant, the Lender from which such participation was acquired);     (ii) in the case of a Lender or Assignee that is not a "bank" under Section 881(c)(3)(A) of the Code:     (A) on or before the date it becomes a party to this Agreement deliver to the Borrower and the Administrative Agent (I) a certificate in the form of Exhibit I (an "Exemption Certificate") certifying under penalties of perjury that such Lender is eligible for a complete exemption from withholding on any payment hereunder under Section 881(c) of the Code and (II) a properly completed and duly executed Internal Revenue Service Form W-8BEN or Form W-8ECI or applicable successor form;     (B) deliver to the Borrower and the Administrative Agent two further properly completed and duly executed copies of said Exemption Certificate at least annually and said Form W-8BEN or Form W-8ECI, or any successor applicable form on or before the date that any such form expires or becomes obsolete or, in either case, after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower or upon the request of the Borrower; and     (C) obtain such extensions of time for filing and completing such forms or certifications as may be reasonably requested by the Borrower or the Administrative Agent; and each Lender (or Transferee) that is incorporated or organized under the laws of the United States of America or a state thereof shall provide two properly completed and duly executed copies of Form W-9, or successor applicable form, at the times specified for delivery of forms under paragraph (b)(i) of this subsection unless, in any such case, any change in law or regulation has occurred subsequent to the date such Lender (or Transferee) became a party to this Agreement (or in the case of a Loan Participant, the date such Loan Participant became a Loan Participant hereunder) which renders all such forms inapplicable or which would prevent such Lender (or Transferee) from properly completing and executing any such form with respect to it and such Lender (or Transferee) so advises the Borrower and the Administrative Agent in writing no later than 15 calendar days before any payment hereunder or under any Note is due. Each such Lender (and each Transferee) shall certify (i) in the case of a Form W-8BEN or W-8ECI, that it is entitled to an exemption from, or reduction in, withholding of any United States federal income taxes with respect to payments under this Agreement and (ii) in the case of a Form W-8BEN, Form W-8ECI or W-9, that it is entitled to an exemption from United States backup withholding tax.     (c) The Borrower shall not be required to indemnify any Lender (or Transferee), or to pay any increased amounts to any Lender (or Transferee) in respect of any Non-Excluded Tax, pursuant to this subsection 4.10 to the extent that (i) any obligation to withhold or deduct amounts with respect to taxes existed on the date such Lender (or Transferee) became a party to this Agreement (or, in the case of a Loan Participant, on the date such Loan Participant became a Loan Participant hereunder) or, with respect to payments to a New Lending Office, the date such Lender (or Transferee) designated such New Lending Office with respect to a Loan, provided, however, that this clause (i) shall not apply to any Transferee or New Lending Office that becomes a Transferee or New Lending Office as a result of an assignment, participation, transfer or designation made at the written request of the Borrower, or (ii) any Lender (or Transferee) fails to comply in full with the provisions of subsection 4.10(b) hereof.     (d) If the Administrative Agent or any Lender (or Transferee) receives a refund in respect of Non-Excluded Taxes paid by the Borrower, which in the good faith judgment of such Lender is allocable to such payment, it shall promptly pay such refund, together with any other amounts paid by the Borrower in connection with such refunded Non-Excluded Taxes, to the Borrower, net of all 37 -------------------------------------------------------------------------------- out-of-pocket expenses of such Lender incurred in obtaining such refund, provided, however, that the Borrower agrees to promptly return such refund to the Administrative Agent or the applicable Lender (or Transferee), as the case may be, if it receives notice from the Administrative Agent or applicable Lender (or Transferee) that such Administrative Agent or Lender (or Transferee) is required to repay such refund.     4.11  Indemnity.   The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense (other than the loss of any payments in respect of the Applicable Margin) which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar Loan after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans or converting any Eurodollar Loans to ABR Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.     4.12  Change of Lending Office; Filing of Certificates or Documents.   Each Lender agrees that if it makes any demand for payment, or becomes entitled to any increased amounts, under subsection 4.8, 4.10 or 4.11(a) or if any adoption or change of the type described in subsection 4.9 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a New Lending Office or file any certificate or document reasonably requested in writing by the Borrower if such action would reduce or obviate the need for the Borrower to make payments under subsection 4.8, 4.10 or 4.11(a) or would eliminate or reduce the effect of any adoption or change described in subsection 4.9.     4.13  Replacement Lenders.   In the event that the Borrower becomes obligated to pay additional amounts or increased amounts to, or receives notice from, any Lender pursuant to subsection 4.8, 4.9 or 4.10 then, unless such Lender has theretofore removed or cured the conditions which result in the obligation to pay such additional amounts or increased amounts, the Borrower may, on ten Business Days' prior written notice to the Administrative Agent and such Lender, cause such Lender to (and such Lender shall) assign pursuant to subsection 13.6(c) all of its rights and obligations under this Agreement to another bank or financial institution which is willing to become a Lender and is acceptable (which acceptance shall not be unreasonably withheld) to the Administrative Agent, for a purchase price equal to the outstanding principal amount of the Loans payable to such Lender plus any accrued but unpaid interest on such Loans, any accrued but unpaid commitment fees in respect of such Lender's Commitment and any other amounts payable to such Lender under this Agreement (including, without limitation, amounts payable under subsection 4.11). 38 -------------------------------------------------------------------------------- SECTION 5. REPRESENTATIONS AND WARRANTIES     To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, Holdings and the Borrower hereby jointly and severally represent and warrant to the Administrative Agent and each Lender that:     5.1  Financial Condition.   The consolidated balance sheet of Holdings and its consolidated Subsidiaries as at December 29, 2000 and the related consolidated statements of operations and of cash flows for the fiscal year ended on such date, reported on by Ernst & Young LLP, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of Holdings and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of Holdings and its consolidated Subsidiaries as at March 30, 2001 and June 29, 2001 and the related unaudited consolidated statements of operations and of cash flows for the three-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of Holdings and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants and as disclosed therein). Neither Holdings nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or in the notes thereto. During the period from December 29, 2000 to and including the date of this Agreement there has been no sale, transfer or other disposition by Holdings or any of its consolidated Subsidiaries of any material part of its or their business or property and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of Holdings and its consolidated Subsidiaries at December 29, 2000. 39 --------------------------------------------------------------------------------     5.2  No Change.   (a) Since December 29, 2000, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect, and (b) during the period from December 29, 2000 to and including the date of this Agreement no dividends or other distributions have been declared, paid or made upon the Capital Stock of Holdings nor has any of the Capital Stock of Holdings been redeemed, retired, purchased or otherwise acquired for value by Holdings or any of its Subsidiaries.     5.3  Corporate Existence; Compliance with Law.   Each Loan Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified or licensed to do business as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification except where the failure to be so qualified and/or in good standing, in the aggregate is not reasonably likely to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith is not, in the aggregate, reasonably likely to have a Material Adverse Effect.     5.4  Corporate Power; Authorization; Enforceable Obligations.   Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary corporate action to authorize the Extensions of Credit on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance by it of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by any Loan Party in connection with the Extensions of Credit hereunder or with the execution, delivery or performance by each applicable Loan Party or the validity or enforceability with respect to or against any Loan Party of the Loan Documents to which it is a party. This Agreement has been, and each other Loan Document will be, duly executed and delivered on behalf of each Loan Party that is a party thereto. This Agreement constitutes, and each other Loan Document when executed and delivered will constitute, a legal, valid and binding obligation of each Loan Party that is a party thereto enforceable against such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).     5.5  No Legal Bar.   The execution, delivery and performance of the Loan Documents, the Extensions of Credit hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of any Loan Party and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation other than as contemplated in or permitted by the Loan Documents.     5.6  No Material Litigation.   No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against any Loan Party or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby or (b) which has a reasonable possibility of an adverse determination, and if adversely determined, is reasonably likely to have a Material Adverse Effect.     5.7  No Default.   No Loan Party is in default under or with respect to any of its Contractual Obligations in any respect which is reasonably likely to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 40 --------------------------------------------------------------------------------     5.8  Ownership of Property; Liens.   Each Loan Party has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property except for such matters as do not materially adversely affect the use of the property in the conduct of the business as currently conducted, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien except as permitted by subsection 8.3.     5.9  Intellectual Property.   (a) Each Loan Party owns, or is licensed to use, all material Intellectual Property necessary for the conduct of its business except for those the failure to own or license which is not reasonably likely to have a Material Adverse Effect and (b) no claim of which Holdings or the Borrower has been given notice has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does Holdings or the Borrower know of any valid basis for any such claim, except for such claims that, in the aggregate, are not reasonably likely to have a Material Adverse Effect.     5.10  No Burdensome Restrictions.   No Requirement of Law or Contractual Obligation applicable to any Loan Party is reasonably likely to have a Material Adverse Effect.     5.11  Taxes.   Holdings and the Borrower and its Subsidiaries have filed or caused to be filed all tax returns which, to the knowledge of Holdings and its Subsidiaries, are required to be filed in respect of periods subsequent to the Closing Date and have paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property in respect of such periods and all other material taxes imposed on it or any of its property by any Governmental Authority (other than any taxes the amount or validity of which are being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the applicable Loan Party and other than any taxes which in the aggregate would not have a Material Adverse Effect as the case may be) in respect of such periods; no tax lien has been filed (except as permitted by subsection 8.3).     5.12  Federal Regulations.   No part of the proceeds of any Extension of Credit will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U.     5.13  ERISA.   Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code, except where, in connection with any such event or non-compliance, the liability which would be likely to result is not reasonably likely to have a Material Adverse Effect. No termination of a Single Employer Plan has occurred except where, in connection with any such termination, the liability which would be likely to result is not reasonably likely to have a Material Adverse Effect, and no Lien (except as permitted by subsection 8.3) which remains unsatisfied in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount in excess of $15,000,000. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan; neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made; and no such Multiemployer Plan is in 41 -------------------------------------------------------------------------------- Reorganization or Insolvent, except where, in any such case, the liability which would be likely to result is not reasonably likely to have a Material Adverse Effect.     5.14  Investment Company Act; Other Regulations.   No Loan Party is, or is "controlled" by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors) which limits its ability to incur Indebtedness as contemplated herein.     5.15  Subsidiaries.   The Subsidiaries of Holdings and the Borrower, as set forth in Schedule 5.15, constitute all the Subsidiaries of Holdings and the Borrower as of the Closing Date. The Material Subsidiaries of the Borrower, as set forth in Schedule 5.15, constitute all the Material Subsidiaries of the Borrower as of the Closing Date.     5.16  Purpose of Loans.   The proceeds of the Term Loans shall be used by the Borrower to refinance and repurchase existing indebtedness of the Borrower under the Existing Credit Agreement. The proceeds of the Revolving Credit Loans shall be used by the Borrower (i) to refinance and repurchase existing indebtedness of the Borrower under the Existing Credit Agreement, (ii) for general corporate purposes, including working capital needs, of the Borrower and its Subsidiaries in the ordinary course of business, (iii) for acquisitions permitted under this Agreement and (iv) for Investments permitted under this Agreement (including in Joint Ventures).     5.17  Environmental Matters.   Except to the extent that the inaccuracy of any of the following (or the circumstances giving rise to such inaccuracy), individually or in the aggregate, is not reasonably likely to have a Material Adverse Effect:     (a) The facilities and properties owned (including without limitation the Mortgaged Properties), leased or operated by the Borrower or any of its Subsidiaries (the "Properties") do not contain any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, or (ii) could give rise to any liability under, any Environmental Law or could interfere with the continued operation of the Properties or could reasonably be expected to impair the fair saleable value thereof.     (b) The Borrower and its Subsidiaries and the Properties are in compliance, and to the knowledge of the Borrower and its Subsidiaries have in the last three years been in compliance with all applicable Environmental Laws and applicable Environmental Permits, and the Borrower and its Subsidiaries reasonably believe that they will be able to comply with all applicable Environmental Laws in the future and renew or obtain all Environmental Permits necessary for their operations in the future.     (c) Hazardous Materials have not been transported, disposed of, emitted, discharged, or otherwise released or threatened to be released, nor has their disposal been arranged for, (i) by the Borrower or any of its Subsidiaries in violation of, or (ii) in a manner or to a location which is reasonably likely to give rise to liability under, any applicable Environmental Law; nor have any Hazardous Materials been generated, treated, stored, emitted, discharged or otherwise released or threatened to be released or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law.     (d) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or to the knowledge of the Borrower or any of its Subsidiaries will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements 42 -------------------------------------------------------------------------------- outstanding under any Environmental Law with respect to the Borrower or any of its Subsidiaries, or the Properties or the Business.     5.18  Accuracy of Information.   The factual statements and information contained in the Confidential Information Memorandum dated September 2001 relating to Holdings and its Subsidiaries (as the same may be supplemented in writing through the Closing Date, the "Information Memorandum"), when taken as a whole, were, as of the date of such Information Memorandum or the dates otherwise specified therein or written supplements thereto, accurate in all material respects and did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which such statements were made, provided that to the extent any such information therein was based upon or constitutes a forecast or projection or pro forma financial information, Holdings and the Borrower represent only that such forecasts or projections or pro forma financial information were based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made.     5.19  Solvency.   As of the Closing Date, after giving effect to the transactions contemplated to occur on the Closing Date and the making of the Term Loans and the initial Revolving Credit Loans (as if such Term Loans and Revolving Credit Loans were made on the Closing Date), each Loan Party is Solvent.     5.20  Labor Matters.   There are no strikes pending or, to Holdings' or the Borrower's knowledge, threatened against the Borrower or any of its Subsidiaries which, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect. The hours worked and payments made to employees of the Borrower and each of its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law, except to the extent such violations are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect. The consummation of the transactions contemplated hereby will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower or any of its Subsidiaries (or any predecessor) is a party or by which the Borrower or any of its Subsidiaries (or any predecessor) is bound.     5.21  Security Documents.   (a) The Security Documents are effective to create in favor of the Administrative Agent, for the benefit of the Lenders (and the Lender Affiliates party to any Specified Hedge Agreement), a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Security Documents, when stock certificates representing such Pledged Stock, together with stock powers executed in blank, are delivered to and maintained by the Administrative Agent, and in the case of the other Collateral described in the Security Documents, when financing statements and other filings specified on Schedule 5.21(a) in appropriate form are filed in the offices specified on Schedule 5.21(a), the Security Documents shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Pledged Stock and such Collateral covered by and perfected by filing pursuant to Article 9 of the Uniform Commercial Code and the proceeds thereof, as security for the Obligations, in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Liens permitted by subsection 8.3).     (b) Each of the Mortgages is or, upon execution, will be effective to create in favor of the Administrative Agent, for the benefit of the Lenders (and the Lender Affiliates party to any Specified Hedge Agreement), a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and the Mortgages, or when the Mortgages are filed in the offices specified on Schedule 5.21(b), each such Mortgage shall, constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and 43 -------------------------------------------------------------------------------- superior in right to any other Person, except for Liens permitted by subsection 8.3. Schedule 1.1B lists the Mortgaged Properties.     (c) No Mortgage encumbers or will encumber improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 and has not been obtained. SECTION 6. CONDITIONS PRECEDENT     6.1  Conditions to Term Loans.   The effectiveness of this Agreement and the agreement of each Lender to make the Term Loan requested to be made by it is subject to the satisfaction on the Closing Date, of the following conditions precedent:     (a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of Holdings and the Borrower with a counterpart for the Administrative Agent and each Lender, (ii) each Borrower Pledge Agreement, executed and delivered by a duly authorized officer of the Borrower with a counterpart for the Administrative Agent and each Lender, (iii) the Borrower Security Agreement, executed and delivered by a duly authorized officer of the Borrower with a counterpart for the Administrative Agent and each Lender, (iv) the Collateral Agreement, executed and delivered by a duly authorized officer of each Guarantor with a counterpart for the Administrative Agent and each Lender, (v) the Holdings Pledge Agreement, executed and delivered by a duly authorized officer of Holdings with a counterpart for the Administrative Agent and each Lender, (vi) the Subsidiaries' Guarantee, executed and delivered by a duly authorized officer of each Loan Party party thereto with a counterpart for the Administrative Agent and each Lender, (vii) for the account of each Revolving Credit Lender which requests a Revolving Credit Note on the Closing Date, a Revolving Credit Note conforming to the requirements hereof and executed by a duly authorized officer of the Borrower, (viii) for the account of each Term Loan Lender which requests a Term Note on the Closing Date, a Term Note conforming to the requirements hereof and executed by a duly authorized officer of the Borrower, and (ix) if requested by the Swing Line Lender on the Closing Date, for the account of the Swing Line Lender, a Swing Line Note conforming to the requirements hereof and executed by a duly authorized officer of the Borrower.     (b) Closing Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit F, with appropriate insertions and attachments, satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of such Loan Party.     (c) Corporate Proceedings of the Loan Parties. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Loan Party authorizing (i) the execution, delivery and performance of each Loan Document to which it is a party, and (ii) with respect to the Borrower, the Extensions of Credit contemplated hereunder, certified by the Secretary or an Assistant Secretary of such Loan Party as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded.     (d) Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Loan Party, dated the Closing Date, as to the incumbency and signature of the officers of such Loan Party executing any Loan Document which certificate shall be reasonably satisfactory in form and substance to the Administrative Agent and shall be 44 -------------------------------------------------------------------------------- executed by the President or any Vice President and the Secretary or any Assistant Secretary of such Loan Party.     (e) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws (or equivalent organizational documents) of each Loan Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party.     (f)  Fees and Expenses. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date.     (g) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender, the executed legal opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel to Holdings, the Borrower and the Subsidiary Guarantors, substantially in the form of Exhibit G, and the executed legal opinions of such local or special counsel as the Administrative Agent deems reasonably advisable. Such legal opinions shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.     (h) Interim Consolidated Financial Statements. The Lenders shall have received, to the extent available, the unaudited consolidated balance sheet of Holdings and its consolidated Subsidiaries as at March 30, 2001 and June 29, 2001 and the related unaudited consolidated statements of income and of cash flows for the three-month periods ended on such dates, certified by a Responsible Officer of Holdings to be complete and correct and present fairly the consolidated financial condition of Holdings and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the three-month periods then ended.     (i)  Representations and Warranties. Each of the representations and warranties made by the Borrower and the other Loan Parties in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date.     (j)  No Default. No Default or Event of Default shall have occurred and be continuing on the Closing Date.     (k) Approvals. All governmental and third party approvals necessary to enter into and consummate the transactions contemplated hereby shall have been obtained and be in full force and effect.     (l)  Pledged Stock and Stock Powers. The Administrative Agent shall have received the certificates representing the shares of Capital Stock pledged pursuant to the Security Documents, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof.     (m) Filings, Registrations and Recordings. Each document required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders (and Lender Affiliates party to any Specified Hedge Agreement), a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by subsection 8.3), shall have been filed or shall be in proper form for filing, registration or recordation. 45 --------------------------------------------------------------------------------     (n) Insurance. The Administrative Agent shall have received insurance certificates satisfying the requirements of subsection 4.3 of the Collateral Agreement.     6.2  Conditions to Each Extension of Credit.   The agreement of each Lender to make any Extension of Credit requested to be made by it on any date (other than the Term Loans), and the agreement of the Issuing Bank to issue any Letter of Credit for which an Application is presented, is subject to the satisfaction of the following conditions precedent:     (a) Closing Date. The Closing Date shall have occurred on or prior to such date.     (b) Representations and Warranties. Each of the representations and warranties made by the Borrower and the other Loan Parties in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date.     (c) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Extension of Credit requested to be made on such date.     (d) Borrowing Requests and Applications. The Administrative Agent shall have received a request or Application for such Loan or Letter of Credit if and as required by subsection 3.2, 3.8, 3.11 or 3.14, as applicable. Each such Extension of Credit hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in clauses (a), (b) and (c) of this subsection have been satisfied. SECTION 7. AFFIRMATIVE COVENANTS     Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document or any Letter of Credit remains outstanding, it shall and (except in the case of delivery of financial information, reports and notices which shall be performed by the Borrower) shall cause each of its Subsidiaries (other than any Joint Venture and any Receivables Subsidiary) to, unless the Required Lenders shall otherwise consent in writing:     7.1  Financial Statements.   Furnish to each Lender:     (a) as soon as available, but in any event within 90 days after the end of each fiscal year of Holdings or the Borrower, as the case may be, a copy of the audited consolidated balance sheet of Holdings and its consolidated Subsidiaries, or if the Merger is consummated, the Borrower and its consolidated Subsidiaries, as at the end of such year and the related audited consolidated statements of operations and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or a qualification arising out of the scope of the audit, by Ernst & Young LLP or other independent certified public accountants of nationally recognized standing; and     (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of Holdings or the Borrower, as the case may be, the unaudited consolidated balance sheet of Holdings and its consolidated Subsidiaries, or if the Merger is consummated, the Borrower and its consolidated Subsidiaries, as at the end of such quarter and the related unaudited consolidated statements of operations and of cash flows of Holdings and its consolidated Subsidiaries, or if the Merger is consummated, the Borrower and its consolidated Subsidiaries, for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, 46 -------------------------------------------------------------------------------- certified by a Responsible Officer of Holdings or the Borrower, as the case may be, as being fairly stated in all material respects (subject to normal year-end audit adjustments); all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or Responsible Officer, as the case may be, and disclosed therein).     7.2  Certificates; Other Information.   Furnish to each Lender:     (a) concurrently with the delivery of the financial statements referred to in subsection 7.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;     (b) concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and (b), a certificate of a Responsible Officer of Holdings and the Borrower (i) stating that, to the best of such Responsible Officer's knowledge, Holdings and the Borrower during such period have observed or performed all of their respective covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by them during such period, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, (ii) setting forth in reasonable detail the calculations required to determine compliance with subsections 4.1(b), 8.1, 8.2(c), 8.6(g), 8.8, 8.9 and 8.10(d) and (f) through (h) inclusive and required to determine the Leverage Ratio Level as of the date of delivery of such certificate, (iii) stating that no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Borrower has complied with the requirements of subsection 7.9 with respect thereto), (iv) stating that neither the Borrower nor any of its Subsidiaries has changed its name or its jurisdiction of incorporation without complying with the requirements of this Agreement and the Security Documents with respect thereto and (v) setting forth a listing of any material Intellectual Property acquired by any Loan Party;     (c) not later than forty-five days after the beginning of each fiscal year of the Borrower, a copy of a business plan and the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for such fiscal year, such projections for such fiscal year to be accompanied by a certificate of a Responsible Officer of the Borrower to the effect that such projections have been prepared using assumptions believed in good faith by management of the Borrower to be reasonable at the time made;     (d) within five Business Days after the same are sent, copies of all financial statements and reports which Holdings sends to the holders of any securities of the Loan Parties registered with the SEC, and within ten Business Days after the same are filed, copies of all financial statements and reports which Holdings may make to, or file with, the SEC or any analogous Governmental Authority;     (e) in the event the Borrower elects to exercise its right to retain amounts received in respect of a Casualty Event to repair or replace any property which is the subject of such Casualty Event, the Borrower shall promptly deliver a certificate of a Responsible Officer to the Administrative Agent setting forth the amount of the Net Proceeds of such Casualty Event which the Borrower expects to use for such purpose; and     (f)  promptly, such additional financial and other information within the possession of Holdings or of the Borrower or any of its Subsidiaries as any Lender may from time to time reasonably request through the Administrative Agent. 47 --------------------------------------------------------------------------------     7.3  Payment of Obligations.   Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except (a) as contemplated by this Agreement, (b) where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on its books and (c) for other delinquent obligations (including trade payables and liabilities) the failure to pay which, individually or in the aggregate, is not reasonably likely to have a Material Adverse Effect.     7.4  Conduct of Business and Maintenance of Existence.   Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except for rights, privileges and franchises, the loss of which are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect and except as otherwise permitted pursuant to subsection 8.5; comply in all material respects with all Contractual Obligations and Requirements of Law (excluding, for purposes of this subsection 7.4, Requirements of Law and Contractual Obligations specifically addressed elsewhere in this Section 7) except to the extent the failure to comply therewith, in the aggregate, is not reasonably likely to have a Material Adverse Effect.     7.5  Maintenance of Property; Insurance.   Keep all property material to the conduct of its business in good working order and condition (ordinary wear and tear excepted); maintain insurance with financially sound and reputable insurance companies (or, to the extent consistent with prudent business practice, a program of self-insurance) on such of its property and in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Lender, upon written request, full information as to the insurance carried.     7.6  Inspection of Property; Books and Records; Discussions.   Keep proper financial records in conformity with GAAP and all applicable Requirements of Law; and permit (a) representatives of the Administrative Agent (and, after the occurrence and during the continuance of an Event of Default, any Lender) to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time, upon reasonable notice, and as often as may reasonably be desired, and (b) upon reasonable notice during normal business hours, representatives of the Administrative Agent or any Lender to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants (provided that officers of the Borrower or the applicable Subsidiary are offered the reasonable opportunity to be present at such discussion).     7.7  Notices.   Promptly give notice to the Administrative Agent and each Lender of:     (a) the occurrence of any Default or Event of Default;     (b) any (i) default or event of default under any Contractual Obligation of Holdings or of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between Holdings, the Borrower or any of their respective Subsidiaries and any Governmental Authority, which in either case, has a reasonable possibility of an adverse determination or result, and if not cured, or resolved or if adversely determined, as the case may be, is reasonably likely to have a Material Adverse Effect;     (c) any litigation or proceeding affecting Holdings, the Borrower or any of their respective Subsidiaries in which the amount involved is not covered by insurance or in which injunctive or similar relief is sought which has a reasonable possibility of an adverse determination and which, if adversely determined, is reasonably likely to have a Material Adverse Effect; 48 --------------------------------------------------------------------------------     (d) the following events, as soon as practicable and in any event within 30 days after Holdings knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan, in each of cases (i) and (ii), where such event is reasonably likely to have a Material Adverse Effect; and     (e) any development or event which is reasonably likely to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer of Holdings and the Borrower setting forth details of the occurrence referred to therein and stating what action Holdings and the Borrower propose to take with respect thereto.     7.8  Environmental Laws.   Comply with, and use reasonable efforts to ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws (including, but not limited to, compliance with all requirements as to investigations, studies, sampling and testing, and all remedial, removal and other actions, under such Environmental Laws and compliance with all lawful orders and directives of all Governmental Authorities regarding such Environmental Laws) and obtain and comply with and maintain, and use reasonable efforts to ensure that all tenants and subtenants obtain and comply with and maintain, any and all Environmental Permits required by applicable Environmental Laws, except, in each such case, to the extent the failure to comply therewith, individually or in the aggregate, is not reasonably likely to have a Material Adverse Effect.     7.9  Additional Collateral.   (a) With respect to any assets acquired after the Closing Date by the Borrower or any of its Domestic Subsidiaries (other than any Joint Venture or Receivables Subsidiary) that are intended to be subject to the Lien created by any of the Security Documents (it being agreed that Excluded Property is not intended to be subject to the Lien created by any of the Loan Documents) but which are not so subject (other than (x) any assets described in paragraph (b) or (c) of this subsection and (y) any assets subject to a Lien permitted by Section 8.3(f)), promptly (and in any event within 45 days after the acquisition thereof): (i) execute and deliver to the Administrative Agent such amendments to the relevant Security Documents or such other documents as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on such assets, (ii) take all actions necessary or advisable to cause such Lien to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements (or other documents such as United States Patent and Trademark Office filings and United States Copyright Office filings) in such jurisdictions as may be requested by the Administrative Agent (it being agreed that (A) no Mortgage shall be required to be executed and delivered with respect to any parcel of real property acquired after the Closing Date unless the book value of such parcel of real property exceeds $1,000,000 and (B) no action shall be required pursuant to this clause (ii) to perfect a Lien in assets that would not constitute UCC Filing Collateral unless the book value of such assets is greater than $1,000,000, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.     (b) With respect to any Person that, subsequent to the Closing Date, becomes a Subsidiary (other than a Foreign Subsidiary, Joint Venture or Receivables Subsidiary), promptly upon the request of the Administrative Agent: (i) execute and deliver to the Administrative Agent, for the benefit of the Lenders, a new pledge agreement or such amendments to the relevant Pledge Agreement or Collateral Agreement as the Administrative Agent shall deem necessary or advisable to grant to the 49 -------------------------------------------------------------------------------- Administrative Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Subsidiaries' Guarantee and the Collateral Agreement, in each case pursuant to documentation which is in form and substance satisfactory to the Administrative Agent, and (B) to take all actions necessary or advisable to cause the Lien created by the Collateral Agreement to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements (or other documents such as United States Patent and Trademark Office filings and United States Copyright Office filings) in such jurisdictions as may be requested by the Administrative Agent and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.     (c) With respect to any Person that, subsequent to the Closing Date, becomes a first tier Foreign Subsidiary, promptly upon the request of the Administrative Agent: (i) execute and deliver to the Administrative Agent a new pledge agreement or such amendments to the relevant Pledge Agreement or Collateral Agreement as the Administrative Agent shall deem necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Foreign Subsidiary which is owned by the Borrower or any of its Subsidiaries (provided that in no event shall more than 65% of the Capital Stock of any such Foreign Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent any certificates representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, and take or cause to be taken all such other actions under the law of the jurisdiction of organization of such Foreign Subsidiary as may be necessary or advisable to perfect such Lien on such Capital Stock and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described in clauses (i) and (ii) immediately preceding, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.     (d) Notwithstanding any other provision of this Agreement, any Security Document or any other Loan Document, in no event shall any Excluded Property be required to be subject to any Lien hereunder, under any Security Document or under any other Loan Document.     7.10  Consummation of Permitted Securitization Transaction.   Consummate within 14 days of the Closing Date, pursuant to documentation satisfactory in form and substance to the Administrative Agent, a Permitted Securitization Transaction having a facility limit of not less than $75,000,000, provided, that the Borrower may at any time after the consummation of such Permitted Securitization Transaction, terminate such Permitted Securitization Transaction so long as (i) after giving effect to such termination, Holdings shall be in pro forma compliance with the covenants contained in subsection 8.1, (ii) both immediately before and after giving effect to such termination, no Default or Event of Default shall have occurred and be continuing and (iii) after giving effect to such termination, the aggregate Available Revolving Credit Commitments shall be at least $50,000,000. The Lenders and the Administrative Agent consent to the execution and delivery of such documentation, in form and substance satisfactory to the Administrative Agent, and the performance and consummation of the transactions contemplated thereunder by all applicable Loan Parties. 50 -------------------------------------------------------------------------------- SECTION 8. NEGATIVE COVENANTS     Holdings and the Borrower hereby jointly and severally agree that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document or any Letter of Credit remains outstanding, neither Holdings nor the Borrower shall, nor (except with respect to subsection 8.1) shall Holdings or the Borrower permit any of their respective Subsidiaries (other than any Joint Venture and any Receivables Subsidiary) to, directly or indirectly, unless the Required Lenders shall otherwise agree in writing:     8.1  Financial Condition Covenants.        (a) Maintenance of Net Worth. Permit Consolidated Net Worth at the end of any fiscal quarter to be less than an amount equal to the sum of (i) $262,977,000 and (ii) 50% of aggregate Consolidated Net Income for each fiscal quarter ending after June 29, 2001 for which Consolidated Net Income is positive.     (b) Maintenance of Consolidated Interest Coverage Ratio. Permit for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter the Consolidated Interest Coverage Ratio for such period to be less than 2.50 to 1.00.     (c) Maintenance of Consolidated Leverage Ratio. Permit for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter the Consolidated Leverage Ratio for such period to be greater than 3.25 to 1.00.     8.2  Limitation on Indebtedness.   Create, incur, assume or suffer to exist any Indebtedness, except:     (a) Indebtedness in respect of the Loans, any Notes, the Guarantees, the Letters of Credit and the other obligations of the Loan Parties under this Agreement and the other Loan Documents;     (b) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary;     (c) Non-Recourse Indebtedness secured by Liens permitted pursuant to subsection 8.3(i), provided that the aggregate principal outstanding amount of such Non-Recourse Indebtedness shall not exceed an amount equal to 5% of Consolidated Capitalization at any time;     (d) Indebtedness of Foreign Subsidiaries (other than Indebtedness owed to the Borrower or any other Subsidiary) of up to $30,000,000 in aggregate principal amount at any one time outstanding;     (e) (i) Indebtedness outstanding on the date hereof and listed on Schedule 8.2(e) and (ii) extensions, renewals, refinancings or successive refinancings (in whole or in part) thereof that do not increase, or shorten the maturity to a date prior to October 31, 2007 of, the principal amount thereof;     (f)  Indebtedness in respect of performance bonds, indemnity bonds, bid bonds, appeal bonds, bankers acceptances, letters of credit, surety bonds or other similar obligations arising in the ordinary course of business, provided that no such bond, bankers acceptance, letter of credit or similar obligation is provided to secure or support the repayment of other Indebtedness;     (g) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within five Business Days of notice to the Borrower or any Subsidiary of its incurrence; 51 --------------------------------------------------------------------------------     (h) Indebtedness arising out of an Investment permitted under subsection 8.10(f) or an Asset Sale permitted under subsection 8.6(e) consisting of (i) obligations with respect to customary post-closing adjustments with respect to accounts receivable, accounts payable, net worth and/or similar items typically subject to post-closing adjustments in similar transactions, provided that such obligations are outstanding for a period of two years or less following the creation thereof or (ii) customary indemnities granted to the seller or buyer in connection with such Investment or Asset Sale, as the case may be;     (i)  Indebtedness of a Person which becomes a Subsidiary after the date hereof, provided that (i) such Indebtedness existed at the time such Person became a Subsidiary and was not created in anticipation of the acquisition and (ii) immediately after giving effect to the acquisition of such Person no Default or Event of Default shall have occurred and be continuing;     (j)  Subordinated Debt, provided that the Net Proceeds of any such Subordinated Debt are applied to prepay Loans (and/or cash collateralize Letter of Credit) and the Revolving Credit Commitments are reduced, in each case to the extent required by subsection 4.1(b); and     (k) any additional Indebtedness of Holdings and any of its Subsidiaries, including, without limitation, Indebtedness incurred to finance the acquisition, construction, repair or improvement of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise), provided, that the sum of (i) the amount of outstanding guarantees under subsection 8.4(e) and (ii) the amount of outstanding Indebtedness under this subsection 8.2(k), shall not exceed $40,000,000 at any time outstanding.     8.3  Limitation on Liens.   Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:     (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of Holdings, the Borrower or the relevant Subsidiary, as the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of incorporation);     (b) statutory landlords' liens and carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business for sums which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings;     (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements;     (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;     (e) easements, rights-of-way, restrictions, and other similar encumbrances incurred in the ordinary course of business, which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the use of the property subject thereto or materially interfere with the ordinary conduct of the business of Holdings or such Subsidiary;     (f)  Liens securing Indebtedness of Holdings and its Subsidiaries permitted by subsection 8.2(k) incurred to finance all or any part of the acquisition, construction, repair or improvement of fixed or capital assets, provided that (i) such Liens shall be created within 90 days after the acquisition, construction, repair or improvement of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property acquired, constructed, repaired or 52 -------------------------------------------------------------------------------- improved with the proceeds of such Indebtedness, (iii) the amount of Indebtedness secured thereby shall not subsequently be increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 100% of the original purchase price of such asset or the amount expended to construct or improve such asset, as the case may be;     (g) Liens in existence on the date hereof listed on Schedule 8.3(g), provided that no such Lien is spread to cover any additional property after the Closing Date and that the amount of Indebtedness secured thereby shall not subsequently be increased;     (h) Liens on assets of any Foreign Subsidiary (other than stock pledged pursuant to any Borrower Pledge Agreement or the Collateral Agreement) securing Indebtedness of such Foreign Subsidiary permitted by subsection 8.2(d);     (i)  Liens securing Non-Recourse Indebtedness of Holdings and its Subsidiaries permitted by subsection 8.2(c);     (j)  Liens on documents of title and property covered thereby securing Indebtedness in respect of Commercial Letters of Credit;     (k) all building codes and zoning ordinances and other laws, ordinances, regulations, rules, orders or determinations of any federal, state, county, municipal or other governmental authority now or hereafter enacted;     (l)  Liens on Excluded Property (including Securitization Receivables) which are subject to any Permitted Securitization Transaction (granted in connection with such Permitted Securitization Transaction), including Liens on the assets of any Receivables Subsidiary (including Excluded Property) created pursuant to any Permitted Securitization Transaction and Liens incurred by the Borrower and its other Subsidiaries on Excluded Property (including Securitization Receivables) to secure obligations owing by them in respect of such Permitted Securitization Transaction;     (m) Liens granted pursuant to the Loan Documents;     (n) Liens on any property or assets of any Person which becomes a Subsidiary after the date hereof (including as a result of a merger with a special purpose Subsidiary formed in connection with such Person becoming a Subsidiary and solely for such purpose) securing Indebtedness permitted by subsection 8.2(i), provided that (i) such Liens existed at the time such Person became a Subsidiary and were not created in anticipation of such event, (ii) any such Lien does not by its terms cover any property or assets after the time such Person becomes a Subsidiary which were not covered immediately prior thereto and (iii) any such Lien does not by its terms secure any Indebtedness other than Indebtedness existing immediately prior to the time such Person becomes a Subsidiary;     (o) Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by clause (f) or (g) of this Section and which are otherwise permitted hereunder; provided that (i) such Liens do not at any time encumber any property other than the property subject to the Lien being refinanced, extended, renewed or refunded and (ii) the amount of Indebtedness secured thereby is not increased;     (p) attachment, judgment or other similar Liens arising in connection with court or arbitration proceedings involving in the aggregate a liability (not paid or fully covered by insurance) not in excess of $5,000,000; provided the same are vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof;     (q) 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, so long as such Liens attach only to the goods so imported; 53 --------------------------------------------------------------------------------     (r) Liens arising out of consignment or similar arrangements for the sale of goods entered into in the ordinary course of business, so long as such Liens attach only to the goods so consigned; and     (s) Liens on funds in applicable bank accounts securing Indebtedness permitted pursuant to subsection 8.2(g).     8.4  Limitation on Guarantee Obligations.   Create, incur, assume or suffer to exist any Guarantee Obligation except:     (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 8.4(a);     (b) the Guarantees and Letters of Credit;     (c) guarantees made in the ordinary course of its business by Holdings or the Borrower of obligations of any Subsidiary, which obligations are otherwise permitted under this Agreement;     (d) guarantees in respect of obligations to third parties issued in the ordinary course of business in connection with relocation of employees of the Borrower or any of its Subsidiaries;     (e) guarantees by Holdings and its Subsidiaries incurred in the ordinary course of business for an aggregate amount not to exceed $10,000,000 at any one time outstanding, provided, that the sum of (i) the amount of outstanding guarantees under this subsection 8.4(e) and (ii) the amount of outstanding Indebtedness under subsection 8.2(k), shall not exceed $40,000,000 at any time outstanding; and     (f)  representations, warranties, covenants and indemnities entered into by the Borrower or any other Loan Party and reasonably customary for securitization transactions similar to the relevant Permitted Securitization Transaction; provided, that, in no event, shall the Borrower or any other Loan Party guarantee the ability to collect upon, or the payment by the Receivables Obligor of, the Receivables subject to a Permitted Securitization Transaction or the financing related thereto.     8.5  Limitation on Fundamental Changes.   Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except:     (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that (i) the Borrower shall be the continuing or surviving corporation and (ii) if the Merger has occurred, such merger or consolidation does not adversely affect the value of the Collateral) or with or into any one or more wholly owned Subsidiaries of the Borrower (provided that (i) the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation and (ii) the surviving corporation shall be a Subsidiary Guarantor if either party to such merger or consolidation is a Subsidiary Guarantor);     (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower (provided that, if the Merger has occurred, such sale, lease, transfer or other disposition does not adversely affect the value of the Collateral) or any other wholly owned Subsidiary of the Borrower and which is a Subsidiary Guarantor if the transferor is a Subsidiary Guarantor;     (c) pursuant to any transaction expressly permitted by subsection 8.6 or 8.10; and     (d) the Merger, provided that, (i) Holdings shall thereafter be the "Borrower" for all purposes of this Agreement, (ii) the provisions of Sections 9 and 10 shall cease to apply to Holdings and (iii) Holdings shall be deemed to and hereby shall assume all of the Borrower's 54 -------------------------------------------------------------------------------- obligations under the Loan Documents (without limiting the foregoing, Holdings shall execute such documents and take such other actions as the Administrative Agent may reasonably request in connection with the Merger and the assumption of the obligations of the "Borrower" under this Agreement and the other Loan Documents) and provided, further, that there has not been a merger, consolidation, sale, lease, transfer or other disposition pursuant to paragraph (a) or (b) of this subsection 8.5 that, after giving effect to the Merger, adversely affects the value of the Collateral.     8.6  Limitation on Sale of Assets.   Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, Receivables and leasehold interests and any sale, transfer or other disposition in connection with a Sale/Leaseback Transaction), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than Holdings or any wholly owned Subsidiary, except:     (a) the conveyance, sale, lease, assignment, transfer or other disposition of Obsolete Property in the ordinary course of business;     (b) the sale of inventory in the ordinary course of business;     (c) the sale or discount for fair value without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof;     (d) as permitted by subsection 8.5(a), 8.5(b) or 8.5(d);     (e) the sale or disposition of any asset or assets (other than as permitted in clauses (a) through (d) of this subsection 8.6) in the ordinary course of business, provided that the net proceeds from any such transaction do not exceed $250,000;     (f)  sales of Receivables pursuant to a Permitted Securitization Transaction;     (g) Asset Sales (other than Asset Sales of inventory and other than any other Asset Sale permitted under this subsection 8.6) in the ordinary course of business, provided that (i) the Net Proceeds of any such Asset Sale are applied to prepay Loans (and/or cash collateralize Letters of Credit) and the Revolving Credit Commitments are reduced, in each case to the extent required by subsection 4.1(b), (ii) the aggregate amount of Net Proceeds of Asset Sales subsequent to the Closing Date shall not exceed $70,000,000 and (iii) the Net Proceeds from any Asset Sale subsequent to the Closing Date (or series of related Asset Sales) shall not exceed $35,000,000;     (h) the lease (as lessor) of real or personal property in the ordinary course of business;     (i)  any Investment permitted by Section 8.10 and any Restricted Payment permitted by Section 8.8;     (j)  consignment arrangements or similar arrangements for the sale of goods in the ordinary course of business and consistent with the past practice of the Borrower and its Subsidiaries prior to the Closing Date; and     (k) licenses or sublicenses of software, trademarks and other Intellectual Property in the ordinary course of business which do not materially interfere with the business of Holdings, the Borrower or any Subsidiary, as the case may be. To the extent that any sale permitted under this subsection 8.6 is of the capital stock of any Subsidiary, such capital stock shall be released from the security interest therein created pursuant to the Security Documents and such Subsidiary, if it is a Subsidiary Guarantor, shall be released from its obligations under the Subsidiaries' Guarantee.     8.7  [Intentionally Omitted.]    55 --------------------------------------------------------------------------------     8.8  Limitation on Restricted Payments.   Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower or in options, warrants or other rights to purchase such common stock) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "Restricted Payments"), except that,     (a) the Borrower may pay cash dividends to Holdings to pay any taxes or expenses required to be paid by Holdings in the ordinary course of business and to maintain a cash balance of $250,000 for the payment of such taxes and expenses, provided that any such taxes or expenses are paid no later than fifteen Business Days after the date on which the relevant dividend is made;     (b) the Borrower may pay dividends to Holdings to enable Holdings to make investments and satisfy obligations permitted to be made and incurred under Section 9;     (c) so long as no Default or Event of Default has occurred or would occur after giving effect to such declaration or payment, the Borrower may, from time to time, declare and pay cash dividends to Holdings on the common stock of the Borrower in an aggregate amount not to exceed $5,000,000 in any fiscal year of the Borrower or $10,000,000 in the aggregate, provided, that the proceeds of such dividends shall be used within 30 days of the receipt of such dividends by Holdings to repurchase Holdings stock or stock options from, or to cash out other management equity interests held by, management employees of Holdings or any of its Subsidiaries, and provided, further, that such $10,000,000 amount shall be increased by the proceeds of any additional Holdings capital stock which is issued to any management employees of Holdings or any of its Subsidiaries so long as such proceeds are contributed by Holdings to the capital of the Borrower; and     (d) so long as no Default or Event of Default shall have occurred and be continuing, Holdings and the Borrower may redeem or repurchase shares of its own common stock or common stock options or declare and pay cash dividends on its own common stock in order to enable Holdings to declare and pay equivalent cash dividends to its shareholders in an aggregate amount not to exceed $75,000,000, provided, that, once the Index Debt of Holdings or the Borrower is rated BBB- or higher (with a stable outlook) by S&P and Baa3 or higher (with a stable outlook) by Moody's, Holdings and the Borrower may redeem or repurchase additional shares of its own common stock or common stock options or pay cash dividends on its own common stock in order to enable Holdings to declare and pay equivalent cash dividends to its shareholders, in any fiscal year of the Borrower, in an aggregate amount not to exceed 50% of Consolidated Net Income for the preceding fiscal year of the Borrower.     8.9  Limitation on Capital Expenditures.   Make or commit to make Capital Expenditures in the aggregate for the Borrower and its Subsidiaries during any fiscal year of the Borrower, in excess of $70,000,000, provided, that, up to 100% of any amount permitted to be expended in any fiscal year if not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next following fiscal year but, if not so expended in the fiscal year immediately succeeding the fiscal year for which it is permitted may not be carried over for expenditure in succeeding fiscal years.     8.10  Limitation on Investments, Loans and Advances.   Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of, or any assets constituting a business unit of, or make any other investment in, any Person (an "Investment"), except: 56 --------------------------------------------------------------------------------     (a) extensions of trade credit (including to Foreign Subsidiaries) and endorsements of negotiable instruments and other negotiable documents in the ordinary course of business;     (b) investments in Cash Equivalents;     (c) payroll advances in the ordinary course of business and loans and advances to employees and directors of Holdings, the Borrower or any of its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for Holdings, the Borrower and its Subsidiaries not to exceed $500,000 at any time outstanding;     (d) Investments in Subsidiaries and in RISA and Investments by such Subsidiaries in the Borrower and in other Subsidiaries, provided that the aggregate amount of all such Investments (including Investments in the nature of sales and transfers of assets (including, pursuant to a transaction permitted under subsection 8.5(b) and assumption or guarantees of Indebtedness) for less than fair market value) after the Closing Date (i) in the Mexican Subsidiary and RISA shall not exceed at any one time outstanding the sum of (A) $15,000,000 and (B) the aggregate Capital Expenditures made by the Mexican Subsidiary and RISA and funded by Investments by the Borrower or Holdings, provided further, that additional Investments in the Mexican Subsidiary and RISA shall reduce on a dollar-for-dollar basis acquisitions permitted under Section 8.10(f) and Investments permitted under Section 8.10(g), (ii) in Foreign Subsidiaries (including the Mexican Subsidiary and RISA) shall not exceed at any one time outstanding the sum of (A) $25,000,000 and (B) the amount referred to in clause (i)(B) above, provided further, that additional Investments in Foreign Subsidiaries shall reduce on a dollar-for-dollar basis acquisitions permitted under Section 8.10(f) and Investments permitted under Section 8.10(g), and (iii) in Subsidiaries (other than Foreign Subsidiaries and RISA) which are not Subsidiary Guarantors shall not exceed at any one time outstanding $15,000,000, provided further, that additional Investments in Subsidiaries which are not Subsidiary Guarantors shall reduce on a dollar-for-dollar basis acquisitions permitted under Section 8.10(f) and Investments permitted under Section 8.10(g);     (e) advances by the Borrower to Holdings, in lieu of the payment of cash dividends, to enable Holdings to make the payments contemplated by subsection 8.8, provided that, if such advances are made with respect to the payments contemplated by subsection 8.8(a) or 8.8(b), such advances are used to make such payments within fifteen Business Days after such advances are made;     (f)  acquisitions, by the Borrower or any Subsidiary Guarantor, of all the Capital Stock of any Person or, acquisitions, by the Borrower, any Subsidiary Guarantor, or any Foreign Subsidiary which is owned directly by the Borrower or any Subsidiary Guarantor, of any assets constituting a business unit, so long as (i) in each case, (A) no Default or Event of Default has occurred and is continuing either before or immediately after giving effect to any such acquisition, (B) Holdings shall be in pro forma compliance with the covenants contained in subsection 8.1 after giving effect to any such acquisition, and (C) after giving effect to any such acquisition, the sum of the acquisitions pursuant to this subsection 8.10(f) and Investments pursuant to the provisos of subsection 8.10(d) and subsection 8.10(g) shall not exceed $200,000,000, (ii) with respect to any acquisition of any Person, the Person to be acquired shall be in substantially the same line of business as the Borrower and (iii) the requirements of subsection 7.9 shall be satisfied with respect to such acquisition (after giving effect thereto);     (g) Investments in any Joint Venture or in any Foreign Subsidiary which Foreign Subsidiary is not directly owned by the Borrower or a Subsidiary Guarantor (including Investments in the nature of sales and transfers of assets for less than fair market value and assumptions or guarantees of Indebtedness), so long as (i) no Default or Event of Default has occurred and is continuing either before or immediately after giving effect to any such Investment, (ii) Holdings shall be in pro forma compliance with the covenants contained in subsection 8.1 after giving effect to any such 57 -------------------------------------------------------------------------------- Investment, (iii) the aggregate amount of Investments pursuant to this subsection 8.10(g) does not exceed $100,000,000 (provided, that such $100,000,000 basket may be replenished (up to the original available amount of $100,000,000) on a dollar-for-dollar basis with cash received by the Borrower or any Subsidiary from any Joint Venture or any Foreign Subsidiary, which Foreign Subsidiary is not directly owned by the Borrower or a Subsidiary Guarantor, and, in each case, which was invested in pursuant to this Section 8.10(g) to the extent cash is used to repay Revolving Credit Loans pursuant to subsection 4.1), (iv) once the aggregate amount of Investments under this subsection 8.10(g) exceeds $50,000,000, on the date of any such Investment, the Consolidated Leverage Ratio (calculated on a pro forma basis) of Holdings and its consolidated Subsidiaries shall not exceed 2.75 to 1.00, and (v) after giving effect to any such Investment, and subject to the proviso in clause (iii) above, the sum of the Investments pursuant to the proviso of subsection 8.10(d), acquisitions pursuant to subsection 8.10(f) and Investments pursuant to this subsection 8.10(g) shall not exceed $200,000,000;     (h) Investments comprised of capital contributions, loans or deferred purchase price (whether in the form of cash, a note or other assets) in any Receivables Subsidiary; provided, that the aggregate amount of such Investments comprising of equity in any Receivables Subsidiary shall not exceed 5% of the Receivables transferred to such Receivables Subsidiary; provided, further, that non-equity Investments in any Receivables Subsidiary shall be pledged to the Administrative Agent for the benefit of the Lenders;     (i)  loans by the Borrower to members of its senior management in an aggregate principal amount not to exceed $2,000,000 at any time;     (j)  Investments identified on Schedule 8.10, without giving effect to any additions thereto or replacements thereof;     (k) Investments (including debt obligations) 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;     (l)  Specified Hedge Agreements permitted hereunder;     (m) debt securities acquired as partial consideration for a sale of assets permitted by Section 8.6; provided that the aggregate amount of such debt securities acquired during the term of this Agreement shall not exceed $10,000,000;     (n) Investments resulting from or to effect Capital Expenditures permitted by Section 8.9; and     (o) pledges or deposits made in the ordinary course of business consistent with past practice to secure obligations not considered Indebtedness.     8.11  Limitation on Transactions with Affiliates.   Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate (other than a Loan Party) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of the Borrower's or such Subsidiary's business or, if not in the ordinary course of business, the terms of which are set forth in writing and the board of directors of the Borrower or such Subsidiary, as the case may be, has determined in good faith that such transaction meets the applicable criteria set forth in clause (c) below, and (c) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate, provided, that the foregoing restriction shall not prohibit (i) payment of reasonable fees, expenses and compensation paid to, and indemnity provided on behalf of, officers, directors and employees of Holdings, the Borrower and its Subsidiaries, (ii) any payment or other transaction pursuant to any tax sharing agreement, 58 -------------------------------------------------------------------------------- (iii) payments permitted under subsection 8.8 or subsection 8.10, (iv) the Indebtedness permitted pursuant to subsection 8.2(b), (v) any employment agreement entered into by the Borrower or any of its Subsidiaries in the ordinary course of business, (vi) any issuance of securities in connection with employment arrangements, stock options and stock ownership plans of the Borrower entered into in the ordinary course of business, (vii) any Permitted Securitization Transaction, and (viii) any other agreement as in effect on the Closing Date and as set forth on Schedule 8.11, or any transaction contemplated thereby, or any amendment thereto or any replacement agreement thereof, so long as such amendment or replacement agreement is not more disadvantageous to the Loan Parties or the Lenders in any material respect than the original agreement as in effect on the Closing Date. .     8.12  Limitation on Sales and Leasebacks.   Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary (a "Sale/Leaseback Transaction"), other than Sale/Leaseback Transactions the Asset Sales with respect to which are permitted under subsection 8.6(g).     8.13  Limitation on Changes in Fiscal Year.   Change the fiscal year of Holdings; provided that Holdings may change the basis of its fiscal year from 52/53 weeks to a calendar year.     8.14  Limitation on Certain Clauses.   Enter into with any Person any agreement, which prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired or which prohibits or limits loans or dividends by Subsidiaries to the Borrower, other than (a) this Agreement, (b) any industrial revenue or development financings, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby or securing any such financing, mortgage or Lease) or other Liens permitted by subsection 8.3 (in which case any prohibition or limitations may only be effective against the assets subject to such Liens), or (c) any other Contractual Obligation permitted by this Agreement (provided that any prohibition of the type limited by this subsection contained in any such Contractual Obligation may be effective only against the rights of the Borrower or its Subsidiary in the contract or agreement relating to such Contractual Obligation and the assets subject thereto).     8.15  Limitation on Lines of Business.   Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the Closing Date (including the manufacture and distribution of ceramic tile and related products and the distribution of home furnishing, construction and renovation products connected to ceramic tile and related products) or any Related Business.     8.16  Amendments to Permitted Securitization Transaction.   Amend, modify or change any of the terms of any Permitted Securitization Transaction (other than by any amendment, modification, change, supplement or waiver which (a) would extend the maturity thereof or, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), change the fees payable with respect thereto, (b) does not adversely affect in any material respect the interests of the Administrative Agent or the Lenders hereunder or under the Loan Documents or (c) is of a technical or clarifying nature).     8.17  Limitation on Optional Payments and Modifications of Debt Instruments.   (a) Make any optional payment or prepayment on or redemption or purchase of any Subordinated Debt, (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any Subordinated Debt (other than any such amendment, modification or change which would extend the maturity, shorten the maturity to a date not prior to October 31, 2007 or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon or which would make the covenants applicable thereto less restrictive on the Borrower and its Subsidiaries), or (c) amend the subordination provisions of the Subordinated Debt without obtaining the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld). 59 -------------------------------------------------------------------------------- SECTION 9. NEGATIVE COVENANTS OF HOLDINGS     Holdings agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document or any Letter of Credit remains outstanding, Holdings shall not, unless the Required Lenders shall otherwise agree in writing:     9.1  Limitation on Holdings' Activities.   Create, incur, assume or suffer to exist any Indebtedness, Lien or Guarantee Obligation, or make any Investments, loans or advances to any Person, or purchase any material assets, or conduct, transact or otherwise engage, or commit to transact, conduct or otherwise engage, in any business or operations other than (i) transactions contemplated in connection with the consummation of the Merger, (ii) the ownership of the Capital Stock of the Borrower, and the exercise of rights and performance of obligations in connection therewith, (iii) the entry into, and exercise of rights and performance of obligations in respect of, (A) this Agreement, (B) contracts and agreements with or for the benefit of officers, directors and employees of Holdings or any Subsidiary thereof relating to their employment or directorships, (C) insurance policies and related contracts and agreements, (D) a Permitted Securitization Transaction and (E) equity subscription agreements, registration rights agreements, warrant agreements, voting and other stockholder agreements, engagement letters, underwriting agreements and other agreements in respect of its equity securities or any offering, issuance or sale thereof, (iv) transactions which would be permitted for the Borrower pursuant to subsections 8.2, 8.3, 8.4, 8.6 and 8.10, provided that (A) the qualitative and quantitative limitations described in those subsections shall apply to Holdings, and (B) each such transaction shall reduce the amount permitted for the Borrower under each such subsection, (v) the offering, issuance and sale of its equity securities to the extent such offering, issuance or sale does not constitute a Default or Event of Default under subsection 11(j), (vi) the filing of registration statements, and compliance with applicable reporting and other obligations, under and compliance with its federal, state or other securities laws, (vii) the performance of obligations under and compliance with its certificate of incorporation and by-laws, or any applicable law, ordinance, regulation, rule, order, judgment, decree or permit, including, without limitation, as a result of or in connection with the activities of its Subsidiaries, (viii) the performance of contractual obligations in existence on the date hereof or otherwise permitted hereunder, (ix) the incurrence and payment of its business expenses and any taxes for which it may be liable and (x) other activities necessarily incidental to the foregoing.     9.2  Restricted Payments.   Use any amount received by it pursuant to subsection 8.8 from the Borrower or any of its Subsidiaries for any purpose other than as set forth in such subsection.     9.3  Equity Net Proceeds.   Fail to contribute the Net Proceeds of any issuance of Common Stock by Holdings subsequent to the Closing Date to the Borrower (or to a Person if Holdings' investment therein is permitted under subsection 9.1) within five Business Days of the receipt of such Net Proceeds.     9.4  Dividends.   Declare or pay any dividend (other than dividends payable solely in Common Stock or other Capital Stock of Holdings) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of Capital Stock of Holdings, or any warrants or options to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Holdings or any of its Subsidiaries, except as contemplated by clause (d) of subsection 8.8. SECTION 10. GUARANTEE     10.1  Guarantee.   (a) To induce the Administrative Agent and the Lenders to execute and deliver this Agreement and to make the Extensions of Credit provided for herein to the Borrower, Holdings hereby unconditionally and irrevocably guarantees to the Administrative Agent and the Lenders (and 60 -------------------------------------------------------------------------------- the Lender Affiliates party to the Specified Hedge Agreements) and their respective successors, permitted transferees and permitted assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. Holdings further agrees to pay any and all reasonable expenses (including, without limitation, all reasonable fees and disbursements of counsel) which may be paid or incurred by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, Holdings under this Section 10. This Guarantee shall remain in full force and effect until the Obligations (other than the Obligations with respect to any Specified Hedge Agreement) are paid in full, the Commitments are terminated and no Letter of Credit is outstanding or not fully collateralized on terms satisfactory to the Administrative Agent, notwithstanding that from time to time prior thereto the Borrower may be free from any Obligations.     (b) No payment or payments made by the Borrower or any other Person or received or collected by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) from the Borrower or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Holdings under this Section 10 which shall, notwithstanding any such payment or payments, remain in full force and effect until the Obligations (other than the Obligations with respect to any Specified Hedge Agreements) are paid in full, the Commitments are terminated and no Letter of Credit is outstanding or not fully collateralized on terms satisfactory to the Administrative Agent. Holdings agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) on account of its liability under this Section 10, it will notify the Administrative Agent and such Lender (or such Lender Affiliate) in writing that such payment is made under this Section 10 for such purpose.     10.2  No Subrogation, Contribution, Reimbursement or Indemnity.   Notwithstanding anything to the contrary in this Section 10, Holdings shall not be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) for the payment of the Obligations, nor shall Holdings seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by Holdings hereunder, until all amounts owing to the Administrative Agent and the Lenders (and the Lender Affiliates party to the Specified Hedge Agreements) by the Borrower on account of the Obligations (other than the Obligations with respect to any Specified Hedge Agreement) are paid in full, the Commitments are terminated and no Letter of Credit remains outstanding or not fully collateralized on terms satisfactory to the Administrative Agent. If any amount shall be paid to Holdings on account of such subrogation rights at any time when all of the Obligations (other than the Obligations with respect to any Specified Hedge Agreement) shall not have been paid in full, the Commitments shall not have been terminated or a Letter of Credit remains outstanding, such amount shall be held by Holdings in trust for the Administrative Agent and the Lenders (and the Lender Affiliates party to the Specified Hedge Agreements), segregated from other funds of Holdings, and shall, forthwith upon receipt by Holdings, be turned over to the Administrative Agent in the exact form received by Holdings (duly indorsed by Holdings to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. The provisions of this subsection shall survive the termination of the guarantee contained in this Section 10 and the payment in full of the Obligations (other than the Obligations with respect to any Specified Hedge Agreement), the termination of the Commitments and the cancellation, revocation or termination of all outstanding Letters of Credit. 61 --------------------------------------------------------------------------------     10.3  Amendments, etc.   with respect to the Obligations; Waiver of Rights. Holdings shall remain obligated hereunder notwithstanding that, without any reservation of rights against Holdings, and without notice to or further assent by Holdings, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) may be rescinded by the Administrative Agent or such Lender (or such Lender Affiliate), and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement), and this Agreement, the other Loan Documents, any Specified Hedge Agreement and any other documents executed and delivered in connection herewith or therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders, as the case may be) or such Lender or Lender Affiliate may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for the guarantee contained in this Section 10 or any property subject thereto. When making any demand hereunder against Holdings, the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) may, but shall be under no obligation to, make a similar demand on the Borrower or any other guarantor, and any failure by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) to make any such demand or to collect any payments from the Borrower or any such other guarantor or any release of the Borrower or such other guarantor shall not relieve Holdings of its obligations or liabilities under this Section 10, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) against Holdings. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings.     10.4  Guarantee Absolute and Unconditional.   Holdings waives, to the fullest extent permitted by applicable law, any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) upon the guarantee contained in this Section 10 or acceptance of the guarantee contained in this Section 10; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 10; and all dealings between the Borrower or Holdings, on the one hand, and the Administrative Agent and the Lenders (and the Lender Affiliates party to the Specified Hedge Agreements), on the other hand, shall likewise be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 10. Holdings waives, to the fullest extent permitted by applicable law, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or Holdings with respect to the Obligations. This Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of this Agreement, any Note, any other Loan Document, any Specified Hedge Agreement, any of the Obligations or any guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement), (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) or (c) any other circumstance whatsoever (other than payment or other 62 -------------------------------------------------------------------------------- satisfaction in full) (with or without notice to or knowledge of the Borrower or Holdings) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of Holdings under the guarantee contained in this Section 10, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against Holdings, the Administrative Agent and any Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or of any such guarantee or right of offset, shall not relieve Holdings of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Lender (or any Lender Affiliate party to any Specified Hedge Agreement) against Holdings. The guarantee contained in this Section 10 shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon Holdings and its successors, and shall inure to the benefit of the Administrative Agent and the Lenders, and their respective successors, permitted transferees and permitted assigns, until all the Obligations (other than the Obligations with respect o the Specified Hedge Agreements) and the obligations of Holdings under this Guarantee shall have been satisfied by payment in full, the Commitments shall be terminated and no Letter of Credit shall remain outstanding, notwithstanding that from time to time during the term of this Agreement the Borrower may be free from any Obligations.     10.5  Reinstatement.   The guarantee contained in this Section 10 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any substantial part of its property, or otherwise, all as though such payments had not been made.     10.6  Payments.   Holdings hereby agrees that the Obligations will be paid to the Administrative Agent without set-off or counterclaim in Dollars at the office of the Administrative Agent located at 270 Park Avenue, New York, New York 10017. SECTION 11. EVENTS OF DEFAULT     If any of the following events shall occur and be continuing:     (a) The Borrower shall fail to pay any principal of any Loan or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder, within three Business Days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or     (b) Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or     (c) The Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in subsection 7.9, Section 8 or Section 9; or     (d) The Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in 63 -------------------------------------------------------------------------------- paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date on which a Responsible Officer of Holdings becomes aware of such default or (ii) the date on which written notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender; or     (e) Holdings, the Borrower or any its Subsidiaries shall (i) default in any payment of principal of or interest on any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace (not to exceed 60 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created, as the case may be, if the aggregate amount of the Indebtedness and/or Guarantee Obligations in respect of which such default or defaults shall have occurred is at least $5,000,000; or (ii) default in the observance or performance of any other agreement or condition to be observed or performed by such Person relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (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 become due prior to its stated maturity or the full amount of such Guarantee Obligation to become payable, provided, however, that, a default, event or condition described in this subsection 11(e)(ii) shall not constitute an Event of Default under this subsection 11(e) unless, at the time of such default, event or condition, defaults, events or conditions of the type described in this subsection 11(e)(ii) shall have occurred and are continuing with respect to Indebtedness and Guarantee Obligations the aggregate amount of which exceeds $5,000,000; or     (f)  (i) The Borrower or any of its Significant Subsidiaries or Holdings shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Significant Subsidiaries or Holdings shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Significant Subsidiaries or Holdings any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Significant Subsidiaries or Holdings any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Significant Subsidiaries or Holdings shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Significant Subsidiaries or Holdings shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or     (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single 64 -------------------------------------------------------------------------------- Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, or (vi) any other similar event or condition shall occur or exist with respect to a Plan that could result in a liability (other than in the ordinary course), and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, is reasonably likely to have a Material Adverse Effect; or     (h) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $5,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or     (i)  Any Guarantee shall cease, for any reason, to be in full force and effect or any Guarantor shall so assert; or     (j)  (i) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or the Borrower or any other Loan Party which is a party to any of the Security Documents shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or     (k) Any "Termination Event" under a Permitted Securitization Transaction or any similar such event or occurrence as defined in the documentation relating to a Permitted Securitization Transaction, or any event or circumstance entitling the Persons purchasing, or financing the purchase of, Receivables under a Permitted Securitization Transaction to stop so purchasing or financing (other than by reason of the occurrence of the stated expiry date of such Permitted Securitization Transaction or any termination of such Permitted Securitization Transaction in compliance with Section 7.10), provided that any notices or cure periods that are conditions to the rights of such Persons to stop purchasing, or financing the purchase of, such Receivables have been given or have expired, as the case may be; or     (l)  A Change in Control shall occur; then, and in any such event, (A) if such event is an Event of Default specified in clause (i), (ii) or (iii) of paragraph (f) of this Section with respect to the Borrower, automatically the Commitments (including the Swing Line Commitment) shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments (including the Swing Line Commitment) to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. 65 --------------------------------------------------------------------------------     With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank and the L/C Participants, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Loan Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other Obligations. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Bank and the L/C Participants, such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the security interest in such cash collateral account. SECTION 12. THE ADMINISTRATIVE AGENT     12.1  Appointment.   Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.     12.2  Delegation of Duties.   The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.     12.3  Exculpatory Provisions.   Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower. 66 --------------------------------------------------------------------------------     12.4  Reliance by Administrative Agent.   The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or such other Lenders as shall be required by this Agreement) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or such other Lenders as shall be required by this Agreement), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.     12.5  Notice of Default.   The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower or Holdings referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or such other Lenders as shall be required by this Agreement, provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.     12.6  Non-Reliance on Administrative Agent and Other Lenders.   Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 67 --------------------------------------------------------------------------------     12.7  Indemnification.   The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Commitment Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing, provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder.     12.8  Administrative Agent in Its Individual Capacity.   The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to the Loans made by it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity.     12.9  Successor Administrative Agent.   The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be subject to the approval of the Borrower (which approval shall not be unreasonably withheld), or shall appoint as a successor agent a financial institution which is not a Lender and which is reasonably acceptable to the Borrower, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.     12.10  Issuing Bank; Swing Line Lender.   The provisions of this Section 12 (other than subsection 12.9) shall apply to the Issuing Banks and the Swing Line Lender mutatis mutandis to the same extent as such provisions apply to the Administrative Agent.     12.11  Annual Administration Fee.   The Borrower shall pay to the Administrative Agent an annual administration fee (the "Annual Administration Fee") on the Closing Date and annually in advance on each anniversary thereof prior to the Revolving Credit Termination Date (or such earlier date on which the Revolving Credit Commitments shall terminate pursuant to Section 11) and the payment in full of all Obligations. The Annual Administration Fee payable on the Closing Date shall be in an amount equal to $50,000 and the Annual Administration Fee payable on each anniversary of the Closing Date in accordance with the immediately preceding sentence shall be in an amount equal to $50,000. 68 -------------------------------------------------------------------------------- SECTION 13. MISCELLANEOUS     13.1  Amendments and Waivers.   Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower and each Loan Party which is a party to the relevant Loan Documents written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences, provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan made by any Lender or of any installment thereof, or reduce the stated rate of any interest thereon or reduce the fees or any other amounts payable hereunder to any Lender or extend the scheduled date of any payment thereof or increase the aggregate amount or extend the expiration date of any Lender's Commitments, in each case without the consent of each such Lender directly affected thereby, (ii) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Lenders or consent to the assignment or transfer by any Loan Party (except any Subsidiary Guarantor to any other Subsidiary Guarantor or the Borrower) of any of its rights and obligations under this Agreement and the other Loan Documents or release all or substantially all of the Guarantees or release all or substantially all of the Collateral, in each case without the written consent of all the Lenders (except that in connection with the Merger, the release of the capital stock of the Borrower shall not require the consent of the Lenders and except as provided in subsection 8.6), (iii) amend, modify or waive subsection 4.1(c) without the written consent of the Required Term Loan Lenders or reduce the percentage in the definition of Required Term Loan Lenders without the consent of all the Term Loan Lenders, (iv) amend, modify or waive any provision of Section 3 without the prior written consent of the Required Revolving Credit Lenders and each Issuing Bank or reduce the percentage in the definition of Required Revolving Credit Lenders or amend, modify or waive the penultimate sentence of subsection 4.7(c) without the consent of all the Revolving Credit Lenders and the Issuing Banks or (v) amend, modify or waive any provision of Section 12 without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Lenders and the Administrative Agent shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.     13.2  Notices.   All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in 69 -------------------------------------------------------------------------------- Schedule 1.1(a) in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: Holdings:   Dal-Tile International Inc. 7834 C.F. Hawn Freeway P.O. Box 170130 Dallas, Texas 75217 Attention: Mr. Scott R. Veldman Telecopy: (214) 309-4390 The Borrower:   Dal-Tile Group Inc. 7834 C.F. Hawn Freeway P.O. Box 170130 Dallas, Texas 75217 Attention: Mr. Scott R. Veldman Telecopy: (214) 309-4390 with a copy to:   Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004-1980 Attention: Ms. Jean Hanson Telecopy: (212) 859-4000 The Administrative Agent:   The Chase Manhattan Bank 2200 Ross Avenue Dallas, Texas 75201 Attention: Allen King Telecopy: (214) 965-2705 with a copy to:   The Chase Manhattan Bank Agent Bank Services 140 East 45th Street, 29th Floor New York, New York 10017 Attention: Muniram Appanna Telecopy: (212) 552-2261 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 3.2, 3.4, 3.7 or 3.11 shall not be effective until received. 70 --------------------------------------------------------------------------------     13.3  No Waiver; Cumulative Remedies.   No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents 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.     13.4  Survival of Representations and Warranties.   All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.     13.5  Payment of Expenses and Taxes.   The Borrower agrees (a) to pay or reimburse the Administrative Agent and the Arranger for all their reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent and the Arranger, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents prepared in connection herewith or therewith, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel in lieu of the fees and expenses of outside counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their Affiliates and their respective officers, directors, employees, advisors and agents harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents, the Merger or the use of the proceeds of the Loans, and any other documents, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), provided, that the Borrower shall have no obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of the Administrative Agent or any such Lender, as the case may be, or (ii) legal proceedings commenced against the Administrative Agent or any such Lender, as the case may be, by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder.     13.6  Successors and Assigns; Participations and Assignments.   (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, Holdings, the Lenders, the Administrative Agent and their respective successors and assigns, except that neither the Borrower nor Holdings may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each 71 -------------------------------------------------------------------------------- Lender and any assignment or transfer by any Lender of its rights or obligations under this Agreement or any Loan Document must be made in compliance with this subsection 13.6 (and any purported assignment in violation of this subsection shall be null and void).     (b) Any Lender other than any Conduit Lender may, in the ordinary course of its lending or investment business and in accordance with applicable law, at any time sell to one or more financial institutions or other entities ("Loan Participants") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Loan Participant, (i) such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible for the performance thereof, (iii) such Lender shall remain the holder of any such Loan, Commitment or other interest for all purposes under this Agreement and the other Loan Documents, (iv) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents, and (v) no Loan Participant under any participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except with respect to the matters described in clauses (i) and (ii) of the proviso to the second sentence of subsection 13.1. The Borrower agrees that, while an Event of Default shall have occurred and be continuing, if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Loan Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in subsection 13.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Loan Participant shall be entitled to the benefits of subsections 4.9, 4.10 and 4.11 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it were a Lender, provided that, in the case of subsection 4.10 such Loan Participant shall have complied with the requirements of said subsection and provided, further, that no Loan Participant shall (i) be required, on or before the date it becomes a Loan Participant or thereafter, to deliver to the selling Lender the forms required in subsection 4.10, or (ii) be entitled to receive in respect of the amount of its participation any greater amount pursuant to subsection 4.10 (or any other subsection) than the transferor Lender would have been entitled to receive in respect of the amount of the participation it transferred to such Loan Participant if no such transfer had occurred.     (c) Any Lender other than any Conduit Lender may, in the ordinary course of its lending or investment business and in accordance with applicable law, at any time and from time to time assign to any other Lender or any Lender Affiliate or, with the consent of the Borrower and the Administrative Agent (which in each case shall not be unreasonably withheld), to an additional bank, financial institution or other entity (an "Assignee") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit H, executed by such Assignee and such assigning Lender (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by the Borrower and the Administrative Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register, provided that, in the case of any such assignment to an additional bank, financial institution or other entity, the sum of the aggregate principal amount of Loans, the aggregate amount of L/C Obligations, the aggregate Swing Line Participation Amounts and the aggregate amount of unused Commitments being assigned and, if such assignment is of less than all of the rights and obligations of the assigning Lender, the sum of the aggregate principal amount of Loans, the aggregate amount of L/C Obligations, the aggregate Swing Line Participation Amounts and the aggregate amount of the unused 72 -------------------------------------------------------------------------------- Commitments remaining with the assigning Lender are each not less than $5,000,000 (or $1,000,000 in the case of Term Loans) (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent). For purposes of the proviso contained in the preceding sentence, the amount described therein shall be aggregated in respect of each Lender and its Lender Affiliates, if any. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this subsection, the consent of the Borrower shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs when any of the events described in subsection 11(f) shall have occurred and be continuing. Notwithstanding the foregoing, any Conduit Lender may assign at any time to its designating Lender hereunder without the consent of the Borrower or the Administrative Agent any or all of the Loans it may have funded hereunder and pursuant to its designation agreement and without regard to the limitations set forth in the first sentence of this Section 13.6(c). An Assignor's rights under Section 13.5 shall survive the assignment of its Commitments, L/C Obligations, Swing Line Participation Amounts and Loans.     (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in subsection 13.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder (whether or not evidenced by a Note) shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.     (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an Affiliate thereof, by the Borrower and the Administrative Agent) together with, except in the case of an assignment pursuant to subsection 4.13, payment to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower.     (f)  The Borrower authorizes each Lender to disclose to any Loan Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 13.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of Holdings or the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of Holdings or the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement.     (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes relate only to absolute assignments and that 73 -------------------------------------------------------------------------------- such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law, provided, that any transfer of Loans or Notes upon, or in lieu of, enforcement of or the exercise of remedies under any such pledge shall be treated as an assignment thereof which shall not be made without compliance with the requirements of this subsection 13.6.     (h) Each of Holdings, the Borrower, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.     13.7  Adjustments; Set-off.   (a) If any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in subsection 11(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans or the Reimbursement Obligations owing to it, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan or the Reimbursement Obligations owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders, provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loans and/or participating interests in any Letters of Credit may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.     (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.     13.8  Counterparts.   This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.     13.9  Severability.   Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or 74 -------------------------------------------------------------------------------- unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.     13.10  Integration.   This Agreement and the other Loan Documents represent the agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.     13.11  GOVERNING LAW.   THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.     13.12  Submission To Jurisdiction; Waivers.   The Borrower and Holdings hereby irrevocably and unconditionally:     (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;     (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;     (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower or Holdings at its address set forth in subsection 13.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;     (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and     (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages.     13.13  Acknowledgements.   The Borrower hereby acknowledges that:     (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;     (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and     (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 75 --------------------------------------------------------------------------------     13.14  WAIVERS OF JURY TRIAL.   THE BORROWER, HOLDINGS, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.     13.15  Confidentiality.   Each Lender agrees to keep confidential (and to cause its employees, officers, directors, agents, attorneys, accountants and other professional advisors to keep confidential) all non-public information provided to it by the Borrower or any Loan Party pursuant to or in connection with this Agreement or any other Loan Documents designated as such by the Borrower or such other Loan Party, provided that nothing herein shall prevent any Lender from disclosing any such information (i) to the Administrative Agent, any other Lender or any Lender Affiliate, (ii) to any Transferee or prospective Transferee which agrees to comply with the provisions of this subsection, (iii) on a need-to-know basis to its employees, directors, agents, attorneys, accountants and other professional advisors (each of which shall be instructed to hold the same in confidence), (iv) upon the request or demand of any Governmental Authority (including, without limitation, the National Association of Insurance Commissioners) having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement or (vii) in connection with the exercise of any remedy hereunder or under any of the other Loan Documents.     13.16  Usury Savings Clause.   It is the intention of the parties hereto to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any provision to the contrary in this Agreement, any Notes, any of the other Loan Documents or any other document related hereto or thereto, in no event shall this Agreement or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws. If from any circumstances whatsoever, fulfillment of any provision of this Agreement, any Notes, any of the other Loan Documents or of any other document pertaining hereto or thereto, shall involve transcending the limit of validity prescribed by applicable law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if form any such circumstances the Administrative Agent and the Lenders shall ever receive anything of value as interest or deemed interest by applicable law under this Agreement, any Notes, any of the other Loan Documents or any other document pertaining hereto or otherwise an amount that would exceed the highest lawful rate, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing under the Loans or on account of any other indebtedness of the Borrower, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to the Borrower. In determining whether or not the interest paid or payable with respect to any indebtedness of the Borrower to the Administrative Agent and the Lenders, under any specified contingency, exceeds the Highest Lawful Rate (as hereinafter defined), the Borrower, the Administrative Agent and the Lenders shall, to the maximum extent permitted by applicable law, (a) characterize any non-principal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects thereof, (c) amortize, prorate, allocate and spread the total amount of interest throughout the full term of such indebtedness so that interest thereon does not exceed the maximum amount permitted by applicable law, and/or (d) allocate interest between portions of such indebtedness, to the end that no such portion shall bear interest at a rate greater than that permitted by applicable law.     To the extent that the Texas Finance Code is relevant to the Administrative Agent and the Lenders for the purpose of determining the Highest Lawful Rate, the Administrative Agent and the Lenders hereby elect to determine the applicable rate ceiling under such Code by the indicated (weekly) rate ceiling form time to time in effect. Nothing set forth in this subsection 13.16 is intended to or shall limit the effect or operation of subsection 13.11. 76 --------------------------------------------------------------------------------     For purposes of this subsection 13.16, "Highest Lawful Rate" shall mean the maximum rate of nonusurious interest that may be contracted for, taken, reserved or received on the Loans under laws applicable to the Administrative Agent and the Lenders.     13.17  Release of Collateral.   (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender) to take any action requested by the Borrower having the effect of releasing any Collateral or Guarantee Obligations (i) to the extent necessary to permit consummation of any transaction permitted by any Loan Document or that has been consented to in accordance with subsections 7.10 or 13.1 or (ii) under the circumstances described in paragraph (b) below. Without limiting the generality of the foregoing, the Administrative Agent is authorized to enter into non-disturbance or similar agreements in connection with any lease of Mortgaged Property entered into by the Borrower or any of its Subsidiaries as landlord.     (b) On the first date after the Closing Date on which the Borrower has Index Debt of BBB- or higher from S&P and Baa3 or higher from Moody's, in each case on stable watch or the equivalent, the Collateral (other than the Capital Stock of the Borrower and each of its Domestic Subsidiaries, whether direct or indirect, and 65% of the Capital Stock of direct Foreign Subsidiaries of the Borrower or any Domestic Subsidiary) shall automatically be released from the Liens created by the Security Documents (it being understood that the Guarantees shall nevertheless remain in effect), provided, that if at any time thereafter the Index Debt is rated BBB- (with a negative outlook or the equivalent) or lower by S&P or Baa3 (with a negative outlook or the equivalent) or lower by Moody's in each case for a period of six months, the Obligations under this Agreement and the other Loan Documents shall be secured by the Collateral and the Borrower shall and shall cause each of its Subsidiaries as soon as practicable (but in any event no later than 30 days after the expiration of such six month period) and, at its own expense, to consummate any and all actions necessary or advisable in the reasonable discretion of the Administrative Agent to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral (subject in the case of all Collateral, other than the pledged Capital Stock, to Liens permitted under subsection 8.3).     13.18  Effect of Agreement.   Holdings, the Borrower, the Administrative Agent and the Lenders hereto which are parties to the Existing Credit Agreement hereby agree that (i) the Existing Credit Agreement is amended to provide for the facilities set forth in Section 2 and Section 3 herein and (ii) that immediately following the repayment of the Term Loans (as defined in the Existing Credit Agreement) and the Revolving Credit Loans (as defined in the Existing Credit Agreement), the Term Loan Commitments and the Revolving Credit Commitments (each as defined in the Existing Credit Agreement) shall be terminated and the Existing Credit Agreement shall be and hereby is amended and restated on the terms and conditions set forth herein. This Agreement is intended to amend and restate the Existing Credit Agreement and shall be construed and enforced to give effect to such intention, provided that each of the parties hereto agrees that this Agreement shall be effective and enforceable against each of them in accordance with its terms whether or not construed as or constituting an amendment and restatement of the Existing Agreement. This Agreement shall not be deemed a novation and any new Notes executed and delivered by the Borrower under the terms of this Agreement shall be deemed to amend and restate the existing Notes. [Remainder of page left blank intentionally; Signature page to follow.] 77 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. Annex A PRICING GRID Leverage Ratio Level   Commitment Fee Rate   Applicable Margin for Eurodollar Loans   Applicable Margin for ABR Loans -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Leverage Ratio Level I   50 basis points   212.5 basis points   112.5 basis points --------------------------------------------------------------------------------               Leverage Ratio Level II   50 basis points   178.5 basis points   78.5 basis points -------------------------------------------------------------------------------- Leverage Ratio Level III   37.5 basis points   162.5 basis points   62.5 basis points -------------------------------------------------------------------------------- Leverage Ratio Level IV   37.5 basis points   137.5 basis points   37.5 basis points -------------------------------------------------------------------------------- Leverage Ratio Level V   25 basis points   112.5 basis points   12.5 basis points -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 78 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.               DAL-TILE INTERNATIONAL INC., as Holdings     By:   /s/ MARK A. SOLLS    -------------------------------------------------------------------------------- Name: Mark A. Solls Title: Vice President     DAL-TILE GROUP INC., as the Borrower     By:   /s/ MARK A. SOLLS    -------------------------------------------------------------------------------- Name: Mark A. Solls Title: Vice President     THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender     By:   /s/ ALLEN K. KING    -------------------------------------------------------------------------------- Name: Allen K. King Title: Vice President     BANK OF AMERICA, N.A., as Syndication Agent and as a Lender     By:   /s/ STEVEN A. MACKENZIE    -------------------------------------------------------------------------------- Name: Steven A. Mackenzie Title: Vice President     CREDIT LYONNAIS NEW YORK BRANCH, as a Co-Documentation Agent and as a Lender     By:   /s/ ATTILA KOC    -------------------------------------------------------------------------------- Name: Attila Koc Title: Senior Vice President 79 --------------------------------------------------------------------------------     FIRST UNION NATIONAL BANK, as a Co-Documentation Agent and as a Lender     By:   /s/ DAVID J.C. SILANDER    -------------------------------------------------------------------------------- Name: David J.C. Silander Title: Vice President     ALLIED IRISH BANKS, P.L.C., as a Lender     By:   /s/ WILLIAM J. STRICKLAND    -------------------------------------------------------------------------------- Name: William J. Strickland Title: President and CEO     By:   /s/ GERMAINE REUSCH    -------------------------------------------------------------------------------- Name: Germaine Reusch Title: Vice President     BANK LEUMI USA, as a Lender     By:   /s/ ALIZ SADAN    -------------------------------------------------------------------------------- Name: Aliz Sadan Title: Assistant Treasurer     BANK ONE, NA, as a Lender     By:   /s/ KATHY TURNER    -------------------------------------------------------------------------------- Name: Kathy Turner Title: Director     BNP PARIBAS, as a Lender     By:   /s/ JEFF TEBEAUX    -------------------------------------------------------------------------------- Name: Jeff Tebeaux Title: Associate     By:   /s/ LLOYD G. COX    -------------------------------------------------------------------------------- Name: Lloyd G. Cox Title: Managing Director 80 --------------------------------------------------------------------------------     CREDIT SUISSE FIRST BOSTON, as a Lender     By:   /s/ KRISTIN LEPRI    -------------------------------------------------------------------------------- Name: Kristin Lepri Title: Assistant Vice President     By:   /s/ BILL O'DALY    -------------------------------------------------------------------------------- Name: Bill O'Daly Title: Vice President     SUNTRUST BANK, as a Lender     By:   /s/ BRADLEY J. STAPLES    -------------------------------------------------------------------------------- Name: Bradey J. Staples Title: Director     THE BANK OF NOVA SCOTIA, as a Lender     By:   /s/ A.S. NORSWORTHY    -------------------------------------------------------------------------------- Name: A.S. Norsworthy Title: Sr. Team Leader-Loan Operations     THE FUJI BANK, LIMITED, A MEMBER OF THE MIZUHO FINANCIAL GROUP, AS CO-DOCUMENTATION AGENT, as a Lender     By:   /s/ NOBUKI KOIKE    -------------------------------------------------------------------------------- Name: Nobuki Koike Title: Senior Vice President     THE INDUSTRIAL BANK OF JAPAN, LIMITED NEW YORK BRANCH, A MEMBER OF THE MIZUHO FINANCIAL GROUP, AS CO-DOCUMENTATION AGENT, as a Lender     By:   /s/ MICHAEL N. OAKES    -------------------------------------------------------------------------------- Name: Michael N. Oakes Title: Senior Vice President, Houston Office 81 --------------------------------------------------------------------------------
Exhibit 10.1 Software Development and Consulting Agreement between Arbitron Inc. and Statistical Research Inc.       THIS AGREEMENT is made this 2nd day of July, 2001 (the “Effective Date”) by and between Arbitron Inc., a Delaware corporation (“Arbitron”) with offices at 142 West 57th Street, New York, New York 10019 and Statistical Research, Inc. (“SRI”) a New Jersey corporation with offices at 111 Prospect Street, Westfield, New Jersey 07090. BACKGROUND       A. Arbitron and SRI have entered into an Asset Purchase Agreement dated effective as of July 2, 2001 (the “Asset Purchase Agreement”) wherein Arbitron is purchasing from SRI certain assets comprising SRI’s Radio All Dimensional Audience Research business (hereinafter “RADAR”) as specified therein. This Agreement is being entered into as a condition to the closing under the Asset Purchase Agreement (the “Closing”).       B. Arbitron desires the services described hereunder to ensure the continued and profitable operation of RADAR after the Closing, and the transition of the software used for RADAR from processing telephone interview based data to processing diary based data.       NOW THEREFORE, in consideration of and as part of the transaction set forth in the Asset Purchase Agreement and the mutual agreements contained herein, the parties agree as follows: 1. Services Provided; Payment.       A. Commencing on the Effective Date and continuing until terminated as provided by Section 10 herein, SRI shall provide to Arbitron the services and software, including any modifications and enhancements thereto (respectively referred to as the “Services” and the “Software”) which are more particularly described in Schedule ‘A’ attached to this Agreement and which are incorporated herein.       B. Arbitron shall pay SRI for the Services and Software in accordance with Schedule ‘A’. 2. Term.       This Agreement shall commence on the Effective Date and shall continue in accordance with the Term set forth in Schedule ‘A’, or unless otherwise terminated in accordance with the provisions set forth in Section 9 or in Schedule ‘A’. 3. Proprietary Rights; Disclosures of Intellectual Property:       (a) All work performed under this Agreement, and all Services, Software, materials, products, deliverables developed or prepared for Arbitron by SRI under this Agreement, are the property of Arbitron and all title and interest therein shall vest in Arbitron and shall be deemed to be a Work Made for Hire and made in the course of performing the services rendered hereunder. To the extent that title to any such works may not, by operation of law, vest in Arbitron or such works may not be considered Works Made for Hire under applicable law, all rights, title and interest therein are hereby irrevocably assigned to Arbitron. All such materials shall belong exclusively to Arbitron, with Arbitron having the right to obtain and to hold in its own name, copyrights, registrations or such other protection as may be appropriate to the subject matter, and any extensions and renewals thereof. SRI agrees to give Arbitron and any person designated by -------------------------------------------------------------------------------- Arbitron, reasonable assistance required to perfect the rights defined in this Paragraph without further payment or compensation.       SRI shall promptly make a complete written disclosure to Arbitron of any invention, discovery or improvement which, to SRI’s knowledge, is unique or novel, whether patentable or not, conceived of or first actually reduced to practice, solely or jointly, by Arbitron’s or SRI’s employees during the term of this Agreement and in the performance of services hereunder (hereinafter referred to, whether actually disclosed by SRI or not, as “Disclosed Subject”). As to any such Disclosed Subject, SRI shall specifically point out, in writing, the features or concepts which SRI believes to be new or different.       In consideration of the payment by Arbitron to SRI of the amounts specified hereunder for the performance of work, SRI hereby agrees to assign and does hereby assign to Arbitron all right, title and interest in and to any such Disclosed Subject; and SRI further agrees to execute, acknowledge and deliver all such papers prepared by Arbitron with the cooperation of SRI as may be necessary to obtain patents for such Disclosed Subject in any and all countries of the world and to vest title thereto in Arbitron, its successors and assigns, and provide, at Arbitron’s expense, all assistance reasonably required to assure Arbitron the rights thereto. SRI shall have each employee performing work hereunder execute a Contract Employee Invention Agreement in the form attached hereto sufficient to comply with this Agreement.       There shall be no accountability to SRI for royalties or other payments with respect to the use of any such Disclosed Subject by Arbitron or its subsidiaries or licensees.       Unless otherwise requested by Arbitron, upon the completion of the Services to be performed under this Agreement or upon the earlier termination of this Agreement (other than upon default for non-payment by Arbitron that is not later cured either through written agreement of the parties hereto or through satisfaction by Arbitron of a judgment against it to make such payments), SRI shall immediately turn over to Arbitron all materials and deliverables acquired or developed by SRI pursuant to this Agreement. 4. Confidential Information: Any specifications, drawings, sketches, models, samples, data, computer programs (including all source code and object code) or documentation, technical information, methods of operation, Arbitron client information, SRI client information finances, or other business information or confidential information of either Arbitron or SRI (the “Confidential Information”) and furnished or disclosed by one party to the other hereunder shall be deemed the property of and, when in tangible form, shall be returned to the providing party upon completion or termination of this Agreement; provided, however, that any Confidential Information created by either party in accordance with or in furtherance of the terms of this Agreement shall be deemed the property of Arbitron, and SRI shall be deemed the receiving party. Unless such information was previously known to the receiving party free of any obligation to keep it confidential, or has been or is subsequently made public by the providing party or a third party with a right to disclose such information, it shall be held in confidence by the receiving party, shall not be disclosed to any third party by the receiving party, shall be used only for the purposes hereunder, and may be used for other purposes only upon such terms and conditions as may be mutually agreed upon in writing; provided, however, that the receiving party may disclose the Confidential Information as may be required by law, rule, regulation or court order or decree, or if the receiving party reasonably determines (following advance notice to and opportunity to comment by the other party) that such disclosure is necessary in order to comply with applicable law.       Both parties acknowledge that disclosure of any Confidential Information by the receiving party will give rise to irreparable injury to the providing party, inadequately compensable in damages. Accordingly, the providing party may seek and obtain injunctive relief against the breach or threatened breach of the foregoing undertakings, in addition to any other legal remedies which may be available. Both parties acknowledge and agree that the covenants 2 -------------------------------------------------------------------------------- contained herein are necessary for the protection of legitimate business interests of the providing party and are reasonable in scope and content.       Notwithstanding anything to the contrary, in the event that SRI incorporates any of its Confidential Information into the Services and/or Software, Arbitron shall have the right to use, disclose and sublicense such Confidential Information. 5. Warranty: SRI warrants that the Software as accepted by Arbitron provided hereunder shall at all times conform to the specifications set forth in the Statement of Work attached hereto as Schedule A. The Software as accepted by Arbitron shall function properly and in conformity with such specifications for a period of one (1) year following the date of Arbitron’s acceptance of the Software, and for a period of one (1) year from the date of Arbitron’s acceptance of the Software SRI shall use its best efforts to correct any defects in the Software, as accepted by Arbitron, so that such Software shall function properly and in conformity with the required specifications. At the time of acceptance by Arbitron of the Software and for one (1) year thereafter, SRI will use its best efforts to keep the Software as accepted by Arbitron free of all viruses, “trojan horses,” and other similar defects or deficiencies. The Services provided by SRI shall be produced in a workmanlike manner and shall be rendered by qualified personnel who will perform the tasks assigned consistent with good professional practice and the state of the art involved. In addition, SRI represents and warrants that to its knowledge it has the right to provide the Software without violating any rights of any third party, that there is currently no actual or threatened suit by any such third party based on an alleged violation of such right, and that to SRI’s knowledge Arbitron shall receive free, good and clear title to all Software, Services and Disclosed Subject(s) developed and/or provided under this Agreement. SRI warrants and represents that it has not and shall not grant any rights to any third parties inconsistent with the provisions of this Agreement. SRI hereby warrants that it has not granted to any other party exclusive rights to the Software in the specific areas described herein. SRI further warrants that no other party has exclusive rights to its Services and/or, to SRI’s knowledge, Software in the specific areas described herein and that SRI is in no way compromising any rights or trust relationships between any other party and SRI, or creating a conflict of interest, or any known or likely possibility thereof, for SRI or for Arbitron. SRI further warrants that all Services and Software provided hereunder will be performed in accordance with all applicable Federal, State, or Local laws, regulations and executive orders. EXCEPT FOR THE LIMITED WARRANTIES SET FORTH IN THIS SECTION 5, SRI MAKES NO WARRANTIES HEREUNDER, AND EXCEPT AS OTHERWISE SET FORTH IN THIS SECTION 5, SRI EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 6. Indemnification; Injunction Remedy: SRI shall indemnify and hold harmless Arbitron for any loss, injury, damage, expense or liability and all costs, fees and expenses (including reasonable attorneys’ fees) that may result by reason of: (a) any breach by SRI of SRI’s representations or warranties, and (b) any infringement, or claim of infringement, of any patent, trademark, copyright or other proprietary right of any third party based on the Software and/or Services provided under this Agreement to Arbitron hereunder. SRI shall defend or settle, provided that such settlement does not prejudice Arbitron’s rights, at its own expense, any action for which it is responsible hereunder. Each party shall notify the other promptly of any claim of infringement for and shall provide reasonable cooperation to the other party to facilitate the defense of any such claim. Notwithstanding anything in this Agreement to the contrary, if any claim brought by Arbitron under this Section 6 is a result of any infringement, or claim of infringement, of any patent, trademark, copyright or other proprietary right of any third party based on the Software and/or Services provided under this Agreement to Arbitron hereunder was not known by SRI at the time SRI provided Arbitron notice of SRI’s achieving the Acceptance 3 -------------------------------------------------------------------------------- Criterion (an “SRI Unknown Infringement”), then SRI’s obligation to indemnify Arbitron under clause (b) of this first paragraph of Section 6 shall not exceed a maximum of $2,000,000. All costs, fees, judgments, settlements and expenses that may result by reason of defending or settling an SRI Unknown Infringement claim that exceed $2,000,000 shall be born 50% by SRI and 50% by Arbitron; provided that SRI’s share shall in no event exceed an aggregate of $5,000,000 (including the $2,000,000). In the event of an injunction preventing Arbitron’s use of the Services and/or Software or if the Services and/or Software are likely to become the subject of a claim of violation of the rights of a third party, SRI shall, at Arbitron’s election and SRI’s sole expense: (a) replace or modify the infringing Services and/or Software; (b) obtain for Arbitron the right to continue to use the Services and/or software; or (c) refund amount paid for the Services and/or Software. The foregoing shall be in addition to SRI’s indemnification obligation to Arbitron. For the avoidance of doubt, SRI’s representations relating to infringement and SRI’s obligations to defend, indemnify and hold harmless with respect to any infringement or claim of infringement shall not apply if and to the extent that any infringement or claimed infringement relates to modifications in the Software by Arbitron, and Arbitron shall defend, indemnify and hold harmless SRI to the extent that any infringement or claims of infringement relate to modifications in the Software by Arbitron. 7. Acceptance: When SRI determines the Acceptance Criterion (as defined in Schedule A) has been achieved, SRI shall provide written notification of such fact to Arbitron. Arbitron shall have an acceptance period of thirty (30) working days, from the date of receipt of SRI’s notice, in which to conduct tests to determine if the Acceptance Criterion has been achieved. On or prior to the expiration of this acceptance period, Arbitron shall provide to SRI a written notice of either, (1) Arbitron’s acceptance, or (2) notice of non-achievement of Acceptance Criterion and Arbitron’s rejection of same. Payment by Arbitron to SRI shall not relieve SRI of any of its obligations and responsibilities under this Agreement and/or applicable Schedule. SRI shall supply the appropriate personnel to investigate the reported deficiencies found by Arbitron during the acceptance period. Deficiencies found to be of SRI’s causing will be corrected by SRI at its own expense. Such correcting activities will commence immediately and be completed as quickly as is reasonably possible. If corrections are required, upon receipt of SRI’s notice that the deficiencies have been remedied, Arbitron shall again have an acceptance period of thirty (30) working days, unless otherwise specified or agreed to in writing. 8. Insurance and Liability: SRI shall secure and maintain workers’ compensation, disability benefits, unemployment insurance and the like, in accordance with the law of the state or states wherein SRI shall perform services for Arbitron. Personnel supplied by SRI are not Arbitron employees or agents and SRI assumes full responsibility for their acts. Such personnel used or supplied by SRI shall be informed that they are not entitled to the provisions of any Arbitron employee benefits. With respect to such personnel, SRI shall have sole responsibility for supervision, daily direction and control. Arbitron will not be responsible for workers’ compensation, disability benefits, unemployment insurance and withholding income taxes and social security for said personnel. SRI assumes full and complete liability for all injuries to, or death of, any person including SRI’s employees, agent or subcontractors, and for damages to property, including property and service of Arbitron, caused by the presence of SRI’s employees, agent or subcontractors on Arbitron premises in connection with the services furnished under this Agreement whether caused by negligence or otherwise except to the extent caused by the negligence of Arbitron. SRI shall defend, indemnify and save Arbitron harmless from all claims, losses, expenses, including reasonable attorneys’ fees, or suits for such injuries, death or damages whether or not such claims are valid to the extent such injuries, death or damages are attributable to SRI. Arbitron 4 -------------------------------------------------------------------------------- assumes full and complete liability for all injuries to, or death of, any person including Arbitron’s employees, agent or subcontractors, and for damages to property, including property and service of SRI, caused by the presence of Arbitron’s employees, agent or subcontractors on SRI premises in connection with the services furnished under this Agreement whether caused by negligence or otherwise except to the extent caused by the negligence of SRI. Arbitron shall defend, indemnify and save SRI harmless from all claims, losses, expenses, including reasonable attorneys’ fees, or suits for such injuries, death or damages whether or not such claims are valid to the extent such injuries, death or damages are attributable to Arbitron. 9. Termination and Cancellation: This Agreement shall commence as of the date first hereinabove stated, and shall be in effect until April 1, 2002 unless extended by mutual written agreement of both parties hereto, except for the payment provisions hereof which, by their terms, shall be in effect until the twelve (12) monthly payments have been made in accordance with this Agreement and Schedule A hereto. In the event of any material breach of this Agreement by SRI which remains uncured after thirty (30) days written notice setting forth in reasonable detail the nature of such breach, Arbitron may immediately cancel this Agreement, by giving written notice thereof. In the event that Arbitron has not paid amounts due, which are not in dispute, within thirty (30) days of receipt of written notice of the past due amount, SRI shall have the right to terminate this Agreement. In the event of cancellation or expiration of this Agreement (other than upon default for non-payment by Arbitron that is not later cured either through written agreement of the parties hereto or through satisfaction by Arbitron of a judgment against it to make such payments), all Arbitron property and all work in SRI’s possession shall be forwarded to Arbitron. 10. Limitation of Liability: EXCEPT FOR DAMAGES INCURRED OR THAT MAY BE INCURRED BY ARBITRON AS A RESULT OF ANY INFRINGEMENT KNOWN BY SRI ON OR PRIOR TO THE DATE ON WHICH ARBITRON ACCEPTS THE SOFTWARE IN ACCORDANCE WITH CLAUSE (1) OF SECTION 7 OF THIS AGREEMENT OR, IF NO SUCH ACCEPTANCE IS MADE, THE DATE OF TERMINATION OF THIS AGREEMENT OR ANY EXTENSION HERETO, OR CLAIM OF INFRINGEMENT KNOWN BY SRI ON OR PRIOR TO THE DATE ON WHICH ARBITRON ACCEPTS THE SOFTWARE IN ACCORDANCE WITH CLAUSE (1) OF SECTION 7 OF THIS AGREEMENT OR, IF NO SUCH ACCEPTANCE IS MADE, THE DATE OF TERMINATION OF THIS AGREEMENT OR ANY EXTENSION HERETO, OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER PROPRIETARY RIGHT OF ANY THIRD PARTY BASED ON THE SOFTWARE AND/OR SERVICES PROVIDED UNDER THIS AGREEMENT TO ARBITRON, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR OTHERWISE, AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. The parties have agreed that the limitations specified in this Section 10 will survive and apply even if any limited remedy specified in this Agreement is found to have failed of its essential purpose. Except as specifically set forth in this Agreement and Schedule A hereto, SRI shall have no responsibilities or obligations under this Agreement with respect to the Software or the Services. Notwithstanding anything in this Agreement to the contrary, Arbitron acknowledges and agrees that its sole and exclusive remedy with respect to any and all claims, losses, damages or expenses (“Losses”) in connection with this Agreement shall be pursuant to the indemnification provisions set forth in this Agreement: provided, however, that this shall not limit or prohibit the right of any party to seek specific enforcement, injunctive relief or other equitable remedies for any breach of this Agreement. SRI shall have no obligation to indemnify Arbitron against any 5 -------------------------------------------------------------------------------- Losses, unless written notice thereof is delivered to SRI prior to July 1, 2004 (or prior to July 1, 2006 in the case of Losses relating to a breach of Section 12 hereof). 11. Compliance with Laws: SRI shall comply with all applicable federal and state laws and regulations relating in any way to its performance under this Agreement. SRI shall defend, indemnify, and hold Arbitron harmless from and against any and all damages and expenses, including legal fees, incurred directly or indirectly as a consequence of SRI’s failure to comply with any such laws or regulations. 12. Conflict of Interest: SRI agrees that it will not, while performing under this Agreement and within five (5) years after the date of this Agreement, directly or indirectly perform any development of software data processing systems or reporting systems for syndicated local radio ratings or syndicated national network radio ratings. Arbitron agrees to evaluate any breach of the foregoing sentence and notify SRI within a reasonable amount of time following Arbitron’s becoming aware of such breach of any decision Arbitron reaches with regard thereto, which, if not remedied to the satisfaction of Arbitron within thirty (30) days of such notice, may include but shall be in no manner limited to the termination of this Agreement without penalty to Arbitron. Notwithstanding the preceding provisions of this Section 11, SRI shall be permitted to conduct any activities that are not restricted by the non-compete provisions of Section 7.5 of the Asset Purchase Agreement dated July 2, 2001 to which Arbitron and SRI are parties, including without limitation the Permitted Activities (as defined in the Asset Purchase Agreement). 13. Applicable Law: This Agreement shall be deemed to be a contract made under the laws of the State of New York and for all purposes it, plus any related or supplemental documents and notices, shall be construed in accordance with and governed by the laws of the State of New York exclusive of its choice of law rules. The parties expressly agree that any and all disputes arising out of or concerning this Agreement shall be litigated and adjudicated in the state and/or federal courts located in the State of New York, and each party consents to and submits to such jurisdiction. 14. Assignment and Delegation:   (a) By SRI: SRI may not sell, transfer, assign or otherwise convey any of its rights or obligations under this Agreement to any other person without the express prior written consent of Arbitron. Any such assignment without such consent shall be null and void.   (b) By Arbitron: Arbitron may not sell, transfer, assign or otherwise convey any of its rights or obligations under this Agreement to any other person without the express prior written consent of SRI. Any such assignment without such consent shall be null and void. Notwithstanding the foregoing, Arbitron may assign its rights hereunder without the consent of SRI to any division or wholly owned subsidiary of Arbitron or to an entity which acquires all or substantially all of Arbitron’s assets or business; provided that (i) Arbitron shall remain liable hereunder, (ii) Arbitron shall promptly notify SRI in writing of such assignment and (iii) the Assignee shall agree in writing to be bound by the provisions of this Agreement. 15. Sub-Contractors: SRI will not engage or make use of subcontractors for the purpose of providing services to Arbitron except as authorized in writing by Arbitron. 16. Surviving Sections: All sections of this Agreement regarding representations, warranties, covenants, confidentiality obligations, conflict of interest, proprietary rights, non-solicitation and indemnities by SRI shall survive expiration or termination of this Agreement or any Schedule hereunder, provided, however, that no claim may be asserted after the earlier to occur of (i) the date which is sixty (60) days following the expiration of the applicable statute of limitation, or (ii) three (3) years following the date of this Agreement. Notwithstanding anything in 6 -------------------------------------------------------------------------------- this Agreement to the contrary, claims relating to a breach by SRI of Section 12 of this Agreement may be asserted until sixty (60) days following the day that is five (5) years following the date of this Agreement. 17. Notices: All notices to either party shall be in writing and shall be directed to the address stated below (unless notice of an address change is given). Any notices or other communications so addressed shall be deemed duly served if delivered in person or sent by certified mail or facsimile, confirmed by certified mail, return receipt requested.       If to Arbitron: ARBITRON INC. 9705 Patuxent Woods Drive Columbia, Maryland 21046 Attention: Dolores L. Cody, Executive Vice President                     & Chief Legal Officer   If to SRI: STATISTICAL RESEARCH INC. 11 Prospect Street Westfield, New Jersey 07090 Attention: Gale D. Metzger   with a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, NY 10112 Attention: Morton E. Grosz   and Gale D. Metzger and Gerald Glasser at the addresses furnished to Arbitron by such parties 18. No Waiver: No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law. 19. Entire Agreement: This Agreement, including any Schedules hereto and made a part hereof, constitutes and expresses the entire agreement and understanding between the parties, on the subject matter herein. All previous discussions, promises, representations and understandings between the parties relative to this Agreement, if any, have been merged into this document. 20. Independent Contractors: The relationship of the parties is that of independent contractors. Nothing in the Agreement shall be construed to mean that the parties are members of any partnership, joint venture, association, syndicate or other entity or to confer on either party any express, implied or apparent authority to incur any obligation or liability on behalf of the other party. 21. Severability: In the event that any term or provision of this Agreement is determined to be unlawful or unenforceable, such term or provision shall be deemed severed from this Agreement and all remaining terms and provisions of this Agreement shall remain in full force and effect. 22. Disclosure: Both parties acknowledge and agree that it may be necessary for one party to disclose the fact of the SRI’s retention, the duties performed and the compensation paid, should there be proper inquiry from such a source as an authorized U.S. or state government agency or should either party believe it has a legal obligation to disclose such information and each party hereby authorizes any such disclosures. 7 -------------------------------------------------------------------------------- 23. Publicity: Other than to promote the deliverable to RADAR clients and to potential RADAR clients, SRI shall not advertise, market or otherwise make known to others any information relating to the work performed under this Agreement, including mentioning or implying the name of Arbitron Inc. or its subsidiaries. The obligations under this Section shall survive expiration or termination of this Agreement. 24. Non-Solicitation. During the Term of this Agreement, and any Schedule, and for a period of two (2) year(s) following the termination of this Agreement, or any Schedule, neither party shall, directly or indirectly, solicit, employ or otherwise engage the other party’s employees. Employee shall include anyone who was an employee of a party within six (6) months prior to the non-solicitation period. 25. Amendments: This Agreement may not be and shall not be deemed or construed to have been modified, amended, rescinded, canceled or waived in whole or in part, except by written instrument signed by the parties hereto. 26. Force Majeure: Neither party shall be liable to the other party for any delay in performance or nonperformance of any provision of this Agreement resulting from state or governmental action; riots, war, acts of terrorism, sabotage, strikes, lock-outs, prolonged shortage of energy, fire, flood, hurricane, earthquakes, lightning, and explosion, provided that each party shall promptly notify the other party of the occurrence of such event and shall estimate the probable delay resulting therefrom. 27. Headings: The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any other provision hereof. 28. Authority to Execute: Each party represents and warrants that it has the legal power and authority to enter into this Agreement and that it has not made and will not make any commitments to the other inconsistent with such rights. 29. Knowledge of SRI: For purposes of this Agreement, the “knowledge” of or matters “known to” SRI are defined to mean actual knowledge of any of the directors or officers or members of management of the Seller. 8 -------------------------------------------------------------------------------- [SIGNATURE PAGE TO SOFTWARE DEVELOPMENT AGREEMENT]       STATISTICAL RESEARCH INC. ARBITRON INC.     By: /s/ Gerald J. Glasser By: /s/ Stephen B. Morris -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Gerald J. Glasser Stephen B. Morris -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (print or type above signature) (print or type above signature) Title: Secretary/Treasurer Title: President/CEO -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Date: 7/2/01 Date: 7/2/01 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 9 -------------------------------------------------------------------------------- Schedule “A” Statement of Work to the Software Development and Consulting Agreement       (1) Objectives: The work covered by this agreement will consist of two parts, as follows:         (a) SRI consultants designing, overseeing and, in conjunction with the Arbitron RADAR Group, changing all existing RADAR software systems so that Arbitron diary data will be able to be used in place of telephone interview data for a RADAR national audience measurement service; and         (b) SRI consultants fully cooperating in the orientation and training of Arbitron personnel with respect to the workings and details of the software systems; it is understood that the aim is for Arbitron to maintain and to modify, when appropriate, all RADAR software systems under the control of its own employees.       (2) SRI will serve as consultants to Arbitron to achieve the objectives stated in the paragraph (1). SRI’s work will consist of software system design and development , advisory opinions, actual coding of software and documentation of RADAR data processing software system and the PC RADAR 2010 reporting software system. SRI will work cooperatively with Arbitron personnel to complete the project successfully.       (3) Conversion of existing RADAR software to a diary base necessarily covers two main systems: the RADAR data processing software system which processes and stores data and then builds files for reporting purposes, and the PC RADAR 2010 reporting software system. SRI will be responsible for systems redesign in both and then overseeing the implementation of changes in these systems. Implementation will involve changing code, testing changes and documenting the changes; that is, modifying and updating the RADAR documentation for both software systems,       (4) The criterion Arbitron will use for judging the successful completion of the conversion part of both software systems is as follows: can any report or screen display that is currently available from the present PC RADAR 2010 reporting software system be produced in essentially the same way and in the same format with the new diary-based software system? SRI will have the responsibility to remedy any gaps or errors in the capability of both systems.       The word “essentially” is used in the preceding paragraph rather than “exactly” because the diary data do not include some information that is currently reported by RADAR (e.g., audiences by race). Such variations might be changed in subsequent versions of the software systems. “Essentially” also covers the fact that because a larger sample size is contemplated, some software that accesses respondent-by-respondent data may run longer than it does currently; SRI will develop the new software systems so that any increase in run time will be approximately proportional to the increase in sample size, as compared to the run time of a 12,000 annual sample size, so long as every other aspect of the respective files to be tested on run times are identical. Further, there will be no options within the PC 2010 reporting software system that link or otherwise compare telephone-based data with diary- -------------------------------------------------------------------------------- based data. Comparisons can be made be using the old and new software systems independently.       (5) SRI, as consultants, will make every effort to deliver by November 2001 software systems that produce the full range of audience estimates by network, including the SCAN program, completed as soon as is possible. Arbitron understands that its cooperation in providing diary data and related information on a timely basis is a prerequisite for the project to achieve completion. From SRI’s perspective, an earlier date is possible if Arbitron can operate on an expedited schedule.       (6) Within twenty (20) days of execution of the Software Development Agreement, Arbitron and SRI will develop a project plan, including delivery milestones, due dates of deliverables from Arbitron, due dates of software and test schedules for data and software systems. This plan will be expanded, or otherwise modified, at the weekly status meetings specified in (11).       (7) The parties agree that the basic plan for the software systems is to have a flow of diary data from Arbitron Columbia to Arbitron RADAR in New Jersey on an ongoing basis; that is, Arbitron’s RADAR Service will be incorporated in the ongoing Arbitron production schedule. Data bases to store these data must be developed. SRI will design, oversee and in conjunction with the Arbitron RADAR Group in New Jersey, implement the development of these data bases.       (8) Under the plan, every three months a sample will be drawn by the Arbitron RADAR Group in New Jersey utilizing an efficient sampling scheme, to be designed and developed by SRI. These samples will be used as input into the RADAR data processing software system. SRI will be responsible for the design and for the development of software to implement this sampling. All aspects of the sampling plan, and its implementation, are subject to review and approval by Arbitron.       (9) An objective in the conversion to diaries is to place minimum demands on non-RADAR Arbitron IT/Operations personnel. Aside from the preparation and transmission of data described in (10), the burden of work will be assumed by the Arbitron RADAR Group in New Jersey and/or SRI consultants.       (10) Arbitron Columbia will be responsible for some tasks that involve preparing and transmitting data to the Arbitron RADAR Group in New Jersey in a mutually-agreed format and on a mutually-agreed schedule. Within twenty (20) days of execution of the Software Development Agreement, careful documentation of conventions used in preparing these data will be specified and agreed upon by Arbitron and SRI.       (11) In connection with all aspects of this software agreement, there will be weekly status meetings, at a fixed time in Westfield. These will be attended by a senior Arbitron person (e.g., David Lapovsky or Claire Kummer or Lee Youngblood ) in person or by telephone, by members of the Arbitron RADAR Group (usually Michael Klein and Marlene Gilmore) as well as by SRI (Gerald Glasser).       (12) The purpose of the meetings are to review progress against the schedule referenced above and to deal with problems any member of the group has encountered. In addition, new tasks may be specified during the meetings. A task will be a well-defined activity, with assigned responsibility, together with a realistic schedule under which the task can be accomplished. Both parties recognize that the project -------------------------------------------------------------------------------- is a joint effort and to be successful, the efforts of all involved must be brought to bear on the necessary tasks.       One attendee at the weekly meeting shall be appointed to record elements of the discussion at the weekly status meetings. These “minutes” will be distributed to all attendees for review, and if and when corrected, will serve as a continuing status report on the project.       (13) Any RADAR software that is revised or modified by SRI consultants in conjunction with this agreement, particularly RADAR PC 2010 reporting software system, will be transferred to the Arbitron RADAR Group in New Jersey on a continuous basis.       (14) The RADAR data processing software system has by necessity incorporated various system limits into its design. While it may be desirable to change some of these limits for future marketing or other considerations, this will not be done during the course of conversion to a dairy-basis and such changes are not covered by this software agreement. Subsequently, Arbitron will have the responsibility for making these changes, if they decide they are warranted.       (15) The RADAR data processing software system work will be done in such a way that there will be no mechanical limitation on sample size. While the initial target will be to sample 12,000 diaries a quarter, or 48,000 per year, the system will be designed to easily accommodate change in that number, up or down.       (16) At the same time that conversion of the RADAR data processing software system to the diary is proceeding, SRI will also provide support for minor or small changes required in RADAR data processing software system because of network product changes or other requests that Arbitron deems important (i.e., those that are not global changes throughout the system). If need for a major change is desirable, then SRI can be retained for an additional fee to make such change, or the change can be deferred until Arbitron assumes full responsibility for maintaining the system.       (17) If Arbitron decides, at some point, that they wish to base the RADAR report delivered to RADAR clients on independent samples every quarter rather than the present moving average concept, the RADAR data processing software system should be changed to accommodate that new concept. As both systems are designed, it is not feasible to have them accommodate both kinds of reporting simultaneously. If this change is decided upon during the term of this software agreement, SRI will help implement that change at no additional cost to Arbitron. The change, which can be done in a couple of different ways, will be easy to accomplish.       (18) Both parties to this agreement recognize that the current state of computer hardware imposes limitations on the size of the sample that can be used with the RADAR system. Run time of client (reporting) software and of internal RADAR data processing is often proportional to the size of the respondent data base. Increasing the sample size from 12,000 to 48,000, as is initially contemplated, will increase run time of such programs 4-fold. Additional increases will result in proportional increases in run time.       (19) If Arbitron decides to experiment with or demonstrate alternate sampling schemes; that is, larger samples and/or independent samples, Arbitron will have the software capability to do so. Both -------------------------------------------------------------------------------- software systems will be designed to accommodate the option of processing larger samples.       (20) In addition to generating test runs to compare diary-based estimates with telephone-based estimates, once the new software systems have been created, Arbitron will assume the responsibility for testing the reporting software in accord with paragraph (4). If any errors or gaps are found and reported to SRI, SRI has the responsibility to repair them. This testing period shall be either two months or until the end of this service agreement, whichever is longer.       (21) With respect to transfer of knowledge, the RADAR data processing system software needs to be distinguished from RADAR reporting PC 2010 software. Knowledge regarding data processing software systems will be transferred on an ongoing basis from the start of the project. This is, by necessity, because Arbitron RADAR personnel will be intimately involved in the conversion of such software and the development of new software to support operations (e.g., the sampling subsystem).       (22) SRI consultants will assume the responsibility for converting the RADAR PC 2010 software with the assistance of the Arbitron RADAR Group. The Arbitron RADAR Group in New Jersey (Marlene Gilmore, Bob McGowan and anyone else Arbitron designates) will be kept fully informed as to changes and equally important, fully informed as to what is not being changed. This provides a good knowledge base for these employees for future maintenance of the system.       (23) If Arbitron wishes one or more of its employees to have further training or orientation on either RADAR software system during the course of this agreement, SRI will cooperate with such requests. These employees should have already used (applied) the software extensively so that they are reasonably familiar with its functionality. Further training would involve, first of all, reviewing the source code for programs and all documentation. Second, SRI will meet with the employee or employees and provide an orientation as to the technical workings of the program. If, after this training, the employee or employees have further questions they should be submitted to SRI in writing, and responses will be given in writing or orally.       (24) The delivery of both software systems will be completed before the end of this agreement. Once this software agreement is concluded, irrespective of any supplemental agreement, SRI will have no further responsibility for maintaining or modifying the system, though it will make itself available, on a reasonable basis, for general questions that Arbitron employees may have. Such questions should relate to the system as it was turned over to Arbitron; questions relating to expansion or modification of the system are covered by any supplemental services agreement specified in (30).       (25) If any changes are made by Arbitron to a particular RADAR program, any SRI warranties about the accuracy or reliability of the revised program are no longer in effect. The warranties will still apply to the original version of the program if it can be demonstrated that a problem exists with that version. Warranties on any other software package are not affected unless that package itself is, or inputs to that package are, changed by Arbitron.       (26) SRI resources in fulfilling this service agreement will include Gerald Glasser, with support staff as is necessary. This work will be Dr. Glasser’s primary, though not exclusive, work commitment during the term of this agreement. --------------------------------------------------------------------------------       (27) Work done by SRI as consultants will be in Westfield, New Jersey. Special arrangements, including payment of travel expenses, may be made for an occasional meeting off-premises.       (28) Arbitron will provide access to the servers used for RADAR in New Jersey for computers used by Dr. Glasser and by two or three persons, that he will specifically designate, who will work with him under this agreement.       (29) Subject to the payment provisions of Paragraph (30) below, the term of this software agreement is for nine months, beginning July 2, 2001 and ending April 1, 2002.       (30) The fee for these software development services is $900,000. This amount will be paid monthly in advance on or before the first (1st) day of each month in 12 equal monthly installments of $75,000 beginning July 2, 2001 and ending June 1, 2002.       (31) SRI will make Dr. Glasser available on a consulting basis beyond the term of this agreement, for 2 half-days per month for a retainer of $4,000 per month, payable in full in advance on or before the first (1st) day of each month. This supplemental agreement would begin April 2, 2002. The work in each half-day might cover a 3-hour internal meeting plus 1 to 3 hours of preparation time to discuss a facet of the RADAR systems, including possible expansion or modification of the software systems. SRI will fulfill this supplemental consulting agreement for a minimum period of 6 months, after which time it may cancel it with 30 days notice. Arbitron may cancel it at any time with 30 days notice.       Any work beyond the 2 half-days of consulting per month will be subject to Arbitron and SRI developing an additional agreement, details of which will be negotiated at that time.
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.14 EMPLOYMENT AGREEMENT     THIS EMPLOYMENT AGREEMENT is made and entered into as of October 17, 2000 by and between Finisar Corporation, a Delaware corporation (the "Company"), and Gregory H. Olsen (the "Employee"). This Agreement shall become effective on the effective date of the merger (the "Effective Date") of Gemstone Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of the Company ("Sub"), with and into Sensors Unlimited, Inc., a New Jersey corporation ("Sensors"), pursuant to an Agreement and Plan of Reorganization dated as of August 16, 2000 herewith by and among the Company, Sub, Sensors and certain shareholders of Sensors. RECITALS     A.  The Employee is currently employed as the President and Chief Executive Officer of Sensors pursuant to an Employment Agreement dated as of March 4, 1997, as amended (the "Prior Agreement"); and     B.  The Company desires to replace the Prior Agreement and employ the Employee on the terms and subject to the conditions of this Agreement, and the Employee desires to accept such employment. The employment of the Employee pursuant to this Agreement is hereinafter sometimes referred to as the "Employment";     NOW THEREFORE, in consideration of the premises and the agreements, representations and warranties contained in this Agreement, the Company and the Employee hereby agree as follows:     1.  Duties, Term and Exclusive Employment.     1.1 Duties and Responsibilities.  The Employee will be employed as Executive Vice President of the Company and President and Chief Executive Officer of the Sensors subsidiary, reporting to the Company's Chief Executive Officer. Within the limitations established by the Bylaws of the Company, the Employee shall have each and all of the duties and responsibilities of that position and such other duties on behalf of the Company, Sensors or any other subsidiary of the Company (collectively, the "Company Group") consistent with that position as may be assigned from time to time by the Company's Chief Executive Officer. Subject to the direction of the Company's Chief Executive Officer, the Employee shall have the duties, responsibilities and authority summarized in the job description attached hereto as Appendix A. As part of his duties it is contemplated that the Employee shall serve as a member of the Board of Directors of the Company during the Employment. The Company shall use its best efforts to cause the Employee to be elected to such position and periodically reelected at each meeting of stockholders held for that purpose (and in each stockholder action by written consent taken for that purpose) during the Employment.     1.2 Term of Employment.  The Employment shall begin on the Effective Date and, unless earlier terminated as provided in Paragraph 3 hereof, the Employment shall continue until midnight on the third anniversary of the Effective Date, unless the Employment hereunder shall have been extended beyond such date by written agreement of the parties. Any continued employment of the Employee by the Company, or any other member of the Company Group, following such termination shall be at will, but, except for the provisions of Paragraph 3 hereof, will continue to be governed by the terms and conditions of this Agreement.     1.3 No Other Employment or Productive Activities.  During the term of the Employment, the Employee shall diligently and conscientiously devote all of his working time and attention to discharging his duties to the Company Group and shall not, without the express prior written consent of the Company, render to any other person, corporation, partnership, firm, company, joint venture or other entity any services of any kind for compensation or engage in any other activity that would in any manner interfere with the performance of the Employee's -------------------------------------------------------------------------------- duties on behalf of the Company Group. The foregoing notwithstanding, nothing herein shall prevent the Employee from (i) devoting a reasonable amount of time to charitable or professional activities, (ii) managing, on his own personal time, any personal investments in entities not in competition with any actual or proposed business of the Company Group, (iii) owning up to one percent (1%) of the outstanding shares of any class of equity securities of a corporation engaged in any such competition whose securities are listed on a national securities exchange or quoted daily in the over-the-counter listings of The Wall Street Journal ("Permitted Shares"), or (iv) engaging in the other activities described on Appendix A.     1.4 Proprietary Information and Inventions Agreement.  Concurrently with his delivery of this Agreement, the Employee will execute and deliver to the Company an Employee Agreement Regarding Confidentiality and Inventions in the form of Appendix B hereto (the "Confidentiality and Inventions Agreement").     2.  Compensation. In full and complete consideration for the Employment and each and all of the services to be rendered by the Employee to the Company or any other member of the Company Group, the Employee shall receive compensation as follows, except as otherwise provided in Paragraph 3 hereof:     2.1 Base Salary.  The Employee shall be entitled to receive from the Company a base salary, at the initial rate of $200,000 per annum, payable in equal installments, on the Company's regular payroll dates, during the term of the Employment. The base salary will be reviewed annually and may be increased by the Company in its sole discretion based upon such factors as it deems relevant, including the financial condition and operating results of the Company, but may not be decreased except in connection with a general decrease in salaries of all of the Company's executive officers. From each of the Employee's salary payments the Company will withhold and pay to the proper governmental authorities any and all amounts required by law to be withheld from the Employee's salary. The Company will also deduct from the Employee's salary payments those sums, if any, authorized by the Employee in writing and approved by the Company. The Company will make all payments and contributions that are required by law to be made by the Company for the Employee's benefit without any deduction from the Employee's salary payments.     2.2 Annual Incentive Bonus.  For each fiscal year of the Company during the Employment, the Employee will be eligible to receive, in addition to his base salary, annual incentive compensation (the "Annual Bonus"). The amount of the Annual Bonus, if any, for each year will be based on the achievement of financial goals and the Employee's performance as assessed by the Company. The Annual Bonus will be determined and awarded at the same time similar bonus awards are determined and awarded to the Company's other executive officers following the end of each fiscal year. Each Annual Bonus will be deemed to be earned on the date it is awarded and will be paid to the Employee promptly following the date of the award.     2.3 Vacation.  The Employee shall be entitled to paid vacation in accordance with the Company's vacation policy applicable to executive officers, as in effect from time to time. For purposes of calculating the Employee's eligibility for vacation benefits, his period of employment by Sensors shall be counted as employment by the Company.     2.4 Insurance and Other Benefits.  The Employee shall be entitled to participate in the life, medical, dental and/or disability insurance plans, together with any supplemental insurance plans, offered by the Company to its executive officers, generally. The Employee shall be eligible to participate in any other fringe benefits and perquisites as may be provided by the Company to its executive officers, generally, during the Employment. For purposes of calculating the Employee's eligibility for such benefits, his period of employment by Sensors 2 -------------------------------------------------------------------------------- shall be counted as employment by the Company, except as may be prohibited by the terms of any plan.     2.5 Stock Option.  Effective upon the Effective Date, the Employee will be granted an option to purchase 300,000 shares of Finisar Common Stock under Finisar's employee stock option plan, pursuant to an option agreement, in Finisar's standard form, dated as of the Effective Date (the "Option Agreement").     2.6 Registration Rights.  If, during the Employment, the Company grants to any of its other executive officers or directors the right to require the Company to register any of their shares of the Company's Common Stock under the Securities Act of 1933, as amended, the Company shall grant to the Employee identical and pro rata rights with respect to shares of the Company's Common Stock then owned by the Employee.     2.7 Golf Club Membership.  Upon termination of the Employment, the Company and Sensors shall transfer to the Employee all rights and interest the Company and/or Sensors may have at such time with respect to memberships at Jasna Polana and Cherry Valley Country Club.     3.  Termination of Employment.  The Employment may be terminated prior to the end of the term specified in Paragraph 1.2 hereof, including any extension thereof, upon the occurrence of any of the following:     3.1 Death or Disability.  The Employment shall automatically terminate upon the death of the Employee. The Company shall have the right, but not the obligation, to terminate the Employment at any time following determination of the Employee's "permanent disability" (as then defined in the Company's long-term disability insurance plan covering the Employee). In the event of the Employee's death or permanent disability, the Employee or his estate shall be entitled to receive (i) the Employee's base salary through the date of termination of the Employment, plus (ii) any Annual Bonus earned by the Employee and payable as of the date of termination of the Employment pursuant to Paragraph 2.2 hereof but not yet paid, plus (iii) any other benefits to which the Employee is entitled pursuant to the plans described in Paragraph 2.4 hereof.     3.2 Termination of Employment by the Company "For Cause".  The Company shall have the right, but not the obligation, to terminate the Employment at any time "For Cause" in the event of the Employee's (i) conviction of a felony, (ii) commission of any act of theft, fraud or dishonesty against, or involving the records of, the Company or any other member of the Company Group, (iii) material breach of the Employee's obligations hereunder, or under the Confidential Information and Inventions Agreement, which, if curable, is not cured within ten (10) days following notice thereof by the Company, (iv) intentional act that has a material detrimental effect on the reputation or business of the Company or any other member of the Company Group, or (v) failure or inability (other than as a result of physical disability) to perform any duties reasonably assigned hereunder, which failure or inability is not cured within thirty (30) days following written notice thereof by the Company. The decision to terminate the Employment For Cause, to take other action or to take no action in response to any such occurrence shall be in the sole and exclusive discretion of the Company. Upon any termination of the Employment by the Company For Cause, the Employee shall be entitled to receive (A) the Employee's base salary through the date of such termination, plus (B) any Annual Bonus earned by the Employee and payable as of the date of termination of the Employment pursuant to Paragraph 2.2 hereof but not yet paid, plus (C) any other benefits to which the Employee is entitled pursuant to the plans described in Paragraph 2.4 hereof. 3 --------------------------------------------------------------------------------     3.3 Other Termination of Employment by the Company.  The Company shall have the right to terminate the Employment at any time. However, if the Employment is terminated by the Company for any reason other than pursuant to Paragraphs 1.2, 3.1 or 3.2 hereof, the Employee shall be entitled to receive his base salary through the date of termination of the Employment, plus an amount (the "Severance Payment") equal to (i) his then-current base salary for a period of twelve (12) months following the date of termination (the "Severance Period") plus (ii) an amount equal to the Annual Bonus, if any, awarded to the Employee for the prior fiscal year, pro-rated for the period from the commencement of the current fiscal year through the date of termination. The Severance Payment shall be paid in equal, bi-weekly installments during the Severance Period and shall be in lieu of any other severance pay to which the Employee might otherwise be entitled. In addition, in the event of such a termination, the Company will, to the extent its plans permit, continue to provide to the Employee, at the current level of employee contribution by the Employee prevailing at the date of termination, coverage under its life, medical, dental and/or disability plans, as in effect on the date of termination, during the Severance Period. The Employee shall also be entitled, upon any such termination, to receive (i) any Annual Bonus earned by the Employee and payable as of the date of termination of the Employment pursuant to Paragraph 2.2 hereof but not yet paid, plus (ii) any other benefits to which the Employee is entitled pursuant to the plans described in Paragraph 2.4 hereof.     3.4 Termination of Employment by the Employee For "Good Reason".  The Employee shall have the right to terminate the Employment at any time for "Good Reason" in the event that, other than pursuant to Paragraph 3.1 or 3.2 hereof, without the Employee's prior written consent, (i) the Company materially alters or reduces the Employee's duties, responsibilities and authority from those described in Appendix A hereto; (ii) the Company materially breaches the terms of this Agreement in respect to the payment of compensation or benefits or in any other material respect and such breach is not cured within ten (10) days after the Company receives notice thereof; (iii) the Company requires the Employee, as a condition to the Employment, to perform illegal or fraudulent acts or omissions; (iv) the Company requires the Employee, as a condition to the Employment, to be based more than fifty (50) miles from Sensors' principal place of business as of the date of this Agreement; (v) the Employee is involuntarily removed from the Company's Board of Directors or the stockholders of the Company fail to re-elect the Employee to the Company's Board of Directors in any vote taken for that purpose, except in either case where the Employment has been terminated "For Cause" pursuant to Paragraph 3.2 hereof; or (vi) this Agreement is not expressly assigned to and assumed by an assignee or transferee of the Company as contemplated by Paragraph 11.1 hereof. If the Employee voluntarily terminates the Employment for Good Reason pursuant to this Paragraph 3.4, the Employee shall be entitled to receive the payments and other benefits specified in Paragraph 3.3 hereof with respect to a termination by the Company other than For Cause.     3.5 Termination of Employment by the Employee Without "Good Reason".  Upon any voluntary termination of the Employment by the Employee, other than for Good Reason pursuant to Paragraph 3.4 hereof, the Employee shall be entitled to receive (i) the Employee's base salary through the date of such termination, plus (ii) any Annual Bonus earned by the Employee and payable as of the date of termination of the Employment pursuant to Paragraph 2.2 hereof but not yet paid, plus (iii) any other benefits to which the Employee is entitled pursuant to the plans described in Paragraph 2.4 hereof.     4.  Expenses.  The Company will reimburse the Employee for those customary, ordinary and necessary business expenses incurred by him in the performance of his duties and activities on behalf of the Company or any other member of the Company Group. Such expenses will be 4 -------------------------------------------------------------------------------- reimbursed upon presentation by the Employee of appropriate documentation to substantiate such expenses pursuant to the policies and procedures of the Company governing reimbursement of business expenses to its executive officers. The Employee shall present such documentation for any unreimbursed expenses not later than thirty (30) days after the termination of the Employment.     5.  Authority; Noncompetition.  The Employee covenants, warrants and represents to the Company that he has the full, complete and entire right and authority to enter into the Employment and this Agreement, that he has no agreement, duty, commitment or responsibility of any kind or nature whatsoever with any other person, corporation, partnership, firm, company, joint venture or other entity which would conflict in any manner whatsoever with any of his duties, obligations or responsibilities to the Company or any other member of the Company Group pursuant to the Employment and/or this Agreement, and that he is fully ready, willing and able to perform each and all of such duties, obligations and responsibilities. As a condition of the Employment and of the Company's entering into this Agreement, the Employee hereby specifically agrees, covenants, warrants and represents that, during the Employment, he will not, without the Company's express prior written consent, accept any employment, contractual or other relationship of any kind or nature whatsoever or engage in any association or dealing of any kind or nature whatsoever with any person, corporation, partnership, firm, company, joint venture, or other entity, in competition with any business of the Company or any other member of the Company Group currently conducted or conducted during that period; provided that nothing in this Paragraph 5 shall prohibit the Employee from owning Permitted Shares.     6.  Duties of the Employee After Any Notice of Termination of the Employment.   Following any notice of termination of the Employment, provided that the Company is not then in breach of a material term of this Agreement, the Employee shall fully cooperate with the Company in all matters relating to the winding up of the Employee's work on behalf of the Company and the orderly transfer of all pending work and of the Employee's duties and responsibilities to such other person or persons as may be designated by the Company in its sole discretion. Upon any termination of the Employment, the Employee will immediately deliver to the Company any and all of the property of the Company or any other member of the Company Group of any kind or nature whatsoever in the Employee's possession, custody or control, including, without limitation, any and all Proprietary Information as that term is defined in the Confidentiality and Inventions Agreement.     7.  No Predatory Solicitation.  During the Employment and for one (1) year following any termination of the Employment, provided that the Company is not then in breach of a material term of this Agreement, the Employee will not, without having received the Company's prior written permission to do so, directly or indirectly, on his own behalf or in the service of others, (i) interfere with or raid the officers, employees, consultants, agents and/or independent contractors of the Company or any other member of the Company Group or in any manner attempt to persuade any such person to discontinue any relationship with such entity, or (ii) solicit any customer or supplier of the Company or any other member of the Company Group to cease doing business with such entity. The Employee and the Company confirm that this Paragraph 7 is reasonable and necessary for the protection of the trade secrets and proprietary information of the Company Group.     8.  Arbitration.  Except as otherwise expressly provided in this Agreement, any controversy, dispute and/or claim in any manner arising out of or relating to this Agreement or the Employment shall be fully and finally resolved solely by binding arbitration conducted by the American Arbitration Association in San Jose, California. Judgment on any decision rendered by the arbitrator may be entered in any court having jurisdiction. All costs of the arbitration, including, without limitation, the costs of any record or transcript of the arbitration proceedings, administrative fees, the fee of the arbitrator, the fees and expenses of the attorneys for each party 5 -------------------------------------------------------------------------------- and all other fees and costs shall be borne by the party not prevailing in the arbitration, as determined by the arbitrator, or apportioned as the arbitrator shall determine if, in the judgment of the arbitrator, neither party prevails. Except as otherwise expressly provided in this Agreement, the arbitration provisions set forth above in this Paragraph 8 are intended by the Employee and by the Company to be absolutely exclusive for all purposes whatsoever and applicable to each and every controversy, dispute and/or claim in any manner arising out of or relating to this Agreement, and the Employment, the meaning, application and/or interpretation of this Agreement, any breach or claimed breach hereof and/or any voluntary or involuntary termination of this Agreement with or without cause, including, without limitation, any such controversy, dispute and/or claim which, if pursued through any state or federal court or administrative agency, would arise at law, in equity and/or pursuant to statutory, regulatory and/or common law rules, regardless of whether such dispute, controversy and/or claim would arise in and/or from contract, tort or any other legal and/or equitable theory or basis. Notwithstanding anything to the contrary contained in this Paragraph 8, the Company shall at all times have and retain the full, complete and unrestricted right to immediate and permanent injunctive and other relief as provided in Paragraph 9 below.     9.  The Company's Right to Immediate Injunctive Relief.  The Employee recognizes, acknowledges and agrees that any breach or any threatened breach of any Paragraph, term, provision or covenant of any of Paragraphs 1.4, 5, 6, 7 or 8 of this Agreement or of the Confidentiality and Inventions Agreement would cause irreparable injury to the Company which could not be adequately compensable in monetary damages and that the remedy at law for any such breach will be entirely insufficient and inadequate to protect their legitimate interests. Therefore, the Employee specifically recognizes, acknowledges and agrees that the Company shall at any and all times be and remain fully entitled to seek and obtain immediate temporary, preliminary and permanent injunctive relief for any such breach or threatened breach from any court of competent jurisdiction. Notwithstanding the provisions of Paragraph 8 hereof, the Employee shall be entitled to contest any such proposed injunctive relief, or to seek damages arising from any injunctive relief awarded to the Company, in any court of competent jurisdiction. The prevailing party in any action instituted pursuant to this Paragraph 9, or in any appeal from any arbitration pursuant to Paragraph 8 hereof, shall be entitled to recover from the other party its reasonable attorneys' fees and other expenses incurred in such litigation.     10. Survival of Certain Provisions of this Agreement.  Except as may otherwise be provided herein, the respective rights and obligations of the parties hereunder shall survive any termination of the Employment, regardless of whether such termination is by the Employee, by the Company, by expiration or otherwise.     11. General.     11.1 Successors and Assigns.  The provisions of this Agreement shall inure to the benefit of and be binding upon the Company, the Employee and each and all of their respective heirs, legal representatives, successors and assigns. The rights and obligations of the Company under this Agreement may be assigned or transferred by the Company pursuant to a merger or consolidation in which the Company is not the surviving entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it will use commercially reasonable efforts to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of the Company hereunder. The duties, responsibilities and obligations of the Employee under this Agreement shall be personal and not assignable or delegable by the Employee in any manner whatsoever to any person, corporation, partnership, 6 -------------------------------------------------------------------------------- firm, company, joint venture or other entity. The Employee may not assign, transfer, convey, mortgage, pledge or in any other manner encumber the compensation or other benefits to be received by him or any rights which he may have pursuant to the terms and provisions of this Agreement.     11.2 Waiver.  No waiver of any breach of any warranty, representation, agreement, promise, covenant, paragraph, term or provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other warranty, representation, agreement, promise, covenant, paragraph, term and/or provision of this Agreement. No extension of the time for the performance of any obligation or other act required or permitted by this Agreement shall be deemed to be an extension of the time for the performance of any other obligation or any other act required or permitted by this Agreement.     11.3 Sole and Entire Agreement.  This Agreement, the attachments hereto and the other agreements referred to herein, including the Company's bonus and award plans and benefit plans, are the sole, complete and entire contract, agreement and understanding between the Company, and the Employee concerning the Employment, the terms and conditions of the Employment, the duration of the Employment, the termination of the Employment and the compensation and benefits to be paid and provided by the Company to the Employee pursuant to the Employment. Except as otherwise provided herein, this Agreement supersedes the Prior Agreement and any and all other prior contracts, agreements, plans, agreements in principle, correspondence, letters of intent, understandings, and negotiations, whether oral or written, concerning the Employment, the terms and conditions of the Employment, the duration of the Employment, the termination of the Employment and the compensation and benefits to be paid by the Company and Sub to the Employee pursuant to the Employment.     11.4 Amendments.  No amendment, modification, waiver, or consent relating to this Agreement will be effective unless and until it is embodied in a written document signed by the Company and by the Employee.     11.5 Originals.  This Agreement may be executed by the Company and the Employee in counterparts, each of which shall be deemed an original and which together shall constitute one instrument.     11.6 Headings.  Each and all of the headings contained in this Agreement are for reference purposes only and shall not in any manner whatsoever affect the construction or interpretation of this Agreement or be deemed a part of this Agreement for any purpose whatsoever.     11.7 Savings Provision.  To the extent that any provision of this Agreement or any Paragraph, term, provision, sentence, phrase, clause or word of this Agreement shall be found to be illegal or unenforceable for any reason, such Paragraph, term, provision, sentence, phrase, clause or word shall be modified or deleted in such a manner as to make this Agreement, as so modified, legal and enforceable under applicable laws. The remainder of this Agreement shall continue in full force and effect.     11.8 Applicable Law.  This Agreement shall be governed in all respects by the laws of the State of New Jersey as such laws are applied to agreements between New Jersey residents entered into and to be performed entirely within New Jersey.     11.9 Construction.  The language of this Agreement and of each and every paragraph, term and provision of this Agreement shall, in all cases, for any and all purposes, and in any and all circumstances whatsoever be construed as a whole, according to its fair meaning, not 7 -------------------------------------------------------------------------------- strictly for or against the Employee, the Company and with no regard whatsoever to the identity or status of any person or persons who drafted all or any portion of this Agreement.     11.10  Notices.  Any notices to be given pursuant to this Agreement by either party to the other party may be effected by personal delivery or by registered or certified mail, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses stated below, but each party may change its or his address by written notice to the other in accordance with this Paragraph 11.10. Notices delivered personally shall be deemed received on the date of delivery. Notices delivered by mail shall be deemed received on the third business day after the mailing thereof. Mailed notices to the Employee shall be addressed as follows: Gregory H. Olsen 51 Cherrybrook Drive Princeton, NJ 08540 Mailed notices to the Company shall be addressed as follows: Finisar Corporation 1308 Moffett Park Drive Sunnyvale, CA 94089-1113 Attention: Chief Executive Officer     IN WITNESS WHEREOF the Company and the Employee have each duly executed this Agreement as of the date first set forth above.     FINISAR CORPORATION     BY:   --------------------------------------------------------------------------------     TITLE:   --------------------------------------------------------------------------------     EMPLOYEE     -------------------------------------------------------------------------------- Gregory H. Olsen 8 -------------------------------------------------------------------------------- APPENDIX A JOB DESCRIPTION Title:  Executive Vice President of the Company and President and Chief Executive Officer of Sensors. Description:  The Employee will report to the President and Chief Executive Officer of the Company (the "CEO"). The Employee's responsibilities shall include: •General management of Sensors, as a subsidiary or division of the Company; •Maintaining an organization that is committed to providing customers with the highest quality products, service and value in its industry; •Providing leadership and vision to Sensors and the Company as he manages the activities of Sensors to maximize its contribution to the revenue growth and profitability of the Company, consistent with the priorities of the Company and the directions of the CEO; •Managing Sensors to become the Princeton center of excellence for the Company's active device activities; •Maintaining the small company, responsive spirit of Sensors; •Hiring excellent people and assuring that Sensors provides a supportive environment conducive to the personal growth and satisfaction of its employees; and •Assuring the maintenance of absolutely ethical and legal operations and business practices at Sensors. 9 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.14 EMPLOYMENT AGREEMENT RECITALS APPENDIX A JOB DESCRIPTION
Exhibit 10.3.1 CHART INDUSTRIES, INC. 1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS      Chart Industries, Inc., hereinafter referred to as the “Company,” hereby adopts a stock option plan for eligible Directors of the Company (hereinafter referred to sometimes as “Optionees”) pursuant to the following terms and provisions:      1. Purpose of the Plan. The purpose of this plan, hereinafter referred to as the “Plan,” is to provide additional incentive to those Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates by encouraging them to acquire a new or an additional share ownership in the Company, thus increasing their proprietary interest in the Company’s business and providing them with an increased personal interest in the Company’s continued success and progress. These objectives will be promoted through the grant of options to acquire Common Stock, par value $.01 per share (the “Common Stock”), of the Company pursuant to the terms of the Plan. Only those Directors who meet the qualifications stated above are eligible for and shall receive options under this Plan.      2. Effective Date of the Plan. The Plan shall become effective upon the date the Plan is approved by holders of a majority of the outstanding shares of voting capital stock of the Company which is present and entitled to vote thereon at a meeting or otherwise. In the case that the Company’s stockholders have not approved the Plan within twelve (12) months after the date the Plan is adopted by the Board of Directors, the Plan and the options granted hereunder shall be null and void.      3. Shares Subject to the Plan. The shares to be issued upon the exercise of the options granted under the Plan shall be shares of Common Stock of the Company. Either treasury or authorized and unissued shares of Common Stock, or both, as the Board of Directors shall from time to time determine, may be so issued. No shares of Common Stock which are subject of any lapsed, expired or terminated options may be made available for reoffering under the Plan. If an option granted under this Plan is exercised pursuant to the terms and conditions of subsection 5(b), any shares of Common Stock which are the subject thereof shall not thereafter be available for reoffering under the Plan.      Subject to the provisions of the next succeeding paragraph of this Section 3, the aggregate number of shares of Common Stock for which options may be granted under the Plan shall be Fifty Thousand (50,000) shares of Common Stock.      In the event that subsequent to the date of effectiveness of the Plan, the Common Stock should, as a result of a stock split, stock dividend, combination or exchange of shares, exchange for other securities, reclassification, reorganization, redesignation, merger, consolidation, recapitalization or other such change, be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, then (i) there shall automatically be substituted for each share of Common Stock subject to an unexercised option (in whole or in part) granted under the Plan, each share of Common Stock available for additional grants of options under the Plan and each share of Common Stock made available for grant to each eligible Director pursuant to Section 4 hereof, the number and kind of shares of stock or other securities into which each outstanding share of A-1 Common Stock shall be changed or for which each such share of Common Stock shall be exchanged, (ii) the option price per share of Common Stock or unit of securities shall be increased or decreased proportionately so that the aggregate purchase price for the securities subject to the option shall remain the same as immediately prior to such event and (iii) the Board shall make such other adjustments as may be appropriate and equitable to prevent enlargement or dilution of option rights. Any such adjustment may provide for the elimination of fractional shares.      4.  Grant of Options.      (a) Initial Automatic Grant. Subject to the terms of the Plan, each eligible Director shall be granted a non-qualified stock option for 10,000 shares of Common Stock on the later of (1) the date of stockholder approval of the Plan or (2) the effective date of such Director’s initial election as a member of the Board of Directors. Such grant shall occur automatically without any further action by the Board of Directors.     (b) Cut-back. In the event an eligible Director has been granted options to purchase shares of Common Stock under the Company’s 1994 Outside Director Stock Option Plan, then such Director shall be granted a non-qualified stock option only for 5,000 shares of Common Stock as otherwise set forth in subsection (a) above.      (c) Option Price. The price at which each share of Common Stock may be purchased pursuant to an option granted under the Plan shall be equal to the “fair market value” (as determined pursuant to Section 7) for each such share as of the date on which the option is granted (the “Date of Grant”), but in no event shall such price be less than the par value of such shares of Common Stock. Anything contained in this subsection (c) to the contrary notwithstanding, in the event that the number of shares of Common Stock subject to any option is adjusted pursuant to Section 3, a corresponding adjustment shall be made in the price at which the shares of Common Stock subject to such option may thereafter be purchased.      (d) Duration of Options. Each option granted under the Plan shall expire and all rights to purchase shares of Common Stock pursuant thereto shall cease on the date (the “Expiration Date”) which shall be the tenth anniversary of the Date of Grant of such option.      (e) Vesting of Options. Each option granted under the Plan shall be exercisable on each anniversary of the Date of Grant for up to a maximum of thirty-three and one-third percent (33-1/3%) of the total number of shares of Common Stock subject to the option, which annual rights of exercise shall be cumulative.      5. Option Provisions.      (a)  Limitation on Exercise and Transfer of Options. Only the Director to whom the option is granted may exercise the same except where a guardian or other legal representative has been duly appointed for such Director and except as otherwise provided in the case of such Director’s death. No option granted hereunder shall be transferable otherwise than by the Last Will and Testament of the Director to whom it is granted or, if the Director dies intestate, by the applicable laws of descent and distribution. No option granted hereunder may be pledged or hypothecated, nor shall any such option be subject to execution, attachment or similar process.   A-2       (b) Exercise of Option. Each option granted hereunder may be exercised in whole or in part (to the maximum extent then exercisable) from time to time during the option period, but this right of exercise shall be limited to whole shares. Options shall be exercised by the Optionee (i) giving written notice to the Secretary of the Company at its principal business office, by certified mail, return receipt requested, of intention to exercise the same and the number of shares with respect to which the Option is being exercised (the “Notice of Exercise of Option”) accompanied by full payment of the purchase price in cash or, with the consent of the Board, in whole or in part in shares of Common Stock having a fair market value on the date the option is exercised equal to that portion of the purchase price for which payment in cash is not made and (ii) making appropriate arrangements with the Company with respect to income tax withholding, as required, which arrangements may include, in lieu of other withholding arrangements, (a) the Company withholding from issuance to the Optionee such number of shares of Common Stock otherwise issuable upon exercise of the option as the Company and the Optionee may agree; provided that such Optionee has had on file with the Board of Directors, for at least six (6) months prior thereto, an effective standing election to satisfy said Optionee’s tax withholding obligations in such a fashion, which election form by its terms shall not be revocable or amendable for at least six (6) months or (b) with the consent of the Board of Directors, the Optionee’s delivery to the Company of shares of Common Stock having a fair market value on the date the option is exercised equal to that portion of the withholding obligation for which payment in cash is not made. Such Notice of Exercise of Option shall be deemed delivered upon deposit into the mails.      (c) Termination of Directorship. If the Optionee ceases to be a Director of the Company, his or her option shall terminate three (3) months after the effective date of termination of his or her directorship and neither he or she nor any other person shall have any right after such date to exercise all or any part of such option. If the termination of the directorship is due to death, then the option may be exercised within three (3) months after the Optionee’s death by the Optionee’s estate or by the person designated in the Optionee’s Last Will and Testament or to whom transferred by the applicable laws of descent and distribution (the “Personal Representative”). Notwithstanding the foregoing, in no event shall any option be exercisable after the expiration of the option period and not to any greater extent than the Optionee would have been entitled to exercise the option at the time of death.      (d) Acceleration of Exercise of Options in Certain Events. Notwithstanding anything in the foregoing to the contrary, in the event of a “change in control” the eligible Director shall have the immediate right and option (notwithstanding the provisions of Section 4) to exercise the option with respect to all shares of Common Stock covered by the option, which exercise, if made, shall be irrevocable. The term “change in control” shall include, but not be limited to: (i) the first purchase of shares pursuant to a tender offer or exchange (other than a tender offer or exchange by the Company) for all or part of the Company’s shares of any class of common stock or any securities convertible into such common stock; (ii) the receipt by the Company of a Schedule 13D or other advice indicating that a person is the “beneficial owner” (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of twenty percent (20%) or more of the Company’s shares of capital stock calculated as provided in paragraph (d) of said Rule 13d-3; (iii) the date of approval by stockholders of the Company of an agreement providing for any consolidation or merger of the Company in which the Company will not be the continuing or surviving corporation or pursuant to which shares of capital stock, of any class or A-3   any securities convertible into such capital stock, of the Company would be converted into cash, securities, or other property, other than a merger of the Company in which the holders of shares of all classes of the Company’s capital stock immediately prior to the merger would have the same proportion of ownership of common stock of the surviving corporation immediately after the merger; (iv) the date of the approval by stockholders of the Company of any sale, lease, exchange, or other transfer (in one or a series of related transactions) of all or substantially all the assets of the Company; or (v) the adoption of any plan or proposal for the liquidation (but not a partial liquidation) or dissolution of the Company.      (e) Option Agreements. Options granted under the Plan shall be subject to the further terms and provisions of an Option Agreement, a copy of which is attached hereto as Exhibit A, the execution of which by each Optionee shall be a condition to the receipt of an option.      6. Investment Representation; Approvals and Listings. The options to be granted hereunder shall be further conditioned upon receipt of the following investment representation from the Optionee: > “I further agree that any shares of Common Stock of Chart Industries, Inc. > which I may acquire by virtue of this option shall be acquired for investment > purposes only and not with a view to distribution or resale; provided, > however, that this restriction shall become inoperative in the event the said > shares of Common Stock subject to this option shall be registered under the > Securities Act of 1933, as amended, or in the event Chart Industries, Inc. is > otherwise satisfied that the offer or sale of the shares of Common Stock > subject to this option may be lawfully made without registration of the said > shares of Common Stock under the Securities Act of 1933, as amended.” The Company shall not be required to issue any certificate or certificates for shares of Common Stock upon the exercise of an option granted under the Plan prior to (i) the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable, (ii) the admission of such shares of Common Stock to listing on any national securities exchange on which the Common Stock may be listed, (iii) the completion of any registration or other qualification of the shares of Common Stock under any state or federal law or ruling or regulations of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable or the determination by the Company, in its sole discretion, that any registration or other qualification of the shares of Common Stock is not necessary or advisable and (iv) the obtaining of an investment representation from the Optionee in the form stated above or in such other form as the Company, in its sole discretion, shall determine to be adequate.      7. General Provisions. For all purposes of this Plan the fair market value of a share of Common Stock shall be determined as follows: so long as the Common Stock of the Company is listed upon an established stock exchange or exchanges such fair market value shall be determined to be the highest closing price of a share of such Common Stock on any stock exchange or exchanges on the date the option is granted (or the date the shares of Common Stock are tendered as payment, in the case of determining fair market value for that purpose) or if no sale of such Common Stock shall have been made on any stock exchange on that day, then on the closest preceding day on which there was a sale of such Common Stock and during any A-4 period of time as such Common Stock is not listed upon an established stock exchange the fair market value per share shall be the mean between dealer “Bid” and “Ask” prices of such Common Stock in the over-the-counter market on the day the option is granted (or the day the shares of Common Stock are tendered as payment, in the case of determining fair market value for that purpose), as reported by the National Association of Securities Dealers, Inc.      The liability of the Company under the Plan and any distribution of Common Stock made hereunder is limited to the obligations set forth herein with respect to such distribution and no term or provision of the Plan shall be construed to impose any liability on the Company in favor of any person with respect to any loss, cost or expense which the person may incur in connection with or arising out of any transaction in connection with the Plan, including, but not limited to, any liability to any federal, state, or local authority and/or any securities regulatory authority.      Nothing in the Plan or in any option agreement shall confer upon any Optionee any right to continue as a Director of the Company, or to be entitled to any remuneration or benefits not set forth in the Plan or such option.      Nothing contained in the Plan or in any option agreement shall be construed as entitling any Optionee to any rights of a stockholder as a result of the grant of an option until such time as shares of Common Stock are actually issued to such Optionee pursuant to the exercise of an option.      The Plan may be assumed by the successors and assigns of the Company.      The Plan shall not be amended more than once every six (6) months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder.      The cash proceeds received by the Company from the issuance of Common Stock pursuant to the Plan will be used for general corporate purposes or in such other manner as the Board of Directors deems appropriate.      The expense of administering the Plan shall be borne by the Company.      The captions and section numbers appearing in the Plan are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of the Plan.      8. Termination of the Plan. The Plan shall terminate ten (10) years from the date of its adoption by the Board of Directors of the Company and thereafter no options shall be granted hereunder. All options outstanding at the time of termination of the Plan shall continue in full force and effect in accordance with and subject to their terms and the terms and conditions of the Plan.      9. Taxes. Appropriate provisions shall be made for all taxes required to be withheld and/or paid in connection with the options or the exercise thereof, and the transfer of shares of Common Stock pursuant thereto, under the applicable laws or other regulations of any governmental authority, whether federal, state, or local and whether domestic or foreign. A-5     10. Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Delaware and any applicable federal law.      11. Venue. The venue of any claim brought hereunder by an eligible Director shall be Cleveland, Ohio.      12. Changes in Governing Rules and Regulations. All references herein to the Internal Revenue Code, or sections thereof, or to rules and regulations of the Department of Treasury or of the Securities and Exchange Commission, shall mean and include the Code sections thereof and such rules and regulations as are now in effect or as they may be subsequently amended, modified, substituted or superseded.      13. Replacement of 1994 Stock Option Plan for Outside Directors. Upon approval of the Plan by the holders of voting capital stock as set forth in Section 2, no further grants of options under the 1994 Stock Option Plan for Outside Directors shall be made. A-6
Exhibit 10(a) AMENDMENT DATED MAY 11, 2001 TO THE 1997 TRW LONG-TERM INCENTIVE PLAN       TRW Inc., by action of the Compensation Committee of its Board of Directors, hereby adopts this Amendment dated May 11, 2001 to the 1997 TRW Long-Term Incentive Plan (the “Plan”). I.       Effective as of the close of business on May 11, 2001, Section 2(e) of the Plan is amended to read in its entirety as follows:   (e) Fair Market Value. For any particular date, the average of the high and low sales prices of a Share on such date on the New York Stock Exchange Composite Transactions Listing as reported by the New York Stock Exchange or such other source as may be approved by resolution of the Committee (or if there are no sales on such date, then the closing sale price on such Listing on the nearest date before such date).
-------------------------------------------------------------------------------- AGREEMENT FOR PURCHASE AND SALE OF ASSETS BY AND BETWEEN TRISENSE SOFTWARE, LTD. AND GROUP 1 SOFTWARE, INC. DATED APRIL 30, 2001 -------------------------------------------------------------------------------- TABLE OF CONTENTS   1.   ACQUISITION OF THE ASSETS   1     2.   PURCHASE PRICE  3     3.   LIABILITIES OF TRISENSE; ASSUMED CONTRACTS  4     4.   REPRESENTATIONS AND WARRANTIES OF TRISENSE  5     5.   COVENANTS OF TRISENSE  13     6.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF GROUP 1  15     7.   CLOSING AND CONDITIONS TO CLOSING  16     8.   INDEMNIFICATION  19     9.   SURVIVAL OF REPRESENTATIONS AND WARRANTIES  22   10.  TERMINATION  22   11.  MISCELLANEOUS  23   -------------------------------------------------------------------------------- AGREEMENT FOR PURCHASE AND SALE OF ASSETS      THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS (the “Agreement”) is made and entered into this __ day of April, 2001, by and between TRISENSE Software, Ltd., a Minnesota corporation (“TriSense”) and Group 1 Software, Inc., a Delaware corporation (“Group 1”), regarding the acquisition by Group 1 of all of the assets and the assumption of identified liabilities of TriSense and other transactions described below.      In consideration of the premises and the mutual promises, representations, warranties and covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, TriSense and Group 1 intending to be legally bound hereby agree as follows: 1. ACQUISITION OF THE ASSETS      (a)  Subject to the terms and conditions of this Agreement, Group 1 shall acquire at Closing (as defined below) and Trisense shall sell to Group 1, all of TriSense’s right, title and interest, and with respect to the items set forth in items (v), and (viii) and (xi) below, any interest of a third party, in and to all of the assets (collectively, except for the excluded assets set forth in Schedules 1.6.1 and 1.4.1 hereof, the “Assets”) of Trisense related to, or used in conjunction with, the business of Trisense of developing and distributing bill presentment and payment software, and related businesses, as conducted by Trisense on the date of this Agreement (the “Business”) including, but not limited to the following assets: (i) all of TriSense’s business methods, web pages and web sites (screens and underlying programming), computer programming and derivative works, customizations, supplemental works, interim works, works in progress and all other intellectual or industrial property rights (other than Trademarks as defined below), and portions thereof, whether or not fixed in a tangible medium of expression, including without limitation (A) all patents, copyrights and applications for such, and rights with respect to patents, and applications for such (including without limitation, U.S. Patent No. 6,078,907), (B) all moral rights, inventions, original works of authorship, discoveries, concepts, data, processes, ideas and know-how contained therein or associated therewith; with respect to all channels or modes of transmission, receipt, display or processing; with respect to all computing or processing platforms and configurations - known or unknown (e.g., Internet, WWW, PC, midrange, LAN, WAN, client server, mini, mainframe and so on); with respect to all the processes or works at any time developed or owned by TriSense (collectively, the “IPR”); (ii) whether or not included in the IPR, all of the computer programs identified in Exhibit 1.1, hereto, and all development tools (other than those licensed from third parties) for such software (collectively the “Software”), including both object code and source code versions to the extent in existence, and including, without limitation, (A) all definition of files, fields of files, variables, details, parameters, installation and maintenance specifications, inputs and outputs (including codes and acronyms), program descriptions, file descriptions, formats and layouts, report descriptions and layouts, screen descriptions and layouts, graphical and non-graphical user interfaces, input documents, data elements, paper processing flowcharts, computer processing flowcharts, processing narratives, editing rules, password development and protection rules, telecommunications requirements, glossaries and manual procedures created or used by TriSense with respect to the Software, (B) all layout rules, extraction rules, protocols owned by TriSense or used in the Business, and all application program interfaces (“APIs”), dynamic link libraries, DLLs and other programming by which the Software integrates or communicates with other software and/or hardware/equipment and (C) all concomitant user, installation, technical, functional design, development and maintenance information describing the design and development of the Software (including source code documentation, source listings and annotations, test data and test results in sufficient detail to permit a reasonably skilled software developer not involved in the Software’s development to maintain, enhance and correct errors in the Software without assistance from or reference to any other persons or materials) regardless of the media on which the same is contained (such user, installation, technical, functional design, development and maintenance information, including the materials identified on Exhibit 1.1, being hereafter referred to as the “Documentation”); -------------------------------------------------------------------------------- (iii) all of TriSense’s logos, trade dress, trademarks, service marks or trade names, and registrations and applications for registrations related thereto, including, without limitation, those set out in Exhibit 1.2, hereto (the “Trademarks”); (iv) all of TriSense’s URLs, domain names and other Internet address identifiers (the “URLs”); (v) originals of TriSense’s financial, production, marketing and sales books and records, including, without limitation, all notes, records and books regarding the warranty/software performance, credit and payment history of all past, current and prospective customers, but not including minute books, corporate financial statements and electronic records of corporate financial statements (the “Books and Records”); (vi) the contracts identified in Exhibit 1.3, hereto (the “Assumed Contracts”), including with respect to such Assumed Contracts, and to the extent assignable, the right to seek enforcement, either in its own name, as a third party beneficiary, or in TriSense’s name as a delegate of TriSense, with respect to any such Assumed Contract relating to Development Personnel (as defined below) by which any Development Personnel have agreed to maintain the confidentiality of any information and/or have agreed that the intellectual property rights to any such works are owned by TriSense. (vii) the list of all of TriSense’s past, current and prospective (as of Closing) customers and all databases which contain customer information, personal data and the like (the “Customer Information”); (viii) the cash and cash equivalents in the amounts set out in Exhibit 1.4, hereto (the “Cash”); (ix) all prepaid items and deposits (including but not limited to security deposits paid with respect to any leases), except for prepaid taxes, payroll or employee benefits set out in Exhibit 1.4.1, hereto (the “Prepaids”), (x) the accounts and notes receivable identified in Exhibit 1.5 (the “Accounts Receivable”); (xi) all of the equipment, furniture and fixtures used or owned by TriSense, including, without limitation, the assets described in Exhibit 1.6, hereto, but excluding the Excluded Assets identified in Exhibit 1.6.1 (the “FF&E”); (xii) all tenant improvements to the premises located at 418 Gateway Boulevard, Burnsville, Minnesota 55337 (the “Improvements”); 2 -------------------------------------------------------------------------------- (xiii) all inventory, including documentation and media used to supply copies of the Software and documentation to customers, computer hardware, firmware, and ancillary third party software held for resale or sublicensing by TriSense, as such assets are identified on Exhibit 1.7, hereto (the “Inventory”); (xiv) those assets belonging to Mr. David Lamm or to any third party (“Lamm”) which are specifically identified on Exhibit 1.8 hereto and which will be transferred to TriSense prior to Closing, excluding certain assets identified on such Exhibit (the “Personal Assets”); and (xv) except as identified or described in Exhibit 1.6.1hereto, all other assets of TriSense used in TriSense’s business, whether real property or personnel property, tangible or intangible ((i)-(xv), collectively, the “Assets”).      (b)  The Books and Records, the Cash, the FF&E, and the Personal Assets shall be transferred to Group 1 free of any lien, claim or encumbrance, security interests or other clouds on title (collectively, “Liens”), excepting only liens for taxes not yet paid (“Permitted Liens). The Assumed Contracts, the Customer Information, the Prepaids, the Accounts Receivable, the Improvements and the Inventory shall be transferred to Group 1 free of any Liens, excepting only Permitted Liens and the interests of customers to confidentiality, the rights of the other contract parties (including any interests of the lessor under the Lease), and the financial interest of obligors and payors in such financial assets. The IPR, Software, Documentation, Trademarks and URLs shall be transferred subject only to Permitted Liens and the reservations with respect to the rights of third parties set forth in the representations and warranties herein and in the schedules attached hereto. TriSense hereby grants to Group 1 the right to seek enforcement, either in its own name, as a third party beneficiary, or in TriSense’s name as a delegate of TriSense in Group 1’s reasonable discretion, with respect to any of the Assumed Contracts, or any other agreement by which such Development Personnel has agreed to maintain the confidentiality of any information and/or has agreed that the intellectual property rights to any such works are owned by TriSense 2.  PURCHASE PRICE      The total purchase price for the Assets, and consideration for the other transactions to be consummated hereunder is as follows:      (a)  Total consideration of Eight Million One Hundred and Five Thousand Dollars ($8,105,000) (the “Purchase Price”), payable in one (1) cash payment of One Million Five Hundred Forty Five Thousand Dollars ($1,545,000) at Closing and the delivery of Group 1’s Promissory Note, in the form of Exhibit K, in the amount of aggregate principal and interest of Six Million Five Hundred and Sixty Thousand Dollars ($6,560,000) payable in installments of principal plus accrued interest at the annual rate of 4.63%, with payments of principal and interest totaling Three Million Two Hundred Eighty Thousand Dollars ($3,280,000) on each of the first and second anniversary dates of Closing.      (b)  The consideration described in Section 2(a), above, shall include all payments to be made in connection with the transactions, including any consideration to support Mr. Lamm’s restrictive covenant entered into pursuant to this Agreement, but shall exclude any salary or bonus to be paid under any employment agreements or the consulting arrangement described in Section 4(h)(ii).      (d)  All payments shall be made by Federal Wire Transfer, in accordance with the wire transfer instructions set out in Exhibit 2.1, hereto, or such other wire transfer instructions provided from time to time by TriSense to Group 1, in writing no less than thirty (30) days prior to a payment due date. 3 --------------------------------------------------------------------------------      (e)  Paymentech Matters. Group 1 and Trisense acknowledge that as of the date of this Agreement, Lamm and TriSense have agreed in principle with Paymenttech LLC, and/or its affiliates (collectively, “Paymentech”) to license or grant to Paymentech, for fees or other payments of approximately $125,000 upon execution of an agreement and an additional $200,000 upon receipt by Paymentech of a trademark registration, the right to use one logo that may, absence such license, infringe one of Trisense’s Paysense Trademarks. Lamm agrees that during the period of his consulting with Group 1, he will use diligent efforts to complete negotiations with Paymentech and present an agreement with the above terms to Group 1 for execution within 120 days after the date of this Agreement. In order to facilitate the transactions contemplated hereby, TriSense agrees to transfer the Trademarks to Group 1 without entering into any definitive agreement with Paymentech. In consideration for the foregoing, Group 1 agrees that if Lamm has presented an agreement to Group 1 for execution within 120 days of the date of this Agreement, or if Lamm is has made substantial progress on completing such agreement and is diligently continuing to negotiate the same during such period of extension as the parties reasonably agree, and Group 1 or any affiliate of Group 1 who is the successor to the rights in the Trademarks, receives any payment from Paymentech relating to the above described right under the Trademarks (no matter whether such payment results from a license agreement, settlement agreement or any other arrangement) Group 1 shall pay 50% of any such payment to TriSense within 10 days of receipt from Paymentech.  3.  LIABILITIES OF TRISENSE; ASSUMED CONTRACTS      (a)  Group 1 shall assume and be responsible for, and shall promptly pay, perform and otherwise satisfy in accordance with their terms, only those obligations and liabilities of TriSense set forth in clauses (i) through (iv) below (collectively, the “Assumed Liabilities”) and no others:        (i)  The obligations of TriSense under the Assumed Contracts;        (ii)  All liabilities and obligations arising out of or resulting from an Assumed Contract by Group 1 occurring subsequent to the date of Closing; and        (iii)  All liabilities reflected on the Financial Statements (as defined below) including the payables set forth in the attached Exhibit 3(a)(i), other than liabilities in respect of indebtedness for borrowed money.        (iv)  All liabilities of TriSense for vacation or holiday pay that has been earned through closing by employees of TriSense hired by Group 1 but not used.      (b)  Except for the Assumed Liabilities, Group 1 shall assume no liabilities or obligations whatsoever of TriSense, regardless of whether such arise or are required to be performed before, at or after Closing. In furtherance of the above, TriSense represents, warrants, covenants and agrees that except for the Assumed Liabilities, Group 1 shall not assume or be liable for, whether contractually, by operation of law, or otherwise, any contracts, commitments, indebtedness, obligations or liabilities of TriSense, including, without limitation: (i) liabilities or obligations of or claims against TriSense arising out of any action, suit, proceeding, arbitration, investigation or hearing or notice of hearing arising out of, or relating in any manner to, the Business before Closing; (ii) liabilities or obligations arising from, out of or in connection with the transactions contemplated by this Agreement including the fees and expenses of TriSense’s counsel, investment bankers, accountants and other representatives; (iii) liabilities or obligations involving the payment of any domestic (federal, state or local) or foreign taxes, customs or other governmental charges of any kind, including but not limited to use taxes, property taxes, taxes on services and ad valorem taxes, excise taxes, sales taxes, transfer taxes, gains taxes, recording taxes and taxes on or measured by income, any of which taxes are due or shall become due as a result of the operation of TriSense’s Business prior to Closing or respect to the Assets or interest or penalties relating thereto except to the extent such liabilities have been accrued and the accrual is transferred to Group 1 in accordance with Section 1; and (iv) liabilities or obligations of any kind or nature incurred by TriSense on or after Closing except to the extent the same relate to an Assumed Contract(such liabilities not being assumed by Group 1 being hereafter referred to as the “Excluded Liabilities”) All liabilities, obligations and payables of or claims against TriSense not expressly herein assumed by Group 1 shall be and remain the sole responsibility of and shall be satisfied by TriSense. 4 -------------------------------------------------------------------------------- 4.  REPRESENTATIONS AND WARRANTIES OF TRISENSE      TriSense represents and warrants to Group 1 that, except as set forth in the Disclosure Schedule delivered by TriSense to Group 1 on the date hereof (the “Disclosure Schedule”) (which Disclosure Schedule sets forth the exceptions to the representations and warranties contained in this Article IV):      (a)  Organization and Standing; Shareholder. TriSense is a corporation duly incorporated and organized, validly existing, and in good standing under the laws of the state of Minnesota, and has the full power and authority (corporate and otherwise) to carry on its business as it is now being conducted, and to own and lease the properties and assets which it now owns or leases. TriSense is duly qualified and/or licensed to transact business and in good standing as a foreign corporation in all jurisdictions in which the nature of its business or its ownership of property requires it to be qualified and in which the failure to be so qualified would have a material adverse effect on the financial or operating condition of the Business. Lamm is, and has been since the organization of TriSense, the sole shareholder of TriSense.      (b)  Execution, Delivery; Valid and Binding Agreement. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors and sole shareholder of TriSense and this Agreement constitutes the valid and legally binding obligations of TriSense, except as enforceability may be limited by applicable equitable principles or judicial discretion, or by bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to time in effect affecting the enforcement of creditors’ rights generally.      (c)  Authority; No Breach. TriSense has the capacity and authority to execute and deliver this Agreement, to perform hereunder, and to consummate the transactions contemplated hereby. Except as contemplated by this Agreement, there are no authorizations, consents, approvals, licenses, exemptions from or filings with, or registrations with any governmental, quasi-governmental or non-governmental regulatory agency or authority, necessary on the part of TriSense for, or in connection with, the transactions contemplated hereunder, except where the failure to obtain the same would not be reasonably likely to result in a material adverse effect. TriSense covenants and agrees that if at any time any of the aforesaid authorizations, consents, approvals, licenses, exemptions or filings shall be required, TriSense shall take all commercially reasonable actions to either immediately obtain the appropriate authorization, consent, approval, license, or exemptions, or take all commercially reasonable actions to cure the facts and circumstances which prevent the issuance or obtaining of such authorization, consent, approval, license or exemption. 5 --------------------------------------------------------------------------------      (d)  No Conflict. The execution and delivery of this Agreement by Group 1 does not, and the consummation of the transactions contemplated hereby will not, violate (i) any provisions of TriSense’s Articles of Incorporation or Bylaws, as amended or (ii) any provisions or constitute a breach or event of default under any agreement, lease, instrument or other document, including, without limitation, the Merger Agreement effective May 15, 1995 by and between Document Solutions, Inc. and BIDOC Acquisition Corp (a subsidiary of The Bisys Group, Inc.) . No consent, approval or agreement of any person, party, court, government or entity is required to be obtained by Trisense in connection with the execution and delivery of this Agreement, or the other instruments and agreements provided herein or the consummation of the transactions contemplated hereby, including any notice or other requirement under bulk sales or similar laws.      (e)  Compliance. TriSense (i) is not in default or breach under any of the Assumed Contracts; (ii) to its knowledge after diligent inquiry, no other party to an Assumed Contract is in default or breach thereunder; (iii) there are not any facts or circumstances of which TriSense is aware, which given only the passage of time would become a default or breach under any of the Assumed Contracts; (iii) all of the computer programming and other deliverables and services to be provided under any of the Assumed Contracts prior to the date of this Agreement have been timely delivered in full and have been accepted by TriSense or the customer, as applicable.      (f)  Financial Statements. TriSense has delivered to Group 1 its consolidated financial statements (i.e. — balance sheet, income statement, cash flow statement) and notes thereto, dated December 31, 2000 (the “Annual Statements”) and unaudited Financial Statements dated April 15, 2001 (the “Interim Statements,” and together with the Annual Statements, the “Financial Statements”), copies of which are attached to the Disclosure Schedule under the caption referencing this Section. The Financial Statements fairly present, in all material respects the financial condition of TriSense as of the dates indicated, and the results of its operations for the periods indicated. The Annual Statements have been prepared in accordance with generally accepted accounting principles consistently applied, and the Interim Statements have been prepared in a manner consistent with the Annual Statements. TriSense has no liabilities or obligations whatsoever, either accrued, absolute, contingent or otherwise which are not reflected or provided for in the Financial Statements except (A) those arising after the date of the Balance Sheet which are in the ordinary course of its business, in each case a normal amount and all of which, cumulatively, are not materially adverse to the Assets or the Business, and (B) as to the extent specifically described in schedules thereto.      (g)  Trade Organizations. TriSense is a member in good standing of the organizations, and the TriSense representatives hold the offices, described on the Disclosure Schedule under the caption referencing this Section.      (h)  Intellectual Property.        (i)  The IPR, including the Software and the Documentation, and the Third Party Software, constitutes all of the intellectual property rights used in, developed for use in or necessary to the conduct of the Business as conducted. TriSense is the sole and exclusive owner of the IPR and the Trademarks and, to the knowledge of TriSense, TriSense has, and at all times has had, the right to develop, use and distribute all of the IPR used in the Business or contemplated for use in the Business, including the Software and the Documentation, and the right to enjoy all rights with respect to the Trademarks within the scope of the registrations listed in Exhibit 1.2. At Closing TriSense shall have the unqualified right to grant to Group 1 any and all rights it has in and to the IPR including the Software and Documentation, and in and to the Trademarks, as contemplated hereunder. Neither the rights granted to Group 1 hereunder, nor the exercise of such rights by Group 1, do or will infringe upon or conflict with the rights held by any third party under any patent, trademark, copyright, license, trade secret claimed by or through Bysis Group, Inc., or any affiliate, successor or assign thereof, or any current or former Development Personnel (as defined below), any copyright or trade secret of any third party, or to TriSense’s knowledge any license patent or trademark or other proprietary right of any other party. The IPR and Trademarks are subsisting and , to the knowledge of TriSense, are not invalid or unenforceable, in whole or in part. Upon transfer of the Software at Closing, Group 1 shall have the right to use the whole of the Software, any part or parts thereof, or none of the work, as it sees fit, including the right to alter the Software, add to it, combine it with any other work or works, at its sole discretion, except to the extent there are restrictions imposed on the same by the license of Third Party Software (as defined below). No rights are reserved by TriSense. 6 --------------------------------------------------------------------------------        (ii)  TriSense has taken all commercially reasonable steps necessary to protect and preserve its trade secrets.        (iii)  Except as set forth in the Schedule of Exceptions and except to the extent the Trisense represents only to its knowledge that such rights may be pursued without infringement of third party patents, trademarks and other intellectual property rights other than copyright and trade secrets, upon transfer of the IPR to Group 1 in accordance with this Agreement, Group 1 shall have the right, without payment of any additional consideration to any party, to own, make, use, sell, have made, rent, lease, lend, license, enhance, modify, amend, copy and prepare derivative works and customizations thereof, refrain from giving attribution to any author with respect to any work created by him/her, and to display publicly and exhibit the Software and Documentation and the Trademarks and to otherwise exploit fully the processes, products, software and services derived from any discoveries, concepts, ideas and improvements to the IPR, on or through any medium or means now known or hereafter developed, including without limitation the Internet and/or satellite transmission, whether or not patentable or copyrightable, which are within the scope of the IPR, including the Software or Documentation.        (iv)  The IPR, including the Software and Documentation and Trademarks are not subject to any copyright registrations or applications, and to the knowledge of Trisense are not subject to any patent or trademark registrations or applications, except for registrations or applications TriSense has initiated, with respect to any governmental authority, including U.S. Patent No. 6,078,907, U.S. Patent Application Serial No. 09/594056 and Australia Patent Application Serial No. 1736499 and the copyright and trademark registrations and applications identified on Exhibit 1.2 hereto. All patent, copyright and trademark registrations with respect to the Software, Documentation and the Trademarks listed in the Disclosure Schedule are in full force and effect, and all applications for registrations with respect to the Software, Documentation and the Trademarks are proceeding without any opposition known to TriSense, except as identified on the Disclosure Schedule referencing this Section.        (v)  TriSense has not received any notice of any violations of, and it is not violating, any, copyright or, trade secret rights, or to its knowledge any trademark, trade name, service mark, patent or other intellectual property right of any other party because of TriSense’s development, marketing, licensing or sale of the IPR, including the Software and Documentation or Trademarks.        (vi)  TriSense has provided to Group 1: (i) a record or copy of the substance of all material complaints from any customer regarding the performance of the Software or the Documentation which have been received from June 1, 2000 through Closing, and (ii) the complete, most current bug list and enhancement list for the Software. Materiality, for the purposes of this Section 4(g)(vi), shall mean that the particular program complained of does not conform to the applicable warrantee(s) provided by TriSense. 7 --------------------------------------------------------------------------------        (vii)  To the knowledge of TriSense after reasonable inquiry, the Software as delivered to customers and to Group 1 has been free of any remote or automatic disabling or recapture devices, passwords, keys, security devices or trap doors and Computer Viruses. For the purposes of this Agreement, Computer Viruses means any computer instructions (including, but not limited to, computer instructions commonly referred to as Trojan Horses, anomalies, worms, self-destruct mechanisms or time/logic bombs) which do not provide the functionality clearly described in the Documentation and which interfere with the use of the Software, any portion thereof, or other software, firmware or computer hardware.        (viii)  Other than pursuant to this Agreement, TriSense is not a party to any contract or obligation whereby an absolute or contingent right to purchase, obtain or acquire any rights in any of TriSense’s rights in any of the Assets, including without limitation, any of the Software or IPR or Trademarks has been granted to anyone, except for customer licenses granted in the ordinary course of TriSense’s business and except for rights of distribution or resale granted pursuant to the contracts set forth on the Disclosure Schedule referencing this Section.        (ix)  The IPR, including TriSense’s website, the Software and Documentation (and all predecessor versions) and all portions thereof, and the Trademarks, have been developed by TriSense exclusively by and through the employees or contractors identified on the Disclosure Schedule referencing this Section, hereto (the “Development Personnel”). None of the Development Personnel has any proprietary rights in the IPR, including the TriSense website, the Software, Documentation or Trademarks. All Development Personnel participated in the development of the IPR, including the TriSense website, the Software, Documentation or Trademarks, while regularly employed/retained by TriSense and were fully paid by for such services. All Development Personnel performed, at all times, such development of the IPR, including the TriSense website, the Software, Documentation and Trademarks, within the normal scope of their employment/retention with TriSense. None of the Development Personnel has made any claim of ownership (including without limitation copyrights or patent rights) regarding the IPR, including the TriSense website, the Software, Documentation or Trademarks, or any portion thereof, nor to the knowledge of TriSense does any such Development Personnel have colorable claim of right to such.        (x)  No copies of the source code for the Software have been provided to any third party except as identified on the Disclosure Schedule under the caption referencing this Section. No license or other rights to use Trademarks (or any variations thereof) have been granted to any third party, except for rights to use the same granted to distributers, resellers, and sales agents in connection with the sale of the Software.        (xi)  There are no third parties who are entitled to any proceeds with respect to the sale, licensing, sublicensing or other granting of rights with respect to IPR, including the TriSense website, the Software, the Documentation, the Trademarks or any portion thereof, including without limitation royalties.        (xii)  TriSense has provided to Group 1 true and complete copies of all agreements entered into with any person or entity who contributed to the development of the IPR, including the TriSense website, the Software, the Documentation or the Trademarks.        (xiii)  Except as set forth on the Disclosure Schedule under the caption referencing this Section: (i) no software of others (“Third Party Software”) is necessary or desirable in order for the TriSense website or the Software to perform in accordance with its standard documentation and (ii) no Third Party Software is routinely provided to customers in conjunction with a licensing of the Software, for installation or use in accordance with the Software’s standard documentation. TriSense shall deliver to Group 1 on or after Closing, consents, if required, in forms reasonably acceptable to Group 1, to the transfer to Group 1 from TriSense of all of TriSense’s rights to Third Party Software. 8 --------------------------------------------------------------------------------        (xiv)  No claims have been made with respect to the Software or Documentation under any insurance coverage including, but not limited to, errors and omission insurance.        (xv)  Trisense has collected no personal, identifiable data, except the personal data collected in the process of processing EBPP transactions on behalf of Trisense clients, and all such data has been used solely and exclusively to present and/or process payment of bills for the individual whose data has been collected; Trisense has made no disclosure or transfer, with or without consideration, of any personal data to any third parties.      (i)  Employment Matters        (i)  At the Closing, Ms. Connie Howard and Messrs. John Decker, Steven Henry, Thomas Kuder and Richard Urban shall accept employment at Closing with Group 1 on terms reasonably acceptable to the respective individual. Group 1 also intends to offer to employ at Closing the other current TriSense employees on terms reasonably acceptable to the respective parties, including reasonable non-compete covenants. Such terms of employment may, however, differ from those previously offered by TriSense. Group 1 shall have the right to notify these employees during the due diligence period of the fact that Group 1 may employ them in its business at Closing.        (ii)  Lamm shall serve as an independent consultant to Group 1 for ninety (90) days after Closing at an hourly rate of Two Hundred and Thirty-Seven Dollars and Fifty Cents ($237.50) per hour. He shall serve under the direction of DOC1’s General Manager. He shall abide by the provisions set out in Exhibit M, hereto.        (iii)  TriSense employs a total of seventeen (17) employees, all of whom are full-time.        (iv)  There are no disputes or proceedings involving TriSense that relate to any present or former employee of TriSense, and to the knowledge of TriSense, no employee of TriSense intends to terminate employment prior to Closing. Without limiting the generality of the foregoing, TriSense has no knowledge of any labor grievance proceeding, controversy with any employee, and no knowledge after diligent inquiry of any claim or proceeding under any labor law, equal employment opportunity law, or occupational safety and health law. TriSense is in full compliance with all applicable federal, state and local laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours and the other employment matters referenced in this Section 4(h). There is no charge or lawsuit pending or to TriSense’s knowledge threatened against TriSense with respect to TriSense’s employer-employee relations or practices.        (v)  No officer or director of TriSense, and no employee or consultant of TriSense is known by TriSense to be, or is expected by TriSense to be, in violation of any term of any proprietary information agreement or obligation, non-disclosure agreement, non-competition agreement, or any other contract or agreement or duty or any restrictive covenant related to the right of any such officer, employee or consultant to be employed by TriSense or relating to the use of the Assets, trade secrets or proprietary information of TriSense. 9 --------------------------------------------------------------------------------   (vi)  Except as set forth on the Disclosure Schedule under the caption referencing this Section, TriSense does not have any obligation, contingent or otherwise under, nor any commitment or agreement to enter into, and no employee of TriSense is covered with respect to his/her employment by, an employment contract, union agreement with employees, executive compensation agreement, or other similar contract or agreement.      (j)  Employee Benefit Plans.        (i) TriSense has no “employee benefit plans” for the benefit of its employees other than the plans identified in Schedule 4(j), hereto. For the purposes of this Section 3(i), “employee benefit plans” shall mean any pension, retirement, disability, medical, dental or other health insurance plan, life insurance or other death benefit plan, profit sharing, deferred compensation, stock option, bonus or other incentive plan, vacation benefit plan, severance plan or other employee benefit plan or arrangement, including without limitation any “employee pension benefit plan” as defined in Section 3(2) of ERISA, and any “employee welfare benefit plan” as defined in Section 3(1) of ERISA, whether or not any of the foregoing is funded, (a) to which TriSense is a party or by which it is bound or (b) with respect to which TriSense has made any payments or contributions or may otherwise have any liability (including any such plan or arrangement formerly maintained by TriSense); "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended and SEPPAA shall mean the Single-Employer Pension Plan Amendments Act of 1986, as amended. All of TriSense’s employee benefit plans are fully funded, with all payments or contributions, to be made by TriSense, having been made or accrued on the Financial Statements as of April 10, 2001. Trisense has no employment agreements with its employees.        (ii)  TriSense has no liability to the Pension Benefit Guaranty Corporation or to any other person, firm or corporation on account of any termination of an employee pension benefit plan subject to Title IV of ERISA, as amended by SEPPAA.      (k)  Affiliates. TriSense does not have, and has never had, any Affiliates. For the purposes of this Agreement, Affiliates shall mean any business entity, whether it is a corporation, partnership or otherwise, which is under common control with, controls or is controlled by, TriSense, including any entity that might be a direct or indirect subsidiary of TriSense.      (l)  Taxes and Other Governmental Charges.        (i)  Since December 31, 1996, TriSense has filed all returns required of it with respect to any governmental entity as to sales or licenses of the Assets or copies thereof, the filing of which returns or the failure to do so may affect the Assets.        (ii)  There are no tax liens, other than liens not filed for taxes not yet due (“Permitted Liens”) , on any of the Assets, and TriSense shall not be delinquent in the payment of any federal, foreign, state or local income, sales, employment, withholding or other taxes (including interest and penalties thereon), the liability for which might impose a lien or encumbrance on any of the Assets; TriSense shall not be subject to any liability for unpaid taxes under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise; the provisions for taxes shown in the Financial Statements are and will be adequate to cover the aggregate liability of TriSense as of Closing for all taxes, duties and charges based on the income, purchases, sales, business, capital stock or surplus, or assets of TriSense; TriSense has incurred or will incur no liability for any taxes, duties or charges for the period from April 15, 2001 through Closing; no taxing authority has indicated to TriSense any intent to conduct an audit or other investigation or asserted any unresolved deficiencies with respect to tax liabilities of TriSense for any period; TriSense has received no deficiency letter or similar notice from any taxing authority for any open tax year; TriSense confirms its responsibility for, and agreement to pay when due, any and all taxes, duties or charges based on the Assets, TriSense’s income or sales, employees’compensation or otherwise, incurred or accrued on or prior to the Closing. 10 --------------------------------------------------------------------------------        (iii)  Proper and accurate amounts have been withheld by TriSense from the compensation of all of TriSense’s employees for all periods prior to Closing in full compliance with the tax withholding provisions of any applicable laws, statutes, codes, ordinances, rules and regulations;        (iv)  Proper and accurate returns have been filed by TriSense for all periods prior to Closing for which returns were due with respect to employee income tax and social security withholding and FICA and unemployment taxes, and the amounts shown on such returns to be due and payable have been paid in full or adequate provision for payment of such amounts have been included in the Financial Statements;        (v)  Hours worked by, and payments made to, employees of TriSense have not been in violation of the Fair Labor Standards Act or any applicable laws dealing with such matters;        (vi)  All payments due from TriSense on account of employee health and welfare insurance have been accrued as a liability in the Financial Statements; and        (vii)  All severance payments which are or were due under the terms of any agreement, oral or written, have been accrued as a liability in the Financial Statements.      (m)  Environmental and Safety Matters. TriSense has not received any written notice concerning, and there are no violations of, and to the knowledge of TriSense there is no pending or threatened investigation, claim or allegation from any governmental authority, regulatory authority or third party relating to or associated with a potential violation of applicable federal, state and local laws, regulations, rules, ordinances, permits, licenses, authorizations or orders related to: (i) toxic or hazardous materials or wastes of any kind (including, without limitation, petroleum and its derivatives and by-products, other hydrocarbons, asbestos and asbestos-containing materials, and PCBs or other materials regulated under any Environmental Laws (as defined below) (collectively “Hazardous Materials”); (ii) the protection of the environment (including, without limitation, the Resource Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Water Pollution Control Act and the Clean Air Act), any and all applicable laws, ordinances, regulations, orders, decrees, judgments, injunctions, permits, approvals and licenses issued, promulgated or entered by any governmental or quasi-governmental entity or agency relating to the environment, to employee health or safety as it pertains to the use or handling of remediation of (or exposure to) Hazardous Materials, to the preservation or reclamation of natural resources or to the management, release or threatened release of contaminants or noxious odors (collectively “Environmental Laws”); or (iii) occupational or public health or safety (collectively “Safety Laws”) with respect to the Assets or the Business. To TriSense’s knowledge, there are no Hazardous Materials or underground storage tanks (“USTs”) at, on or under the premises located at 418 Gateway Boulevard, Burnsville, Minnesota 55337, no Hazardous Materials have been transported or released from the premises located at 418 Gateway Boulevard, Burnsville, Minnesota 55337 and no Hazardous Materials have been disposed of or stored at 418 Gateway Boulevard, Burnsville, Minnesota 55337 that has or would require remediation under any Environmental Laws or Safety Laws. 11 --------------------------------------------------------------------------------      (n)  Litigation.        (i)  TriSense has not received notice of, and to TriSense’s knowledge after diligent inquiry, there are not any suits, actions, proceedings, claims or investigations instituted against the Assets, the Business or TriSense.        (ii)  To TriSense’s knowledge there has been no threat made by another party to institute a suit, action, proceeding, claim or investigation against the Assets, Business or TriSense.      (o)  Licenses and Permits; Compliance With Law. TriSense holds all licenses, certificates, permits, franchises and rights from all appropriate federal, state, local and other public authorities necessary for the conduct of the Business and the ownership and use of the Assets, except where the failure to hold the same would not be reasonably likely to result in a material adverse effect on the Business.      (p)  Contracts, Etc. Except for the Assumed Contracts, TriSense isnot a party or subject to any of the following written, or to its knowledge any of the following oral, contracts or commitments, which would singly or in the aggregate, have a material adverse impact upon the Assets or the Business:        (i)  any contract or commitment directly related to the Software or Documentation which requires services to be provided or performed by TriSense or which authorized others to perform services for, through or on behalf of TriSense;        (ii) any contract or commitment involving an obligation related to the Assets which cannot, or in reasonable probability will not, be performed or terminated within thirty (30) days from the date as of which these representations are made;        (iii) any contract or commitment providing for payments to third parties based in any manner upon the sales, purchases, receipts, income or profits of TriSense; or        (iv)  any contract, agreement, understanding or arrangement, restricting Group 1 from fully and duly enjoying sole and exclusive rights to the Assets.        (v)  (A) any license and other agreements by which any rights to the Software have been granted to any third party, (B) any contracts under which TriSense purchased services or intellectual property was contributed to the development of any of the IPR; (C) any third party channel agreements (VAR, reseller, BSP, OEM, distributor and other agreements) to which TriSense is a party; (D) any lease for real property; and (E) any other material commercial contracts of TriSense in effect on the date first written above.      (q) Brokerage. No agent, broker, person or firm (other than Dougherty and Company) acting on behalf of TriSense or any of its affiliates, or under its authority, is or will be entitled to a financial advisory fee, brokerage commission, finder’s fee or like payment in connection with this Agreement or any of the transactions contemplated hereby. TriSense has paid or will pay any fees and expenses payable to Dougherty and Company in connection with the transactions contemplated hereby.      (r) Disclosure and Absence of Undisclosed Liabilities. No statement contained herein or in any certificate, schedule, list, exhibit or other instrument or document furnished to Group 1 pursuant to the provisions hereof, taken as a whole, intentionally contains any untrue statement of a material fact, or intentionally omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. 12 -------------------------------------------------------------------------------- 5. COVENANTS OF TRISENSE      (a)  Conduct of the Business of TriSense Prior to the Closing. From the date of this Agreement to Closing, unless otherwise agreed to by Group 1, TriSense shall:        (i)  conduct its business in the regular and ordinary course, shall not introduce any material new method of management, operation or accounting, and shall preserve the business, organization and goodwill of TriSense;        (ii)  not transfer, assign, convey or liquidate any of the Assets, or enter into any transaction or incurred any liability or obligation which affect the Assets or the Business, other than transactions occurring in the ordinary course of the Business;        (iii)  not enter into (i) any agreement to provide any goods or services except on terms consistent with comparable contracts entered into on or after January 1, 1999, (ii) any other agreements which may effect any of the Assets in excess of Thirty Thousand Dollars ($30,000) in the aggregate or (iii) make or agree to any change in the terms of any contract or instrument to which it is a party which might have a material adverse effect on any of the Assets or the Business;        (iv)  promptly notify Group 1 of any material developments relating to the Assets or TriSense’s business interests;        (v)  maintain its properties, facilities and equipment and other assets in as good working order and condition as at present, ordinary wear and tear excepted;        (vi)  perform in the ordinary course of business all of its obligations under debt and lease instruments and other agreements relating to or affecting its assets, properties equipment and rights;        (vii)  maintain present debt and lease instruments and not enter into new or amended debt or lease instruments other than in the ordinary course of business;        (viii)  keep in full force and effect present insurance policies or other comparable insurance coverage;        (ix)  use commercially reasonable efforts to maintain intact and preserve its business organization, retain its present employees and maintain its relationships and present agreements with suppliers, customers and others having business relations with the TriSense;        (x)  not increase current salaries and commission levels for any officers, directors, employees or agents except in the ordinary course of business, consistent with past practice or as required by contract or law;        (xi)  maintain its memberships with the industry groups identified herein;        (xii)  maintain compliance in all material respects with all material permits, rules, laws and regulations, consent orders and the like; and        (xiii)  not declare any dividends nor pay out any extraordinary bonuses, fees, commissions or any unusual distributions to the owner, director, management or other personnel between the date of this Agreement and Closing, other than accrued and unpaid bonuses. 13 --------------------------------------------------------------------------------      (b)  Trading. TriSense acknowledges that it is aware, and that its shareholder and representatives will be made aware, that in connection with the discussions with Group 1 regarding the transactions described herein, they may come into possession of material non-public information about Group 1. Accordingly, TriSense agrees that it will not trade (or cause or encourage any third party to trade), and will use its commercially reasonable efforts to assure that none of its shareholder or representatives will trade (or cause or encourage any third party to trade), in any securities of Group 1 (or securities convertible into or exercisable for securities of Group 1) while in possession of any such material non-public information. Such restrictions are in addition to, and not in lieu of, any restrictions that Group 1 may impose upon insiders who are employees or that may be imposed under applicable law.      (c)  No-Shop. Until the first to occur of Closing or May 1, 2001, TriSense will not, (and shall use commercially reasonable efforts to ensure that its shareholder and representatives do not), directly or indirectly solicit, encourage the submission of offers or proposals from any person or entity (including by way of providing any information concerning TriSense or the Assets to any person or entity, or otherwise) with respect to, or initiate or participate in any negotiations or discussions regarding or enter into (or authorize) any agreement or agreement in principle with respect to, any expression of interest, offer, proposal to acquire or any acquisition of either all or any portion of the Business or the Assets, whether by stock purchase, share exchange, merger, consolidation, purchase of assets, tender offer or otherwise. TriSense shall promptly inform Group 1 of any inquiries or proposals received from any party with respect to the foregoing.      (d)  Due Diligence; Employees. TriSense will continue to allow Group 1, its employees, consultants and other representatives (collectively referred to as Group 1 in references to due diligence) full access to, and the right to inspect all its financial, marketing, sales, development, support, maintenance and enhancements documents and records and source and object code, software documentation and logs, books, records, files, contracts, agreements and other information relating to the Assets, the Business or the transactions contemplated hereunder which may be reasonably requested. Group 1 shall have the right to inspect, observe and test the operations of the Software and Documentation. Group 1 shall conduct any investigation in a manner which will not unreasonably interfere with TriSense’s operations or cause TriSense to incur additional costs or liabilities.      (e)  Release of Employees. TriSense agrees to release at Closing all its employees and consultants from any contractual obligations to TriSense, which, in Group 1’s reasonable determination, would impair the utility of such person’s services to Group 1, or Group 1 obtaining free and clear title to any of the Assets.      (f)  Consents/Successor Liability Statutes. TriSense will obtain prior to Closing and deliver to Group 1 all tax clearance and similar certificates reasonably requested by Group 1, including: (i) sales tax clearance certificates and (ii) an employment tax clearance certificate and any other required exemptions or certificates, to the extent that the non-compliance therewith or the failure to provide necessary clearances would subject either Group 1 or the Assets to the claims of any creditors of TriSense, or would subject any of the Assets to any liens and Group 1 shall have received satisfactory evidence of TriSense’s compliance with the terms of this Section. TriSense will deliver to Group 1 at Closing the consents, estoppels and releases identified on the Disclosure Schedule referencing this Section, and such other estoppels or consents otherwise reasonably determined necessary by Group 1; provided, however, that Trisense need not obtain the consent of Compuware prior to Closing but Lamm, on behalf of Trisense, shall work with Group 1 to either obtain the consent from Compuware to assignment of its contract with Trisense, to obtain the right through Group 1’s contract with Compuware, or to apply other quality assurance software to Paysense after closing, and shall bear the expensae of obtaining such consent or application to the extent such expense does not exceed $4,000. 14 --------------------------------------------------------------------------------      (g)  Change of Name. Within ten (10) days of Closing, TriSense shall cause its corporate name to be changed to a name which is not confusingly similar to the name “TriSense.” TriSense agrees that it shall not subsequently amend its Articles of Incorporation and shall prevent any affiliate from amending its Articles of Incorporation to change the name of TriSense to any corporate name which includes the term “TriSense” or any derivative of it, and TriSense agrees that it will not organize or beneficially own any of the equity of any entity whose name includes the term TriSense or any derivative of it.      (h)  Transfer Taxes. TriSense will pay any stamp, sales, transfer or other taxes payable by TriSense in respect to any of the transactions to be consummated hereunder.      (i)  Confidentiality. Except to the extent that information is or becomes public knowledge or is required by law or accounting or reporting rules applicable to Group 1 or TriSense to be disclosed, Trisense agrees that any confidential information of Group 1 (as defined in their November 17, 2000 Confidentiality Agreement) which has been obtained in connection with this Agreement or in the course of performing the obligations contemplated hereby, shall not be used by Trisense or disclosed, furnished or made accessible to third parties by it except, prior to Closing, as allowed pursuant to the terms and conditions of the November 17, 2000 Agreement, or on or after Closing, as determined by Group 1. 6.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF GROUP 1      Group 1 represents and warrants to TriSense that:      (a)  Group 1’s Authority and Status. Group 1 is a corporation in good standing under the laws of the state of Delaware and it has the capacity and authority to execute and deliver this Agreement, to perform hereunder and to consummate the transactions contemplated hereby without the necessity of any act or consent of any other person whomsoever. The execution and delivery by Group 1 of this Agreement and the other instruments and agreements to be delivered by it hereunder, and the performance by it of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary action on its part. This Agreement, and each and every other agreement, document and instrument to be executed, delivered and performed by Group 1 in connection herewith, constitutes, once all conditions to Closing have been satisfied, the valid and legally binding obligation of Group 1, enforceable against Group 1 in accordance with their respective terms, except as enforceability may be limited by applicable equitable principles or judicial discretion, or by bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to time in effect affecting the enforcement of creditors’ rights generally.      (b)  No Conflict. The execution and delivery of this Agreement by Group 1 does not, and the consummation of the transactions contemplated hereby will not, violate (i) violate any provisions of Group 1’s Restated Certificate of Incorporation or Bylaws, as amended, or (ii) any provisions or constitute a breach or event of default under any agreement, lease, instrument or other document. No consent, approval or agreement of any person, party, court, government or entity is required to be obtained by Group 1 in connection with the execution and delivery of this Agreement, or the other instruments and agreements provided herein or the consummation of the transactions contemplated hereby. 15 --------------------------------------------------------------------------------      (c)  No Broker. No agent, broker, person or firm (other than Pennsylvania Merchants Group) acting on behalf of Group 1 or any of its affiliates, or under its authority, is or will be entitled to a financial advisory fee, brokerage commission, finder’s fee or like payment in connection with this Agreement or any of the transactions contemplated hereby. Group 1 has paid or will pay any fees and expenses payable to Pennsylvania Merchants Group in connection with the transactions contemplated hereby.      (d)  Confidentiality. Except to the extent that information is or becomes public knowledge or is required by law or accounting or reporting rules applicable to Group 1 or TriSense to be disclosed, Group 1 agrees that any confidential information (as defined in their November 17, 2000 Confidentiality Agreement) which has been obtained in connection with this Agreement or in the course of performing the obligations contemplated hereby, shall not be used by Group 1 or disclosed, furnished or made accessible to third parties by it except, prior to Closing, as allowed pursuant to the terms and conditions of the November 17, 2000 Agreement, or on or after Closing, as determined by Group 1.      (e)  Access. Group 1 agrees to provide Trisense and its representatives reasonable access during normal business hours to the Assumed Contracts and records of Trisense relating to periods prior to closing to enable Trisense to prepare its taxes, respond to tax inquiries and audits, and respond to any other controversies relating to its operations prior to Closing. 7.  CLOSING AND CONDITIONS TO CLOSING      (a)  Time and Place of Closing. The closing of the transactions contemplated hereby (the “Closing”) shall take place on April 30, 2001, and shall occur at the offices of Group 1, 4200 Parliament Place, Suite 600, Lanham, Maryland 20706-1844, or at such other time and place as may be agreed upon by the parties.      (b)  Conditions Precedent to Obligation of Group 1 to Close. The obligation of Group 1 to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing, of each and every one of the following conditions, all or any of which may be waived in writing in whole or in part by Group 1:        (i)  The representations and warranties made by TriSense in this Agreement, and the Exhibits hereto, and in the documents and instruments to be delivered to Group 1 or its representatives at the Closing, shall be true and correct in all material respects as of the Closing with the same force and effect as though such representations and warranties have been made on and as of such time, except for changes contemplated by this Agreement.        (ii)  TriSense shall have duly performed all of the covenants, acts and undertakings to be performed by it as of or prior to the Closing.        (iii)  No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or which is related to or affects any of the Assets or the Business, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Group 1, would make it inadvisable to consummate such transactions.        (iv)  TriSense shall have received consents, waivers, certifications, estoppels and opinions required for the execution of this Agreement and the consummation of the transactions contemplated hereby. 16 --------------------------------------------------------------------------------        (v)  The execution and the delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been approved by all regulatory authorities whose approvals are required by law.        (vi)  Ms. Howard and Messrs. Decker, Henry, Kuder and Urban shall have accepted employment with Group 1 (or Group 1 shall have determined not to require such employment).      (c)  Conditions Precedent to the Obligation of TriSense to Close. The obligations of TriSense to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by TriSense.        (i)  The representations and warranties made by Group 1 in this Agreement, and in the documents and instruments to be delivered to TriSense or its representatives at the Closing, shall be true and correct in all material respects with the same force and effect as though such representations and warranties had been made on and as of such time.        (ii)  Group 1 shall have duly performed, in all material respects, all of the covenants, acts and undertakings to be performed by it as of or prior to the Closing.        (iii)  No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of TriSense would make it inadvisable to consummate such transactions.        (iv)  The execution and the delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been approved by all authorities whose approvals are required by law.      (d)  Transactions at Closing. At the Closing, each of the following transactions shall occur:        (i)  TriSense’s Performance. At the Closing, TriSense shall deliver the following to Group 1, fully executed, notarized and attested to where applicable:        (A)  bill of sale in the form of Exhibit C,        (B)  assignment of copyrights suitable for filing in the U.S.A. in the form set out in Exhibit D,        (C)  assignment of all of the trademarks suitable for filing in the forms set out in Exhibits E, F and G.        (D)  assignment of U.S. Patent No. 6,078,907 in the form set out in Exhibit H, hereto,        (E)  other good and sufficient instruments of sale, conveyance, transfer and assignment as shall be required or as may be appropriate in order to effectively vest in Group 1 good and marketable title to all of the Assets, free and clear of all liens, security interests and encumbrances, except for Permitted Liens, 17 --------------------------------------------------------------------------------        (F)  copies of all books of account (excluding minute books and stock books of TriSense), contracts, files and other data and documents pertaining to the Assets or the Business,        (G)  all records on all BSP, Senior Bureau, end user license, subscription or maintenance agreements for the Software;        (I)  certified copies of resolutions of the Board of Directors of TriSense approving the transactions set forth in this Agreement;        (J)  certified copies of resolutions of the stockholder of TriSense approving the transactions set forth in this Agreement;        (K)  certificate of incumbency for the officers of TriSense who are executing this Agreement and the other documents contemplated hereunder;        (L)  opinion of counsel in the form set out in Exhibit B, hereto;        (M)  physical possession of the Assets;        (N)  Certificate of Status or Good-Standing as of the most recent practicable date from the Secretary of State of Minnesota with respect to TriSense;        (O)  assignment of all of the Assumed Contracts, except the Compuware Contract;        (P)  assignment of all rights to all URLs, domain names and other Internet address identifiers identified on Exhibit J;        (Q)  consents, estoppels and assignments from entities identified on the Disclosure Schedule hereto, in forms reasonably acceptable to Group 1;        (R)  such other evidence of the performance of all covenants and satisfaction of all conditions required of parties to this Agreement, other than Group 1, at or prior to the Closing, as Group 1 or its counsel may reasonably require.   (ii)  Performance by Group 1. At the Closing, Group 1 shall deliver to TriSense the following payment and documents, fully executed, notarized and attested to where applicable:        (A)  payment of One Million, Five Hundred and Forty Five Thousand Dollars ($1,545,000) to be made at Closing as required in Section 2, above;        (B)  restricted covenants of Lamm in the from set out in Exhibit A, hereto;        (C)  a promissory note in the form of Exhibit K for aggregate principal and interest of $6,560,000; 18 --------------------------------------------------------------------------------        (D)  a security agreement in the form of the attached Exhibit L; --        (E)  such other evidence of the performance of all the covenants and satisfaction of all the conditions required of Group 1 by this Agreement at or before the Closing as TriSense may reasonably require. 8.  INDEMNIFICATION      (a)  Indemnification by TriSense. TriSense agrees to indemnify, defend and hold harmless Group 1 and its current and past officers, directors, employees, agents and representatives (collectively, the “Group 1 Indemnified Parties”) from all losses, damages, liabilities, costs (including reasonable attorneys’ and experts’ fees) and expenses (collectively, the “Losses”) incurred by the party being indemnified from:        (i)  The failure of TriSense to transfer to Group 1 all of the right, title and interest of Trisense to the Assets, or of the third party that owns such Assets and for which Trisense has agreed to obtain conveyance to Group 1 as provided in Section 1, in each case free and clear of all liens, other than Permitted Liens and otherwise as described herein;        (ii)  Any breach of any representation or warranty of TriSense contained in this Agreement or any other agreement, certificate or document delivered by them pursuant hereto; and        (iii)  Any breach of any covenant or agreement of TriSense contained in this Agreement or any other agreement or document delivered by them pursuant hereto requiring performance after the Closing Date;        (iv)  The Excluded Liabilities; and        (v)  The inability of TriSense or Group 1 to prevent another party to a TriSense’s BSP Agreement, Service Bureau Agreement or Service Provider Agreement, because of language contained in the assignment clauses of such agreements, from terminating that agreement on the grounds that the assignment of that agreement hereunder was made without their consent.        (b)  Indemnification by Group 1. Group 1 agrees to indemnify, defend and hold harmless TriSense and its current and past officers, directors, employees, agents and representatives (collectively, the “TriSense Indemnified Parties”) from all Losses incurred by the party being indemnified from:        (i)  Any breach of any representation or warranty of Group 1 contained in this Agreement or any other agreement, certificate or document delivered by Group 1 pursuant hereto;        (ii)  Any breach of any covenant of Group 1 contained in this Agreement or any other agreement or document delivered by Group 1 pursuant hereto; and        (iii)  The Assumed Liabilities. 19 --------------------------------------------------------------------------------      (c)  Third Person Claims. Promptly after any person entitled to indemnification under this Section 8 (the “Indemnified Party”) has received notice of or has knowledge of any claim, or a threat of a claim, against the Indemnified Party by a natural person or business entity (a “Person”) not a party to this Agreement (a “Third Person”) or the commencement of any covered action or proceeding by a Third Person, that Indemnified Person shall give the other party (the “Indemnifying Party”) written notice of such claim or the commencement of such action or proceeding. The Indemnified Party shall be entitled to indemnification only if the Indemnified Party delivers such notice to the Indemnifying Party prior to the expiration of the representations and warranties of the Indemnifying Party as set forth in Section 9. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the Loss and shall be given as promptly as practicable. The Indemnifying Party shall have right to defend, at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any personnel, books, records or information reasonably requested by the Indemnifying Party that are in the Indemnified Party’s possession or control. Notwithstanding the foregoing, the Indemnified Party shall have the right to approve the selection of any counsel selected by the indemnifying party to defend hereunder, which approval shall not be unreasonably conditioned, delayed or denied and to participate in any matter through counsel of its own choosing at its own expense so long as there is not a conflict of interest with counsel for the Indemnifying Party ); provided, however, that the Indemnifying Party’s counsel shall always be lead counsel and shall determine all litigation and settlement steps, strategy and the like. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently and in good faith pursues such defense and otherwise indemnifies and holds the Indemnified Party harmless, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim, such settlement shall require as an unconditional term thereof that the Third Person deliver to the Indemnified Party a release from all liability in respect of such claim. If the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party’s liability under this Section with respect to such Third Person’s claim shall be limited to the amount so offered in settlement by said Third Person and the Indemnified Party shall reimburse the Indemnifying Party for any additional costs of defense which it subsequently incurs with respect to such claim; provided, however that such limitation shall not apply to claims in respect of taxes or intellectual property claims or claims arising out of misuse of personally identifiable data, for which no settlement shall be made without the prior consent of the Indemnified Party, which consent shall not be unreasonably conditioned, delayed or denied. If the Indemnifying Party does not promptly undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails to diligently or in good faith pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at reasonable cost and expense of the Indemnifying Party, and the Indemnified Party may settle such matter, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or reasonable expenses incurred by the Indemnified Party in connection therewith.      (d)  If the indemnification provided for in this Section 8 from the Indemnifying Party is unavailable to an Indemnified Party, in respect of any Losses referred to therein, the Indemnifying Party, in lieu of indemnifying such persons, shall contribute to the amount paid or payable by such persons as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnified Party in connection with the actions that resulted in such Losses, as well as any other relative equitable considerations. The amount paid or payable by a party as a result of the Losses shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with any investigation, lawsuit or legal or administrative action or proceeding 20 --------------------------------------------------------------------------------      (e)  Other Claims. In the event any Indemnified Party should have a claim for indemnification against any Indemnifying Party which does not involve a claim by a Third Person, the Indemnified Party shall deliver a notice of such claim to the Indemnifying Party, setting forth in reasonable detail the identity, nature and estimated amount of the Loss (if reasonably determinable) related to such claim or claims, with reasonable promptness. The Indemnified Party shall be entitled to indemnification only if the Indemnified Party delivers such notice to the Indemnifying Party prior to the expiration of the representations and warranties of the Indemnifying Party as set forth in Section 9. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such notice or fails to notify the Indemnified Party within twenty (20) business days after delivery of such notice by the Indemnified Party whether the Indemnifying Party disputes the claim described in such notice, the Loss in the amount specified in the Indemnified Party’s notice will be conclusively deemed a liability of the Indemnifying Party subject to the limitations of the Basket Amount and Cap described below. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute for a period of thirty (30) business days. If such dispute has not been resolved by such time, such dispute shall be resolved fully and finally by an arbitrator selected pursuant to, and an arbitration governed by, the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall resolve the dispute within 120 days after selection and judgment upon the award rendered by such arbitrator may be entered in any court of competent jurisdiction. The place of arbitration shall be Minneapolis, Minnesota if initiated by Group 1 or the Washington, DC metropolitan area if initiated by TriSense. If a Third Person raises a claim or threat of a claim related to an arbitrated claim for indemnification during the pendency of the arbitration proceeding pursuant to this Section (e), the procedures set forth in Section 8(c) shall control and the arbitration proceeding shall be withdrawn.      (f)  Good Faith Claims. Any Indemnified Party shall bring a claim for indemnification hereunder in good faith and in a timely manner consistent with good commercial practices.      (g)  Limitations on Indemnity. Anything to the contrary notwithstanding, neither the Group 1 Indemnified Parties, on the one hand, nor the TriSense Indemnified Parties, on the other hand, shall be entitled to recovery from the Indemnifying Party (i) unless and until the aggregate amount of such Losses suffered (excluding, however, legal fees and expenses), sustained or incurred by the Group 1 Indemnified Parties or the TriSense Indemnified Parties, as the case may be, shall exceed $135,000 calculated on a cumulative and not on a per item basis (the “Basket Amount”), and then only with respect to the excess over the Basket Amount, and (ii) in an aggregate amount in excess of $6,000,000 (the “Cap”).      (h)  Offset against Promissory Note. Notwithstanding any other provision in this Section 8, if Group 1 either (a) asserts in good faith a claim to indemnity for a Loss pursuant to subsection 8(e) that has not been settled or proceeded to the point of an arbitration award or other adjudication, or (b) is subject to a Loss from a third party claim pursuant to Section 8(c) that has not been adjudicated or settled (such Loss described in (a) and (b) being referred to as a “Pending Loss”), then Group 1 may withhold from its obligation to pay pursuant to the Promissory Note, the reasonable amount of such Pending Loss that is the subject to such claim for indemnity, provided that Group 1 shall not be entitled to withhold for a Pending Loss to the extent that the amount of such Pending Loss, together with all other Pending Losses that have been withheld, shall exceed $1,500,000. If and to the extent Trisense is held not liable through arbitration or litigation for any such Pending Loss, Group 1 shall immediately pay over the amount withheld to Trisense plus interest from the due date of the payment from which such amount is withheld to the date of such payment to Trisense at the rate of twelve percent (12%) per annum.      (i)  Offsetting Losses. Notwithstanding anything in this Agreement to the contrary, the amount of any Losses for which indemnification is provided under this Section 8 shall be reduced by (A) any related recoveries actually received by an Indemnified Party under insurance policies, and (B) any other related payments actually received by an Indemnified Party from third parties. 21 --------------------------------------------------------------------------------      (j)  Notwithstanding anything in this Agreement to the contrary, Group 1 shall not be entitled to indemnification under this Section 8 for any Losses related to the collection of an account receivable, unless and until Group 1 has (i) expended commercially reasonable efforts to collect such account receivable, and (ii) offered to assign such account receivable to TriSense.      (k)  Exclusive Remedy. After the Closing, the rights set forth in this Section 8 (Indemnification) shall be each party’s sole and exclusive remedies against the other party hereto for misrepresentations or breaches of covenants or warranties contained in this Agreement and the other agreements contemplated hereby, excluding, however, enforcement of Lamm’s restrictive covenant and any action in equity that either party may institute to obtained equitable relief. Notwithstanding the foregoing, nothing herein shall prevent any of the parties hereto from bringing an action based upon allegations of fraud or other intentional breach of an obligation of or with respect to the other parties in connection with this Agreement or the additional agreements contemplated hereby. In the event such action is brought, Group 1, on the one hand, and TriSense on the other hand, shall bear their own fees and expenses in connection with such action. 9.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES      (a)  All representations, warranties, agreements, covenants and obligations made or undertaken by Group 1 in this Agreement orin any document or instrument executed and delivered pursuant hereto, have been relied upon by TriSense and shall survive the Closing for a period of twenty-four (24) months unless an express provision of the document or instrument executed and delivered pursuant hereto calls for a longer period of survival.      (b)  All representations, warranties, agreements, covenants and obligations made or undertaken by TriSense in this Agreement or in any document or instrument executed and delivered pursuant hereto have been relied upon by Group 1 and shall survive the Closing for a period of twenty-four (24) months unless an express provision of the document or instrument executed and delivered pursuant hereto calls for a longer period of survival.      (c)  Except as expressly set forth herein, TriSense makes no representation or warranty, express or implied, at law or in equity, in respect of any of its assets (including, without limitation, the Assets), liabilities or operations. 10.  TERMINATION      (a)  This Agreement constitutes the binding agreement of the parties to consummate the transactions contemplated hereby, the consideration for which is, inter alia, the covenants set forth herein and the expenditures and obligations incurred and to be incurred by TriSense and Group 1 in respect of this Agreement. This Agreement may be terminated and abandoned at any time prior to the Closing by: (i) mutual written consent of TriSense and Group 1; (ii) by the TriSense, on the one hand, or by Group 1, on the other hand, if the Closing shall not have been consummated on or prior to April 16, 2001 or such later date, if any, as the parties hereto shall agree in writing, provided, that, no party will be entitled to terminate this Agreement pursuant to this Section 10(a)(ii) if such party’s willful breach of this Agreement has prevented the consummation of the transactions contemplated hereby;or (iii) by TriSense, on the one hand, or by Group 1, on the other hand, in the event of a material breach or default by the other party of any provision of this Agreement and, in the case of a breach or default that is capable of being cured, continuation of such breach or default for a period of 10 days after written notice thereof shall have been given to the breaching party. 22 --------------------------------------------------------------------------------      (b) In the event of a termination of this Agreement pursuant to this Section 10, each party shall pay the costs and expenses incurred by it in connection with this Agreement, and no party (or any of its officers, directors, employees, agents, representatives or shareholders) shall be liable to any other party for any costs, expenses, damage or loss of anticipated profits hereunder; provided, however, if such termination is due to the breach by any party of any covenant, agreement, warranty or representation, or results from any party failing to use its commercially reasonable efforts to fulfill any condition to which the Closing is subject (a “Breaching Party”), then the Breaching Party shall be solely responsible for the costs and expenses incurred by the other party in connection with this Agreement and the transaction contemplated hereby. 11.  MISCELLANEOUS      (a)  Payment of Fees and Expenses. Except as set forth in Sections 8 and 10(b), herein, TriSense and Group 1 each agrees that regardless of whether the transactions contemplated hereunder close, to pay their own fees and expenses, including the fees and expenses of its respective counsel, accountants, investment brokers, advisors, employees and other agents, if any, incurred in connection with the transactions contemplated here, unless expressly agreed to otherwise in the Agreement. Notwithstanding anything to the contrary set out herein, in the event that either TriSense or Group 1 resorts to litigation to settle a dispute under this Agreement, the prevailing party shall be entitled to recover reasonable fees expended to retain legal counsel, experts and to defray costs and expenses directly related with such litigation.      (b)  Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered by hand, mailed by Federal Express or other overnight, tracked delivery service or sent by facsimile, addressed as follows: (i) If to TriSense:   Mr. David Lamm TriSense Software, Ltd. 204 Marcin Lane, Burnsville, MN 55337   With copy to:   Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402 Attention: Thomas Martin, Esq. Telefax: (612) 340-8738   If to Group 1:   Group 1 Software, Inc. 4200 Parliament Place Suite 600 Lanham, Maryland 20706-1488 Attention: General Counsel Telefax: (301) 731-0360 23 --------------------------------------------------------------------------------        (ii)  Any party hereto may change its address specified for notices herein by designating a new address by notice in accordance with this Section. Any notice shall be deemed given (A) at the time it is received if delivered by hand or (B) the day after being mailed if mailed by Federal Express or other overnight courier.      (c)  Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, executors and administrators and successors and assigns, but may not be assigned by any party hereto without the prior written consent of the other party hereto which consent shall not be unreasonably conditioned, delayed or denied. Notwithstanding the foregoing provisions of this Section 12(c), Group 1 may transfer or assign this Agreement and all of its rights and obligations hereunder without the consent of TriSense to any entity that purchases all or substantially all of its assets or that succeeds to such assets through merger or consolidation, and provided that after any such transfer or assignment Group 1 remains liable to TriSense for any failure of an transferee or assignee to perform its obligations hereunder, to any Affiliate (an entity which controls, is controlled by or is under common control with respect to Group 1).      (d)  Further Assurances. Each party covenants that at any time, and from time to time after the Closing, it will execute and deliver (or cause to be so done) such additional instruments and take such actions as may be reasonably requested by the other parties to confirm or perfect or otherwise to carry out the intent and purposes of this Agreement. TriSense agrees to execute and deliver (or cause to be so done) to Group 1 any instruments or documents that Group 1 requests in order to register or otherwise protect or preserve any rights (patent, trademark, copyright or otherwise) that Group 1 has or shall have in and to U.S. Patent No. 6,078,907, the Trademarks, the Software or the Documentation. All documents shall be prepared at the sole cost and expense of the requesting party. TriSense agrees to obtain from Lamm, at no additional expense to Group 1, at any time, and from time-to-time after Closing, his execution and delivery of such additional instruments as may be reasonably requested by Group 1 to convey to Group 1 title, free and clear of any and all liens, encumbrances or other clouds on title, with respect to any of the Assets which, prior to Closing, were titled in his name and had not, at Closing, been transferred to TriSense.      (e)  No Third Party Beneficiaries. Nothing contained herein shall be construed to afford any rights or benefits to any third party or person. Any implication of rights grant to any such party is hereby expressly disclaimed.      (f)  Risk of Loss. TriSense assumes all risk of theft or casualty of loss or damage regarding the Assets (except for any Assets which are in the Group 1’s possession prior to Closing) from the date of this Agreement up to the Closing. In the event of such loss or damage prior to Closing, TriSense shall use its commercially reasonable efforts to repair, replace or restore such Assets immediately. If TriSense does not so effect repair, replacement or restoration to satisfy the conditions to Closing set out above, Group 1 shall have the right to terminate this Agreement.      (d)  Captions. The section and other headings in this Agreement are inserted solely as a matter of convenience and for reference, and are not a part of this Agreement.      (e)  Integration. This Agreement together with the documents executed concurrently herewith or at the Closing and the November 17, 2000 Confidentiality Agreement between the parties constitute the entire agreement among the parties hereto with respect to the transactions contemplated hereby and supersedes and cancels any prior agreements representations, warranties, or communications, whether oral or written, among the parties hereto relating to the transactions contemplated hereby. 24 --------------------------------------------------------------------------------      (f)  Governing Law. This Agreement shall be governed by and enforced in accordance with the laws of the State of Maryland, principles of conflicts of law notwithstanding.      (g)  Forum. This Agreement may be enforced in any federal court or state court sitting in Minnesota or Maryland; and the parties hereto consent to the jurisdiction and venue of any such court and waive any argument that venue in such forum is not convenient.      (h)  Waiver. Any failure on the part of any party hereto to comply with any of its obligations, agreements or conditions hereunder may be waived in writing by any other party to whom such compliance is owed. No waiver of any provision of this Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an agreement in writing signed by the party against whom or which the enforcement of such change, waiver, discharge or termination is sought.      (i)  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. A facsimile signature followed by an original signature shall be sufficient to execute this Agreement and the other agreements contemplated hereunder.      (j)  Gender. All pronouns used herein shall be deemed to refer to the masculine, feminine or neuter gender as the context requires. References herein to the plural shall include the singular, or vice versa, as context requires.      (k) Interpretation .The Agreement shall be construed without reference to any presumption or rules of construction operating against the “draftsman” of the document, the intent of the parties being that any such presumption or rule is inapplicable in this instance because both parties have reviewed and negotiated this document in the manner that each viewed as most advantageous to its own interests.      (l)  Exhibits. All Exhibits attached hereto are incorporated herein by reference, and all blanks in such Exhibits, if any, will be filled in as required in order to consummate the transactions contemplated herein and in accordance with this Agreement.      (m)  Severability. In the event that any provision of this Agreement or any word, phrase, clause, sentence or other portion thereof shall be held to be unenforceable or invalid under applicable law for any reason, such provision or portion thereof shall be modified or deleted in such a manner so as to effect the agreement of the parties under this Agreement, as modified, to the fullest extent permitted under applicable law.      (n)  Definition of Knowledge. — An individual will be deemed to have “knowledge” of a particular fact or other matter if such individual is actually aware of such fact or other matter or a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the ordinary and prudent course of the business of such Person. A Person (i.e., not an individual) will be deemed to have “knowledge” of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer or member of management or professional advisor of such Person (or in any similar capacity) has, or at any time had, knowledge of such fact or other matter. 25 --------------------------------------------------------------------------------      IN WITNESS WHEREOF, each party hereto has executed or caused this Agreement to be executed on its behalf, all on the day and year first above written. TRISENSE SOFTWARE, LTD. By:       ——————————————— David Lamm, President GROUP 1 SOFTWARE, INC. By:       ——————————————— Name:            —————————————— Its:       ——————————————— 26
Exhibit 10.6   OUR CREDIT NUMBER ISSUE DATE EXPIRY DATE LETTER OF CREDIT AMOUNT SE441429P FEB. 26, 2001 FEB. 26, 2002 USD37,675,000.00   BENEFICIARY: ISSUER: US BANK NATIONAL ASSOCIATION GE CAPITAL CORPORATION INTERNATIONAL DEPARTMENT   1420 FIFTH AVENUE, 9TH FLOOR   SEATTLE, WA. 98101     DEAR BENEFICIARY: AT THE REQUEST OF THE ABOVE ISSUER WE HAVE BEEN INSTRUCTED TO ADVISE YOU THAT THE ATTACHED IRREVOCABLE STANDBY LETTER OF CREDIT HAS BEEN ESTABLISHED IN YOUR FAVOR, AS BENEFICIARY. ALL DEMANDS FOR PAYMENTS MUST BE SENT TO FIRST UNION NATIONAL BANK, ONE SOUTH BROAD STREET, PHILADELPHIA, PA 19106, MAIL CODE PA 4928, ATTN: GE CORPORATE FINANCE STANDBY TEAM. DOCUMENTS MUST CONFORM STRICTLY WITH THE TERMS OF THE ATTACHED LETTER OF CREDIT.  IF YOU ARE UNABLE TO COMPLY WITH SAME, PLEASE COMMUNICATE DIRECTLY WITH YOUR CUSTOMER IN ORDER TO HAVE THE ISSUER AMEND THE RELEVANT CONDITIONS.  THIS SHOULD ELIMINATE DIFFICULTIES AND DELAYS IN PAYMENT IN THE EVENT DOCUMENTS ARE PRESENTED FOR NEGOTIATION. ALL DEMANDS HEREUNDER MUST INDICATE THE ABOVE REFERENCED LETTER OF CREDIT NUMBER. EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT TO THE "INTERNATIONAL STANDBY PRACTICES (1998 EDITION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NUMBER 590" ALL INQUIRIES REGARDING THIS CREDIT SHOULD BE DIRECTED TO FIRST UNION NATIONAL BANK AT OUR PHONE NUMBER (215) 973-7012.   /s/ Richard Fortino --------------------------------------------------------------------------------   FIRST UNION NATIONAL BANK AUTHORIZED SIGNATURE                  GE Capital                                                                                                                                        General Electric Capital Corporation   OUR CREDIT NO. ISSUE DATE EXPIRY DATE LETTER OF CREDIT AMOUNT SE441429P FEBRUARY 26, 2001 FEBRUARY 26, 2002 USD 37,675,000.00   BENEFICIARY: APPLICANT:   US BANK NATIONAL ASSOCIATION LABOR READY, INC INTERNATIONAL DEPARTMENT 1016 SOUTH 28TH 1420 FIFTH AVENUE, 9TH FLOOR TACOMA, WA 98409 SEATTLE, WA 98101       DEAR BENEFICIARY: WE HEREBY ESTABLISH, AT THE REQUEST OF AND FOR THE ACCOUNT OF LABOR READY, INC ("LABOR READY") IN YOUR FAVOR, OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO.  SE441429P FOR AN AMOUNT NOT TO EXCEED $37,675,000.00 THIRTY SEVEN MILLION SIX HUNDRED AND SEVENTY FIVE THOUSAND DOLLARS (THE “STATED AMOUNT”), AVAILABLE IMMEDIATELY. WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT IN YOUR FAVOR, AS BENEFICIARY, WHICH IS AVAILABLE BY SIGHT PAYMENT. THIS STANDBY LETTER OF CREDIT IS BEING ISSUED TO SUPPORT THE OBLIGATIONS OF LABOR READY (TO THE EXTENT NOT IN EXCESS OF THE STATED AMOUNT) IN RESPECT TO THE LABOR READY STANDBY LC'S. (AS EACH SUCH TERM IS DEFINED BELOW) FOR PURPOSES OF THIS STANDBY LETTER OF CREDIT AND ANY DRAWING CERTIFICATE DELIVERED HEREUNDER, THE FOLLOWING TERMS SHALL HAVE THE MEANINGS INDICATED: "LABOR READY STANDBY LC'S" MEANS ONE OF THE IRREVOCABLE STANDBY LETTERS OF CREDIT ISSUED BY US BANK NATIONAL ASSOCIATION FOR THE ACCOUNT OF LABOR READY SET FORTH ON ANNEX I HERETO. IT IS A CONDITION OF THIS STANDBY LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM ITS EXPIRY DATE OF FROM ANY FUTURE EXPIRY DATE, UNLESS AT LEAST 30 DAYS PRIOR TO ANY SUCH EXPIRY DATE WE SHALL NOTIFY YOU BY CERTIFIED MAIL THAT WE ELECT NOT TO CONSIDER THIS STANDBY LETTER OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD. AVAILABLE BY SIGHT PAYMENT AGAINST THE FOLLOWING: THE BENEFICIARY'S TESTED TELEX OR AUTHENTICATED SWIFT SENT TO OUR TELEX NO. 4990118 ANSWERBACK BANKPHILOR SWIFT ADDRESS PNBPUS33APHL ON OR PRIOR TO 3 P.M. ON OR BEFORE THE EXPIRY DATE HEREOF STATING THEREIN THE FOLLOWING: A) “THE BENEFICIARY HEREBY DEMANDS PAYMENT UNDER GENERAL ELECTRIC CAPITAL CORPORATION LETTER OF CREDIT NUMBER SE441429P AN AMOUNT OF USD (SUPPLY AMOUNT) WHICH AMOUNT REPRESENTS FUNDS DUE AND OWING TO THE BENEFICIARY IN REIMBURSEMENT OF PAYMENT BY THE BENEFICIARY OF DRAWING(S) UNDER OUTSTANDING LETTER(S) OF CREDIT NO.(S) (SUPPLY RELEVANT NUMBER(S)) ISSUED BY THE BENEFICIARY FOR THE ACCOUNT OF LABOR READY.  SUCH DRAWING(S) CONFORM TO THE TERMS AND CONDITIONS OF THE RELEVANT LETTER OF CREDIT OR THE PAYMENT OF SUCH DRAWING(S) HAS/HAVE BEEN AUTHORIZED BY                       ,   SEE CONTINUATION A GE Capital Services Company   ATTACHED TO AND FORMING PART OF STANDBY CREDIT NO.  SE441429P DATED FEBRUARY 26, 2001. PAGE TWO   AND/OR A) B)  “THE BENEFICIARY HEREBY DEMANDS UNDER GENERAL ELECTRIC CAPITAL CORPORATION LETTER OF CREDIT NUMBER SE441429P AN AMOUNT OF USD(SUPPLY AMOUNT) WHICH AMOUNT REPRESENTS FUNDS DUE AND OWING TO THE BENEFICIARY FOR PAYMENT OF CUSTOMARY AND REASONABLE FEES AND CHARGES IN CONNECTION WITH OUTSTANDING LETTER(S) OF CREDIT NO.(S) (SUPPLY RELEVANT-NUBERS) ISSUED BY THE BENEFICIARY FOR THE ACCOUNT OF LABOR READY, INCLUDING WITHOUT LIMITATION THE NEGOTIATION FEE.  SUCH FEES AND CHARGES HAVE NOT BEEN PAID BY LABOR READY AS OF THE DATE HEREOF."     (STATE A AND/OR B ABOVE, AS APPLICABLE) SPECIAL CONDITIONS: A)  THE STATED AMOUNT OF THIS LETTER OF CREDIT SHALL ALSO BE REDUCED FROM TIME TO TIME, UPON RECEIPT BY FIRST UNION NATIONAL BANK OF THE FOLLOWING: TESTED TELEX OR AUTHENTICATED SWIFT, DULY TRANSMITTED TO OUR TELEX NO.  TELEX NO. 4990118 ANSWERBACK:  PNBPUS33;OR SWIFT ADDRESS PNBPUS33APHL ON OR PRIOR TO THE EXPIRY DATE HEREOF, STATING THEREIN THE FOLLOWING:   A) “THE OUTSTANDING LETTER(S) OF CREDIT NO.(S) (SUPPLY RELEVANT NUMBER(S)) ISSUED BY US BANK NATIONAL ASSOCIATION FOR THE ACCOUNT OF LABOR READY HAS(HAVE) EXPIRED WITH AN UNUSED BALANCE OF USD(SUPPLY AMOUNT), THEREFORE GENERAL ELECTRIC CAPITAL CORPORATION IS INSTRUCTED AND AUTHORIZED TO REDUCE THE STATED AMOUNT OF THEIR LETTER OF CREDIT NUMBER SE441429P BY SUCH AMOUNT." AND/OR   B) “THE OUTSTANDING LETTER(S) OF CREDIT NO.(S) (SUPPLY RELEVANT NUMBER(S)) ISSUED BY US BANK NATIONAL ASSOCIATION FOR THE ACCOUNT OF LABOR READY HAS(HAVE) BEEN RETURNED TO US FOR CANCELLATION AND HAS(HAVE) BEEN TERMINATED BY US WITH AN UNUSED BALANCE OF USD(SUPPLY AMOUNT), THEREFORE GENERAL ELECTRIC CAPITAL CORPORATION IS INSTRUCTED AND AUTHORIZED TO REDUCE THE STATED AMOUNT OF THEIR LETTER OF CREDIT NUMBER SE441429P BY SUCH AMOUNT." SEE CONTINUATION   A GE Capital Services Company   ATTACHED TO AND FORMING PART OF STANDBY CREDIT NO.  SE441429P DATED FEBRUARY 26, 2001. PAGE THREE AND/OR C) “THE OUTSTANDING LETTER(S) OF CREDIT NO.(S) (SUPPLY RELEVANT NUMBER(S))  ISSUED BY US BANK NATIONAL ASSOCIATION FOR THE ACCOUNT OF LABOR READY HAS(HAVE) BEEN REDUCED BY USD(SUPPLY AMOUNT), THEREFORE GENERAL ELECTRIC CAPITAL CORPORATION IS INSTRUCTED AND AUTHORIZED TO REDUCE THE STATED AMOUNT OF THEIR LETTER OF CREDIT NUMBER SE441429P BY SUCH AMOUNT."  THE ORIGINAL OF THIS LETTER OF CREDIT AND ALL, AMENDMENTS, IF ANY, FOR OUR ENDORSEMENT. (IF YOUR DEMAND REPRESENTS A PARTIAL DRAWING HEREUNDER, WE WILL ENDORSE THE ORIGINAL CREDIT AND RETURN SAME TO YOU FOR POSSIBLE FUTURE CLAIMS.  IF, HOWEVER, YOUR DEMAND REPRESENTS A FULL DRAWING OR IF SUCH DRAWING IS PRESENTED ON THE DAY OF THE RELEVANT EXPIRATION DATE HEREOF, WE WILL HOLD THE ORIGINAL FOR OUR FILES AND REMOVE SAME FROM CIRCULATION.) THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING AND SUCH UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED OR AMPLIFIED BY REFERENCE TO ANY DOCUMENT OR INSTRUMENT REFERRED TO HEREIN OR IN WHICH THIS LETTER OF CREDIT IS REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES AND ANY SUCH REFERENCE SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY DOCUMENT OR INSTRUMENT. WE ENGAGE WITH YOU THAT ALL DOCUMENTS PRESENTED IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT WILL BE DULY HONORED BY US IF DELIVERED TO FIRST UNION NATIONAL BANK, P.O. BOX 13866, 1345 CHESTNUT STREET, NINTH FLOOR, MAIL CODE PA4928, ATTENTION: LETTER OF CREDIT DEPARTMENT, PHILADELPHIA, PA. 19107 PRIOR TO 3 P.M. ON OR BEFORE THE EXPIRY DATE HEREOF. ALL DEMANDS FOR PAYMENT, NOTICES AND OTHER COMMUNICATIONS TO US IN RESPECT OF THIS LETTER OF CREDIT SHALL i BE IN WRITING AND ADDRESSED AND PRESENTED TO US AT FIRST UNION BANK, N.A., 9TH FLOOR, MAIL CODE PA4928,1345 CHESTNUT STREET, PHILADELPHIA, PA. 19107, ATTENTION: INTERNATIONAL STANDBY LETTER OF CREDIT, (OR AT SUCH OTHER OFFICE OR OFFICES AS WE MAY DESIGNATE BY WRITTEN NOTICE TO YOU), AND SHALL MAKE SPECIFIC REFERENCE TO THIS LETTER OF CREDIT BY NUMBER, ii BE PERSONALLY DELIVERED TO US AT THE ADDRESS SPECIFIED ABOVE, OR, iii MAY BE SENT TO US BY TESTED TELEX, SWIFT OR BY TELECOPIER ON YOUR LETTERHEAD SIGNED BY YOUR OFFICER, TO THE FOLLOWING NUMBERS: TELEX NO. 4990118 ANSWERBACK: PNBPUS33; SWIFT ADDRESS PNBPUS33APHL;TELECOPIER NO.: 215-786-8803.   EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED HEREIN THIS LETTER OF CREDIT IS SUBJECT TO THE "INTERNATIONAL STANDBY PRACTICES, INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 590 ("ISP98"). ALL INQUIRIES REGARDING THIS CREDIT SHOULD BE DIRECTED TO US AT OUR PHONE NUMBERS (215) 973-8157; (215)973-5981; (215) 973-1944. /s/ Richard Fortino --------------------------------------------------------------------------------   AUTHORIZED SIGNATURE     A GE Capital Services Company   ATTACHED TO AND FORMING PART OF STANDBY CREDIT NO. SE441429P.DATED FEBRUARY 26, 2001. PAGE FOUR   ANNEX I   Beneficiary $Amount   Expiration   LC #   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Mutual Indemnity $7,560,000.00   12/31/01   SLCS001461   TOTAL OUTSTANDING SBLCs $7,560,000.00           OUTSTANDING STANDBY AND DOCUMENTARY LETTERS OF CREDIT     END OF ANNEX I A GE Capital Services Company    
Exhibit 10.1 LEASE AGREEMENT Date:  8/13/01 LESSOR:   LESSEE:       Place & Plaza LLC c/o Wellington Management, Inc. 1625 Energy Park Drive, Suite 100 St. Paul, MN 55108   Endocardial Solutions, Inc. 1350 Energy Lane, Suite 104 St. Paul, MN 55108 Federal ID # 41-1724963   Lessor hereby leases to Lessee the Premises described below, on the terms and conditions defined within this Agreement 1.             DESCRIPTION. Address   1410 Energy Park Drive, Suite 12, St. Paul, MN 55108       Building Square Footage   49,158 square feet       Premises Square Footage   7,316 square feet       Percentage Share   14.88%       The commencement date shall be 30 days from Lease execution and will terminate on March 31, 2004, but must be executed no later than August 13, 2001.  Lessor will issue a commencement letter to Lessee, as confirmation of the commencement date.  Should the commencement date be a date other than the first of the month, the first month’s rent shall be prorated as necessary.       Monthly Rent   (see below)       Use of Premises   General warehouse and production space   2.             LEASE.  IN CONSIDERATION OF THESE MUTUAL AGREEMENTS AND PROVISIONS, LESSOR LEASES TO LESSEE AND LESSEE LEASES FROM LESSOR THE ABOVE PREMISES FOR THE ABOVE USE AND IN COMPLIANCE WITH FEDERAL, STATE AND LOCAL REGULATIONS AND THE RULES AND REGULATIONS ESTABLISHED BY LESSOR. 3.             RENT PAYMENTS.  LESSEE SHALL PAY TO LESSOR IN ADVANCE, THE STATED MONTHLY BASE RENT AND THE ADDITIONAL RENT ON OR BEFORE THE FIRST DAY OF EACH MONTH WITH SAID AMOUNT TO BE PRORATED FOR THE FIRST AND LAST MONTH OF THE LEASE TERM IF OCCUPANCY BY LESSEE SHALL BEGIN OR END ON A DAY OTHER THAN THE FIRST OF THE MONTH.  LESSOR SHALL HAVE THE RIGHT TO ASSESS AND COLLECT FROM LESSEE A LATE SERVICE FEE OF TEN (10) PERCENT ON RENT PAYMENTS RECEIVED AFTER THE FIFTEENTH (15TH) OF THE MONTH, SAID AMOUNT TO BE PAID WITH THE NEXT INSTALLMENT OF MONTHLY RENT.  FAILURE ON BEHALF OF LESSEE TO MAKE THESE RENT PAYMENTS UNTIL PROPER TERMINATION OF THIS AGREEMENT WILL RESULT IN THE RIGHT OF LESSOR TO EXERCISE LEGAL REMEDIES. The Base Rent shall be paid according to the following schedule: TERM   RATE PER SF.   ANNUAL BASE RENT   MONTHLY BASE RENT                   First 12 months   $ 6.00   $ 43,896.00   $ 3,658.00   Remainder of Term   $ 6.50   $ 47,554.00   $ 3,962.83     OPTION TO TERMINATE.  Lessee is granted the right to terminate this lease agreement in accordance with the terms as set forth in the Option to Terminate in Lessee’s Lease for the Premises located at 1350 Energy Lane, Suites 104-110, St. Paul, MN 55108. 4.             ADDITIONAL RENT FOR OPERATING COSTS.  LESSEE SHALL PAY LESSEE’S PRO RATA SHARE 14.88% OF THE “OPERATING EXPENSES,” AS MAY BE NECESSARY AND REASONABLE, AS REASONABLY ESTIMATED FROM TIME TO TIME BY LESSOR, IN OPERATING AND MANAGING, EQUIPPING, POLICING AND PROTECTING, LIGHTING, REPAIRING, REPLACING NON-CAPITAL IMPROVEMENT ITEMS, AND MAINTAINING THE BUILDING.  “OPERATING COSTS” ARE NOT SPECIFIC COSTS WHICH ARE SEPARATELY BILLED TO AND PAID BY SPECIFIC TENANTS, AND NOT DEPRECIATION EXPENSES OR EXPENSES ARISING FROM THE AMORTIZATION OF ANY PRINCIPAL OR INTEREST PAYMENTS ON LESSOR’S MORTGAGE DEBT AGAINST THE PREMISES, OR PAYMENT OF INCOME TAXES BY LESSOR.  “OPERATING EXPENSES” INCLUDE, BUT ARE NOT LIMITED TO, THE FOLLOWING: (A)           EMPLOYEE EXPENSES.  WAGES, SALARIES AND RELATED EXPENSES OF ALL EMPLOYEES DIRECTLY ENGAGED IN THE OPERATION, MAINTENANCE AND SECURITY OF THE BUILDING. (B)           SUPPLIES AND MATERIALS.  ALL SUPPLIES AND MATERIALS USED IN THE OPERATION AND MAINTENANCE OF THE BUILDING. (C)           UTILITIES.  THE “COMMON AREA” UTILITIES THAT SERVE THE BUILDING ARE SEPARATELY METERED, AND LESSEE SHALL PAY ITS PERCENTAGE SHARE OF ANY SUCH COSTS WHICH MAY INCLUDE GAS, ELECTRICITY, WATER AND SEWER FOR THE TERM OF THIS AGREEMENT.  ALL OTHER UTILITY SERVICES TO THE PREMISES WILL BE METERED SEPARATELY, BILLED TO AND PAID FOR BY LESSEE. (D)           MANAGEMENT AND MAINTENANCE AGREEMENT.  MANAGEMENT COSTS NOT TO EXCEED THOSE WHICH ARE CUSTOMARILY CHARGED BY INDEPENDENT MANAGERS FOR SIMILAR BUILDINGS IN SIMILAR LOCATIONS, MAINTENANCE AND SERVICE AGREEMENTS FOR THE BUILDING AND THE EQUIPMENT THEREIN INCLUDING, BUT NOT LIMITED TO, BUILDING ALARM SYSTEM(S), WINDOW CLEANING, SNOW REMOVAL AND GROUND MAINTENANCE. (E)           INSURANCE.  COST OF ALL INSURANCE, INCLUDING, BUT NOT LIMITED TO, FIRE, CASUALTY, LIABILITY AND RENTAL ABATEMENT INSURANCE APPLICABLE TO THE BUILDING AND LESSOR’S PERSONAL PROPERTY USED IN CONNECTION THEREIN.  IF THE USE OF THE PREMISES BY LESSEE RESULTS IN ANY RATE INCREASE FOR SUCH INSURANCE, LESSEE SHALL CORRECT THE CIRCUMSTANCES THAT CAUSE SUCH RATE INCREASE OR SHALL PAY SUCH RATE INCREASE IMMEDIATELY WHEN DUE. (F)            REPAIRS, REPLACEMENTS AND GENERAL MAINTENANCE.  COSTS OF REPAIRS, REPLACEMENTS OF NON-CAPITAL ITEMS AND GENERAL MAINTENANCE (EXCLUDING REPAIRS AND GENERAL MAINTENANCE PAID BY PROCEEDS OF INSURANCE OR BY LESSEE OR OTHER THIRD PARTIES, AND ALTERATIONS ATTRIBUTABLE SOLELY TO TENANTS OF THE BUILDING OTHER THAN LESSEE). (G)           COMMON AREA MAINTENANCE.  ANY AND ALL COMMON AREA MAINTENANCE COSTS RELATED TO THE PUBLIC AREAS OF THE BUILDING INCLUDING INTERIOR LOBBY AND SERVICE AREAS, SIDEWALKS, THE PARKING LOT, LANDSCAPING, WINDOW WASHING, EXTERIOR PAINTING AND ALL OTHER SUCH MAINTENANCE REQUIRED DURING THE TERM OF THIS AGREEMENT.  ALL SERVICES SHALL BE PROVIDED FOR THE COMFORTABLE USE OF THE PREMISES DURING BUSINESS HOURS PROVIDED THAT LESSEE IS NOT LIABLE FOR DAMAGES FOR FAILURE TO PROVIDE SERVICES DUE TO CAUSES BEYOND ITS REASONABLE CONTROL. (H)           MAINTENANCE OF HEATING, MECHANICAL AND AIR-CONDITIONING FIXTURES AND EQUIPMENT SHALL SPECIFICALLY INCLUDE THE REASONABLE COST OF QUARTERLY INSPECTIONS AND PREVENTIVE MAINTENANCE PERFORMED BY AN INDEPENDENT MECHANICAL CONTRACTOR WHO SHALL BE CONTRACTED FOR BY LESSOR.  ANY ADDITIONAL CHARGES THAT RESULT FROM REPAIRS OR MECHANICAL BREAKDOWNS WHICH RESULT IN COSTS OVER AND ABOVE ROUTINE MAINTENANCE COVERED IN SERVICE CONTRACTS WILL BE BILLED TO AND DIRECTLY PAID FOR BY LESSEE. (I)            REAL ESTATE TAXES.  ALL REAL ESTATE TAXES ASSESSED AGAINST THE BUILDING, INCLUDING SPECIAL ASSESSMENTS WHICH ARE DUE AND PAYABLE DURING THE TERM OF THE LEASE. (J)            OTHER TAXES.  ALL OTHER TAXES, SERVICE PAYMENTS IN LIEU OF TAXES, EXCISE, LEVIES, FEES OR CHARGES, GENERAL AND SPECIAL, ORDINARY AND EXTRAORDINARY, UNFORESEEN AS WELL AS FORESEEN, OF ANY KIND WHICH ARE ASSESSED, LEVIED, CHARGED, CONFIRMED OR IMPOSED BY ANY PUBLIC AUTHORITY UPON THE BUILDING, ITS OPERATION OR THE RENT PROVIDED FOR IN THIS LEASE AGREEMENT. Lessee understands that Lessee’s pro rata share has been arrived at by dividing the number of rentable square feet in the Leased Premises by the total rentable square feet available in the Building.  Lessee shall pay in advance, together with payment of Monthly Base Rent, its pro rata share of all Operating Expenses. 2001 estimated operating expenses are $4.97 per square foot. Within one-hundred and twenty (120) days of the end of each calendar year during the term of this Lease Agreement, or any extensions or renewals thereof, Lessor shall furnish Lessee, upon Lessee’s request, a statement detailing the actual costs incurred by Lessor during the preceding calendar year, at which time an appropriate adjustment will be made if such figures are different than the estimated payment made by Lessee throughout the preceding calendar year. 5.             SECURITY DEPOSIT.  UPON THE DATE HEREOF, LESSEE SHALL PAY TO LESSOR THE AMOUNT OF $0.00, OF WHICH WILL BE HELD AS A SECURITY DEPOSIT TO GUARANTEE THE PAYMENT OF RENT AND THE PERFORMANCE OF ALL THE TERMS OF THIS AGREEMENT.  UPON THE OCCURRENCE OF ANY DEFAULT BY LESSEE OR LATE PAYMENT, LESSOR MAY USE SAID SECURITY DEPOSIT TO THE EXTENT NECESSARY TO MAKE GOOD ANY ARREARAGE OF RENT OR ANY OTHER EXPENSE.  ANY REMAINING BALANCE OF SAID SECURITY DEPOSIT SHALL BE RETURNED TO LESSEE UPON COMPLIANCE WITH THE TERMS HEREIN AND ACCEPTANCE OF THE VACATED PREMISES BY LESSOR.  LESSEE UNDERSTANDS THAT ITS LIABILITY IS NOT LIMITED TO THE AMOUNT OF THE SECURITY DEPOSIT AND USE OF SUCH DEPOSIT BY LESSOR SHALL NOT CONSTITUTE A WAIVER, BUT IS IN ADDITION TO OTHER REMEDIES AVAILABLE TO LESSOR UNDER THIS AGREEMENT AND LAW.  UPON THE USE OF ALL OR PART OF THE SECURITY DEPOSITS TO CURE DEFAULTS OF LESSEE, LESSEE SHALL FORTHWITH DEPOSIT WITH LESSOR THE AMOUNT OF THE SECURITY DEPOSIT SO USED. 6.             OCCUPANCY.  LESSOR AGREES TO DELIVER THE PREMISES IN A SAFE, BROOM CLEAN AND USABLE CONDITION, IN COMPLIANCE WITH ALL APPLICABLE BUILDING CODES.  IN THE EVENT LESSEE IS PREVENTED FROM OCCUPYING THE PREMISES AT THE START OF THE ABOVE TERM DUE TO DELAYS BY LESSOR, THE COMMENCEMENT AND TERMINATION DATES OF THIS LEASE AGREEMENT WILL BE EXTENDED ONE DAY FOR EACH DAY OCCUPANCY IS DELAYED.  UNDER NO CIRCUMSTANCES WILL THE LEASE TERM BE REDUCED.  LESSEE SHALL HAVE ACCESS TO THE SPACE AS OF AUGUST 1, 2001 FOR SPACE PLANNING AND CONSTRUCTION PURPOSES. 7.             UTILITIES.  LESSEE SHALL PAY FOR ALL UTILITIES, INCLUDING GAS, ELECTRICITY, WATER, SEWER AND TELEPHONE SERVICES FOR THE LEASED PREMISES DURING THE TERM OF THE AGREEMENT.  IT IS UNDERSTOOD BY LESSEE AND LESSOR THAT LESSEE’S ELECTRICAL METER IS SHARED BY SUITE 11; FURTHERMORE, LESSEE AGREES TO PAY THE MONTHLY SERVICE BILLS, KEEP TRACK OF THE ANNUAL EXPENSES AND WILL SUBMIT FOR REIMBURSEMENT AT THE END OF EACH CALENDAR YEAR, AS LONG AS SUITE 11 IS OCCUPIED.  SUITE 11 CONSISTS OF 1,344 SQUARE FEET, AND LESSEE WILL BE REIMBURSED ON A PER SQUARE FOOT BASIS. 8.             STRUCTURAL MAINTENANCE.  LESSOR SHALL, AT ITS EXPENSE, KEEP THE STRUCTURAL PARTS OF THE BUILDING IN GOOD REPAID, INCLUDING THE STRUCTURAL PARTS OF THE EXTERIOR WALLS, ROOF AND FOUNDATION, EXCEPT THAT LESSOR SHALL NOT BE RESPONSIBLE FOR REPAIRS CAUSED BY THE FAULT OF NEGLIGENCE OF LESSEE, ITS EMPLOYEES OR INVITEES. 9.             EXTERIOR MAINTENANCE.  LESSOR SHALL CONTRACT FOR, AND LESSEE SHALL PAY ITS PERCENTAGE SHARE OF ALL COMMON AREAS HEAT, ELECTRICITY, WATER, SEWER, LANDSCAPE CARE, SNOW REMOVAL, WINDOW WASHING, PARKING LOT MAINTENANCE, EXTERIOR PAINTING AND ALL OTHER SUCH MAINTENANCE REQUIRED DURING THE TERM OF THIS AGREEMENT.  ALL SERVICES SHALL BE PROVIDED FOR THE COMFORTABLE USE OF THE PREMISES DURING BUSINESS HOURS PROVIDED THAT LESSOR IS NOT LIABLE FOR DAMAGES FOR FAILURE TO PROVIDE SERVICES DUE TO CAUSES BEYOND ITS REASONABLE CONTROL. 10.           INTERIOR MAINTENANCE.  LESSEE SHALL BE RESPONSIBLE FOR THE INTERIOR MAINTENANCE OF THE PREMISES, INCLUDING MAINTENANCE, REPAIR OR REPLACEMENT OF ENTRANCE DOORS, OVERHEAD GARAGE DOORS, HEATING, PLUMBING, ELECTRICAL, MECHANICAL AND AIR-CONDITIONING FIXTURES AND EQUIPMENT USED BY LESSEE; THE REPLACEMENT OF ALL GLASS (INTERIOR OR EXTERIOR) BROKEN AND AGREES TO KEEP THE PREMISES, AND SURRENDER THE PREMISES UPON TERMINATION OF THIS AGREEMENT, IN AS GOOD A CONDITION AS WHEN TURNED OVER TO IT, REASONABLE WEAR, TEAR AND DAMAGE FROM THE ELEMENTS EXPECTED.  ALL SERVICE CHARGES FOR REPAIRS AND MECHANICAL BREAKDOWNS, SUCH AS, BUT NOT LIMITED TO: HEATING AND COOLING, LIGHT BULBS OR BALLAST’S, PLUMBING AND ELECTRICAL, THAT ARE OVER AND ABOVE THE COST OF ROUTINE MAINTENANCE CONTRACTS THAT ARE ALREADY PAID THROUGH OPERATING COSTS, WILL BE BILLED TO AND PAID DIRECTLY BY LESSEE. Lessor warrants for the first 60 days of this Lease Agreement that all heating, mechanical and air-conditioning fixtures and equipment is in working condition.  Specific mechanical requirements that Lessee may require that are outside of a typical building standard will be the sole responsibility and cost of the Lessee. 11.           LESSEE INSURANCE.  TO OBTAIN AT LESSEE’S EXPENSE AND KEEP IN FORCE DURING THE TERM OF THIS LEASE A POLICY OF COMPREHENSIVE GENERAL LIABILITY INSURANCE, IN SUCH AMOUNTS AS LESSOR MAY REQUIRE, PROTECTING LESSEE FROM AND AGAINST ANY AND ALL CLAIMS FOR DAMAGES TO PERSON OR PROPERTY, WHICH SHALL INCLUDE PLATE GLASS COVERAGE, OR FOR LOSS OF LIFE OR PROPERTY OCCURRING ON, IN OR ABOUT THE PREMISES.  SUCH INSURANCE TO AFFORD PROTECTION OF NOT LESS THAN $1,000,000.00 COMBINED SINGLE LIMIT, FOR INJURIES TO PERSON, INCLUDING DEATH, DAMAGE TO PROPERTY, INCLUDING LOSS OF USE THEREOF.  SUCH POLICY SHALL CONTAIN A PROVISION REQUIRING THIRTY (30) DAYS’ WRITTEN NOTICE TO LESSOR BEFORE CANCELLATION OF THE POLICY CAN BE EFFECTED. If the Lessee shall fail to procure and maintain such insurance, Lessor may, but shall not be required to, procure and maintain the same, but at the expense of the Lessee, which shall become additional rent hereunder.  Lessee shall deliver to Lessor, prior to occupancy, copies of policies of liability insurance required herein or certificates evidencing the existence and amounts of such insurance.  Lessee may use blanket insurance coverage to satisfy the requirement. Lessee must also obtain, at its expense, and keep in full force during the term of this Lease Agreement, property insurance covering the contents of the Leased Premises and all alterations, additions and leasehold improvements made thereto, in the amount of their full replacement value. Such property insurance shall provide coverage for causes of loss relating from RISK OF DIRECT PHYSICAL LOSS as described in the standard form of insurance “Causes of loss-special form” or its equivalent.  Lessee’s policies of property insurance required herein, or certificate evidencing the existence and amounts of such insurance shall be provided to Lessor.  Such policy shall contain a provision requiring thirty (30) days’ written notice to Lessor before cancellation of the policy can be effected. 12.           HAZARDOUS SUBSTANCES.  LESSEE SHALL NOT USE, OCCUPY, SUFFER OR PERMIT ANY USE OF THE LEASED PREMISES WHICH WOULD IN ANY WAY INCLUDE THE STORAGE, USE OR GENERATION OF ANY SUBSTANCES OR MATERIALS DEFINED AS “HAZARDOUS WASTE,” “HAZARDOUS SUBSTANCES,” “POLLUTANTS” OR “CONTAMINANTS” UNDER ANY FEDERAL, STATE OR LOCAL STATUTE, ORDINANCE OR REGULATION.  LESSEE SHALL INDEMNIFY AND SAVE HARMLESS LESSOR AGAINST ALL LIABILITIES, DAMAGES, CLAIMS, FINES, PENALTIES, COSTS AND OTHER EXPENSES, INCLUDING REASONABLE ATTORNEYS’ FEES, WHICH MAY BE IMPOSED UPON, OR INCURRED BY, OR ASSERTED AGAINST LESSOR BY REASON OF A BREACH OF THE FOREGOING COVENANT BY LESSEE REGARDING HAZARDOUS SUBSTANCES. 13.           NOTICES.  ANY NOTICE REQUIRED OR PERMITTED TO BE GIVEN HEREUNDER BY ONE PARTY TO THE OTHER SHALL BE DEEMED TO BE GIVEN WHEN PERSONALLY DELIVERED TO LESSEE AT THE DEMISED PREMISES AND TO LESSOR AT THEIR OFFICE OR MAILED, POSTAGE PREPAID, BY CERTIFIED OR REGISTERED MAIL, ADDRESSED TO THE RESPECTIVE PARTY TO WHOM NOTICE IS INTENDED TO BE GIVEN AT THE FOLLOWING ADDRESS OF SUCH PARTY.  NOTICE PERTAINING TO THE LEASE TERM, E.G., OPTIONS, RENEWALS, ETC., MUST BE DELIVERED VIA CERTIFIED OR REGISTERED MAIL. LESSOR:   LESSEE:       Place & Plaza LLC c/o Wellington Management, Inc. 1625 Energy Park Drive, Suite 100 St. Paul, MN 55108   Endocardial Solutions, Inc. 1350 Energy Lane, Suite 104 St. Paul, MN 55108   14.           TENANT IMPROVEMENTS.  LESSOR WILL IMPROVE THE PREMISES AS FOLLOWS: 1.             Bring all lights and HVAC equipment to good working order. Any additional improvements will be done by Lessee, must be approved by Lessor prior to the beginning of construction, and are at the sole cost and expense of Lessee.  All work shall be done in a good workmanlike manner, by licensed, bonded and insured contractors, and in accordance with all federal, state and local regulations. 15.           RULES AND REGULATIONS.  LESSEE HAS READ AND AGREES TO BE BOUND BY THE FOLLOWING RULES AND REGULATIONS OF LESSOR AND ACKNOWLEDGES THAT A VIOLATION OF ANY OF SAID RULES SHALL CONSTITUTE A BREACH OF THE PROVISIONS OF THE LEASE AGREEMENT OF THE ABOVE DATE.  SAID RULES AND REGULATIONS MAY BE ADDED TO OR AMENDED FROM TIME TO TIME BY LESSOR FOR THE BENEFIT OF ALL LEASES WITHIN THE BUILDING, AND SUCH ADDITIONS OR AMENDMENTS SHALL BECOME EFFECTIVE IMMEDIATELY UPON NOTIFICATION. (A)           TRASH.  LESSEE SHALL PROVIDE ITS OWN DUMPSTER FOR TRASH AND AGREES NOT TO LEAVE OR STORE ANY MATERIALS, LITTER OR TRASH ON THE GROUNDS OR PARKING AREAS. (B)           DISTURBANCE.  NO OFFENSIVE NOISE, ODORS OR CONDUCT SHALL BE PERMITTED AT ANY TIME WHICH WILL DISTURB OR ANNOY OTHER LESSEES. (C)           PARKING.  THE USE OF PARKING SHALL BE SUBJECT TO REASONABLE REGULATIONS AS LESSOR MAY PROMULGATE FROM TIME TO TIME UNIFORMLY FOR ALL LESSEES.  LESSEE AGREES THAT IT WILL NOT USE, OR PERMIT THE USE OF, THE PARKING AREA FOR OVERNIGHT STORAGE OF AUTOMOBILES.  THERE WILL NOT BE ANY ASSIGNED EXCLUSIVE PARKING SPACES AVAILABLE TO ANY LESSEE OF THE BUILDING EXCEPT WITH THE PRIOR WRITTEN CONSENT OF LESSOR.  LESSEE WILL USE ITS BEST EFFORTS TO AVOID PARKING IN FRONT OF OTHER TENANT SPACES. (D)           SIGNS.  NO SIGN, ADVERTISEMENT OR OTHER LETTERING SHALL BE PAINTED, AFFIXED OR EXPOSED ON WINDOWS OR DOORS OR ANY PART OF THE BUILDING OR PROPERTY WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.  ALL IDENTIFICATION SIGNS SHALL BE AS PER THE BUILDING STANDARDS. (E)           ALTERATIONS.  NO INTERIOR ALTERATIONS, CONNECTION, PAINTING OR REDECORATING OF A PERMANENT NATURE MAY BE DONE TO THE PREMISES WITHOUT WRITTEN APPROVAL OF LESSOR.  LESSEE AGREES THAT ALL SUCH APPROVED WORK SHALL BE DONE IN A GOOD, WORKMANLIKE MANNER IN COMPLIANCE WITH APPLICABLE BUILDING CODES, THAT NO LIENS SHALL ATTACH TO THE PREMISES BY REASON THEREOF, AND THAT THE PREMISES SHALL BE RESTORED TO THEIR ORIGINAL CONDITION BY LESSEE PRIOR TO THE EXPIRATION OF THE AGREEMENT.  FAILURE TO REMOVE FIXTURES AND EQUIPMENT SHALL CONSTITUTE ABANDONMENT TO LESSOR WHO MAY REMOVE SAID FIXTURES AND EQUIPMENT, AND RESTORE THE PREMISES TO THEIR ORIGINAL CONDITION, AT THE EXPENSE OF LESSEE. (F)            FIXTURE MOVEMENT.  LESSEE AGREES THAT ANY AND ALL FURNITURE, FIXTURES AND GOODS WILL BE MOVED BY THE LESSEE WHENEVER SUCH MOVING IS NECESSARY FOR THE PURPOSE OF BUILDING REPAIR AND/OR MAINTENANCE BY LESSOR. (G)           ACCESS.  LESSOR OR AUTHORIZED AGENT HAS THE RIGHT TO ENTER THE UNIT AT ANY REASONABLE TIME TO INSPECT, MAKE REPAIRS OR ALTERATIONS AS NEEDED, AND THREE (3) MONTHS PRIOR TO THE TERMINATION OF THIS AGREEMENT TO DISPLAY THE UNIT TO PROSPECTIVE TENANTS, AND TO PLACE ON DOORS AND WINDOWS APPROPRIATE NOTICE THAT THE PREMISES ARE FOR RENT. (H)           LOCKS.  NO ADDITIONAL LOCKS WILL BE PLACED ON ANY OF THE DOORS IN THE BUILDING WITHOUT THE PRIOR WRITTEN APPROVAL OF LESSOR AND, IN SUCH EVENT, LESSOR SHALL RECEIVE AN ACCESS KEY TO SUCH LOCKS. (I)            STORAGE.  STORAGE AND INSTALLATION OF ANY MACHINERY, PART, MATERIALS, SHELVING OR FURNITURE OF ANY TYPE WHATSOEVER CONSTITUTES OCCUPANCY, AND WILL REQUIRE PAYMENT OF RENT FOR EACH DAY THE SPACE IS USED, AND IS SPECIFICALLY DISALLOWED UNLESS APPROVED IN WRITING BY LESSOR. (J)            FLOORS.  LESSEE WILL NOT CAUSE FLOOR LOADING IN EXCESS OF 200 POUNDS PER SF. (K)           TRAILERS.  LESSEE SHALL NOT PARK AND/OR STORE TRAILERS OF ANY KIND, COVERED OR UNCOVERED, IN THE PARKING AREA FOR TEMPORARY OR PERMANENT STORAGE AT ANY TIME OF THE DAY.  THIS SHALL INCLUDE SEMI-TRAILERS, PANEL VANS, HAULING TRAILERS OF ANY SIZE, OPEN OR ENCLOSED.  LESSEE WILL NOT PARK SEMI-TRAILERS FOR LOADING OR UNLOADING FOR EXTENDED PERIODS OF TIME.  ALL TRAILERS MUST BE STORED INSIDE THE LEASED PREMISES OR STORED OFF SITE.  IN ADDITION, THE STORAGE OF BOATS AND PERSONAL RECREATION VEHICLES IN THE PARKING LOT IS PROHIBITED. 16.           WAIVER OF SUBROGATION.  LESSOR AND LESSEE EACH HEREBY MUTUALLY WAIVE AND RELEASE ALL CLAIMS AND LIABILITIES AGAINST THE OTHER, AND THE AGENTS, SERVANTS, EMPLOYEES AND INVITEES OF THE OTHER, FOR LOSS OR DAMAGE TO THE PREMISES OR ANY PORTION THEREOF, THE BUILDING AND OTHER IMPROVEMENTS OF WHICH THE PREMISES ARE A PART, AS WELL AS ANY IMPROVEMENTS, FIXTURES, EQUIPMENT, SUPPLIES, MERCHANDISE AND OTHER PROPERTY LOCATED IN, UPON OR ABOUT THE PREMISES, RESULTING FROM FIRE, EXPLOSION OR OTHER PERILS INCLUDED IN STANDARD FIRE AND EXTENDED COVERAGE INSURANCE, WHETHER CAUSED BY THE NEGLIGENCE OF ANY OF SAID PERSONS OR ENTITIES, OR OTHERWISE.  IT IS UNDERSTOOD THAT LESSOR AND LESSEE SHALL LOOK SOLELY TO THEIR OWN INSURERS IN THE EVENT OF CASUALTY. 17.           LOSS PROTECTION.  LESSEE AGREES TO HOLD LESSOR HARMLESS FROM AND INDEMNIFY LESSOR AGAINST ANY AND ALL LIABILITIES, DAMAGES AND EXPENSES ARISING FROM INJURY, DAMAGE OR LOSS TO OR CAUSED BY LESSEE, ITS EMPLOYEES, GUESTS, AGENTS, SUB-TENANTS OR VISITORS, OR ANY PROPERTY OF SAID PERSONS, IN OR ABOUT THE PREMISES, BUILDING OR GROUNDS FROM ANY CAUSE WHATSOEVER, CONNECTED WITH THE USE OF OR ACTIVITIES IN OR ABOUT THE PROPERTY.  LESSEE FURTHER WILL MAKE NO CLAIM AGAINST LESSOR FOR ANY LOSS OF OR DAMAGE TO THE PREMISES OR PROPERTY OF LESSEE CAUSED BY THEFT, BURGLARY, WATER, GAS OR OTHER MEANS. 18.           FIXTURES AND EQUIPMENT.  ALL FIXTURES AND EQUIPMENT CONSIDERED NECESSARY TO THE GENERAL OPERATION AND MAINTENANCE OF THE PROPERTY SHALL BE THE PROPERTY OF LESSOR, EXCEPT THAT ANY “TRADE FIXTURES” PROVIDED BY LESSEE, AT ITS OWN EXPENSE, SHALL REMAIN THE PROPERTY OF THE LESSEE AND WILL BE REMOVED BY LESSEE UPON TERMINATION OF THIS AGREEMENT.  LESSEE GRANTS TO THE LESSOR A LIEN UPON ALL PERSONAL PROPERTY OF LESSEE IN SAID PREMISES TO SECURE PAYMENT OF THE RENT, AND AGREES THAT NO SUCH PROPERTY SHALL BE REMOVED FROM SAID PREMISES WHILE ANY INSTALLMENTS OF RENT ARE PAST DUE OR ANY OTHER DEFAULT EXISTS UNDER THIS AGREEMENT. 19.           ASSIGNMENT.  NO SUBLEASING OR OTHER ASSIGNMENT BY LESSEE IS ALLOWED WITHOUT WRITTEN CONSENT OF LESSOR, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD.  SUCH CONSENT SHALL NOT RELEASE THE ASSIGNING PARTY OF ANY OBLIGATION OR LIABILITY ARISING UNDER THE TERMS OF THIS AGREEMENT.  THIS AGREEMENT AND THE DEPOSITS SHALL BE ASSIGNABLE BY LESSOR, PROVIDED THE ASSIGNEE ASSUMES ALL OF THE OBLIGATIONS OF LESSOR HEREUNDER. 20.           BREACH.  A BREACH OF THIS AGREEMENT SHALL EXIST IF AT ANY TIME DURING THE TERM OF THIS AGREEMENT LESSEE SHALL:  (A) VACATE SAID PREMISES OR DEFAULT IN THE PAYMENT OF RENT; (B) MAKE AN ASSIGNMENT FOR THE BENEFIT OF CREDITORS; (C) FILE OR HAVE FILED AGAINST IT A PETITION FOR BANKRUPTCY OR ARRANGEMENT IN SETTLEMENT OF LIABILITIES OR REORGANIZATION; OR (D) VIOLATE AND/OR FAIL TO COMPLY WITH ANY ARTICLE, PROVISION, RULE OR REGULATION IN THIS LEASE.  IN ADDITION, IF LESSEE FAILS MORE THAN TWICE WITHIN ANY TWELVE (12) MONTH PERIOD TO OBSERVE OR PERFORM ANY COVENANT, CONDITION, RULE, REGULATION OR AGREEMENT OF THIS LEASE (INCLUDING, WITHOUT LIMITATION, THE PAYMENT OF RENT), REGARDLESS OF WHETHER SUCH DEFAULTS HAVE BEEN CURED BY LESSEE, THE THIRD (3RD) DEFAULT SHALL, AT THE ELECTION OF LESSOR, IN ITS SOLE DISCRETION, BE DEEMED A NONCURABLE BREACH. In the event of a Breach, Lessor shall have the following rights: (A)           LESSOR SHALL HAVE THE RIGHT TO ENTER THE PREMISES AND REMOVE ALL PERSONS AND PROPERTY FROM THE PREMISES AND STORE SUCH PROPERTY IN A PUBLIC WAREHOUSE OR ELSEWHERE AT THE COST OF LESSEE, AND LESSOR MAY EITHER TERMINATE THIS AGREEMENT OR, WITHOUT TERMINATION THIS AGREEMENT, MAKE SUCH ALTERATIONS AND REPAIRS AS MAY BE NECESSARY IN ORDER TO RENT THE PREMISES, AND RENT THE PREMISES OR ANY PART THEREOF FOR SUCH TERM AND AT SUCH RENTS AND UPON SUCH OTHER TERMS AND CONDITIONS AS LESSOR, IN ITS SOLE DISCRETION, MAY DEEM ADVISABLE.  UPON SUCH RENTING, ALL RENTALS RECEIVED BY LESSOR SHALL BE APPLIED FIRST TO THE PAYMENT OF ANY DEBT OTHER THAN RENT DUE HEREUNDER FROM LESSEE TO LESSOR; SECOND TO PAY ANY REASONABLE COSTS AND EXPENSES OF SUCH RENTING, INCLUDING BROKERAGE AND LEGAL FEES; THIRD TO PAY ANY RENT DUE HEREUNDER; AND THE RESIDUE, IF ANY, SHALL BE HELD BY LESSOR AND APPLIED IN PAYMENT OF FUTURE RENT WHICH BECOMES DUE AND PAYABLE HEREUNDER.  IF THE RENTAL RECEIVED FROM RENTING THE PREMISES IS LESS THAN THE RENT PAYABLE HEREUNDER, LESSEE SHALL PAY ANY SUCH DEFICIENCIES, MONTHLY, TO LESSOR.  NO ENTRY OR TAKING POSSESSION OF THE PREMISES BY LESSOR SHALL BE AN ELECTION BY LESSOR TO TERMINATE THIS AGREEMENT. (B)           LESSOR SHALL ALSO HAVE THE RIGHT TO TERMINATE THIS AGREEMENT, IN WHICH EVENT, IN ADDITION TO ANY OTHER REMEDIES LESSOR MAY HAVE, LESSOR MAY RECOVER FROM LESSEE ALL DAMAGES INCURRED BY REASON OF LESSEE BREACH, INCLUDING THE COST OF RECOVERING THE PREMISES, REASONABLE LEGAL FEES AND ANY EXCESS OF THE RENT RESERVED IN THIS AGREEMENT FOR THE REMAINDER OF THE STATED TERM OVER THE THEN REASONABLE RENTAL VALUE OF THE PREMISES FOR THE REMAINDER OF THE STATED TERM, ALL OF WHICH SHALL BE IMMEDIATELY DUE AND PAYABLE FROM LESSEE TO LESSOR. (C)           LESSOR MAY, AT ITS OPTION, INSTEAD OF EXERCISING ANY OTHER RIGHT OR REMEDY, SPEND SUCH REASONABLE SUMS AS MAY BE REASONABLY NECESSARY TO CURE ANY DEFAULT OF LESSEE AND SUCH AMOUNT, INCLUDING LEGAL FEES, SHALL BE PAID BY LESSEE AS ADDITIONAL RENT, UPON DEMAND. (D)           ANY REMEDY OF LESSOR HEREIN OR BY LAW OR STATUTE SHALL BE CUMULATIVE WITH ALL OTHER REMEDIES AND MAY BE EXERCISED FROM TIME TO TIME AND AS OFTEN AS THE OCCASION MAY ARISE. (E)           NO FORBEARANCE BY LESSOR TO EXERCISE ANY RIGHT ACCRUING TO LESSOR HEREUNDER SHALL BE CONSTRUED AS A WAIVER OF ANY SUCH RIGHTS. In the event of a Breach, Lessee shall have the following rights to cure: (A)           FAILURE TO MAKE PAYMENTS.  UPON WRITTEN NOTICE FROM LESSOR, LESSEE WILL HAVE TEN (10) DAYS TO MAKE PAYMENTS IN THE FORM OF GUARANTEED FUNDS SUBJECT TO ARTICLE 20, PARAGRAPH 6 ABOVE. (B)           FAILURE TO OBSERVE OR PERFORM.  UPON WRITTEN NOTICE FROM LESSOR THAT LESSEE HAS NOT OBSERVED, PERFORMED OR HAS VIOLATED A COVENANT, CONDITION OR PROVISION OF THIS LEASE AGREEMENT, EXCEPT FAILURE TO MAKE PAYMENT, LESSEE SHALL HAVE THIRTY (30) DAYS TO CURE; PROVIDED, HOWEVER, THAT IF THE NATURE OF LESSEE’S DEFAULT IS SUCH THAT MORE THAN THIRTY (30) DAYS ARE REASONABLY REQUIRED TO ITS CURE, THEN LESSEE SHALL NOT BE DEEMED TO BE IN BREACH IF LESSEE COMMENCES SUCH CURE WITHIN SAID THIRTY (30) DAY PERIOD AND THEREAFTER DILIGENTLY PROSECUTES SUCH CURE TO COMPLETION, SUBJECT TO ARTICLE 20, PARAGRAPH 6 ABOVE. 21.           IMPAIRMENT OF USE.  IF THE PREMISES SHALL BECOME UNTENANTABLE OR UNFIT FOR OCCUPANCY, IN WHOLE OR IN PART, BY THE TOTAL OR PARTIAL DESTRUCTION OF THE BUILDING BY FIRE OR OTHER CASUALTY, THIS AGREEMENT MAY, AT THE OPTION OF THE LESSOR, CEASE AND TERMINATE AND LESSEE SHALL HAVE NO CLAIM AGAINST LESSOR FOR THE VALUE OF ANY UNEXPIRED TERM OF SAID AGREEMENT.  IF LESSOR SHALL ELECT TO RESTORE THE PREMISES, RENT SHALL BE ABATED FOR EACH PERIOD OF RESTORATION IN ACCORDANCE WITH THE RATIO OF THE PORTION OF THE PREMISES DEEMED UNTENANTABLE TO THE ENTIRE PREMISES. 22.           RELOCATION.  LESSOR HEREBY RESERVES THE RIGHT TO RELOCATE LESSEE TO ANOTHER PART OF THE COMPLEX DURING THE LEASE TERM SO LONG AS THE NUMBER AND VALUE OF THE IMPROVEMENTS SO SUBSTITUTED EQUALS OR EXCEEDS THE NUMBER AND VALUE OF THOSE IN THE LEASED PREMISES.  LESSOR WILL PROVIDE LESSEE WITH SIXTY (60) DAYS’ WRITTEN NOTICE OF SUCH RELOCATION.  THE COST OF ANY SUCH RELOCATION WILL BE AT THE REASONABLE COST TO THE LESSOR. 23.             CONDEMNATION.  IF THE WHOLE OR ANY PART OF THE BUILDING AND/OR THE DEMISED PREMISES SHALL BE ACQUIRED OR CONDEMNED BY EMINENT DOMAIN FOR ANY PUBLIC OR QUASI-PUBLIC USE OF PURPOSE, THEN, AND IN THAT EVENT, THE TERM OF THIS AGREEMENT MAY, AT THE OPTION OF THE LESSOR, CEASE AND TERMINATE FROM THE DATE THE TITLE VESTS AND LESSEE SHALL HAVE NO CLAIM AGAINST LESSOR FOR THE VALUE OF ANY UNEXPIRED TERM OF SAID AGREEMENT. 24.           OTHER PAYMENTS.  IN ADDITION TO THE RENT SET FORTH HEREIN, ALL OTHER PAYMENTS TO BE MADE BY LESSEE TO LESSOR HEREUNDER SHALL CONSTITUTE RENT AS HEREIN DEFINED. 25.           HOLDING OVER.  IF LESSEE REMAINS IN POSSESSION OF THE PREMISES AFTER THE EXPIRATION OF THE LEASE TERM WITH THE EXPRESS WRITTEN CONSENT OF LESSOR, LESSEE SHALL BE DEEMED TO BE OCCUPYING THE PREMISES AS A LESSEE FROM MONTH TO MONTH, SUBJECT TO ALL THE CONDITIONS, PROVISIONS AND OBLIGATIONS OF THIS AGREEMENT INSOFAR AS THE SAME CAN BE APPLICABLE TO A MONTH-TO-MONTH TENANCY; PROVIDED, HOWEVER, THAT THE GROSS RENT REQUIRED TO BE PAID BY LESSEE DURING ANY HOLDOVER PERIOD SHALL BE A MINIMUM OF 1.5 TIMES THE GROSS RENT WHICH LESSEE WAS OBLIGATED TO PAY FOR THE MONTH IMMEDIATELY PRECEDING THE END OF THE TERM OF THIS LEASE AGREEMENT FOR EACH MONTH OR ANY PART THEREOF, OF ANY SUCH HOLDOVER PERIOD.  IN THE EVENT OF HOLDING OVER BY LESSEE AFTER EXPIRATION OR TERMINATION OF THIS LEASE AGREEMENT WITHOUT THE WRITTEN CONSENT OF LESSOR, LESSEE SHALL BE IN BREACH OF THIS LEASE AND LESSOR SHALL BE ENTITLED TO ALL OF ITS RIGHTS AND REMEDIES UNDER THIS LEASE, IN LAW, OR IN EQUITY.  NO HOLDING OVER BY LESSEE AFTER THE TERM OF THIS LEASE AGREEMENT SHALL OPERATE TO EXTEND THE LEASE TERM; IN THE EVENT OF ANY UNAUTHORIZED HOLDING OVER, LESSEE SHALL INDEMNIFY LESSOR AGAINST ALL CLAIMS FOR DAMAGES BY ANY OTHER TENANT TO WHOM LESSOR MAY HAVE LEASED ALL OR ANY PART OF THE LEASED PREMISES COVERED HEREBY EFFECTIVE UPON THE TERMINATION OF THE LEASE AGREEMENT. 26.           SUBORDINATION.  IT IS MUTUALLY AGREED THAT THIS LEASE SHALL BE SUBORDINATE TO ANY AND ALL MORTGAGES, GROUND LEASES, OTHER SECURITIES, OR THE INTERESTS OF FINANCIAL PARTICIPANTS, INCLUDING ANY RENEWAL, MODIFICATIONS, CONSOLIDATIONS, REPLACEMENTS AND EXTENSIONS THEREOF NOW OR HEREAFTER RECORDED AGAINST THE LEASE PREMISES BY THE LESSOR.  LESSEE SHALL, IN THE EVENT OF ANY PROCEEDINGS BROUGHT FOR THE FORECLOSURE OF, OR IN THE EVENT OF EXERCISE OF THE POWER OF SALE UNDER, ANY MORTGAGE MADE BY LESSOR COVERING THE PREMISES, ATTORN TO THE PURCHASER AND RECOGNIZE SUCH PURCHASER AS LESSOR UNDER THIS LEASE. 27.           EXHIBITS.  ANY AND ALL EXHIBITS ATTACHED TO THIS AGREEMENT SHALL BE A PART OF THIS AGREEMENT AND ANY AMENDMENTS HERETO SHALL BE IN WRITING AND EXECUTED BY BOTH LESSOR AND LESSEE. 28.           ESTOPPEL CERTIFICATE.  LESSEE SHALL AT ANY TIME AND FROM TIME TO TIME, UPON NOT LESS THAN THREE (3) DAYS’ PRIOR WRITTEN NOTICE FROM LESSOR, EXECUTE, ACKNOWLEDGE AND DELIVER TO LESSOR A STATEMENT IN WRITING CERTIFYING (A) THAT THIS LEASE IS IN FULL FORCE AND UNMODIFIED (OR, IF MODIFIED, STATING THE NATURE OF SUCH MODIFICATION), (B) THE DATE TO WHICH RENTAL AND OTHER CHARGES PAYABLE HEREUNDER HAVE BEEN PAID IN ADVANCE, IF ANY, AND (C) THAT THERE ARE, TO LESSEE’S KNOWLEDGE, NO UNCURED DEFAULTS ON THE PART OF LESSOR HEREUNDER (OR SPECIFYING SUCH DEFAULTS IF ANY ARE CLAIMED).  ANY SUCH STATEMENT MAY BE FURNISHED TO AND RELIED UPON BY ANY PROSPECTIVE PURCHASER, LESSEE OR ENCUMBRANCER OF ALL OR ANY PORTION OF THE PROJECT. 29.           SUBMISSION.  THE SUBMISSION OF THIS DOCUMENT FOR EXAMINATION DOES NOT CONSTITUTE AN OPTION OR OFFER TO LEASE SPACE, OR RESERVATION OF SPACE.  THIS DOCUMENT SHALL HAVE NO BINDING EFFECT ON THE PARTIES UNLESS EXECUTED BY THE LESSOR AND THE LESSEE AND A FULLY EXECUTED COPY IS DELIVERED TO THE LESSEE.  THE LESSEE IS SOLELY AT RISK FOR ANY BUSINESS DECISIONS, PURCHASES MADE, OR CONTRACTS ENTERED INTO, IN RELATION TO THE PRESENTATION OF THIS LEASE DOCUMENT. 30.           PREPAYMENT OF RENT.  LESSEE SHALL, CONTEMPORANEOUSLY WITH THE EXECUTION OF THIS LEASE, PAY TO LESSOR ONE MONTH’S BASE RENT, OPERATING COSTS, IMPROVEMENT AMORTIZATION AND THE ENTIRE AMOUNT OF SECURITY DEPOSIT.  AFTER THAT TIME, LESSEE SHALL PAY RENT IN ACCORDANCE WITH ARTICLE 3 HEREIN.  FAILURE OF LESSEE TO PREPAY SAID AMOUNTS SHALL BE CONSIDERED AN ANTICIPATORY BREACH OF THE TERMS OF THIS LEASE, AND SHALL OPERATE TO TERMINATE LESSEE’S RIGHTS UNDER THIS LEASE, INCLUDING POSSESSION OF THE PREMISES. 31.           BROKERS.  WITH THE EXCEPTION OF WELLINGTON MANAGEMENT, INC., LESSOR’S AGENT, EACH OF THE PARTIES REPRESENTS AND WARRANTS THAT THERE ARE NO CLAIMS FOR BROKERAGE COMMISSION OR FINDER’S FEES IN CONNECTION WITH THE EXECUTION OF THIS LEASE, AND AGREE TO INDEMNIFY THE OTHER AGAINST, AND HOLD IT HARMLESS FROM, ALL LIABILITIES ARISING FROM SUCH CLAIM, INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES. IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their proper officers or representatives and warrant that they have the authority to bind same. LESSOR:   LESSEE:           Price & Plaza LLC   Endocardial Solutions, Inc.           By:   /s/  Steven Wellington   By:      Michael Fredrick         Name Printed           Its:          Chief Manager   By:      /s/  Michael Fredrick       Signature           Date:    8/13/01   Its:       Controller                       Date:      8/13/01            
Exhibit 10.2   OUR CREDIT NUMBER ISSUE DATE EXPIRY DATE LETTER OF CREDIT AMOUNT SM441521P APRIL 25,2001 DEC. 31,2001 USD1,890,000.00   BENEFICIARY:   ISSUER::   GREENWICH INSURANCE COMPANY   GE CAPITAL CORPORATION.   160 WATER STREET 16T" FLOOR       NEW YORK, NY 10038         DEAR BENEFICIARY: AT THE REQUEST OF THE ABOVE ISSUER WE HAVE BEEN INSTRUCTED TO ADVISE YOU THAT THE ATTACHED IRREVOCABLE STANDBY LETTER OF CREDIT HAS BEEN ESTABLISHED IN YOUR FAVOR, AS BENEFICIARY. ALL DEMANDS FOR PAYMENTS MUST BE SENT TO FIRST UNION NATIONAL BANK, ONE SOUTH BROAD STREET, PHILADELPHIA, PA 19106, MAIL CODE PA 4928, ATTN: GE CORPORATE FINANCE STANDBY TEAM. DOCUMENTS MUST CONFORM STRICTLY WITH THE TERMS OF THE ATTACHED LETTER OF CREDIT. IF YOU ARE UNABLE TO COMPLY WITH SAME, PLEASE COMMUNICATE DIRECTLY WITH YOUR CUSTOMER IN ORDER TO HAVE THE ISSUER AMEND THE RELEVANT CONDITIONS.  THIS SHOULD ELIMINATE DIFFICULTIES AND DELAYS IN PAYMENT IN THE EVENT DOCUMENTS ARE PRESENTED FOR NEGOTIATION. ALL DEMANDS HEREUNDER MUST INDICATE THE ABOVE REFERENCED LETTER OF CREDIT NUMBER. EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS LETTER OF CREDIT IS SUBJECT TO THE "UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500." ALL INQUIRIES REGARDING THIS CREDIT SHOULD BE DIRECTED TO FIRST UNION NATIONAL BANK AT OUR PHONE NUMBER (215) 973-7012.   /s/ Richard Fortino --------------------------------------------------------------------------------   FIRST UNION NATIONAL BANK AUTHORIZED SIGNATURE                                                                                                GE Capital                                                                                                                                        General Electric Capital Corporation                LETTER OF CREDIT NO                                                 ISSUE DATE                              EXPIRY DATE              SE441521P                                                                          APRIL 25,2001                           DEC. 31,2001              FDL BENEFICIARY:            APPLICANT: GREENWICH INSURANCE COMPANY                                    LABOR READY, INC. 160 WATER STREET 16TH FLOOR                                             TREASURY DEPARTMENT NEW YORK, NY 10038                                                                  P.0 BOX 2910                                                                                                            TACOMA, WASHINGTON 98401 DEAR BENEFICIARY, AT THE REQUEST OF LABOR READY, INC., WE, FIRST UNION NATIONAL BANK HAVE OPENED AN IRREVOCABLE LETTER OF CREDIT IN YOUR FAVOR FOR UP TO AN AMOUNT NOT EXCEEDING USD1,890,000.00, AVAILABLE BY YOUR DRAFTS AT SIGHT ON GE CAPITAL CORPORATION. WE WARRANT TO YOU THAT ALL YOUR DRAFTS UNDER THIS IRREVOCABLE LETTER OF CREDIT WILL BE DULY HONORED UPON PRESENTATION AT OUR LETTER OF CREDIT DEPARTMENT, ONE SOUTH BROAD STREET, 9TH FLOOR, ATTENTION INTERNATIONAL TRADE OPERATIONS PA4928, PHILADELPHIA, PA 19107 ON OR BEFORE THE EXPIRATION DATE OR ON OR BEFORE ANY AUTOMATICALLY EXTENDED DATE AS SET FORTH BELOW. EXCEPT AS EXPRESSLY STATED HEREIN, THIS IRREVOCABLE LETTER OF CREDIT IS NOT SUBJECT TO ANY CONDITION OR QUALIFICATION AND IS OUR INDIVIDUAL OBLIGATION WHICH IS IN NO WAY CONTINGENT UPON REIMBURSEMENT. THIS IRREVOCABLE LETTER OF CREDIT IS EFFECTIVE APRIL 19,2001 AND EXPIRES ON DECEMBER 31,2001, BUT WILL AUTOMATICALLY BE EXTENDED WITHOUT AMENDMENT FOR SUCCESSIVE ONE YEAR PERIODS FROM THE CURRENT EXPIRATION DATE AND ANY FUTURE EXPIRATION DATE UNLESS AT LEAST 45 DAYS PRIOR TO THE EXPIRATION DATE WE NOTIFY YOU BY LETTER SENT CERTIFIED MAIL AT THE ABOVE LISTED ADDRESS THAT WE ELECT NOT TO RENEW FOR SUCH ADDITIONAL ONE YEAR PERIODS. EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS LETTER OF CREDIT IS SUBJECT TO THE "UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500." ALL INQUIRIES REGARDING THIS CREDIT SHOULD BE DIRECTED TO US AT OUR PHONE NUMBERS (215) 973-5981; (215) 973-8157; (215) 973-1944. /s/ Richard Fortino   /s/ Diane Ruch --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   RICHARD FORTINO   DIANE RUCH ASST. VICE PRESIDENT   TEAM LEADER   A GE Capital Services Company
  EXHIBIT 10.6 EMPLOYMENT AGREEMENT      This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into by and between Washington Gas Light Company (the “Company” or the “Utility”) and James B. White (the “Executive”), as of the 1st day of November, 2000. RECITALS      The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company or its parent company, WGL Holdings, Inc. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control of the Company or WGL Holdings, Inc., to encourage the Executive’s full attention and dedication to the interests of the Company currently and in the event of any threatened or pending Change of Control of the Company or WGL Holdings, Inc. and to provide the Executive with compensation and benefits arrangements upon such a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. AGREEMENT      NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:      1.      Certain Definitions. (a) The “Effective Date” shall mean the first date during the Change of Control Period (as defined in Section l(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated within twelve months prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination of employment. 1 --------------------------------------------------------------------------------        (b)     The “Change of Control Period” shall mean the period commencing on the date hereof and ending on the second anniversary of the Effective Date.        2.      Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:        (a)     The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then-outstanding shares of common stock of WGL Holdings, Inc. or (ii) the combined voting power of the then-outstanding voting securities of WGL Holdings, Inc. entitled to vote generally in the election of directors; provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from WGL Holdings, Inc., (ii) any acquisition by WGL Holdings, Inc. or any corporation controlled by or otherwise affiliated with WGL Holdings, Inc., (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by WGL Holdings, Inc. or any corporation controlled by or otherwise affiliated with WGL Holdings, Inc.; or (iv) any transaction described in clauses (i), (ii), and (iii) of subsection (d) of this Section 2; or        (b)     Individuals who, as of the close of business on November 1, 2000, constituted the Board of Directors of WGL Holdings, Inc. (the “Incumbent WGL Holdings, Inc. Board”) cease for any reason to constitute at least a majority of the Board of Directors of WGL Holdings, Inc.; provided, however, that any individual becoming a director subsequent to November 1, 2000 whose election, or nomination for election by WGL Holdings, Inc.’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent WGL Holdings, Inc. Board shall be considered as though such individual were a member of the Incumbent WGL Holdings, Inc. Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent WGL Holdings, Inc. Board; or 2 --------------------------------------------------------------------------------          (c)     The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then-outstanding shares of common stock of the Utility or (ii) the combined voting power of the then-outstanding voting securities of the Utility entitled to vote generally in the election of directors, provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Utility, (ii) any acquisition by the Utility or any corporation controlled by or otherwise affiliated with the Utility, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Utility or any corporation controlled by or otherwise affiliated with the Utility; or (iv) any transaction described in clauses (i) and (ii) of subsection (e) of this Section 2; or        (d)     Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the WGL Holdings, Inc. (a “Business Combination”), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding WGL Holdings, Inc. common stock and outstanding WGL Holdings, Inc. voting securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding WGL Holdings, Inc. common stock and outstanding WGL Holdings, Inc. voting securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of WGL Holdings, Inc. or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent WGL Holdings, Inc. Board at the time of the execution of the initial agreement, or of such Incumbent WGL Holdings, Inc. Board, providing for such Business Combination; or 3 --------------------------------------------------------------------------------          (e)     Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Utility (a “Utility Business Combination”), in each case unless, following such Utility Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, directly or indirectly, respectively, of the outstanding Utility common stock and the outstanding Utility voting securities immediately prior to such Utility Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Utility Business Combination in substantially the same proportions as their ownership, immediately prior to such Utility Business Combination, of the outstanding Utility common stock and outstanding Utility voting securities, as the case may be, and (ii) no Person (excluding any corporation resulting from such Utility Business Combination or any employee benefit plan (or related trust) of the Utility or such corporation resulting from such Utility Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Utility Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Utility Business Combination; or        (f)     Approval by the shareholders of WGL Holdings, Inc. of a complete liquidation or dissolution of WGL Holdings, Inc.      3.     Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the “Employment Period”).      4.     Terms of Employment. (a) Positions and Duties. (i) During the Employment Period, (A) the Executive’s position, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date (it being understood that changes in reporting relationships or offices shall not necessarily constitute a material change in position, duties or responsibilities) and (B) the Executive’s services shall be performed at the location where the Executive was employed 4 --------------------------------------------------------------------------------   immediately preceding the Effective Date or any office or location less than 35 miles from such location; and      (ii)      During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of the activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.      (b)     Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. As used herein, “Annual Base Salary” will include all wages or salary paid to the Executive and will be calculated before any salary reduction or deferrals, including but not limited to reductions made pursuant to Section 125 and 401(k) of the Internal Revenue Code of 1986, as amended. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company. 5 --------------------------------------------------------------------------------        (ii)      Annual Incentive. In addition to Annual Base Salary, the Executive shall earn annual incentive compensation (the “Annual Incentive”) for each fiscal year ending during the Employment Period, at least equal to that available to other peer executives of the Company and its affiliated companies. Each such Annual Incentive shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Incentive is awarded, unless the Executive shall elect to defer the receipt of such Annual Incentive. In the event the Executive is terminated during the Employment Period, the Executive’s Annual Incentive for the most recent year shall be prorated for the portion of that year that the Executive worked in the manner set forth in Section 6(a)(i)(A)(2).      (iii)      Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.      (iv)     Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s beneficiaries, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. 6 --------------------------------------------------------------------------------        (v)      Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.      (vi)     Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.      (vii)      Office. During the Employment Period, the Executive shall be entitled to an office at least equal to that of other peer executives of the Company and its affiliated companies.      (viii)      Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.      5.     Termination of Employment. (a) Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the 7 --------------------------------------------------------------------------------   Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.      (b)       Cause. The Company may terminate the Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean:        (i)      the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or        (ii)      the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. 8 --------------------------------------------------------------------------------        (c)      Good Reason. The Executive’s employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:        (i)     the assignment to the Executive of any duties inconsistent in any material respect with the Executive’s position as contemplated by Section 4(a) of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by the Executive;        (ii)     any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company promptly after receipt of notice thereof given by the Executive;        (iii)     failure by the Company to reimburse the Executive for expenses related to a required relocation;        (iv)     any required relocation of the Executive more than thirty five miles from Washington, D.C., other than on a temporary basis (less than two months);        (v)     any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or        (vi)     any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.      (d)      Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the 9 --------------------------------------------------------------------------------   Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.      (e)      Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.      6.     Obligations of the Company upon Termination During Employment Period. (a) Good Reason, Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:        (i)     the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:        A.      the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Target Annual Incentive (as defined in the Executive Compensation Plan of the Company) in the fiscal year of the Executive’s Termination and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not therefore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”); and        B.      Subject to the provisions of Section 9, the amount equal to two times the Executive’s Highest Pay. For purposes of this Agreement, Highest Pay shall mean the sum of (1) the Executive’s Annual Base Salary, plus (2) the highest of the Executive’s Annual Incentive actually earned for the last three full fiscal years. 10 --------------------------------------------------------------------------------          (ii)     for two years after the Executive’s Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s beneficiaries at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. After this two-year term, the Executive shall immediately be eligible for COBRA benefits. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the last day of such period;        (iii)     to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”);        (iv)     the Company shall credit the Executive with up to an additional two years of benefit service under the Company’s Supplemental Executive Retirement Plan (the “SERP”), but in no event shall such additional years of benefit service result in total years of benefit service exceeding the maximum under the SERP;        (v)     the Company shall, at its sole expense as incurred, provide the Executive with reasonable outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion; and 11 --------------------------------------------------------------------------------          (vi)     immediately prior to termination of the Executive’s employment, all restricted stock grants made to the Executive which are outstanding at the time of such event shall be accelerated and vest.      (b)      Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peers and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.      (c)     Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term “Other Benefits” as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s beneficiaries, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. 12 --------------------------------------------------------------------------------        (d)      Cause: Other than for Good Reason. If the Executive’s employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) the Executive’s Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.      7.     Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.      8.     Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.      9.     Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a “Payment”) would be subject to the excise tax imposed 13 --------------------------------------------------------------------------------   by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.      (b)      Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm as may be designated by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.      (c)      In the event the Internal Revenue Service (“IRS”) subsequently challenges the Excise Tax computation herein described, then the Executive shall notify the Company in writing of any claim by the IRS that, if successful, would require the payment by the Executive of additional Excise Taxes. Such 14 --------------------------------------------------------------------------------   notification shall be given no later than ten days after the Executive receives written notice of such claim. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall cooperate with the Company in good faith in order effectively to contest such claim and permit the Company to participate in any proceedings relating to such claim. In the event a final determination is made with respect to the IRS claim, or in the event the Company chooses not to further challenge such claim, then the Company shall reimburse the Executive for the additional Excise Tax owed to the IRS in excess of the Excise Tax calculated by the Accounting Firm. The Company shall also reimburse the Executive for all interest and penalties related to the underpayment of such Excise Tax. The Company will also reimburse the Executive for all federal and state income tax and employment taxes thereon.      10.     Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.      11.     Successors & Assigns. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.      (b)     This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. 15 --------------------------------------------------------------------------------        (c)      The Company will require any successor or any party that acquires control of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or any party that acquires control of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.      12.     Miscellaneous. (a) Governing Law; Headings; Amendment. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.      (b)      Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:   If to the Executive: at the address for Executive that is on file with the Company   If to the Company: Washington Gas Light Company 1100 H Street, N.W. Washington, D.C. 20080 ATTN: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.      (c)     Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 16 --------------------------------------------------------------------------------        (d)      Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.      (e)      Waiver. The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right under this Agreement.      (f)      At Will Employment. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive’s employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.      (g)      Arbitration. In the event of any dispute between the parties regarding this Agreement, the parties shall submit to binding arbitration, conducted in Washington, DC or in Virginia within 25 miles of Washington, DC. The arbitration shall be conducted pursuant to the rules of the American Arbitration Association. Each of the parties shall select one arbitrator, who shall not be related to, affiliated with or employed by that party. The two arbitrators shall, in turn, select a third arbitrator. The decision of any two of the arbitrators shall be binding upon the parties, and may, if necessary, be reduced to judgment in any court of competent jurisdiction. Notwithstanding the foregoing, the parties expressly agree that nothing herein in any way precludes Company from seeking injunctive relief or declaratory judgment through a court of competent jurisdiction with respect to a breach (or an alleged breach) of any covenant not to compete or of any confidentiality covenant contained in this Agreement. In the event the Executive pursues arbitration pursuant to this Section herein, the Executive shall be compensated up to $150,000 in legal costs.      (h)      Pooling of Interests Accounting. In the event any provision of this Agreement would prevent the use of pooling of interests accounting in a corporate transaction involving the Company and such transaction is 17 --------------------------------------------------------------------------------   contingent upon pooling of interests accounting, then that provision shall be deemed amended or revoked to the extent required to preserve such pooling of interests. The Executive will, upon advice from the Company, take (or refrain from taking, as appropriate) all actions necessary or desirable to ensure that pooling of interests accounting is available.      (i)      Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes the Employment Agreement dated July 19, 1999 between the Company and the Executive.      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.         -------------------------------------------------------------------------------- Name: James B. White       WASHINGTON GAS LIGHT COMPANY       By:   --------------------------------------------------------------------------------   James H. DeGraffenreidt, Jr. Title: Chairman, President and Chief           Executive Officer 18
Exhibit 10.3(N) CIT Business Credit 1211 Avenue of the Americas New York, NY 10030 August 23, 2001 Pharmaceutical Formulations, Inc. 460 Plainfield Avenue Edison, New Jersey 08817 Gentlemen:           Reference is made to the Loan and Security Agreement between The CIT Group/Business Credit~ Inc. assignee of Fidelcor Business Credit Corporation and you, dated August 4, 1989 as amended from time to time (the “Agreement"). Capitalized terms as used herein shall have the meanings ascribed to them in the Agreement unless otherwise specifically defined herein.           Pursuant to mutual understanding, the Agreement is hereby amended effective immediately as follows: 1. Clause (d) of Section 6.13 of the Agreement is hereby amended by increasing the per diem charge so as to be at the rate of $750 per person, per day for Lender's' examiners in the field and office.    2. Section 9.1 of the Agreement is hereby amended by deleting it in its entirety and the following is substituted in lieu thereof:    "Term. This Agreement shall continue in full force and effect until December 31, 2001 (the "Term").    3. Section 9.2 of the Agreement is hereby amended so as to read in its entirety as follows:   "9.2 Borrower may also terminate this Agreement by giving Lender at least sixty (60) days prior written notice at any time upon payment in full of all of the Obligations as provided herein, including the early termination fee provided below. Lender shall also have the right to terminate this Agreement at any time upon or after the occurrence of an Event of Default. If Lender terminates this Agreement upon or after the occurrence of an Event of Default, or if Borrower shall terminate this Agreement as permitted herein effective prior to the end of the Term. in addition to all other Obligations. Borrower shall pay to Lender, upon the effective date of termination, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Lender's lost profits, an early termination fee equal to one percent (1%) of the Maximum Credit if the effective date of termination occurs on or prior to December 31, 2001.    4. Section 10.1(a) of the Agreement is hereby amended so as to read in its entirety as follows: "(a) Maximum Credit $10,000,000"    5. Section 10.1 (c) of the Agreement is hereby amended so as to read in its entirety as follows:    "(c) Sublimits for: Walgreen Accounts Eligible Inventory $0 $6,000,000    6. Section 10.1(b) of the Agreement is hereby amended so as to read in its entirety as follows: "(b) Gross Availability Formulas:    Eligible Accounts Percentage Eligible Inventory Percentages: Primary Raw Materials 85% Raw Materials 60% provided that on the first day of each month commencing on November 1, 2001 such percentage shall be reduced by 2% until such time as the percentage equals 40%   Other raw materials 60% provided that on the first day of each month commencing on November 1, 2001 such percentage shall be reduced by 2% until such time as the percentage equals 40%    Packaged finished goods Bulk finished goods Bottles and caps 60% 60% 35% provided that on the first day of each month commencing on November 1, 2001 such percentage shall be reduced by 2% until such time as the percentage equals 26%    Gelatin capsules 40%" 7. Notwithstanding anything to the contrary contained in Section 10.4(a) or elsewhere in the Agreement, the interest rate to be charged pursuant to the Agreement is hereby amended effective as of August 1, 2001 to be the Prime Rate plus a margin equal to two (2.0%) per annum (the "Margin"). The default interest rate provided for in the Agreement shall remain unchanged.   Section 2.1 and Section 3 of the Agreement are here by amended by deleting all references to Eurodollar Rate Loans, and all Revolving Loans shall hereafter consist only of Prime Rate Loans.    8. Section 10.4 ("Fees") of the Agreement is hereby amended by deleting such clause (c) and inserting the following in lieu thereof: (c) Collateral Handling Fee: $2,000.00 per month commencing August 1, 2001 payable to the Lender on the first business day of each month thereafter so long as the Agreement is in effect which shall be fully earned and not refundable or rebateable when due. 9. Notwithstanding anything to the contrary contained in the Agreement, the internal financial statements providing the sales and net income results must be delivered to us no later than twenty (20) days following the end of each month and your failure to deliver any such reports to us on or before the twentieth day after each month end shall constitute an Event of Default under the Agreement.    10. Section 2.1(f) of the Agreement is hereby amended by adding the following to the end of such subparagraph:   "in the event at any time you fail to deliver to us the weekly perpetual inventory report ("Inventory Report") on or before the due date Tuesday, you agree that we shall have the right to establish an additional reserve of $50,000.00 per day for each day until such time as you have delivered the Inventory Report to us." 11. In consideration for our amending the Agreement you hereby agree to pay to us a facility fee in the amount of $40,000.00 and to compensate us for the use of our in house legal department and facilities in documenting this amendment, you agree to pay to us a Documentation Fee equal to $750.00, which amounts shall be due Upon the date hereof and may, at our option, be charged to your account on the due date thereof. The effectiveness of this Agreement is subject to our receipt of an amendment (in form and substance satisfactory to us) increasing the Guaranty executed by ICC Industries Inc. in our favor dated December 20,2000, as amended, from $1,000,000.00 to $2,000,000.00. Except as otherwise specifically provided herein, no other change in the terms or conditions of the Agreement is intended or implied. [Remainder of this page intentionally left blank] If the foregoing is in accordance with your understanding, please so indicate by signing and returning to us the enclosed copy of this letter. In addition, we have asked the Guarantors to sign below to confirm that their guaranties and/or pledge and security agreements shall continue in full force and effect notwithstanding this amendment.    Very truly yours, THE CITY GROUP/BUSINESS CREDIT, INC. By:                                                    Title Read and Agreed to: PHARMACEUTICAL FORMULATIONS, INC. By:                                                    Title: Read and Confirmed: ICC INDUSTRIES INC. By:                                                    Title: EXTRA PARENT CORP. ICC INDUSTRIES INC. By:                                                    Title:
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.6 AMENDMENT TO PREFERRED STOCK RIGHTS AGREEMENT 1.General Background. In accordance with Section 27 of the Preferred Stock Rights Agreement between Fleet National Bank (the "Rights Agent") and Integrated Telecom Express, Inc. ("Integrated Telecom") dated April 4, 2001 (the "Agreement"), the Rights Agent and Integrated Telecom desire to amend the Agreement to appoint EquiServe Trust Company, N.A 2.Effectiveness. This Amendment shall be effective as of                  (the "Amendment") and all defined terms and definitions in the Agreement shall be the same in the Amendment except as specifically revised by the Amendment. 3.Revision. The section in the Agreement entitled "Change of Rights Agent" is hereby deleted in its entirety and replaced with the following: Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares or Preferred shares by registered or certified mail and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares or Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Right Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Right Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit such holder's Right Certificate for inspection by the company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation or trust company organized and doing business under the laws of the United States, in good standing, which is authorized under such laws to exercise corporate trust of stock transfer powers and is subject to supervision or examination by federal or state authority and which has individually or combined with affiliate at the time of its appointment as Right Agent a combined capital and surplus of at least $100 million dollars. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties, and responsibilities as if it had been originally named as Rights Agent without further act of deed: but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares or Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. 4.Except as amended hereby, the Agreement and all schedules or exhibits thereto shall remain in full force and effect. --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed in their names and on their behalf by and through their duly authorized officers, as of this 18 day of October, 2001. Integrated Telecom Express, Inc.   Fleet National Bank               /s/ James Williams --------------------------------------------------------------------------------   /s/ Michael J. Connor -------------------------------------------------------------------------------- By:   James Williams   By:   Michael J. Connor Title:   CFO   Title:   Managing Director, Client Administration                       EquiServe Trust Company, N.A.                       /s/ Michael J. Connor --------------------------------------------------------------------------------         By:   Michael J. Connor         Title:   Managing Director, Client Administration -------------------------------------------------------------------------------- QuickLinks Exhibit 10.6
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.2 EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is entered into on May 8, 2001 by and between John J. Rangel, an individual (the "Executive"), and K2 Inc., a Delaware corporation (the "Company"). W I T N E S S E T H     WHEREAS, the Executive is currently the Senior Vice President—Finance of the Company; and     WHEREAS, the Company and the Executive mutually desire that an employment agreement be entered into setting forth their mutual rights and obligations in respect of the Executive's employment;     NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows: A G R E E M E N T 1.  EMPLOYMENT BY THE COMPANY AND TERM.     (a) POSITION AND REPORTING. Subject to the terms set forth herein, the Company agrees to employ the Executive as Senior Vice President—Finance and Chief Financial Officer and the Executive hereby accepts such employment. During the term of the Executive's employment, the Executive will report solely and directly to the Chief Executive Officer of the Company.     (b) FULL TIME AND BEST EFFORTS. During the term of his employment with the Company, the Executive will devote substantially all of his business time and use his best efforts to advance the business and welfare of the Company, except for sick leave, vacations and approved leaves of absence. During the term of the Executive's employment, he will not engage in any other employment or business activities that would be directly harmful or detrimental to, or that may compete with, the business and affairs of the Company, or that would interfere with his duties hereunder. However, the foregoing will not prevent the Executive from devoting a reasonable amount of time to personal investment, civic and charitable activities.     (c) DUTIES. The Executive will perform such duties as are customarily associated with his position in a corporation of the size and nature of the Company, consistent with the Bylaws of the Company and as reasonably required by the Board.     (d) COMPANY POLICIES. The employment relationship between the parties will be governed by the general employment policies and practices of the Company, including but not limited to those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company's general employment policies or practices, this Agreement will control.     (e) TERM. The term of this Agreement will begin as of May 8, 2001 and end on May 7, 2004 (such three-year period, the "Employment Term"), unless extended and subject to the provisions for termination set forth herein. This Agreement shall automatically be extended for a period of one year following the Employment Term or any extension thereof unless the Company shall have notified the Executive, in writing, of its election not to extend this Agreement not less than 120 nor more than 150 days prior to the expiration of this Agreement. 2.  COMPENSATION AND BENEFITS.     (a) SALARY. The Executive will receive for services to be rendered hereunder a base salary at the annual rate of $240,000 payable at least as frequently as monthly and subject to payroll deductions as may be necessary or customary in respect of the Company's salaried employees (the "Base Salary"). -------------------------------------------------------------------------------- The Base Salary will be subject to review at least annually and to increase at such times and in such amounts as the Board may approve.     (b) PARTICIPATION IN BENEFIT PLANS. During the term of the Executive's employment, the Executive will be entitled to participate in any insurance, hospitalization, medical, dental, health, accident, disability or similar plan or program of the Company now existing or established hereafter to the extent that he is eligible under the general provisions thereof. The Company may, in its sole discretion and from time to time, amend, eliminate or establish additional benefit programs as it deems appropriate. The Executive will also participate in all fringe benefits offered by the Company to any of its senior executives. 3.  INCENTIVE, BONUS AND OPTION PLANS.     During the Executive's employment, the Executive will be entitled to participate, on terms and conditions that are appropriate to his position and responsibilities at the Company and are no less favorable than those applying to other senior executives of the Company, in any incentive, bonus, deferred compensation, retirement, stock option and other compensation plans of the Company currently or hereafter made available by the Company to senior executives of the Company. 4.  PERQUISITES, VACATIONS AND REIMBURSEMENT OF EXPENSES.     During the term of the Executive's employment:     (a) The Company will furnish the Executive with, and the Executive will be allowed full use of, office facilities, automobiles, secretarial and clerical assistance and other Company property and services commensurate with his position and of at least comparable quality, nature and extent to those made available to other senior executives of the Company from time to time;     (b) The Executive will be allowed vacations and leaves of absence with pay on a basis no less favorable than that applying to other senior executives of the Company;     (c) The Company will reimburse the Executive for all monies which he has expended for purposes of the Company's business, such reimbursement to be effected in accordance with Company reimbursement policies and procedures from time to time in effect. 5.  TERMINATION OF EMPLOYMENT.     (a) DEFINITIONS. The following definitions will apply to Sections 5 and 6 as applicable:     (i)  CAUSE. The term "Cause" means: (A) conviction of a felony involving moral turpitude, or (B) willful gross neglect or willful gross misconduct in carrying out Executive's duties under this Agreement, resulting in material economic harm to the Company, unless Executive believed in good faith that such conduct was in, or not contrary to, the best interests of the Company.     (ii) DISABILITY. The term "Disability" means the inability of the Executive due to illness (mental or physical), accident, or otherwise, to perform his duties for any period of 180 consecutive days, as determined by an independent physician selected by the Company and reasonably acceptable to the Executive or his legal representative. Any return to work from a period of disability must be authorized by the Executive's physician.     (iii) GOOD REASON. The term "Good Reason" means: (A) a material breach of this Agreement by the Company; (B) without the Executive's prior written consent, assignment to the Executive of duties materially inconsistent in any respect with his position or any other action by the Company that results in a material diminution in the Executive's position, authority, duties or responsibilities, it being expressly understood that a change in the Executive's reporting responsibility so that he does not report directly and solely to the Board will constitute "Good 2 -------------------------------------------------------------------------------- Reason"; (C) any transaction in which the Company becomes a subsidiary of another corporation or which is described in clause (iii) or (iv) of the definition of "Change in Control" in Section 6(a) below; (D) reduction, without the Executive's prior written consent, of the Executive's Base Salary, or his bonus or other cash incentive compensation opportunity, for any reason other than in connection with the termination of his employment or in connection with, and proportionate to, a Company-wide pay reduction; (E) any material reduction of fringe benefits provided to the Executive for any reason other than in connection with the termination of the Executive's employment or in connection with any change to the Company's benefit programs applicable to all Company employees generally made in the normal course of business; (F) assignment of the Executive, without his prior written consent, to a Company office located more than 20 miles from the Executive's current office location; (G) election by the Company not to extend the term of this Agreement in accordance with Section 1(e) hereof; or (H) the Company's failure to obtain an agreement from any successor or assign of the Company to assume and to agree to perform this Agreement. A change in the formula, methodology or factors considered in determining incentive cash incentive compensation shall not by itself constitute a reduction of the Executive's incentive compensation opportunity for purposes of clause (D) above.     (iv) NOTICE OF TERMINATION. The term "Notice of Termination" means a notice which indicates the specific termination provision in this Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated. Any purported termination of employment by the Company or by the Executive must be communicated by written Notice of Termination to the other party hereto in accordance with Section 11(a) hereof. With respect to any termination of employment by the Executive for Good Reason, the Executive will have 120 days following the occurrence of any event described in Section 5(a)(iii) to provide the Company with Notice of Termination, and may not do so thereafter.     (v) SEVERANCE TERM. The term "Severance Term" means the remaining period of the Employment Term as of a Termination Date or one full year, whichever is longer.     (vi) TERMINATION DATE. The term "Termination Date" means: (i) if the Executive terminates his employment for Good Reason, the date that is 60 days after Notice of Termination is given and (ii) if the Executive's employment is terminated by the Company other than for Cause, death or Disability, the date that is 30 days after Notice of Termination is given.     (b) TERMINATION BY THE COMPANY FOR CAUSE. The Board may terminate the Executive's employment with the Company at any time for Cause, immediately upon notice to the Executive of the circumstances leading to such termination for Cause. In the event that the Executive's employment is terminated for Cause, the Executive will receive payment for all accrued salary and vacation time through the Termination Date, which in this event will be the date upon which Notice of Termination is given. The Company will have no further obligation to pay severance of any kind whether under this Agreement or otherwise nor to make any payment in lieu of notice.     (c) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive will have the right, at his election, to terminate his employment with the Company by written notice to the Company to that effect for a period of 120 days following any occurrence constituting Good Reason; PROVIDED, HOWEVER, that termination for Good Reason will not be effective until the Executive gives written notice specifying the occurrence constituting Good Reason and, PROVIDED that if such occurrence is curable, the Company fails to correct it within 10 days after the receipt of the applicable notice.     (d) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON. In the event that the Executive's employment is terminated by the Company (other than pursuant to Section 5(b)) or such employment is terminated by the Executive for Good 3 -------------------------------------------------------------------------------- Reason (and in either such case the Executive is not entitled to benefits pursuant to Section 6(b)), the Company agrees to pay or provide to the Executive as termination compensation the following:     (i)  A single lump sum payment, payable in cash within five days of the Termination Date, equal to the sum of:     (A) the accrued portion of any Base Salary and vacation through the Termination Date; plus     (B) an amount representing bonus and all other cash incentive compensation for such period determined by multiplying:     (I) the average of such bonus and other cash incentive compensation accrued for each of the three preceding full years, by     (II) the fraction of the year of termination elapsed prior to the Termination Date; plus     (C) the present value of:     (I) the Executive's Base Salary in effect upon the Termination Date for the Severance Term, plus     (II) incentive compensation for the Severance Term, based upon the Executive's average bonus and all other cash incentive compensation accrued for each of the three preceding full years, less standard withholdings for tax and social security purposes. For the purpose of determining present value, future payments will be discounted at an interest rate equal to the short-term borrowing rate of the Company.     (ii) All stock options, restricted stock or other equity awards then held by Employee will automatically be deemed amended, without further action on the part of the Company or the Executive, so that (A) all options will be fully vested and not subject to forfeiture or expiration by reason of the Executive's termination, and will be subject to exercise in full for one year from the Termination Date; and (B) all restricted stock or other equity awards will be fully vested and all restrictions thereon will lapse.     (iii) Continuation of benefits as follows:     (A) All benefits provided under Section 2(b) will continue for the remaining period of the Severance Term. Notwithstanding the foregoing, to the extent any such benefit cannot be provided through the applicable plan of the Company, the Company will provide such benefit outside of the plan or will provide a cash lump sum payment equal to the value of such additional benefit.     (B) The Company shall meet its obligation under (A) above, in connection with its group medical/dental plan for the period ending on the earlier to occur of: (i) the end of the Severance Term or (ii) the date the Executive ceases to be eligible for continuation coverage under the Company's group medical/dental plan pursuant to the provisions of COBRA, by providing the continuation of such coverage at Company expense, contingent upon the Executive's timely election of such coverage under COBRA.     (C) To the extent required to avoid adverse tax consequences under Section 105(h) of the Internal Revenue Code of 1986 (the "Code"), the Company's payments under this Section 5(d)(iii) will be recognized by the Executive in his taxable income and the Executive will receive, in addition, a "gross-up" payment covering the tax liability attributable to such recognized income consistent with principles of paragraph 6(c)(v), below. 4 --------------------------------------------------------------------------------     (iv) Additional credited service for retirement benefits under all retirement plans, including supplemental retirement plans (if any), equivalent to the Severance Term.     (e) TERMINATION BY REASON OF DEATH OR DISABILITY. This Agreement will terminate upon the death of the Executive; and the Executive's employment hereunder may be terminated by the Executive or the Company, at either of their election, upon the Executive's Disability. In the event the Executive's employment is terminated as the result of death or Disability, except as set forth in the following sentence, the Executive, or his estate or legal representative, will be entitled to receive the accrued portion of any Base Salary and vacation through the Termination Date, plus any unreimbursed business expenses, plus for the remainder of the Employment Term: (i) periodically not less frequently than monthly in accordance with the Company's normal payroll practice, payments at the rate of his then Base Salary; and (ii) at the normal and customary time for payment of bonuses and all other cash incentive compensation, amounts equal to the average of such payments accrued for each of the three full preceding years; in each case subject to any applicable withholdings for tax and social security purposes. The payments provided in this Section 5(e) will be reduced by the amount of any payments made to the Executive pursuant to any disability or life insurance policy provided by the Company for this purpose, which insurance policy is in addition to any other insurance benefits provided to the Executive as a benefit hereunder. 6.  BENEFITS UPON CHANGE OF CONTROL.     (a) DEFINITIONS. In addition to the definitions provided in Section 5, the following definition will apply to this Section 6:     CHANGE IN CONTROL. The term "Change in Control" means the occurrence of any of the following events after the date of this Agreement: (i) the acquisition by any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a "Person"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors ("Voting Securities"); PROVIDED, HOWEVER, that the following acquisitions will not constitute a Change in Control: (A) any acquisition by the Company, (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by the Executive (or a group including the Executive); (ii) a change in the composition of a majority of the Board within a three-year period, which change has not been approved by a majority of the persons then surviving as Directors who also comprised the Board immediately prior to the commencement of such period; or (iii) the consummation of any reorganization, merger or consolidation other than a reorganization, merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 60% of the combined voting power of the Voting Securities of the Company or such surviving entity outstanding immediately after such reorganization, merger or consolidation; or (iv) the consummation of a plan of complete liquidation of the Company or of an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company's assets.     (b) ELIGIBILITY FOR BENEFITS. The Company agrees to pay to the Executive the benefits specified in Section 6(c) hereof if (i) there is a Change in Control during the term of this Agreement and (ii) within the period commencing on the date of the Change in Control, or (if earlier) the date of any agreement by the Company to enter into the transaction resulting in such Change in Control, and ending two years after the Change in Control (A) the Company terminates the employment of the Executive for any reason other than Cause, death or Disability or (B) the Executive voluntarily terminates employment with the Company for Good Reason. A Change of Control will be deemed to 5 -------------------------------------------------------------------------------- have occurred during the term of this Agreement, for purposes of this paragraph 6(b), if an agreement is entered into during the term of this Agreement for a transaction resulting in a Change of Control, notwithstanding that the Change of Control transaction is not completed until after the term of this Agreement.     (c) BENEFITS UPON TERMINATION OF EMPLOYMENT. If the Executive is entitled to benefits pursuant to Section 6(b) hereof, in lieu of any payments and benefits provided in Section 5 the Company agrees to pay or provide to the Executive as termination compensation the following:     (i)  A single lump sum payment, payable in cash within five days of the Termination Date, equal to the sum of:     (A) the accrued portion of any Base Salary and vacation through the Termination Date; plus     (B) an amount representing bonus and all other cash incentive compensation for such period determined by multiplying:     (I) the average of such bonus and other cash incentive compensation accrued for each of the three preceding full years, by     (II) the fraction of the year of termination elapsed prior to the Termination Date; plus     (C) 299% of the sum of:     (I) the Executive's Base Salary in effect upon the Termination Date plus     (II) the Executive's average bonus and all other cash incentive compensation accrued for each of the three preceding full years.     (ii) All stock options, restricted stock or other equity awards then held by Employee will automatically be deemed amended, without further action on the part of the Company or the Executive, so that (A) all options will be fully vested and not subject to forfeiture or expiration by reason of the Executive's termination, and will be subject to exercise in full for the remainder of their stated term; and (B) all restricted stock or other equity awards will be fully vested and all restrictions thereon will lapse.     (iii) Continuation of benefits as follows:     (A) All benefits provided under Section 2(b) will continue for the remaining period of the Severance Term. Notwithstanding the foregoing, to the extent any such benefit cannot be provided through the applicable plan of the Company, the Company will provide such benefit outside of the plan or will provide a cash lump sum payment equal to the value of such additional benefit.     (B) The Company shall meet its obligation under (A), above, in connection with its group medical/dental plan for the period ending on the earlier to occur of: (i) the end of the Severance Term or (ii) the date the Executive ceases to be eligible for continuation coverage under the Company's group medical/dental plan pursuant to the provisions of COBRA, by providing the continuation of such coverage at Company expense, contingent upon the Executive's timely election of such coverage under COBRA.     (C) To the extent required to avoid adverse tax consequences under Section 105(h) of the Internal Revenue Code of 1986 (the "Code"), the Company's payments under this Section 6(c)(iii) will be recognized by the Executive in his taxable income and the Executive will receive, in addition, a "gross-up" payment covering the tax liability attributable to such recognized income consistent with principles of paragraph 6(c)(v), below. 6 --------------------------------------------------------------------------------     (iv) Additional credited service for retirement benefits under all retirement plans, including supplemental retirement plans (if any), equivalent to the remaining period of the Employment Term.     (v) In the event that any amount or benefit that may be paid or otherwise provided to the Executive by the Company or any affiliated company, whether pursuant to this Agreement or otherwise (collectively, "Covered Payments"), is or may become subject to the tax imposed under Code Section 4999 ("Excise Tax"), the Company will pay to the Executive a "Reimbursement Amount" equal to the total of: (A) any Excise Tax on the Covered Payments, plus (B) any Federal, state, and local income taxes, employment and excise taxes (including the Excise Tax) on the Reimbursement Amount (but without reduction for any Federal, state, or local income or employment taxes on such Covered Payments), plus (C) the product of any deductions disallowed for Federal, state or local income tax purposes because of the inclusion of the Reimbursement Amount in the Executive's adjusted gross income multiplied by the highest applicable marginal rate of Federal, state, and local income taxation, respectively, for the calendar year in which the Reimbursement Amount is to be paid. For purposes of this Section 6(c)(v), the Executive will be deemed to pay (Y) Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Reimbursement Amount is to be paid and (Z) any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which such Reimbursement Amount is to be paid, 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 (determined without regard to limitations on deductions based upon the amount of the Executive's adjusted gross income).     (d) CHANGES TO BENEFITS. In the event the Board desires to approve a merger to be accounted for as a "pooling of interests," the Executive will, in good faith, negotiate with the Company concerning such changes in the foregoing payments and benefits (if any) as may be necessary in order to achieve such accounting treatment. The parties acknowledge that the Executive's obligation to negotiate in good faith hereunder will not require him to accept a material reduction in the net after tax benefits provided to him hereunder or in any alternative agreement or arrangement. 7.  NO OBLIGATION TO MITIGATE DAMAGES.     In the event of a termination of the Executive's employment for any reason, the Executive will not be required to seek other employment or to mitigate any of the Company's obligations under this Agreement, and no amount payable hereunder will be reduced (a) by any claim the Company may assert against the Executive or (b) by any compensation or benefits earned by the Executive as a result of employment by another employer, self-employment or from any other source after such termination of employment with the Company; PROVIDED, HOWEVER, that the benefits provided pursuant to Sections 5(d)(iii) and 6(c)(iii)(A) will terminate at such time as the Executive becomes eligible for comparable benefits as the result of employment by another Person. 8.  PROPRIETARY INFORMATION OBLIGATIONS.     During the Executive's employment pursuant to this Agreement, the Executive will have access to and become acquainted with confidential and proprietary information of the Company and its subsidiaries, including, but not limited to, information or plans regarding customer relationships, personnel, or sales, marketing, and financial operations and methods; trade secrets; formulas; devices; secret inventions; processes; and other compilations of information, records, and specifications (collectively, "Proprietary Information"). The Executive will not disclose any such Proprietary Information directly or indirectly, or use it in any way, either during the Executive's employment pursuant to this Agreement or at any time thereafter, except as required in the course of his employment for the Company or as authorized in writing by the Company. All files, records, 7 -------------------------------------------------------------------------------- documents, computer-recorded information, drawings, specifications, equipment and similar items relating to the business of the Company or its subsidiaries, whether prepared by the Executive or otherwise coming into his possession, will remain the exclusive property of the Company or its subsidiaries, as the case may be, and may not be removed from the premises of the Company under any circumstances whatsoever without the prior written consent of the Company, except when (and only for the period) necessary to carry out the Executive's duties hereunder, and if removed must be immediately returned to the Company upon any termination of his employment; PROVIDED, HOWEVER, that the Executive may retain copies of documents reasonably related to his interest as a shareholder and any documents that were personally owned, which copies and the information contained therein the Executive agrees not to use for any business purpose. Notwithstanding the foregoing, Proprietary Information will not include (a) information which is or becomes generally public knowledge or public except through disclosure by the Executive in violation of this Agreement and (b) information that may be required to be disclosed by applicable law. 9.  NON-INTERFERENCE.     While employed by the Company and for a period of one year after termination of this Agreement, the Executive agrees not to interfere with the business of the Company or any subsidiary of the Company by directly or indirectly soliciting, attempting to solicit, or otherwise inducing, any employee of the Company or any subsidiary of the Company to terminate his or her employment in order to become an employee, consultant or independent contractor to or for any other employer. 10. NON-COMPETITION.     The Executive agrees that, during the Employment Term, he will not, without the prior consent of the Company, directly or indirectly, have an interest in, be employed by, or be connected with, as an employee, consultant, officer, director, partner, stockholder or joint venturer, in any person or entity owning, managing, controlling, operating or otherwise participating or assisting in any business which is in competition with the business of the Company, in any location, unless the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason; PROVIDED, HOWEVER, that the foregoing will not prevent the Executive from being a stockholder of less than 1% of the issued and outstanding securities of any class of a corporation listed on a national securities exchange or designated as national market system securities on an interdealer quotation system by the National Association of Securities Dealers, Inc. 11. MISCELLANEOUS.     (a) NOTICES. Any notices provided hereunder must be in writing and will be deemed effective upon the earlier of two days following personal delivery (including personal delivery by telecopy or telex), or the fourth day after mailing by first class mail to the recipient at the address indicated below: To the Company: K2 Inc. 4900 South Eastern Avenue Los Angeles, CA 90040 Attn: Secretary Telecopier No: (213) 724-0667 With a copy to: Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, California 90071-3197 8 -------------------------------------------------------------------------------- Attention: Andrew E. Bogen, Esq. Telecopier: (213) 229-7520 To the Executive: JOHN J. RANGEL K2 Inc. 4900 South Eastern Avenue Los Angeles, CA 90040 or to such other address or to the attention of such other person as the recipient party will have specified by prior written notice to the sending party.     (b) SEVERABILITY. Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction will, as to that jurisdiction and subject to this Section be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable because its scope is considered excessive, such covenant will be modified so that the scope of the covenant is reduced only to the minimum extent necessary to render the modified covenant valid, legal and enforceable.     (c) ENTIRE AGREEMENT. This document constitutes the final, complete, and exclusive embodiment of the entire agreement and understanding between the parties related to the subject matter hereof and supersedes and preempts any prior or contemporaneous understandings, agreements, or representations by or between the parties, written or oral.     (d) COUNTERPARTS. This Agreement may be executed on separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same agreement.     (e) 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, except that the Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the prior written consent of the Company.     (f)  AMENDMENTS. No amendments or other modifications to this Agreement may be made except by a writing signed by both parties. No amendment or waiver of this Agreement requires the consent of any individual, partnership, corporation or other entity not a party to this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any third person any rights or remedies under or by reason of this Agreement.     (g) CHOICE OF LAW. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California without giving effect to principles of conflicts of law. 12. ARBITRATION.     (a) Any disputes or claims arising out of or concerning the Executive's employment or termination by the Company, whether arising under theories of liability or damages based upon contract, tort or statute, will be determined exclusively by arbitration before a single arbitrator in accordance with the employment arbitration rules of the American Arbitration Association, except as modified by this Agreement. The arbitrator's decision will be final and binding on both parties. Judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction. In recognition of the fact that resolution of any disputes or claims in the courts is rarely timely or cost effective for either party, the Company and the Executive enter this mutual agreement to 9 -------------------------------------------------------------------------------- arbitrate in order to gain the benefits of a speedy, impartial and cost-effective dispute resolution procedure.     (b) Any arbitration will be held in the Executive's place of employment with the Company. The arbitrator must be an attorney with substantial experience in employment matters, selected by the parties alternately striking names from a list of five such persons provided by the American Arbitration Association (AAA) office located nearest to the place of employment, following a request by the party seeking arbitration for a list of five such attorneys with substantial professional experience in employment matters. If either party fails to strike names from the list, the arbitrator will be selected from the list by the other party.     (c) Each party will have the right to take the deposition of one individual and any expert witness designated by the other party. Each party will also have the right to propound requests for production of documents to any party and the right to subpoena documents and witnesses for the arbitration. Additional discovery may be made only where the arbitrator selected so orders upon a showing of substantial need. The arbitrator will have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and will apply the standards governing such motions under the Federal Rules of Civil Procedure.     (d) The Company and the Executive agree that they will attempt, and they intend that they and the arbitrator should use their best efforts in that attempt, to conclude the arbitration proceeding and have a final decision from the arbitrator within 120 days from the date of selection of the arbitrator; PROVIDED, HOWEVER, that the arbitrator will be entitled to extend such 120-day period for one additional 120-day period. The arbitrator will deliver a written award with respect to the dispute to each of the parties, who must promptly act in accordance therewith.     (e) The Company will pay any and all reasonable fees and expenses incurred by the Executive in seeking to obtain or enforce any rights or benefits provided by this Agreement, including all reasonable attorneys' and experts' fees and expenses, accountants' fees and expenses, and court costs (if any) that may be incurred by the Executive in pursuing a claim for payment of compensation or benefits or other right or entitlement under this Agreement, PROVIDED that the Executive is successful as to at least part of the disputed claim by reason of litigation, arbitration or settlement.     (f)  In a contractual claim under this Agreement, the arbitrator must act in accordance with the terms and provisions of this Agreement and applicable legal principles and will have no authority to add, delete or modify any term or provision of this Agreement.     IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date it is last executed below by either party.     /s/ JOHN J. RANGEL    -------------------------------------------------------------------------------- John J. Rangel     K2 INC.     By:   /s/ RICHARD M. RODSTEIN    -------------------------------------------------------------------------------- Richard M. Rodstein President and Chief Executive Officer 10 -------------------------------------------------------------------------------- QuickLinks EMPLOYMENT AGREEMENT W I T N E S S E T H A G R E E M E N T
TERMINATION OF LEASE         THIS TERMINATION OF LEASE (this “Agreement”), made as of the 13th day of October, 2000 by and between CHIPPEWA LIMITED PARTNERSHIP, a Maryland limited partnership (the “Landlord”), and EARTHSHELL CORPORATION, a Delaware corporation (the “Tenant”). RECITALS         Pursuant to a Lease Agreement dated July 2, 1999 (the “Lease”) by and between the Landlord and the Tenant, the Landlord leased to the Tenant a certain premises (the “Premises”) located in the building known as 9020 Junction Drive in Howard County, Maryland. The Landlord and the Tenant have agreed to terminate the Lease, subject to the terms and conditions set forth in this Agreement.         NOW THEREFORE, in consideration of the premises and for further good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:         1. Termination of the Lease. The Lease and the leasehold estate created thereby are hereby terminated, effective 12:00 a.m., October 13, 2000 (the “Termination Date”). From and after the Termination Date, (a) the Tenant shall have no interest whatsoever in the Premises, and (b) neither the Landlord nor the Tenant shall have further rights, obligations, responsibilities or duties under the Lease, except as set forth herein.         2. Conditions Precedent to Termination. This Agreement and the termination of the Lease is, at the Landlord's election, subject to the following conditions precedent:                 (a) New Lease. On or prior to the Termination Date, the Landlord and Little Optics, Inc., a Delaware corporation (the "New Tenant"), shall have entered into a new lease agreement for the lease of the Premises to the New Tenant on terms and conditions satisfactory to the Landlord in the Landlord's sole and absolute discretion and such lease shall not be subject to any unsatisfied condition precedent or conditioned on any approval not obtained by Landlord.                 (b) Lender's Approval. Landlord shall have obtained from the holder of any mortgage or deed of trust or similar instrument affecting all or any part of the Premises (a "Mortgagee") the written approval of the termination of the Lease and of the new lease to be entered into by and between the Landlord and the New Tenant.                 (c) Estoppel and SNDA. The Landlord shall have obtained from the New Tenant a Tenant Estoppel Certificate, a Subordination, Non-Disturbance and Attornment Agreement and any other agreement required by a Mortgagee with respect to the New Tenant.         In the event that any of the foregoing conditions precedent are not satisfied as of the Termination Date, then the Landlord, in its sole and absolute discretion, shall have the right (but shall not be obligated to) to terminate this Agreement. If the Landlord elects to terminate this Agreement, it shall give written notice of termination to the Tenant and, upon the giving of such notice, this Agreement shall become null, void and of no force or effect, as if it had never been executed, and the Lease shall continue in existence in accordance with its terms and conditions.         3. Possession and Condition of Premises. On the Termination Date, the Tenant shall deliver to the Landlord possession of the Premises in the condition that the Premises are required, by paragraph 24, and any other applicable provisions of the Lease, to be in on the date of expiration or earlier termination of the Lease.         4. Security Deposit. If the Tenant shall have performed all of its obligations under the terms of the Lease and under the terms of this Agreement, the Landlord shall, within thirty (30) days after the Termination Date, return to the Tenant the security deposit held by the Landlord, pursuant to paragraph 6 of the Lease. If the Tenant has defaulted in any obligation under the Lease or under this Agreement, the Landlord shall be entitled to apply any or all of the security deposit towards the Landlord’s damages, as determined by the Landlord.         5. Adjustment of Taxes, Insurance and Common Area Charges. Taxes, insurance and common area charges payable by the Tenant under the Lease shall be adjusted to the Termination Date. The obligation of the Tenant to make payments on account of taxes, insurance and common area charges shall survive the termination of the Lease and the execution of this Agreement and the Tenant shall make any payment to the Landlord on account thereof within twenty (20) days after written notice form the Landlord to the Tenant specifying the amount of such payment that is due.         6. Indemnification. Except to the extent the claim results from the negligence or intentional misconduct of Landlord or its agents or employees, the Tenant will defend and will indemnify Landlord and save it harmless from and against any and all claims, actions, damages, liability, and expenses (including, but not limited to, reasonable attorneys’ fees) in connection with or arising out of the failure of the Tenant to comply with any term or provision of this Agreement. Without limiting the generality of the foregoing, if the Tenant holds over after the Termination Date, without the express written consent of Landlord, the Tenant shall pay the Landlord a hold over fee on a daily basis at the rate of one and one-half (1 1/2) times the monthly basic rental specified to be due under the terms of the Lease, but such obligation for payment of the hold over fee shall not give rise to any right of the Tenant to maintain occupancy of the Premises after the Termination Date nor shall it give rise to any tenancy or new lease.         7. Indemnification, Etc. The obligations of the Tenant set forth in paragraph 20.A (Indemnification and Waiver of Claim) and paragraph 34 (Hazardous Materials) of the Lease shall survive the termination of the Lease and the execution of this Agreement.         8. Acknowledgment of Notice. Landlord acknowledges that it has received sufficient notice of Tenant’s intention to vacate the Premises pursuant to paragraph 21(8) of the Lease so that, if Tenant vacates the Premises on the Termination Date, Tenant shall not have committed an event of default under the Lease, pursuant to paragraph 21(8) of the Lease.         9. Representations and Warranties. The Tenant hereby represents and warrants to the Landlord that (i) this Agreement has been duly authorized by all necessary action on the part of Tenant and constitutes the valid and binding act of Tenant and is enforceable against Tenant in accordance with its terms, and (ii) Tenant has not assigned, sublet or otherwise transferred or encumbered its interest in the Lease or the Premises, in whole or in part. The undersigned individual represents and warrants to the Landlord that he is the duly authorized officer of the Tenant and has the power and authority to execute and deliver this Agreement on behalf of the Tenant.         10. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon Landlord and Tenant and their respective successors and assigns.         11. Applicable Law. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of Maryland.         12. Remedies Cumulative. Any and all remedies available to the Landlord for the enforcement of the provisions of this Agreement are cumulative and not exclusive and the Landlord shall be entitled to pursue singly or concurrently any of the rights and remedies enumerated in this Agreement or in the Lease or authorized by law or available in equity. In the event the Landlord retains legal counsel to enforce any of its rights or remedies under or in connection with this Agreement, the Tenant shall pay all of the reasonable counsel fees and court costs of the Landlord’s counsel.         13. Time is of the Essence. Time is of the essence of all of the provisions of the Agreement.         14. Entire Agreement. This Agreement, together with the Lease, contains the entire agreement between the parties as to the subject matter hereof, and all agreements relating hereto have been integrated herein. This Agreement cannot be changed or modified except by a written instrument signed by the party to be bound thereby.         IN WITNESS WHEREOF the parties hereto, by the properly authorized persons, have duly executed this Agreement, under seal, as of the day and year first above written. WITNESS/ATTEST: CHIPPEWA LIMITED PARTNERSHIP, a Maryland limited partnership, By: Emory Holdings II Limited Partnership, its general partner __/s/unlegible__________ By: _/s/R.Clayton Emory_______(SEAL) R. Clayton Emory, general partner WITNESS/ATTEST: EARTHSHELL CORPORATION _/s/Teasha Blackman_____ By: /s/Scott Houston_____________(SEAL) Teasha Blackman Name: Scott Houston Title: Chief Financial Officer
Exhibit 10.11 AVX CORPORATION 1995 STOCK OPTION PLAN AS AMENDED THROUGH OCTOBER 24, 2000   1. Adoption and Purpose. The Company hereby adopts this Plan providing for the granting of stock options to selected employees of the Company and its Subsidiaries. The general purpose of the Plan is to promote the interests of the Company and its Subsidiaries by providing to their employees incentives to continue and increase their efforts with respect to, and remain in the employ of, the Company and its Subsidiaries. Options granted under the Plan may be "incentive stock options" within the meaning of Section 422 of the Code or "nonqualified stock options", and the specific type of option granted shall be designated in an applicable stock option agreement. 2. Administration. The Plan will be administered by the Equity Compensation Committee (the "Committee"), which shall be comprised of two or more persons, each of whom shall qualify as (a) an "outside director" within the meaning of Section 162(m) of the Code and (b) a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3)(i) promulgated under the Exchange Act. Subject to the express provisions of the Plan, the Committee shall have plenary authority, in its discretion, to administer the Plan and to exercise all powers and authority either specifically granted to it under the Plan or necessary and advisable in the administration of the Plan, including without limitation the authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms of all options granted under the Plan (which need not be identical), the purchase price of the shares covered by each option, the individuals to whom and the time or times at which options shall be granted, whether an option shall be an incentive stock option or a nonqualified stock option, when an option can be exercised and whether in whole or in installments, and the number of shares covered by each option; and to make all other necessary or advisable determinations with respect to the Plan. The determination of the Committee on such matters shall be conclusive. 3. Participants. The Committee shall from time to time select the officers and key employees of the Company and its Subsidiaries to whom options are to be granted, and who will, upon such grant, become participants in the Plan. 4. Shares Subject to Plan. The Committee may not grant options under the Plan for more than 9,300,000 shares of Common Stock, subject to any adjustment as provided in Section 13 hereof. Shares to be optioned and sold may be made available from either authorized but unissued Common Stock or Common Stock held by the Company in its treasury. Shares that by reason of the expiration of an option or otherwise are no longer subject to purchase pursuant to an option granted under the Plan may be reoffered under the Plan. 5. Limitation on Number of Options. The Committee may not grant incentive stock options under the Plan to any employee unless either (i) the aggregate Fair Market Value (determined as of the time an incentive stock option is granted) of the stock with respect to which incentive stock options granted to an employee under the Plan (including all options qualifying as incentive stock options pursuant to Section 422 of the Code granted to such employee under any other plan of the Company or its Parent or Subsidiaries) are exercisable for the first time by such employee during any calendar year does not exceed $100,000 or (ii) such option is issued in exchange for a previously granted incentive stock option in a substitution which is not treated as a modification of such option pursuant to Section 424 of the Code. No person may be granted options under the Plan in any five-year period representing an aggregate of more than 1,000,000 shares of Common Stock. The limitation established by the preceding sentence shall be subject to adjustment as provided in Section 13 hereof. 6. Grant of Options. All options under the Plan shall be granted by the Committee. The Committee shall determine the number of shares of Common Stock to be offered from time to time by grant of options to employees who are participants of the Plan (it being understood that more than one option may be granted to the same employee). The grant of an option to an employee shall not be deemed either to entitle the employee to, or to disqualify the employee from, participation in any other grant of options under the Plan. The grant of options shall be evidenced by stock option agreements containing such terms and provisions as are approved by the Committee, but not inconsistent with the Plan, including provisions that may be necessary to ensure, in the case of an incentive stock option, that the option qualifies as an incentive stock option under the Code. The Company shall execute stock option agreements upon instructions from the Committee. 7. Option Price. Subject to the provisions set forth in this Section 7 relating to incentive stock options, the purchase price per share of the Common Stock for any option granted under the Plan shall be determined by the Committee, but shall not be less than (i) 100% of the Fair Market Value per share of the Common Stock on the date the option is granted, or (ii) with respect to an option issued in exchange for a previously granted option in a substitution which is not treated as a modification of such option (or would be so treated if such option was an incentive stock option) pursuant to Section 424 of the Code, the appropriately adjusted exercise price determined in accordance with Section 424 and the regulations issued thereunder. No incentive stock option shall be granted to an employee who, at the time such option is granted, is a Ten Percent Shareholder unless at the time such incentive stock option is granted the option price per share is at least 110% of the Fair Market Value per share of the Common Stock subject to the incentive stock option. 8. Option Period. The option period will begin on the date the option is granted, which will be the date the Committee authorizes the option unless the Committee specifies a later date. No option may terminate later than the day prior to the tenth anniversary of the date the option is granted; provided, however, that an incentive stock option granted to an employee who, at the time of such grant, is a Ten Percent Shareholder shall not be exercisable after the expiration of five years after the date of grant. The Committee may provide for the exercise of options in installments and upon such terms, conditions and restrictions as it may determine. The Committee may provide in a stock option agreement for termination of an option in the case of termination of employment or any other reason. 9. Exercisability of Options. The Committee may in its discretion prescribe in the stock option agreement the installments, if any, in which an option granted under the Plan shall become exercisable; provided, however, that no option shall be exercisable (x) until the six-month anniversary of the date of its grant and (y) unless the holder thereof is then an employee of the Company or a Subsidiary, except in each case as otherwise provided in this Plan (including Section 12) or as the Committee otherwise determines. Except as provided in the applicable option agreement, if the participant voluntarily terminates his employment or his employment with the Company or Subsidiary is terminated for cause (as defined below), neither the Company, the Parent nor any Subsidiary shall have any further obligation to the participant hereunder, and the options (whether or not vested) shall immediately terminate in full. In the event a participant's employment is terminated by the Company for any reason other than for cause (defined as the commission of an act of dishonesty, gross incompetency or intentional or willful misconduct, which act occurs in the course of participant's performance of his duties as an employee), options may be exercised, to the extent of the shares with respect to which the option could have been exercised by the participant as of his date of termination of employment, by the participant in accordance with its terms but in no event beyond the earlier of (x) 90 days after the date of termination or (y) the scheduled expiration of such option. 10. Payment; Method of Exercise. Payment shall be made in cash or, unless otherwise prohibited in the applicable stock option agreement, in shares of Common Stock already owned by the holder of the option or partly in cash and partly in such shares. No shares may be issued until full payment of the purchase price therefore has been made, and a participant will have none of the rights of a stockholder until shares are issued to him. An option may be exercised by written notice to the Company. Such notice shall state that the holder of the option elects to exercise the option, the number of shares in respect of which it is being exercised and the manner of payment for such shares and shall either (i) be accompanied by payment of the full purchase price of such shares or (ii) fix a date (not more than 10 business days from the date of exercise) for the payment of the full purchase price of such shares. Cash payments shall be made by cash or check payable to the order of the Company. Common Stock payments (valued at Fair Market Value on the date of exercise) shall be made by delivery of stock certificates in negotiable form. If certificates representing Common Stock are used to pay all or part of the purchase price of an option, a separate certificate shall be delivered by the Company representing the same number of shares as each certificate so used, and an additional certificate shall be delivered representing the additional shares to which the holder of the option is entitled as a result of the exercise of the option. 11. Withholding Taxes. If the Committee shall so require, as a condition of exercise, each participant shall agree that (a) no later than the date of exercise of any option, the participant will pay to the Company or make arrangements satisfactory to the Committee regarding payment of any Federal, state or local taxes of any kind required by law to be withheld upon the exercise of such option (any such tax, a "Withholding Tax"); and (b) the Company shall, to the extent permitted or required by law, have the right to deduct from any payment of any kind otherwise due to the participant, any such Withholding Tax. 12. Rights in the Event of Death, Retirement or Incapacity. Options granted on or before April 30, 2000 . If a participant's employment is terminated due to death, Retirement or Incapacity prior to termination of his or her right to exercise an option in accordance with the provisions of his or her stock option agreement without having fully exercised the option, then (a) the Committee in its discretion may cause the option to become fully vested and (b) such option may be exercised by the participant (or in the event of the participant's death, by his estate or by the person who acquired the right to exercise the option by bequest or inheritance), to the extent of the shares with respect to which the option could have been exercised by the participant as of the date of his or her death, Retirement or Incapacity but also taking into account any acceleration of vesting pursuant to clause (a) above, provided that the option is exercised prior to the earlier of (x) one year after the date of such death, Retirement or Incapacity and (y) the date of its original expiration. In the event of the death of a participant following his or her termination of employment during the period in which his or her option remains exercisable, such option may be exercised to, the extent the option could have been exercised by the decedent, by the participant's estate or by the person who acquired the right to exercise the option by bequest or inheritance at any time within one year after the date of death but in no event beyond the original expiration date of the option. Options granted on or after May 1, 2000 . If a participant's employment is terminated due to death, Retirement or Incapacity prior to the termination of his or her right to exercise an option in accordance with the provisions of his or her stock option agreement without having fully exercised the option, then the total number of shares of Common Stock then underlying the option shall thereupon become exercisable. Such exercisable options may only be exercised prior to the date of their original expiration. In the event of the death of a participant, including death following his or her termination of employment during the period in which his or her option remains exercisable, then notwithstanding the foregoing, such option may be exercised to the extent the option could have been exercised by the decedent, by the participant's estate or by the person who acquired the right to exercise the option by bequest or inheritance only during the period within one year after the date of death, but in no event beyond the original expiration date of the option. 13. Effect of Certain Changes. (a) If there is any change in the number of outstanding shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination, exchange of shares, merger, consolidation, liquidation, split-up, spin-off or other similar change in capitalization, any distribution to common shareholders, including a rights offering, other than cash dividends, or any like change, then the number of shares of Common Stock available for options, the number of such shares covered by outstanding options, and the price per share of such options shall be proportionately adjusted by the Committee to reflect such change or distribution; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. (b) In the event of a change in the Common Stock of the Company as presently constituted, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of the Plan. (c) In the event of a reorganization, recapitalization, merger, consolidation, acquisition of property or stock, extraordinary dividend or distribution (other than as covered by Section 13(a) hereof), separation or liquidation of the Company, or any other event similarly affecting the Company, the Board or the Committee shall have the right, but not the obligation, notwithstanding anything to the contrary in this Plan, to provide that outstanding options granted under this Plan shall (i) be canceled in respect of a cash payment or the payment of securities or property, or any combination thereof, with a per share value determined by the Board in good faith to be equal to the value received by the stockholders of the Company in such event in the respect of each share of Common Stock, with appropriate deductions of exercise prices, or (ii) be adjusted to represent options to receive cash, securities, property, or any combination thereof, with a per share value determined by the Board in good faith to be equal to the value received by the stockholders of the Company in such event in respect of each share of Common Stock, at such exercise prices as the Board or the Committee in its discretion may determine is appropriate. (d) To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive; provided that each incentive stock option granted pursuant to this Plan shall not be adjusted in a manner that causes such option to fail to continue to qualify as an incentive stock option within the meaning of Section 422 of the Code. 14. Nonexclusive Plan. Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 15. Section 16 Persons. With respect to persons subject to Section 16 of the Exchange Act, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 16. Assignability. Nonqualified options may be transferred by gift to any member of the optionee's immediate family or to a trust for the benefit of one or more of such immediate family members and nonqualified and incentive stock options may be transferred by the laws of descent and distribution. During an optionee's lifetime, options granted to an optionee may be exercised only by such optionee or by his or her guardian or legal representative unless the option has been transferred in accordance with the preceding sentence, in which case, it shall be exercisable only by such transferee. For purposes of this Section 16, immediate family shall mean the optionee's spouse, children and grandchildren. 17. Amendment or Discontinuance. The Plan may be amended or discontinued by the Board without the approval of the stockholders of the Company, except that stockholder approval shall be required for any amendment that would (a) increase (except as provided in Section 13 hereof) the maximum number of shares of Common Stock for which options may be granted under the Plan, (b) change the class of employees eligible to participate in the Plan, or (c) otherwise materially modify the terms of the Plan. No termination, modification or amendment of the Plan may, without the consent of the participant to whom any option shall theretofore have been granted, adversely affect the rights of such employee (or his or her transferee) under such option. 18. Effect of Plan. Neither the adoption of the Plan nor any action of the Board or Committee shall be deemed to give any officer or employee any right to be granted an option to purchase Common Stock or any other rights except as may be evidenced by a stock option agreement, or any amendment thereto, duly authorized by the Board or Committee and executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein. 19. Term. Unless sooner terminated by action of the Board, this Plan will terminate on August 1, 2005. The Committee may not grant options under the Plan after that date, but options granted before that date will continue to be effective in accordance with their terms. 20. Effectiveness; Approval of Stockholders. The Plan shall take effect upon its adoption by the Board, but its effectiveness and the exercise of any options shall be subject to the approval of the holders of a majority of the voting shares of the Company, which approval must occur within twelve months after the date on which the Plan is adopted by the Board. 21. Definitions. For the purpose of this Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: (a) "Board" means the board of directors of the Company. (b) "Code" means the Internal Revenue Code of 1986, as amended. (c) "Common Stock" means the Common Stock which the Company is currently authorized to issue or may in the future be authorized to issue (as long as the Common Stock varies from that currently authorized, if at all, only in amount of par value). (d) "Company" means AVX Corporation, a Delaware corporation. (e) "Exchange Act" means the Securities Exchange Act of 1934, as from time to time amended. (f) "Fair Market Value" means the average of the high and the low sales prices of a share of Common Stock on the date of grant (or, if not a trading day, on the last preceding trading day) as reported on the New York Stock Exchange Composite Transactions Tape or, if not listed on the New York Stock Exchange, the principal stock exchange or the NASDAQ National Market on which the Common Stock is then listed or traded; provided, however, that if the Common Stock is not so listed or traded then the Fair Market Value shall be determined in good faith by the Board. (g) "Incapacity" means any material physical, mental or other disability rendering the participant incapable of substantially performing his services hereunder that is not cured within 180 days of the first occurrence of such incapacity. In the event of any dispute between the Company and the participant as to whether the participant is incapacitated as defined herein, the determination of whether the participant is so incapacitated shall be made by an independent physician selected by the Company's Board of Directors and the decision of such physician shall be binding upon the Company and the participant. (h) "Option Period" means the period during which an option may be exercised. (i) "Parent" means any corporation in an unbroken chain of corporations ending with the Company if, at the time of granting of the option, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. (j) "Plan" means this AVX Corporation 1995 Stock Option Plan as amended from time to time. (k-1) Options granted on or before April 30, 2000: "Retirement" means, with respect to any participant, the participant's retirement as an employee of the Company on or after reaching age 55. (k-2) Options granted on or after May 1, 2000: "Retirement" means, with respect to any participant, the participant's retirement as an employee of the Company on or after reaching age 65, or as otherwise provided under a participant's terms of employment governed by a separate agreement. (l) "Subsidiary" means any corporation in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. The "Subsidiaries" means more than one of any such corporations. (m) "Ten Percent Shareholder" means an individual who owns (or is treated as owning under Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary.
QuickLinks -- Click here to rapidly navigate through this document SUBORDINATED SECURITY AGREEMENT     THIS SUBORDINATED SECURITY AGREEMENT (this "Agreement") dated as of November 26, 2001, is among CTN Media Group, Inc., a Delaware corporation (the "Company"), and U-C Holdings, L.L.C., a Delaware limited liability company ("Subordinated Creditor").     W I T N E S S E T H:     WHEREAS, the Company has entered into a certain Subordinated Bridge Note Purchase Agreement dated as of the date hereof (as amended or otherwise modified from time to time, the "Note Purchase Agreement") with Subordinated Creditor, pursuant to which Subordinated Creditor has agreed to make loans to the Company.     WHEREAS, it is the intent of the Company to grant a lien on all of its assets then or thereafter existing as collateral security for the obligations of the Company under the Note Purchase Agreement and the Notes.     NOW, THEREFORE, for and in consideration of any loan, advance or other financial accommodation heretofore or hereafter made to the Company under or in connection with the Note Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:     1.  Definitions. When used herein, (a) the terms Account, Account Debtor, Certificated Security, Chattel Paper, Commercial Tort Claim, Deposit Account, Document, Electronic Chattel Paper, Equipment, Financial Asset, Fixtures, Goods, Health-Care-Insurance Receivable, Inventory, Instrument, Investment Property, Letter of Credit Rights, Payment Intangibles, Proceeds, Security, Security Entitlement, Supporting Obligations and Uncertificated Security have the respective meanings assigned thereto in the UCC (as defined below); (b) capitalized terms which are not otherwise defined have the respective meanings assigned thereto in the Note Purchase Agreement; and (c) the following terms have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms):     Assignee Deposit Account—see Section 4.     Collateral means all property and rights of the Company in which a security interest is granted hereunder.     Computer Hardware and Software means all of the Company's rights (including rights as licensee and lessee) with respect to (i) computer and other electronic data processing hardware, including all integrated computer systems, central processing units, memory units, display terminals, printers, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories, peripheral devices and other related computer hardware; (ii) all software programs designed for use on the computers and electronic data processing hardware described in clause (i) above, including all operating system software, utilities and application programs in whatsoever form (source code and object code in magnetic tape, disk or hard copy format or any other listings whatsoever); (iii) any firmware associated with any of the foregoing; and (iv) any documentation for hardware, software and firmware described in clauses (i), (ii) and (iii) above, including flow charts, logic diagrams, manuals, specifications, training materials, charts and pseudo codes.     Credit Agreement means the Amended and Restated Credit Agreement dated as of August 14, 2001 between the Company and LaSalle National Bank Association (as amended or otherwise modified from time to time).     Default means the occurrence of any Event of Noncompliance.     General Intangibles means all of the Company's "general intangibles" as defined in the UCC and, in any event, includes (without limitation) all of the Company's trademarks, trade names, patents, copyrights, trade secrets, customer lists, inventions, designs, Software, software programs, mask works, goodwill, registrations, licenses, franchises, tax refund claims, guarantee claims, Payment Intangibles, security interests and rights to indemnification. --------------------------------------------------------------------------------     Intellectual Property means all past, present and future: trade secrets and other proprietary information; trademarks, service marks, business names, Internet domain names, designs, logos, trade dress, slogans, indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer programs and software) and copyright registrations or applications for registrations which have heretofore been or may hereafter be issued throughout the world and all tangible property embodying the copyrights; unpatented inventions (whether or not patentable); patent applications and patents; industrial designs, industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, source codes, object codes and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past, present and future infringements of any of the foregoing; and all common law and other rights throughout the world in and to all of the foregoing.     Liabilities means all obligations (monetary or otherwise) of the Company under the Note Purchase Agreement, any Note or any other document or instrument executed in connection therewith, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due.     Non-Tangible Collateral means all of the Company's Accounts and General Intangibles.     Organizational I.D. Number means the organizational identification number assigned to the Company by the applicable governmental unit or agency of the jurisdiction of organization for the Company.     Senior Security Agreement means the Amended and Restated Security Agreement dated as of August 14, 2001 among the Company and LaSalle Bank National Association.     Subordination Agreement means the Subordination and Intercreditor Agreement dated as of the date hereof between Subordinated Creditor, the Company and LaSalle National Bank Association (as amended or otherwise modified from time to time).     Revised Article 9 means Revised Article 9 of the Uniform Commercial Code as promulgated by American Law Institute and the National Conference of Commissioners on Uniform State Laws and adopted and/or in effect in each applicable jurisdiction.     UCC means the Uniform Commercial Code as in effect in the State of Illinois on the date of this Agreement, as may be amended or modified from time to time after July 1, 2001; provided that, as used in Section 8 hereof, "UCC" shall mean the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction.     2.  Grant of Security Interest. As security for the payment of all Liabilities, the Company hereby assigns to Subordinated Creditor, and grants to Subordinated Creditor a continuing security interest in all of the following property of the Company whether now or hereafter existing or acquired, regardless of where located: (a)Accounts, including Health-Care-Insurance Receivables; (b)Certificated Securities; (c)Chattel Paper, including Electronic Chattel Paper; (d)Computer Hardware and Software and all rights with respect thereto, including, any and all licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements, additions or model conversions of any of the foregoing; (e)Commercial Tort Claims; (f)Deposit Accounts; -------------------------------------------------------------------------------- (g)Documents; (h)Financial Assets; (i)General Intangibles; (j)Goods (including all of its Equipment, Fixtures and Inventory), and all embedded software, accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor; (k)Instruments; (l)Intellectual Property; (m)Investment Property; (n)Letter of Credit Rights (o)money (of every jurisdiction whatsoever); (p)Security Entitlements; (q)Supporting Obligations; (r)Uncertificated Securities; and (s)to the extent not included in the foregoing, other personal property of any kind or description; together with all books, records, writings, data bases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing, and all Proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing; provided that to the extent that the provisions of any lease or license of Computer Hardware and Software or Intellectual Property expressly prohibit (which prohibition is enforceable under applicable law) the assignment thereof, and the grant of a security interest therein, Subordinated Creditor will not enforce its security interest (other than in respect of the Proceeds thereof) for so long as such prohibition continues, it being understood that upon request of Subordinated Creditor, the Company will in good faith use reasonable efforts to obtain consent for the creation of a security interest in favor of Subordinated Creditor (and to Subordinated Creditor's enforcement of such security interest) in the Company's rights under such lease or license.     In furtherance of the intent of the parties hereto and the parties to the Subordination Agreement, the security interests and liens granted hereunder shall be treated as a severable second priority security interest and lien granted to Subordinated Creditor as the lender under the Note Purchase Agreement, and the security interests and liens granted by the Company under the Senior Security Agreement shall be treated as a severable first priority security interest and lien granted to LaSalle Bank National Association as the lender under the Credit Agreement, for the purpose of determining the relative rights in the Collateral. All of the obligations of the Company hereunder and the rights of the Subordinated Creditor hereunder are subject to the provisions of the Subordination Agreement, including, without limitation, all provisions of Section 4 relating to Assignee Deposit Accounts and collections thereunder.     3.  Warranties. The Company warrants that: (a) no financing statement (other than any which may have been filed on behalf of LaSalle Bank National Association in connection with liens expressly permitted by the Credit Agreement ("Permitted Liens")) covering any of or has other rights in the Collateral is on file in any public office; (b) the Company is and will be the lawful owner of all Collateral, free of all liens, claims, security interests and encumbrances whatsoever, other than the security interest hereunder and Permitted Liens, with full power and authority to execute this Agreement and perform the Company's obligations hereunder, and to subject the Collateral to the security interest hereunder; (c) all information with respect to Collateral and Account Debtor set forth in any schedule, certificate or other writing at any time heretofore or hereafter furnished by the Company to Subordinated Creditor is and will be true and correct in all material respects as of the -------------------------------------------------------------------------------- date furnished; (d) the Company's chief executive office and principal place of business are as set forth on Schedule I hereto (and the Company has not maintained its chief executive office and principal place of business at any other location at any time since September 1, 2000), and each other location where the Company maintains a place of business is also set forth on Schedule I hereto; (e) the Company is a corporation duly organized, validly existing and in good standing under the laws of the state Delaware and its Organizational I.D. Number is as set forth on Schedule II; (f) except as set forth on Schedule III hereto, the Company is not now known and during the five years preceding the date hereof has not previously been known by any trade name; (g) the Company's exact legal name is as set forth on the signature pages of this Agreement and, except as set forth on Schedule III hereto, during the five years preceding the date hereof the Company has not been known by any different legal name nor has the Company been the subject of any merger or other corporate reorganization; (h) Schedule IV hereto contains a complete listing of all of the Company's Intellectual Property which is subject to registration statutes (i) the execution and delivery of this Agreement and the performance by the Company of its obligations hereunder are within the Company's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the articles of incorporation or by-laws of the Company or of any material agreement, indenture, instrument or other document, or any material judgment, order or decree, which is binding upon the Company; (j) this Agreement is a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except that the enforceability of this Agreement may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); and (k) the Company is in compliance with the requirements of all applicable laws (including the provisions of the Fair Labor Standards Act), rules, regulations and orders of every governmental authority, the non-compliance with which would not reasonably be expected to result in a Material Adverse Effect; (l) Schedule V hereto contains a complete listing of all of the Company's Instruments, Deposit Accounts, Investment Property, Letter of Credit Rights, Chattel Paper, Documents and Commercial Tort Claims; (m) except as set forth on Schedule VI hereto Company has no tangible Collateral located outside of the United States; (n) Schedule VII hereto contains a complete listing of the Company's tangible Collateral located with any bailee, warehousemen or other third parties; (o) Schedule VIII hereto contains a complete listing of all of the Company's Collateral which is subject to certificate of title statutes; and (p) Schedule IX hereto contains a complete listing of all of the Company's Deposit Accounts and other bank accounts, including locations and applicable account numbers.     4.  Collections, etc. Until such time as Subordinated Creditor shall notify the Company of the revocation of such power and authority, the Company (a) may, in the ordinary course of its business, at its own expense, sell, lease or furnish under contracts of service any of the Inventory normally held by the Company for such purpose, use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by the Company for such purpose, and use, in the ordinary course of its business (but subject to the terms of the Credit Agreement), the cash proceeds of Collateral and other money which constitutes Collateral, (b) will, at its own expense, endeavor to collect, as and when due, all amounts due under any of the Non-Tangible Collateral, including the taking of such action with respect to such collection as Subordinated Creditor may reasonably request or, in the absence of such request, as the Company may deem advisable, and (c) may grant, in the ordinary course of business, to any party obligated on any of the Non-Tangible Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of Goods, the sale or lease of which shall have given rise to such Non-Tangible Collateral. Subordinated Creditor, however, may, at any time that a Default exists, whether before or after any revocation of such power and authority or the maturity of any of the Liabilities, notify an Account Debtor or other Person obligated on Collateral to make payment or otherwise render performance to or for the benefit of Subordinated Creditor and enforce, by suit or otherwise the obligations of an Account Debtor or other Person obligated on Collateral and exercise the rights of the Company with respect to the obligation of the Account Debtor or other Person obligated on Collateral -------------------------------------------------------------------------------- to make payment or otherwise render performance to the Company, and with respect to any property that secures the obligations of the Account Debtor or other Person obligated on the Collateral. In connection with exercise of such rights and remedies, Subordinated Creditor may surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon the request of Subordinated Creditor during the existence of a Default, the Company will, at its own expense, notify any or all parties obligated on any of the Non-Tangible Collateral to make payment to Subordinated Creditor of any amounts due or to become due thereunder.     Upon request by Subordinated Creditor during the existence of a Default, the Company will forthwith, upon receipt, transmit and deliver to Subordinated Creditor, in the form received, all cash, checks, drafts and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by Subordinated Creditor) which may be received by the Company at any time in full or partial payment or otherwise as proceeds of any of the Collateral. Except as Subordinated Creditor may otherwise consent in writing, any such items which may be so received by the Company will not be commingled with any other of its funds or property, but will be held separate and apart from its own funds or property and upon express trust for Subordinated Creditor until delivery is made to Subordinated Creditor. The Company will comply with the terms and conditions of any consent given by Subordinated Creditor pursuant to the foregoing sentence.     During the existence of a Default, all items or amounts which are delivered by the Company to Subordinated Creditor on account of partial or full payment or otherwise as proceeds of any of the Collateral shall be deposited to the credit of a deposit account (each an "Assignee Deposit Account") of the Company with a financial institution selected by Subordinated Creditor over which Subordinated Creditor has sole dominion and control, as security for payment of the Liabilities. The Company shall have no right to withdraw any funds deposited in the applicable Assignee Deposit Account. Subordinated Creditor may, from time to time, in its discretion, and shall upon request of the Company made not more than once in any week, apply all or any of the then balance, representing collected funds, in the Assignee Deposit Account toward payment of the Liabilities, whether or not then due, in such order of application as Subordinated Creditor may determine, and Subordinated Creditor may, from time to time, in its discretion, release all or any of such balance to the Company.     Subordinated Creditor (or any designee of Subordinated Creditor) is authorized to endorse, in the name of the Company, any item, howsoever received by Subordinated Creditor, representing any payment on or other Proceeds of any of the Collateral.     5.  Certificates, Schedules and Reports. The Company will from time to time, as Subordinated Creditor may request, deliver to Subordinated Creditor such schedules, certificates and reports respecting all or any of the Collateral at the time subject to the security interest hereunder, and the items or amounts received by the Company in full or partial payment of any of the Collateral, as Subordinated Creditor may reasonably request. Any such schedule, certificate or report shall be executed by a duly authorized officer of the Company and shall be in such form and detail as Subordinated Creditor may specify. The Company shall immediately notify Subordinated Creditor of the occurrence of any event causing any loss or depreciation in the value of its Inventory or other Goods which is material to the Company and its Subsidiaries taken as a whole, and such notice shall specify the amount of such loss or depreciation.     6.  Agreements of the Company. The Company hereby irrevocably authorizes Subordinated Creditor at any time, and from time to time, to file in any jurisdiction any initial financing statements and amendments thereto that (i) indicate the Collateral (x) as all assets of the Company or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed, or (y) as being of an equal or lesser scope or within greater detail, and (ii) contain any other information required by Section 5 of Article 9 of the UCC of the jurisdiction wherein such financing statement or amendment is filed regarding the sufficiency or filing office acceptance of any financing statement or amendment, including (x) whether the Company is a registered organization, the -------------------------------------------------------------------------------- Organization ID Number issued to the Company and (y) in the case of a financing statement filed as a fixture filing or indicating Collateral to be extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates, the Company further ratifies and affirms its authorization for any financing statements and/or amendments thereto, filed by Subordinated Creditor in any jurisdiction prior to the date of this Agreement. The Company (a) at Subordinated Creditor's request, at any time and from time to time, will execute and deliver to Subordinated Creditor such financing statements, agreements, amendments and other documents and do such acts as Subordinated Creditor deems necessary in order to establish and maintain valid, attached and perfected priority security interests in the Collateral in favor of Subordinated Creditor, including, without limitation, with respect to any Collateral consisting of Deposit Accounts, Investment Property, Letter of Credit Rights or Electronic Chattel Paper, free and clear of all Liens and claims and rights of third parties whatsoever except Permitted Liens, (b) will keep all its Inventory at, and will not maintain any place of business at any location other than, its address(es) shown on Schedule I hereto or at such other addresses of which the Company shall have given Subordinated Creditor not less than 30 days' prior written notice, (c) will keep its records concerning the Non-Tangible Collateral in such a manner as will enable Subordinated Creditor or its designees to determine at any time the status of the Non-Tangible Collateral; (d) will furnish Subordinated Creditor such information concerning the Company, the Collateral and the Account Debtor as Subordinated Creditor may from time to time reasonably request; (e) will permit Subordinated Creditor and its designees, from time to time, on reasonable notice and at reasonable times and intervals during normal business hours (or at any time without notice during the existence of a Default) to inspect the Company's Inventory and other Goods, and to inspect, audit and make copies of and extracts from all records and other papers in the possession of the Company pertaining to the Collateral and the Account Debtor, and will, upon request of Subordinated Creditor during the existence of a Default, deliver to Subordinated Creditor all of such records and papers; (f) will, upon request of Subordinated Creditor, stamp on its records concerning the Collateral, and add on all Chattel Paper and Instruments constituting a portion of the Collateral, a notation, in form satisfactory to Subordinated Creditor, of the security interest of Subordinated Creditor hereunder; (g) except for the sale or lease of Inventory in the ordinary course of its business and sales of Equipment which is no longer useful in its business or which is being replaced by similar Equipment, will not sell, lease, assign or create or permit to exist any Lien on any Collateral other than Permitted Liens; (h) without limiting the provisions of Section 9.17 of the Credit Agreement, will at all times keep all of its Inventory and other Goods insured under policies maintained with reputable, financially sound insurance companies against loss, damage, theft and other risks to such extent as is customarily maintained by companies similarly situated, and cause all such policies to provide that loss thereunder shall be payable to Subordinated Creditor as its interest may appear (it being understood that (A) so long as no Default shall be existing, Subordinated Creditor shall deliver any proceeds of such insurance which may be received by it to the Company and (B) whenever a Default shall be existing, Subordinated Creditor may apply any proceeds of such insurance which may be received by it toward payment of the Liabilities, whether or not due, in such order of application as Subordinated Creditor may determine), and such policies or certificates thereof shall, if Subordinated Creditor so requests, be deposited with or furnished to Subordinated Creditor; (i) will take such actions as are reasonably necessary to keep its Goods in good repair and condition; (j) will take such actions as are reasonably necessary to keep its Equipment in good repair and condition and in good working order, ordinary wear and tear excepted; (k) will promptly pay when due all license fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against the ownership, operation, possession, maintenance or use of its Equipment and other Goods; (l) will, upon request of Subordinated Creditor, (i) cause to be noted on the applicable certificate, in the event any of its Equipment is covered by a certificate of title, the security interest of Subordinated Creditor in the Equipment covered thereby, and (ii) deliver all such certificates to Subordinated Creditor or its designees; (m) will take all steps reasonably necessary to protect, preserve and maintain all of its rights in the Collateral; (n) except as listed on Schedule VI, will keep all of the tangible Collateral in the United States; (o) promptly notify Subordinated Creditor in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Deposit Accounts, Investment Property, Letter of Credit Rights or Electronic Chattel Paper and, upon the request of Subordinated Creditor, -------------------------------------------------------------------------------- will promptly execute such other documents, and do such other acts or things deemed appropriate by Subordinated Creditor to deliver to Subordinated Creditor control with respect to such Collateral; (p) promptly notify Subordinated Creditor in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Documents or Instruments and, upon the request of Subordinated Creditor, will promptly execute such other documents, and do such other acts or things deemed appropriate by Subordinated Creditor to deliver to Subordinated Creditor possession of such Documents which are negotiable and Instruments, and, with respect to nonnegotiable Documents, to have such nonnegotiable Documents issued in the name of Subordinated Creditor; (q) with respect to Collateral in the possession of a third party, other than Certificated Securities and Goods covered by a Document, obtain an acknowledgment from the third party that it is holding the Collateral for benefit of Subordinated Creditor; (r) promptly notify Subordinated Creditor in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the date hereof against any third party, and, upon the request of Subordinated Creditor, will promptly enter into an amendment to this Agreement, and do such other acts or things deemed appropriate by Subordinated Creditor to give Subordinated Creditor a security interest in such Commercial Tort Claim; (s) further agrees to take other action reasonably requested by Subordinated Creditor to insure the attachment, perfection and priority of, and the ability of Subordinated Creditor to enforce, the security interests in any and all of the Collateral including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC, to the extent, if any, that the Company's signature thereon is required therefor, (ii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Subordinated Creditor to enforce, the security interests in such Collateral, (iii) obtaining governmental and other third party consents and approvals, including without limitation any consent of any licensor, lessor or other Person obligated on Collateral, (iv) obtaining waivers from mortgagees and landlords in form and substance satisfactory to Subordinated Creditor, and (v) taking all actions required by the UCC in effect from time to time or by other law, as applicable in any relevant UCC jurisdiction, or by other law as applicable in any foreign jurisdiction, (t) not change its state of incorporation or the legal nature of its existence; and (u) not change its legal name without providing Subordinated Creditor with at least 30 days' prior written notice.     Any expenses incurred in protecting, reserving or maintaining any Collateral shall be borne by the Company. Except as otherwise expressly set forth in Section 2, whenever a Default shall be existing, Subordinated Creditor shall have the right to bring suit to enforce any or all of the Intellectual Property or licenses thereunder, in which event the Company shall at the request of Subordinated Creditor do any and all lawful acts and execute any and all proper documents required by Subordinated Creditor in aid of such enforcement and the Company shall promptly, upon demand, reimburse and indemnify Subordinated Creditor for all costs and expenses incurred by Subordinated Creditor in the exercise of its rights under this Section 6. Notwithstanding the foregoing, Subordinated Creditor shall have no obligation or liability regarding the Collateral or any thereof by reason of, or arising out of, this Agreement.     To the extent the Company uses any of the proceeds from the Loans to purchase Collateral, Company's repayment of the Loans shall apply on a "first-in-first-out" basis so that the portion of the Loans used to purchase a particular item of Collateral shall be paid in the chronological order the Company purchased the Collateral.     7.  Default and Remedies upon a Default. (a) If a Default shall have occurred and be continuing, Subordinated Creditor may exercise (or cause its sub-agents to exercise) any or all of the remedies available to it (or to such sub-agents) under this Agreement. (b)Without limiting the generality of the foregoing, if a Default shall have occurred and be continuing, Subordinated Creditor may exercise all the rights of a secured party under the UCC (whether or not in effect in the jurisdiction where such rights are exercised) with respect to any Collateral and, in addition, Subordinated Creditor may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, -------------------------------------------------------------------------------- withdraw all cash held in the Assignee Deposit Account and apply such cash as provided in Section 8 and, if there shall be no such cash or if such cash shall be insufficient to pay all the Liabilities in full, sell, lease, license or otherwise dispose of the Collateral or any part thereof. Notice of any such sale or other disposition shall be given to the Company as required in Section 9.     8.  Application of Proceeds. Subject to the provisions of the Subordination Agreement, (a) If a Default shall have occurred and be continuing, Subordinated Creditor may apply the proceeds of any sale or other disposition of all or any part of the Collateral, in the following order or priorities:     first, to pay the expenses of such sale or other disposition, including reasonable compensation to agents of and counsel for Subordinated Creditor, and all expenses, liabilities and advances incurred or made by Subordinated Creditor in connection with the Collateral Documents, and any other amounts then due and payable to Subordinated Creditor pursuant to the Loan Documents;     second, to pay the unpaid principal of the Liabilities ratably, until payment in full of the principal of all Liabilities shall have been made (or so provided for);     third, to pay ratably all interest (including Post-Petition Interest) and all facility and other fees payable under the Loan Documents, until payment in full of all such interest and fees shall have been made;     fourth, to pay all other Liabilities ratably, until payment in full of all such other Liabilities shall have been made (or so provided for); and     finally, to pay to the Company, or as a court of competent jurisdiction may direct, any surplus then remaining from the proceeds of the Collateral owned by it.     Subordinated Creditor may make such distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof.     (b) All distributions made by Subordinated Creditor pursuant to this Section shall be final (except in the event of manifest error).     9.  Authority to Administer Collateral. Subject to the provisions of the Subordination Agreement, the Company irrevocably appoints Subordinated Creditor its true and lawful attorney with full power of substitution, in the name of the Company or otherwise, for the sole use and benefit of Subordinated Creditor, but at Company' expense, to the extent permitted by law to exercise, at any time and from time to time while a Default shall have occurred and be continuing, all or any of the following powers with respect to all or any of the Company's Collateral (to the extent necessary to pay the Liabilities in full):     (a) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof;     (b) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto;     (c) to sell, lease, license or otherwise dispose of the same or the Proceeds thereof, as fully and effectually as if Subordinated Creditor were the absolute owner thereof, and     (d) to extend the time of payment of any or all thereof and to make any allowance or other adjustment with reference thereto; provided that, except in the case of Collateral that is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Subordinated Creditor will give the Company at least ten (10) days' prior written notice of the time and place of any public sale thereof or the time after which any private sale or other intended disposition thereof will be made.     10. Limitation on Duty in Respect of Collateral. Beyond the exercise of reasonable care in the custody and preservation thereof, Subordinated Creditor will have no duty as to any Collateral in its -------------------------------------------------------------------------------- possession or control or in the possession or control of any sub-agent or bailee or any income therefrom or as to the preservation of rights against prior parties or any other rights pertaining thereto. Subordinated Creditor will be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession or control if such Collateral is accorded treatment substantially equal to that which it accords its own property, and will not be liable or responsible for any loss or damage to any Collateral, or for any diminution in the value thereof, by reason of any act or omission of any sub-agent or bailee selected by Subordinated Creditor in good faith or by reason of any act or omission by Subordinated Creditor pursuant to instructions form Subordinated Creditor, except to the extent that such liability arises from Subordinated Creditor's gross negligence or willful misconduct.     To the extent that applicable law imposes duties on Subordinated Creditor to exercise remedies in a commercially reasonable manner, the Company acknowledges and agrees that it is not commercially unreasonable for Subordinated Creditor (a) to fail to incur expenses reasonably deemed significant by Subordinated Creditor to prepare Collateral for disposition or otherwise to complete raw material or work-in-process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against Account Debtor or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (d) to exercise collection remedies against Account Debtor and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other Persons, whether or not in the same business as the Company, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, including, without limitation, any warranties of title, (k) to purchase insurance of credit enhancements to insure Subordinated Creditor against risks of loss, collection or disposition of Collateral, or to provide to Subordinated Creditor a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by Subordinated Creditor, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Subordinated Creditor in the collection or disposition of any of the Collateral. The Company acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Subordinated Creditor would not be commercially unreasonable in Subordinated Creditor's exercise of remedies against the Collateral and that other actions or omissions by Subordinated Creditor shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation upon the foregoing, nothing contained in this Section shall be construed to grant any right to the Company or to impose any duties on Subordinated Creditor that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.     12. General. (a) Any notice from Subordinated Creditor to the Company, if mailed, shall be deemed given five days after the date mailed, postage prepaid, addressed to the Company either at the Company's address shown on Schedule I hereto or at such other address as the Company shall have specified in writing to Subordinated Creditor as its address for notices hereunder.     (b) The Company agrees to pay all expenses, including reasonable attorney's fees and charges (including time charges of attorneys who are employees of Subordinated Creditor) paid or incurred by Subordinated Creditor in endeavoring to collect the Liabilities of the Company, or any part thereof, and in enforcing this Agreement against the Company, and such obligations will themselves be Liabilities. --------------------------------------------------------------------------------     (c) No delay on the part of Subordinated Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Subordinated Creditor of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy.     (d) This Agreement shall remain in full force and effect until all Liabilities have been paid in full. If at any time all or any part of any payment theretofore applied by Subordinated Creditor to any of the Liabilities is or must be rescinded or returned by Subordinated Creditor for any reason whatsoever (including the insolvency, bankruptcy or reorganization of the Company), such Liabilities shall, for the purposes of this Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by Subordinated Creditor, and this Agreement shall continue to be effective or be reinstated, as the case may be, as to such Liabilities, all as though such application by Subordinated Creditor had not been made.     (e) This Agreement shall be construed in accordance with and governed by the laws of the State of Illinois applicable to contracts made and to be performed entirely within such State. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.     (f)  The rights and privileges of Subordinated Creditor hereunder shall inure to the benefit of its successors and assigns.     (g) This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. At any time after the date of this Agreement, one or more additional Persons may become parties hereto by executing and delivering to Subordinated Creditor a counterpart of this Agreement together with supplements to the Schedules hereto setting forth all relevant information with respect to such party as of the date of such delivery. Immediately upon such execution and delivery (and without any further action), each such additional Person will become a party to, and will be bound by all the terms of, this Agreement.     (h) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT SUBORDINATED CREDITOR'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, TO THE ADDRESS SET FORTH ON SCHEDULE I HERETO (OR SUCH OTHER ADDRESS AS IT SHALL HAVE SPECIFIED IN WRITING TO SUBORDINATED CREDITOR AS ITS ADDRESS FOR NOTICES HEREUNDER) OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN -------------------------------------------------------------------------------- ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.     (i)  EACH OF THE COMPANY AND SUBORDINATED CREDITOR HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.     [Remainder of Page Intentionally Left Blank] -------------------------------------------------------------------------------- IN WITNESS WHEREOF, this Subordinated Security Agreement has been duly executed as of the day and year first above written.     THE COMPANY:     CTN MEDIA GROUP, INC.     By:   /s/ PATRICK DORAN    --------------------------------------------------------------------------------     Name:   Patrick Doran     Title:   Chief Financial Officer and Secretary     SUBORDINATED CREDITOR:     U-C HOLDINGS, L.L.C.     By:   WILLIS STEIN & PARTNERS, L.P.     Its:   Managing Member     By:   Willis Stein & Partners, L.L.C.     Its:   General Partner     By:   /s/ DANIEL M. GILL    --------------------------------------------------------------------------------     Name:   Daniel M. Gill     Title:   Managing Director     Signature page for the Subordinated Security Agreement dated as of November 26, 2001 between CTN Media Group, Inc. and U-C Holdings, L.L.C.         The undersigned is executing a counterpart hereof for purposes of becoming a party hereto (and attached to this signature page are the Schedules to the Subordinated Security Agreement setting forth all relevant information with respect to the undersigned):         [ADDITIONAL DEBTOR]         By:                     --------------------------------------------------------------------------------             Title:                     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QuickLinks SUBORDINATED SECURITY AGREEMENT
EMPLOYMENT AGREEMENT   This Employment Agreement (the “Agreement”) is entered into as of May ___, 2001  (the “Effective Date”) between Click2learn.com, Inc., a Washington corporation with its principal offices located at 110-110th Avenue N.E., Bellevue, Washington 98004-5840, and/or one or more subsidiaries of Click2learn.com, Inc. (collectively the “Company”) and SRINIVASAN CHANDRASEKAR (“Employee”). In consideration of the promises and the terms and conditions set forth in this Agreement, the parties agree as follows: 1.          Position During the term of this Agreement, Company will employ Employee and Employee will serve as an executive officer of the Company with the title of Senior Vice President of Technology. 2.          Duties Employee will be responsible for all aspects of Click2Learn’s product development, and will have such additional duties as are reasonably determined by the Company consistent with his position asSenior Vice President of Technology.  Employee will comply with and be bound by Company’s operating policies, procedures, and practices from time to time in effect during Employee’s employment.  Employee hereby represents and warrants that he is free to enter into and fully perform this Agreement and the agreements referred to herein without breach of any agreement or contract to which he is a party or by which he is bound. 3.          Exclusive Service Employee will devote his full professional time and efforts exclusively to this employment and apply all his skill and experience to the performance of his duties and advancing the Company’s interests in accordance with Employee’s experience and skills.  In addition, Employee will not engage in any consulting activity except with the prior written approval of Company, or at the direction of Company, and Employee will otherwise do nothing incompatible with the performance of his duties hereunder. 4.          Term of Agreement This Agreement will commence on the Effective Date and will continue until the earlier of one year after the Effective Date or when terminated pursuant to Section 7 hereof.  The expiration or termination of this Agreement will not result in the termination of Employee’s employment, but Employee will become an “at will” employee upon such termination or expiration. 5.          Compensation and Benefits              (a)         Base Salary.     The Company agrees to pay Employee an initial base salary of $100,000 through December 31, 2001.  Effective January 1, 2002 Employee’s base salary will be increased to $150,000 per year.  Employee’s salary will be payable as earned in accordance with Company’s customary payroll practice, which currently is to pay salary on a bi-weekly basis.              (b)        Additional Benefits.    Employee will be eligible to participate in Company’s employee benefit plans of general application, including without limitation the Company’s 401(k) Plan and those plans covering life, health, disability and dental insurance in accordance with the rules established for individual participation in any such plan and applicable law.  Employee will receive 4 weeks ofpaid vacation per year (consisting of the week from December 25 through January 1 plus three additional weeks to be taken in the discretion of Employee), and in addition will receive such other benefits, including health club membership, holidays and sick leave, as the Company generally provides to its employees holding similar positions as that of Employee.              (c)         Bonus Plan.  Employee shall be eligible to participate in the Click2learn.com, Inc. 2001 Bonus Plan.   Bonuses are determined based on corporate revenue and operating income.  As SVP of Technology, Employee’s target bonus is 30% of annual base salary, with a maximum bonus of 100% of base salary.              (d)        Business Expenses.  The Company will reimburse Employee for all reasonable and necessary expenses incurred by Employee in connection with the Company’s business, provided that such expenses are deductible to the Company, are in accordance with the Company’s applicable policy and are property documented and accounted for in accordance with the requirements of the Internal Revenue Service. 6.          Proprietary Rights Employee hereby agrees that concurrently with the execution of this Agreement, Employee will execute Click2learn’s standard form of Employee Invention, Confidentiality, Non-raiding and Noncompetition Agreement (the “Invention Agreement”). 7.          Termination              (a)         Events of Termination.  Employee’s employment with the Company shall terminate upon any one of the following:                            (i)          the Company’s determination made in good faith that it is terminating the Employee for “cause” as defined under Section 7(b) below (“Termination for Cause”); or                              (ii)         the effective date of a written notice sent to Employee stating that the Company is terminating his employment, without cause, which notice can be given by the Company at any time after the Effective Date at the Company’s sole discretion, for any reason or for no reason (“Termination Without Cause”); or                            (iii)        the effective date of a written notice sent to the Company from Employee stating that Employee is electing to terminate his employment with the Company “Voluntary Termination”).              (b)        “Cause” Defined.         For purposes of this Agreement, “cause” for Employee’s termination will exist at any time after the happening of one or more of the following events:                            (i)          a failure or refusal to comply in any material respect with the reasonable policies, standards or regulations of the Company;                            (ii)         a good faith determination by the Company  that Employee’s performance is unsatisfactory after reasonable notice of the ways in which performance is unsatisfactory and a reasonable opportunity to correct any such deficiencies;                            (iii)        a failure or refusal in any material respect to perform his duties determined by the Company in accordance with this Agreement or the customary duties of Employee’s employment (except for any failure due to ill health or disability);                            (iv)       unprofessional, unethical or fraudulent conduct or conduct that materially discredits the Company or is materially detrimental to the reputation, character or standing of the Company;                            (v)        dishonest conduct or a deliberate attempt to do an injury to the Company;                            (vi)       Employee’s material breach of a term of this Agreement or the Invention Agreement, including, without limitation, Employee’s unauthorized disclosure or theft of the Company’s proprietary information;                            (vii)      an unlawful or criminal act which would reflect badly on the Company in the Company’s reasonable judgment; or                            (viii)     Employee’s death. 8.          Effect of Termination              (a)         Termination for Cause or Voluntary Termination.       In the event of any termination of this Agreement pursuant to Sections 7(a)(i) or 7(a)(iii), the Company shall pay Employee the compensation and benefits otherwise payable to Employee under Section 5 through the date of termination.  Employee’s rights under the Company’s benefit plans of general application shall be determined under the provisions of those plans.              (b)        Termination Without Cause.   In the event of any termination of this Agreement pursuant to Section 7(a)(ii) during the period ending one year after the Effective Date:                              (i)          the Company shall pay Employee the compensation and benefits otherwise payable to Employee under Section 5 through the date of termination (including a pro rata portion of any bonus compensation that may become payable for the calendar quarter that includes the date of termination, which bonus compensation shall be paid following the end of such calendar quarter);                            (ii)         for a period ending on the later of one year after the Effective Date or six months following the date of termination, the Company shall continue to pay Employee his base salary under Section 5(a) above at Employee’s then current salary, less applicable withholding taxes, payable on the Company’s normal payroll dates during that period;                            (iii)        Employee’s rights under the Company’s benefit plans of general application shall be determined under the provisions of those plans. 9.          Miscellaneous              (a)         Arbitration.      Employee and the Company shall submit to mandatory binding arbitration in Seattle, Washington any controversy or claim arising out of, or relating to, this Agreement or any breach hereof, provided, however, that Employee and the Company retain their right to and shall not be prohibited, limited or in any other way restricted from, seeking or obtaining equitable relief from a court having jurisdiction over the parties.  Such arbitration shall be conducted in accordance with the employment dispute arbitration rules of the American Arbitration Association in effect at that time, and judgment upon the determination or award rendered by the arbitrator may be entered in any court having jurisdiction thereof.              (b)        Severability.     If any provision of this Agreement shall be found by any arbitrator or court of competent jurisdiction to be invalid or unenforceable, then the parties hereby waive such provision to the extent that it is found to be invalid or unenforceable and to the extent that to do so would not deprive one of the parties of the substantial benefit of its bargain.  Such provision shall, to the extent allowable by law and the preceding sentence, be modified by such arbitrator or court so that it becomes enforceable and, as modified, shall be enforced as any other provision hereof, all the other provisions continuing in full force and effect.              (c)         Remedies.         The Company and Employee acknowledge that the service to be provided by Employee is of special, unique, unusual, extraordinary and intellectual character, which gives it peculiar value the loss of which cannot be reasonably or adequately compensated in damages in an action at law.  Accordingly, Employee hereby consents and agrees that for any breach or violation by Employee of any of the provisions of this Agreement including, without limitation, Section 3, a restraining order an/or injunction may be issued against Employee, in addition to any other rights and remedies the Company may have, at law or equity, including without limitation the recovery of money damages.              (d)        No Waiver.      The failure by either party at any time to require performance or compliance by the other of any of its obligations or agreements shall in no way affect the right to require such performance or compliance at any time thereafter.  The waiver by either party of a breach of any provision hereof shall not be taken or held to be a waiver of any preceding or succeeding beach of such provision or as a waiver of the provision itself.  No waiver of any kind shall be effective or binding, unless it is in writing and is signed by the party against whom such waiver is sought to be enforced.              (e)         Assignment.  This Agreement and all rights hereunder are personal to Employee and may not be transferred or assigned by Employee at any time.  The Company may assign its rights, together with its obligations hereunder, to any parent, subsidiary, affiliate or successor, or in connection with the sale, transfer, or other disposition of all or substantially all of its business and assets, provided, however, that any such assignee assumes the Company’s obligations hereunder.              (f)         Withholding.   All sums payable to Employee hereunder shall be reduced by all federal, state, local and other withholding and similar taxes and payments required by applicable law.              (g)        Entire Agreement.        This Agreement and the Invention Agreement constitute the entire and only agreement between the parties relating to employment of Employee with the Company, and this Agreement and the Invention Agreement supersede and cancel any and all previous contracts, arrangements or understandings with respect thereto.              (h)        Amendment.    This Agreement may be amended, modified, superseded, canceled, renewed or extended only by an agreement in writing executed by both parties hereto.              (i)          Notices.            All notices and other communications required or permitted under this Agreement shall be in writing and hand delivered, sent by telecopier, sent by certified first class mail, postage prepaid, or sent by nationally recognized express courier service.  Such notices and other communications shall be effective upon receipt if hand delivered or sent by telecopier, five days after mailing if sent by U.S. mail, and one day after dispatch if sent by express courier, to the following addresses, or such other addresses as any party shall notify the other parties:   If to the Company: 110-110th Avenue N.E., Suite 700     Bellevue, WA 98004-5840   Telecopier: 206-637-1540   Attention: Chairman of the Board of Directors   If to Employee: Srinivasan Chandrasekar (at the address on the records of the Company)                (j)          Binding Nature.            This Agreement shall be binding upon, and inure to the benefit of, the successors and personal representatives of the respective parties hereto.              (k)         Governing Law.            This Agreement and the rights and obligations of the parties hereto shall be construed in accordance with the laws of the State of Washington, without giving effect to the principles of conflict of laws; provided, however, that if Employee is relocated to another jurisdiction then the laws of such jurisdiction shall apply, and in the event of any claim made following termination, the laws of the jurisdiction where Employee was located on the date of termination shall apply. IN WITNESS WHEREOF the Company and Employee have executed this Agreement as of the date first above written.   “COMPANY”   “EMPLOYEE”   CLICK2LEARN.COM, INC.                                     By:         --------------------------------------------------------------------------------   --------------------------------------------------------------------------------       Srinivasan Chandrasekar Name         --------------------------------------------------------------------------------     Title:         --------------------------------------------------------------------------------      
Exhibit 10.19 THIRD AMENDMENT TO SECURITY AGREEMENT (MTRI)                            THIS THIRD AMENDMENT TO SECURITY AGREEMENT (MTRI) ("Third Amendment to Security Agreement") is made and entered into as of July 30, 2001 by and between MTR GAMING GROUP, INC., a Delaware corporation, party of the first part (hereinafter collectively referred to as "Debtor") and WELLS FARGO BANK, National Association, as administrative and collateral agent for the Lenders and the Swingline Lender, all of which are defined in the Credit Agreement referred to below, party of the second part (hereinafter referred to, in such capacity, as "Secured Party"). R_E_C_I_T_A_L_S:                            A.         Debtor and Secured Party executed, among other instruments, a Security Agreement (MTRI) dated December 20, 1999 (herein­after the "Original Security Agreement").  The Original Security Agreement was amended by: (i) that certain First Amendment to Security Agreement (MTRI) (the "First Amendment to Security Agreement") dated June 1, 2000; and (ii) that certain Second Amendment to Security (MTRI) dated August 15, 2000.  The Original Security Agreement as so amended is collectively referred to herein as the "Existing Security Agreement".                            B.          The Existing Security Agreement secures payment and performance under the following (among other obligations):              (i)          That certain Amended and Restated Credit Agreement executed under date of August 15, 2000 (the "Existing Credit Agreement") by Debtor, Mountaineer Park, Inc., a West Virginia corporation, Speakeasy Gaming of Las Vegas, Inc., a Nevada corporation and Speakeasy Gaming of Reno, Inc., a Nevada corporation (collectively, "Existing Borrowers"), the Lenders party thereto (together with their successors and assigns, the "Lenders"), the Swingline Lender party thereto (together with its successors and assigns, the "Swingline Lender") and Secured Party, pursuant to which, among other things: (aa) the Lenders provided a reducing revolving credit facility to the Existing Borrowers with an initial maximum principal amount of Sixty Million Dollars ($60,000,000.00) (the "Existing Credit Facility"); and (bb) the Swingline Lender provided a swingline subfacility, under the Existing Credit Facility, in the maximum principal amount of Five Million Dollars ($5,000,000.00) (as it may be renewed, extended, amended, restated, replaced, substituted or otherwise modified from time to time, the "Swingline Facility");              (ii)         That certain Amended and Restated Revolving Credit Promissory Note which was executed by Existing Borrowers under date of August 15, 2000 and is payable to the order of Secured Party in the principal amount of Sixty Million Dollars ($60,000,000.00), all for the purpose of evidencing Existing Borrowers' obligation (among other obligations) to repay amounts advanced under the Existing Credit Facility, together with accrued interest thereon (the "Existing RLC Note"); and              (iii)        That certain Swingline Note which was executed by Existing Borrowers under date of August 15, 2000 and is payable to the order of the Swingline Lender in the principal amount of Five Million Dollars ($5,000,000.00), all for the purpose of evidencing Existing Borrowers' obligation (among other obligations) to repay amounts advanced under the Swingline Facility together with accrued interest thereon (as it may be renewed, extended, amended, restated, replaced, substituted or otherwise modified from time to time, the "Swingline Note").                            C.          Concurrently, or substantially concurrent, herewith, Presque Isle Downs, Inc., a Pennsylvania corporation ("PIDI") and Existing Borrowers (collectively, "Borrowers") have entered into a First Amendment to Amended and Restated Credit Agreement with the Lenders, the Swingline Lender and Secured Party (the "First Amendment to Credit Agreement') pursuant to which, among other things: (i) PIDI has become a borrower under the Existing Credit Agreement, as amended thereby; and (ii) the maximum amount available for borrowing under the Existing Credit Facility has been increased from Sixty Million Dollars ($60,000,000.00) to Seventy-five Million Dollars ($75,000,000.00) (the "Commitment Increase"); with the Existing Credit Facility, as modified pursuant to the Credit Agreement, and as it may be further renewed, extended, amended, restated, replaced, substituted or otherwise modified, being collectively referred to herein as the "Credit Facility".                            D.         Borrowers executed and delivered to Secured Party a Revolving Credit Note (Second Restated), which is dated concurrently, or substantially concurrent, herewith, in a maximum principal amount of Seventy-five Million Dollars ($75,000,000.00) (the "Restated RLC Note" and, as it may be renewed, extended, amended, restated, replaced, substituted or otherwise modified from time to time, the "RLC Note") for the purpose of restating the Existing RLC Note in order to provide, among other things, for the Existing RLC Note, as so restated, to evidence Borrowers' obligation to repay amounts advanced under the Credit Facility, together with accrued interest thereon.                            E.          Debtor and Secured Party now wish to amend the Existing Security Agreement for the purpose, among other things, of: (i) reflecting the enactment of Revised Article 9, which is referred to below; (ii) providing record notice of the First Amendment to Credit Agreement, the Commitment Increase and the RLC Note; (iii) confirming that the Existing Security Agreement secures Borrowers' payment and performance under the Credit Agreement and the RLC Note; and (iv) to the extent that Borrowers' payment and performance under the Credit Agreement and the RLC Note may not be secured by the Existing Security Agreement, amending the Existing Security Agreement to so secure such payment and performance; (collectively, the "Security Agreement Modifications").                            NOW, THEREFORE, for the purpose, among other things, of:  (i) amending the Existing Security Agreement; and (ii) providing for the Existing Security Agreement Modifications; all as hereinafter set forth, and for other good and valuable consideration, the parties hereto do agree as follows:                            1.          Section 1.03 of the Existing Security Agreement is hereby amended to read, in its entirety, as follows:              "Section 1.03.  Secured Obligations.  This Agreement secures, and the Collateral is security for, the following (collectively, the "Secured Obligations"):                           (a)         Payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), of:  (i) the principal sum which is, at any time, advanced and unpaid under the Credit Facility (as defined in the Credit Agreement), not to exceed Seventy-five Million Dollars ($75,000,000.00) at any one time, all on a reducing revolving line of credit basis; (ii) interest and other charges accrued on said principal sum, or accrued on interest and other charges then outstanding under the Credit Facility (all including, without limitation, interest and other charges that would accrue on such obligations, but for the filing of a petition in bankruptcy with respect to any of the Borrowers); and (iii) any other obligations of Borrowers under the RLC Note referred to below; all according to the terms of a Revolving Credit Note (Second Restated) dated concurrently, or substantially concurrent, with the Third Amendment to Security Agreement, which is made by Borrowers and is payable to the order of Secured Party according to the tenor and effect of said Revolving Credit Note (Second Restated), and all renewals, extensions, amendments, restatements, replacements, substitutions and other modifica­tions thereof (hereinafter collectively referred to as the "RLC Note").                           (b)        Payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. § 362(a)), of:  (i) the principal sum which is, at any time, advanced and unpaid under the Swingline Facility (as defined in the Credit Agreement), not to exceed Five Million Dollars ($5,000,000.00) at any one time, all on a revolving line of credit basis; (ii) interest and other charges accrued on said principal sum, or accrued on interest and other charges then outstanding under the Swingline Facility (all including, without limitation, interest and other charges that, but for the filing of a petition in bankruptcy with respect to any of the Borrowers, would accrue on such obligations); and (iii) any other obligations of Borrowers under the S/L Note referred to below; all according to the terms and conditions of a Swingline Note dated August 15, 2000, which is made by Existing Borrowers (and assumed by PIDI) and payable to the order of the Swingline Lender according to the tenor and effect of said Swingline Note, and all renewals, extensions, amendments, restatements, replacements, substitutions and other modifica­tions thereof (hereinafter collectively referred to as the "S/L Note" and, together with the RLC Note, collectively referred to as the "Note").                           (c)         Payment and performance of every obligation, warranty, representation, covenant, promise and agreement of Borrowers, or any of them, contained in that certain Certificate and Indemnification Regarding Hazardous Substances, which was executed by Borrowers and delivered to Secured Party under date of December 20, 1999, together with all extensions, renewals, amendments, restatements and other modifications thereof.                           (d)        Payment and performance of every obliga­tion, covenant, promise and agreement of Debtor contained in this Agreement or incorporated into this Agreement by reference, including any sums paid or advanced by Secured Party or any of the Banks pursuant to the terms hereof.                           (e)         Payment of the expenses and costs incurred or paid by Secured Party or any of the Banks in the preservation and enforcement of the rights and remedies of Secured Party and the duties and liabilities of Debtor under this Agreement, including, but not by way of limitation, reasonable attorney's fees, court costs, witness fees, expert witness fees, collection costs, and reasonable costs and expenses paid by Secured Party or any of the Banks in performing for Debtor's account any obligation of said Debtor.                           (f)         Payment of any sums which may hereafter be owing by Borrowers, or any of them, to any of the Banks or any of their affiliates, under the terms of any interest rate swap agreement, interest rate cap agreement, basis swap agreement, forward rate agreement, interest collar agreement or interest floor agreement to which Borrowers, or any of them, may be a party, or under any other agreement or arrangement to which Borrowers, or any of them, may be a party, which in each case is designed to protect Borrowers, or any of them, against fluctua­tions in interest rates or currency exchange rates with respect to any indebtedness secured by this Agreement.                           (g)        Payment of additional sums and interest thereon which may hereafter be loaned to Borrowers, or any of them, pursuant to the Credit Agreement when evidenced by a promissory note or notes which recite that this Agreement is security therefor.                           (h)        Performance and payment of every obligation, warranty, representation, covenant, agreement and promise of Borrowers, or any of them, which are contained in the Credit Agreement and in the Loan Documents which are defined therein."                            2.          Article 9 of the Commercial Code (as defined in the Original Security Agreement), as in effect on the date of the Original Security Agreement ("Previous Article 9") has been amended pursuant to Sections 1 through 135 of Chapter 104, Statutes of Nevada 1999, at Page 281, et seq. in the State of Nevada, pursuant to W.Va. §§ 46–9–101, et seq., revised in the State of West Virginia and pursuant to §§ Del.C. 9-101, et seq., revised in the State of Delaware.  Previous Article 9, as so amended, is referred to herein as "Revised Article 9".  Grantor hereby additionally grants a security interest to Secured Party as security for the Secured Obligations, in and to the following collateral (the "Additional Collateral"), subject to the terms and conditions of the Existing Security Agreement, as amended hereby: "All right, title and interest of Grantor, which is now owned or hereafter acquired in, and to, all present and future: (i) accounts; (ii) chattel paper; (iii) commercial tort claims; (iv) deposit accounts; (v) documents; (vi) equipment, inventory and other goods of any kind or nature; (vii) instruments; (viii) investment property; (ix) letter of credit rights; (x) money; (xi) general intangibles; and (xii) proceeds of any of the foregoing; all as defined by Revised Article 9." The "Collateral" which is defined by the Existing Security Agreement is referred to herein as the "Existing Collateral".  The Additional Collateral shall be in addition to, and not substituted for, the Existing Collateral.                            3.          All references herein, and in the Existing Security Agreement (as amended hereby) to:                            "Agreement" shall be to the Existing Security Agreement as amended by the Third Amendment to Security Agreement.                            "Collateral" shall mean a collective reference to the Existing Collateral and the Additional Collateral.                            "Commercial Code" shall mean the Previous Article 9, as amended by Revised Article 9, and as it may hereafter be amended or recodified from time to time.                            "Credit Agreement" shall mean the Existing Credit Agreement as amended by the First Amendment to Credit Agreement and as it may hereafter be renewed, extended, amended, restated or otherwise modified.                            "Third Amendment to Security Agreement" shall have the meaning set forth by the preamble to this instrument.                            4.          Except as set forth herein, the Existing Security Agreement shall remain unchanged and of full force and effect.                            5.          This Third Amendment to Security Agreement may be executed in any number of separate counterparts with the same effect as if the signatures hereto and hereby were upon the same instrument.  All such counterparts shall together constitute one and the same document.              IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Security Agreement as of the day and year first written above. DEBTOR: SECURED PARTY:     MTR GAMING GROUP, INC., a Delaware corporation            WELLS FARGO BANK, National Association                    By /s/  Edson R. Arneault By /s/  Virginia S. Christenson   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Edson R. Arneault,   Virginia S. Christenson,   President   Vice President       STATE OF WEST VIRGINIA )         ) ss       COUNTY OF )                    The foregoing instrument was acknowledged before me on July ___, 2001, by EDSON R. ARNEAULT as President of MTR GAMING GROUP, INC.   --------------------------------------------------------------------------------       Notary Public               STATE OF NEVADA )       ) ss     COUNTY OF CLARK )                    The foregoing instrument was acknowledged before me on July ___, 2001, by VIRGINIA S. CHRISTENSON as Vice President of WELLS FARGO BANK, National Association.   --------------------------------------------------------------------------------   Notary Public  
Exhibit 10.1 [**] The confidential portion has been omitted and filed separately with the Securities and Exchange Commission. VERSICOR MANUFACTURING, DEVELOPMENT AND SUPPLY AGREEMENT              This Manufacturing, Development and Supply Agreement (the “Agreement”) is entered into this 25th day of June, 2001, and effective December 11,  2000 by and between Abbott Laboratories, an Illinois corporation having a principal place of business at 100 Abbott Park Road, Abbott Park, Illinois  60064-3500 (“Abbott”), and Versicor, Inc., a Delaware corporation, having a principal place of business at 34790 Ardentech Court, Freemont California 94555 (“Versicor”).              WHEREAS, Eli Lilly Industries, Inc. is the owner or licensee of certain technology and patent rights regarding ECBN-HCl (as defined below) and API (as defined below), and the manufacturing processes relating thereto;              WHEREAS, Lilly has granted to Versicor a worldwide license to develop, manufacture and sell an injectable form of API; and              WHEREAS, Versicor will file for approval with the United States Food and Drug Administration (and its foreign equivalents) (the “FDA”), a New Drug Application (and its foreign equivalents) (an “NDA”), and Investigational New Drug Applications (“INDs”) for certain formulations containing API, (as defined below); and              WHEREAS, Versicor has certain process information relating to the synthesis of ECBN-HCl (as defined below) and API; and              WHEREAS, Abbott possesses process engineering capabilities and operates process development facilities, which include small scale production and pilot plants, as well as large scale facilities for manufacture of commercial quantities of certain ECBN-HCl and API; and              WHEREAS, the parties desire to have Abbott evaluate Versicor’s process information and to scale-up and adapt the current manufacturing process for the preparation of ECBN-HCl and API licensed to Versicor by Lilly to Abbott facilities; and              WHEREAS, Abbott desires to manufacture for Versicor developmental, clinical and commercial quantities of ECBN-HCl and API and Versicor desires to purchase from Abbott such quantities.              NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1.          Definitions As used in this Agreement, the following words and phrases shall have the following meanings:              1.1        “Abbott Know-How” means all non-patented technical data, processing information, drawings, documentation, analytical and regulatory information and other information, including all improvements thereto, not included in Abbott Patent Rights, as defined below, covering manufacturing and process and ECBN-HCl and API development operations relating to the manufacture of ECBN-HCl and API according to the process developed hereunder by Abbott for Versicor, that is owned by Abbott, or licensed to Abbott, with the right to sublicense, as of the Effective Date, as defined below, or generated or acquired by Abbott during the term of this Agreement.              1.2        “Abbott Patent Rights” means United States and foreign patents and patent applications, including divisions, continuations, continuations-in-part, additions, renewals, extensions, re-examinations and reissues of all such patents and patent applications, all as are owned by Abbott, or licensed to Abbott, as of the Effective Date, with the right to sublicense, claiming manufacturing and/or process development operations relating to the manufacture of ECBN-HCl and API according to the process adapted hereunder by Abbott for Versicor.              1.3        “Affiliate” of a party hereto means any entity that controls, is controlled by, or is under common control with such party.  For purposes of this definition, a party shall be deemed to control another entity if it owns or controls, directly or indirectly, at least fifty percent (50%) of the voting equity of the other entity (or other comparable ownership interest for an entity other than a corporation).              1.4        “API”, “LY303366” or “VER002” means the bulk form of the final active pharmaceutical ingredient, Anidulafungin, which is issued as a drug for Candidiasis, Aspergillosis and other fungal infections, as more fully described in Exhibit A.              1.5        “cGMP” means the FDA’s current good manufacturing practices for drug products, as specified in the Code of Federal Regulations and FDA’s guidance documents, and all successor regulations, orders and guidance documents thereto.              1.6        “CMC” means the Chemistry and Manufacturing Controls (or its foreign equivalents) filed with the FDA in support of the  NDA, IND or DMF.              1.7        “Confidential Information” means all information, including, but not limited to, Versicor Know-How and Abbott Know-How disclosed pursuant to this Agreement in writing (or all information disclosed orally, visually, in writing and/or in another tangible form, except any portion thereof that:   (a)   is known to the recipient, as evidenced by its written records before receipt thereof under this Agreement;           (b)   is disclosed to the recipient without restriction after acceptance of this Agreement by a third person who has the right to make such disclosure;                (c )   is or becomes part of the public domain through no fault of the recipient;  or           (d)   is independently developed by or for the recipient by individuals or entities that have not had access to Confidential Information, as evidenced by its written records.              1.8        “Contract Year” shall mean [**].              1.9        “DMF” means the Drug Master File filed with the FDA in support of the NDA .              1.10      “ECBN-HCl” means the bulk form intermediate Echinocandin B Nucleus hydrochloride used in the production of API as more fully described in Exhibit B.              1.11      “ECBN-HCl Specifications” and/or  “API Specifications” (hereinafter collectively referred to as the “Specifications”) means the written specifications for API and the ECBN-HCl.  The API Specifications are set forth in Exhibit C as of the date hereof.  The ECBN-HCl Specifications shall be added to Exhibit C of this Agreement at a later date, upon their approval in writing by both parties.  The Specifications may be modified from time to time pursuant to Section 7.2 of this Agreement, by written agreement of the parties.  Neither the addition of the ECBN-HCl Specifications, or any modification to the Specifications, shall require a formal amendment to this Agreement.              1.12      “Effective Date” means December 11, 2000.              1.13      “EMEA” shall mean the European Medicine Evaluation Agency, or any successor entity thereto.              1.14      “FDA” means the United States Food and Drug Administration (or its foreign equivalents), or any successor entity thereto.              1.15      “IND” means an Investigational New Drug Application(or its foreign equivalent) filed with the FDA.              1.16      “Launch Date” means the date on which the first commercial sale of Product is made in the Territory by Versicor.              1.17      “NDA” means the New Drug Application (or its foreign equivalent) filed with or to be filed by Versicor with the FDA, seeking authorization to market Product in the Territory.              1.18      “Product” means any finished pharmaceutical product containing API as its active ingredient.              1.19      “Project” means a multi-stage project to adapt the process for the manufacture of ECBN-HCl and API.              1.20      “Proposal” means the description of the Project, as set forth in Exhibit D.              1.21      “Regulatory Filings” means the governmental filings required to obtain approval to market Product in a given country, including, but not limited to, Product registration(s) and marketing approval(s), as applicable, in each country.              1.22      “Regulatory Authorities” means the FDA, the EMEA, or any comparable national or territorial regulatory entity.              1.23      “Stability Protocol” means the document created by Abbott personnel and reviewed by Versicor, or any of its CMC consultants that controls the details of collection and analysis of samples by the Quality Control group of Abbott.              1.24      “Territory”  means the world.              1.25      “Versicor Know-How” means all non-patented technical data, processing information, drawings, documentation, analytical and regulatory information, oral data and other information, including all improvements thereto, not included in Versicor Patent Rights, as defined below, relating to the manufacture, use or sale of ECBN-HCl or API that is owned by Versicor, or licensed to Versicor, with the right to sublicense, as of the Effective Date, or generated or acquired by Versicor during the term of this Agreement.              1.26      “Versicor Patent Rights” means United States and foreign patents and patent applications, including divisions, continuations, continuations-in-part, additions, renewals, extensions, re-examinations and reissues of all such patents and patent applications, all as are owned by Versicor, or licensed to Versicor, with the right to sublicense, claiming ECBN-HCl and API, and under which Abbott would need a license or sublicense to lawfully manufacture ECBN-HCl and API for Versicor under this Agreement. 2.          ECBN-HCl and API Development Project.              Promptly after the Effective Date, Abbott shall undertake the Project.  The Project shall consist of research and development activities described in the Proposal in accordance with Exhibit D.  Abbott shall use its reasonable best efforts in performing its research and development activities hereunder, but Versicor understands that, because the Project involves research from which the results are inherently uncertain, Abbott cannot and does not make any representation, warranty or guarantee of any kind that the Project will result in a commercially-viable process. 3.          Abbott’s Research and Development Activities.              3.1        Abbott’s Activities.  Abbott shall use its reasonable best efforts to conduct and perform certain activities including, but not limited, to the following:         a. Source raw materials for use in manufacturing ECBN-HCl and API;               b. Chemically synthesize the ECBN-HCl to form the API;               c. Perform pilot scale evaluation of Versicor’s manufacturing process;               d. Adapt Versicor’s manufacturing process to Abbott’s equipment and systems;               e. Develop process parameters to manufacture ECBN-HCl and API in Abbott’s manufacturing facility;               f. Prepare suitable manufacturing instructions and manufacturing controls for inclusion in Regulatory Filings;               g. Provide appropriate Regulatory Authorities with letters of authorization referencing Abbott's DMF and containing process validation data, batch documents and other data required to support Regulatory Filings and to provide timely notice to Versicor of any significant changes in Abbott’s process development and production activities (whether or not referred to herein) to enable Versicor to amend the appropriate Regulatory Filings and to assist Versicor in responding to questions from Regulatory Authorities concerning the ECBN-HCl and API;               h. Conduct material contact and cleaning validation studies, engineering and validation runs, process validation studies, and preparing process justification and validation summary reports, in a timely manner, to pass FDA pre-approval and other appropriate Regulatory Authority inspections to support manufacture of the ECBN-HCl and API in the Abbott manufacturing facility, and either (i) provide Versicor with copies of such reports and studies, in a timely manner to enable Versicor to make all appropriate Regulatory Filings, or (ii) allow Versicor to refer to Abbott’s Type II DMF containing such information and permitting Versicor to have access to such documents;               i. Permit Versicor to conduct all necessary cGMP and quality assurance reviews of Abbott facilities and documentation in accordance with Section 8.4 hereof, including review and receipt of copies of Abbott manufacturing instructions (both prior to and after the manufacturing process), and to provide notice to Versicor so as to permit Versicor to have a representative in Abbott’s manufacturing plant at the time of critical operations upon the mutual agreement of the parties, which consent by Abbott shall not be unreasonably withheld and at Versicor’s cost;               j. Permit Versicor to use and access Abbott’s data and development reports, including, but not limited to, the DMF and compounds as they relate solely to the manufacture of ECBN-HCl and API;               k. Provide Versicor with acceptable environmental impact statements for inclusion with Regulatory Filings, if required;               l. Provide Versicor with appropriate pilot and commercial scale batch record manufacturing documentation for Regulatory Filings;               m. Conduct all stability testing on ECBN-HCl and/or API and compile data for Regulatory Filings;               n. Prepare and administer the FDA pre-approval inspection; and               o. Manufacture development supplies, clinical supplies, stability supplies and process validation batches of ECBN-HCl and/or API in accordance with current cGMPs and pursuant to protocols to which the parties shall mutually agree. 4.          Versicor’s Research and Development Activities.              4.1        Versicor’s Activities.  Versicor shall use its reasonable best efforts to conduct and perform research and development activities, including the following:           a. Provide Abbott with applicable and available analytical methods for raw materials, in-process tests and manufacture of ECBN-HCl and/or API and all available reference materials;                   b. Provide Abbott with technical data on ECBN-HCl and/or API that includes, but is not limited to, the following:  (i) material safety data sheets with environmental and safety information, and (ii) additional detailed data, if necessary, to define potential hazards and establish employee exposure levels;                   c. Provide Abbott with copies of Regulatory Filings as necessary for Abbott to obtain regulatory pre-inspection approval;                   d. Maintain a stability program for, and retain samples of, the ECBN-HCl and/or API; and                 e. Provide Abbott with such additional information as Abbott may reasonablyrequest, including but not limited to:  process, product, and safety/toxicity  information. 5.          Payment for Abbott’s Development Efforts              5.1        Research and Development Fee.  In consideration of select activities that Abbott shall perform under Articles 3 and 4 hereof, Versicor shall pay Abbott a non-refundable research and development fee of [**] U.S. Dollars (U.S. $[**]).  In the event that Abbott does not receive complete, validated reference standards in Abbott specified amounts from Eli Lilly or other third parties, and it becomes necessary for Abbott to perform additional research and development, Versicor shall pay to Abbott an amount, not to exceed [**] U.S. Dollars (U.S. $[**]) as set forth on Exhibit D.  This “not to exceed” amount is currently reflected in Exhibit E.  The total research and development fees charged to Versicor under this Agreement shall not exceed [**] U.S. Dollars (U.S. $[**]), excluding all raw materials other than [**] and additional charges, if any, incurred pursuant to Sections 5.2 and 5.3 below.  Unless instructed by Versicor, the total fees to be paid by Versicor under Exhibit E in Contract Years [**] shall not exceed the amounts set forth therein.  If reference standard production fees are incurred in [**], Abbott shall adjust other fees accordingly to assure that the total annual charges do not exceed the total annual charges set forth in Exhibit E.  The parties shall agree to any additional changes in the research and development scope and commercial production activities that are not covered herein.  The research and development fee shall be paid to Abbott in accordance with Exhibit E.              5.2        Changes in Project Scope.  If changes occur in the Project or Specifications, or if technical difficulties require that Abbott perform either additional work or repeat work, unrelated to Abbott’s fault or negligence, or if Abbott reclassifies the ECBN-HC1 or ABI, or if the ECBN-HC1 or ABI is found to be a skin sensitizor dictating specific containment necessary for manufacturing, Abbott shall provide Versicor with new or revised activities and price estimates for such work.  The current Abbott drug classification is Level 2 based on the toxicology information provided by Lilly.  If Versicor approves such estimates and activities, Abbott shall perform such work and shall invoice Versicor for such work.  Versicor shall remit payment on such invoice within [**] of receipt of such invoice.  Reimbursement for such additional work shall be at the rate of [**] U.S. Dollars (U.S. $[**]) per hour per person, plus out-of-pocket costs for reasonable travel and sustenance, materials and supplies.              5.3        Additional Costs.  Versicor shall pay Abbott for its direct costs pre-approved by Versicor associated with any FDA filing by Abbott requested by Versicor including but not limited to the filing of a CMC or CMC amendment, in support of Versicor’s FDA filing with respect to ECBN-HCl, API and/or Product.  Versicor also shall pay Abbott’s direct costs pre-approved by Versicor for any work requested by Versicor to produce and assemble documentation for Productregistrations outside the United States. 6.          Pilot Scale and Clinical Supplies.         6.1 Year [**] Clinical Supplies.               a. API.  Abbott shall provide to Versicor [**] pilot scale lots of API, with each lot consisting of [**] to [**] of API, using ECBN-HCl provided by Versicor.               b. ECBN-HCl.  Abbott shall provide to Versicor [**] cGMP lots of ECBN-HCl with each lot consisting of enough material to prepare [**] lots of approximately [**]  of API.  Versicor shall notify Abbott regarding any alteration of the clinical schedule and ECBN-HCl and API amounts needed.              6.2        Revisions to Schedule.  If necessary, a revised pilot scale and clinical development schedule will be mutually negotiated by the parties.  In the event that there is a change in the pilot scale and clinical development schedule that has not been communicated by Versicor to Abbott upon at least [**] prior written notice, the parties shall mutually agree to an allocation of the costs associated with revisions to such schedule. 7.          Manufacture and Commercial Supply of ECBN-HCl and API.              7.1        Purchase and Sale of ECBN-HCl and API.  Pursuant to the terms and conditions of this Agreement, Abbott shall manufacture, sell and deliver ECBN-HCl and API exclusively to Versicor and, Versicor may but shall not be obligated to purchase from Abbott any of its requirements of ECBN-HCl and API(other than the purchase of approximately [**] of commercial validation materials as provided in Section 5.1 and Exhibit E); provided, however, from and after the date the parties mutually agree on an acceptable price for commercial supplies of API, Versicor shall purchase from Abbott, at an amount not to exceed such price, a minimum of [**] of its commercial requirements of ECBN-HCl and API in the Territory.  In the event that Abbott is unable to deliver a scheduled shipment of ECBN-HCl or API for any reason and is unable to cure such failure by delivering to Versicor the scheduled shipment of ECBN-HCl and API within [**] of such scheduled shipment date, Versicor shall have the right to purchase its remaining ECBN-HCl and API requirements in the Territory from secondary sources until Abbott becomes able to meet said requirements.  Versicor may elect to designate, qualify and enable a secondary supplier at any time during this Agreement.              7.2        Modification of Specifications.  If the Specifications are modified by Versicor hereunder, or the Specifications must be modified by requirement of the FDA or other regulatory agency, or a process change would be required under the CMC, or other applicable governmental application, and such modification or process change increases or decreases Abbott's cost to manufacture ECBN-HCl or API, Abbott shall submit to Versicor a revised price for either the current or future stage of development or ECBN-HCl or API that reflects such cost increase or decrease.  Abbott and Versicor shall mutually agree on the cost allocation of such change.  In the event the parties are unable to agree on such cost allocation, either party may seek to have the dispute resolved in accordance with the provisions of Section 18.2 hereof.  If such modification results in the requirement to reprocess and/or retest previously manufactured and otherwise acceptable ECBN-HCl or API, any additional costs incurred by Abbott in such reprocessing and/or retesting shall be paid by Versicor upon submission by Abbott of documentation and justification of such costs.              7.3        Modification of ECBN-HCl or API Process.  Process changes by Abbott that effect Versicor’s ECBN-HCl or API DMF or CMC shall not occur without prior written permission of Versicor.              7.4        Validation Production Runs.  Abbott will make [**] production runs of API starting from the initial fermentation, and ending with the chemical synthesis steps (“Validation Production Runs).   The Validation Production Runs will be conducted at the desired and agreed upon production batch size and may be used for validation and/or commercial market supply needs as determined by the parties.         a. The Validation Production Runs will be conducted at the Abbott facility in North Chicago and directed by an accompanying Protocol.  A completed, signed copy of the Protocol which will be generated by Abbott personnel and approved in writing by Versicor will be forwarded to Versicor for inclusion in the NDA.               b. The Validation Production Runs produced by Abbott will meet API Specifications and an Abbott Certificate of Analysis will be generated for each lot.               c. At the conclusion of the Validation Production Runs a validation report will be generated by Abbott.  A copy of this report will be signed, dated and sent to Versicor for inclusion in the NDA.               d. Abbott shall ship the API generated from the Validation Production Runs to a Versicor specified drug Product formulation facility upon written notice by Versicor and completion by Abbott.               e. EBC and API produced by Abbott under this Section 7.4 will be placed on stability at an appropriate location under real time and accelerated conditions. 8.          Manufacture of ECBN-HCl and Bulk Drug Substance API.              8.1        ECBN-HCl and API Title and Shipment.  Any ECBN-HCl and API manufactured by Abbott pursuant to this Agreement shall be shipped F.O.B. Abbott’s manufacturing facility.  Title and risk of loss shall pass to Versicor upon delivery of ECBN-HCl and/or API to the carrier.  Shipment shall be via a carrier designated by Versicor.  All shipment costs shall be borne by Versicor.              8.2        ECBN-HCl and API Storage.  Versicor shall pay Abbott at a rate of [**] U.S. Dollars (U.S.$[**]) per month for any ECBN-HCl and/or API storage costs incurred by Abbott in excess of [**] after manufacture, provided that such ECBN-HCl or API was forecasted by Versicor.              8.3        Quality Control.  Abbott shall apply its quality control procedures and in-plant quality control checks on the manufacture of ECBN-HCl or API for Versicor in the same manner as Abbott applies such procedures and checks to material of a similar nature manufactured for sale by Abbott.  In addition, Abbott will test and release ECBN-HCl and/or API to Versicor in accordance with the Specifications described in Exhibit C.              8.4        Audits. Upon Abbott’s written approval, which approval shall not be unreasonably withheld or delayed, Versicor shall have the right, upon [**] prior written notice to Abbott, to conduct during normal business hours a quality assurance audit and inspection of Abbott’s records and ECBN-HCl and/or API facilities relating to the manufacture of ECBN-HCl and/or API, and to perform follow-up audits as reasonably necessary.  Such audits and inspections may be conducted from time to time on a reasonable basis prior to ECBN-HCl and/or API production of the first commercial API order placed by Versicor and thereafter once each Contract Year.  The duration of such audits shall not exceed [**] and such audits shall be performed by no more than [**], unless Versicor reasonably believes that a longer audit or additional personnel are necessary and provides its reasons for such belief to Abbott in writing.  If Versicor wishes to perform audits more often than once per year or over a period in excess of [**], Versicor shall pay Abbott [**] U.S. Dollars (U.S. $[**]) per additional audit day.  Notwithstanding the foregoing, in the event that an audit is required by Versicor due to quality issues that arise during any Contract Year, Versicor shall be entitled to conduct such audit free of charge.  If more than [**] perform the audit, Versicor shall pay Abbott [**] U.S. Dollars (U.S. $[**]) per additional auditor.              Visits by Versicor to Abbott’s ECBN-HCl or API facilities may involve the transfer of Confidential Information, and any such Confidential Information shall be subject to the terms of Article 11 hereof.  The results of such audits and inspections shall be considered Confidential Information under Article 11 and shall not be disclosed to third persons, including but not limited to the FDA and any other Regulatory Authority, unless required by law and upon prior written notice to Abbott. If Versicor utilizes auditors that are not employees of Versicor, each of such auditors shall execute a non-disclosure agreement with confidentiality terms at least as stringent as those set forth herein.              Abbott shall be responsible for inspections of its North Chicago manufacturing facility by the FDA or an equivalent Regulatory Authority and shall notify Versicor of all inspections that are directly related to the manufacture of ECBN-HCl or API within [**] or receipt by Abbott of notice of such inspections              8.5        Payment Terms.         a. Price and Payment.  Abbott shall invoice Versicor upon delivery of ECBN-HCl and/or API by Abbott at the prices set forth in Exhibit E of this Agreement.  Versicor shall make payment net [**] from the date of receipt of Abbott’s invoice.  All payments due under this Agreement shall be paid in U.S. Dollars by wire transfer or by such other means agreed upon by the parties, in each case at the expense of the payor, for value no later than the due date thereof (with [**] advance notice of each wire transfer) to the following bank account or such other bank accounts as the payee shall designate in writing within a reasonable period of time prior to such due date:           Account Name: Abbott Laboratories     Account Number: [**]     Bank: [**]       New York, New York     ABA Number: [**]         b. Taxes.  Any federal, state, county or municipal sales or use tax, excise, customs charges, duties or similar charge, or any other tax assessment (other than that assessed against income), license, fee or other charge lawfully assessed or charged on the manufacture, sale or transportation of ECBN-HCl and/or API sold pursuant to this Agreement shall be paid by Versicor.   9.          Orders and Forecasts.              9.1        First [**] Estimate.  Versicor shall, within [**] after filing its NDA for the Product, provide Abbott with a written estimate of Versicor’s monthly requirements of ECBN-HCl and API to be supplied by Abbott for the [**] period commencing on the Launch Date.  Abbott acknowledges that such quantities are estimates only and are not binding.              9.2        Rolling Forecast.  Thereafter, Versicor shall provide [**] to Abbott rolling [**] projections of requirements of ECBN-HCl and API to be manufactured by Abbott, with the first [**] of such projection consisting of firm purchase orders and the remaining [**] of each projection consisting of Versicor’s best estimate forecast of its ECBN-HCl and API requirements.              9.3        First Firm Order.  Abbott and Versicor shall cooperate fully in estimating and scheduling production for the first commercial order of ECBN-HCl and API to be placed by Versicor with Abbott in anticipation of regulatory approval of Product.  The first firm order shall cover the [**] period commencing on the Launch Date.  Versicor shall place its first firm order for ECBN-HCl and API approximately [**] in advance of the anticipated NDA approval date or desired API availability date.  At the same time, Versicor shall provide to Abbott Versicor’s estimate of its monthly requirements of ECBN-HCl and API to be supplied by Abbott for the next succeeding [**] calendar month period.  Each Firm Order submitted by Versicor shall be no less than [**] percent ([**] %) nor more than [**] percent ([**]%) of the most recent forecast covering such time period.              9.4        Purchase Order Acceptance.  Within [**] after receipt of Versicor’s firm purchase orders for ECBN-HCl and API, Abbott shall confirm to Versicor its acceptance of the purchase order, delivery date and quantity of ECBN-HCl and API ordered by Versicor.              9.5        Firm Order Changes.  If, due to significant unforeseen circumstances, Versicor requests changes to firm orders within the [**] firm purchase order timeframe, Abbott shall attempt to accommodate the changes within reasonable manufacturing capabilities and efficiencies.  Abbott shall advise Versicor of the costs associated with making any such change and Versicor and Abbott shall mutually agree to proceed with changes at Versicor’s cost.              9.6        Purchase Order Terms.  Each purchase order or any acknowledgment thereof, whether printed, stamped, typed, or written shall be governed by the terms of this Agreement and none of the provisions of such purchase order or acknowledgment shall be applicable except those specifying ECBN-HCl and/or API quantities ordered, delivery dates, special shipping instructions and invoice information. 10.        Proprietary Ownership of Development Work, Preexisting Technology and License Grants              10.1      Existing Proprietary Information.  Except as otherwise provided herein, neither party hereto shall be deemed by this Agreement to have been granted any license or other rights to patent rights existing as of the date hereof, or know-how relating to compounds, formulations, or processes that are owned or controlled by the other party.              10.2      Abbott Inventions.  With respect to any ideas, innovations or inventions (whether or not patentable) developed by Abbott during the term of this Agreement and relating to the manufacturing process of ECBN-HCl and/or API, Abbott shall own all proprietary rights to such ideas, innovations and inventions, and may obtain patent, copyright, and/or other proprietary protection relating to such ideas, innovations and inventions; provided however, that Abbott shall grant to Versicor a worldwide exclusive license, with the right to grant sublicenses, to any ideas, innovations or inventions developed hereunder as they relate to the manufacturing process of ECBN-HCl or API.  In the event that Versicor utilizes a third party in the manufacture of ECBN-HCl or API, Versicor shall pay Abbott an innovation transfer payment (“ITP”) to be mutually agreed upon by the parties in an amount no more than [**] percent of the dollar volume of ECBN-HCl and API purchased by Versicor from a third party utilizing such licensed technology solely for the manufacture of ECBN-HCl and API for Versicor depending on the quality and quantity of Abbott inventions so used, as reasonably determined by Abbott.  In the event that Abbott files a patent application on such ideas, innovations or inventions, then Abbott shall so notify Versicor within [**] of the filing of such patent application.  Abbott may not use any specific ECBN-HCl or API innovations or inventions for ECBN-HCl or API developed in the Agreement by Abbott or Versicor to develop or manufacture any glucan synthase inhibitors for any third party other than Versicor during the term of this Agreement, and for a [**] period thereafter; provided, however, that Abbott shall be entitled to use any innovations or inventions developed by Abbott hereunder for Abbott’s own purposes; provided, however, that such Abbott inventions and/or innovations shall not include any Versicor Patent Rights, Versicor Know-How or API.              10.3      Versicor Inventions.  During the term of this Agreement, Versicor hereby grants to Abbott a royalty-free, worldwide, nonexclusive license, with the right to grant sublicenses to satisfy Abbott’s manufacturing obligations hereunder, to Versicor Confidential Information, Versicor Know-How, Versicor Patent Rights, and other proprietary rights reasonably necessary to conduct the research and development work described in Articles 3 and 4 hereof, and to make, have made, import, sell and supply ECBN-HCl and/or API hereunder, but only for such purposes.  In the event that Abbott desires to use a third party in the manufacture of ECBN-HCl and/or API, Abbott shall notify Versicor in advance of such use in order to obtain Versicor’s approval of such third party manufacturer, which approval shall not be unreasonably withheld.  Versicor shall have [**] to approve or reject such third party manufacturer.  Failure of Versicor to respond in writing with such [**] time period shall be deemed a rejection of that third party manufacturer.  Abbott shall only use Versicor approved third party manufacturers in the manufacture of ECBN-HCl and/or API. 11.        Confidential Information.              Neither party shall use or disclose any Confidential Information received by any third party contract entered into by Abbott and that party shall contain a provision to allow Versicor to audit such facilities pursuant to this Agreement without the prior written consent of the other party.  Except as provided in the following sentence, nothing contained in this Article shall be construed to restrict the parties from disclosing Confidential Information as is reasonably necessary to perform acts permitted by this Agreement.  However, if either party is required or feels it necessary to disclose any Confidential Information received by it pursuant to this Agreement (whether by audit or otherwise) to any third party or governmental agency in compliance with any federal, state and/or local laws and/or regulations, or pursuant to an order of a court of competent jurisdiction, the disclosing party shall notify the party owning such Confidential Information immediately, prior to any such disclosure, in order to enable the owning party to protect its Confidential Information.  In any event, the disclosing party shall make any disclosures of Confidential Information received by it pursuant to this Agreement only to the extent required, and only to such persons who have a need to know.  The obligations of the parties relating to Confidential Information shall expire [**] after termination of this Agreement. 12.        Term and Termination.              12.1      Term.  This Agreement shall become effective as of the Effective Date, and unless sooner terminated hereunder, shall continue in effect until the completion of the [**] Contract Year following the Launch Date.  THIS AGREEMENT MAY BE TERMINATED UPON EXPIRATION OF SUCH [**] TERM UPON NOT LESS THAN [**] WRITTEN NOTICE.  THEREAFTER, THIS AGREEMENT SHALL STAY IN EFFECT FOR ADDITIONAL [**] PERIODS UNLESS [**] PRIOR WRITTEN NOTICE OF A PARTY’S INTENT TO TERMINATE IS GIVEN TO THE OTHER PARTY.              12.2      Versicor Termination Rights.  Versicor may terminate the Project upon [**] prior written notice to Abbott if Versicor determines in good faith that the clinical, development and/or commercial stage of the ECBN-HCl and/or API, before or after the Launch Date, is not technically, clinically or commercially feasible, as determined by Versicor.  If the Project is terminated, Abbott shall advise Versicor of Abbott’s actual research and development costs on the Project incurred prior to such termination.  If Versicor disputes such amount, the dispute shall be resolved in accordance with the provisions of Section 18.2 hereof.  The parties shall negotiate in good faith an appropriate adjustment based upon Abbott’s actual costs and Versicor’s payments to Abbott to support the Project.  Abbott, if requested by Versicor, shall provide to Versicor a summary of costs payable pursuant to this Section 12.2.  Upon payment of any adjustment required by this Section 12.2, this Agreement shall terminate.              12.3      Abbott Termination Rights.  In the event Versicor elects not to launch Product by [**], Abbott shall have the right to terminate this Agreement.              12.4      General Termination Rights.  Upon the occurrence of the following events, either party may terminate this Agreement by giving the other party [**] prior written notice:   a. Upon the bankruptcy or insolvency of the other party; or         b. Upon the material breach of any provision of this Agreement by the other party if the breach is not remedied prior to the expiration of such [**] notice period.              12.5      Termination in Event of Hardship.  In the event that during the term of this Agreement the general situation and/or the data and/or economic appropriateness on which this Agreement is based are substantially changed such that it is not commercially reasonable for either party to proceed towards commercialization of the Product, such party may, after good faith negotiations between the parties, terminate this Agreement with [**] prior written notice to the other party; provided, however, that in the event that Versicor subsequently proceeds toward the commercialization of Product, Abbott shall be entitled to manufacture the ECBN-HCl and API for such Product at the price and upon the terms and conditions set forth in this Agreement.              12.6      Survival Provisions.  Termination, expiration, cancellation or abandonment of this Agreement through any means and for any reason shall not relieve the parties of any obligation accruing prior thereto, including, but not limited to, the obligation to pay money, and shall be without prejudice to the rights and remedies of either party with respect to the antecedent breach of any of the provisions of this Agreement. Further, Articles 10,11, 12, 13, 14, 15, 16,  20 and 25 shall survive the termination of this Agreement. 13.        Warranties              13.1      Versicor Warranties.  Versicor warrants to Abbott that Versicor Patent Rights, Versicor Know-How, and Confidential Information provided by Versicor to Abbott for use in the research and development work described in this Agreement and for Abbott to manufacture and supply ECBN-HCl and API under this Agreement do not, and will not for the term hereof, infringe any patent or other proprietary right of any third party. Versicor warrants that it owns or controls all of the rights, title and interest in and to the Versicor Patent Rights, Versicor Know-How, and Confidential Information provided by Versicor to Abbott hereunder, and that it has the full right and authority to grant to Abbott the license described in Section 10.2.  Versicor further warrants that such license constitutes the only license that Abbott will need to manufacture and supply ECBN-HCl and API for Versicor, its Affiliates, subsidiaries, licensees and sublicensees.              13.2      Abbott Warranties.  Abbott warrants to Versicor that Abbott Patent Rights, Abbott Know-How, and Confidential Information provided by Abbott for use in the research and development work described in this Agreement and the manufacture and supply of ECBN-HCl and API under this Agreement do not, and will not for the term hereof, infringe any patent or other proprietary right of any third party.  Abbott warrants to Versicor that ECBN-HCl and API delivered to Versicor pursuant to this Agreement shall conform to cGMP and the Specifications, and shall be in compliance with applicable laws and regulations.  ABBOTT MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO ECBN-HCl OR API.  ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED BY ABBOTT.  IN NO EVENT SHALL ABBOTT BE LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOST REVENUES OR PROFITS. 14.        Indemnification.              14.1      Versicor Indemnification.  Versicor shall defend, indemnify and hold Abbott and its Affiliates and their respective employees, consultants, directors and agents harmless against any liability, judgment, demand, action, suit, loss, damage, cost and other expense (including reasonable attorney's fees) (”Liability") arising from (i) Versicor’s negligence or willful act or omission in the development, testing, use, manufacture, promotion, marketing, sale, distribution, packaging, labeling, handling, storage, and/or disposal of ECBN-HCl and/or API and/or Product; or (ii) any action brought by a third party alleging infringement of any patent or other proprietary rights of such third party by use of the Versicor Patents, Versicor Know-How, or Confidential Information provided by Versicor; or (iii) Versicor’s and/or any Versicor’s Affiliate’s, licensee’s and/or sublicensee’s material breach of this Agreement, except to the extent Abbott is liable under Section 14.2.              14.2      Abbott Indemnification.  Abbott shall defend, indemnify and hold Versicor, its Affiliates, licensees and sublicensees and their respective employees, consultants, directors and agents harmless against any Liability arising from (i) Abbott’s negligence or willful act or omission in the development, testing, use, storage, handling, manufacture, storage or delivery of ECBN-HCl and/or API; (ii) any action brought by a third party alleging infringement of any patent or other proprietary rights of such third party by use of the Abbott Patents, Abbott Know-How, or Confidential Information provided by Abbott; or (iii) Abbott’s material breach of this Agreement, except to the extent Versicor is liable under Section 14.              14.3      Claims and Proceedings.  Each party shall notify the other promptly of any threatened or pending claim or proceeding covered by any of the above Sections in this Article 14 and shall include sufficient information to enable the other party to assess the facts.  Each party shall cooperate fully with the other party in the defense of all such claims.  No settlement or compromise shall be binding on a party hereto without its prior written consent. 15.        Assignment.              Neither party shall assign this Agreement or any part thereof without the prior written consent of the other party, which consent shall not be unreasonably withheld.  Any permitted assignee shall assume all obligations of its assignor under this Agreement.  No assignment shall relieve any party of responsibility for the performance of any accrued obligation, which such party then has hereunder. 16.        Notices.              All notices hereunder shall be in writing and shall be delivered personally, registered or certified mail, postage prepaid, mailed by express mail service or given by facsimile, to the following addresses of the respective parties:   If to Abbott: Abbott Laboratories     President     Specialty Products Division     Department 390, Building A1     1401 Sheridan Road     North Chicago, IL 60064-4000     Fax Number: 847/938-2315         with copy to: Abbott Laboratories     Senior Vice President and General Counsel     Department 364, Building AP6D     100 Abbott Park Road     Abbott Park, IL 60064-6049     Fax Number: 847/938-6277         If to Versicor: Versicor, Inc.     34790 Ardentech Court     Fremont, Ca 94555     Attention: CEO and CFO         With a copy to O’Melveny & Myers LLP     275 Battery Street, Suite 2600     San Francisco, California 94111     Attention:  Peter T. Healy, Esq. Notices shall be effective upon receipt if personally delivered, on the third business day following the date of mailing if sent by certified or registered mail, and on the second business day following the date of delivery to the express mail service if sent by express mail, or the date of transmission if sent by facsimile.  A party may change its address listed above by notice to the other party. 17.        Entire Agreement.              This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all written or oral prior agreements or understandings with respect thereto. 18.        Alternative Dispute Resolution and Applicable Law.              18.1      Choice of Law.  This Agreement shall be construed, interpreted and governed by the laws of the State of New York, excluding its choice of law provisions.              18.2      Alternative Dispute Resolution.  The parties recognize that bona fide disputes may arise which relate to the parties’ rights and obligations under this Agreement.  The parties agree that any such dispute shall be resolved by Alternative Dispute Resolution (“ADR”) in accordance with the procedure set forth in Exhibit F. 19.        Force Majeure.              Any delay in the performance of any of the duties or obligations of any party (except the payment of money due hereunder) caused by an event outside the affected party’s reasonable control shall not be considered a breach of this Agreement, and unless provided to the contrary herein, the time required for performance shall be extended for a period equal to the period of such delay.  Such events shall include without limitation, acts of God; acts of the public enemy; insurrections; riots; injunctions; embargoes; labor disputes, including strikes, lockouts, job actions, or boycotts; fires; explosions; floods; earthquakes; shortages of material or energy; delays in the delivery of raw materials, or other unforeseeable causes beyond the reasonable control and without the fault or negligence of the party so affected.  The party so affected shall give prompt notice to the other party of such cause, and shall take whatever reasonable steps are necessary to relieve the effect of such cause as rapidly as reasonably possible. 20.        Severability.              If any term or provision of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision hereof, and this Agreement shall be interpreted and construed as if such term or provision, to the extent the same shall have been held to be invalid, illegal or unenforceable, had never been contained herein. 21.        Waiver.              No waiver or modification of any of the terms of this Agreement shall be valid unless in writing and signed by an authorized representative of each party hereto.  Failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of such rights, nor shall a waiver by either party in one or more instances be construed as constituting a continuing waiver or as a waiver in other instances. 22.        Exhibits.              All Exhibits referenced herein are hereby made a part of this Agreement. 23.        Counterparts.              This Agreement may be executed in any number of separate counterparts, each of which shall be deemed to be an original, but which together shall constitute one and the same instrument. 24.        No Publicity.              With the exception of communicating, “Abbott has become the worldwide manufacturing, development and supply partner for Versicor’s ECBN-HCl and API,” for the limited purposes of communicating information (i) to Versicor’s Board of Directors, (ii) Versicor investors, (iii) to symposium participants in break out question and answer sessions, neither party shall disclose the existence of this Agreement or the provisions of this Agreement without the prior written approval of the other party.  Neither party shall use the name of the other party in any publicity or advertising without the other party’s prior written consent.  Neither party shall make any public announcement concerning the transactions contemplated herein, or make any public statement that includes the name of the other party or any of its Affiliates or subsidiaries, or otherwise use the name of the other party or any of its Affiliates or subsidiaries in any public statement or document, except as may be required by law or judicial order, without the written consent of the other party, which consent shall not be unreasonably withheld.  Subject to any legal or judicial disclosure obligation, any such public announcement proposed by a party that names the other party shall first be provided in draft to the other party.              IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives on the later day and year written below. ABBOTT LABORATORIES   VERSICOR, INC.           By: /s/  Chris Kolber   By: /s/George F. Horner, III   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Title: DVP   Title: President and CEO   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Date: 6/12/01   Date: 25 June 2001   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- EXHIBIT A API VER002 API   Anidulafungin (VER002) API Structure Chemical name:  [**]     [**] EXHIBIT B EBCN-HCl       [**]           [**]             Chemical Name:  [**] EXHIBIT C ECBN-HCl AND/OR API SPECIFICATIONS Analytical Property Method Type/Code   Limit -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- [**] [**]   [**] [**] [**]   [**] [**] [**]   [**] [**] [**]   [**]         [**]       [**] [**]   [**] [**] [**]   [**] [**] [**]   [**]         [**] [**]   [**] [**] [**]   [**] [**] [**]   [**] [**] [**]   [**] [**] [**]   [**] [**] [**]   [**]         [**] [**]   [**]         [**] [**]   [**]         [**] [**]   [**]         [**] [**]   [**]         [**] [**]   [**]         [**] [**]   [**]         [**] [**]   [**]         [**] [**]   [**]   EXHIBIT D PROPOSALS LY 303366 PROPOSAL Versicor - ABBOTT LABORATORIES PIII CHEMICAL PRODUCTION PROGRAM   Goals: [**] Abbott Activities: [**] Assumptions: [**] Summary Program Timeline [**] Goals: [**] Abbott Activities: [**] Assumptions: [**] Program Timeline: [**]   VERSICOR CHEMICAL R&D VALIDATION PROPOSAL STAGE II   [**]      VERSICOR CHEMICAL R&D VALIDATION PROPOSAL STAGE III   [**]     VERSICOR FERMENTATION ACTIVITY LIST [**] – DAJ   [**]   FERMENTATION REFERENCE STANDARDS PROPOSAL OPTIONS -------------------------------------------------------------------------------- SCOPE: [**]. -------------------------------------------------------------------------------- BACKGROUND: [**] -------------------------------------------------------------------------------- SCENARIO START DATE DEMO RUN COMPLETE PROCESS VALIDATION RUN #1 PROCESS VALIDATION RUN #2 PROCESS VALIDATION RUN #3 ADDED COST From Scen. 1 PROJECT DELAY From Scen. 1 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Scenario 1 [**] [**] [**] [**] [**] [**] [**] Scenario 2 [**] [**] [**] [**] [**] [**] [**] Scenario 3 [**] [**] [**] [**] [**] [**] [**] Scenario 4 [**] [**] [**] [**] [**] [**] [**]   Scenario 1        [**] Scenario 2        [**] Scenario 3        [**] Scenario 4        [**] ASSUMPTIONS: [**] DECISION MILESTONES: [**]: Deadline for Versicor to select the optimal scenario in order for Abbott to maintain the appropriate timelines posted in the above table.  Note:  if a decision is made sooner or later, the timelines will be affected accordingly.     [**]: Deadline for Abbott to receive reference standards in order to maintain project timing in Scenarios 2-4. Additional Comments: •            [**] •            [**] •            [**] EXHIBIT E   PROGRAM TIME GAITED COSTS ($000s) All dates are estimated and actual activity dates are subject to change Activity Start Date End Date Actual [**] Projected[**] Projected[**] Projected[**] -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- [**]     [**]       [**]     [**]       [**]     [**]                     [**] [**] [**]   [**]     [**] [**] [**]   [**]     [**] [**] [**]     [**]     [**] [**] [**]   [**]     [**] [**] [**]   [**]     [**] [**]     [**]     [**]         [**]   [**] [**] [**]   [**]     [**] [**]     [**]     [**]   [**]     [**]   [**] [**] [**]      [**]     [**] [**] [**]   [**]                   [**] [**] [**]     [**]   [**]* [**] [**]     [**]   [**]* [**] [**]     [**]   [**] [**] [**]     [**]   [**]           [**]** [**]     [**] [**] [**] [**]**                                                                                                                                                                 Total Program Cost           [**] Invoices shall be sent to Versicor upon the completion of each line item activity above unless specified as project initiation; Upon such event, invoices shall be sent on the initiation date of said activity. [**]. [**]. Activities to include the cGMP production of approx. [**] of Commercial validation material. **Miscellaneous program charges if reference standard production fees are incurred in [**].  Abbott shall adjust the timing of other fees accordingly to assure that the total annual charges do not exceed the total annual charges listed above. EXHIBIT F Alternative Dispute Resolution The parties recognize that from time to time a dispute may arise relating to either party’s rights or obligations under this Agreement.  The parties agree that any such dispute shall be resolved by the Alternative Dispute Resolution (“ADR”) provisions set forth in this Exhibit, the result of which shall be binding upon the parties.              To begin the ADR process, a party first must send written notice of the dispute to the other party for attempted resolution by good faith negotiations between their respective presidents (or their designees) of the affected subsidiaries, divisions, or business units within [**] after such notice is received (all references to “days” in this ADR provision are to calendar days).  If the matter has not been resolved within [**] of the notice of dispute, or if the parties fail to meet within such [**], either party may initiate an ADR proceeding as provided herein.  The parties shall have the right to be represented by counsel in such a proceeding. 1.          To begin an ADR proceeding, a party shall provide written notice to the other party of the issues to be resolved by ADR.  Within [**] after its receipt of such notice, the other party may, by written notice to the party initiating the ADR, add additional issues to be resolved within the same ADR. 2.          Within [**] following receipt of the original ADR notice, the parties shall select a mutually acceptable neutral to preside in the resolution of any disputes in this ADR proceeding.  If the parties are unable to agree on a mutually acceptable neutral within such period, either party may request the President of the CPR Institute for Dispute Resolution (“CPR”), 366 Madison Avenue, 14th Floor, New York, New York  10017, to select a neutral pursuant to the following procedures: (a)            The CPR shall submit to the parties a list of not less than [**] candidates within [**] after receipt of the request, along with a Curriculum Vitae for each candidate.  No candidate shall be an employee, director, or shareholder of either party or any of their subsidiaries or affiliates. (b)            Such list shall include a statement of disclosure by each candidate of any circumstances likely to affect his or her impartiality. (c)            Each party shall number the candidates in order of preference (with the number one (1) signifying the greatest preference) and shall deliver the list to the CPR within [**] following receipt of the list of candidates.  If a party believes a conflict of interest exists regarding any of the candidates, that party shall provide a written explanation of the conflict to the CPR along with its list showing its order of preference for the candidates.  Any party failing to return a list of preferences on time shall be deemed to have no order of preference. (d)            If the parties collectively have identified fewer than [**] candidates deemed to have conflicts, the CPR immediately shall designate as the neutral the candidate for whom the parties collectively have indicated the greatest preference.  If a tie should result between two candidates, the CPR may designate either candidate.  If the parties collectively have identified [**] or more candidates deemed to have conflicts, the CPR shall review the explanations regarding conflicts and, in its sole discretion, may either (i) immediately designate as the neutral the candidate for whom the parties collectively have indicated the greatest preference, or (ii) issue a new list of not less than [**] candidates, in which case the procedures set forth in subparagraphs 2(a) - 2(d) shall be repeated. 3.          No earlier than [**] or later than [**] after selection, the neutral shall hold a hearing to resolve each of the issues identified by the parties.  The ADR proceeding shall take place at a location agreed upon by the parties.  If the parties cannot agree, the neutral shall designate a location other than the principal place of business of either party or any of their subsidiaries or affiliates. 4.          At least [**] prior to the hearing, each party shall submit the following to the other party and the neutral: (a)             a copy of all exhibits on which such party intends to rely in any oral or written presentation to the neutral; (b)            a list of any witnesses such party intends to call at the hearing, and a short summary of the anticipated testimony of each witness; (c)             a proposed ruling on each issue to be resolved, together with a request for a specific damage award or other remedy for each issue. The proposed rulings and remedies shall not contain any recitation of the facts or any legal arguments and shall not exceed one (1) page per issue. (d)            a brief in support of such party’s proposed rulings and remedies, provided that the brief shall not exceed [**] pages.  This page limitation shall apply regardless of the number of issues raised in the ADR proceeding. Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery shall be required or permitted by any means, including depositions, interrogatories, requests for admissions, or production of documents. 5.          The hearing shall be conducted on [**] and shall be governed by the following rules: (a)             Each party shall be entitled to [**] of hearing time to present its case.  The neutral shall determine whether each party has had the [**] to which it is entitled. (b)             Each party shall be entitled, but not required, to make an opening statement, to present regular and rebuttal testimony, documents or other evidence, to cross-examine witnesses, and to make a closing argument.  Cross-examination of witnesses shall occur immediately after their direct testimony, and cross-examination time shall be charged against the party conducting the cross-examination. (c)              The party initiating the ADR shall begin the hearing and, if it chooses to make an opening statement, shall address not only issues it raised but also any issues raised by the responding party.  The responding party, if it chooses to make an opening statement, also shall address all issues raised in the ADR.  Thereafter, the presentation of regular and rebuttal testimony and documents, other evidence, and closing arguments shall proceed in the same sequence. (d)             Except when testifying, witnesses shall be excluded from the hearing until closing arguments. (e)              Settlement negotiations, including any statements made therein, shall not be admissible under any circumstances.  Affidavits prepared for purposes of the ADR hearing also shall not be admissible.  As to all other matters, the neutral shall have sole discretion regarding the admissibility of any evidence. 6.          Within [**] following completion of the hearing, each party may submit to the other party and the neutral a post-hearing brief in support of its proposed rulings and remedies, provided that such brief shall not contain or discuss any new evidence and shall not exceed [**] pages.  This page limitation shall apply regardless of the number of issues raised in the ADR proceeding. 7.          The neutral shall rule on each disputed issue within [**] following completion of the hearing.  Such ruling shall adopt in its entirety the proposed ruling and remedy of one of the parties on each disputed issue but may adopt one party’s proposed rulings and remedies on some issues and the other party’s proposed rulings and remedies on other issues.  The neutral shall not issue any written opinion or otherwise explain the basis of the ruling. 8.          The neutral shall be paid a reasonable fee plus expenses.  These fees and expenses, along with the reasonable legal fees and expenses of the prevailing party (including all expert witness fees and expenses), the fees and expenses of a court reporter, and any expenses for a hearing room, shall be paid as follows: (a)        If the neutral rules in favor of one party on all disputed issues in the ADR, the losing party shall pay 100% of such fees and expenses. (b)             If the neutral rules in favor of one party on some issues and the other party on other issues, the neutral shall issue with the rulings a written determination as to how such fees and expenses shall be allocated between the parties.  The neutral shall allocate fees and expenses in a way that bears a reasonable relationship to the outcome of the ADR, with the party prevailing on more issues, or on issues of greater value or gravity, recovering a relatively larger share of its legal fees and expenses. 9.          The rulings of the neutral and the allocation of fees and expenses shall be binding, non-reviewable, and non-appealable, and may be entered as a final judgment in any court having jurisdiction. 10.        Except as provided in paragraph 9 or as required by law, the existence of the dispute, any settlement negotiations, the ADR hearing, any submissions (including exhibits, testimony, proposed rulings, and briefs), and the rulings shall be deemed Confidential Information.  The neutral shall have the authority to impose sanctions for unauthorized disclosure of Confidential Information.   [**] The confident portion has been omitted and filed separately with the Securities and Exchange Commission
EXHIBIT 10.47 Comerica Bank-California 55 Almaden Boulevard San Jose, CA 95113-1609 July 25, 2000 (408)556-5836 Via Facsimile and First Class Mail Gary O. Rhea, CFO Versant Corporation 6539 Dumbarton Circle Fremont, CA 94555   Re: Revolving Loan and Security Agreement dated as of May 15, 1997, as modified from time to time in writing (the "Agreement"), between Versant Corporation ("Borrower") and Comerica Bank - California ("Bank") Dear Gary:           We have learned of the following breach of the Agreement based upon Borrower prepared financial statements as of the fiscal quarter ending June 30, 2000.   Borrower is in violation of the following:           "b. SECTION 6.17 (f) Net Operating Cash, as defined in FASB 95 and 102, equal to or greater than $1,000,000 as of the last day of the fiscal quarter ending June 30, 2000;..."           Bank has agreed to waive the breach described above for the period ending June 30, 2000.  Except as specifically set forth in this letter, all other terms and conditions of the Agreement shall remain in full force and effect.  This waiver is not a waiver of any other, or future breach, of any other term or condition of the Agreement.     Very truly yours,   Comerica Bank - California   /s/ Roland Tucker --------------------------------------------------------------------------------   Roland Tucker   Vice President    
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.21 SEPARATION AGREEMENT     THIS SEPARATION AGREEMENT ("Agreement") is made by and between Michael R. Shabazian ("Shabazian"), together with each and every dependent, heir, agent, executor, legal representative, successor and assign of Shabazian, and En Pointe Technologies, Inc., a Delaware corporation ("Parent"), and its subsidiaries (the Parent and its subsidiaries are collectively referred to as the "Company"), together with each and every of their predecessors, successors (by merger or otherwise), assigns, parents, subsidiaries, affiliates, divisions, joint venture partners, and any of its or their directors, officers, employees, attorneys, accountants and agents, whether past, present or former.     WHEREAS, Shabazian and the Company have agreed that he should resign his employment with the Company and as a director of the Company; and     WHEREAS, Shabazian and the Parent, on its own behalf and on behalf of each Company, desire to set forth herein their entire understanding and agreement regarding such resignation.     NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, each of Shabazian and the Parent, on its own behalf and on behalf of each Company, acting of his and its own free will, and intending to be legally and irrevocably bound hereby, agree as follows:     1.  Resignation and Duties.       a.  Resignation.  Shabazian hereby resigns all employment and other positions with the Company (including, as COO and President of Parent and CEO of En Pointe Technologies Sales, Inc., one of the subsidiaries of Parent, and as a member of the Board of the Parent and its subsidiaries), effective on December 31, 2001 (the "Termination Date"). Except as otherwise set forth herein, any and all employment agreements between the Company and Shabazian shall terminate as of December 31, 2001.     b.  Interim Duties.  From the date of this Agreement until December 31, 2001, Shabazian shall have only those duties that are directed by the Board of Directors or Chief Executive Officer of the Parent, which may include (a) working with the Company's lenders and the financial community, (b) supporting the Company's investor relationship activity and (c) assisting with merger and acquisition activities, as required.     2.  Payments.       a.  Severance.  The Company agrees to pay Shabazian (or his estate (or personal representative) in the case of Shabazian's death) the sum of Two Hundred Twenty-Five Thousand Dollars ($225,000), subject to all applicable federal, state and local tax and subject to any offset pursuant to the next succeeding sentence(the "Severance Payment"), to be paid to Shabazian by wire transfer to the bank account set forth on Exhibit A attached hereto on January 2, 2002; provided, however, that no Severance Payment shall be due and owing if Shabazian resigns from the Board of Directors or as an officer of the Parent or any of its subsidiaries prior to December 31, 2001. In addition, the parties hereto agree that the One-Hundred Fifty Thousand Dollar ($150,000) that was paid by the Parent to Shabazian on May 1, 2001 was a bonus payment as of such date and to the extent federal, state and local tax was not withheld and must now be withheld, such tax will be set-off against the Severance Payment.     b.  Salary and Expense Reimbursement.  Notwithstanding anything contained in any employment agreement to the contrary, the Company shall continue to pay Shabazian his current salary until October 31, 2001 (such salary to be paid in accordance with the Company's existing business practices), after which Shabazian's salary from the Company shall terminate. The Company agrees to reimburse Shabazian in accordance with its existing business practices for his 7 -------------------------------------------------------------------------------- reasonable business expenses related to the Company incurred prior to December 31, 2001 ("Reasonable Business Expenses"). Shabazian agrees to submit to the Chief Financial Officer of the Parent the appropriate expense reports reflecting such expenses prior to January 15, 2002. Once such reports are processed, the Company will reimburse Shabazian for the Reasonable Business Expenses prior to January 31, 2002.     c.  Option Vesting.  The Parent hereby agrees that the option to purchase 275,000 shares of common stock of the Parent for a purchase price of $1.94 per share granted to Shabazian as of May 14, 2001 (the "Option") shall continue to vest until December 31, 2001 so that as of such date the option to purchase 127,678 of such shares shall be vested. The parties hereto agree that the remaining unvested portion of such Option shall terminate as of December 31, 2001. Notwithstanding anything to the contrary in the Option Agreement relating to the Option or the Company's stock option plans, Shabazian shall be entitled to exercise that portion of the Option that is fully vested as of December 31, 2001 at any time until March 31, 2002, at which time such Option shall no longer be exercisable and shall terminate. In addition, the parties hereto agree that the modified treatment for vesting of the Option upon a "change of control" (as defined in the Company's stock option plans) contained in the Option Agreement relating to the Option or as has otherwise been agreed between the parties hereto shall be null and void as of the date of this Agreement, and that any such "change of control" shall have no effect on the vesting of such Option so that upon any such "change of control" the Option will nevertheless vest as set forth above in this paragraph 2(c).     3.  Benefits Continuation.  Until March 31, 2002, the Company will provide Shabazian his current equivalent coverage under the Company group medical plan, subject to the requirements of the medical plan. Shabazian agrees to pay directly to the Company for the medical coverage an amount equal to any required employee contribution to the medical plan premium. Shabazian's statutory rights under COBRA to continue participation in the Company's group medical coverage for a period of up to eighteen (18) months, at his own cost, shall begin on April 1, 2002. The Company's obligation to continue medical coverage will cease if Shabazian becomes covered in a comparable medical plan with a new employer. In that case, Shabazian agrees to immediately provide written notification of that fact to the Vice President of Human Resources of the Parent and the Chief Executive Officer of the Parent. If the Company is unable to continue medical coverage under its group medical plan as required by this paragraph 3 due to requirements of such plan, the Company shall pay to Shabazian an amount equal to the cost of premiums which the Company would have incurred had it not been prohibited from providing such coverage.     4.  Mutual Release of Claims.  Subject to and conditioned upon the satisfaction by the Company of its financial obligations to Shabazian set forth herein, including the payment of the Severance Payment, Shabazian hereby completely remises, releases, relinquishes, waives and forever discharges the Company, together with each and every of their predecessors, successors (by merger or otherwise), assigns, parents, subsidiaries, affiliates, divisions, directors, officers, employees, attorneys, accountants and agents, whether past, present or former of and from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims, liabilities and demands whatsoever, in law or in equity, known or unknown, in tort, contract, by statute, negligence (whether by contribution or indemnification) or any other basis for relief, compensatory, punitive or other damages, expenses (including attorneys' fees), reimbursements or costs of any kind which Shabazian ever had, now has or may have, for or by reason of any cause, matter or thing whatsoever that may have occurred prior to the Termination Date arising out of or in any way related to the Company or his employment with the Company, his membership on any Boards of Directors of the Company, the termination of that employment or membership or his ownership of securities of the Parent; provided, however, that nothing contained herein shall release the Company from its obligations under this Agreement and the Company's obligations to indemnify Shabazian from acts and 8 -------------------------------------------------------------------------------- omissions as a director and officer of the Company to the fullest extent permissible by law. Shabazian agrees that he has executed this Release on his own behalf, and also on behalf of his dependents, heirs, agents, executors, legal representatives, successors and assigns. This Release includes, but is not limited to, a release of any rights or claims he may have for, or pursuant to: (a) any state or local wage payment statute; (b) the Age Discrimination in Employment Act, 29 U.S.C. §621 et seq., which prohibits age discrimination in employment; (c) Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991, 42 U.S.C. §2000(e) et seq., which prohibits discrimination in employment based on race, color, national origin, religion or sex; (d) the Americans with Disabilities Act, 42 U.S.C. §12101, et seq., which prohibits discrimination on the basis of a covered disability; (e) the Employee Retirement and Income Security Act, which prohibits discrimination on the basis of entitlement to certain benefits; (f) the Family and Medical Leave Act, 29 U.S.C. §2601, et seq., which prohibits discrimination on the basis of entitlement to certain benefits; (g) any other federal, state or local laws or regulations prohibiting employment discrimination; (h) Section 1542 of the California Civil Code concerning unknown claims; (i) the California Fair Employment and Housing Act; (j) breach of any express or implied contract claims, including but not limited to, claims for wages or benefits arising out of any and all employment agreements with the Company, including, but not limited to, the Employment Agreement dated as of July 1, 2001 and the Employment Agreement dated as of May 16, 2000; (k) wrongful termination or any other tort claims, including claims for misrepresentation, defamation, invasion of privacy, intentional infliction of emotional distress whether based on common law, or otherwise; (l) any and all claims for federal or state securities law violations; (m) any and all claims for compensatory or punitive damages; and (n) any and all claims for attorneys' fees and costs. Shabazian expressly understands and agrees that the foregoing release is in full accord, satisfaction and discharge of doubtful and disputed claims by him against the Company, and that the foregoing release has been executed with the express intention of effectuating the legal consequences provided in Section 1541 of the California Civil Code, to wit, the extinguishment of all obligations as herein described.     Parent, on its own behalf and on behalf of each Company, hereby completely remises, releases, relinquishes, waives and forever discharges Shabazian and his dependents, heirs, agents, executors, legal representatives, successors and assigns, of and from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims, liabilities and demands whatsoever, in law or equity, known or unknown, in tort, contract, by statute, negligence (whether by contribution or indemnification) or any other basis for relief, compensatory, punitive or other damages, expenses (including attorney's fees), reimbursements or costs of any kind which the Company ever had, now has or may have, for or by reason of any cause, matter or thing whatsoever that may have occurred prior to the Termination Date, arising out of or in any way related to the Company or Shabazian's employment with the Company, Shabazian's membership on any Boards of Directors of the Company, the termination of that employment and membership or his ownership of securities of the Parent; provided however, that nothing contained herein shall release Shabazian from his obligations under this Agreement. The Parent agrees that it has executed this Release on its own behalf and also on behalf of each Company, and also on behalf of each and every of their predecessors, successors (by merger or otherwise), assigns, parents, subsidiaries, affiliates, divisions, directors, officers, employees, attorneys, accountants and agents, whether past, present or former.     5.  Promise Not to Sue.  Shabazian expressly represents that he has not filed a lawsuit or initiated any other administrative proceeding against Company, and that he has not assigned any claim against Company or its employees or affiliates to any other person or entity. Shabazian further promises not to initiate a lawsuit or to bring any other claim against Company arising prior to the date of the signing of this Agreement or prior to the Termination Date. This paragraph shall not prohibit Shabazian from initiating a lawsuit or bringing a claim for a breach of this Agreement. 9 --------------------------------------------------------------------------------     6.  Return of Company Equipment and Property.  Shabazian agrees that, to the extent he has not already done so, he will deliver all Company equipment, such as, but not limited to, fax machines, computer equipment, video cameras and peripheral equipment, books, credit cards, automobiles, telephone charge cards, office furniture, and any other Company property in his possession to a Company representative by December 31, 2001.     7.  Acknowledgment of Consideration.  Shabazian acknowledges that he is acting of his own free will, that he has been afforded twenty-one (21) days to read and review the terms of this Agreement, that he has been advised to seek the advice of counsel, and that he is voluntarily entering into this Agreement with full knowledge of its respective provisions and effects. Shabazian also acknowledges that he has seven (7) days following his signing of this Agreement to revoke this Agreement in which case Company will have no obligation to make any payment to him.     8.  Non-Defamation.  Each party agrees not to intentionally defame or otherwise disparage the other with respect to matters arising prior to the Termination Date.     9.  Arbitration of Disputes Under this Agreement.  The parties agree that any and all disputes arising out of the performance or breach of this Agreement or any promise or covenant herein shall be resolved by submission to final and binding arbitration by a panel of three arbitrators in Los Angeles, California, under, and in accordance with, the Individual Employment Rules and Procedures of the American Arbitration Association. In any such proceeding, the prevailing party shall be entitled to an award of reasonable attorneys' fees, cost and expenses.     10.  Governing Law; Enforcement.  This Agreement shall be governed by and construed and enforced under the laws of the State of Delaware. All remedies at law and equity shall be available for the enforcement of this Agreement incorporated by reference herein. This Agreement may be pleaded as a full bar to the enforcement of any claim in any way related to or arising out of Shabazian's employment or other positions with the Company and/or the termination thereof.     11.  Contractual Effect.  The parties understand and acknowledge that the terms of this Agreement are contractual and not a mere recital. Consequently, they expressly consent that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, and that it shall be binding upon the respective parties as well as their dependents, heirs, executors, legal representatives, successors and assigns.     12.  Notices.  All notices, requests, payments, acknowledgments and other communications hereunder to a party shall be in writing and shall be deemed to have been duly given when delivered by hand, deposited with a recognized overnight courier for next day delivery or telecopied to such party at his or its address set forth below or such other address as such party may specify by notice to the other party hereto.     If to Shabazian, to: Michael Shabazian 57 Checama Road RR#3 Box 95J Vinyard Haven, MA 02568     If to the Company, to: En Pointe Technologies, Inc. 100 N. Sepulveda Blvd., 19th Floor El Segundo, CA 90245 Attn: Chief Executive Officer 10 --------------------------------------------------------------------------------     13.  Entire Agreement; Etc.  This Agreement represents the entire understanding of the parties hereto with reference to the subject matters hereof and supersedes any and all other oral or written agreements heretofore or contemporaneously made.     14.  Headings.  The descriptive headings of the Paragraphs of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.     15.  Counterparts and Facsimile Signatures.  This Agreement may be delivered by telecopied signatures and executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument.     16.  Severability.  If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against public or regulatory policy, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.     IN WITNESS WHEREOF, Shabazian and the Company, each acknowledge that they are acting of their own free will, that they have had a sufficient opportunity to read and review the terms of this Agreement, they have each received the advice of their respective counsel with respect hereto, and that they have voluntarily caused the execution of this Agreement and by reference herein as of the day and year set forth below.             --------------------------------------------------------------------------------             Michael R. Shabazian             Date:                     --------------------------------------------------------------------------------                   On behalf of EN POINTE TECHNOLOGIES, INC.         By:                     --------------------------------------------------------------------------------             Name:                     --------------------------------------------------------------------------------         Date:                     --------------------------------------------------------------------------------         11 -------------------------------------------------------------------------------- QuickLinks SEPARATION AGREEMENT
Exhibit (10)(m)* to Report on Form 10-K for Fiscal Year Ended June 30, 2001 by Parker-Hannifin Corporation     Parker-Hannifin Corporation 2002 Target Incentive Bonus Plan Description.       *Numbered in accordance with Item 601 of Regulation S-K. PARKER-HANNIFIN CORPORATION 2002 TARGET INCENTIVE BONUS PLAN A.         Payments earned under the Bonus Plan depend upon the Company's performance against a pre-tax return on average assets (ROAA) schedule which is based upon the Fiscal Year 2002 operating plan. B.         The payout under the Plan ranges from 15% to 150% of each participant's target award, with 100% payout set at achievement of fiscal year 2002 planned ROAA. C.         Any payout pursuant to the Plan that will result in the exceedance of the $1 million cap on the tax deductibility of executive compensation will be deferred until such time in the earliest subsequent fiscal year that such cap will not be exceeded. D.         Participants: All of the executive officers of the Company, plus Group Presidents who are not executive officers. E.         Fiscal year 2002 Planned ROAA: 11.1% ROAA Payout Schedule         FY02   Percentage of Target ROAA            Award Paid*      < 2.6%   0%   2.6%   30%   4.0%   40%   5.2%   50%   6.5%   60%   7.6%   68%   7.7%   70%   8.9%   80%   10.0%   90%   11.1%   100%   11.7%   113%   12.3%   125%   13.0%   138%   13.6%   150%                * Fiscal year 2002 ROAA less than 7.6% will reduce the amount paid by 50%. F.         ROAA will not include the impact of:              1. Environmental costs in excess of planned amounts              2. Acquisitions/divestitures              3. Currency gains or losses   
February 21, 2001 Certified Mail Return Receipt Requested Kathy Sweeny, Vice President Brandywine Realty Trust 10,000 Midlantic Drive Suite 300 West Mount Laurel, NJ 08054 Re: QAD, Inc. Dear Ms. Sweeny:     Our firm is counsel to QAD, Inc. in connection with its lease at premises located at 10,000 Midlantic Drive, Suite 200, Mount Laurel, New Jersey (the "Lease"), as amended. Pursuant to Exhibit E of said Lease, this letter shall constitute notice to Landlord that Tenant exercises its option to extend the terms of the Lease for an additional term of five (5) years under the terms and conditions set forth in Exhibit E.     I note that the Fourth Amendment to the Lease, dated the 14th day of July, 1998, requires notices to be sent to Brandywine Realty Trust, Plaza 1000 at Main Street, Suite 400, Voorhees, New Jersey 08043, Attention: John M. Adderly, Jr., Senior Vice President. I have been informed that Brandywine no longer maintains an office at those premises, and that John Adderly is no longer with your company. Accordingly, I am sending this notice, certified mail to you, at your current address. I ask that if this notice is deemed deficient in any way, that you contact me immediately and I will send a copy of this notice to the address set forth in the Fourth Amendment to the Lease.     Upon receipt of this letter, please contact me so that we may discuss the particulars of the extension and the coordination of the refurbishment of the leased premises.     Very truly yours,     FLASTER/GREENBERG P.C.     /s/ PETER R. SPIRGEL        Peter R. Spirgel PRS:jr cc:John Sarkasian Michael Dale --------------------------------------------------------------------------------
I.C.H. CORPORATION SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT JOHN A. BICKS              THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement") is effective as of the 15th day of May, 2001, by and between I.C.H. Corporation ("ICH"), a Delaware corporation with offices at 9255 Towne Centre Drive, Suite 600, San Diego, CA 92121, and its subsidiaries, Sybra, Inc., a Michigan corporation ("Sybra"), and Care Financial Corp., a Delaware corporation ("Care"), and collectively, with ICH and Sybra, the "Companies"), each with offices at c/o I.C.H. Corporation, 9255 Towne Centre Drive, Suite 600, San Diego, California 92121 and John A. Bicks, an individual residing at 1070 Park Avenue, New York, New York 10128 (the "Executive").              WHEREAS, Executive has served as Co-Chief Executive Officer and Co-Chairman of the Board of Directors of ICH (the “ICH Board”) and in similar capacities for each of the other Companies pursuant to his prior employment agreement with ICH and the other Companies dated as of June 15, 2000 (the "Prior Agreement") and through such service, has acquired special and unique knowledge, abilities and expertise; and              WHEREAS, ICH desires to continue to employ Executive as its Co-Chief Executive Officer and to have Executive serve as Co-Chairman of the ICH Board and the other Companies desire to continue to employ Executive in similar capacities and the Companies desire to employ Executive in such capacities with any future subsidiaries of the Companies and wish to be assured of his continued services on the terms and conditions hereinafter set forth; and              WHEREAS, Executive desires to be employed by ICH as its Co-Chief Executive Officer and to serve as Co-Chairman of the ICH Board, and by the other Companies and any future subsidiaries of the Companies in similar capacities and to perform and to serve the Companies on the terms and conditions hereinafter set forth.              NOW, THEREFORE, in consideration of the premises and of the mutual promises, agreements and covenants set forth herein, the parties hereto agree as follows:              1.          Employment.                            (a)         Duties.  The Companies hereby agree to employ Executive, and Executive hereby accepts such employment as the Co-Chief Executive Officer of ICH and agrees to serve as Co-Chairman of the ICH Board and as Co-Chief Executive Officer and Co-Chairman of the Board of Directors of each of the other Companies.  In his role as Co-Chief Executive Officer of ICH and the other Companies, Executive shall be responsible for duties of a supervisory or managerial nature as may be directed from time to time by the ICH Board and each other respective Board of Directors, provided, that such duties are reasonable and customary for an Co-Chief Executive Officer.  Executive agrees that he shall, during the term of this Agreement, except during reasonable vacation periods, periods of illness and the like, devote substantially all his business time, attention and ability to his duties and responsibilities hereunder; provided, however, that nothing contained herein shall be construed to prohibit or restrict Executive from (i) serving as a director of any corporation, with or without compensation therefor; (ii) serving in various capacities in community, civic, religious or charitable organizations or trade associations or leagues; or (iii) attending to personal business; provided, however,  that no such service or activity permitted in this Section 1(a) shall materially interfere with the performance by Executive of his duties hereunder.  Executive shall report directly to the ICH Board and each other Board of Directors.                            (b)        Term.                                         (i)          Except as otherwise provided in this Agreement to the contrary, the terms and conditions of this Agreement shall be and remain in effect during the period of employment (the "Employment Period") established under this Section 1(b).  The initial Employment Period shall be for a term commencing on the date of this Agreement and ending on the third anniversary of the date of this Agreement; provided, however, that commencing on the first day after the date of this Agreement and on each day thereafter, the Employment Period shall be extended for one additional day so that a constant three (3) year Employment Period shall be in effect, unless (A) ICH (on its behalf and on behalf of the other Companies) or Executive elects not to extend the term of this Agreement by giving written notice to the other party in accordance with Sections 4(b) and 11 hereof, in which case, the term of this Agreement shall become fixed and shall end on the third anniversary of the date of such written notice ("Notice of Non-Renewal"), or (B) Executive’s employment terminates hereunder.                                         (ii)         Notwithstanding anything contained herein to the contrary, (A) Executive’s employment with the Companies may be terminated by ICH (on its behalf and on behalf of the other Companies) or Executive during the Employment Period, subject to the terms and conditions of this Agreement; and (B) nothing in this Agreement shall mandate or prohibit a continuation of Executive’s employment following the expiration of the Employment Period upon such terms and conditions as the ICH Board and Executive may mutually agree.                                         (iii)        If Executive’s employment with the Companies is terminated, for purposes of this Agreement, the term "Unexpired Employment Period" shall mean the period commencing on the date of such termination and ending on the last day of the Employment Period.                              (c)         Location/Travel.  Executive shall work at ICH's offices in New York, New York.  Executive shall not be required to relocate from the New York City area during the Employment Period.              2.          Compensation.  Subject to the provisions of Section 7 hereof, the Companies shall each be responsible and have joint and several liability for all compensation and benefits owed to Executive under this Agreement.  A reference to an ICH plan, program, obligation or commitment shall also be considered an obligation or commitment of each of the other Companies but shall not result in duplicate benefits being paid or provided to Executive.                            (a)         Salary.  Executive shall receive an annual base salary of Three Hundred Thousand Dollars ($300,000).  The annual base salary payable to Executive pursuant to this Section 2(a), which may be increased but not decreased by the ICH Board or the Compensation Committee of the ICH Board , shall be hereinafter referred to as the "Annual Base Salary" (it being understood that if and when such Annual Base Salary is increased, it may not be subsequently decreased below such new Annual Base Salary).                            (b)        Annual Bonus.                                         (i)          Executive shall be entitled to receive an annual cash bonus, hereinafter referred to as the "Annual Bonus," based upon the performance of ICH and Executive as determined by the ICH Board.  The target Annual Bonus payable to Executive for each fiscal year shall be an amount equal to at least forty percent (40%) of Executive’s Annual Base Salary for such year.                                         (ii)         Executive’s Annual Bonus shall be paid to Executive no later than forty five (45) days following the end of the period for which the bonus is being paid.                            (c)         Reimbursement of Business Expenses.  ICH shall reimburse Executive for all reasonable out-of-pocket expenses incurred by him during the Employment Period, including, but not limited to, all reasonable travel and entertainment expenses.  Executive may only obtain reimbursement under this Section 2(c) upon submission of such receipts and records as may be required under the reimbursement policies established by ICH.                            (d)        Additional Benefits; General Rights.  During the Employment Period, Executive shall be entitled to:                                         (i)          participate in all employee stock option, pension, savings, and other similar benefit plans of ICH and/or such other plans or programs of the other Companies as ICH may designate from time to time;                                         (ii)         participate in all welfare plans established by ICH such as life insurance, medical, dental, disability, and business travel accident plans and programs and/or such other plan or programs of the other Companies as ICH may designate from time to time.  In addition, ICH shall reimburse Executive for (i) any premium costs Executive may incur with respect to the health insurance plan currently maintained by ICH (and which may be maintained by ICH from time to time) in which Executive (and his spouse and children) participates and (ii) for all other medical and dental expenses not covered by any medical or dental plan in which Executive (and his spouse and children) participates, including, without limitation, deductibles and out of pocket expenses;                                         (iii)        reimbursement from ICH for any premium costs associated with the life insurance policy in the face amount of Two Million Dollars ($2,000,000) issued by Security Connecticut Life Insurance Company and currently owned by Executive; provided, that such reimbursement shall not exceed Seventy-Five Hundred Dollars ($7,500) per year;                                         (iv)       a minimum Four Hundred Dollars ($400) per month parking/transportation allowance;                                         (v)        four (4) weeks paid vacation per year; and                                         (vi)       any other benefits provided by ICH to its executive officers.                            (e)         Withholding.  ICH and/or the other Companies, as the case may be, shall deduct from all compensation paid to Executive under this Agreement, any Federal, State or city withholding taxes, social security contributions and any other amounts which may be required to be deducted or withheld by the Companies pursuant to Federal, State or city laws, rules or regulations.              3.          Option Grant.                            (a)         (i)          Executive has received options issued pursuant to ICH’s 1997 Employee Stock Option Plan, as amended (the "Stock Option Plan") as follows: Herein Referred To As Grant Date   Number of Shares Granted   Exercise Price/Share ($)   Vesting 1998 Options March 12, 1998   60,000   3.4375   25 % installments on March 12, 1998, January 1, 1999, January 1, 2000 and January 1, 2001   September 1, 1998   10,000   4.00   25 % installments on September 1, 1998, January 1, 1999, January 1, 2000 and January 1, 2001 1999 Options February 15, 1999   10,000   5.625   25 % installments on February 15, 1999, January 1, 2000, January 1, 2001 and January 1, 2002   May 7, 1999   35,000   12.25   25 % installments on May 7, 1999, January 1, 2000, January 1, 2001 and January 1, 2002 2000 Options June 29, 2000   35,000   5.06   50 % on the grant date and 25 installments on January 1, 2001 and January 1, 2002 The terms and conditions of each option grant set forth above are memorialized in  written option grant agreements between ICH and Executive dated the dates thereof.  Such 1998 Options, 1999 Options and 2000 Options plus any additional options granted to Executive in the future (collectively referred to herein as the "Options") shall expire on the tenth anniversary of each respective grant date.                                         (ii)         The Options were and are intended to qualify as incentive stock options within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that to the extent that any Options do not satisfy the requirements of Section 422(b) of the Code either at the time of grant or before or after exercise, including, without limitation, upon disposition of the underlying stock acquired by the exercise of Options prior to the requisite holding period, they shall be treated as non-qualified stock options.                            (b)        In the event that Executive incurs taxable income as a result of any or all of his Options being treated as non-qualified options (i.e. Options have been exercised and the requirements of Section 422(b) of the Code have not been or are no longer met) (the "Taxable Event") as soon as practicable after a determination by ICH and Executive that the Options are non-qualified and a Taxable Event has occurred, ICH shall make an additional single sum cash payment to Executive in an amount equal to thirty percent (30%) of Executive’s taxable income resulting from the Taxable Event.  Such payment shall only be made in the event Executive’s employment with ICH has not terminated for Cause within the meaning of Section 4(a)(i) of this Agreement.                            (c)         Notwithstanding any provisions in an Option grant agreement to the contrary, upon termination of his employment for any reason, Executive shall have the right to exercise his Options at any time through the tenth anniversary of the grant date of such Options.  Executive understands that the effect of exercising any incentive stock options on a day that is more than ninety (90) days after the date of termination of employment (or, in the case of a termination of employment on account of death or disability, on a day that is more than one (1) year after the date of such termination) shall be to cause such incentive stock options to be treated as non-qualified stock options.                            (d)        In the event ICH issues additional shares of Common Stock and/or any class of stock convertible into Common Stock and/or any other security convertible into Common Stock (including, without limitation, options and warrants which may be granted to individuals or entities other than employees and directors but excluding (i) the exercise of any currently outstanding options or warrants, (ii) any future grants of options, but only to the extent such grants relate to shares of Common Stock currently authorized to be granted under the Stock Option Plan or the ICH 1997 Director Stock Option Plan (collectively, the "Option Plans") (i.e. any options that may be granted by virtue of an increase in the number of shares of Common Stock currently authorized under the Option Plans shall not be excluded) and (iii) the exercise of any of such options) at any time during the Employment Period and prior to Executive’s termination of employment and in connection with a public or private equity offering or in connection with an acquisition (the "Issuance"), Executive shall be granted additional stock options and/or provided with a loan to purchase Common Stock, as determined by the ICH Board, in an amount equal to three and one-half percent (3.5%) of the number of shares issued pursuant to such Issuance.  The foregoing notwithstanding, in the event ICH repurchases any shares of Common Stock, stock convertible into shares of Common Stock and/or any other security convertible into shares of Common Stock, the anti-dilution provisions set forth in this Section 3(d) shall not apply until an equal number of such shares of Common Stock, stock convertible into shares of Common Stock and/or other securities convertible into shares of Common Stock are first reissued by ICH.  In addition, equitable adjustments shall be made to such anti-dilution provisions in the event ICH effectuates a stock split, reverse stock split, stock dividend or other recapitalization transaction.                            (e)         To the extent any Options are not vested upon a "Change in Control" of ICH, such unvested Options shall become fully vested and immediately exercisable upon a "Change in Control" of ICH (whether or not such Change in Control is approved of by the Continuing Directors of ICH (as defined in the Rights Agreement between ICH and Mid-America Bank of Louisville and Trust Company dated as of February 19, 1997 and amended as of February 10, 1998)).  A "Change in Control" of ICH shall be deemed to have occurred upon the happening of any of the following events:                                         (i)  approval by the ICH Board or stockholders of ICH of a transaction that would result in the reorganization, merger, or consolidation of ICH with one or more other "Persons" within the meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 ("Exchange Act"), other than a transaction following which:                                                      (A)  at least seventy-one percent (71%) of the equity ownership interests of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by Persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least seventy-one percent (71%) of the outstanding equity ownership interests in ICH; and                                                      (B)  at least seventy-one percent (71%) of the securities entitled to vote generally in the election of directors of the entity resulting from such transaction are beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the same relative proportions by Persons who, immediately prior to such transaction, beneficially owned (within the meaning of Rule 13d-3 promulgated under the Exchange Act) at least seventy-one percent (71%) of the securities entitled to vote generally in the election of directors of ICH;                                         (ii)  the acquisition of all or substantially all of the assets of ICH or Sybra;                                         (iii)  a complete liquidation or dissolution of ICH or Sybra, or approval by the stockholders of ICH or Sybra of a plan for such liquidation or dissolution of ICH or Sybra, respectively;                                         (iv)  the occurrence of any event in the nature of an event described in this Section 3(e) if, immediately following such event, at least seventy-five percent (75%) of the members of the ICH Board do not belong to any of the following groups:                                                      (A)  individuals who were members of the ICH Board on the date of this Agreement; or                                                      (B)  individuals who first became members of the ICH Board after the date of this Agreement either: (I)  upon election to serve as a member of the ICH Board by affirmative vote of three-quarters of the members of such ICH Board, or of a nominating committee thereof, in office at the time of such first election; or (II)  upon election by the stockholders of ICH to serve as a member of the ICH Board, but only if nominated for election by affirmative vote of three-quarters of the members of the ICH Board, or of a nominating committee thereof, in office at the time of such first nomination; provided, however, that such individual's election or nomination did not result from an actual or threatened election contest (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents (within the meaning of Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by or on behalf of the ICH Board. (v)  in a single transaction or a series of related transactions, one or more other Persons, other than an employee benefit plan sponsored by ICH, becomes the "beneficial owner," as such term is used in Section 13 of the Exchange Act, of shares of Common Stock of ICH (including newly issued shares) which equal thirty percent (30%) or more of the issued and outstanding shares of Common Stock of ICH prior to such person or persons becoming such a "beneficial owner."              (f)         In the event of a conflict between the terms of any Option grant agreement or the Stock Option Plan and this Agreement, the terms of this Agreement shall control. 4.          Termination of Employment; Events of Termination.                            (a)         Executive’s employment hereunder may be terminated during the Employment Period under the following circumstances: (i)  Cause.  Executive’s employment hereunder shall terminate for "Cause" ten days after the date that any of the Companies shall have given Executive notice of the termination of his employment for "Cause".  For purposes of this Agreement, "Cause" shall mean (A) the commission by Executive of fraud, embezzlement or an act of serious, criminal moral turpitude against any of the Companies; (B) the commission of an act by Executive constituting material financial dishonesty against any of the Companies; or (C) Executive's gross neglect in carrying out his material duties and responsibilities under this Agreement which has a material adverse effect on any of the Companies and which is not cured within thirty (30) days subsequent to written notice from any of the Companies to Executive of such breach. (ii)  Death.  Executive’s employment hereunder shall terminate upon his death. (iii)  Disability.  Executive’s employment hereunder shall terminate ten days after the date on which any of the Companies shall have given Executive notice of the termination of his employment by reason of his physical or mental incapacity or disability on a permanent basis.  For purposes of this Agreement, Executive shall be deemed to be physically or mentally incapacitated or disabled on a permanent basis if the ICH Board determines he is unable to perform his duties hereunder for a period exceeding six (6) months in any twelve (12) month period. (iv)  Good Reason.  Executive shall have the right to terminate his employment for "Good Reason."  This Agreement shall terminate effective immediately on the date Executive shall have given the ICH Board notice of the termination of his employment with the Companies for "Good Reason."  For purposes of this Agreement, "Good Reason" shall mean (A) any material and substantial breach of this Agreement by any of the Companies, (B) a diminution of Executive’s responsibilities, loss of title or position in which Executive currently serves, failure to reelect Executive to the ICH Board or the Board of Directors of any of the other Companies or reappoint Executive Co-Chairman of the ICH Board or Co-Chairman of the Board of Directors of any of the other Companies, but not including the loss of responsibilities and title associated with any of the Companies other than ICH or Sybra upon the sale of the stock or substantially all of the assets of such other Company, (C) a Change in Control occurs and Executive voluntarily quits at any time within the six (6) month period on or immediately following the Change in Control, (D) ICH issues a Notice of Non-Renewal to Executive, (E) a reduction in Executive’s Annual Base Salary or a material reduction in other benefits (except for bonuses or similar discretionary payments) as in effect at the time in question, or any other failure by the Companies to comply with Sections 2 and 3, hereof, (F) the relocation of Executive’s office outside the New York City area, or (G) this Agreement is not assumed by a successor to ICH. (v)  Without Cause.  The Companies shall have the right to terminate Executive’s employment hereunder without Cause subject to the terms and conditions of this Agreement.  In such event, this Agreement shall terminate, effective immediately upon the date on which any of the Companies shall have given Executive notice of the termination of his employment for reasons other than for Cause or due to Executive’s Disability. (vi)  Without Good Reason.  Executive shall have the right to terminate his employment hereunder without Good Reason subject to the terms and conditions of this Agreement.  This Agreement shall terminate, effective immediately upon the date as of which Executive shall have given the ICH Board notice of the termination of his employment without Good Reason. (b)        Notice of Termination.  Any termination of Executive's employment by any of the Companies or any such termination by Executive (other than on account of death) shall be communicated by written Notice of Termination to the other party hereto.  For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated.  In the event of the termination of Executive’s employment on account of death, written Notice of Termination shall be deemed to have been provided on the date of death.                5.          Payments Upon Termination.                            (a)         Without Cause, for Good Reason, Death or Disability.  If Executive's employment is terminated by any of the Companies without Cause (pursuant to Section 4(a)(v)), by Executive for Good Reason (pursuant to Section 4(a)(iv)), due to death of Executive (pursuant to Section 4(a)(ii)), or by any of the Companies due to Executive’s Disability (pursuant to Section 4(a)(iii)), Executive, or in the case of Executive’s Death or Disability, Executive’s legal representative estate or beneficiaries, as the case may be, shall be entitled to receive from the Companies (i) a lump sum payment in an aggregate amount equal to three (3) times the sum of (A) then current Annual Base Salary and (B) the average of all bonuses, including, without limitation, Executive's Annual Bonus, earned by or paid to Executive during the two (2) immediately preceding full fiscal years of employment ending prior to the date of termination (the "Severance Payment"); (ii) any bonuses which have been earned but not been paid prior to such termination ("Prior Bonus Payment") and (iii) reimbursement of expenses incurred prior to date of termination (the "Expense Reimbursement").  The aforesaid amounts shall be payable in cash without discount for early payment, at the option of Executive, either in full immediately upon such termination or monthly over the Unexpired Employment Period (the "Payment Election").  In addition, (x) Executive's fringe benefits specified in Section 2 shall continue through the end of the Unexpired Employment Period, provided, however, that such benefits which may not continue pursuant to law, such as participation in a qualified pension plan, shall terminate on the date of termination and further provided, that Executive shall be entitled to COBRA continuation coverage and to continue the applicable life insurance policies thereafter, at his cost ("Fringe Benefit Continuation); and (y) all outstanding Options which are not vested as of the date of termination, if any, shall upon such date of termination vest and become immediately exercisable in accordance with the terms of the Option grant agreements and this Agreement ("Vested Options").                            In the event Executive terminates his employment within the six month period on or immediately following a Change in Control which constitutes a termination for Good Reason under this Agreement pursuant to Section 4(a)(iv)(C), Executive shall be entitled to receive from the Companies an additional lump sum cash payment in an amount sufficient to pay any excise taxes which may be imposed on Executive pursuant to Section 4999 of the Code (or any successor provisions) plus any excise or income tax liability on the gross up payment itself so that on a net after tax basis Executive shall be in the same position as if the excise tax under Section 4999 of the Code (or any successor provisions) had not been imposed.                            In the event Executive is terminated by any of the Companies without Cause or due to Executive’s Disability, or Executive terminates his employment with the Companies for Good Reason, Executive shall have no duty to mitigate the amount of the payment received pursuant to this Section 5(a), it being understood that Executive's acceptance of other employment shall not reduce ICH’s or the other Companies’ obligations hereunder.                            (b)        Termination With Cause or Voluntary Quit.  If any of the Companies terminates Executive's employment for Cause (pursuant to Section 4(a)(i)) or in the event Executive voluntarily terminates his employment without Good Reason (pursuant to Section 4(a)(vi)) ("Voluntary Quit"), Executive shall be entitled to his Annual Base Salary through the date of the termination of such employment and Executive shall be entitled to any bonuses which have been earned but not paid prior to such termination.  Executive shall not be entitled to any other bonuses.  Executive's additional benefits specified in Section 2 shall terminate at the time of such termination.  Additionally, Executive shall be entitled to all Options that have vested as of the date of such termination.  All outstanding Options, if any, which have not vested as of date of such termination shall be forfeited, and if the termination is for Cause, no further payments pursuant to Section 3(b) shall be made to Executive.                            (c)         Termination by any of the Companies Upon Change in Control.  If any of the Companies terminates Executive’s employment for any reason in connection with a Change in Control which is not approved by the Continuing Directors of ICH, Executive shall receive from the Companies in one lump sum, payable on the consummation of the Change in Control an amount equal to the Severance Payment, the Prior Bonus Payment and the Expense Reimbursement.  The aforesaid amount shall be payable in cash without discount for early payment on the consummation of such Change in Control.  Executive shall be entitled to his Vested Options and Executive (and his spouse and children) shall be entitled to Fringe Benefit Continuation.  In addition to the aforesaid cash payment, the Companies shall pay Executive, on the consummation of the Change in Control, in one lump sum, a cash payment  in an amount sufficient to pay any excise taxes which may be imposed on Executive pursuant to Section 4999 of the Code (or any successor provisions) plus any excise or income tax liability on the gross up payment itself so that on a net after tax basis Executive shall be the same as if the excise tax under Section 4999 of the Code (or any successor provisions) had not been imposed.                            In the event Executive is terminated by any of the Companies in connection with a Change in Control which is not approved by the Continuing Directors of ICH, Executive shall have no duty to mitigate the amount of the payment received pursuant to this Section 5(c), it being understood that Executive's acceptance of other employment shall not reduce the Companies obligations hereunder.                            (d)        Vesting Trust.  At Executive’s option, the Companies shall establish a vesting trust into which the Companies shall, to the extent economically feasible, contribute and/or pledge assets to secure their severance obligations to Executive under this Agreement.              6.          Successors and Assigns.                            (a)         This Agreement shall be binding upon and inure to the benefit of ICH, its successors and assigns.  ICH shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all its assets to expressly assume and agree to perform this Agreement in the same manner and to the same extent ICH would be required to perform if no such succession had taken place.                              (b)        Executive agrees that this Agreement is personal to him and may not be assigned by him other than by the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by Executive's legal representative.              7.          Joint and Several Liability.                            (a)         No Duplication of Payments.  The Companies shall be jointly and severally liable for any amounts payable to Executive under this Agreement.  In no event shall any amount payable pursuant to this Agreement be paid by ICH and any other Company, or any two or more Companies and Executive shall not be entitled to receive duplicate benefits or payments under any of the provisions of this Agreement.                            (b)        New Subsidiaries.  Any subsidiary of the Companies that is formed or acquired on or after the date hereof shall be required to become a signatory to this Agreement and shall become jointly and severally liable with the Companies for the obligations hereunder.                            (c)         Sale of Subsidiaries.  Other than with respect to the joint and several obligations of each subsidiary pursuant to Section 5 hereof, upon the sale of the stock or substantially all of the assets of any subsidiary of ICH, which is approved by the ICH Board, such subsidiary shall be automatically released from its obligations hereunder and shall not be considered as having any continuing liability for the obligations hereunder, and Executive shall be released from his obligations to such subsidiary hereunder.              8.          Governing Law.  This Agreement shall be construed in accordance with, and its validity, interpretation, performance and enforcement shall be governed by, the laws of the State of New York without regard to conflicts of law principles thereof. Each of the parties hereto hereby (a) irrevocably and unconditionally submits to the non-exclusive jurisdiction of any New York State or Federal court sitting in New York County, New York in any action or proceeding arising out of or relating to this Agreement, (b) irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding, and (c) irrevocably and unconditionally consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process by certified mail to such party and its counsel at their respective addresses specified in Section 11 hereof.              9.          Entire Agreement.                            (a)         This instrument contains the entire understanding and agreement among the parties relating to the subject matter hereof, except as otherwise referred to herein, and supersedes all other prior agreements and undertakings, both written and oral, among the parties with respect to the subject matter hereof.  The parties recognize that the Prior Agreement has been amended and restated in its entirety by this Agreement and the terms of the Prior Agreement are of no further force and effect.                            (b)        Neither this Agreement nor any provisions hereof may be waived or modified, except by an agreement in writing signed by the party(ies) against whom enforcement of any waiver or modification is sought.              10.        Provisions Severable.   In case any one or more of the provisions of this Agreement shall be invalid, illegal or unenforceable in any respect, or to any extent, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.              11.        Notices.  Any notice required or permitted to be given under the provisions of this Agreement shall be in writing and delivered by courier or personal delivery, facsimile transmission (to be followed promptly by written confirmation mailed by certified mail as provided below) or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows:              If to ICH or any of the other Companies:                            ICH Corporation                            9255 Towne Centre Drive                            Suite 600                            San Diego, California  92121                            Attention: Board of Directors                            Facsimile Number:  (858) 638-2083              With a copy to:                            Christopher J. Sues, Esq.                            Pryor Cashman Sherman & Flynn LLP                            410 Park Avenue                            New York, New York 10022                            Facsimile Number:  (212) 326-0806              If to Executive:                            John A. Bicks, Esq.                            1070 Park Avenue                            New York, New York  10128                            Facsimile Number:  (212) 876-2908 If delivered personally, by courier or facsimile transmission (confirmed as aforesaid and provided written confirmation and receipt is obtained by the sender), the date on which a notice is delivered or transmitted shall be the date on which such delivery is made.  Notices given by mail as aforesaid shall be effective and deemed received upon the date of actual receipt or upon the third business day subsequent to deposit in the U.S. mail, whichever is earlier.  Either party hereto may change its or his address specified for notices herein by designating a new address by notice in accordance with this Section 11.              12.        Counterparts.  This Agreement may be executed in separate counterparts, each of which is deemed to be an original and both of which taken together shall constitute one and the same agreement.   THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.                IN WITNESS WHEREOF, the Companies and Executive have executed this Agreement as of the date first above written. EXECUTIVE   ICH CORPORATION /s/ John A. Bicks   /s/ Robert H. Drechsler --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- John A. Bicks   Name: Robert H. Drechsler     Title: Co-Chairman and CEO           SYBRA, INC.     /s/ Robert H. Drechsler     --------------------------------------------------------------------------------     Name: Robert H. Drechsler     Title: Co-Chairman and CEO                 LYON’S OF CALIFORNIA, INC.     /s/ Robert H. Drechsler     --------------------------------------------------------------------------------     Name: Robert H. Drechsler     Title: Co-Chairman and CEO                 CARE FINANCIAL CORP.     /s/ Robert H. Drechsler     --------------------------------------------------------------------------------     Name: Robert H. Drechsler     Title: Co-Chairman and CEO  
WEST BROUSSARD EXPLORATION AGREEMENT This Agreement is made and entered into between PLEDGER OPERATING COMPANY, INC. (“Pledger”), a Mississippi corporation, and BETA OIL &amp; GAS, INC. a Nevada corporation (“Beta”), Pledger and Beta are sometimes hereinafter referred to individually as a “Party” and collectively as the “Parties”. RECITALS WHEREAS, Beta desires to acquire oil, gas and mineral leases, interests and geological data in the West Broussard Prospect Area (the “Prospect”) subsequent to reviewing proprietary geological data and interpretations presented to Beta by Pledger, in accordance with the terms and provisions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises, mutual covenants and agreement herein contained, the Parties agree as follows: ARTICLE I DEFINITIONS         As used in the Agreement, the following terms have the meaning ascribed hereunder: a. "Agreement" means this West Broussard Exploration Agreement between Pledger and Beta. b. "Pledger ORRI" means that interest to be conveyed to Pledger pursuant to Article V of this Agreement.   c. “Prospect Area” means the area outlined on the map attached hereto and made a part hereof as EXHIBIT “A” defining the Area of Mutual Interest, located in T10S-R5E of Lafayette, Parish Louisiana. d. "Effective Date" means February 28, 2001. e. "Term of Agreement" means for the duration of two (2) years after the i) Termination of the JOA, or ii) expiration of the last Lease acquired through leasing in the AMI or acreage acquired through purchase or farmout in the AMI, whichever last occurs.   f. “JOA” or “Operating Agreement” means the agreement attached to this Agreement as Exhibit “B” hereto, made a part hereof for all purposes, and naming Beta, as Operator.   g. “ORRI Form Of Assignment” means the type and format attached to this Agreement as Exhibit “C” hereto, and made a part hereof for the purpose of assigning the Pledger ORRI.   h. “Leasehold Acquisition Costs” means all out of pocket costs incurred by Beta incident to or in connection with the acquisition of Leasehold Interest with respect to the Prospect Area including, but not limited to, lease bonuses, delay rentals, brokerage fees, geological consulting fees and legal expenses incurred for preparation of documents, title examination in the Prospect Area and preparation for unitization hearings.   i. “Leasehold Interests” or “Leases” means any seismic option, oil, gas and mineral lease or interest therein, fee interest, unleased mineral interest or other oil, gas or mineral right acquired by the Parties pursuant to this Agreement, including any such lease, right or interest acquired or subject to acquisition by the Parties under the terms of any farmout agreement, lease purchase agreement, assignment from third parties, options, fee purchase or any other type of agreement.   j. “Payout” means that point in time when Beta’s interest in cumulative revenues from production from any well or wells drilled in the Prospect Area during the term of this Agreement, after deducting applicable royalties, overriding royalties which are not solely the burden of Beta, the Pledger ORRI, any production payments, shut-in payments, delay rentals, non-participating royalties and/or mineral interests and/or other similar burdens attributable to Beta’s interest, production taxes or severance taxes and any other taxes provided by law (excluding income taxes), shall first equal the sum of (i) Beta’s share of all Leasehold Acquisition Costs, (ii) Beta’s share of 100% of the costs and expenses incurred in drilling, testing, completing, equipping and operating, inclusive of Beta’s share of any workover or recompletion of any well or wells drilled on the Prospect Area by Beta before Payout, and (iii) Beta’s share of other expenses incurred by Beta as same are directly attributable and   applicable to Beta’s cost bearing interest in the Prospect Area. Payout shall become effective at 7:00 AM of the first day of the month after Payout occurs. It is agreed that after Payout on any well, Beta will pay in arrears any amount of earned revenue accruing to Pledger’s interest beginning on the day actual Payout is achieved, and will be tendered within 30 days of Beta having received production payment covering this period.   k. “Royalty” or “Royalties” shall mean lessor’s royalty under the terms of a Lease, or overriding royalties in favor of a third party under a Lease. ARTICLE II OWNERSHIP 2.1 Except as otherwise provided in this Agreement, the Parties agree to share all future costs, liabilities and benefits (except the Pledger ORRI) attributable to, or derived from this Agreement with respect to each well drilled under the terms of this Agreement in the following percentages before Payout: Pledger 0% Beta 100% 2.2 The foregoing notwithstanding, upon well by well Payout, 12.50% of the interest credited above to Beta shall revert to Pledger, such that effective upon Payout of each well, the Parties shall share all costs, liabilities and benefits (including the Pledger ORRI) attributable to or to be derived from this Agreement, and Rentals, in the following percentages: Pledger 12.50% Beta 87.50% 2.3 If after the Effective Date a Party creates any lease burden, including, but not limited to, any overriding royalty interest, production payment, net profits interest, or assignment of production, but excluding the royalty or other interest which the Leases provide for lessors, such burden shall be deemed the sole and absolute responsibility, obligation and liability of the Party creating such burden, and such Party shall indemnify, defend and hold harmless the other Party from and against any liability therefor. 2.4 It is agreed and understood that the Beta will notify Pledger and will furnish all necessary conveyances to vest Pledger with its after Payout interest. Beta shall furnish Pledger with monthly payout statements prior to Payout and all monthly accounting data as it applies to operations of any well in the AMI. 2.5 The assignment by and from Beta of Pledger’s 12.5% interest shall occur within twenty days after the date upon which Well Payout of each well becomes effective as defined herein by Article 1.1 Pledger’s interest shall be free and clear of any liens and encumbrances at the time that the assignment is executed. 2.6 “WI Form Of Assignment” means the type and format of assignment, attached to this Agreement as Exhibit “D” hereto, and made a part hereof for the purpose of assigning a Working Interest in the prospect to Pledger, as provided for in this Agreement. 2.7 Beta agrees to fully defend, protect and indemnify and hold harmless Pledger, its subsidiaries and affiliates and their respective directors, officers, executives, supervisors, employees, agents, successors and assigns from and against each and every claim, demand, action, cause of action, or lawsuit and any liability cost, damage, or loss, including, but not limited to, court costs and attorney’s fees that may be asserted against Pledger by any party, including Beta’s subsidiaries and affiliates and their respective directors, officers, executives, supervisors, employees, agents, successors and assigns, arising from or on account of any operation conducted by Beta or for the benefit of Beta prior to the effective date of the assignment of working interest by Beta to Pledger. ARTICLE III CONSIDERATION         Pledger shall be paid a cumulative total of Seventy Five Thousand and No/100 Dollars ($75,000) in cash and two thousand Warrants to Purchase Beta Common Stock at Nine and 50/100 Dollars ($9.50) per share, as consideration for generating the geological concept under the following timetable: (i) $30,000, in cash upon closing and execution of this Agreement, and (ii) $45,000 in cash and the said Warrants to Purchase Beta Common Stock after the acquisition of Leases within the Prospect Area covering 500 net mineral acres. ARTICLE IV DUTIES AND RESPONSIBILITIES OF THE PARTIES 4.1 Concurrent with the execution of this Agreement, the Parties shall enter into the Operating Agreement. Except as otherwise provided for herein, Beta shall be designated as “Operator” of the Prospect Area and shall conduct or cause to be conducted all operations within the Prospect Area. To the extent of any conflict between the terms of this Agreement and the Operating Agreement, the terms of this Agreement shall be controlling, except as otherwise provided in this Agreement. All operations in the Prospect Area shall otherwise be subject to, and conducted in accordance with, the terms and conditions of the Operating Agreement. 4.2 Should Beta or Pledger desire to surrender in whole or in part, any Leasehold Interests within the Prospect Area (including any Leases, extensions, farm ins or lease renewals) the other Party shall be notified of their intent 90 days prior to expiration of each Lease and / or 30 days prior to any rental obligation. The Party receiving such notice shall in turn give the other Party written notice, no later than 10 days before the Lease expiration or rental date, of the interest it desires to preserve, and shall be entitled to an assignment of such interest. Beta and Pledger shall make a good faith effort to comply with the provisions of this Paragraph 4.2 but in the event of failure to do so, through oversight or otherwise, Beta and/or Pledger shall not be liable for any default or loss of Lease. 4.3 This letter shall be binding through the term of any Lease renewals, extensions, farm-ins, farm-outs or acquisitions that Beta or Pledger may be a part of, involving the Leases within the Prospect Area, so long as actions to extend the term of the Leases are made during the term of this Agreement. ARTICLE V PLEDGER OVERRIDING ROYALTY INTEREST 5.1 In addition to the 12.5% interests provided for above, Pledger shall be assigned an overriding royalty interest in all Leases and lease agreements as follows: (i) in the event the net revenue acquired is 75% or greater, the Pledger ORRI shall be 3% of 8/8ths, (ii) in the event the net revenue acquired is less than 75% and greater than 70%, the Pledger ORRI shall be 2% of 8/8ths, and (iii) in the event the net revenue is equal to or less than 70%, the Pledger ORRI shall be 1% of 8/8ths. 5.2 If a Lease covers less than the full undivided fee estate in the oil, gas, sulphur and associated hydrocarbons in any lands covered by the Lease, or in the event less than one hundred percent (100%) of the leasehold estate in any such Lease is acquired by the Parties as to any of the lands covered by the Lease, then as to such Lease, insofar as it covers such lands, the Pledger ORRI shall be proportionately reduced. The Pledger ORRI shall not apply if already applicable to a conveyed interest, avoiding duplication of burden on the same interest, and will likewise not apply to the acquisition of any Royalties, production payments, net profits interests and/or other expense-free interests acquired in wells already producing and/or capable of producing hydrocarbons. 5.3 In the event all or a part of the lands covered by a Lease are pooled or unitized with other Leasehold Interests, the Pledger ORRI shall be further reduced in the proportion that the surface acreage of the land covered by the Lease and included in the unit, bears to the total surface acreage of such unit. 5.4 No interest in a Lease burdened by the Pledger ORRI, whether or not jointly owned, shall be surrendered in whole or in part unless and to the extent allowed by the Operating Agreement or this Agreement with respect to surrender of Leases acquired for the joint account of the Parties. 5.5 Pledger shall be assigned the ORRI on any and all acreage leased, purchased, farmed-in, or acquired through any means, by Beta or Pledger. Assignment of such ORRI shall be made by Beta or Pledger within thirty (30) days after either, 1.) the acquisition of any Lease, or 2.) acquisition of an interest in any Lease or 3.) within thirty (30) days after the recordation by Beta or Pledger, of any affected interest assignments and within five (5) business days if any assignment or Lease is acquired during the thirty (30) day period prior to drilling any well to which the Lease pertains. The Assignment of Overriding Royalty shall utilize the form of assignment which is attached hereto as, EXHIBIT “C”. 5.6 The Pledger ORRI shall apply to and burden all renewals, extensions, top Leases and amendments of Leases burdened by the Pledger ORRI acquired within 2 year (s) after the expiration of each such Lease. 5.7 In the event Beta’s or Pledger’s working interest in a Lease is subsequently reduced by virtue of a reversionary, carried or other working interest in favor of a third party, then the Pledger ORRI shall be reduced proportionately at the time Beta and/or Pledger’s working interest is so reduced. ARTICLE VI DATA 6.1 Beta will give notice (via telephone) fax or e-mail) twenty-four (24) hours in advance of the spudding of a well, logging of a well and completion of any well to the following Parties: Pledger Operating Company, Inc., 606 Washington Street, Natchez, Mississippi 391120, (601) 442-9871, E-Mail - [email protected]; ----------------------- Alton Miller, Post Office Box 314, Jackson, Mississippi, (601)821-4863, E-Mail - [email protected]; Research Petroleum, Inc., 25025 I-45 North, Suite 400, The Woodlands, Texas 77380, (281) 363-4474,(281)363-0045 Fax, [email protected] ----------------- 6.2 The same parties shall have complete access to the rig floor at it’s sole cost, risk and expense, open hold logging truck and cased hole perforating truck. The same parties will receive a copy of all electronic digital data, including though not limited to, field prints of all open and cased hole logs and a final print of all open and cased hold logs, a copy of all core evaluation reports simultaneous to the time Beta receives same, as well as all formation test results, pressure or build-up surveys, mud logs, samples and driller’s logs, inclusive of copies of any geophysical data and tapes acquired within the AMI, vsp surveys, velocity surveys, cased hole logs, or any other open or cased hole surveys conducted on wells in the AMI of which Beta has an interest. The same parties shall also be furnished a copy of any core studies and reservoir evaluations, test data, regulatory reports, daily drilling and completion reports provided on daily fax basis during conduct of field operations, in addition to copies of monthly accounting data as it applies to operations expenses. ARTICLE VII COST OF OPERATIONS         Except as expressly provided in paragraph 2.1, all costs incurred after the Effective Date by Pledger or Beta, if authorized by this Agreement, in the furtherance of the acquisition or maintenance of Leasehold Interests in the Prospect Area, including Leasehold Acquisition Costs, will be shared by the Parties in the proportions provided in paragraph 2.1 prior to Payout, and paragraph 2.2 after Payout. ARTICLE VIII TERM The Term of Agreement is as defined in Section 1.1 e. above. ARTICLE IX ASSIGNMENT OF INTEREST 9.1 Any assignment or transfer by any Party of any Leasehold Interest in the Prospect Area shall be subject to this Agreement and the Operating Agreement. This Agreement shall accompany the sale and assignment of any interest within the AMI in whole or in part. 9.2 Subject to the foregoing and to the Operating Agreement, the terms, covenants and conditions of this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective legal representatives, successors and assigns. ARTICLE X REMEDIES         The Parties shall be entitled to any remedy available at law or equity for any breach of this Agreement. ARTICLE XI MISCELLANEOUS PROVISIONS 11.1 In connection with the transactions contemplated by this Agreement, Pledger represents and warrants that: (i) Pledger is a corporation duly organized, existing, and in good standing under the laws of the State of Mississippi, with full power and authority to conduct its business as now conducted and to own and operate its properties and other assets; (ii) Pledger has all requisite power authority to execute and deliver this Agreement and (iii) this Agreement has been duly and validly executed and delivered by Pledger and, assuming its due authorization, execution, and delivery by the purchaser, constitutes the legal, valid, and binding obligation of Pledger, enforceable against Pledger in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws now or hereafter in effect relating to or limiting creditors’ rights or by legal principles of general applicability governing the availability of equitable remedies. 11.2 In connection with the transactions contemplated by this Agreement, Beta represents and warrants that: (i) it is a corporation duly organized, existing, and in good standing under the laws of the State of Nevada, with full power and authority to conduct its business as now conducted and to own and operate its properties and other assets; (ii) it has all the requisite power and authority to execute and deliver this Agreement and (iii) this Agreement has been duly and validly executed and delivered by Beta and, assuming its due authorization, execution, and delivery by Beta, constitutes the legal, valid, and binding obligation of Beta, enforceable against Beta in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar laws now or hereafter in effect relating to or limiting creditors’ rights or by legal principles of general applicability governing the availability of equitable remedies. 11.3 The Parties do not intend to create, nor shall this Agreement be construed to create, a partnership, mining partnership, joint venture, or other relationship of mutual agency between Parties, their relation with respect to this Agreement and all rights, interests, and obligations hereunder being solely one of co-owners or co-tenants. Nothing herein shall be construed as authorization of one Party hereto to act as general agent of the other Party nor to permit either Party to act for or on behalf of the other Party outside the terms of this Agreement. 11.4 Time is of the essence for each and every provision of this Agreement. If Beta can not acquire an interest in the prospect acreage within 90 days, this Agreement shall terminate unless otherwise agreed upon in writing, however Beta shall be prohibited from acquiring any interest in the Prospect AMI for five years after the Effective Date of this Agreement, and furthermore in any oil, gas, or mineral lease. Pledger shall not be required to refund any monies which it previously received and Beta shall assign free of cost it’s entire mineral interest or farmout agreements which it had acquired as of the termination date. 11.5 The Parties hereto agree to execute, acknowledge, and deliver, as appropriate such other and further instruments, documents, and assurances as the other of them may reasonably require to effectuate the purpose and intent of this Agreement 11.6 All notices, requests, and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand (including, without limitation, by overnight courier), transmitted by facsimile, or mailed, certified or registered mail (return receipt requested) with postage prepaid to the applicable party as follows: Pledger Operating Company, Inc. Attn: Mr. Tim G. Chesteen, Pres. 606 Washington Street Natchez, Mississippi 39120 Telephone: (601)442-9871 Telecopier: (601)442- 9872 E-mail: [email protected] Beta Oil & Gas, Inc. Attn: Robert S. Spahr Tulsa, Oklahoma 74136 Telephone: (918) 495-1011 Telecopier: (918) 495-1077 E-mail: [email protected] or to such other persons or entities or addresses as the applicable Party shall furnish to the other Party in writing in accordance with this Section 11.6. Delivery of notices shall be effective only upon actual receipt by the intended recipient (or in the case of facsimile transmission the completion of such transmission during the recipient’s normal business hours). 11.7 This Agreement, and the legal relations among the Parties hereto arising from this Agreement, shall be governed by and construed in accordance with the laws of the State of Louisiana. 11.8 This Agreement (including the Exhibits hereto and the other instruments referred to herein) embodies the entire agreement and understanding of the Parties hereto in respect of the subject matter contained herein; there are no restrictions, promises, warranties, covenants or undertakings, other than those expressly set forth or referred to herein, and this Agreement supercedes all prior agreements and understandings among the Parties with respect to such subject matter. 11.9 Neither this Agreement nor any other agreements between the Parties nor any uncertainty or ambiguity herein or therein shall be construed or resolved using any presumption against any Party hereto or thereto, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by the Parties and their counsel and, in the case of any ambiguity or uncertainty, shall be construed accordingly to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all Parties hereto. 11.10 The headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretations of this Agreement. 11.11 The Parties shall make no press release or other public announcement or public disclosure relating to this Agreement or the subject matter of this Agreement, without consulting with each other in advance. 11.12 Beta shall manage the acquisition of the acreage within the AMI, under terms mutually satisfactory to Pledger. 11.13 A memorandum of this Agreement may be recorded in the public record of the Parish of Lafayette Louisiana. 11.14 Pledger shall be allowed to name the wells and will be drafted to meet with Beta's approval. 11.15 Pledger, through no obligation, reserves the option to purchase at ground floor cost, up to a five percent (5.0% of 8/8‘ths) working interest, on a well by well basis, in each well and drilling unit created within the AMI. Beta shall give Pledger at least 30 days notice on the first well and 60 days notice on all subsequent wells, prior to initiating operations. The election period by Pledger shall be within 30 days of having received notice and AFE Beta. 11.16 Pledger, reserves the right to market any available interest for sale by Beta to industry parties that have expressed a desire to Pledger in participating in their West Broussard Field Prospect, as long as the terms under which the interest is offered to Pledger by Beta are met by the purchasing party in full. Interest will be sold on a first come basis. 11.17 Pledger shall be reimbursed for all land related expenses invoiced by Paul Monju &Associates, Inc. Associates as incurred prior to the date of execution of this agreement. Currently this equals approximately $45,000. (02/12/01). 11.18 Monju and Associates, Inc shall be retained as the lead broker during the acquisition of Leases within the AMI, so as to not dilute the land knowledge thus far acquired. Leases shall be acquired in the name of Paul Monju &amp; Associates, Inc. as Lessee, subject to the terms of an agency agreement between Paul Monju &amp; Associates, Inc. and Beta, whereby Monju will be required to assign all interest in any such Leases to Beta upon demand without reservation of economic interest whatsoever. Paul Monju &amp;Associates, Inc. shall not be authorized to assign Leases or any interest therein directly to Pledger, whether in the form of overriding royalty or working interest effective at Payout. ARTICLE XII BINDING EFFECT 12.1 This Agreement is entered into by Beta, whose legal name is “Beta Oil &amp; Gas, Inc.,” and shall be binding to their officers, directors, employees, agents, attorneys, partners, designees, and representatives. If any part of this Agreement is breached, declared void or unenforceable, the Parties agree to be bound by the remaining part of this Agreement. ARTICLE XIII ROYALTY ACQUISITION         After, in the sole opinion of Beta, sufficient Leases have been acquired within the AMI, the officers of Pledger, namely Tim Chesteen and Al Miller, will attempt to purchase Royalty within the AMI. Any Royalty acquired under the terms of this Paragraph shall be offered to Beta under Paragraph XV AREA OF MUTUAL INTEREST of the Operating Agreement. * * * IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date of the individual acknowledgments, but same shall be effective as of the Effective Date. PLEDGER OPERATING COMPANY, INC. _______________________ By:_________________________ Witness: Tim G. Chesteen __________ Witness: BETA OIL & GAS, INC. _______________________ By:__________________________ Witness Robert S. Spahr Manager of Land and Marketing __________ Witness STATE OF MISSISSIPPI COUNTY OF _____________ On this ____ day of _________________, 2001, before me appeared TIM G. CHESTEEN, to me personally known, who, being by me duly sworn, did say that he is the PRESIDENT of PLEDGER OPERATING COMPANY, INC. and that the foregoing instrument was signed and delivered by him on behalf of said corporation by authority of its Board of Directors and said appear acknowledged said instrument to be the free act and deed of said corporation. ----------------------------------- Notary Public STATE OF OKLAHOMA COUNTY OF _____________ On this ____ day of _________________, 2001, before me appeared ROBERT S. SPAHR, to me personally known, who, being by me duly sworn, did say that he is the MANAGER OF LAND AND MARKETING of BETA OIL &amp;GAS, INC. and that the foregoing instrument was signed and delivered by him on behalf of said corporation by authority of its Board of Directors and said appear acknowledged said instrument to be the free act and deed of said corporation. ----------------------------------- Notary Public
-------------------------------------------------------------------------------- Exhibit 10.29 THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. VISUAL NETWORKS, INC. Nonstatutory Stock Option Grant Agreement       This Grant Agreement (the “Agreement") is entered into this 3rd day of May, 2001 (the “Grant Date"), by and between VISUAL NETWORKS, INC., a Delaware corporation (the “Company"), and ELTON KING (the “Optionee").       In consideration of the premises, mutual covenants and agreements herein, the Company and the Optionee agree as follows:       1. Grant of Option. The Company hereby grants to the Optionee a nonstatutory stock option to purchase from the Company, at a price of $3.92 per share (the “Exercise Price"), One million (1,000,000) shares of Common Stock of the Company, $0.01 par value per share (“Common Stock"), subject to the provisions of this Agreement (the “Option"). The Option will expire at 5:00 p.m. Eastern Time on the last business day preceding the tenth anniversary of the Grant Date (the “Expiration Date"), unless fully exercised or terminated earlier. 2. Terminology.             (a) Except where the context otherwise requires, the term “Company” as used herein includes Visual Networks, Inc. and its affiliates.               (b) This Agreement will be administered by Compensation Committee of the Board of Directors of the Company or by the full Board of Directors in its discretion (each hereinafter referred to as the “Administrator").               (c) The term “Fair Market Value” as used herein means, with respect to a share of Common Stock for any purpose on a particular date, the value determined by the Administrator in good faith. However, if the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”), “Fair Market Value” means, as applicable, (i) either the closing price or the average of the high and low sale price on the relevant date, as determined in the Administrator’s discretion, quoted on the New York Stock Exchange, the American Stock Exchange, or the Nasdaq National Market; (ii) the last sale price on the relevant date quoted on the Nasdaq SmallCap Market; (iii) the average of the high bid and low asked prices on the relevant date quoted on the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc. or a comparable service as determined in the Administrator’s discretion; or (iv) if the Common Stock is not quoted by any of the above, the average of the closing bid and asked prices on the relevant date furnished by a professional market maker for the Common Stock, or by such other source, selected by the Administrator. If no public trading of the Common Stock occurs on the relevant date, then Fair Market Value shall be determined as of the next preceding date on which trading of the Common Stock does occur. For all purposes under this Agreement, the term “relevant date” as used in this Section 2(c) means either the date as of which Fair Market Value is to be determined or the next preceding date on which public trading of the Common Stock occurs, as determined in the Administrator’s discretion.   --------------------------------------------------------------------------------       3. Exercise of Option.             (a) Right to Exercise. Except as otherwise provided in this Agreement, this Option may be exercised as to its vested portion at any time and from time to time, in whole or in part, on or before the Expiration Date or earlier termination of the Option. In the event of the Optionee’s death, disability, or other termination of employment or service relationship, the exercisability is governed by Section 4 below.               (b) Vesting. The Option will become vested over thirty-six (36) months, as follows; provided, however, that the Optionee is in the continuous employ of or in a service relationship with the Company from the date the Optionee’s employment with the Company commences (“Commencement Date”) through the applicable date upon which vesting is scheduled to occur:   (i)   20% of the Option shall be vested on the Commencement Date, and     (ii)   2.666% of the Option shall become vested, on the 15th day of each month, over a thirty (30) month period that commences January 15, 2002 (rounded down to the nearest whole share each month, except for the thirtieth month, in which case vesting is rounded up). Unless the Option has earlier terminated, vesting of the Option will be accelerated so that the outstanding unvested portion of the Option will become 100% vested immediately before the occurrence of a Change in Control in the Company. For purposes of this Agreement, a “Change in Control of the Company” shall occur or be deemed to have occurred only if:                     (1) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company), 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;                       (2) during any period of two consecutive years ending during the term of the Plan, individuals who at the beginning of such period constitute the Board of Directors of the Company, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect any transaction described in clause (1), (3) or (4) of this Section 3(b)) 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 of the directors then still in office who were either directors at the beginning of the period or whose election or whose nomination for election was previously so approved (collectively, the “Disinterested Directors”), cease for any reason to constitute a majority of the Board of Directors;                       (3) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior 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 herein above defined) acquires more than 50% of the combined voting power of the Company’s then outstanding securities; or --------------------------------------------------------------------------------                      (4) the stockholders of the Company approve a plan of complete liquidation of the Company or the sale of all or substantially all of the Company’s assets which, in either case, has not previously been approved by a majority of the Disinterested Directors.             (c) Exercise Procedure. Subject to the conditions set forth in this Agreement, this Option shall be exercised by delivery of written notice of exercise on any business day to the Corporate Secretary of the Company in such form as the Company may require from time to time. Such notice shall specify the number of shares in respect of which the Option is being exercised and shall be accompanied by full payment of the Exercise Price for such shares in accordance with Section 3(d) of this Agreement. The exercise will be effective upon receipt by the Corporate Secretary of the Company of such written notice accompanied by the required payment or properly executed, irrevocable instructions to effectuate a broker-assisted cashless exercise. The Option may be exercised only in multiples of whole shares and may not be exercised at any one time as to fewer than ten (10) shares (or such lesser number of shares as to which the Option is then exercisable). No fractional shares will be issued pursuant to this Option.               (d) Method of Payment. Payment of the Exercise Price may be made by delivery of cash, certified or cashier’s check, money order or other cash equivalent acceptable to the Administrator in its discretion, a broker-assisted cashless exercise in accordance with Regulation T of the Board of Governors of the Federal Reserve System through a brokerage firm approved by the Administrator, or a combination of the foregoing. In addition, payment of the Exercise Price may be made by any of the following methods, or a combination thereof, as determined by the Administrator in its discretion at the time of exercise: (i) by tender (via actual delivery or attestation) to the Company of other shares of Common Stock of the Company which have a Fair Market Value on the date of tender equal to the Exercise Price, provided that such shares have been owned by the Optionee for a period of at least six months free of any substantial risk of forfeiture or were purchased on the open market without assistance, direct or indirect, from the Company; or (ii) by any other method approved by the Administrator.               (e) Issuance of Shares upon Exercise. Upon due exercise of the Option, in whole or in part, in accordance with the terms of this Agreement, the Company will issue to the Optionee, the brokerage firm specified in the Optionee’s delivery instructions pursuant to a broker-assisted cashless exercise, or such other person exercising the Option, as the case may be, the number of shares of Common Stock so paid for, in the form of fully paid and nonassessable stock and will deliver certificates therefor as soon as practicable thereafter. The stock certificates for any shares of Common Stock issued hereunder will, unless such shares are registered or an exemption from registration is available under applicable federal and state law, bear a legend restricting transferability of such shares.       4. Termination of Employment or Service.             (a) Exercise Period Following Cessation of Employment or Service Relationship, In General. If the Optionee ceases to be employed by, or in a service relationship with, the Company for any reason other than death, total and permanent disability (as defined in Section 4(b) below) or discharge for Cause (as defined in Section 4(d) below), (i) this Option will terminate immediately upon such cessation to the extent it is unvested, and (ii) this Option will be exercisable during the three (3) month period following such cessation with respect its vested portion, but in no event after the Expiration Date. Unless sooner terminated, this Option will terminate in its entirety upon the expiration of such three (3) month period.               (b) Disability of Optionee. Notwithstanding the provisions of Section 4(a) above, if the Optionee ceases his employment or service relationship with the Company as a result of his or her total and permanent disability, (i) this Option will terminate immediately upon such cessation to the extent it is unvested, and (ii) this Option will be exercisable during the one (1) year period following such -------------------------------------------------------------------------------- cessation with respect to its vested portion, but in no event after the Expiration Date. Unless sooner terminated, this Option will terminate in its entirety upon the expiration of such (1) year period. For purposes of this Agreement, “total and permanent disability” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. The Administrator may require such proof of total and permanent disability as the Administrator in its sole discretion deems appropriate and the Administrator’s good faith determination as to whether the Optionee is totally and permanently disabled will be final and binding on all parties concerned.               (c) Death of Optionee. If the Optionee dies prior to the Expiration Date or other termination of the Option, including if the Optionee dies during the three (3) month period following termination of service for reasons other than Cause, (i) this Option will terminate immediately upon the Optionee’s death to the extent it is unvested, and (ii) this Option will be exercisable during the one (1) year period following the date of death of the Optionee with respect to its vested portion, but in no event after the Expiration Date, by the Optionee’s executor, personal representative, or the person(s) to whom this Option is transferred by will or the laws of descent and distribution. Unless sooner terminated, this Option will terminate in its entirety upon the expiration of such one (1) year period.               (d) Cause. Notwithstanding anything to the contrary herein, this Option will terminate in its entirety, regardless of whether the Option is vested in whole or in part, immediately upon the Optionee’s discharge of employment or service relationship for Cause or upon the Optionee’s commission of conduct constituting Cause during any period following the cessation of employment or service relationship during which the Option otherwise would be exercisable. For purposes of this Agreement, “Cause” shall have the meaning set forth in the employment agreement entered into between the Optionee and the Company, as the same may be amended from time to time, and shall be determined in a manner consistent with the procedure set forth therein.       5. Adjustments and Business Combinations.             (a) Adjustments for Events Affecting Common Stock. In the event of changes affecting the Company, the capitalization of the Company or the Common Stock of the Company by reason of any stock dividend, spin-off, split-up, recapitalization, merger, consolidation, business combination or exchange of shares and the like, the Administrator will, in its discretion, make appropriate adjustments to the number, kind and price of shares covered by this Option, and will, in its discretion and without the consent of the Optionee, make any other adjustments in this Option, including but not limited to reducing the number of shares subject to the Option or providing or mandating alternative settlement methods such as settlement of the Option in cash or in shares of Common Stock or other securities of the Company or of any other entity, or in any other matters which relate to the Option as the Administrator, in its sole discretion, determines to be necessary or appropriate.               (b) Pooling of Interests Transaction. Notwithstanding anything in this Agreement to the contrary and without the consent of the Optionee, the Administrator, in its sole discretion, may make any modifications to the Option, including but not limited to cancellation, forfeiture, surrender or other termination of the Option in whole or in part, solely to the extent necessary to facilitate any business combination that is authorized by the Board to comply with requirements for treatment as a pooling of interests transaction for accounting purposes under generally accepted accounting principles.               (c) Adjustments for Unusual Events. The Administrator is authorized to make, in its discretion and without the consent of the Optionee, adjustments in the terms and conditions of, and the criteria included in, the Option in recognition of unusual or nonrecurring events affecting the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, -------------------------------------------------------------------------------- or accounting principles, whenever the Administrator determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Option.               (d) Binding Nature of Adjustments. Adjustments under this Section 5 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 shares will be issued pursuant to this Option on account of any such adjustments.       6. Compliance with Securities Laws; Listing and Registration. If at any time the Administrator determines that the delivery of Common Stock under this Agreement is or may be unlawful under the laws of any applicable jurisdiction, or federal or state securities laws, the right to exercise the Option or receive shares of Common Stock pursuant to the Option shall be suspended until the Administrator determines that such delivery is lawful. The Company shall have no obligation to effect any registration or qualification of the Common Stock under federal or state laws.       The Company may require that the Optionee, as a condition to exercise of the Option, and as a condition to the delivery of any share certificate, make such written representations (including representations to the effect that such person will not dispose of the Common Stock so acquired in violation of federal or state securities laws) and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company to issue the Common Stock in compliance with applicable federal and state securities laws.       7. Investment Representations. The Optionee represents, warrants and covenants that:       (a) Any shares purchased upon exercise of this Option shall be acquired for the Optionee’s account for investment only and not with a view to, or for sale in connection with, any distribution of the shares in violation of the Securities Act of 1933 (the “Securities Act") or any rule or regulation under the Securities Act, and that he will not distribute the same in violation of any state or federal law or regulation.       (b) The Optionee has had such opportunity as he has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Optionee to evaluate the merits and risks of his investment in the Company.       (c) The Optionee is able to bear the economic risk of holding shares acquired pursuant to the exercise of this Option for an indefinite period.       (d) The Optionee understands that (i) the shares acquired pursuant to the exercise of this Option will not be registered under the Securities Act or under the securities laws of any state and are “restricted securities” within the meaning of Rule 144 under the Securities Act; (ii) such shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act, and such registration or qualification as may be necessary under the securities laws of any state, or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least one year from date of exercise and even then will not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is then available to the public and other terms and conditions of Rule 144 are complied with; and (iv) there is as of the date of this Agreement no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company covered by this Option and the Company has no obligation or current intention to register any shares acquired pursuant to the exercise of this Option under the Securities Act. --------------------------------------------------------------------------------       By making payment upon exercise of this Option, the Optionee shall be deemed to have reaffirmed, as of the date of such payment, the representations made in this Section 7.       8. Reservation of Shares. The Company will reserve and set apart and have at all times, free from preemptive rights, a number of shares of authorized but unissued Common Stock deliverable upon the exercise of this Option sufficient to enable it at any time to fulfill all its obligations hereunder.       9. Non-Guarantee of Employment or Consulting Relationship. Nothing in this Agreement alters the at-will or other employment or consulting status of the Optionee, nor is to be construed as a contract of employment or consulting relationship between the Company and the Optionee, or as a contractual right of Optionee to continue in the employ of, or in a consulting relationship with, the Company, or as a limitation of the right of the Company to discharge the Optionee at any time with or without cause or notice and whether or not such discharge results in the failure of any portion of the Option to vest or any other adverse effect on the Optionee’s interests under this Agreement.       10. No Rights as a Stockholder. The Optionee will not have any of the rights of a stockholder with respect to the shares of Common Stock that may be issued upon the exercise of the Option until such shares of Common Stock have been issued to him or her upon the due exercise of the Option. No adjustment will be made for dividends or distributions or other rights for which the record date is prior to the date such certificate or certificates are issued.       11. Nonstatutory Nature of the Option. This Option is not intended to qualify as an “incentive stock option” within the meaning of Code section 422, and this Agreement will be so construed. The Optionee acknowledges that, upon exercise of this Option, the Optionee will recognize taxable income in an amount equal to the excess of the then Fair Market Value of the shares over the Exercise Price and must comply with the provisions of Section 12 of this Agreement with respect to any tax withholding obligations that arise as a result of such exercise.       12. Withholding of Taxes. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll or any other payment of any kind due the Optionee and otherwise agrees to make adequate provision for foreign, federal, state and local taxes required by law to be withheld, if any, which arise in connection with the Option. The Company may require the Optionee to make a cash payment to cover any withholding tax obligation as a condition of exercise of the Option. If the Optionee does not make such payment when requested, the Company may refuse to issue any stock certificate until arrangements satisfactory to the Administrator for such payment have been made.       The Company may, in its sole discretion, permit the Optionee to satisfy, in whole or in part, any withholding tax obligation which may arise in connection with the Option either by electing to have the Company withhold from the shares to be issued upon exercise that number of shares, or by electing to deliver to the Company already-owned shares, in either case having a Fair Market Value equal to the amount necessary to satisfy the statutory minimum withholding amount due.       13. The Company’s Rights. The existence of this Option will not affect in any way the right or power of the Company or its stockholders to make or 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. --------------------------------------------------------------------------------       14. Optionee. Whenever the word “Optionee” 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 this Option may be transferred by will or by the laws of descent and distribution, the word “Optionee” will be deemed to include such person.       15. Nontransferability of Option. This Option is nontransferable otherwise than by will or the laws of descent and distribution and during the lifetime of the Optionee, the Option may be exercised only by the Optionee or, during the period the Optionee is under a legal disability, by the Optionee’s guardian or legal representative. Except as provided above, the Option may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and will not be subject to execution, attachment or similar process.       16. Notices. All notices and other communications made or given pursuant to this Agreement will be in writing and will be sufficiently made or given if hand delivered or mailed by certified mail, addressed to the Optionee at the address contained in the records of the Company, or addressed to the Company for the attention of its Corporate Secretary at its principal 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.       17. Effect of Administrator’s Decision. All actions taken and decisions and determinations made by the Administrator on all matters relating to this Agreement pursuant to the powers vested in it hereunder shall be in the Administrator’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Optionee, the Company, its stockholders, director and officers, and their respective successors in interest.       18. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the stock option 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 stock option granted hereunder will be void and ineffective for all purposes.       19. Amendment. This Agreement may be amended from time to time by the Administrator in its discretion; provided, however, that this Agreement may not be modified in a manner that would have a materially adverse effect on the Option as determined in the discretion of the Board of Directors, except as provided in a written document signed by each of the parties hereto.       20. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Maryland, other than the conflict of laws principles thereof.       23. Headings. The headings in this Agreement are for reference purposes only and will not affect the meaning or interpretation of this Agreement. --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer as of the date first above written.       VISUAL NETWORKS, INC.   By: /s/ Peter J. Minihane                           Executive Vice President, Chief Financial Officer The undersigned hereby acknowledges that he has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein.       OPTIONEE     /s/ Elton King                                 Date: May 3, 2001                      
Exhibit 10(xi) Amendment No. 2 to Corporate Revolving and Term Loan Agreement Among Certain Lenders, HSBC Securities (USA) Inc., formerly known as HSBC Securities, Inc., As Arranger, HSBC Bank USA, formerly known as Marine Midland Bank, As Agent And Moog Inc.      This Amendment dated as of February 23, 2001 (“Amendment”) to the Corporate Revolving and Term Loan Agreement dated as of November 30, 1998 as amended by Amendment No. 1 thereto dated as of October 24, 2000 (collectively, the “Agreement”) is entered into by and among MOOG INC., a New York business corporation (“Borrower”), certain lenders which are currently parties to the Agreement (“Lenders”), HSBC SECURITIES (USA) INC., a Delaware corporation, formerly known as HSBC Securities, Inc., as arranger (“Arranger”), and HSBC BANK USA, a New York banking corporation, formerly known as Marine Midland Bank, as agent for the Lenders (“Agent”). RECITALS      1.   Borrower has requested that the Arranger, the Agent and the Lenders amend the Agreement in order to, among other things:           a.   consent to the proposed acquisition by Borrower of all of the stock of a Delaware company named G & H Technology, Inc. (“G & H Technology”) for an aggregate purchase price not in excess of $10,500,000 which acquisition should be completed in March, 2001 (“G & H Acquisition”);           b.   consent to a secured loan by the Borrower of approximately $8,500,000 to G & H Technology (“G & H Technology Loan”) in connection with the G & H Acquisition in order to enable G & H Technology to fully repay its pre-acquisition indebtedness to its lender.           c.   consent to the substitution by Borrower of (i) a pledge in favor of the Arranger, the Agent and the Lenders of all of the stock of G & H Technology acquired by Borrower, and (ii) a collateral assignment to the Arranger, the Agent and the Lenders of all of the collateral granted to Borrower as security for the G & H Technology Loan, all in lieu of a guaranty and security agreement by G & H Technology as otherwise required by the Agreement.           d.   agree with the Borrower that the completion of the G & H Acquisition is a Permitted Acquisition under the Agreement and re-establish the basket for Permitted Acquisitions at $15,000,000 whether or not the G & H Acquisition is completed in order to provide the Borrower with sufficient room for an additional acquisition or acquisitions.           e.   agree to release a one-acre parcel of the Borrower’s real estate from the lien of the Mortgage in order to provide additional parking for The Moog Employees Federal Credit Union.      2.  The Arranger, the Agent and the Lenders are agreeable to the foregoing to the extent set forth in this Amendment and subject to each of the terms and conditions stated herein.      3.  The Borrower and each of the guarantors under the Agreement (“Guarantors”) will benefit from the changes to the Agreement set forth in this Amendment.      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set forth herein, and of the loans or other extensions of credit heretofore, now or hereafter made by the Lenders, to, or for the benefit of the Borrower and its Subsidiaries, the parties hereto agree as follows:      1.  Definitions. Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings specified in the Agreement.      2. Amendments.           2.1  Section 1 entitled "Definitions" is amended by adding the following new definition: > "bbbb. Amendment No. 2. "Amendment No. 2" means the Amendment No. 2 dated as > of February 23, 2001 by and among the Borrower, the Agent, the Arranger and > the Lenders amending this Agreement to provide for, among other things, > certain covenant modifications and certain agreements, waivers and consents."           2.2 Section 1 hhh. entitled "Permitted Acquisition" is deleted in its entirety and replaced with the following: > "hhh. Permitted Acquisition. "Permitted Acquisition" means (i) the G & H > Acquisition as defined in Amendment No. 2 and (ii) any other acquisition by > the Borrower or any Subsidiary of all or substantially all of the assets or > stock of any other Person, or assets constituting all or substantially all of > a division or product line of any other Person so long as (A) immediately > prior to contracting for or consummating such other acquisition there does not > exist, and there does not occur as a direct or indirect result of the > consummation of such other acquisition, any Event of Default or Default, (B) > the aggregate consideration paid (whether by means of transfer of assets, by > means of assumption of liabilities or otherwise) by the Borrower and all > Subsidiaries in connection with all such other acquisitions from the date of > Amendment No. 2 to the Maturity Date (exclusive of the G & H Acquisition as > defined in Amendment No. 2) does not exceed $15,000,000 unless specifically > consented to in writing by the Agent and the Required Lenders and (C) with > respect to any assets or stock of any Person acquired directly or indirectly > pursuant to any such other acquisition, all collateral requirements of the > Required Lenders are satisfied."      3.  Consents and Agreements.           3.1  Acquisition Financing and Waiver of Guaranty and Security Agreement. The Agreement has certain restrictions in Section 7(r) on the ability of the Borrower to create or acquire a Domestic Subsidiary without having such a Domestic Subsidiary guaranty the indebtedness of Borrower, and the Agreement also has restrictions on the ability of the Borrower and its Subsidiaries to obtain financing and grant security for such financing. Notwithstanding such restrictions in the Agreement, the Arranger, the Agent and the Lenders hereby waive the requirement under Section 7(r) of a guaranty and security agreement from G & H Technology upon completion of the G & H Acquisition, and consent to the G & H Technology Loan provided (i) that such loan is secured by a first priority lien general security interest from G & H Technology to Borrower covering all of G & H Technology’s owned or after acquired Accounts, Inventory, Equipment, Fixtures, Investment Property, Deposit Accounts, Letter of Credit Rights, Chattel Paper including leases, Documents, Instruments and General Intangibles and all proceeds thereof (collectively, the “G & H Technology Loan Collateral”) subject only to such prior liens in specific equipment as may be approved by Agent, such security interest to be evidenced by a security agreement and UCC financing statements in form and content satisfactory to the Agent; (ii) the note evidencing the G & H Technology Loan and the G & H Technology Loan Collateral are satisfactorily pledged by the Borrower to the Agent and the Lenders as additional collateral security for the indebtedness of Borrower under the Agreement; and (iii) Borrower pledges to the Agent and the Lenders all of the stock of G & H Technology as additional collateral security for the indebtedness of Borrower under the Agreement, such pledges to be evidenced by pledge documentation in form and content satisfactory to the Agent.           3.2  Limitation on Waiver and Consents. The foregoing waiver, agreements and consents are only applicable and shall only be effective in the specific instance and for the specific purpose for which made, are expressly limited to the facts and circumstances referred to herein, and shall not operate as (i) a waiver of, or consent to non-compliance with any other provision of the Agreement or any other Loan Document, (ii) a waiver of any right, power or - 4 remedy of either the Arranger, the Agent or any Lender under the Agreement or any Loan Document, or (iii) a waiver of or consent to any Event of Default or Default under the Agreement or any Loan Document.           3.3  Mortgage Release. Promptly upon the request of Borrower, the Arranger, the Agent and the Lenders agree that the Agent may and shall execute and deliver to Borrower a release, in form and content satisfactory to Borrower and Agent, of one acre of real estate from the Mortgage in order to enable Borrower to sell such released real estate to The Moog Employees Federal Credit Union for use as a parking lot.      4.  Conditions Precedent to this Amendment.  The effectiveness of each and all of the amendments, agreements and consents contained in this Amendment is subject to the satisfaction, in form and substance satisfactory to the Agent, of each of the following conditions precedent:           4.1  Amendment Documentation.  The parties hereto shall have duly executed and delivered to the Agent eleven (11) duplicate originals of this Amendment.           4.2  Counsel Opinion.  Counsel to the Borrower, Hodgson Russ LLP, shall have delivered to the Agent a counsel opinion in form and content satisfactory to the Agent addressed to each Lending Entity, and covering such matters as are requested by the Agent and its counsel and to include an express statement to the effect that the Lending Entities’ and Agent’s counsel are authorized to rely on such opinion.           4.3  No Default.  As of the effective date of this Amendment, no Default or Event of Default shall have occurred and be continuing.           4.4  Representations and Warranties.  The representation and warranties contained in Section 5 of this Amendment and in the Agreement shall be true correct and complete as of the effective date of this Amendment as though made on such date.           4.5  Other.  The Agent shall have received such other approvals, opinions or documents as any Lender through the Agent may reasonably request, and all legal matters incident to the foregoing shall be satisfactory to the Agent and its counsel.      5.  Representations and Warranties of Borrower. Borrower hereby represents and warrants as follows:           5.1  Each of the representations and warranties set forth in the Agreement is true, correct, and complete on and as of the date hereof as though made on the date hereof, and the Agreement and each of the other Loan Documents remains in full force and effect.           5.2  As of the date hereof, there exists and will exist no Default or Event of Default under the Agreement or any other Loan Document, and no event which, with the giving of notice or lapse of time, or both, would constitute a Default or Event of Default           5.3  The execution, delivery and performance by the Borrower of this Amendment is within Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not, and will not, (i) contravene Borrower’s certificate of incorporation or by-laws, (ii) violate any law, including without limitation the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or any rule, regulation (including Regulations T, U or X of the Board of Governors of the Federal Reserve System) order, writ, judgement, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any material contract, loan agreement, mortgage, deed of trust or any other material instrument or agreement binding on Borrower or any Subsidiary or any of their properties or result in or require the creation or imposition of any lien upon or with respect to any of their properties.           5.4  This Amendment has been duly executed and delivered by the Borrower and by the Guarantors. This Amendment is the legal, valid and binding obligation of the Borrower and the Guarantors enforceable against the Borrower and each of the Guarantors in accordance with its terms.           5.5   No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery or performance by the Borrower and the Guarantors of this Amendment or any other agreement or document related hereto or contemplated hereby to which the Borrower or any of the Guarantors is or is to be a party or otherwise bound or (ii) the exercise by the Agent, the Arranger or any Lender of its rights under the Agreement as amended by this Amendment.      6.  Acknowledgments and Reaffirmations.           6.1  The Borrower hereby reaffirms the Loan Documents to which it is a party and agrees that such Loan Documents remain in full force and effect.           6.2  By their signatures below, each of the Guarantors specifically consents to each of the amendments, consents and agreements herein and reaffirms the continuing effectiveness of their respective guaranty, general security agreement and UCC financing statements originally executed and delivered in connection with the Agreement, and agrees that such guaranty, general security agreement and UCC financing statements cover payment of any and all Obligations under the Agreement as amended hereby and under the notes executed and delivered in connection therewith.      7.  Other.           7.1  Borrower agrees to pay all out-of-pocket expenses and fees of the Agent in connection with the preparation of this Amendment including the reasonable fees and disbursements of counsel to the Agent.           7.2  This Amendment may be executed in any number of counterparts and by the parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same agreement.           7.3  This Amendment shall be governed by and construed under the internal laws of the State of New York, as the same may be from time to time in effect, without regard to principles of conflicts of laws.      The parties hereto have caused this Amendment to be duly executed as of the date shown at the beginning of this Amendment. HSBC BANK USA By /S/ -------------------------------- Name: William H. Graser Title: Vice President MANUFACTURERS AND TRADERS TRUST COMPANY By /S/ -------------------------------- Name: Sean Timms Title: Vice President FLEET NATIONAL BANK By /S/ -------------------------------- Name: John Larry Title: Regional President BANK OF TOKYO-MITSUBISHI TRUST COMPANY By /S/ -------------------------------- Name: Joseph P. Devoe Title: Vice President KEYBANK NATIONAL ASSOCIATION By /S/ -------------------------------- Name: Mary K. Young Title: Vice President LANDESBANK BADEN-WURTTEMBERG By /S/ -------------------------------- Name: Terry Blagden Title: Senior Credit Officer By /S/ -------------------------------- Name: Karen Richard Title: Senior Account Officer NATIONAL BANK OF CANADA By /S/ -------------------------------- Name: Timothy Lohn Title: Regional Manager By /S/ -------------------------------- Name: Jon Patterson Title: Vice President THE CHASE MANHATTAN BANK By /S/ -------------------------------- Name: Michael E. Wolfram Title: Vice President HSBC SECURITIES (USA) INC., As Arranger By /S/ -------------------------------- Name: Martin F. Brown Title: Managing Director HSBC BANK USA, As Agent By /S/ -------------------------------- Name: William H. Graser Title: Vice President MOOG INC. By /S/ -------------------------------- Name: Robert R. Banta Title: Executive Vice President MOOG FSC LTD., as a guarantor By /S/ -------------------------------- Name: Donald R. Fishback Title: Vice President MOOG PROPERTIES, INC., as a guarantor By /S/ -------------------------------- Name: Donald R. Fishback Title: Vice President MOOG INDUSTRIAL CONTROLS CORPORATION, as a guarantor By /S/ -------------------------------- Name: Donald R. Fishback Title: Vice President
Exhibit 10.51 SCOTT TECHNOLOGIES, INC. NONQUALIFIED DEFINED BENEFIT PLAN   Effective: January 1, 1998 TABLE OF CONTENTS ARTICLE NO. NAME AND PURPOSE 1 DEFINITIONS 2 ELIGIBILITY AND PARTICIPATION 3 ACCRUED ANNUAL BENEFIT 4 RETIREMENT BENEFITS 5 DEATH BENEFITS 6 RIGHTS OF PARTICIPANTS AND BENEFICIARIES 7 TRUST 8 ADMINISTRATION AND CLAIMS PROCEDURE 9 AMENDMENT AND TERMINATION 10 MISCELLANEOUS 11 SCOTT TECHNOLOGIES, INC. NONQUALIFIED DEFINED BENEFIT PLAN      This Plan is hereby adopted by Scott Technologies, Inc. (formerly known as Figgie International Inc.), a corporation organized and existing under and by virtue of the laws of the State of Delaware (hereinafter referred to as the “Company”); W I T N E S S E T H:      WHEREAS, the Company maintains the Scott Technologies, Inc. (formerly Figgie International Inc.) Retirement Income Plan II; and      WHEREAS, the Company now desires to establish the Scott Technologies, Inc. Nonqualified Defined Benefit Plan (hereinafter referred to as the “Plan”) in order to permit certain management and highly compensated employees earning in excess of the Internal Revenue Code Section 401(a)(17) compensation limit on qualified plans to accrue additional benefits which are based on compensation in excess of said limit;      NOW, THEREFORE, the Company hereby adopts the Plan, effective January 1, 1998, as follows: ARTICLE 1 NAME AND PURPOSE      1.1 Name. The name of this Plan shall be the SCOTT TECHNOLOGIES, INC. NONQUALIFIED DEFINED BENEFIT PLAN.      1.2 Purpose. This Plan is hereby established to provide unfunded deferred compensation to certain management and highly compensated employees of the Company under certain conditions specified herein.      1.3 Plan for a Select Group. This Plan shall only cover employees of the Company who are members of a “select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA. The Company shall have the authority to take any and all action necessary or desirable in order that this Plan satisfies the requirements set forth in ERISA and regulations thereunder applicable to plans maintained for employees who are members of a select group of management or highly compensated employees. Moreover, this Plan at all times shall be administered in such a manner, and benefits hereunder shall be so limited, notwithstanding any contrary provision of this Plan, in order that this Plan shall constitute such a plan.      1.4 Not a Funded Plan. It is the intention and purpose of the Company that this Plan shall be deemed to be “unfunded” for tax purposes as well as being such a plan as would properly be described as “unfunded” for purposes of Title I of ERISA. This Plan shall be administered in such a manner, notwithstanding any contrary provision of this Plan, in order that it will be so deemed and would be so described. ARTICLE 2 DEFINITIONS      Unless the context otherwise indicates, the following terms used herein shall have the following meanings whenever used in this Plan:      2.1 Accrued Annual Benefit. “Accrued Annual Benefit” means for a Participant an amount determined in accordance with the provisions of Article 4 hereof.      2.2 Administrator. “Administrator” means the “Administrator” as defined in the RIP II.      2.3 Appeals Committee. “Appeals Committee” means the Appeals Committee established pursuant to Article 9 hereof.      2.4 Average Excess Pensionable Earnings. “Average Excess Pensionable Earnings” means for any Participant the excess of his Average Unlimited Pensionable Earnings over his RIP II Average Pensionable Earnings.      2.5 Average Unlimited Pensionable Earnings. “Average Unlimited Pensionable Earnings” means the total of the Participant’s Unlimited Pensionable Earnings during each of the five (5) consecutive calendar years among the ten (10) calendar years which includes the calendar year containing the earlier of his date of Termination of Employment or the date he ceased to be a Covered Employee, during which said total was highest, divided by five (5).      If a Participant has less than five (5) full calendar years, his “Average Unlimited Pensionable Earnings” shall mean his Unlimited Pensionable Earnings for his entire period of employment divided by the number of full months of his employment and multiplied by twelve (12).      2.6 Beneficiary. “Beneficiary” means any person who receives or is designated or eligible to receive payment of any benefit under the terms of this Plan on the death of a Participant or former Participant.      2.7 Benefit Commencement Date. “Benefit Commencement Date” means for a Participant the date his retirement benefits have commenced or been paid in accordance with Article 5 hereof.      2.8 Benefit Service. “Benefit Service” means for a Participant the number of calendar years during which the Participant has been actively participating in the RIP II, including any such calendar years during which such Participant accrued benefits under the RIP II as a Disabled Participant.      2.9 Board. “Board” means the Board of Directors of the Company.    2.10 Change of Control. “Change of Control” means the occurrence of any of the following events: (a)    a change in the composition of the Board such that a majority of such Board members are not the same persons who were directors twelve (12) months earlier; (b)    approval by the Company of a reorganization, merger or consolidation with respect to which, in any such case, the persons who were shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote in the election of the directors of the reorganized, merged or consolidated company; (c)    liquidation or dissolution of the Company; or (d)    a sale or disposition by the Company of all or substantially all of the Company’s assets.     2.11 Code. “Code” means the Internal Revenue Code of 1986, as amended, and any regulations or other pronouncements promulgated thereunder.     2.12 Company. “Company” means Scott Technologies, Inc. and any successor corporation or business organization which shall assume the duties and obligations of Scott Technologies, Inc. under this Plan.     2.13 Covered Employee. “Covered Employee” means an active participant in the RIP II whose Unlimited Pensionable Earnings for a Plan Year exceed the 401(a)(17) Earnings Limit for such Plan Year and who, solely with respect to the 1998 Plan Year, is actively participating in the Supplemental Part of the RIP II. An eligible employee shall become a Covered Employee as of the first payroll payment date following the payroll period in the Plan Year in which his Unlimited Pensionable Earnings first exceed the 401(a)(17) Earnings Limit. An employee shall cease to be a Covered Employee upon the earlier of his ceasing to be an active participant in the RIP II or the point at which his Average Unlimited Pensionable Earnings are projected to be below the 401(a)(17) Earnings Limit.     2.14 Disabled Participant. “Disabled Participant” means for periods commencing on or after January 1, 1998 a Participant who has received or is receiving disability income benefits under the Company’s Disability Benefits Plan for Salaried Employees.     2.15 Effective Date. “Effective Date” means the date this Plan became effective, which date is January 1, 1998.     2.16 ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any regulations or other pronouncements promulgated thereunder.     2.17 401(a)(17) Earnings Limit. “401(a)(17) Earnings Limit” means the limitation on annual compensation which must be taken into account under the RIP II pursuant to Section 401(a)(17) of the Code.     2.18 Normal Retirement Date. “Normal Retirement Date” means a Participant’s “normal retirement date” as defined in the RIP II.     2.19 Participant. “Participant” means a Covered Employee who is designated to be an eligible employee pursuant to Section 3.1 hereof. A Participant shall cease to be a Participant, and shall become a former Participant, upon the earlier of his Termination of Employment or the date the Participant ceases to be designated by the Company as eligible to participate. However, the word Participant may also include, where the context indicates, any former Participant in this Plan.     2.20 Pensionable Earnings. “Pensionable Earnings” means for any Participant his Pensionable Earnings as defined in the RIP II and as limited in accordance with the 401(a)(17) Earnings Limit. In all respects, the amount of Pensionable Earnings shall be determined in accordance with the information contained in the payroll records of the Company.     2.21 Plan. “Plan” means the Scott Technologies, Inc. Nonqualified Defined Benefit Plan as set forth herein, effective as of the Effective Date, and as it may be later amended.     2.22 Plan Year. “Plan Year” means the calendar year. The first Plan Year shall be the 1998 calendar year.     2.23 RIP II. “RIP II” means the Salaried Program of the Company’s Retirement Income Plan II, including for purposes of calculating “Benefit Service” the Prior Salaried Program (as defined in the RIP II).     2.24 RIP II Average Pensionable Earnings. “RIP II Average Pensionable Earnings” means the total of the Participant’s Pensionable Earnings during each of the five (5) consecutive calendar years in which his Pensionable Earnings are the highest among the ten (10) calendar years which includes the calendar year containing the earliest of his date of Termination of Employment or the date he ceased to be a Covered Employee, divided by five (5). If a Participant has less than five (5) full calendar years, his “RIP II Average Pensionable Earnings” shall mean his Pensionable Earnings for his entire period of employment divided by the number of full months of his employment and multiplied by twelve (12).     2.25 Surviving Spouse. “Surviving Spouse” means the individual to whom a Participant or former Participant had been married throughout the twelve (12) month period ending on the date of his death.     2.26 Termination of Employment. “Termination of Employment” means a Participant’s “Termination of employment” as defined in the RIP II.     2.27 Trust. “Trust” means any trust established pursuant to Article 8 hereof.     2.28 Unlimited Pensionable Earnings. “Unlimited Pensionable Earnings” means for any Participant his Pensionable Earnings as defined in Section 2.20 hereof, except that such amount shall not be subject to the 401(a)(17) Earnings Limit. In all respects, the amount of Unlimited Pensionable Earnings shall be determined in accordance with the information contained in the payroll records of the Company.   ARTICLE 3 ELIGIBILITY AND PARTICIPATION      3.1 Eligibility. A Covered Employee shall be eligible to participate in this Plan for any Plan Year commencing on or after the Effective Date if the Covered Employee is designated by the Company as a member of a “select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA for such Plan Year and meets such other eligibility requirements as the Company may impose. A Covered Employee must be designated by the Company as eligible to participate for a Plan Year in order to participate for such Plan Year.      3.2 Participation. Each Covered Employee who has satisfied the eligibility requirements set forth in Section 3.1 hereof shall automatically become or continue as a Participant and actively participate for a Plan Year. ARTICLE 4 ACCRUED ANNUAL BENEFIT     4.1 Amount of Accrued Annual Benefit. The Accrued Annual Benefit of a Participant shall be an amount equal to (a) multiplied by (b) below, where: (a)    equals one and two-tenths percent (1.2%) of his Average Excess Pensionable Earnings; and (b)    equals his number of years of Benefit Service (computed to the nearest one-twelfth (1/12) year) up to a maximum of thirty (30) years. ARTICLE 5 RETIREMENT BENEFITS      5.1 Vesting of Retirement Benefits. A Participant’s Accrued Annual Benefit under this Plan shall become fully vested and nonforfeitable at the same time as his Vested Percentage under the RIP II becomes one hundred percent (100%). To the extent that a Participant’s Accrued Annual Benefit under this Plan does not become fully vested and nonforfeitable, such Accrued Annual Benefit shall be forfeited and shall not be paid or provide a basis for payments to the Participant under this Plan.      5.2 Eligibility for Retirement Benefits. A Participant shall be eligible to receive his vested retirement benefit under this Plan at the same time he is eligible to receive a retirement benefit pursuant to Article IX of the Salaried Provisions of the RIP II. Subject to Section 5.5 hereof, payment of such Participant’s vested retirement benefit under this Plan shall commence or be made at the same time as payment of his Company Funded Benefit under the RIP II commences or is made.      5.3 Form of Retirement Benefits. Subject to Section 5.5 hereof, payment of a Participant’s vested retirement benefit under this Plan shall be made in the form of retirement benefits pursuant to which he is receiving payment of his Company Funded Benefit under the RIP II.      5.4 Amount of Retirement Benefits. The annual retirement benefit payable to a Participant pursuant to this Article 5 shall be equal his vested Accrued Annual Benefit if: (a)    his Benefit Commencement Date is on or after his Normal Retirement Date; and (b)    such retirement benefit is paid in the form of a straight life annuity as described in Section 10.3 of the Salaried Provisions of the RIP II. The annual retirement benefit payable to a Participant pursuant to this Article 5 shall be reduced in accordance with the provisions of the RIP II if payment of such retirement benefit does not meet the requirements of Subsection (a) or (b) above and is not made pursuant to Section 5.5 hereof. Specifically such annual retirement benefit shall be reduced in accordance with the Salaried Provisions of the RIP II to reflect early payment if the requirement of Subsection (a) is not satisfied and shall be actuarially reduced in accordance with the Base Plan Provisions and the Salaried Provisions of the RIP II to reflect payment under a periodic form of payment which is not a straight life annuity form of payment if the requirement of Subsection (b) is not satisfied. In addition, the monthly amount of retirement benefit actually payable hereunder shall equal one-twelfth of the annual retirement benefit.      5.5 Cashout of Retirement Benefits. Notwithstanding anything in this Plan to the contrary, if the lump sum actuarial equivalent of any Participant’s or former Participant’s benefits under this Plan, calculated in accordance with the provisions of the RIP II, would amount to Five Thousand Dollars ($5,000.00) or less at the time of distribution, such Participant’s or former Participant’s benefits shall be paid in such actuarially equivalent lump sum.      5.6 Cessation of Active Participation Initiated by the Administrator. In the event that the Administrator determines, in its sole discretion, that a Participant is not, or may not be, a member of a “select group of management or highly compensated employees” within the meaning of Sections 201(2), 301(a)(3), 401(a)(1) or 4021(b)(6) of ERISA, then the Administrator may, in its sole discretion, terminate such Participant’s active participation in this Plan. In the event of any such termination of active participation, the Accrued Annual Benefit of such Participant shall be frozen and shall not thereafter change.      5.7 Tax Withholding. The Company may withhold from any payment made by it under this Plan such amount or amounts as may be required for purposes of complying with the tax withholding or other provisions of the Code, the Social Security Act or any state or local income or employment tax act or for purposes of paying any estate, inheritance or other tax attributable to any amounts payable hereunder. ARTICLE 6 DEATH BENEFITS      6.1 Death Prior to Benefit Commencement Date. If a Participant or former Participant whose Accrued Annual Benefit under this Plan is fully vested and nonforfeitable dies prior his Benefit Commencement Date, his Surviving Spouse shall receive a 50% Surviving Spouse Benefit which shall be based on the Participant’s Accrued Annual Benefit. Except as provided in Section 6.3 hereof, such 50% Surviving Spouse Benefit shall be paid on a monthly basis. The amount of such 50% Surviving Spouse’s Benefit shall be calculated by adjusting such Accrued Annual Benefit as though it were payable as a monthly 50% Surviving Spouse’s Benefit under the RIP II. Subject to Section 6.3 hereof, the 50% Surviving Spouse’s Benefit which is payable pursuant to this Plan shall be paid in the same manner and at the same time as the 50% Surviving Spouse’s Benefit under the RIP II would be paid to the Surviving Spouse if such Surviving Spouse was actually eligible for such a 50% Surviving Spouse’s Benefit under the RIP II.      6.2 Death On or After Benefit Commencement Date. If a Participant or former Participant dies on or after his Benefit Commencement Date, there shall be paid to his Beneficiary or Beneficiaries the death benefit, if any, provided under the form of retirement benefits under which such Participant or former Participant was receiving retirement benefits accrued under this Plan.      6.3 Cashout of Retirement Benefits. Notwithstanding anything in this Plan to the contrary, if the lump sum actuarial equivalent of any death benefits payable to a Beneficiary under this Plan, calculated in accordance with the provisions of the RIP II, would amount to Five Thousand Dollars ($5,000.00) or less at the time of distribution, such death benefits shall be paid in such actuarially equivalent lump sum as soon as reasonably possible after the death of the Participant. ARTICLE 7 RIGHTS OF PARTICIPANTS AND BENEFICIARIES      7.1 Creditor Status of Participants and Beneficiaries. This Plan constitutes the unfunded, unsecured promise of the Company to make benefit payments to Participants and Beneficiaries in the future and shall be a liability solely against the general assets of the Company. The Company shall not be required to segregate, set aside or escrow any amounts for the benefit of any Participant or Beneficiary. Participants and Beneficiaries shall have the status of general unsecured creditors of the Company and may look only to the Company and its general assets for payment of benefits under this Plan.      7.2 Rights with Respect to a Trust. Any trust, and any assets held thereby to assist the Company in meeting its obligations under this Plan, shall in no way be deemed to controvert the provisions of Section 7.1 hereof.      7.3 Investments. In its sole discretion, the Company may acquire insurance policies, annuities or other financial vehicles for the purpose of providing future assets of the Company to meet its anticipated liabilities under this Plan. Such policies, annuities or other investments shall at all times be and remain unrestricted general property and assets of the Company or property of a trust established pursuant to Article 8 hereof. Participants and Beneficiaries shall have no rights, other than as general creditors, with respect to such policies, annuities or other acquired assets. ARTICLE 8 TRUST       8.1 Establishment of Trust. Notwithstanding any other provision or interpretation of this Plan, the Company may establish a Trust in which to hold cash, insurance policies or other assets to be used to make, or reimburse the Company for, payments to the Participants or Beneficiaries of all or part of the benefits under this Plan. Any Trust assets shall at all times remain subject to the claims of general creditors of the Company in the event of its insolvency as more fully described in the Trust.      8.2 Obligation of the Company. Notwithstanding the fact that a Trust may be established under Section 8.1 hereof, the Company shall remain liable for paying the benefits under this Plan. However, any payment of benefits to a Participant or Beneficiary made by such a Trust shall satisfy the Company’s obligation to make such payment to such person.      8.3 Trust Terms. A Trust established under Section 8.1 hereof shall be revocable by the Company; provided, however, that such a Trust shall become irrevocable in accordance with its terms in the event of a Change in Control. Such a Trust may contain such other terms and conditions as the Company may determine to be necessary or desirable. The Company may terminate or amend a Trust established under Section 8.1 hereof at any time, and in any manner it deems necessary or desirable, subject to the preceding sentence and the terms of any agreement under which any such Trust is established or maintained. ARTICLE 9 ADMINISTRATION AND CLAIMS PROCEDURE      9.1 General Rights, Powers, and Duties of Administrator. The Administrator, or such person or entity as the Administrator may delegate from time to time hereunder, shall be responsible for the general administration of this Plan and shall have all powers as may be necessary to carry out the provisions of this Plan and may, from time to time, establish rules for the administration of this Plan and the transaction of this Plan’s business. In addition to any powers, rights and duties set forth elsewhere in this Plan, the Administrator shall have the following powers, rights and duties: (a) To enact such rules, regulations, and procedures and to prescribe the use of such administrative forms as it shall deem advisable; (b) To appoint or employ such agents, attorneys, actuaries, accountants, assistants or other persons (who may also be Participants in this Plan or be employed by or represent the Company) at the expense of the Company as it may deem necessary to keep its records or to assist it in taking any other action authorized or required hereunder; (c) To delegate to designated persons or entities the right to exercise any of its powers or the obligation to carry out any or all of its duties as Administrator; (d) To interpret this Plan, and to resolve ambiguities, inconsistencies and omissions, to determine any question of fact, to determine the right to benefits of, and the amount of benefits, if any, payable to, any person in accordance with the provisions of this Plan and to resolve all questions arising under this Plan; (e) To administer this Plan in accordance with its terms and any rules and regulations it establishes; (f) To maintain such records concerning this Plan as it deems sufficient to prepare reports, returns and other information required by this Plan or by law; and (g)    To direct the Company to pay benefits under this Plan and to give such other directions and instructions as may be necessary for the proper administration of this Plan.      9.2 Information to be Furnished to the Administrator. The Company shall furnish the Administrator with such data and information as it may reasonably require. The records of the Company shall be determinative of each Participant’s period of employment, Termination of Employment and the reason therefor, leave of absence, reemployment, years of service, personal data, and data regarding Average Excess Pensionable Earnings, Average Unlimited Pensionable Earnings, Pensionable Earnings, RIP II Average Pensionable Earnings and Unlimited Pensionable Earnings and all reductions thereof under this Plan. Participants and Beneficiaries shall furnish to the Administrator such evidence, data or information and execute such documents as the Administrator requests.      9.3 Claim for Benefits. Any claim for benefits under this Plan shall be made in writing to the Administrator in such a manner as the Administrator shall prescribe. The Administrator shall process each such claim and determine entitlement to benefits within ninety (90) days following its receipt of a completed application for benefits unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date as of which the Administrator expects to render the final decision. If such a claim is wholly or partially denied by the Administrator, the Administrator shall notify the claimant of the denial of the claim in writing, delivered in person or mailed by first class mail to the claimant’s last known address. Such notice of denial shall contain: (a)    the specific reason or reasons for denial of the claim; (b)    a reference to the relevant Plan provisions upon which the denial is based; (c)    a description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and (d) an explanation of this Plan’s claim review procedure. If no such notice is provided, the claim shall be deemed denied. The interpretations, determinations and decisions of the Administrator shall be final and binding upon all persons with respect to any right, benefit and privilege hereunder, subject to the review procedures set forth in this Article.      9.4 Request for Review of a Denial of a Claim for Benefits. Any claimant or any authorized representative of such claimant whose claim for benefits under this Plan has been denied or deemed denied, in whole or in part, by the Administrator may upon written notice to the Appeals Committee request a review by the Appeals Committee of such denial of his or her claim for benefits. Such claimant shall have sixty (60) days from the date the claim is deemed denied, or sixty (60) days from receipt of the notice denying the claim, as the case may be, in which to request such a review. Such notice must specify the relief requested and the reason such claimant believes the denial should be reversed.      9.5 Appeals Procedure. The Appeals Committee is hereby authorized to review the facts and relevant documents, including this Plan, to interpret this Plan and other relevant documents and to render a decision on the claim of the claimant. Such review may be made by written briefs submitted by the claimant and the Administrator or at a hearing, or by both, as shall be deemed necessary by the Appeals Committee. The Appeals Committee may, in its sole discretion, appoint from its members an Appeal Examiner to conduct such review. Any hearing conducted by an Appeal Examiner shall be held in such location as shall be reasonably convenient to the claimant. Any hearing conducted by the Appeals Committee shall be held in the Corporate Headquarters of the Company or such other location as the Appeals Committee shall select. The date and time of such hearing shall be designated by the Appeals Committee or the Appeal Examiner upon not less than fifteen (15) days’ notice to the claimant and the Administrator unless both of them accept shorter notice. The notice shall specify that such claimant must indicate in writing, at least five (5) days in advance of the time established for such hearing, his or her intention to appear at the appointed time and place, or the hearing will automatically be cancelled. The reply shall specify any other persons who will accompany him or her to the hearing, or such other persons will not be admitted to the hearing. The Appeals Committee or the Appeal Examiner shall make every effort to schedule the hearing on a day and at a time which is convenient to both the claimant and the Administrator. The claimant, or his or her duly authorized representative, may review all pertinent documents relating to the claim in preparation for the hearing and may submit issues and comments in writing prior to or during the hearing.      9.6 Decision Upon Review of Denial of Claim for Benefits. After the review has been completed, the Appeals Committee or the Appeal Examiner shall render a decision in writing, a copy of which shall be sent to both the claimant and the Administrator. In making its decision the Appeals Committee or the Appeal Examiner shall have full power and discretion to interpret this Plan, to resolve ambiguities, inconsistencies and omissions, to determine any question of fact, to determine the right to benefits of, and the amount of benefits, if any, payable to, any person in accordance with the provisions of this Plan. The Appeals Committee or the Appeal Examiner shall render a decision on the claim review promptly, but not more than sixty (60) days after the receipt of the claimant’s request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time, in which case the sixty (60) day period shall be extended to one hundred twenty (120) days. Such decision shall include specific reasons for the decision and contain specific references to the relevant Plan provisions upon which the decision is based and, if the decision is made by an Appeal Examiner, the rights of the claimant or the Administrator to request a review by the entire Appeals Committee of the decision of the Appeal Examiner. The decision on review shall be furnished to the claimant within the appropriate time described above. If the decision on review is not furnished within such time, the claim shall be deemed denied on review. Either the claimant or the Administrator may request a review of an adverse decision of the Appeal Examiner by filing a written request with the Appeals Committee within thirty (30) days after they receive a copy of the Appeal Examiner’s decision or the claim is deemed denied on review. The review of a decision of the Appeal Examiner shall be conducted by the Appeals Committee in accordance with the procedures of this Section and Section 9.5 hereof. There shall be no further appeal from a decision rendered by a quorum of the Appeals Committee. Except to the extent provided above, the decision of the Appeals Committee or the Appeal Examiner shall be final and binding in all respects on the Administrator, the Company and the claimant. Except as otherwise provided in ERISA, the review procedures of this Section and said Section 9.5 shall be the sole and exclusive remedy and shall be in lieu of all actions at law, in equity, pursuant to arbitration or otherwise. In any event, a claimant must exhaust the review procedures of this Section and said Section 9.5 prior to the commencement of any such action.      9.7 Establishment of Appeals Committee. The Company shall appoint the members of an Appeals Committee which shall consist of three (3) or more members. The members of the Appeals Committee shall remain in office at the will of the Company and the Company, from time to time, may remove any of said members with or without cause. A member of the Appeals Committee may resign upon written notice to the remaining member or members of the Appeals Committee and to the Company, respectively. The fact that a person is a Participant or a former Participant or a prospective Participant shall not disqualify him from acting as a member of the Appeals Committee, nor shall any member of the Appeals Committee be disqualified from acting on any question because of his interest therein, except that no member of the Appeals Committee may act on any claim which such member has brought as a Participant, former Participant, or Beneficiary under this Plan. In case of the death, resignation or removal of any member of the Appeals Committee, the remaining members shall act until a successor-member shall be appointed by the Company. At the Administrator’s request, the Secretary of the Company shall notify the Administrator in writing of the names of the original members of the Appeals Committee, of any and all changes in the membership of the Appeals Committee, of the member designated as Chairman, and the member designated as Secretary, and of any changes in either office. Until notified of a change, the Administrator shall be protected in assuming that there has been no change in the membership of the Appeals Committee or the designation of Chairman or of Secretary since the last notification was filed with it. The Administrator shall be under no obligation at any time to inquire into the membership of the Appeals Committee or its officers. All communications to the Appeals Committee shall be addressed to its Secretary at the address of the Company.      9.8 Operations of Appeals Committee. On all matters and questions, a decision of a majority of the members of the Appeals Committee shall govern and control; but a meeting need not be called or held to make any decision. The Appeals Committee shall appoint one of its members to act as its Chairman and another member to act as Secretary. The terms of office of these members shall be determined by the Appeals Committee, and the Secretary and/or Chairman may be removed by the other members of the Appeals Committee for any reason which such other members may deem just and proper. The Secretary shall do all things directed by the Appeals Committee. Although the Appeals Committee shall act by decision of a majority of its members as above provided, nevertheless in the absence of written notice to the contrary, every person may deal with the Secretary and consider his acts as having been authorized by the Appeals Committee. Any notice served or demand made on the Secretary shall be deemed to have been served or made upon the Appeals Committee.      9.9 Limitation of Duties. The Company, the Administrator, the Appeals Committee, the Appeal Examiner, and their respective officers, members, employees and agents shall have no duty or responsibility under this Plan other than the duties and responsibilities expressly assigned to them herein or delegated to them pursuant hereto. None of them shall have any duty or responsibility with respect to the duties or responsibilities assigned or delegated to another of them.      9.10 Expenses of Administration and the Committee. No fee or compensation shall be paid to the Administrator or any member of the Appeals Committee for his or its services as such, but the Administrator and the Appeals Committee may be reimbursed for his or its expenses by the Company. The Administrator and the Appeals Committee may hire such attorneys, accountants, actuaries, agents, clerks, and secretaries as they may deem desirable in the performance of their functions, any of whom may also be advisors to the Company or any affiliated company, and the expense associated with the hiring or retention of any such person or persons shall be paid directly by the Company.      9.11 Indemnification. In addition to whatever rights of indemnification an employee of the Company who serves as a delegate of the Administrator or the Company or is a member of the Appeals Committee may be entitled to under the Certificate of Incorporation or bylaws of the Company, under any provision of law or under any other agreement, including the RIP II, the Company shall satisfy any liability actually incurred by any such individual, including reasonable expenses and attorneys’ fees, and any judgments, fines, and amounts paid in settlement, in connection with any threatened, pending or completed action, suit or proceeding which is related to the exercise or failure to exercise by such individual of any powers, authority, responsibilities or discretion provided under this Plan or reasonably believed by such individual to be provided hereunder, and any action taken by such individual in connection therewith. This indemnification for all such acts taken or omitted is intentionally broad, but shall not provide indemnification for acts taken or omissions occurring as a result of bad faith. Such indemnification will not be provided to any person who is not a present or former employee of the Company or affiliated company thereof nor shall it be provided for any claim by the Company or affiliated company thereof against any such person. No indemnification shall be provided to any person who is not an individual.      9.12 Limitation of Administrative Liability. Neither the Administrator, nor the Appeals Committee, nor any of their respective officers, members, employees, agents and delegates shall be liable for any act taken by such person or entity pursuant to any provision of this Plan except for gross abuse of the discretion given it and them hereunder. No member of the Appeals Committee shall be liable for the act of any other member. No member of the Board shall be liable to any person for any action taken or omitted in connection with the administration of this Plan.      9.13 Limitation of Sponsor Liability. Any right or authority exercisable by the Company, pursuant to any provision of this Plan, shall be exercised in the Company’s capacity as sponsor of this Plan, or on behalf of the Company in such capacity, and not in a fiduciary capacity, and may be exercised without the approval or consent of any person in a fiduciary capacity. Neither the Company, nor any of its respective officers, members, employees, agents and delegates, shall have any liability to any party for its exercise of any such right or authority.      9.14 Special Provisions Relating to Change of Control. In the event of a Change of Control, the three (3) individuals having the greatest benefits due under this Plan shall assume the responsibilities of the Appeals Committee or the Appeal Examiner set forth in Sections 9.5 and 9.6 hereof. If one or more of them shall not be able to serve or to continue to serve, the individual or individuals having the next largest benefit due under this Plan will serve in their place. If at any time less than three (3) individuals have benefits due under this Plan, such individual or individuals shall perform the duties of the Appeals Committee and the Appeal Examiner. If only one (1) individual has benefits due under this Plan, the Appeals Committee shall not consist of such individual but shall consist of such individual as he and the Company shall agree. If he and the Company shall fail to agree on a single individual, the Appeals Committee shall consist of three (3) individuals, one appointed by the Company, one appointed by the individual claiming benefits hereunder, and the third selected by the other two (2). ARTICLE 10 AMENDMENT AND TERMINATION      10.1 Amendment, Modification and Termination. This Plan may be amended, modified or terminated by the Company at any time, or from time to time, by a document executed on behalf of the Company by an officer thereof, which amendment, modification or termination is authorized or ratified by the Compensation Committee of the Board. No such amendment, modification or termination shall reduce the Accrued Annual Benefit or vested percentage of any Participant, as determined as of the date of such amendment, modification or termination. Notwithstanding anything contained in this Plan to the contrary, no amendment made to this Plan after a Change of Control shall: (a)    change the time when payments are available or the methods of payments available to any Participant or Beneficiary without such Participant’s or Beneficiary’s consent; or (b)    change the appeal process set forth in Article 9 of the Plan as in effect immediately prior to such Change of Control. Notwithstanding the preceding sentence, this Plan may be amended to the extent necessary to comply with applicable law and, in the event the RIP II is amended, this Plan may be amended so that its provisions are consistent with the provisions of the RIP II as amended.      10.2 Distributions on Termination. Except as provided in Section 5.5 hereof, in the event this Plan is terminated, distribution of a Participant’s vested retirement benefits shall be accomplished by the purchase of an annuity in one of the forms of retirement benefits provided under the RIP II as selected by the Participant. Distributions of death benefits pursuant to Section 6.2 hereof may be accelerated in the sole discretion of the Company if this Plan is terminated. ARTICLE 11 MISCELLANEOUS      11.1 No Implied Rights. Neither the establishment of this Plan nor any amendment thereof shall be construed as giving any Participant, any Beneficiary or any other person any legal or equitable right unless such right shall be specifically provided for in this Plan or conferred by specific action of the Company in accordance with the terms and provisions of this Plan. Except as expressly provided in this Plan, the Company shall not be required or be liable to make any payment under this Plan.      11.2 No Right to Company Assets. Neither the Participant nor any other person shall acquire by reason of this Plan any right to or title to any assets, funds or other property of the Company whatsoever including, without limiting the generality of the foregoing, any specific assets, funds or other property which the Company, in its sole discretion, may set aside in anticipation of a liability hereunder. Any benefits which become payable hereunder shall be paid from the general assets of the Company. The Participant shall have only a contractual right to the amounts, if any, payable hereunder, unsecured by any asset of the Company. Nothing contained in this Plan constitutes a guarantee by the Company that the assets of the Company shall be sufficient to pay any benefit to any person.      11.3 No Employment Rights Created. This Plan shall not be deemed to constitute a contract of employment between the Company and any Participant, nor confer upon any Participant or employee the right to be retained in the service of the Company for any period of time, nor shall any provision hereof restrict the right of the Company to discharge or otherwise deal with any Participant or other employees, with or without cause. Nothing herein shall be construed as fixing or regulating the Unlimited Pensionable Earnings payable to any Participant or other employee of the Company.      11.4 Offset. If, at the time payments or installments of payments are to be made hereunder, a Participant or Beneficiary is indebted or obligated to the Company, then the payments remaining to be made to the Participant or the Beneficiary may, at the discretion of the Company, be reduced by the amount of such indebtedness or obligation; provided, however, that an election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim for such indebtedness or obligation.      11.5 Non-assignability. Neither the Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, and any attempt to do so shall be void. All benefits are expressly declared to be unassignable and non-transferable. No part of the benefits under this Plan shall be, prior to actual payment, subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or any other person, or be transferable by operation of law in the event of the Participant’s or any other person’s bankruptcy or insolvency.      11.6 Notice. Any notice required or permitted to be given under this Plan shall be sufficient if in writing and hand delivered, or sent by first class mail, and if given to the Company, delivered to the principal office of the Company, directed to the attention of the President. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.      11.7 Governing Laws. This Plan shall be construed and administered according to ERISA and the laws of the State of Ohio.      11.8 Incapacity. If the Administrator determines that any Participant or Beneficiary entitled to payments under this Plan is incompetent by reason of physical or mental disability and is consequently unable to give a valid receipt for payments made hereunder, or is a minor, the Administrator may order the payments becoming due to such Participant or Beneficiary to be made to another person for the benefit of such Participant or Beneficiary, without responsibility on the part of the Administrator to follow the application of amounts so paid. Payments made pursuant to this Section shall completely discharge this Plan, any Trust, the Administrator, the Company and the Appeals Committee with respect to such payments.      11.9 Administrative Forms. Applications, elections and designations, if any, made by a Participant or Beneficiary in connection with this Plan shall become effective only when provided to the Administrator in such form as is required by the Administrator.      11.10 Independence of Plan. Except as otherwise expressly provided herein, this Plan shall be independent of, and in addition to, any other employee benefit agreement or plan or any rights that may exist from time to time thereunder.      11.11 Responsibility for Legal Effect. Neither the Company, the Administrator, the Appeals Committee, nor any officer, member, delegate or agent of any of them, makes any representations or warranties, express or implied, or assumes any responsibility concerning the legal, tax, or other implications or effects of this Plan.      11.12 Successors. The terms and conditions of this Plan shall inure to the benefit of and bind the Company, the Administrator, the Appeals Committee and its members, the Participants, the Beneficiaries and the successors, assigns, and personal representatives of any of them.      11.13 Headings and Titles. The Section headings and titles of Articles used in this Plan are for convenience of reference only and shall not be considered in construing this Plan.      11.14 General Rules of Construction. The masculine gender shall include the feminine and neuter, and vice versa, as the context shall require. The singular number shall include the plural, and vice versa, as the context shall require. The present tense of a verb shall include the past and future tenses, and vice versa, as the context may require.      11.15 Severability. In the event that any provision or term of this Plan, or any agreement or instrument required by the Administrator hereunder, is determined by a judicial, quasi-judicial or administrative body to be void or not enforceable for any reason, all other provisions or terms of this Plan or such agreement or instrument shall remain in full force and effect and shall be enforceable as if such void or nonenforceable provision or term had never been a part of this Plan, or such agreement or instrument.      11.16 Actions by the Company. Except as otherwise provided herein, all actions of the Company under this Plan shall be taken by the Board, by any officer of the Company, or by any other person designated by any of the foregoing.       IN WITNESS WHEREOF, Scott Technologies, Inc., by its appropriate officers duly authorized, has caused this Plan to be executed as of the ____ day of December, 1998.   SCOTT TECHNOLOGIES, INC.       (“Company”)           By:     --------------------------------------------------------------------------------           And:     --------------------------------------------------------------------------------         AMENDMENT NO. 1 TO SCOTT TECHNOLOGIES, INC. NONQUALIFIED DEFINED BENEFIT PLAN        THIS AMENDMENT NO. 1 is made this ___ day of ___________, 2000, by SCOTT TECHNOLOGIES, INC., a Delaware corporation (hereinafter referred to as the “Company”). W I T N E S S E T H:      WHEREAS, the Company established the Scott Technologies, Inc. Nonqualified Defined Benefit Plan (hereinafter referred to as the “Plan”), effective as of January 1, 1998; and      WHEREAS, the Company reserved the right, pursuant to Section 10.1 of the Plan, to make certain amendments thereto; and      WHEREAS, it is the desire of the Company to amend the Plan to reflect the intent of the Company with regard to the maximum number of years of Benefit Service which is to be taken into account in determining Participants’ Accrued Annual Benefits;      NOW, THEREFORE, pursuant to Section 10.1 of the Plan and effective as of January 1, 1998, the Company hereby amends the Plan by the deletion of subparagraph (b) of Section 4.1 of the Plan and the substitution in lieu thereof of a new subparagraph (b) to read as follows:      “(b) equals his number of years of Benefit Service (computed to the nearest one-twelfth (1/12) year) up to a maximum of thirty-five (35) years.”      IN WITNESS WHEREOF, the Company, by its duly authorized officers, has caused this Amendment No. 1 to be executed as of the day and year first above written.   SCOTT TECHNOLOGIES, INC.         (“Company”)                    By:     --------------------------------------------------------------------------------           And:     --------------------------------------------------------------------------------          
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.6 AGREEMENT OF LEASE BETWEEN JOSEPH RUBENFELD, LANDLORD AND KOREA FIRST BANK OF NEW YORK, TENANT -------------------------------------------------------------------------------- TABLE OF CONTENTS     Page -------------------------------------------------------------------------------- Minimum Rent and Adjustments   1 Additional Rent   2 Taxes   2 Assignment and Subletting   3 Permanent Building Improvements   4 Repairs   5 Mechanics' Lien   5 Requirements of Law   6 Insurance   7 Destruction—Fire or Other Causes   9 Condemnation   10 Subordination   11 Landlord Not Liable for Injury or Damage   11 No Rent Abatement   11 Access to Premises   11 Force Majeure   11 No Unlawful Occupancy   12 Indemnity   12 Default   12 Bankruptcy or Insolvency   14 Remedies of Landlord   15 No Representations by Landlord   15 No Waiver   15 End of Term   15 Quiet Enjoyment   16 Arbitration   16 Estoppel Certificate   16 Lease Mortgageable by Tenant   16 No Landlord Insurance   16 Exculpation   16 Payment of Landlord's Fees   16 As-Is Condition   17     i -------------------------------------------------------------------------------- Air Conditioning   17 Certificate of Occupancy   17 Lease Not Binding Unless Executed   17 Tenant's Operating Obligations   17 Tenant's Use   18 [Intentionally Omitted]   18 Interest   18 Utilities   18 [Intentionally Omitted]   19 Signs   19 Landlord's Cooperation   19 Notice   19 Shoring   19 Definitions   20 Entire Agreement   20 New York Law   20 Waiver of Trial by Jury   20 Descriptive Notes   20 Successors and Assigns   21 [Intentionally Omitted]   21 Brokerage   21 Late Charges   21 Zoning Resolution   21 Further Encumbrances   21 Tenant's Right of First Refusal to Purchase   21 Like Kind Exchange   22 Assignment and Assumption of Easement   23 Landlord's Consent   23 Termination   23 Refusal and Option     ii --------------------------------------------------------------------------------     THIS INDENTURE, made as of the 10th day of April, between JOSEPH RUBENFELD, residing at 118 East 60th Street, New York, party of the first part, hereinafter referred to as Landlord, and KOREA FIRST BANK OF NEW YORK, a New York corporation, having an office at 29 West 30th Street, New York, N.Y. 10001, party of the second part, hereinafter referred to as Tenant. W I T N E S S E T H:     That Landlord hereby demises and leases to Tenant, and Tenant hereby hires and takes from Landlord, the premises described in Schedule A hereto annexed and made part hereof with same force and effect as though herein at length set forth, which premises are hereinafter called "The Demised Premises"; said Premises are known as and by the street address 138-02 Northern Boulevard, Flushing, New York 11354, Block 5010, Lot 20.     SUBJECT to the estates, interest, liens, charges, encumbrances and matters set forth in Schedule B hereto annexed and made part hereof with the same force and effect as though herein at length set forth:     TO HAVE AND TO HOLD the demised premises pursuant to this net lease for the term of thirty (30) years to commence on April 10, 1992 (hereinafter referred to as the "Commencement Date"), and to end on March 31, 2022 (the "Expiration Date"), both dates inclusive (unless such term shall be sooner terminated as hereinafter provided) at the minimum annual rental rate of: (i) As provided in Paragraph No. 1 hereafter, from the Commencement Date through and including the Expiration Date, payable in equal monthly installments in advance on the first day of each and every month during the term, together with the additional rent hereinafter reserved, all of which shall be payable to Landlord at Landlord's address above-stated or at such other place or to such other person as Landlord shall by notice direct, in lawful money of the United States, which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, without setoff or deduction whatsoever.     The Tenant shall have the option to extend the term of this lease for a period of eighteen (18) years ten (10) months from the time that the first thirty year period ends on March 31, 2022. The rents for the option period shall be computed in the same manner as for the first thirty (30) year period as they were agreed upon at the execution of the lease.     Possession shall be given and the rental term shall commence as of the date of the execution of this lease. This lease and all its terms and conditions is expressly conditioned upon and subject to the initial approval or notice of approval of both the New York State Banking Department and the Federal Deposit Insurance Corporation. It is hereby mutually covenanted and agreed by and between the parties hereto that this lease is made upon the foregoing and upon the following agreements, terms, covenants and conditions:     1.  Minimum Rent and Adjustments.  The minimum annual rental rate reserved in this lease and payable hereunder shall be adjusted as of the times and in the manner set forth in this Article. (a)The minimum annual rental rate for the first year of the term of this lease commencing April 10, 1992 shall be at the annual rate of One Hundred Ninety Thousand Dollars ($190,000.00), ($15,833.33 per month). Actual payment of rent shall commence on October 1, 1992 (see 1(b) below). Tenant shall be entitled to a rental credit for the first ten days of October, 1992, so that the actual rent due for October, 1992 shall be $10,725.80 (b)The Tenant shall be given a concession for the first six (6) months of the term of this lease which concession shall consist of Tenant being allowed to occupy the demised premises rent free for the aforesaid first six (6) month period. This concession shall be granted to Tenant for the purposes of Tenant making improvements to the demised premises. 1 -------------------------------------------------------------------------------- (c)Beginning on April 1, 1993, the minimum annual rent shall be increased to the sum of Two hundred Thousand Dollars ($200,000.00) per annum ($16,666.67 per month). (d)Beginning on April 1, 1996 and on April 1, every three years thereafter for the remainder of the term of this lease, including the option period if exercised by the Tenant, the Tenant shall pay to the Landlord as the new annual rent for each of the subsequent three (3) years, an increase equal to five per cent (5%) of the previous three (3) years' period annual rent added onto that previous three (3) years' period annual rent amount. This new rent amount, including the increase, if any, shall serve as the rent upon which each subsequent three (3) year annual rent increase shall be added. Example:   Annual Rent April 1, 1993   $ 200,000     Annual Rent April 1, 1996     210,000     Annual Rent April 1, 1999     220,500 (e)In no event shall the minimum annual rental rate be reduced. (f)Any delay or failure of Landlord in computing or billing for the rent adjustments waiver of or in any way impair the continuing obligation of Tenant to pay such rent adjustments hereunder. (g)Tenant shall pay the minimum annual rent and adjustments as above provided and the additional rent as hereinafter provided.     2.  Additional Rent.  All taxes, charges, costs and expenses which Tenant assumes or agrees to pay hereunder, together with all interest and penalties that may accrue thereon in the event of Tenant's failure to pay the same as herein provided, all other damages, cost and expenses which Landlord may suffer or incur, and any and all other sums which may become due, by reason of any default of Tenant or failure on Tenant's part to comply with the agreements, terms, covenants and conditions of this lease on Tenant's part to be performed, and each or any of them, shall be deemed to be additional rent and, in the event of non-payment, Landlord shall have all the rights and remedies herein provided in the case of non-payment of rent.     3.  Taxes.       (a) Tenant shall bear, pay and discharge, on or before the last day on which payment may be made without penalty or interest, all taxes, assessments, water rents, rates and charges, sewer rents, and other governmental impositions and charges of every kind and nature whatsoever, extraordinary as well as ordinary, and each and every installment thereof, which shall or may during the term be charged, laid, levied, assessed, imposes, become due and payable, or liens upon, or arise in connection with the use, occupancy or possession of, or grow due or payable out of, or for, the demised premises or any part thereof, or any buildings, appurtenances or equipment thereon or therein or any part thereof, or the sidewalks or streets in front of or adjoining the demised premises, and all taxes charged, laid, levied, assessed or imposed in lieu of or in addition to the foregoing under or by virtue of all present or future laws, ordinances, requirements, orders, directions, rules or regulations of the federal, state, county and city governments and of all other governmental authorities whatsoever, and all fees and charges of public and governmental authorities for construction, maintenance, occupation or use during the term of any vault, passageway or space in, over or under any sidewalk or street on any or adjacent to the demised premises, or for construction, maintenance or use during the term of any part of any building covered hereby within the limits of any street. To the extent that the same may be permitted by law and shall not be inconsistent with any existing or future mortgage or mortgages affecting the demised premises, Tenant shall have the right to apply for the conversion of any special assessment for local improvements in order to cause the same to be payable in installments, and upon such conversion, Tenant shall be obligated to pay and discharge punctually only such of said installments as shall become due and payable during the term. Tenant shall within twenty (20) days after the time 2 -------------------------------------------------------------------------------- above provided for the payment by Tenant of any such tax, assessment, water rent, rate or charge, sewer rent or other governmental imposition or charge produce and exhibit to Landlord satisfactory evidence of such payment.     (b) All such taxes, water rents, rates and charges, sewer rents and other governmental impositions and charges which shall be charged, laid, levied, assessed or imposed for each fiscal period in which the term of this lease commences and terminates shall be apportioned pro rata between Landlord and Tenant in accordance with the respective portions of each such fiscal period during which such term shall be in effect.     (c) Tenant shall have the right to contest or review by legal proceedings, or in such other manner as it may deem suitable (which, if instituted, Tenant shall conduct promptly at its own expense, and free of any expense to Landlord, and if necessary, in the name of Landlord), any tax, assessment, water rent, rate or charge, sewer rent or other governmental imposition or charge aforementioned. Tenant may defer payment of a contested item upon condition that, before instituting any such proceedings, Tenant shall furnish to Landlord, or to any mortgagee Landlord may designate, a surety company bond, a cash deposit, or other security satisfactory to Landlord and such mortgagee, sufficient to cover the amount of the contested item or items, with interest and penalties, for the period which such proceedings may be expected to take, securing payment of such contested items, interest and penalties, and all costs in connection therewith. Notwithstanding the furnishing of any such bond or security other than a cash deposit, Tenant shall promptly pay such contested item or items if at any time the demised premises or any part thereof shall be in danger of being sold, forfeited or otherwise lost. If, however, Tenant shall have made a cash deposit, in any such event Landlord or such mortgagee, as the case may be, may pay such contested item or items out of such deposit. When any such contested item or items shall have been paid or cancelled, any balance of any such cash deposit not so applied shall be repaid to Tenant without interest. The legal proceedings herein referred to shall include appropriate proceedings to review tax assessments and appeals from orders therein and appeals from any judgments, decrees or orders, but all such proceedings shall be begun as soon as possible after the imposition or assessment of any contested item and shall be prosecuted to final adjudication with dispatch. If there shall be any refund with respect to any contested item based on a payment by Tenant, Tenant shall be entitled to the same to the extent of such payment, subject to apportionment as provided in the foregoing subdivision (b).     (d) It is the intention of the parties that the rent herein reserved is net and that the Landlord shall receive the same free from all taxes that by provisions hereof are made payable by Tenant, and that Tenant shall pay all costs, charges, expenses and damages which shall or may be chargeable during the term against the demised premises and, except for the execution and delivery hereof, would or could have been payable by Landlord.     (e) Nothing herein contained shall require or be construed to require Tenant to pay any inheritance, estate, succession, transfer, gift, franchise, corporation, income or profit tax, or capital levy that is or may be imposed upon Landlord, its successors or assigns; provided, however, that in any case where a tax may be levied, assessed or imposed upon the income arising from the rent hereunder for the use and occupancy of the demised premises in lieu of or as substitute, in whole or in part, for a real estate tax upon the demised premises, Tenant shall pay the same.     (f)  Tenant shall not be responsible for any tax increases resulting from the sale of the building or from the increase in the amount of the mortgage on the building.     4.  Assignment and Subletting.       (a) Tenant may upon written notice to Landlord assign this lease or sublet the demised premises in whole or in part. Any such assignment or subletting of any part of the demised premises shall be 3 -------------------------------------------------------------------------------- allowable only as long as the assignment or sublease are subject to the main lease herein and the assignor remains liable under the terms of the lease, and provided:      (i) Tenant at the time of said assignment or subletting shall not be in default in the payment of any minimum rent or additional rent provided to be paid by Tenant hereunder and further that Tenant is not then in material default otherwise under this lease;     (ii) Each assignee of this lease shall assume, and each subtenant of this lease shall take subject to, in writing, all of the terms, covenants and conditions of this lease on the part of Tenant hereunder to be performed and observed;     (iii) An original or duplicated original of the instrument of assignment and assumption or of the sublease agreement shall be delivered to Landlord within five (5) days following the making thereof;     (iv) Any instrument of sublease shall specifically state that each sublease is subject to all of the terms, covenants and conditions of this lease; and     (b) If this lease be assigned or transferred, or if the demised premises be sublet or occupied by anybody other than Tenant, Landlord may, after default by Tenant, collect rent from the assignee, transferee, subtenant or occupant, and apply the net amount collected to the rent reserved herein, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of any agreement, term, covenant or condition hereof, or a release of Tenant from the performance or further performance by Tenant of the agreements, terms, covenants and conditions hereof, and Tenant shall continue to be liable hereunder in accordance with the agreements, terms, covenants and conditions hereof.     5.  Permanent Building Improvements.     (a)(i) Permanent Building Improvements shall mean the restoration, refurbishing and/or remodeling of the facade and roof portions of the demised premises, and other exterior and interior improvements including, but not limited to carpeting, wall coverings, installation of lighting fixtures and painting. Tenant shall have the right to make permanent building improvements in the demised premises so long as the value of said building is not reduced by any alteration made by the tenant.     (ii) It is expressly understood and agreed that the Permanent Building Improvements shall be performed in compliance with all applicable rules, regulations and laws of any governmental department or agency having jurisdiction thereof, as well as in compliance with the provisions of this lease.     (iii) Tenant and its contractors shall employ only labor in the performance of such Permanent Building Improvements which shall be compatible with the other labor in the Building and Tenant agrees to employ only first class workerlike contractors and labor.     (iv) Tenant and any contractor or contractors employed by the Tenant to render services and furnish labor to the demised premises, shall be covered by Worker's Compensation Insurance and a certificate thereof shall be furnished to the Landlord before commencement of any work by any contractor, sub-contractor, their agents, servants or employees.     (v) Promptly following the completion of all Permanent Building Improvements, and as soon as reasonably feasible, the Tenant shall obtain and furnish to Landlord all appropriate certifications from all authorities having jurisdiction to the effect that all Permanent Building Improvements have been performed and completed in accordance with the filed plans, if any, and with all laws, rules, regulations and orders of said authorities having jurisdiction. 4 --------------------------------------------------------------------------------     (vi) Tenant, at its expense, shall procure each and every permit, license, franchise, or other authorization required for the performance of such Permanent Building Improvements.    (vii) Tenant shall be responsible for Tenant's contractors, sub-contractors, material suppliers and laborers furnishing to Landlord: (1) a partial release of lien simultaneously with each payment by Tenant to Tenant's contractors, sub-contractors, material suppliers and laborers for any labor performed or materials furnished and (2) [ILLEGIBLE] immediately upon a final payment by Tenant to Tenant's contractors, sub-contractors, material suppliers and laborers for any labor performed or materials furnished.    (viii) All Permanent Building Improvements shall become the property of Landlord upon installation thereof and shall be surrendered by Tenant in good order and condition, reasonable wear and tear excepted, upon the expiration or sooner termination of the term of the lease, except that at the expiration of the term of the lease, the Tenant at its option shall be allowed to remove the bank vault, teller's counter and the safe deposit boxes, provided that in such event, the Tenant shall restore the demised premises to the condition that existed at the commencement of this lease.     (ix) It is expressly understood and agreed that Landlord shall not be responsible for any repair, replacement or maintenance of any Permanent Building Improvements.     6.  Repairs.  Tenant shall, at all times during the term, and at its own cost and expense, put, keep, replace and maintain in thorough repair and in good, safe and substantial order and condition, all buildings and improvements on the demised premises at the commencement of the term and thereafter erected on the demised premises, or forming part thereof, and their full equipment and appurtenances, both inside and outside, structural and non-structural, extraordinary and ordinary, howsoever the necessity or desirability for repairs may occur, and whether or not necessitated by wear, tear, obsolescence or defects, latent or otherwise; and shall use all reasonable precaution to prevent waste, damage or injury. Tenant shall also, at its own cost and expense, put, keep, replace and maintain in thorough repair and in good, safe and substantial order and condition, and free from dirt, snow, ice, rubbish and other obstructions or encumbrances, the sidewalks, areas, coal chutes, sidewalk hoists, railings, gutters and curbs in front of and adjacent to the demised premises.     Landlord shall not be required to furnish to Tenant any facilities or services of any kind whatsoever during the term, such as, but not limited to, water, steam, heat, gas, hot water, electricity, light and power.     Landlord shall in no event be required to make any alterations, rebuildings, replacements, changes, additions, improvements or repairs during the term.     7.  Mechanics' Lien.  Tenant shall have no power to do any act or make any contract which may create or be the foundation for any lien, mortgage or other encumbrance upon the reversion or other estate of Landlord, or of any interest of Landlord in the demised premises or in the buildings and improvements [ILLEGIBLE] agreed that should Tenant cause any alterations, rebuildings, replacements, changes, additions, improvements or repairs to be made to the demised premises, or cause any labor to be performed or material to be furnished therein, thereon or thereto, neither Landlord nor the demised premises shall under any circumstances be liable for the payment of any expense incurred or for the value of any work done or material furnished, but all such alterations, rebuildings, replacements, changes, additions, improvements and repairs, and labor and material, shall be made, furnished and performed at Tenant's expenses, and Tenant shall be solely and wholly responsible to contractors, laborers and materialmen furnishing and performing such labor and material.     If, because of any act or omission (or alleged act or omission) of Tenant, any mechanic's or other lien, charge or order for the payment of money shall be filed against the demised premises or any 5 -------------------------------------------------------------------------------- building or improvements thereon, or against Landlord or any conditional bill of sale or chattel mortgage shall be filed for or affecting any equipment or any materials used in the construction or alteration of any such materials used in the construction or alternation of any such building or improvement (whether or not such lien, charge or order, conditional bill of sale or chattel mortgage is valid or enforceable as such), Tenant shall, at its own cost and expense, cause the same to be canceled and discharged of record or bonded within ninety (90) days after the date of filing thereof.     8.  Requirements of Law.       (a) During the term Tenant shall, at its own cost and expense, promptly observe and comply with all present and future laws, ordinances, requirements, orders, directions, rules and regulations of the federal, state, county and city governments and of all other governmental authorities having or claiming jurisdiction over the demised premises or appurtenances of any part thereof, and of all their respective departments, bureaus and officials, and of the insurance underwriting board or insurance inspection bureau having or claiming jurisdiction, or any other body exercising similar functions, and of all insurance companies writing policies covering the demised premises or any part thereof, whether such laws, ordinances, requirements, orders, directions, rules or regulations relate to structural alterations, changes, additions, improvements, requirements or repairs, either inside or outside, extraordinary or ordinary, or otherwise, to or in and about the demised premises, or any building thereon, or to any vaults, passageways, franchises or privileges appurtenant thereto or connected with the enjoyment thereof or to alterations, changes, additions, improvements, requirements or repairs incident to or as a result of any use or occupation thereof, or otherwise, including, without limitation, the removal of any encroachment on the street or on adjoining premises by any building on the demised premises, and whether the same are in force at the commencement of the term or may in the future be passed, enacted or directed.     (b) Without limiting the generality of the foregoing, Tenants shall also:      (i) procure each and every permit, license, certificate or other authorization, required in connection with the lawful and proper use of the damaged premises or required in connection with any building or improvement now or hereafter erected thereon;     (ii) require each and every person cleaning any window or windows on the demised premises from the outside to use the equipment and safety devices which may from time to time be required by Section 202 of the Labor Law of the State of New York and the rules supplemental thereto of any board or body administering such section, as said section or rules now exist or may hereafter be amended or supplemented.     (c) Tenant, only after notice to Landlord, may, be appropriate proceedings conducted promptly at Tenant's own expense, in Tenant's name and/or (whenever necessary) Landlord's name, contest in good faith the validity or enforcement of any such statute, law, ordinance, regulation or order, and may defer compliance therewith, provided (i) such deferment shall not constitute a crime on the part of Landlord, (ii) Tenant shall diligently prosecute such contest to a final determination by a court, department or governmental authority or body having jurisdiction thereof, and (iii) Tenant shall furnish Landlord with such security by bond or otherwise, as Landlord may request in connection with such contest. 6 --------------------------------------------------------------------------------     9.  Insurance.       (a) Tenant agrees, at Tenant's sole cost and expense, to keep the demised premises insured at all times throughout the term of this lease, including any period or periods of time during which any renovation or remodeling is being made to the demised premises against loss or damage by fire, lightning, wind storm, explosion, riot, riot attending a strike, civil commotion, damage from aircraft and vehicles, smoke damage, and loss or damage from other hazards as would be covered on an "all-risks" perils contract ("all-risks" as defined by the Insurance Services Offices). The aforementioned policy shall be written in amounts sufficient to prevent Landlord or Tenant from becoming a co-insurer within the terms of the applicable policies, but in any event, all such insurance shall be maintained in any amount not less than 90% (or such greater amount which may be required by a fee mortgagee) of the then full insurable replacement value of the demised premises. Tenant shall also obtain rent insurance covering the risks referred to above, in an amount equal to all minimum rent and additional rent payable under this lease for a period of twelve (12) months commencing with the date loss. It is further agreed that the Tenant shall also obtain at its sole cost and expense, throughout the term of this lease, insurance coverage against loss or damage, (12) months commencing with the date loss. It is further agreed that the Tenant shall also obtain at its sole cost and expense, throughout the term of this lease, insurance coverage against loss or damage, Bodily Injury Liability, Property Damage Liability caused by explosion, rupture or bursting of steam boilers, steam pipes, steam turbines, steam engines or flywheels, and all other objects as may be covered under a Boiler and Machinery Policy in an amount of no less than $2,000,000 per occurrence. Tenant shall also obtain and keep in full force and effect at its sole cost and expense, throughout the term of this lease, plate glass insurance covering the glass in the demised premises against loss or damage by the perils above-mentioned for "all-risk" coverage. Such policies shall be extended to cover loss or damage to all aforementioned objects on a repair or replacement basis and "loss or damage due to electrical surge" clause shall be included. The policies aforementioned shall contain a clause waiving the rights of recovery, for any loss an insurer must pay, against the Landlord. It is further agreed the policies aforementioned will include the Landlord, any agents, mortgagees, assigns or interested parties as required by the Landlord, as additional Named Insured(s).     (b) "Full insurable replacement value" as used herein shall mean the actual replacement cost of the demised premises (excluding foundation and excavation costs) without physical depreciation and said "full insurable replacement value" shall be determined at the request of Landlord by an architect, appraiser, appraisal company or one of the insurers. The insurers that are to be used by the Tenant shall be licensed to do business in New York State as an "admitted" carrier, be rated A XII (and maintain such rating throughout the term of this lease) in Best's Insurance Guide, and be reasonably acceptable to the Landlord. Such policy shall not be cancelable without at least thirty (30) days advance written notice being given to each named insured at their legal place of business.     (c) Tenant agrees, at Tenant's sole cost and expense, throughout the term of this lease, and for the mutual benefit of the Landlord and Tenant, to maintain Comprehensive General Liability Insurance, covering claims for Bodily Injury, Death or Property Damage occurring upon or in the demised premises, elevators, or in the streets adjoining the demised premises. The policy shall be extended to include the Broad Form CGL Extension endorsement. Coverage should also include Personal Injury Liability, Elevator Collision if applicable, Automobile Non-Ownership Liability, and any additional hazards due to any renovations or remodeling of the demised premises. The amount of coverage should be reasonably satisfactory to the Landlord but in no event shall it be less than $2,000,000 per occurrence, Combined Single Limit Bodily Injury and Property Damage. The aforementioned policy shall be written on an occurrence basis and include the Landlord, any agent, assigns, mortgagees, or interested parties as may be required by the Landlord, as Additional Named Insured(s). In the event. the Tenant subleases a portion or all of the demised premises it is agreed that the Subtenant shall be required by the Tenant to obtain, and maintain, insurance equal to that required 7 -------------------------------------------------------------------------------- of the Tenant. Such insurance shall also include the Landlord as additional insured as described in the requirements of the Tenant. All policies described and required shall not be cancelable without at least thirty (30) days advance written notice being given to each named insured at their legal place of business. The insurer that is to be used by the Tenant shall be licensed to do business in New York State as an "admitted" carrier, be rated A XII (and maintain such rating throughout the term of this lease) in Best's Insurance Guide, and be reasonably acceptable to the Landlord.     (d) The Tenant agrees to deliver to the Landlord all original policies aforementioned, with evidence of full payment of premium, fifteen (15) days prior to the commencement of this lease, and all renewals of said policies thirty (30) days prior to the expiration date(s) stated therein, throughout the term of this lease. In the event such policies are not available, within the specified time aforementioned, binders, signed by an authorized employee, underwriter or agent of the insurer, evidencing all coverages required must be maintained until replaced by valid policies. Such "binders of insurance" will be given to the Landlord within the specified times aforementioned as respects delivery of policies of insurance.     (e) Tenant, at its sole cost and expense, throughout the term of this lease, shall provide and keep in force Worker's Compensation Insurance within statutory limits covering all persons employed by it at the demised premises. It is an affirmative obligation of the Tenant, to see to it that all persons employed directly or indirectly, in connection with any renovation, remodeling, repair, installations or improvements made in or to the demised premises shall possess and be covered by Worker's Compensation Insurance, so as to insulate Landlord or Tenant from any death or bodily claims that may be asserted against them by said persons.     (f)  Tenant and Landlord shall cooperate in connection with the collection of any insurance monies that may be due in the event of loss, and Tenant shall execute and deliver to Landlord such proofs of loss and other instruments which may be required for the purpose of obtaining the recovery of any such insurance monies.     (g) In respect of any real, personal or other property owned by Tenant and located in, at or upon the demised premises or the land upon which the damaged premises is situated, Tenant hereby releases Landlord from any and all liability or responsibility to it or anyone claiming through or under it by way of subrogation or otherwise, for any loss or damage to said property caused by fire or any of the extended coverage casualties, even if such fire or other casualty shall have been caused by the fault or negligence of Landlord or anyone for whom Landlord may be responsible; provided, however, that this release shall be applicable and in force and effect only with respect to loss or damage occurring during such time as Tenant's policies of insurance shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of Tenant to recover thereunder. Tenant agrees that it will request its insurance carriers to include in its policies such a clause or endorsement, and to pay the cost therefor.     (h) Tenant shall not carry separate or additional insurance, concurrent in form and contributing, in the event of any loss or damage to the demised premises or the land upon which the demised premises is situated, with any insurance required to be obtained by Tenant under this lease, unless such separate or additional insurance shall comply with and conform to all of the provisions and conditions of this Article. Tenant shall promptly give notice to Landlord of such separate or additional insurance and deliver the original or a duplicate of such policies to Landlord.     (i)  Landlord may recover from Tenant, and Tenant agrees to pay, any and all damages which Landlord may sustain by reason of Tenant's failure to obtain and keep in force any in insurance which Tenant is required to obtain and keep in force under this lease, and the damages of Landlord shall not be limited to the amount of the premiums thereon. 8 --------------------------------------------------------------------------------     10.  Destruction—Fire or Other Causes.       (a) If, during the term, the buildings, improvements or the equipment on, in or appurtenant to the demised premises at the commencement of the term or thereafter erected thereon or therein shall be destroyed or damaged in whole or in part by fire or other cause, Tenant shall give to Landlord immediate notice thereof, and Tenant, at its own cost and expense, shall promptly repair, replace and rebuild the same, at least to the extent of the value and as nearly as possible to the character of the buildings and improvements and the equipment therein existing immediately prior to such occurrence; and Landlord shall in no event be called upon to repair, replace or rebuild any such buildings, improvements or equipment, nor to pay any of the costs or expenses thereof beyond or in excess of the insurance proceeds as herein provided, except with respect to damage caused by the willful acts or negligence of Landlord, its agents, servants or employees. If the demised premises shall be totally damaged or are rendered wholly untenable by fire or other cause, and Landlord in its sole discretion determines that the demised premises cannot be restored within three (3) months from the date of such fire or destruction, Tenant has the option, which option shall be exercised within sixty (60) days from the date of such fire or destruction, upon ten (10) days' prior written notice, to elect to terminate this lease, and this lease shall thereupon terminate at the end of such ten-day period as if such date were the date originally fixed herein for the end and expiration of the term hereof. If this lease is terminated as provided in this Article, all rents and other charges hereunder shall be apportioned to the date of the casualty.     (b) For the purpose of paying towards the cost of such repairs, replacement or rebuilding, Landlord shall make available all sums, net of adjustor's fees, actually received by Landlord under insurance policies covering such loss, as provided in Article 9, except if Tenant elects to terminate the lease as provided in subsection (a) above, to the parties whom Tenant may employ to repair, replace or rebuild the same as such repairs, replacement or rebuilding shall progress, or to Tenant as Tenant shall make or pay for such repairs, replacement or rebuilding, upon the certificates of the architect in charge of such work, whose selection shall be subject to the prior written approval of Landlord, which approval Landlord shall not unreasonably withhold. The disbursement of such insurance proceeds received by Landlord shall be made under a schedule of payments to be prepared by Tenant and approved by Landlord (which approval shall not be unreasonably withheld), each such payment to be in the proportion which the total net amount of insurance proceeds received and hold by Landlord in connection therewith, plus so much of the total net amount thereof received by a mortgagee holding any of such policies as shall be made available therefor by such mortgagee, shall bear to the total estimated cost of the repairs, replacement or rebuilding; provided, however, that Landlord may withhold from each amount so to be paid by Landlord 10% thereof until the work of repairing or rebuilding shall have been completed and proof shall have been furnished to Landlord that no lien or liability has attached or will attach to the demised premises or to Landlord in connection with such repairs, replacement or rebuilding. If in the course of such work, any mechanic's or other lien or order for the payment of money shall be filed against the demised premises or against Landlord or Tenant or any contractor of Tenant, or if Tenant shall default in the performance of any of the agreements, terms, covenants or conditions hereof, Landlord shall not be obligated to make any payment of such insurance proceeds until and unless such lien or order shall have been fully bonded, satisfied, canceled or discharged of record, and/or until such default shall have been cured. If the net amount of such insurance proceeds shall be insufficient for the proper and effective repair, replacement or rebuilding of such damaged or destroyed buildings, improvements or equipment, Tenant shall pay the additional sums required, and if the amount of such insurance proceeds shall be in excess of the cost thereof the excess shall be paid to and retained by Landlord.     (c) Such work and the performance thereof shall be subject to and shall be performed in accordance with the provisions of Article 5. 9 --------------------------------------------------------------------------------     (d) At least ten (10) days before the commencement of such repairs, replacement or rebuilding, Tenant shall notify Landlord of its intention to commence the same.     (e) Except as herein provided, this lease shall not terminate or be affected in any manner by reason or damage to or total, substantial or partial destruction of the buildings, improvements or equipment on, in or appurtenant to the demised premises at the commencement of the term or thereafter erected thereon or therein, or by reason of the untenantability of the demised premises, or any part thereof, for or due to any reason or cause whatsoever excepting the willful acts or negligence of Landlord, its agents, servants or employees.     11.  Condemnation.       (a) If the whole of the demised premises shall be taken or condemned by any competent authority for any public or quasipublic use or purpose, then and in that event this lease and the term hereof shall cease and terminate as of the date upon which title shall vest thereby in such authority and the rent reserved hereunder shall be apportioned and paid up to said date.     (b) If only a part of the demised premises shall be so taken or condemned, this lease and the term hereof shall not cease or terminate, but if the part of the premises so taken or condemned is substantial enough so that in the reasonable judgment of the Tenant, the Tenant could not conduct its business with the remaining portion of the premises, then in such event the Tenant shall have the right to cancel this lease and give back possession of the remaining premises to the Landlord. In the event that the taking or condemnation is not substantial enough to allow Tenant to cancel this lease, then in such event, the rent payable hereunder after the date on which Tenant shall be required to surrender possession of the part of the demised premises so taken or condemned shall be reduced in such proportion and in such manner as the parties may agree or, if the parties cannot so agree, as shall be determined by arbitration.     (c) In the event of any such taking or condemnation in whole or in part, the entire award shall belong to Landlord without any deduction therefrom for the value of the unexpired term of this lease or for any other estate or interest in the demised premises now or hereafter vested in Tenant and Tenant hereby assigns to Landlord all of its right, title and interest in and to any and all such award or awards with any and all rights, estate and interest of Tenant now existing or hereafter arising in and to the same or any part thereof.     (d) In the event of a partial taking, however, Tenant shall promptly proceed to restore the remainder of the building on the demised premises to a complete, independent and self-contained architectural unit, and Landlord shall pay to Tenant, subject to the same provisions and limitations specified in Article 10 (b), the cost of restoration, but in no event to exceed a sum equal to the amount of the separate award made to and received by Landlord for consequential damage. Such work and the performance thereof shall be subject to and shall be performed in accordance with the provisions of Articles 5 (b) (1), (2), (3) and (4), except that the surety company performance bond provided for in Article 5 (b) (4) shall be in an amount, if any, by which the estimated cost of the work exceeds said separate award for consequential damage. In the event that there is no separate award for consequential damage, the same shall be fixed and settled by arbitration as herein provided. The balance of such separate award or allocated amount not so used shall belong to and be retained by Landlord as its own property.     (e) In case of any governmental action, not resulting in the taking or condemnation of any portion of the demised premises, but creating a right to compensation therefor, such as, without limitation, the changing of the grade of any street upon which the demised premises abut, or if less than a fee title to all or any portion of the demised premises shall be taken or condemned by any federal, state, municipal or governmental authority for temporary use or occupancy, this lease shall continue in full force and effect without reduction or abatement of rent, and the rights of Landlord and 10 -------------------------------------------------------------------------------- Tenant shall be unaffected by the other provisions of this Article 11 and shall be governed by applicable law.     (f)  In connection with either a whole or partial taking, Tenant shall be entitled to make a claim in a separate proceeding for compensation for moveable fixtures and personal property owned by Tenant, moving expenses and the unamortized value of improvements made to the demised premises by Tenant at its expense in accordance with the terms of this lease.     12.  Subordination.  This lease and all rights of Tenant hereunder are and shall be subject and subordinate to the lien of any and all current mortgage or mortgages, or consolidation mortgage or mortgages, which may now affect the demised premises, or any part thereof, or the demised premises. Tenant shall upon demand at any time or times execute, acknowledge and deliver to Landlord, without expense to Landlord, any and all instruments that may be necessary or proper to subordinate this lease and all rights hereunder to the lien of any such mortgage or mortgages.     In the event that Landlord or its successors, heirs or assigns shall mortgage the demised premises at any time in the future, then it is expressly agreed upon that all such mortgages shall be made expressly subject to this lease. Tenant shall have the right to record this lease either in its entirety or in a memorandum form.     13.  Landlord Not Liable for Injury or Damage.  Tenant is and shall be in exclusive control and possession of the demised premises as provided herein, and Landlord shall not in any event whatsoever be liable for any injury or damage to any property or to any person happening on or about the demised promises, nor for any injury or damage to any property of Tenant, or of any other person contained therein unless caused by or due to the negligence of Landlord, its agents, servants or employees. The provisions hereof permitting Landlord to enter and inspect the demised premises are made for the purpose of enabling Landlord to be informed as to whether Tenant is complying with the agreements, terms, covenants and conditions hereof, and to do such acts as Tenant shall fail to do.     14.  No Rent Abatement.  No abatement, diminution or reduction of rent, charges or other compensation shall be claimed by or allowed to Tenant, or any person claiming under it, under any circumstances, whether for inconvenience, discomfort, interruption of business, or otherwise, arising from the making of alterations, changes, additions, improvements or repairs to any buildings now on or which may hereafter be erected on the demised premises, by virtue or because of any present or future governmental laws, ordinances, requirements, orders, directions, rules or regulations or by virtue or arising from, and during, the restoration of the demised premises after the destruction or damage thereof by fire or other cause or the taking or condemnation of a portion only of the demised premises (except as provided in Article 11) or arising from any other cause or reason.     15.  Access to Premises.  Tenant shall permit Landlord or its agents to enter the demised premises at all reasonable hours for the purpose of inspection, or of making repairs that Tenant may neglect or refuse to make in accordance with the agreements, terms, covenants and conditions hereof. Throughout the term hereof, Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the demised premises and, at any time within six (6) months prior to the expiration of the term, to persons wishing to rent the same; and Tenant shall within six (6) months prior to the expiration of the term permit the usual notices of "To Let", "For Rent" and "For Sale" to be placed on the demised premises and to remain thereon without hindrance and molestation.     16.  Force Majeure.  The period of time during which Landlord or Tenant is prevented or delayed in the performance of the making of any improvements or repairs or fulfilling any obligation required under this lease (other than the payment of minimum rent or additional rent) due to delays caused by fire, catastrophe, strikes or labor trouble, civil commotion, acts of God or the public enemy, governmental prohibitions or regulations, or inability or difficulty to obtain materials, or other causes beyond Landlord's or Tenant's control, shall be added to Landlord's or Tenant's time for performance thereof as the case may be, and Landlord or Tenant shall have no liability by reason thereof. 11 --------------------------------------------------------------------------------     17.  No Unlawful Occupancy.  Tenant shall not use or occupy, nor permit or suffer the demised premises or any part thereof to be used or occupied for any unlawful or illegal business, use or purpose, nor for any business, use or purpose deemed by Landlord disreputable or extrahazardous, nor in such manner as to constitute a nuisance of any kind, nor for any purpose or in any way in violation of any present or future governmental laws, ordinances, requirements, orders, directions, rules or regulations. Tenant shall immediately upon the discovery of any such unlawful, illegal, disreputable or extrahazardous use take all necessary steps, legal and equitable, to compel the discontinuance of such use and to oust and remove any subtenants, occupants or other persons guilty of such unlawful, illegal, disreputable or extrahazardous use.     18.  Indemnity.  Tenant shall indemnify and save harmless Landlord against and from all costs, expenses, liabilities, losses, damages, injunctions, suits, actions, fines, penalties, claims and demands of every kind of nature, including reasonable counsel fees, by or on behalf of any person, party or governmental authority whatsoever arising out of (a) any failure by Tenant to perform any of the agreements, terms, covenants or conditions of this lease or Tenant's part to be performed, (b) any accident, injury or damage which shall happen in or about the demised premises or appurtenances or on or under the streets, sidewalks, curbs or vaults in front of or adjacent thereto, however occurring, and any matter or thing growing out of the condition, occupation, maintenance, alterations, repair, use or operation of the demised premises, or any part thereof, and/or of the streets, sidewalks, curbs or vaults adjacent thereto during the term, except where the same shall be caused by the willful act or negligence of Landlord, its agents, servants or employees, (c) failure to comply with any laws, ordinances, requirements, orders, directions, rules or regulations of any federal, state, county or city governmental authority, (d) any contest permitted by the provisions of Articles 3(c) and 8(c) hereof, or (e) any mechanic's lien, conditional bill of sale or chattel mortgage filed against the demised premises or any equipment therein or any materials used in the construction or alteration of any building or improvement thereon, except where the same shall be caused by the willful act or negligence of Landlord, its agents, servants or employees.     19.  Default.       (a) Each of the following events shall be a default hereunder by Tenant and a breach of this lease:      (i) If Tenant (or any successor or assignee of Tenant while in possession) shall file a petition in bankruptcy or insolvency or for reorganization or arrangement under the bankruptcy laws of the United States or under any insolvency act of any state or shall voluntarily take advantage of any such law or act by answer or otherwise or shall be dissolved (if Tenant or such successor or assignee be a corporation) or shall make an assignment for the benefit of creditors.     (ii) If involuntary proceedings under any such bankruptcy law or insolvency act or for the dissolution of a corporation shall be instituted against Tenant (or such successor or assignee) or if a receiver or trustee shall be appointed of all or substantially all of the property of Tenant (or such successor or assignee) and such proceedings shall not be dismissed or such receivership or trusteeship vacated within thirty (30) days after such institution or appointment.     (iii) If Tenant shall fail to pay Landlord any rent or additional rent within ten (10) days' notice that the same is due and payable under this lease (however, such notice shall not be required in the event of the third or subsequent failure of Tenant in any twelve (12) consecutive month period to pay rent or additional rent within ten days after first becoming due).     (iv) If Tenant shall fail to perform any of the other agreements, terms, covenants or conditions hereof on Tenant's part to be performed and such non-performance shall continue for a period of thirty (30) days after notice thereof by Landlord to Tenant or, if such performance cannot be reasonably had within such thirty-day period, Tenant shall not in good faith have 12 -------------------------------------------------------------------------------- commenced such performance within such thirty-day period and shall not diligently proceed therewith to completion.     (v) If Tenant shall vacate or abandon the demised premises.     (b) In the event of any such default:      (i) Landlord shall have the right to cancel and terminate this lease, as well as all of the right, title and interest of Tenant hereunder, by giving to Tenant not less than fifteen (15) days' notice of such cancellation and termination, and upon the expiration of the time fixed in such notice, this lease and the term hereof, as well as all of the right, title and interest of Tenant hereunder, shall expire in the same manner and with the same force and effect, except as to Tenant's liability, as if the expiration of the time fixed in such notice of cancellation and termination were the end of the term herein originally demised.     (ii) Landlord at its option may, but shall not be obligated to, make any payment required of Tenant herein or comply with any agreement, term, covenant or condition required hereby to be performed by Tenant, and Landlord shall have the right to enter the demised premises for the purpose of correcting or remedying any such default and to remain therein until the same shall have been corrected or remedied, but any expenditure for such performance by Landlord shall not be deemed to waive or release Tenant's default or the right of Landlord to take such action as may be otherwise permissible hereunder in the case of such default.     (c) In the event of cancellation or termination of this lease either by operation of law by issuance of a dispossessory warrant, by service of notice of cancellation or termination as herein provided, or otherwise, except as provided in Article 11 hereof, or in the event of a default referred to in subparagraph (iii) or (v) of Article 19 (a), Landlord may re-enter and repossess the demised premises provided Landlord is permitted pursuant to law or by order of a court of competent jurisdiction, using such force for that purpose as may be necessary without being liable to prosecute therefor, and Tenant shall nevertheless remain and continue liable to Landlord in a sum equal to all rent and additional rent reserved herein for the remainder of the term herein originally demised. If Landlord shall so re-enter, Landlord may repair and alter the demised premises in such manner as to Landlord may seem necessary or advisable, and/or let or relet the demised premises or any parts thereof for the whole or any part of the remainder of the term herein originally demised or for a longer period, in Landlord's name or as the agent of Tenant, and out of any rent collected or received as a result of such letting or reletting Landlord shall, first, pay to itself the cost and expense of retaking, repossessing, repairing and/or altering the demised premises, and the cost and expense of removing all persons and property therefrom; second, pay to itself the cost and expense sustained in securing any new tenants, and, if Landlord shall maintain and operate the demised premises, the cost and expense of operating and maintaining the demised premises; and, third, pay to itself any balance remaining on account of the liability of tenant to Landlord for the sum equal to all rent and additional rent reserved herein and unpaid by Tenant for the remainder of the term herein originally demised. No re-entry by Landlord, whether had or taken under summary proceedings or otherwise, shall absolve or discharge Tenant from liability hereunder.     (d) Should any rent so collected by Landlord after the aforementioned payments be insufficient to fully pay to Landlord a sum equal to all such rent and additional rent reserved herein, the balance or deficiency shall be paid by Tenant on the rent days herein specified, that is, upon each of such rent days Tenant shall pay to Landlord the amount of the deficiency then existing; and Tenant shall be and remain liable for any such deficiency, and the right of Landlord to recover from Tenant the amount thereof, or a sum equal to all such rent and additional rent reserved herein, if there shall be no reletting, shall survive the issuance of any dispossessory warrant or other cancellation or termination hereof, and Landlord shall be entitled to retain any overplus; and Tenant hereby expressly waives any 13 -------------------------------------------------------------------------------- defense that might be predicated upon the issuance of such dispossessory warrant or other cancellation or termination hereof.     (e) In any of the circumstances hereinabove mentioned in which Landlord shall have the right to hold Tenant liable upon the several rent days as above provided, Landlord shall have the election, in place and instead of holding Tenant so liable, forthwith to recover against Tenant as damages for loss of the bargain and not as a penalty, in addition to any other damages becoming due under Article 20 hereof, an aggregate sum which, at the time of such termination of this lease or of such recovery of possession of the demised premises by Landlord, as the case may be, represents the then present worth of the excess, if any, of the aggregate of the rent and additional rent and all other charges payable by Tenant hereunder that would have accrued for the balance of the term over the aggregate rental value of the demised premises (such rental value to be computed on the basis of a tenant paying not only a rent to Landlord for the use and occupation of the demised premises, but also such additional rent and other charges as are required to be paid by Tenant under the terms of this lease) for the balance of such term.     (f)  Suit or suits for the recovery of such deficiency or damages, or for a sum equal to any installment or installments of rent and additional rent hereunder, may be brought by Landlord, from time to time at Landlord's election, and nothing herein contained shall be deemed to require Landlord to await the date whereon this lease or the term hereof would have expired by limitation had there been no such default by Tenant or no such cancellation or termination.     (g) Tenant hereby expressly waives service of any notice of intention to re-enter. Tenant hereby waives any and all rights to recover or regain possession of the demised premises or to reinstate or to redeem this lease or other right of redemption as permitted or provided by or under any statute, law or decision now or hereafter in force and effect.     (h) Nothing in this Article 19 contained shall limit or prejudice the right of Landlord to prove and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization or dissolution proceeding an amount equal to the maximum allowed by any statute or rule of law governing such proceeding and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to or less than the amount of the damages referred to in either of the preceding subdivisions.     20.  Bankruptcy or Insolvency.  If this lease shall be canceled and terminated as provided in Article 19 (b) (i), Tenant covenants and agrees, any other covenant in this lease to the contrary notwithstanding:     (a) that the demised premises shall be then in the same condition as that in which Tenant has agreed to surrender them to Landlord at the expiration of the term hereof;     (b) that Tenant, on or before the occurrence of any such event, shall perform any covenant contained in this lease for the making of any improvement, alteration or betterment to the demised premises, or for restoring any part thereof; and     (c) that, for the breach of any covenant above-stated in this Article 20, Landlord shall be entitled ipso facto without notice or without action by Landlord to recover, and Tenant shall pay as and for liquidated damages therefor, the then cost for performing such covenant.     Each and every covenant contained in this Article 20 shall be deemed separate and independent and not dependent upon other provisions of this lease, and the performance of any such covenant shall not be considered to be rent or other payment for the use of the demised premises. The damages for failure to perform the same shall be deemed in addition to and separate and independent of the damages accruing by reason of the breach of any other covenant contained in this lease. 14 --------------------------------------------------------------------------------     21.  Remedies of Landlord.       (a) In the event of a breach or a threatened breach by Tenant of any of the agreements, terms, covenants or conditions hereof, Landlord shall have the right of injunction to restrain the same and the right to invoke any remedy allowed by law or in equity, as if specific remedies, indemnity or reimbursement were not herein provided.     (b) The rights and remedies given to Landlord in this lease are distinct, separate and cumulative, and no one of them, whether or not exercised by Landlord, shall be deemed to be in exclusion of any of the others herein or by law or equity provided.     (c) In all cases hereunder, and in any suit, action or proceeding of any kind between the parties, it shall be presumptive evidence of the fact of the existence of a charge being due, if Landlord shall produce a bill, notice or certificate of any public official entitled to give the same to the effect that such charge appears of record on the books in this office and has not been paid.     (d) No receipt of monies by Landlord from Tenant, after the cancellation or termination hereof in any lawful manner, shall reinstate, continue or extend the term, or affect any notice theretofore given to Tenant or operate as a waiver of the right of Landlord to enforce the payment of rent and additional rent then due or thereafter falling due, or operate as a waiver of the right of Landlord to recover possession of the demised premises by proper suit, action, proceedings or other remedy; it being agreed that, after the service of notice to cancel or terminate as herein provided and the expiration of the time therein specified, after the commencement of any suit, action, proceedings or other remedy, or after a final order or judgment for possession of the demised premises, Landlord may demand, receive and collect any monies due, or thereafter falling due, without in any manner affecting such notice, suit, action, proceedings, order or judgment; and any and all such monies so collected shall be deemed to be payments on account of the use and occupation of the demised premises, or at the election of Landlord, on account of Tenant's liability hereunder.     22.  No Representations by Landlord.  At the commencement of the term, Tenant shall accept the buildings and improvements and any equipment on or in the demised premises in their existing condition and state of repair, and Tenant covenants that no representations, statements or warranties, express or implied, have been made by or on behalf of Landlord in respect thereof, in respect of their condition, or the use or occupation that may be made thereof, and that Landlord shall in no event whatsoever be liable for any latent defects therein.     23.  No Waiver.  The failure of Landlord to insist upon a strict performance of any of the agreements, terms, covenants and conditions hereof shall not be deemed a waiver of any rights or remedies that Landlord may have and shall not he deemed a waiver of any subsequent breach or default in any of such agreements, terms, covenants and conditions.     24.  End of Term.  Tenant shall, on the last day of the term, or upon the sooner termination of the term, peaceably and quietly surrender and deliver the demised premises to Landlord free of subtenancies, broom clean, including all buildings, replacements, charges, additions and improvements constructed, erected, added or placed by Tenant thereon, with all equipment in or appurtenant thereto, except all moveable trade fixtures (not including equipment) installed by Tenant, in good condition and repair. Any trade fixtures or personal property not used in connection with the operation of the demised premises and belonging to Tenant or to any subtenant, if not removed at such termination and if Landlord shall so elect, shall be deemed abandoned and become the property of Landlord without any payment or offset therefor. If Landlord shall not so elect, Landlord may remove such fixtures or property from the demised premises and store them at Tenant's risk and expense. Tenant shall repair and restore, and save Landlord harmless from, all damage to the demised premises caused by the removal therefrom, whether by Tenant or by Landlord, of all such trade fixtures and personal property. 15 --------------------------------------------------------------------------------     Tenant shall, at its option, have the right to remove the bank vault, tellers' counters and safe deposit boxes, provided that Tenant at its own cost and expense, restore the demised premises to the condition that the building was in at the commencement of this lease.     25.  Quiet Enjoyment.  Landlord covenants that, so long as Tenant shall faithfully perform the agreements, terms, covenants and conditions hereof, Tenant shall and may peaceably and quietly have, hold and enjoy the demised premises for the term hereby granted without molestation or disturbance by or from Landlord and free of any encumbrance created or suffered by Landlord, except those to which this lease is made subject and subordinate as herein provided.     26.  Arbitration.  In such cases where this lease provides for settlement of a dispute or question by arbitration, the same shall be settled by arbitration in accordance with the rules, then obtaining, of the American Arbitration Association, and judgment upon the award rendered may be entered in any court having jurisdiction thereof.     27.  Estoppel Certificate.  Both parties hereto shall, without charge, at any time and from time to time hereafter, within ten (10) days after request of the other, certify by a written instrument duly executed and acknowledged to any mortgagee or purchaser, or proposed mortgagee or proposed purchaser, or any other person, firm or corporation specified by the other party, as to the validity and force and effect of this lease, in accordance with its tenor, as then constituted, as to the existence of any offsets, counterclaims or defenses thereto on the part of the other party, and as to any other matters as may be reasonably requested by the other party.     The party requesting the estoppel certificate shall be obligated to pay the reasonable legal fees incurred by the party issuing the estoppel certificate.     28.  Lease Mortgageable By Tenant.  The Tenant shall have the right, at its option to mortgage this lease, provided that such action does not materially affect the position of the Landlord in a negative manner, and Landlord shall cooperate with the same, provided that it not jeopardize Landlord's position. Tenant shall hold Landlord harmless from any damages, including reasonable attorney's fees, caused by said mortgaging of Tenant's lease.     29.  No Landlord Insurance.  Tenant understands and agrees that Landlord will not be obligated to carry insurance of any kind on any personal property in the demised premises (regardless of whether such property shall be owned by Tenant and including, but not limited to, Tenant's goods, supplies, furnishings, furniture, fixtures, equipment, improvements, betterments, installations or appurtenances). Tenant hereby waives any and all right of recovery which it might otherwise have against Landlord, any managing agent, fee owner or mortgagee and their respective officers, directors, agents, contractors, servants and employees for loss or damage to such property or any part thereof except for loss or damage due to the willful act or negligence of Landlord, its agents, servants or employees, to the same extent that Tenant's insurer's right of subrogation would be waived if insurance coverage with waiver of subrogation provisions were being maintained by Tenant upon all of such property. The provisions of this Article shall also apply to each permitted assignee, if any, and each permitted subtenant, if any, at any time occupying the demised premises or any part thereof.     30.  Exculpation.  Tenant agrees that, notwithstanding any contrary provision of this lease, Tenant will look solely to the interest of Landlord or its successor in the land and the building for the satisfaction of any judgment or other judicial process requiring the payment of money as a result of any negligence or breach of this lease by Landlord or such successor, and no other property or other assets of Landlord or such successor will be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this lease, the relationship of Landlord and Tenant hereunder or Tenant's use and occupancy of the demised premises.     31.  Payment of Landlords Fees.  If Tenant requests Landlord's consent or approval to alterations, except with respect to Permanent Building Improvements as set forth herein, or any other matter or 16 -------------------------------------------------------------------------------- thing requiring Landlord's consent or approval under this lease, and if in connection with such request Landlord seeks the advice of its attorneys, architect and/or engineer, then Landlord, as a condition precedent to granting its consent or approval, may require (in addition to any other requirements of Landlord in connection with such request) that Tenant pay the reasonable fee of Landlord's attorneys, architect and/or engineer in connection with the consideration of such request and/or the preparation of any documents pertaining thereto.     32.  As-Is Condition.  Tenant has examined and inspected the demised premises and Tenant agrees to accept the demised premises in their condition existing on the commencement date of the term hereof. Tenant understands and agrees that no materials whatever are to be furnished by Landlord and no work whatever is to be performed by Landlord in connection with the demised premises or any part thereof.     33.  Air Conditioning.  Tenant covenants and agrees, at Tenant's sole cost and expense, to repair and to maintain the airconditioning system serving the demised premises and all parts thereof in good and proper working condition at all times during the term of this lease (including the making and maintaining of replacements, if any).     Tenant shall be required to pay for any and all electricity and water required for the operation of all air-conditioning in the demised premises. Title to the aforesaid air-conditioning units, including replacements, if any, shall be and remain with Landlord at all times.     34.  Certificate of Occupancy.  It is expressly understood and agreed that Landlord has made no representation whatsoever regarding a certificate of occupancy for the building or the fitness of the building for Tenant's intended use.     Tenant covenants and agrees, at its sole cost and expense, to perform and make such alterations, installations, additions and improvements in and to the demised premises, and cure any violations imposed by any State, Federal, City, municipal or local government, department, commission or board in regard to Tenant's use of the demised premises, in order to obtain and/or comply with a certificate of occupancy for the building permitting Tenant's intended use.     35.  Lease Not Binding Unless Executed.  Submission by Landlord of the within lease for execution by Tenant, shall confer no rights nor impose any obligations on either party unless and until both Landlord and Tenant shall have executed this lease and duplicate originals thereof shall have been delivered to the respective parties.     36.  Tenant's Operating Obligations.  Tenant covenants and agrees that during the term of this lease:     (a) If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business in the demised premises, or any part thereof, and if failure to secure such license or permit would in any way affect Landlord, Tenant, at its expense, shall duly procure and thereafter maintain such license or permit and submit the same to inspection by Landlord. Tenant shall at all times comply with the terms and conditions of each such license or permit.     (b) Tenant shall maintain any sanitary lines in the. demised premises, and shall not misuse plumbing facilities or dispose of any foreign substances therein. Tenant shall not permit any food, waste, or other foreign substances to be thrown or drawn into the pipes. Tenant shall maintain the plumbing that it installs in good order, repair and condition, and repair any damage resulting from any violation of this paragraph. Tenant shall make any repairs to the other plumbing in the building, if damage results from Tenant's improper use of such plumbing.     (c) Tenant and any subtenants will retain a licensed professional exterminating service which will service the demised premises on a regular basis throughout the term so as to keep the demised premises free of vermin. 17 --------------------------------------------------------------------------------     (d) Tenant shall not install nor permit any subtenants to install any awnings or canopies in, on or in front of the demised premises without Landlord's written consent, which consent shall not be unreasonable withheld.     (e) If Tenant's or any subtenant's installation requires any exhausts to the streets, such exhausts shall be subject to prior written approval of the Landlord as to the location, aesthetics and all other elements thereof.     (f)  Tenant and any subtenants shall install chemical extinguishing devices approved by the Fire Insurance Rating Organization and shall keep such devices under service as required by such organization.     (g) If gas is used in the demised premises, Tenant shall install gas cutoff devices (manual and automatic).     (h) Tenant and any subtenants shall not use, or permit to be used, the sidewalk adjacent to, or any other space outside the demised premises for display, sale or any similar undertaking.     37.  Tenant's Use.  Tenant may use and occupy the demised premises for any legal use.     38.  [INTENTIONALLY OMITTED]       39.  Interest.  Whenever this lease refers to "interest", same shall be computed at a rate equal to the "Prime Rate" (as hereinafter defined) plus two (%) percent except where otherwise in this lease a different rate is specifically set forth. If, however, payment of interest at any such rate by Tenant (or by the tenant then in possession having succeeded to the Tenant's interest in accordance with the terms of this lease) should be unlawful, i.e., violative of the usury statutes or otherwise, then "interest" shall, as against such party, be computed at the maximum lawful rate payable by such party. "Prime Rate" shall mean the rate being charged at the time in question by Citibank, N.S. for short-term ninety-day unsecured loans made to its preferred corporate customers.     40.  Utilities.       (a) It is expressly understood that Landlord shall not supply to the demised premises any utilities or building services of any kind. Tenant agrees to make its own arrangements with the public utility company servicing the demised premises for the furnishing of and payment of all charges for electricity, gas, steam, water and other utilities consumed by Tenant in the demised premises, and for the installation of meters therefor at Tenant's expense. In no event shall Landlord be responsible for charges for electricity, steam, heat, water or any other utilities consumed in the demised premises by tenant. All meters at the demised premises for the purpose of measuring Tenant's consumption of the respective utilities (water, electricity, steam, etc.) shall be maintained by Tenant, at Tenant's sole cost and expense, in good order and condition. Landlord makes no representations to Tenant as to the availability or unavailability of said utilities.     (b) Interruption or curtailment of any utility or service excluding interruption or curtailment due to the willful acts or negligence of Landlord, its agents, servants or employees, shall not constitute a constructive or partial eviction, nor entitle Tenant to any compensation or abatement of rent. In no event shall Tenant in any way interfere with or tie in to any electrical feeders, risers or other electrical installations within the building.     (c) Landlord reserves the right to suspend, delay or stop any of the services to be furnished and provided by Landlord pursuant to the provisions of this lease whenever necessary by reason of fire, storm, explosion, strike, lockout, labor dispute, casualty or accident, lack or failure of sources of supply of labor, fuel supply, acts of God or the public enemy, riots, interferences by civil or military authorities in compliance with the laws of the United states of America, or with the laws, orders, rules and regulations of any governmental authority, or by reason of any other cause beyond Landlord's control, 18 -------------------------------------------------------------------------------- or for emergency or for inspection, cleaning, repairs, replacements, alterations or renewals in Landlord's judgment desirable or necessary to be made, it being expressly understood and agreed that all such work shall be performed in a manner so as not to materially interfere with the conduct of Tenant's business in the demised premises,     41.  Intentionally Omitted.       42.  Signs.  Tenant may install and maintain, at its own expense, a store front sign and window and interior signs. Tenant shall comply with all of the laws, orders, rules and regulations of the governmental authorities having jurisdiction thereof, including zoning laws, building codes and as required by insurance underwriters. Tenant shall obtain and pay for all permits required therefor, and not manufactured and/or installed until all approvals and permits are first obtained and copies thereof delivered to the Landlord with evidence of payment for any fees pertaining thereto. Tenant agrees to pay all annual renewal fees pertaining to Tenant's signs.     43.  Landlord's Cooperation.  Landlord will cooperate with Tenant in obtaining any and all permits, licenses and other municipal or governmental permissions as may be required in connection with the operation or establishment of Tenant's business. Any costs or expenses incurred by Landlord in connection with foregoing shall be borne by Tenant.     44.  Notice.  Whenever it is provided herein that notice, demand, request or other communication shall or may be given to or served upon either of the parties by the other, and whenever either of the parties shall desire to give or serve upon the other any notice, demand, request or other communication with respect hereto or the demised premises, each such notice, demand, request or other communication shall be in writing and, any law or statute to the contrary notwithstanding, shall be effective for any purpose if given or served as follows:     (a) If by Landlord, by mailing the same to Tenant by registered or certified mail, postage, prepaid, return receipt requested, addressed to Tenant at the premises, and to bank at 29 West 30th Street, New York, NY 10001 and to the attorney of Tenant if known to Landlord, or at such other address as Tenant may from time to time designate by notice given to Landlord by registered mail.     (b) If by Tenant, by mailing the same to Landlord by registered or certified mail, postage prepaid, return receipt requested, addressed to Landlord at 118 East 60th Street, New York, New York, or at such other address as Landlord may from time to time designate by notice given to Tenant by registered mail, or to the attorney for the Landlord, if known to Tenant.     Every notice, demand, request or other communication hereunder shall be deemed to have been given or served at the time that the same shall be deposited in the United States mails, postage prepaid, in the manner aforesaid. Nothing herein contained, however, shall be construed to preclude personal service of any notice, demand, request or other communication in the same manner that personal service of a summons or other legal process may be made.     45.  Shoring.  In the event that an excavation shall be made for building or other purposes upon land (including land in the bed of a street) adjacent to the demised premises or shall be contemplated to be so made, Tenant shall afford, to the person or persons causing or authorized to cause such excavation, license to enter upon the demised premises for the purpose of doing such work as said person or persons causing or authorized to cause such excavation, license to enter upon the demised premises for the purpose of doing such work as said person or persons shall deem to be necessary to preserve the wall or walls, structure or structures of the building which is a part of the demised premises from injury or damage and to support the same by proper foundations. Tenant shall, at its own expense, repair or cause to be repaired any damage caused to any part of the demised premises because of any excavation, construction work or other work of a similar nature which may be done on any such adjacent lands, and Landlord hereby assigns to Tenant any and all rights to sue for or recover 19 -------------------------------------------------------------------------------- against all the adjoining owners, or the parties causing such damages, the amounts expended or injuries sustained by Tenant because of the provisions of this Article requiring Tenant to repair any damages sustained by such excavations, construction work or other work.     46.  Definitions.  The term "Landlord" as used herein shall mean only the owner for the time being in fee of the demised premises, or the owner of the leasehold estate created by an underlying lease, or the mortgagee of the fee or of such underlying lease in possession for the time being of the demised premises, so that in the event of any sale or sales of the demised premises or of any transfer or assignment or other conveyance of such underlying lease and the leasehold estate thereby created, the seller, transferor or assignor shall be and hereby is entirely freed and relieved of all agreements, covenants and obligations of Landlord herein and it shall be deemed and construed without further agreement between the parties or their successors in interest or between the parties and the purchaser, transferee or assignee on any such sale, transfer or assignment that such purchaser, transferee or assignee has assumed and agreed to carry out any and all agreements, covenants and obligations of Landlord hereunder.     The work "equipment" as used herein shall, among other things, include, but shall not be limited to, all machinery, engines, dynamos, boilers, elevators, electrical refrigerators, air-conditioning compressors, ducts, units and equipment, heating and hot water systems, pipes, plumbing, wiring, gas, steam, water and electrical fittings, ranges and radiators.     The words "re-enter" and "re-entry" as used herein shall not be restricted to their technical legal meaning.     The use herein of the neuter pronoun in any reference to Landlord or Tenant shall be deemed to include any individual Landlord or Tenant, and the use herein of the words "successor and assign" or Successors and assigns" of Landlord or Tenant shall be deemed to include the heirs, legal representatives and assigns of any individual Landlord or Tenant.     47.  Entire Agreement.  This lease contains the entire agreement between the parties and cannot be changed or terminated orally, but only by an instrument in writing executed by the parties.     48.  New York Law.  This agreement shall be governed by and construed in accordance with the laws of the State of New York. The invalidity or enforceability of any provision of this lease is not to affect or impair any other provision hereof.     49.  Waiver of Trial by Jury.  It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this lease, Tenant's use or occupance of the demised premises, and/or claim of injury or damage. It is further mutually agreed that in the event Landlord commences any summary proceedings of the demised premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding.     50.  Descriptive Notes.  The descriptive notes are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope or intent of this lease nor in any way affect this lease. 20 --------------------------------------------------------------------------------     51.  Successors and Assigns.  The agreements, terms, covenants and conditions herein shall bind and inure to the benefit of Landlord and Tenant and their respective heirs, personal representatives, successors and, except as otherwise provided herein, their assigns.     52.  [INTENTIONALLY OMITTED]       53.  Brokerage.  Landlord warrants and represents that he has had no conversations or negotiations with any broker or agent other than Helmsley Spear Inc. concerning this lease and/or the renting of the demised premises, and that no other broker or agent was instrumental in obtaining the execution of this lease, and Tenant covenants and agrees to indemnify and hold Landlord harmless from and against any and all claims for brokerage commissions and other compensation made by any broker or agent based on any dealings between Tenant and such broker or agent, together with all costs and expenses incurred by Landlord in resisting such claims (including, without limitation, attorneys' fees). The amount of the brokerage commission is as per separate written agreement.     54.  Late Charges.  Should Tenant fail to pay within ten (10) days after same becomes due any installment of rent, additional rent, or any other sum payable to Landlord under the terms of this lease, then interest shall accrue from and after the date on which any such sum shall be due and payable, and such interest, together with a late charge of five cents for each dollar overdue to cover the extra expense involved in handling such delinquency shall be paid by Tenant to Landlord at the time of payment of the delinquent sum. If Tenant shall issue a check to Landlord which is returnable unpaid for any reason, Tenant shall pay Landlord an additional charge of $100 for Landlord's expenses in connection therewith.     55.  Zoning Resolution.  Tenant hereby irrevocably waives any and all right(s) it may have in connection with any zoning lot merger or transfer of development rights with respect to the Real Property including, without limitation, any rights it may have to be a party to, to consent, or to execute, any declaration of Restrictions (as such term is defined in Section 12-10 of the Zoning Resolution of the City of New York effective December 15, 1961, as emended) with respect to the land and building of which the demised premises are a part, which would cause the demised premises to be merged with or unmerged from any other zoning lot pursuant to such Zoning Resolution or to any document of a similar nature and purpose, and Tenant agrees that this lease shall be subject and subordinate to any Declaration of Restrictions or any other document of similar nature and purpose now or hereafter affecting the land and building of which the demised premises are a part. In confirmation of such subordination, Tenant shall execute and deliver promptly upon request, at no cost or expense to Landlord, any certificate or instrument, in recordable form, that Landlord reasonable may request and, in connection therewith, Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and deliver any such certificate or instrument for and on behalf of Tenant, should Tenant fail to execute, acknowledge or deliver such certificate or instrument confirming such subordination within ten (10) business days after request therefor.     56.  Further Encumbrances.  Tenant shall have the right to mortgage, pledge encumber or otherwise hypothecate this lease, provided that Tenant's acts under this paragraph do not encumber the fee or prejudice Landlord's rights under its current or future mortgage.     57.  Tenant's Right of First Refusal to Purchase.  If at any time during the term of this lease, the Landlord shall receive a bona fide offer from any person to purchase the demised premises, the Landlord shall send the Tenant a true copy of the proposed contract (except for the name of the buyer) and notify the Tenant of the intention of the Landlord to accept the same. The Tenant shall have the right within forty-five (45) days to accept the terms of the said contract in its own name for the gross purchase price and on the terms specified in said contract. If Tenant shall exercise its right of first refusal, it must execute the contract of sale (the "contract" and make a downpayment of ten (10%) percent of the purchase price within the said forty-five day period. If the Tenant shall not so 21 -------------------------------------------------------------------------------- elect within the said period, the Landlord may then sell the demised premises to said buyer, and Tenant shall have forever waived its rights under this Article. It is understood that time shall be of the essence with respect to the time periods in this Article. In the event that Tenant shall exercise its rights under the option on page -1- of this lease, then in such event, the right of first refusal under this paragraph shall be included during the term of said option period.     58.  Like Kind Exchange.       (a) Anything contained in Article 57 to the contrary, notwithstanding, in the event Tenant exercises its right of first refusal pursuant to the provisions of Article 57 herein, Landlord shall have the right, at its option, to transfer, assign and convey the demised premises to Tenant as part of a tax-free exchange for other real property of like kind pursuant to Section 1031 of the Internal Revenue Code of 1986 in lieu of selling the demised premises to Tenant, as otherwise provided in Article 57 herein. For purposes of this lease, the terms defined in this Paragraph shall have the respective meanings stated in this Paragraph:      (i) Acquisition Costs—any amount paid by Tenant (and approved by Landlord) in order to enable Tenant to enter into or acquire or hold an Exchange Property, as hereinafter defined, or to convey or transfer such Exchange Property to Landlord, including any deposit under an Exchange Purchase Contract, as hereinafter defined, any cash consideration paid thereunder, any net amount paid by Tenant by reason of adjustments or apportionments thereunder, or any mortgage taxes, real property transfer taxes or stamps, recording charges, title costs, brokerage commissions, accounting and reasonable legal fees, or any costs and other disbursements reasonable incurred by Tenant in connection with an Exchange Purchase Contract.     (ii) Exchange Property—any interest in a fee, leasehold or other estate in real property (which may or may not include personal property and/or fixtures related thereto) which Landlord will accept in exchange for all or part of the demised premises.     (iii) Exchange Purchase Contract—any contract for the purchase or other acquisition of an Exchange Property.     (b) At any time prior to the closing under the Contract, Landlord by twenty (20) days' notice to Tenant may, at its option, require Tenant to enter into or acquire an Exchange Purchase Contract, at the price and on such terms and subject to such state of title as may be acceptable to Landlord in its sole discretion, and Tenant shall do so for its own account and not for the account of or as agent of Landlord. In no event, however, shall Tenant be obligated to acquire title to such Exchange Property prior to the closing of title under the Contract.     (c) The Exchange Purchase Contract and any appropriate closing documents executed or delivered in connection therewith shall provide, in form and substance reasonably satisfactory to both Tenant and Landlord, that:      (i) After consummation of the acquisition of the Exchange Property, the liability of Tenant for the payment of any monetary obligation or the performance of any other obligation in connection with the acquisition or ownership of the Exchange Property, including, without limitation, any notes and mortgages required to be executed or assumed by Tenant, shall be nonrecourse to Tenant and shall be strictly limited to Tenant's interest in the Exchange Property;     (ii) The liability of Tenant to the seller of such Exchange Property pursuant to the terms of the Exchange Purchase Contract for failing to consummate the acquisition of such Exchange Property for any reason shall be limited to liquidated damages in the amount of any earnest money delivered by Tenant pursuant to the terms of such Exchange Purchase Contract;     (iii) Any earnest money paid or deposited on account of such Exchange Purchase Contract shall be held in escrow by the attorney for the seller under the Exchange Purchase Contract; and 22 --------------------------------------------------------------------------------     (iv) The Exchange Purchase Contract shall be freely assignable without the consent of the seller thereunder and shall not contain any provisions which would prohibit the conveyance of the Exchange Property directly by the seller thereof to Landlord upon the direction of Tenant.     (d) Each deposit or payment under any Exchange Purchase Contract prior to the closing of the Contract shall be loaned without interest by Landlord to Tenant who shall in turn, pay over said sum to the escrowee under the Exchange Purchase Contract.     (e) At the closing of the Contract, Tenant shall acquire the Exchange Property in accordance with the terms of the Exchange Purchase Contract and shall immediately thereafter convey (or shall cause to be conveyed) the Exchange Property to Landlord in exchange for Landlord's sale of the demised premises to Tenant. If the amount of the Acquisition Costs at the closing of the Contract is less than the Purchase Price, Tenant shall pay the difference to Landlord as otherwise provided in the Contract and if the amount of the Acquisition Costs exceeds the Purchase Price, Landlord shall pay the excess to Tenant by certified or official bank check.     (f)  In connection with any such Exchange Purchase Contract or any such Exchange Property, Tenant shall deliver such instruments, and shall take such other action, as Landlord specifies by notice to Tenant. The parties shall cooperate with each other in connection with the entry into or acquisition of the Exchange Purchase Contract or Exchange Property by Tenant and the conveyance or transfer of the Exchange Property to Landlord in order to effectuate the purposes of this Paragraph 58.     (g) If Landlord does not designate an Exchange Property prior to the closing of the Contract, then the demised premises shall be transferred pursuant to all of the terms of the Contract.     59.  Assignment and Assumption of Easement.  Landlord hereby assigns, transfers and sets over unto Tenant, for the entire term of this lease, or until such earlier termination as provided herein in this lease, all of Landlord's rights and interest in that certain Easement Agreement dated January 15, 1985 between Landlord and Sheng Rainbow Enterprises Corp. ("Sheng") recorded in Reel 1806 Pages 1209 though 1221 at the office of the City Register, County of Queens, as amended by that certain Amendment to Agreement dated November 5, 1985 between Landlord and Sheng recorded in Reel 1983 Page 1395 (the Easement Agreement and Amendment to Agreement are collectively referred to herein as the "Agreement" and are annexed hereto as Exhibit A and made a part hereof).     Tenant hereby assumes, for the entire term of this lease, or until such earlier termination as provided herein in this lease, the performance of all of the terms, covenants, responsibilities, and conditions, required to be performed pursuant to the Agreement, all with the same force and effect as through Tenant had signed the Agreement as a party named herein.     Tenant further agrees to indemnify and save harmless Landlord against and from all costs, expenses, liabilities, losses, damages, injunctions, suites, actions, fines, penalties, claims and demands of every kind or nature, including reasonable counsel fees, by or on behalf of any person, party or governmental authority whatsoever arising out of the Agreement.     The Agreement shall be subject to all of the provisions contained herein in this lease.     60.  Landlord's Consent.  Whenever the Landlord's consent is required under the terms of this lease, such consent shall not be unreasonably withheld or delayed.     61.  Termination.  Tenant herein shall have the right to terminate this lease, after a period of ten (10) years from the commencement date of this lease. Said right shall be at Tenant's option. In the event that Tenant shall exercise its right under this paragraph, then in such event the Tenant shall pay to the Landlord, a sum of money equal to the annual rent for the one year period immediately prior to the date on which Tenant shall decide to cancel this lease. Notice to terminate under this paragraph shall be served as per paragraph §44 at least six (6) months prior to the date that Tenant intends to 23 -------------------------------------------------------------------------------- terminate. In the event that the Federal Deposit Insurance Corporation should take over the Tenant, then in such event the FDIC shall have the right to terminate this lease without payment or penalty.     IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first above written.     LANDLORD:     /s/ ROSEMARIE RUBENFELD    -------------------------------------------------------------------------------- JOSEPH RUBENFELD,     BY:   ROSEMARIE RUBENFELD ATTORNEY-IN-FACT     TENANT:     KOREA FIRST BANK OF NEW YORK     By:   /s/ [ILLEGIBLE]    -------------------------------------------------------------------------------- Exec. V.P. STATE OF NEW YORK   )             )   ss.:     COUNTY OF NEW YORK   )             On this 10th day of April, 1992, before me personally came Rosemarie Rubenfeld, to me known, who being by me duly sworn, did depose and say that she resides at 118 East 60th Street, New York, New York, that she is the individual described in and which executed the foregoing instrument, as Attorney-in-Fact for the Landlord, Joseph Rubenfeld.     /s/ HOWARD S. EDELSTEIN    -------------------------------------------------------------------------------- Notary Public     HOWARD S. EDELSTEIN Notary Public, State of New York No. 31-4667945 Qualified in New York County Commission Expires December 31, 1992 STATE OF NEW YORK   )             )   ss.:     COUNTY OF NEW YORK   )             On this 10th day of April, 1992, before me personally came [ILLEGIBLE], to me known, who being by me duly sworn, did depose and say that he resides in [ILLEGIBLE], that he is the Executive V.P. of Korea First Bank of New York, the corporation described in and which executed the foregoing 24 -------------------------------------------------------------------------------- instrument, as Tenant; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that is was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.     /s/ HOWARD S. EDELSTEIN    -------------------------------------------------------------------------------- Notary Public     HOWARD S. EDELSTEIN Notary Public, State of New York No. 31-4667945 Qualified in New York County Commission Expires December 31, 1992 25 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.6 AGREEMENT OF LEASE BETWEEN JOSEPH RUBENFELD, LANDLORD AND KOREA FIRST BANK OF NEW YORK, TENANT TABLE OF CONTENTS W I T N E S S E T H:
EXHIBIT 10.3 RESTRICTIVE COVENANT AGREEMENT AGREEMENT made as of the 1st day of January, 2001, by and between NuCo2 Inc., a Florida corporation with its principal office at 2800 SE Market Place, Stuart, Florida 34997 (the "Corporation") and Edward M. Sellian, residing at 6794 SE Isle Way, Stuart, Florida 34996 ("Sellian"). W I T N E S S E T H : WHEREAS, since 1991 Sellian has been employed by the Corporation as its Chairman of the Board ("Chairman") and until September 2000 was also its Chief Executive Officer ("CEO"); and WHEREAS, (i) Sellian possesses substantial technical and managerial expertise and skill with respect to the Corporation's business, (ii) the Corporation's business is substantially national in scope and its products and services are marketed throughout the United States and (iii) the Corporation competes with other businesses that are or could be located in any part of the United States; and WHEREAS, Sellian wishes his employment relationship with the Corporation to be terminated and the parties have agreed upon the following terms and conditions; NOW, THEREFORE, in consideration of the premises and payments hereunder and the mutual covenants contained herein, the parties agree as follows: 1. Termination of Employment. Sellian's last day of employment as Chairman with the Corporation was January 1, 2001 (the "Termination Date"). Effective with the close of business on the Termination Date and except as provided in this Agreement, Sellian's participation in and entitlement to any and all other compensation, fringe benefits and employee benefit plans of the Corporation shall cease, and Sellian shall be entitled to benefits, if any, from employee benefit plans in accordance with the terms of the applicable plan. 2. Confidential Information; Restrictive Covenants. (a) Sellian reaffirms and acknowledges that: (i) During the course of his employment as Chairman and CEO by the Corporation, Sellian has obtained secret and confidential information concerning the business of the Corporation and its affiliates, including, without limitation, customer lists and sources of supply, their needs and requirements, the nature and extent of contracts with them, and related costs, price and sales information, and information about the Corporation's employees. (ii) The Corporation and its affiliates will suffer substantial damage that will be difficult to compute if Sellian should enter into a competitive business or should divulge secret and confidential information relating to the business of the Corporation and its affiliates acquired by him in the course of his employment as Chairman and CEO with the Corporation. (iii) The provisions of this Agreement are reasonable and necessary for the protection of the business of the Corporation and its affiliates. (b) Sellian will not, directly or indirectly, use, disseminate, divulge to any person, firm, corporation or other entity, disclose, lecture upon, or publish articles concerning any proprietary and/or Confidential Information, unless specifically authorized in writing by the Chief Executive Officer of the Corporation. The term "Confidential Information" means trade secrets, information, media, records, or documents containing confidential information disclosed to Sellian or coming into Sellian's possession by virtue of or through Sellian's employment with the Corporation about (1) the Corporation's products, sources of supply, pricing policies, equipment, processes, operational methods, systems, programs or services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, marketing, merchandising or selling; (2) the Corporation's financial affairs, its customers, its officers and directors, its employees and the scope of their work; or (3) past, present or future customers or customers' development or business activities. The only permitted exceptions to the foregoing prohibition on disclosure shall be (i) information which is in the public domain other than as a result of Sellian's breach of any of his obligations hereunder and (ii) information which Sellian is required to disclose by court order, subpoena or other government process. In the event that Sellian is required to make disclosure pursuant to the provisions of clause (ii) of the preceding sentence, Sellian shall promptly, but in no event more than two (2) business days after learning of such subpoena, court order or other government process, notify the Corporation, by personal delivery or by cablegram, confirmed by mail, and at the Corporation's request, Sellian shall take all reasonably necessary steps requested by the Corporation to defend against the enforcement of such subpoena, court order or other government process, and shall permit the Corporation to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof. Any and all costs incurred by, or chargeable to Sellian: in providing notification to the Corporation; complying with, or working with the Corporation's directions in relation to such compelled, or attempted compelled disclosure; and any and all defense against making such disclosures, including reasonable attorneys fees, and costs, shall be reimbursed by the Corporation to Sellian within thirty (30) days of submission to the Corporation by Sellian of a statement of such costs, and fees. (c) Sellian's obligations to the Corporation shall continue during the period commencing on the Termination Date and ending on December 31, 2005. More specifically, Sellian shall not, directly or indirectly, without the express prior written permission of the Chief Executive Officer of the Corporation: 2 (i) Enter into employment by or render any services to any person, firm, corporation or other entity engaged in any Competitive Business (as defined below); or (ii) Engage in any Competitive Business for his own account; or (iii) Be associated with or interested in, or act in concert with, any person, firm, corporation, entity or venture engaged in any Competitive Business, whether as an individual, partner, stockholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor, joint venturer, independent contractor or in any other relationship or capacity; or (iv) Encourage or have contact with any of the Corporation's employees (including any person who was employed or retained by the Corporation or any of its affiliates during Sellian's employment with the Corporation), either directly or indirectly, for the purpose of encouraging them to end their employment with the Corporation and/or to join Sellian or any other person or entity as a stockholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor, joint venturer or independent contractor in any Competitive Business, or employ and/or allow any employee of the Corporation (including any person who was employed or retained by the Corporation or any of its affiliates during Sellian's employment with the Corporation) to join Sellian as a stockholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor, joint venturer or independent contractor in any Competitive Business, provided however, that after January 1, 2003, the foregoing shall not prevent Sellian from encouraging or contacting any of the Corporation's employees, either directly or indirectly, for the purpose of encouraging them to end their employment with the Corporation and join Sellian in a non-Competitive Business; or (v) Solicit, service or attempt to service, interfere with, have contact with, divert or attempt to divert, or endeavor to entice away from the Corporation or any of its affiliates any of its or their sources of supply or customers for the purposes of having such customer's needs for products and services of the Corporation provided by a Competitive Business. The terms "customers" and "sources of supply" includes any entity which, as of the Termination Date or at any time during the immediately preceding twelve-month period, is or was a customer or source of supply of the Corporation, or a prospective customer or source of supply with which the Corporation had proposed or was in the process of proposing to do business, either orally or in writing. However, nothing in this Agreement shall preclude Sellian from investing his personal assets in the securities of any Competitive Business if such securities are traded on a national stock exchange or in the over-the-counter market and if such investment does not result in his beneficially owning, at any time, more than 5.0% of the publicly-traded equity securities of such Competitive Business. (d) Sellian agrees that, prior to accepting employment with or agreeing to perform services for any entity which is or might reasonably be a Competitive Business, Sellian will notify the Corporation in writing of Sellian's intentions, in order to provide the Corporation with the opportunity 3 to assess whether Sellian's employment or retention may violate any provisions of this Agreement. (e) "Competitive Business" shall mean any business or enterprise, or affiliate or subsidiary thereof, which: (i) Is engaged in the business of renting, leasing or supplying to other business entities high pressure or bulk CO2 cylinders and/or selling or distributing CO2; or (ii) Engages in any other business in which the Corporation or any of its affiliates was involved at any time during the twelve-month period immediately preceding the date hereof. "Competitive Business" shall not include the operations of Soda Systems, Inc. in New York, New Jersey and Connecticut, a company owned by a Sellian family member which is based in Pelham, New York, as long as such company is not engaged in the business of renting, leasing or supplying to other business entities high pressure or bulk CO2 cylinders and/or selling or distributing CO2. (f) Any judicial or other tribunal making any determination that any provisions of this Agreement are unenforceable shall have the power to modify the scope, duration or area of any restrictive covenant hereunder, or all of them, to the extent necessary to make such provision(s) enforceable, and such provision(s) shall then be applicable in such modified form. 3. Payments. In consideration of the agreements of Sellian contained in Paragraph 2 hereof, the Corporation shall pay Sellian the sum of Four Hundred Eighty Thousand Dollars ($480,000), payable in thirty-six (36) equal monthly installments on the last day of each month commencing on January 31, 2001. 4. Health and Dental Insurance. The Corporation will continue health insurance coverage for Sellian and Sellian's spouse until December 31, 2003 on the same terms and conditions as for other senior executives of the Corporation. Until December 31, 2003, Sellian and Sellian's spouse shall be entitled to participate in the dental plan offered by the Corporation, provided that the cost shall be borne entirely by Sellian. 5. Stock Options. The parties hereby stipulate that for purposes of the 1995 Stock Option Plan of the Corporation (the "Plan"), Sellian shall be deemed to have voluntarily terminated his employment with the consent of the Corporation and that Sellian may exercise any stock options granted to Sellian under the Plan that are exercisable as of the Termination Date until the expiration of the term stated in the option agreement grant letters between Sellian and the Corporation dated March 16, 1998, which letters shall govern such stock options. 6. Enforcement of Agreement. Sellian recognizes that a breach of any of the provisions of Paragraph 2 of this Agreement would cause irreparable damage to the Corporation's business and that such damage will be difficult or 4 impossible to measure. Therefore, in the event of a violation or a threatened violation by Sellian of the terms of this Agreement, Sellian hereby acknowledges and agrees that the Corporation will have the right, in addition to all other remedies available to it at law, in equity and under this Agreement, to affirmative or negative injunctive relief from a court of competent jurisdiction: (i) restraining Sellian from disclosing, in whole or in part, any Confidential Information to any person, firm, corporation, partnership, association or other entity to whom or to which such Confidential Information is threatened to be disclosed and (ii) restraining Sellian from any continued or threatened violation of the covenants contained in this Agreement. Sellian agrees to entry of an appropriate protective order to ensure confidentiality of all documents and any other relevant evidence. Nothing in this Agreement shall be construed as prohibiting the Corporation from pursuing any other remedies, and pursuit of one or more remedies or forms of relief shall not preclude the Corporation from pursuing any other remedies or forms of relief. The waiver by the Corporation of a breach by Sellian of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by Sellian. 7. Applicable Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Florida. 8. Amendment. This Agreement may be amended only by a written document signed by Sellian and the Chief Executive Officer of the Corporation. 9. Severability. In the event that any of the provisions of this Agreement are determined by a judicial or other tribunal to be unenforceable, the remaining provisions of this Agreement will remain enforceable. 10. Complete Agreement. This Agreement sets forth all of the terms and conditions of the agreement between the parties, and no representations have been made to Sellian which are not contained in this Agreement. With the exception of the option agreements under the Plan (which remain applicable in accordance with their terms only to the extent they are not inconsistent with this Agreement), this Agreement supersedes any and all prior agreements, contracts and understandings, and constitutes the entire [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 agreement between the parties. Sellian acknowledges that no promise, inducement or agreement has been made except as expressly provided in this Agreement. IN WITNESS WHEREOF, each of the parties hereto, either individually or by a duly authorized representative, has signed this Agreement on the date set forth below. Edward M. Sellian NuCo2 Inc. /s/ Edward M. Sellian By: /s/ Michael E. DeDomenico --------------------- ------------------------- Michael E. DeDomenico 6
Exhibit 10.22 September 26, 2001   Mark Robillard 960 Wes Moore Drive West Chester, PA  19082   Dear Mark:   On behalf of Pharsight Corporation, I am pleased to offer you the position of Vice President for World Wide Sales, reporting to me.  Your home office will be in Philadelphia. We are confident that you will make an outstanding addition to our team.  Your leadership and creativity will enable Pharsight to realize our vision of helping customers make confident decisions as they deal with the complex issues of drug development.  With your contributions, Pharsight will continue to improve every level and phase of our customers business and scientific processes.    Your base salary will be $195,000 annually, and will be paid semi-monthly.  Your variable target income will be $156,000 for a total targeted compensation of $351,000.   To assist in the transition, Pharsight will provide you with a non- recoverable draw of $52,500 against your annual target compensation, paid over the first six months of your employment.  You will be eligible for Pharsight’s employee benefits programs, including health, dental, vision, life, and disability insurance, 401(k) plan and an annual accrual of 20 paid personal time-off days. You will become eligible for your health benefits on November 1st, 2001, assuming you are an active employee. In addition, you would be reimbursed for customary expenses associated with your position.  Reimbursement will be administered under the guidelines of our Pharsight Corporation Business Expense Policy.  This will include, mileage reimbursement for personal vehicle travel while on business, airport trips, customer visits and special projects for the company.   In the event your employment at Pharsight is terminated without cause or your responsibilities are materially reduced within the first 18 months, Pharsight will provide you with 6 months of severance.  The amount of severance will be calculated based on your current base salary at the time of the termination.  If there were a change of control within the first 18 months of your employment, this agreement would remain in effect with the surviving company.   In addition, the Board of Directors will grant you an option to purchase 150,000 shares of stock.  This option will vest over four years and is subject to the terms and conditions of the Company’s 2000 Stock Option Plan. The exercise price of the option will be the fair market value of the stock as determined by the closing price on the Thursday of the week in which you start work as an employee of Pharsight.   This offer does not constitute a guarantee of employment for any specific period of time, and either you or Pharsight may terminate the employment relationship at any time, with or without cause.  This offer does not constitute a guarantee of employment for any specific period of time, and either you or Pharsight may terminate our employment relationship at any time, with or without cause.   As a condition of your employment with Pharsight, you will be required to sign the Company’s Proprietary Information and Inventions Agreement, two originals of which are enclosed.  Please sign both originals and return one to me with your acceptance of this offer.   For purposes of federal immigration law, you will be required to provide the Company documentary evidence of your identity and eligibility for employment in the United States.  Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.   This offer is valid through September 28, 2001.  I am sending two originals of this letter.  Please sign and return one to me, to indicate your acceptance.   We will be pleased to have you as a member of the Pharsight team.   Sincerely,     Art Reidel President and Chief Executive Officer   Enclosures   I accept employment with Pharsight Corporation subject to the terms and conditions hereof.  I understand that the terms set forth in this letter supersede all oral discussions I may have had with anyone in the Company.         Mark Robillard   Date   My anticipated start date with Pharsight Corporation will be ____________________________________________
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.37 AMENDMENT NO. 1 TO THE TULARIK INC. 1997 EQUITY INCENTIVE PLAN     At a meeting of the Compensation Committee of the Board of Directors of Tularik Inc. on June 14, 2001, the following amendment to the Tularik Inc. 1997 Equity Incentive Plan (the "Plan") was adopted, effective as of December 12, 1999:     Section 2(l) of the Plan is hereby deleted in its entirety and replaced with the following:     "(a) "Fair Market Value" means, as of any date, the value of the common stock of the Company determined as follows (and in each case prior to the Listing Date, in a manner consistent with Section 260.140.50 of Title 10 of the California Code of Regulations).     (1) If the common stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of common stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Company's common stock) on the day of determination (the most recent day prior to the day of determination, if the day of determination is not a day on which reported sales and bids occurred), as reported in The Wall Street Journal or such other source as the Board deems reliable.     (2) In the absence of such markets for the common stock, the Fair Market Value shall be determined in good faith by the Board or any Committee to which responsibility for administration of the Plan has been delegated pursuant to subsection 3(c)."     Except as amended above, the Plan remains in full force and effect.     The undersigned hereby certifies that the foregoing is true, correct and complete. /s/ WILLIAM J. RIEFLIN    -------------------------------------------------------------------------------- William J. Rieflin Executive Vice President, Administration, General Counsel and Secretary     1 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.37 AMENDMENT NO. 1 TO THE TULARIK INC. 1997 EQUITY INCENTIVE PLAN
Exhibit 10.74 CONFORMED COPY ____________________________________________________________________________________________________________________________   ASSET PURCHASE AGREEMENT by and among PARK AVENUE RECEIVABLES CORPORATION, THE CHASE MANHATTAN BANK, as Funding Agent and THE SEVERAL FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME, as APA Banks 30 March, 2001 (IKON Capital Plc) ____________________________________________________________________________________________________________________________ ARTICLE I DEFINITIONS 1      SECTION 1.1 Incorporation by Reference 1      SECTION 1.2 Other Defined Terms 1 ARTICLE II PURCHASE COMMITMENT 7      SECTION 2.1 Liquidity Purchases 7      SECTION 2.2 Several Commitments of the APA Banks 8      SECTION 2.3 Nonrecourse Nature of Transactions 9      SECTION 2.4 Payments; Indemnity 9      SECTION 2.5 Reduction of Commitment 10 ARTICLE III REPRESENTATIONS AND WARRANTIES 10      SECTION 3.1 PARCO Disclaimer of Representations and Warranties 10      SECTION 3.2 Representations and Warranties of the APA Banks 10 ARTICLE IV THE FUNDING AGENT 11      SECTION 4.1 Appointment 11      SECTION 4.2 Delegation of Duties 11      SECTION 4.3 Exculpatory Provisions 11      SECTION 4.4 Reliance by Funding Agent 12      SECTION 4.5 Notices 12      SECTION 4.6 Non-reliance on the Funding Agent 12      SECTION 4.7 Indemnification 12      SECTION 4.8 The Funding Agent in Its Individual Capacity 13      SECTION 4.9 Successor Funding Agent 13      SECTION 4.10 Chase Conflict Waiver 13 ARTICLE V MISCELLANEOUS 13      SECTION 5.1 Waivers; Amendments, etc. 13      SECTION 5.2 Notices 14      SECTION 5.3 Governing Law; Submission to Jurisdiction 14      SECTION 5.4 Severability; Counterparts; Waiver of Setoff 14 SECTION 5.5 Successors and Assigns: Participations; Assignments 14      SECTION 5.6 Effectiveness of this Agreement 16      SECTION 5.7 No Petition 16      SECTION 5.8 Waiver of Trial by Jury 16      SECTION 5.9 Limited Recourse 16      SECTION 5.10 Liability of Funding Agent 17 EXHIBIT A FORM OF TRANSFER SUPPLEMENT 19 EXHIBIT B NOTICE ADDRESSES 24 i ANNEX I COMMITMENTS 25 ii ASSET PURCHASE AGREEMENT (IKON Capital Plc)      THIS ASSET PURCHASE AGREEMENT, dated as of 30 March, 2001 (as amended, supplemented or otherwise modified and in effect from time to time, this “Agreement”), is by and among PARK AVENUE RECEIVABLES CORPORATION, a Delaware corporation (together with its successors and assigns, “PARCO”), THE SEVERAL FINANCIAL INSTITUTIONS SET FORTH ON THE SIGNATURE PAGES HERETO and the Persons which from time to time may become a party hereto in accordance with Section 5.5(c) (the “APA Banks”) and THE CHASE MANHATTAN BANK, as funding agent for the benefit of PARCO and the APA Banks (in such capacity, the “Funding Agent”), with respect to the transactions contemplated by the Asset Backed Loan Agreement.      The parties hereto agree as follows: ARTICLE I DEFINITIONS      SECTION 1.1    Incorporation by Reference. Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to such terms in, or incorporated by reference into, the Asset Backed Loan Agreement.      SECTION 1.2    Other Defined Terms. As used in this Agreement, the following terms have the following meanings:      “Adjusted Liquidity Price” means, in determining the Purchase Price with respect to any Purchase Amount on any Purchase Date prior to the occurrence of a Trigger Event, an amount equal to OC + NDR where:    OC=   the product of (a) the APA Bank Purchase Percentage for such Purchase Date and (b) all Collections received by the Originator and/or the Servicer or the Borrower during the collection period covered by the most recent Servicer Report which are due and owing to the Funding Agent, PARCO and/or the APA Banks under the Asset Backed Loan Agreement and which have not yet been remitted to the Funding Agent; and       NDR=   the product of (a) the APA Bank Purchase Percentage for such Purchase Date and (b) the sum of (i) the aggregate Outstanding Balance of all Funded Receivables plus (ii) to the extent not included in OC above, all amounts payable by the Borrower and/or the Originator pursuant to Section 2.3(c)(i) and (ii) of the Asset Backed Loan Agreement minus (iii) the aggregate Outstanding Balance of all Funded Receivables that are Defaulted Receivables. Each of the foregoing shall be determined from the most recent Servicer Report delivered to the Funding Agent.      “Affected APA Bank” is defined in Section 5.5(c). 1      “Agent” means Chase, as administrative agent on behalf of PARCO, and its successors and assigns in such capacity.      “Aggregate Commitment” shall mean the Approved Currency Equivalent of $127,500,000.      “Agreement” is defined in the recitals hereto.      “APA Bank Net Investment” means, at any time, the sum of (a) the aggregate amount paid to the Borrower by the APA Banks in connection with any Incremental Borrowing pursuant to Section 2.1 of the Asset Backed Loan Agreement plus (b) the aggregate Purchase Price paid to PARCO by the APA Banks pursuant to Section 2.1 minus the aggregate amount of Collections received by the Funding Agent and remitted by the Funding Agent to the APA Banks in reduction of APA Bank Net Investment pursuant to Section 2.4(a)(iii) of this Agreement or in reduction of the APA Bank’s Capital pursuant to Section 1.03(c)(iii) of the Asset Backed Loan Agreement; provided that the APA Bank Net Investment shall be restored in the amount of any Collections and other amounts so received and applied if, at any time, the distribution thereof is rescinded or otherwise must be returned for any reason.      “APA Bank Interest” means the APA Banks’ security interest granted pursuant to Section 2.14 of the Asset Backed Loan Agreement and from PARCO pursuant to this Agreement in an amount equal to the percentage equivalent of a fraction, the numerator of which is the excess, if any, of (a) the sum of (i) the aggregate Purchase Amounts specified by PARCO in Sale Notices delivered pursuant to Section 2.1 and (ii) the aggregate amount advanced by the APA Banks pursuant to Section 2.1 of the Asset Backed Loan Agreement over (b) the aggregate amount of Collections received by the Funding Agent and remitted by the Funding Agent to the APA Banks in reduction of the APA Bank Net Investment pursuant to Section 2.4(a)(iii) of this Agreement or in reduction of the APA Bank’s Outstanding Loans pursuant to Section 2.3(c)(iii) of the Asset Backed Loan Agreement (unless the APA Bank Net Investment or the APA Banks’ Outstanding Loans shall have been restored because such distribution was rescinded or otherwise returned for any reason) and the denominator of which is the Net Investment; provided that the APA Bank Interest shall be zero on any date that the APA Bank Net Investment is zero.      “APA Bank Purchase Percentage” means, for any Purchase Date, the percentage equivalent of a fraction, the numerator of which is the Purchase Amount for such Purchase Date and denominator of which is the Net Investment on such Purchase Date.      “APA Banks” is defined in the recitals hereto.      “Approved Currency” shall mean United States dollars and Sterling.      “Approved Currency Equivalent” shall mean the value expressed in Approved Currencies as determined by the Applicable Forward Rate(s) of the applicable FX Hedging Agreements.      “Article” means a numbered article of this Agreement, unless otherwise specified.      “Asset Backed Loan Agreement” means the loan agreement dated as of 30 March, 2001 between the Borrower, the Originator, PARCO, the APA Banks and Chase.      “Available Commitment” of any APA Bank means, on any date of determination, the excess, if any, of such APA Bank’s Commitment over such APA Bank’s Pro Rata Share of 2 the APA Bank Net Investment; provided, however that the Available Commitment of any APA Bank shall be reduced to zero on the Scheduled Commitment Termination Date.      “Chase” means The Chase Manhattan Bank, a New York banking corporation, and its successors and assigns.      “Chase Roles” is defined in Section 4.10.      “Commercial Paper” means the short-term promissory notes of PARCO issued in the United States commercial paper market.      “Commitment” of any APA Bank means the amount set forth on Annex I hereto opposite such APA Bank’s name, or in its Transfer Supplement, as the same may be reduced from time to time in accordance with Section 2.5 or Section 5.5(c).      “Commitment Expiry Date” shall mean the earlier to occur of (i) the date on which the Net Investment shall have been reduced to zero and all amounts due and owing to PARCO and the APA Banks under the Asset Backed Loan Agreement shall have been indefeasibly paid in full (as certified by the Funding Agent) and the Commitments have reduced to zero pursuant to Section 2.5(ii) and (ii) the Scheduled Commitment Termination Date.      “Defaulting APA Bank” is defined in Section 2.2(b).      “Discount” means the amount of discount or interest to accrue on or in respect to the Commercial Paper allocated, in whole or in part, by the Funding Agent to fund the purchase or maintenance of the PARCO Net Investment (including, without limitation, any discount or interest attributable to the commissions of placement agents and dealers in respect of such Commercial Paper and any costs associated with funding small or odd-lot amounts, to the extent that such commissions or costs are allocated, in whole or in part, to such Commercial Paper by the Funding Agent).       “Federal Funds Rate” means, for any day, an interest rate per annum equal to (a) 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 (b) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 A.M. (New York time) on such day on such transactions received by the Funding Agent from three (3) federal funds brokers of recognized standing selected by the Funding Agent in its sole discretion.      “Funded Assets” means each Funded Receivable and all Related Security and Collections with respect thereto.       “Funded Receivables” means all of the Receivables funded by PARCO under the Asset Backed Loan Agreement.       “Funding Account” is defined in Section 2.4(a).       “Funding Agent” means Chase, in its capacity as Administrative Agent for the benefit of PARCO and the APA Banks under the Asset Backed Loan Agreement, for the benefit of the APA Banks under this Agreement, and for the benefit of PARCO pursuant to Section 2.4(a) of this Agreement, and not in its individual capacity or as an APA Bank. 3      “Manager” means Global Securitization Services, LLC, a Delaware limited liability company, as manager on behalf of PARCO, and its successors and assigns in such capacity.      “Net Investment” means, at any time, the aggregate amount paid by PARCO or the APA Banks in connection with any Incremental Borrowing pursuant to Section 2.1 of the Asset Backed Loan Agreement minus the aggregate amount of Collections received by the Funding Agent and remitted by the Funding Agent to PARCO or the APA Banks in reduction of Net Investment pursuant to Section 2.4(a)(iii) of this Agreement or in reduction of the Outstanding Loans pursuant to Section 2.3(c)(iii) of the Asset Backed Loan Agreement; provided that the Net Investment shall be restored in the amount of any Collections and other amounts so received and applied if, at any time, the distribution thereof is rescinded or otherwise must be returned for any reason.      “Non-Defaulting APA Bank” is defined in Section 2.2(b).      “PARCO” is defined in the recitals hereto.      “PARCO Insolvency Event” means, with respect to PARCO, the occurrence of any one or more of the following: (a) any proceeding shall have been instituted by PARCO seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, or (b) any proceeding of the type described in the foregoing clause (a) shall be instituted against PARCO and shall have remained undismissed for a period of sixty (60) consecutive days, or an order granting relief requested in any such proceeding shall be entered.      “PARCO Interest” means, on any date of determination, PARCO’s security interest granted pursuant to Section 2.14 of the Asset Backed Loan Agreement in an amount equal to the percentage equivalent of a fraction, the numerator of which is the excess, if any, of (a) the aggregate amount advanced by PARCO pursuant to Section 2.1 of the Asset Backed Loan Agreement over (b) the sum of (i) the aggregate Purchase Amounts specified by PARCO in Sale Notices delivered pursuant to Section 2.1 and (ii) the aggregate amount of Collections received by the Funding Agent and remitted by the Funding Agent to PARCO in reduction of PARCO Net Investment pursuant to Section 2.4(a)(iii) of this Agreement or in reduction of PARCO’s Outstanding Loan pursuant to Section 2.3(c)(iii) of the Asset Backed Loan Agreement (unless the PARCO Net Investment or PARCO’s Capital shall have been restored because such distribution was rescinded or otherwise returned for any reason) and the denominator of which is the Net Investment.      “PARCO Net Investment” means, at any time, the aggregate amount paid to the Borrower by PARCO in connection with any Incremental Borrowing pursuant to Section 2.1 of the Asset Backed Loan Agreement minus the sum of (a) the aggregate Purchase Prices received by PARCO (less any amount thereof attributable to Discount or Unaccrued Discount) pursuant to Section 2.1 and (b) the aggregate amount of Collections received by the Funding Agent and remitted by the Funding Agent to PARCO in reduction of PARCO Net Investment pursuant to Section 2.4(a)(iii) of this Agreement or in reduction of PARCO’s Outstanding Loans pursuant to Section 2.3(c)(iii) of the Asset Backed Loan Agreement; provided that the PARCO Net Investment shall be restored in the amount of any Collections and other amounts so received and applied if, at any time, the distribution thereof is rescinded or otherwise must be returned for any reason. 4      “PARCO Residual Amount” is defined in Section 2.4(d).      “PARCO Termination Event” means the providers of PARCO’s program liquidity and/or letter of credit facilities shall have given notice that an event of default has occurred and is continuing under their respective agreements with PARCO.      “Participation” is defined in Section 5.5(b).      “Pro Rata Share” of any APA Bank means, on any date of determination, the ratio (expressed as a percentage) of such APA Bank’s Commitment to the Aggregate Commitment on such date; provided that on any date after the Commitment Expiry Date the Pro Rata Share of any APA Bank shall be such APA Bank’s Pro Rata Share on the Commitment Expiry Date.      “Purchase Amount” means for any Purchase Date the amount of the PARCO Net Investment specified by PARCO in the Sale Notice for such Purchase Date; provided, however, that the Purchase Amount specified by PARCO for any Purchase Date shall not exceed the amount that will reduce the PARCO Interest to zero.      “Purchase Date” means a date specified by PARCO in a Sale Notice as being the effective date of PARCO’s assignment to the APA Banks of the Purchase Percentage with respect to such Purchase Date of the PARCO Interest.      “Purchase Percentage” means, for any Purchase Date, the percentage equivalent of a fraction, the numerator of which is the Purchase Amount for such Purchase Date and denominator of which is the excess, if any, of (a) the aggregate amount advanced by PARCO to the Borrower pursuant to Section 2.1 of the Asset Backed Loan Agreement over (b) the sum of (i) the aggregate Purchase Amount specified by PARCO in Sales Notices delivered pursuant to Section 2.1 and (ii) the aggregate amount of Collections received by the Funding Agent and remitted by the Funding Agent to PARCO in reduction of PARCO Net Investment pursuant to Section 2.4(a)(iii) of this Agreement or in reduction of PARCO’s Outstanding Loan pursuant to Section 2.3(c)(iii) of the Asset Backed Loan Agreement (unless the PARCO Net Investment or PARCO’s Outstanding Loan shall have been restored because such distribution was rescinded or otherwise returned for any reason) on such Purchase Date.      “Purchase Price” means, (a) on any Purchase Date on or prior to the date of the occurrence of a Trigger Event, an amount equal to the sum of (i) the lesser of (A) the Approved Currency Equivalent of the Purchase Amount for such Purchase Date and (B) the Adjusted Liquidity Price with respect to such Purchase Amount, plus (ii) the sum of (A) the Purchase Percentage with respect to such Purchase Date of all accrued and unpaid Discount and (B) the Unaccrued Discount with respect to such Purchase Amount and (b) on any Purchase Date after the date of the occurrence of a Trigger Event, an amount equal to the sum of (i) the Approved Currency Equivalent of the Purchase Amount for such Purchase Date plus (ii) the sum of (A) the Purchase Percentage with respect to such Purchase Date of all accrued and unpaid Discount and (B) the Unaccrued Discount with respect to such Purchase Amount; provided, that, if on the date of the occurrence of such Trigger Event, the Approved Currency Equivalent of the Net Investment exceeds the Termination Date Balance (the amount of such excess, the “Loss Amount”), the amount in clause (b)(i) above on any Purchase Date occurring after the occurrence of such Trigger Event shall be reduced by an amount equal to the APA Bank Purchase Percentage for such Purchase Date of the Loss Amount.      “Purchase Price Deficit” is defined in Section 2.2(b).      “Purchaser” is defined in Section 5.5(c). 5       “Rating Agencies” means on any date of determination the rating agencies then rating the Commercial Paper at the request of PARCO.       “Rating Confirmation” means, with respect to PARCO and any material amendment, modification, waiver or other action to be taken pursuant to the terms of this Agreement, a confirmation by each of the Rating Agencies that such proposed material amendment, modification, waiver or action shall not result in a downgrade or withdrawal of such Rating Agency’s then current rating of the Commercial Paper.       “Reduction Percentage” means, with respect to any Purchase for which the Adjusted Liquidity Price or Termination Date Balance is included in the calculation of the Purchase Price therefor, the percentage equivalent of a fraction, the numerator of which is the PARCO Residual Amount for such Purchase and the denominator of which is the sum of (i) the Adjusted Liquidity Price or the Termination Date Balance, as applicable, and (ii) the PARCO Residual Amount.      “Required APA Banks” means APA Banks having Pro Rata Shares in the aggregate at least equal to 66-2/3%; provided that the Commitment of any Defaulting APA Bank that has not paid all amounts due and owing by it in respect of purchases it was obliged to make shall not be included in the Aggregate Commitment for purposes of this definition.      “Sale Notice” means an irrevocable written notice given by an authorized signer or authorized officer of PARCO (or on behalf of PARCO by Chase, in its capacity as the Agent) to the Funding Agent committing to sell, assign and transfer to the APA Banks, all or a percentage of the PARCO Interest, which notice shall designate (a) the applicable Purchase Date, (b) the amount of the PARCO Net Investment to be purchased by the APA Banks on such Purchase Date, (c) the Purchase Percentage and the APA Bank Purchase Percentage for such Purchase Date, (d) the Purchase Price (including a calculation of the Purchase Price), (e) that no PARCO Insolvency Event has occurred and (f) wire transfer instructions specifying the account(s) into which the proceeds of the Purchase Price shall be deposited.      “Scheduled Commitment Termination Date” means 28 March 2002, as such date may be extended for an additional period of time up to 364 days from time to time in writing by PARCO, the Funding Agent and the APA Banks.      “Section” means a numbered section of this Agreement unless otherwise specified.      “Termination Date Balance” means, on the date of occurrence of a Trigger Event, an amount equal to: OC + NDR      where: OC=   all Collections received by the Originator and/or the Servicer or the Borrower during the collection period covered by the Servicer Report delivered to the Funding Agent on or immediately prior to the date of the occurrence of such Trigger Event which are due and owing to the Funding Agent, PARCO and/or the APA Banks under the Asset Backed Loan Agreement and which have not yet been remitted to the Funding Agent. 6       NDR=   the sum of (i) the aggregate Outstanding Balance of all Funded Receivables plus (ii) to the extent not included in OC above, all amounts payable by the Borrower and/or the Originator pursuant to Section 2.3(c)(i) and (ii) of the Asset Backed Loan Agreement minus (iii) the aggregate Outstanding Balance of all Funded Receivables that are Defaulted Receivables.       Each of the foregoing shall be determined from the Servicer Report delivered to the Funding Agent on or immediately prior to the date of the occurrence of such Trigger Event.      “Transaction Documents” is defined in Section 3.1.      “Transaction Parties” is defined in Section 3.1.      “Transfer Supplement” is defined in Section 5.5(c).      “Unaccrued Discount” means on any Purchase Date with respect to any Purchase Amount, the Discount that would have accrued on the Commercial Paper allocated, in whole or in part, by the Funding Agent to fund the purchase or maintenance of such Purchase Amount subsequent to such Purchase Date to the maturity date thereof if the related reduction in the PARCO Net Investment had not occurred. ARTICLE II PURCHASE COMMITMENT      SECTION 2.1    Liquidity Purchases.      (a)    Sales by PARCO. From time to time prior to the Commitment Expiry Date, PARCO may, and on the Commitment Expiry Date or upon the occurrence of a PARCO Termination Event, PARCO shall be obligated to deliver a Sale Notice to the Funding Agent. Each Sale Notice shall be delivered by PARCO to the Funding Agent prior to 12.30P.M. (New York time) on the proposed Purchase Date and shall constitute an irrevocable offer by PARCO to sell the Purchase Percentage with respect to such Purchase Date of the PARCO Interest described therein at the Purchase Price. The Purchase Amount set forth in any Sale Notice delivered by PARCO on the Commitment Expiry Date or upon the occurrence of a PARCO Termination Event shall equal the PARCO Net Investment. Each Sale Notice delivered by PARCO shall be deemed to be a representation and warranty by PARCO that no PARCO Insolvency Event shall have occurred and be continuing. Each APA Bank hereby agrees to purchase from PARCO its Pro Rata Share of the Purchase Percentage of the PARCO Interest for a purchase price equal to its Pro Rata Share of the Purchase Price on the Purchase Date (which date, subject to Section 2.1(b) below, may be the same as the date of the Sale Notice). Notwithstanding anything to the contrary set forth in this Agreement, the APA Banks shall have no obligation to purchase the PARCO Interest or any portion thereof from PARCO if, on such Purchase Date, a PARCO Insolvency Event shall have occurred and be continuing. The Funding Agent shall promptly advise the APA Banks (by telecopy or by telephone call promptly confirmed in writing by telecopy) of the receipt and content of any Sale Notice delivered to it by PARCO and shall promptly advise PARCO of the Purchase Price and each APA Bank of its Pro Rata Share of the Purchase Price. The Purchase Price shall be deposited in immediately available funds into the account(s) specified by PARCO in the related Sale Notice.      (b)    Timing of Sale Notice and Purchase Date. If, at or prior to 12.30P.M. (New York time) on any Business Day, PARCO delivers a Sale Notice to the Funding Agent specifying 7 that a Purchase Date shall be the same date as the date of the Sale Notice, the Funding Agent shall, by no later than 1.30P.M. (New York time) on such Business Day, notify each APA Bank of such Sale Notice. Each APA Bank shall make a purchase of its Pro Rata Share of the Purchase Percentage of the PARCO Interest by advancing immediately available funds on such date to the account of PARCO maintained at the principal office of the Funding Agent no later than 3.00P.M. (New York time). Notwithstanding the fact that a Purchase Date may occur on a date which is later than the date on which the Sale Notice is delivered to the Funding Agent, the several obligation of each APA Bank of accept such transfer and to make payment of the amount required to be paid by it pursuant to Section 2.2 shall arise immediately upon receipt by the Funding Agent of a Sale Notice. Regardless of when the Sale Notice is received, any APA Bank may designate any one or more of its domestic or foreign branches, offices or affiliates through which it will fund its Pro Rata Share of the Purchase Price for a Purchase, and the term “APA Bank” shall include any such branch, office or affiliate for such purchase.      SECTION 2.2    Several Commitments of the APA Banks.      (a)    Funding upon Receipt of a Sale Notice. Each APA Bank hereby absolutely and unconditionally (except as provided in Section 2.1(a)) severally commits to PARCO and to the Funding Agent to provide the Funding Agent, on each Purchase Date (if notice has been given in accordance with Section 2.1(b)) at the principal office of the Funding Agent in The City of New York for delivery to PARCO, with immediately available funds in an amount equal to such APA Bank’s Pro Rata Share of the Purchase Price with respect to such Purchase Date, whereupon such APA Bank shall become the sole owner of its Pro Rata Share of the APA Bank Purchase Percentage with respect to such Purchase Date of the Funded Assets. The APA Banks several obligations under this Section 2.2(a) to provide the Funding Agent with funds shall terminate on the Commitment Expiry Date. Notwithstanding anything contained in this Section 2.2(a) or elsewhere in this Agreement to the contrary, no APA Bank shall be obligated to provide the Funding Agent with aggregate funds in connection with a Purchase in an amount that would exceed such APA Bank’s Available Commitment then in effect. The failure of any APA Bank to make its Pro Rata Share of the Purchase Price available to the Funding Agent shall not relieve any other APA Bank of its obligations thereunder.      (b)    Defaulting APA Banks. If, by 2.00P.M. (New York time) on any Purchase Date, one or more APA Banks (each, a “Defaulting APA Bank”, and each APA Bank other than the Defaulting APA Bank being referred to as a “Non-Defaulting APA Bank”) fails to make its Pro Rata Share of the Purchase Price available to the Funding Agent pursuant to Section 2.1(b) (the aggregate amount not so made available to the Funding Agent being herein called the “Purchase Price Deficit”), then the Funding Agent shall, by no later than 2.30P.M. (New York time) on such Purchase Date, instruct each Non-Defaulting APA Bank to pay, by no later than 3.00P.M. (New York time) on such Purchase Date, in immediately available funds, to the accounts designated by the Funding Agent, an amount equal to the lessor of (x) such Non-Defaulting APA Bank’s proportionate share (based upon the relative Commitments of the Non-Defaulting APA Banks) of the Purchase Price Deficit and (y) its Available Commitment. A Defaulting APA Bank shall forthwith, upon demand, pay the Funding Agent for the rateable benefit of the Non-Defaulting APA Banks all amounts paid by each Non-Defaulting APA Bank on behalf of such Defaulting APA Bank, together with interest thereon, for each day from the date a payment was made by a Non-Defaulting APA Bank until the date such Non-Defaulting APA Bank has been paid such amounts in full, at a rate per annum equal to the sum of the Federal Funds Rate plus 2%. In addition, without prejudice to any other rights that PARCO may have under applicable law, each Defaulting APA Bank shall pay to PARCO, forthwith upon demand, the difference between the Defaulting APA Bank’s unpaid Pro Rata Share of the Purchase Price and the amount paid with respect thereto by the Non-Defaulting APA Banks, together with interest thereon, for each day from the date of the Funding Agent’s request for such Defaulting 8 APA Bank’s Pro Rata Share of the Purchase Price pursuant to Section 2.1(b) until the date the requisite amount is paid to PARCO in full, at a rate per annum equal to the sum of the Federal Funds Rate plus 2%.      SECTION 2.3    Nonrecourse Nature of Transactions. Each of the Funding Agent and the APA Banks hereby agrees that any Purchase shall be without recourse of any kind to PARCO or the Funding Agent, except as expressly provided in Section 4.3 and 4.7 with respect to the Funding Agent.      SECTION 2.4    Payments; Indemnity.      (a)    Payments Generally. On or prior to the Closing Date, the Funding Agent shall establish a demand deposit account with Chase for the benefit of PARCO and the APA Banks (the “Funding Account”), into which all Collections and other amounts received by the Funding Agent from the Servicer or the Borrower shall be deposited. The Funding Agent, on behalf of PARCO and the APA Banks, shall have the sole right of withdrawal from the Funding Account. For so long as any amounts remaining due and owing to PARCO or the APA Banks hereunder or under the Asset Backed Loan Agreement, the Funding Agent shall distribute all payments received by it in respect of the Funded Assets immediately after receipt thereof by (i) transferring to PARCO and the APA Banks, on a pro rata basis, based on the amounts thereof owing to PARCO and the APA Banks, respectively, all payments of Interest, (ii) transferring to PARCO and the APA Banks, on a pro rata basis, based on the PARCO Interest and the APA Bank Interest, respectively, on the date of payment, all payments in reduction of the Net Investment and (iii) transferring to PARCO and/or the APA Banks, any other amounts owing to PARCO and/or the APA Banks hereunder or under the Asset Backed Loan Agreement. Such transfers shall be made by the Funding Agent by withdrawing funds on deposit in the Funding Account and remitting such funds to the accounts of PARCO and each of the APA Banks specified by each of them from time to time. The Funding Agent shall remit any such funds to the APA Banks rateably in accordance with their Pro Rata Shares (calculated without regard to that portion of the Commitment of a Defaulting APA Bank which such Defaulting APA Bank failed to fund pursuant to this Agreement).      (b)    Requests for Indemnity under the Transaction Documents. The Funding Agent shall, at the written request of any APA Bank, make demand of PARCO for payment of any amounts from time to time claimed by such APA Bank pursuant to the terms of the Asset Backed Loan Agreement, and the Funding Agent shall, upon its receipt of such amounts, distribute them to each such APA Bank rateably in accordance with their respective Pro Rata Shares (calculated without regard to that portion of the Commitment of a Defaulting APA Bank which such Defaulting APA Bank failed to fund pursuant to this Agreement).      (c)    Payments Conditional upon Receipt from Borrower or the Servicer. Anything in this Agreement to the contrary notwithstanding, the Funding Agent shall have no obligation to make any payments to the APA Banks unless and until it has received such amounts from the Borrower or the Servicer or otherwise pursuant to the Asset Backed Loan Agreement.      (d)    PARCO Residual Amount. If (i) the Adjusted Liquidity Price or the Termination Date Balance is included in the calculation of the Purchase Price for any Purchase of the PARCO Interest, and (ii) on the related Purchase Date, the Adjusted Liquidity Price or the Termination Date Balance, as applicable, is less than the Aggregate Net Investment (the amount of insufficiency, the “PARCO Residual Amount”), then, in such event, each APA Bank hereby agrees that the Funding Agent, for the benefit of PARCO, shall remit to PARCO its Reduction Percentage of any amounts received by the Funding Agent from any Transaction Party in respect of interest or any reduction of the Aggregate New Investment, as applicable, on the First Business 9 Day immediately following the payment in full to the APA Banks of all amounts due and owing to the APA Banks under the Transaction Documents.      SECTION 2.5    Reduction of Commitment. The Commitment of each APA Bank (i) shall be automatically reduced following any permanent reduction of the Funding Limit under the Asset Backed Loan Agreement in an amount equal to such APA Bank’s Pro Rata Share of 102% of the amount of such reduction and (ii) shall be automatically reduced to zero on the Commitment Expiry Date. ARTICLE III REPRESENTATIONS AND WARRANTIES      SECTION 3.1    PARCO Disclaimer of Representations and Warranties. By executing and delivering any Sale Notice pursuant to Section 2.1(a), (a) PARCO makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Funded Assets or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Funded Assets, the Asset Backed Loan Agreement, or any other Transaction Document, and (b) PARCO makes no representation or warranty or assumes no responsibility with respect to the financial condition of the Servicer, the Borrower or the Originator (collectively, the “Transaction Parties”) or the Funding Agent, or the performance or observance by the Transaction Parties of any of their respective obligations under the Transaction Documents.      SECTION 3.2    Representations and Warranties of the APA Banks. Each APA Bank (a) confirms that it has received copies of the Asset Backed Loan Agreement and the other Transaction Documents; (b) represents and warrants to the Funding Agent and PARCO that it has, independently and without reliance upon the Funding Agent or PARCO, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Transaction Parties, and made its own decision to enter into this Agreement; (c) represents that it will, independently and without reliance upon the Funding Agent or PARCO, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Transaction Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, prospects, financial and other condition and creditworthiness of the Transaction Parties; (d) appoints and authorizes the Funding Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are delegated to the Funding Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; (e) represents and warrants that it is (i) a “qualified institutional buyer” (as such term is defined in Rule 144A under the Securities Act of 1933, as amended) and (ii) a corporation or a banking association duly organised and validly existing under the laws of its jurisdiction of incorporation or organisation and has all corporate power to perform its obligations hereunder; (f) represents and warrants that no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by it of this Agreement, which has not otherwise been obtained; (g) represents and warrants that the execution, delivery and performance of this Agreement are within its corporate powers, have been duly authorised by all necessary corporate action, do not contravene or violate (i) its certificate or articles of incorporation or association or by–laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound, or 10 (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any adverse claim on its assets, which contravention or violation in any of the foregoing cases could have a material adverse effect on its financial condition or its ability to perform its obligations hereunder; (h) represents and warrants that this Agreement constitutes its legal, valid and binding obligations enforceable against it in accordance with their terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganisation or other similar laws relating to limiting creditors’ rights generally and by equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (i) represents and warrants that this Agreement has been duly authorised, executed and delivered by it. ARTICLE IV THE FUNDING AGENT      SECTION 4.1    Appointment. Each of PARCO and each APA Bank hereby irrevocably designates and appoints the Funding Agent as its agent under this Agreement and each of PARCO and each APA Bank irrevocably authorizes the Funding Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Funding Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Funding Agent shall not have any duties or responsibilities except those expressly set forth herein, or any fiduciary relationship with either PARCO or any APA Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Funding Agent. The provisions of this Article IV are solely for the benefit of the Funding Agent, PARCO and the APA Banks. In performing its functions and duties solely under this Agreement, subject to the provisions of Section 5.10, the Funding Agent shall act solely as the agent of the APA Banks and does not assume, nor shall be deemed to have assumed, any obligation or relationship of trust or agency with or for PARCO.      SECTION 4.2    Delegation of Duties. The Funding Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel (who may be counsel for the Borrower or the Servicer), independent public accountants and other experts selected by it concerning all matters pertaining to such duties. The Funding Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.      SECTION 4.3    Exculpatory Provisions. Neither the Funding Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or any Person described in Section 4.2 under or in connection with this Agreement (x) with the consent or at the request of either PARCO or the APA Banks or (y) in the absence of its own gross negligence or wilful misconduct or (ii) responsible in any manner to either PARCO or any APA Bank for any recitals, statements, representations or warranties made by any of the Transaction Parties or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Funding Agent under or in connection with, this Agreement or the other Transaction Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Transaction Documents or for any failure of any of the Transaction Parties to perform its obligations hereunder or thereunder. The Funding Agent shall not be under any obligation to either PARCO or any APA Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or 11 conditions of, this Agreement or any of the other Transaction Documents or to inspect the properties, books or records of any of the Transaction Parties.      SECTION 4.4    Reliance by Funding Agent. The Funding Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to PARCO or any APA Bank), independent accountants and other experts selected by the Funding Agent and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. The Funding Agent shall be fully justified in failing or refusing to take any action under the Transaction Documents unless it shall first receive such advice or concurrence of PARCO or the APA Banks, as applicable, as it deems appropriate or it shall first be indemnified to its satisfaction by PARCO or the APA Banks, as applicable, against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Funding Agent shall in all cases be fully protected in acting, or in refraining from acting, under the Transaction Documents in accordance with a request of PARCO or the Required APA Banks, as applicable, and such request and any action taken or failure to act pursuant thereto shall be binding upon PARCO and the APA Banks, as applicable.      SECTION 4.5    Notices. The Funding Agent shall not be deemed to have knowledge or notice of the occurrence of any Trigger Event unless the Funding Agent has received notice from PARCO, any APA Bank or any Transaction Party referring to the Agreement or any other Transaction Document describing such Trigger Event and stating that such notice is a “notice of a Trigger Event”. In the event that the Funding Agent receives such a notice, the Funding Agent shall give notice thereof to PARCO, each APA Bank and the Rating Agencies. The Funding Agent shall take such action with respect to such event as shall be reasonably directed by PARCO and the Required APA Banks, provided that unless and until the Funding Agent shall have received such directions, the Funding Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event as it shall deem advisable in the best interests of PARCO and the APA Banks.      SECTION 4.6    Non-reliance on the Funding Agent. PARCO and each APA Bank expressly acknowledges that neither the Funding Agent nor any of its officers, directors, employees, agents, attorneys–in–fact or Affiliates has made any representations or warranties to it and that no act by the Funding Agent hereinafter taken, including any review of the affairs of any Transaction Party, shall be deemed to constitute any representation or warranty by the Funding Agent to either PARCO or any APA Bank. Except for notices, reports and other documents expressly required to be furnished to PARCO or any APA Bank. Except for notices, reports and other documents expressly required to be furnished to PARCO and the APA Banks by the Funding Agent hereunder, the Funding Agent shall have no duty or responsibility to provide either PARCO or any APA Bank with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Transaction Parties which may come into the possession of the Funding Agent or any of its officers, directors, employees, agents, attorneys–in–fact or Affiliates.      SECTION 4.7    Indemnification. The APA Banks agree to indemnify the Funding Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Transaction Parties, and without limiting the obligation of any Transaction Party to do so in accordance with the terms of the Asset Backed Loan Agreement and the other Transaction Documents), rateably according to their Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or 12 disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for the Funding Agent or the affected Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Funding Agent or such affected Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Funding Agent or such affected Person as a result of, or arising out of, or in any way related to or by reason of, any of the transactions contemplated hereunder or under the Transaction Documents or the execution, delivery or performance of this Agreement, the Asset Backed Loan Agreement, any other Transaction Document or any other document furnished in connection herewith or therewith (but excluding any such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or wilful misconduct of the Funding Agent or such affected Person).      SECTION 4.8    The Funding Agent in Its Individual Capacity. The Funding Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with any of the Transaction Parties or any of their Affiliates as though the Funding Agent were not the Funding Agent hereunder. With respect to its acquisition of any interest in the Funded Assets pursuant to this Agreement, the Funding Agent shall have the same rights and powers under this Agreement as any APA Bank and may exercise the same as though it were not the Funding Agent, and the term “APA Bank” shall include the Funding Agent in its individual capacity as an APA Bank.      SECTION 4.9    Successor Funding Agent. The Funding Agent may, upon five (5) days’ notice to PARCO, the APA Banks and the Rating Agencies resign as Funding Agent. If the Funding Agent shall resign as Funding Agent under this Agreement, then the Required APA Banks shall appoint from among the APA Banks a successor agent, whereupon such successor agent shall succeed to the rights, powers and duties of the Funding Agent, and the term “Funding Agent” shall mean such successor agent, effective upon its acceptance of such appointment, and the former Funding Agent’s rights, powers and duties as Funding Agent shall be terminated, without any other or further act or deed on the part of such former Funding Agent or any of the parties to this Agreement. After the retiring Funding Agent’s resignation hereunder as Funding Agent, the provisions of this Article IV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Funding Agent under this Agreement.      SECTION 4.10    Chase Conflict Waiver. Chase acts as Agent for PARCO, as issuing and paying agent for PARCO’s Commercial Paper and as provider for other backup facilities for PARCO, and may provide other services or facilities from time to time (the “Chase Roles”). Without limiting the generality of Section 4.8, each APA Bank hereby acknowledges and consents to any and all Chase Roles, waives any objections it may have to any actual or potential conflict of interest caused by Chase’s acting as the Funding Agent hereunder and acting as or maintaining any of the Chase Roles, and agrees that in connection with any Chase Role, Chase may take, or refrain from taking, any action which it in its discretion deems appropriate. Each APA Bank is hereby notified that PARCO may delegate responsibility for signing and/or sending Sale Notice to Chase as PARCO’s Agent. 13   ARTICLE V MISCELLANEOUS      SECTION 5.1 Waivers; Amendments, etc.      (a)   No Waiver; Remedies Cumulative. No failure or delay on the part of the Funding Agent or any APA Bank in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights and remedies provided by law. Any waiver of this Agreement shall be effective only for the specific purpose for which given.      (b)   Amendments Etc. This Agreement may be amended, supplemented, modified or waived with the written consent of all of the parties hereto. The Funding Agent shall provide prior written notice to the Rating Agencies of any material amendment, supplement, modification or waiver of this Agreement. In the case of any waiver, PARCO, the APA Banks and the Funding agent shall be restored to their former positions and rights hereunder.      (c)   Integration. This Agreement, the Asset Backed Loan Agreement and the other Transaction Documents contain a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings.      SECTION 5.2   Notices. Except as otherwise expressly provided herein, all communications and notices provided for hereunder shall be in writing and shall be (a) hand-delivered by messenger, (b) sent by reputable overnight or second business day courier, or (c) sent by telecopy or similar electronic transmission directed to the applicable address or telecopy number, as the case may be, set forth on Exhibit B hereto (as amended from time to time) or at such other address or telecopy number as any party may hereafter specific in writing to the Funding agent for the purpose of receiving notices. Each such notice or other communication shall be effective only upon receipt thereof.      SECTION 5.3   Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.      SECTION 5.4   Severability; Counterparts; Waiver of Setoff. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Each of the APA Banks and the Funding Agent hereby waives any right of setoff it may have or to which it may be entitled under this Agreement from time to time against PARCO or their respective assets.      SECTION 5.5   Successors and Assigns: Participations; Assignments. 14      (a)   Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns. No APA Bank may participate, assign or sell any portion of its rights hereunder except as required by operation of law, in connection with the merger, consolidation or dissolution of any APA Bank or as provided in this Section 5.5. No assignment hereunder shall become effective without a Rating Confirmation.      (b)   Participations. Any APA Bank may, with the consent of the Funding Agent and in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more Persons (each, a “Participant”) participating interests in its rights and obligations hereunder and under the Transaction Documents; provided, however, that each Participant shall purchase an identical percentage in such selling APA Bank’s Commitment, Available Commitment and Pro Rata Share of the APA Bank Net Investment. Notwithstanding any such sale by an APA Bank of participating interests to a Participant, such APA Bank’s rights and obligations under this Agreement shall remain unchanged, such APA Bank shall remain solely responsible for the performance thereof, and PARCO and the Funding Agent shall continue to deal solely and directly with such APA bank in connection with such APA Bank’s rights and obligations under this Agreement and the other Transaction Documents. Each APA Bank agrees that any agreement between such APA Bank and any such Participant in respect of such participating interest shall not restrict such APA Bank’s right to agree to any amendment, supplement, waiver or modification to this Agreement.      (c)   Assignments.      (i)    Any APA Bank may at any time and from time to time, upon the prior written consent of PARCO and the Funding Agent, assign to one or more accredited investors or other Persons (“Purchaser(s)”) all or any part of its rights and obligations under this Agreement and the other Transaction Documents pursuant to a supplement to this Agreement, substantially in the form of Exhibit A hereto (each, a “Transfer Supplement”), executed by the Purchaser, such selling APA Bank and, as applicable, the Funding Agent; and provided however that (A) each Purchaser shall purchase an identical percentage in such selling APA Bank’s Commitment, Available Commitment and Pro Rata Share of the APA Bank Net Investment, (b) any such assignment cannot be for an amount less than the lesser of (1)[$10 million] and (2) such selling APA Bank’s Commitment or Pro Rate Share of the APA Bank Net Investment (calculated at the time of such assignment) and (C) each Purchaser must be (1) a financial institution incorporated in an OECD country and rated at least A-1/P-1 (or the equivalent short-term rating) by the Rating Agencies and (2) a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933, as amended).      (ii)   Each of the APA Banks agrees that in the event that it shall cease to have short-term debt ratings at least equal to the ratings then assigned to the Commercial Paper by the Rating Agencies, or, if such APA Bank does not have short-term debt which is rated by the Rating Agencies, in the event that the parent corporation of such APA Bank has rated short-term debt, such parent corporation ceases to have short-term debt ratings at least equal to the ratings then assigned to the Commercial Paper by the Rating Agencies (each, an “Affected APA Bank”), such Affected APA Bank shall be obliged, at the request of PARCO and the Funding Agent, to assign all of its rights and obligations hereunder to (x) one or more other APA Banks selected by PARCO and the Funding Agent which are willing to accept such assignment, or (y) another financial institution having short-term debt ratings at last equal to the ratings when assigned to the Commercial Paper by the Rating Agencies nominated by the Funding Agent and consented to by PARCO (which consent shall not be unreasonably withheld) and the Funding Agent, and willing to participate in this facility through the Scheduled 15 Commitment Termination Date in the place of such Affected APA Bank; provided that (i) the Affected APA Bank receives payment in full, pursuant to a Transfer Supplement and/or, as applicable, an assignment, of an amount equal to the Affected APA Bank’s Pro Rata Share of the APA Bank Net Investment and any other amounts due and owing to such Affected APA Bank under the Asset Backed Loan Agreement and the other Transaction Documents and (ii) such nominated financial institution, if not an existing APA Bank, satisfies all the requirements of this Agreement.      (iii)   Upon (A) execution of a Transfer Supplement, (B) delivery of an executed copy thereof to PARCO, the Funding Agent and the Agent, (C) payment, if applicable, by the Purchaser to such selling APA Bank of an amount equal to the purchase price agreed between such selling APA Bank and the Purchaser and (D) receipt by PARCO of a Rating Confirmation, such selling APA Bank shall be released from its obligations hereunder to the extent of such assignment and the Purchaser shall, for all purposes, be an APA Bank party to this Agreement and shall have all the rights and obligations of an APA Bank under this Agreement to the same extent as if it were an original party hereto, and no further consent or action by PARCO, the APA Banks or the Funding Agent shall be required. The amount of the assigned portion of the selling APA Bank’s Pro Rata Share of the APA Bank Net Investment allocable to the Purchaser shall be equal to the Transferred Percentage (as defined in the Transfer Supplement) of such selling APA Bank’s Pro Rata Share of the APA Bank Net Investment which is transferred hereunder regardless of the purchase price paid therefor. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of the Purchaser as an APA Bank and the resulting adjustment of the selling APA Bank’s Commitment arising from the purchase by the Purchaser of all or a portion of the selling APA Bank’s rights, obligations, and interest hereunder.      SECTION 5.6   Effectiveness of this Agreement. This Agreement, and the obligations of the Funding Agent and the APA Banks hereunder, shall become effective when the Funding Agent has received counterparts hereof, duly executed by the Funding Agent, PARCO and the APA Banks.      SECTION 5.7   No Petition. The Funding Agent and each APA Bank hereby covenant and agree that, prior to the date which is one year and one day after the payment in full of all outstanding Commercial Paper of PARCO, such party will not institute against, or join any other Person in instituting against, PARCO any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of any jurisdiction. The provisions of this Section 5.7 shall survive termination of this Agreement.      SECTION 5.8   Waiver of Trial by Jury. To the extent permitted by applicable law, the Funding Agent, the APA Banks and PARCO irrevocably waive all right of trial by jury in any action, proceeding or counterclaim arising out of or in connection with this Agreement or the operative documents or any matter arising hereunder or thereunder.      SECTION 5.9   Limited Recourse. Notwithstanding anything to the contrary contained herein, the obligations of PARCO under this Agreement are solely the corporate obligations of PARCO and, in the case of obligations of PARCO other than Commercial Paper, shall be payable at such time as funds are received by or are available to PARCO in excess of funds necessary to pay in full all outstanding Commercial Paper and, to the extent funds are not available to pay such obligations, the claims relating thereto shall not constitute a claim against PARCO but shall continue to accrue. Each party hereto agrees that the payment of any claim (as defined in Section 101 of Title 11 of the Bankruptcy Code) of any such party shall be subordinated to the payment in full of all Commercial Paper. 16      No recourse under any obligation, covenant or agreement of PARCO contained in this Agreement shall be had against any incorporator, stockholder, officer, director, employee or agent of PARCO, the Agent, the Funding Agent, the Manager or any of their Affiliates (solely by virtue of such capacity) by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Agreement is solely a corporate obligation of PARCO individually, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, employee or agent of PARCO, the Agent, the Funding Agent, the Manager or any of their Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of PARCO contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by PARCO of any such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Agreement; provided that the foregoing shall not relieve any such Person from any liability it might otherwise have as a result of fraudulent actions taken or omissions made by them. The provisions of this Section 5.9 shall survive termination of this Agreement.      SECTION 5.10   Liability of Funding Agent. Notwithstanding any provision of this Agreement: (i) the Funding Agent shall not have any obligations under this Agreement other than those specifically set forth herein, and no implied obligations of the Funding Agent shall be read into this Agreement; and (ii) in no event shall the Funding Agent be liable under or in connection with this Agreement for indirect, special, or consequential losses or damages of any kind, including lost profits, even if advised of the possibility thereof and regardless of the form of action by which such losses or damages may be claimed. Neither the Funding Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken in good faith by it or them under or in connection with this Agreement, except for its or their own gross negligence or wilful misconduct. Without limiting the foregoing, the Funding Agent (a) may consult with legal counsel (including counsel for PARCO and the APA Bank), 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) shall not be responsible to PARCO for any statements, warranties or representations made in or in connection with this Agreement, the Asset Backed Loan Agreement or the other Transaction Document, (c) shall not be responsible to PARCO for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the Funded Assets, the Asset Backed Loan Agreement or the other Transaction Documents, (d) shall incur no liability under or in respect of any of the Commercial Paper or other obligations of PARCO under this Agreement or the other Transaction Documents and (e) shall incur no liability under or in respect of this Agreement or the other Transaction Documents by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by facsimile) believed by it to be genuine and signed or sent by the proper party or parties. Notwithstanding anything else herein or the other Transaction Documents, it is agreed that where the Funding Agent may be required under this Agreement or the other Transaction Documents to give notice of any event or condition or to take any action as a result of the occurrence of any event or the existence of any condition, the Funding Agent agrees to give such notice or take such action only to the extent that it has actual knowledge of the occurrence of such event or the existence of such condition, and shall incur no liability for any failure to give such notice or take such action in the absence of such knowledge. 17      IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be executed and delivered by their duly authorized officers or signatories as of the date hereof. PARK AVENUE RECEIVABLES CORPORATION     By:   -------------------------------------------------------------------------------- Name: ANDREW L. STIDD Title: PRESIDENT   THE CHASE MANHATTAN BANK, as APA Bank   By:   -------------------------------------------------------------------------------- Name: BRADLEY S. SCHWARTZ Title: MANAGING DIRECTOR   THE CHASE MANHATTAN BANK, as the Funding Agent   By:   -------------------------------------------------------------------------------- Name: LARA GRAFF Title: VICE PRESIDENT 18 EXHIBIT A [FORM OF TRANSFER SUPPLEMENT]      THIS TRANSFER SUPPLEMENT is entered into as of the _______ day of ________, 200__, by and between _____________ (“Seller”) and ____________________ (“Purchaser”). PRELIMINARY STATEMENTS      A.   This Transfer Supplement is being executed and delivered in accordance with Section 5.5(c) of that certain Asset Purchase Agreement, dated as of 30 March, 2001 (as amended, supplemented or otherwise modified and in effect from time to time, the “Agreement”), by an among Park Avenue Receivables Corporation, a Delaware corporation, the several APA Banks party thereto from time to time, and The Chase Manhattan Bank, a New York banking corporation, individually and as Funding Agent. Capitalised terms used herein and not otherwise defined herein are used with the meanings set forth in, or incorporated by reference into, the Agreement.      B.   The Seller is an APA Bank party to the Agreement, and the Purchaser wishes to become an APA Bank thereunder.      C.   The Seller is selling and assigning to the Purchaser an undivided ___% (the “Transferred Percentage”) interest in all of Seller’s rights and obligations under the Agreement, including, without limitation, the Seller’s Commitment and (if applicable) the Seller’s Pro Rata Share of the APA Bank Net Investment as set forth herein.      The parties hereto hereby agree as follows:           1.   The transfer effected by this Transfer Supplement shall become effective (the “Transfer Effective Date”) two (2) Business Days (or such other date selected by the Funding Agent in its sole discretion) following the date on which a transfer effective notice substantially in the form of Schedule II to this Transfer Supplement (“Transfer Effective Notice”) is delivered by the Funding Agent to PARCO, the Seller and the Purchaser. From and after the Transfer Effective Date, the Purchaser shall be an APA Bank party to the Agreement for all purposes thereof as if the Purchaser were an original party thereto and the Purchaser agrees to be bound by all of the terms and provision contained therein.           2.   If there is no APA Bank Net Investment on the Transfer Effective Date, Seller shall be deemed to have hereby transferred and assigned to the Purchaser, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Purchaser shall be deemed to have hereby irrevocably taken, received and assumed from the Seller, the Transferred Percentage of the Seller’s Commitment and all rights and obligations associated therewith under the terms of the Agreement, including, without limitation, the Transferred Percentage of the Seller’s future funding obligation under Section 2.2(a) of the Agreement.           3.   If there is an APA Bank Net Investment, at or before 12:00 noon, local time of the Seller, on the Transfer Effective Date, the Purchaser shall pay to the Seller, in immediately available funds, an amount equal to the sum of (i) the Transferred Percentage of an amount equal to the Seller’s Pro Rata Share of the APA Bank Net Investment (such amount, being hereinafter referred to as the “Purchaser’s Funding Balance”); (ii) all accrued but unpaid (whether or not then due) interest attributable to the Purchaser’s Funding Balance; and (iii) accrued by unpaid fees and other costs and expenses payable in respect of the Purchaser’s Funding Balance for the period commencing upon each date such unpaid amounts commence accruing, to and including the Transfer Effective Date (the “Purchaser’s Acquisition Cost”), 19 whereupon, the Seller shall be deemed to have transferred and assigned to the Purchaser, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Purchaser shall be deemed to have hereby irrevocably taken, received and assumed from the Seller, the Transferred Percentage of the Seller’s Commitment and the Seller’s Pro Rata Share of the APA Bank Net Investment and all related rights and obligations under the Agreement, including, without limitation, the Transferred Percentage of the Seller’s future funding obligations under Section 2.2(a) of the Agreement.           4.   Concurrently with the execution and delivery hereof, the Seller will provide to the Purchaser copies of all documents requested by the Purchaser which were delivered to the Seller pursuant to the Agreement.           5.   Each of the parties to this Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Transfer Supplement.           6.   By executing and delivering this Transfer Supplement, the Seller and the Purchaser confirm to and agree with each other, the Funding Agent and the APA Bank as follows: (a) other than the representation and warranty that it has not created any adverse claim upon any interest being transferred hereunder, the Seller makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by any other Person in or in connection with the Agreement or the Transaction Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value thereof or any other instrument or document furnished pursuant thereto or the perfection, priority, condition, value or sufficiency of any collateral; (b) the Seller makes no representation or warranty and assumes no responsibility with respect to the financial condition of PARCO, the Funding Agent or any Transaction Party, any surety or any guarantor or the performance or observance by PARCO, and Transaction Party or the Funding Agent of any of their respective obligations under the Agreement or any Transaction Document or any other instrument or document furnished pursuant thereto or in connection therewith; (c) the Purchaser confirms that it has received a copy of the Agreement and the Transaction Documents, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this transfer Supplement; (d) the Purchaser will, independently and without reliance upon the Funding Agent, PARCO, or any other APA Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decision in taking or not taking action under the Agreement or the Transaction Documents; (e) the Purchaser appoints and authorizes the Funding Agent to take such action as agent on its behalf and to exercise such powers under the Agreement as are delegated to the Funding Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (f) the Purchaser agrees that it will perform in accordance with their terms all of the obligations which, by the terms of the Agreement are required to be performed by it as an APA Bank.           7.   Each party hereto represents and warrants to and agrees with the Funding Agent that it is aware of and will comply with the provisions of the Agreement, including, without limitation, Sections 2.2, 5.5 and 5.7 thereof.           8.   Schedule I hereto sets forth the revised Commitment of the Seller and the Commitment of the Purchaser, as well as administrative information with respect to the Purchaser.           9.   This Transfer Supplement shall be governed by, and construed in accordance with, the laws of the State of New York. 20      IN WITNESS WHEREOF, the parties hereto have caused this Transfer Supplement to be executed by their respective duly authorised officers as of the date hereof. [SELLER]     By:   -------------------------------------------------------------------------------- Name: Title:   [PURCHASER]     By: -------------------------------------------------------------------------------- Name: Title: 21 SCHEDULE I TO TRANSFER SUPPLEMENT LIST OF PURCHASING OFFICES, ADDRESSEES FOR NOTICES AND COMMITMENT AMOUNTS Date: ___________________, 200__ Transferred Percentage: ___________% Seller Commitment [existing] Commitment [revised] Pro Rata Share of APA Bank Net Investment Pro Rata Share                         Purchaser Commitment [initial] Pro Rata Share of APA Bank Net Investment Pro Rata Share   Address for Notices: ___________________ ___________________ ___________________ Attention: Telephone: Telecopy: 22 SCHEDULE II TO TRANSFER SUPPLEMENT TRANSFER EFFECTIVE NOTICE       TO:   ___________________, Seller     ___________________     ___________________       TO:   ___________________, Purchaser     ___________________     ___________________                        The undersigned, as Funding Agent under the Asset Purchase Agreement, dated as of 30 March, 2001 (as amended, supplemented or otherwise modified and in effect from time to time), by and among Park Avenue Receivables Corporation, a Delaware corporation, the several APA Banks party thereto from time to time, and The Chase Manhattan Bank, a New York banking corporation, individually and as Funding Agent, hereby acknowledges receipt of executed counterparts of a completed Transfer Supplement dated as of _______________, 200__, between ______________, as Seller, and ______________, as Purchaser. Capitalized terms defined in such Transfer Supplement are used herein as therein defined or incorporated by reference therein.           1.   Pursuant to such Transfer Supplement, you are advised that the Transfer Effective Date will be ______________, 200__.           2.   The Funding Agent each hereby consents to the Transfer Supplement as required by Section 5.5(c) of the Agreement.           [3.   Pursuant to such Transfer Supplement, the Purchaser is required to pay $__________ to the Seller at or before 12:00 noon (local time of the Seller) on the Transfer Effective Date in immediately available funds.] Very truly yours,   THE CHASE MANHATTAN BANK, as Funding Agent   By:   -------------------------------------------------------------------------------- Authorized Signatory 23 EXHIBIT B NOTICE ADDRESSES If to PARCO   Park Avenue Receivables Corporation c/o Global Securitization Services, LLC 114 West 47th Street, Suite 1715 New York, New York 10036 Attention: President Telephone: (212) 302-5151 Telecopy: (212) 302-8767   If to the Funding Agent:   The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, New York 10001 Attention: Lara Graff   CMFS - PARCO Telephone: (212) 946-3748 Telecopy: (212) 946-8098   If to the APA Bank:   The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 Attention: Bradley Schwartz Telephone: (212) 834-5144 Telecopy: (212) 834-6562 24 ANNEX I COMMITMENTS The Chase Manhattan Bank $127,500,000     25
  Exhibit 10.39 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR AN EXEMPTION THEREFROM. PROMISSORY NOTE     U.S.$2,188,888 Dated: November 8, 2001   FOR VALUE RECEIVED, the undersigned, ISCO INTERNATIONAL, INC., a Delaware corporation formerly known as ILLINOIS SUPERCONDUCTOR CORPORATION with offices at 451 Kingston Court, Mt. Prospect, Illinois 60056 (“Borrower”), promises to pay to the order of ALEXANDER FINANCE, L.P., an Illinois limited partnership (“Lender”), at 1560 Sherman Avenue, Evanston, Illinois 60201, in lawful money of the United States, the principal sum of Two Million One Hundred and Eighty Eight Thousand and Eight Hundred and Eighty Eight Dollars (U.S.$2,188,888) due March 31, 2003, subject to extension as set forth in Section 3 below (the “Maturity Date”), and to pay interest on the principal sum outstanding under this Note at the rate of 14% per annum, compounded annually, which interest shall also be due and payable on the Maturity Date. Accrual of interest shall commence on the first day to occur after the date hereof and shall continue until payment in full of the principal sum and all other amounts due hereunder have been made. The principal of, and interest on, this Note are payable in such currency of the United States of America as of the time of payment is legal tender for payment of public and private debts. This Note is one of the Notes (the “Notes”) issued pursuant to the Note Purchase Agreement, dated as of November 6, 2001 (the “Note Purchase Agreement”) by and among Borrower, the Lender, and Elliott Associates, L.P. (“Elliott”).      This Note is subject to the following additional provisions:      1.     Interest and Payment Application. Interest shall be calculated on a 360 day year simple interest basis and paid for the actual number of days elapsed. All interest due hereunder shall be payable at the Maturity Date. Notwithstanding anything contained herein, the outstanding principal balance and interest due hereunder shall bear interest, from and after the occurrence and during the continuance of an Event of Default (as defined below) hereunder, at the rate equal to the lower of twenty percent (20%) per annum, compounded annually, or the highest rate permitted by law, and from and after such time interest shall be payable from time to time on demand. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to unpaid interest and fees and any remaining amount to principal. --------------------------------------------------------------------------------        2.     Prepayment.        (a)   Borrower may pre-pay all or any part of this Note at any time, without cost or penalty.        (b)   In the event that, at any time while the Note remains outstanding, the Lender provides equity or equity-linked financing to the Borrower (an “Equity Transaction"), then on the date of funding for the Equity Transaction, an amount under this Note (principal plus interest) equal to the lesser of: (i) the full amount of principal and accrued interest then outstanding or (ii) the amount of consideration Lender provides pursuant to the Equity Transaction, shall become due and payable.      3.     Extension of Maturity Date. In the event that, while any Notes remain outstanding, (a) the Borrower conducts a bona fide cash capital-raising transaction which consists solely of the sale for cash of shares of the Borrower’s common stock (“Common Stock”) or shares of the Borrower’s preferred stock convertible into Common Stock at a fixed price (subject to customary anti-dilution provisions), in either case with or without warrants to purchase Common Stock at a fixed price (subject to customary anti-dilution provisions), where the gross cash proceeds to the Borrower (before deducting bona fide transaction costs) are at least $5 million (a “Qualified Equity Transaction”); (b) the Borrower affords all holders of outstanding Notes the opportunity to participate in that Qualified Equity Transaction on equivalent terms and in an amount not less than the then outstanding principal and interest of the Notes; and (c) at least one holder of Notes participates in the Equity Transaction, and pursuant to Section 2(b) of the Notes all of such holder’s Notes are repurchased; then the Maturity of all the remaining outstanding Notes, including this Note, shall be extended to March 31, 2005.      4.     No Impairment. Borrower shall not intentionally take any action which would impair the rights of Lender hereunder.      5.     Obligations Absolute. No provision of this Note shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place and rate, and in the manner, herein prescribed.      6.     Defaults and Remedies.        (a)   Events of Default. An “Event of Default” is: (i) default in payment of the principal amount or accrued but unpaid interest thereon of any of the Notes on or after the date such payment is due, (ii) failure by the Borrower for ten (10) days after notice to it, to comply with any other material provision of any of the Notes, the Note Purchase Agreement or the Security Agreement (as defined below); (iii) an Event of Default under the Security Agreement; (iv) a breach by the Borrower of its representations or warranties in the Note Purchase Agreement or Security Agreement; (v) any default under or acceleration prior to maturity of any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Borrower or a subsidiary of Borrower or for money borrowed the repayment of which is guaranteed by the Borrower or a subsidiary of Borrower, whether such indebtedness or guarantee now exists or shall be created hereafter, provided that the obligations with respect to any such borrowed or accelerated amount exceeds, in the aggregate, $500,000; (vi) any money judgment, writ or warrant of attachment, or similar process in excess of $500,000 in the aggregate shall be entered -2- --------------------------------------------------------------------------------     or filed against the Borrower or a subsidiary of the Borrower or any of their respective properties or other assets and shall remain unpaid, unvacated, unbonded and unstayed for a period of 45 days; (vii) if the Borrower or any subsidiary of the Borrower pursuant to or within the meaning of any Bankruptcy Law; (A) commences a voluntary case; (B) has an involuntary case commenced against it, and such case is not dismissed within 30 days of such commencement or consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the same become due; (viii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (1) is for relief against the Borrower in an involuntary case; (2) appoints a Custodian of the Borrower or for all or substantially all of its property; or (3) orders the liquidation of the Company or any subsidiary, and the order or decree remains unstayed and in effect for ninety (90) days; or (ix) in the event that the Borrower fails to raise, within four months of the date of the Note Purchase Agreement, at least $15 million in cash proceeds (net of expenses) in a pro rata rights offering to subscribe for Common Stock at a fixed price (qualifying for the exemption pursuant to Rule 16a-9 under the Securities Exchange Act of 1934, as amended) which seeks to raise at least $20 million in cash or in the event that the Borrower fails to file a registration statement covering such offering within one month of the date of this Note. The Terms “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or State Law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.        (b)   Remedies. If an Event of Default occurs and is continuing with respect to any of the Notes, the Lender may declare all of the then outstanding principal amount of this Note, including any interest due thereon, to be due and payable immediately, except that in the case of an Event of Default arising from events described in clauses (vii) and (viii) of Section 6(a) above, this Note shall become due and payable without further action or notice.      7.     Waivers of Demand, Etc. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, all other notices whatsoever and bringing of suit and diligence in taking any action to collect amounts called for hereunder, and will be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder.      8.     Replacement Note. In the event that Lender notifies Borrower that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note (except for the outstanding principal amount, if different than that shown on the original Note), shall be delivered to Lender, provided that the Lender executes and delivers to Borrower an agreement reasonably satisfactory to Borrower to indemnify Borrower from any loss incurred by it in connection with this Note.      9.     Note Purchase Agreement; Security Agreement; Guarantees. This Note is being issued to Lender in connection with the Note Purchase Agreement and is entitled to the benefits thereof. In addition Borrower’s obligations under this Note are guaranteed by the -3- --------------------------------------------------------------------------------   Guarantees of Spectral Solutions, Inc. and Illinois Superconductor Canada Corporation, subsidiaries of Borrower (the “Guarantees”) and this Note is entitled to the benefits thereof. The Borrower’s obligations under this Note are also secured, pursuant to the terms of the Security Agreement, dated as of November 6, 2001, by and among the Borrower, the Guarantor, the Lender and Alexander (the “Security Agreement”), by all the assets of the Borrower and the Guarantors.      10.     Payment of Expenses. Borrower agrees to pay all debts and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Lender in preparing, administering or enforcing this Note and/or collecting any amount due under this Note, the Note Purchase Agreement, the Security Agreement or the Guarantees.      11.     Savings Clause. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby. In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law. If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt. If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum amount allowable under law.      12.     Amendment. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by both Borrower and Lender; except that Sections 3 and 6 hereof may not be amended, nor the interest rate or principal amount hereunder increased or the maturity date hereunder shortened, nor may a waiver of the Event of Default set forth in Section 6(a)(ix) be effected, without the consent of the holders of 75% of the aggregate principal maximum amount of the outstanding Notes.      13.     Assignment Etc. Lender may (i) without notice transfer or assign to one or more of its affiliates at any time, or to any other party, if an Event of Default shall have occurred, this Note or any interest herein and (ii) other than in cases described in clause (i), may mortgage, encumber or transfer this Note or any of its rights or interest in and to this Note or any part hereof in accordance with applicable securities laws, rules and regulations. Each assignee, transferee and mortgagee shall have the right to transfer or assign its interest in accordance with the prior sentence. Each such assignee, transferee and mortgagee shall have all of the rights of Lender under this Note, the Note Purchase Agreement, the Security Agreement and the Guarantees. This Note shall be binding upon Borrower and its successors and shall inure to the benefit of the Lender and its successors and assigns.      14.     No Waiver. No failure on the part of Lender to exercise, and no delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Lender of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power. Each and every right, remedy or power hereby granted to Lender or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by Lender from time to time. -4- --------------------------------------------------------------------------------        15.     Miscellaneous. Unless otherwise provided herein, any notice or other communication to Borrower hereunder shall be sufficiently given if in writing and personally delivered or mailed to Borrower by certified mail, return receipt requested, at its address set forth above or such other address as it may designate for itself in such notice to Lender, and communications shall be deemed to have been received when delivered personally or, if sent by mail or facsimile, then when actually received by the party to whom it is addressed. Whenever the sense of this Note requires, words in the singular shall be deemed to include the plural and words in the plural shall be deemed to include the singular. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may (1) renew, extend (repeatedly and for any length of time) or modify this Note (in accordance with Section 12 above), or release any party or any guarantor or collateral, (2) impair, fail to realize upon or perfect any security interest Lender may have from time to time in collateral, or (3) take any other action deemed necessary by Lender, in each case without the consent of or notice to anyone and without releasing Borrower or any guarantor from any liability.      16.     Choice of Law and Venue; Waiver of Jury Trial. THIS NOTE SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. Borrower hereby agrees that all actions or proceedings arising directly or indirectly from or in connection with this Note shall, at Lender’s sole option, be litigated only in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York, in each case, located in New York County, New York. Borrower consents to the exclusive jurisdiction and venue of the foregoing courts and consents that any process or notice of motion or other application to either of said courts or a judge thereof may be served inside or outside the State of New York or the Southern District of New York by certified or registered mail, return receipt requested, directed to Borrower at its address set forth in this Note (and service so made shall be deemed “personal service” and be deemed complete five (5) days after the same has been posted as aforesaid) or by personal service or in such other manner as may be permissible under the rules of said courts. BORROWER HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS NOTE.      IN WITNESS WHEREOF, Borrower has caused this instrument to be duly executed by an officer thereunto duly authorized.           ISCO INTERNATIONAL, INC.     By:   /s/ CHARLES F. WILLES -------------------------------------------------------------------------------- Charles F. Willes Executive Vice President and Chief Financial Officer ATTEST: -------------------------------------------------------------------------------- 5
EXHIBIT 10(e) AMENDMENT NO. 1 TO THE 364-DAY CREDIT AGREEMENT Dated as of September 27, 2001                          AMENDMENT NO. 1 TO THE 364-DAY CREDIT AGREEMENT among The Interpublic Group of Companies, Inc., a Delaware corporation (the "Company"), the banks, financial institutions and other institutional lenders parties to the Credit Agreement referred to below (collectively, the "Lenders") and Citibank, N.A., as administrative agent (the "Agent") for the Lenders.                          PRELIMINARY STATEMENTS:                          (1)     The Company, the Lenders and the Agent have entered into a 364-Day Credit Agreement dated as of June 26, 2001 (the "Credit Agreement"). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement.                          (2)     The Company and the Lenders have agreed to amend the Credit Agreement as hereinafter set forth.                          SECTION 1.     Amendment to Credit Agreement. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended as follows:                          The definition of "EBITDA" in Section 1.01 is in full to read as follows:                "EBITDA" means, for any period, net income (or net loss) plus the sum of (a) Interest Expense, (b) income tax expense, (c) depreciation expense, (d) amortization expense, in each case determined in accordance with GAAP for such period, (e) restructuring and other merger related charges, (f) costs related to the acquisition of Deutsch, Inc. and its Affiliates, (g) investment impairment charges, (h) goodwill impairment and other related charges, in the case of (e), (f), (g) and (h), as recorded in the financial statements of the Company and its Consolidated Subsidiaries in accordance with GAAP for the fiscal quarters ended September 30, 2000, December 31, 2000 and March 31, 2001, (i) all non-cash write-offs referred to in clauses (e), (f), (g) and (h) above, as recorded in the financial statements of the Company and its Consolidated Subsidiaries in accordance with GAAP for the fiscal quarters ended June 30, 2001 and September 30, 2001 and (j) all cash charges up to an aggregate amount of $350,000,000 referred to in clauses (e), (f), (g) and (h) above, as recorded in the financial statements of the Company and its Consolidated Subsidiaries in accordance with GAAP for the fiscal quarter ended September 30, 2001.                           SECTION 2.     Conditions of Effectiveness. This Amendment shall become effective as of the date first above written when, and only when, the Agent shall have received counterparts of this Amendment executed by the Borrower and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Agent that such Lender has executed this Amendment. This Amendment is subject to the provisions of Section 8.01 of the Credit Agreement.                          SECTION 3.     Representations and Warranties of the Company. The Company represents and warrants as follows:                         (a)  The Company is a corporation duly organized, incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business.                          (b)  The execution, delivery and performance by the Company of this Amendment and the Credit Agreement, as amended hereby, are within the Company's corporate powers, have been duly authorized by all necessary corporate action and do not contravene, or constitute a default under, any provision of applicable law or regulation or the certificate of incorporation of the company or any judgment, injunction, order, decree, material agreement or other instrument binding upon the Company or result in the creation or imposition of any Lien on any asset of the Company or any of its Consolidated Subsidiaries.                          (c)  No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery or performance by the Company of this Amendment, the Credit Agreement or any of the Notes to which it is or is to be a party, as amended hereby.                          (d)  This Amendment has been duly executed and delivered by the Company. This Amendment and each of the Credit Agreement and the Notes to which the Company is or is to be a party, as amended hereby, are legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the rights of creditors generally and subject to general principles of equity.                          (e)  There is no action, suit, investigation, litigation or proceeding pending against, or, to the knowledge of the Company, threatened against the Company or any of its Consolidated Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a significant probability of an adverse decision that (i) would have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Amendment or the Credit Agreement or any Note, as amended hereby, or the consummation of any of the transactions contemplated hereby.                           SECTION 4.     Reference to and Effect on the Credit Agreement and the Notes. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment.                           (b)  The Credit Agreement and the Notes, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.                           (c)  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement.                          SECTION 5.     Costs and Expenses. The Company agrees to pay on demand all reasonable costs and expenses of the Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Agent) in accordance with the terms of Section 9.04 of the Credit Agreement.                          SECTION 6.     Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment.                          SECTION 7.     Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.                          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE INTERPUBLIC GROUP OF COMPANIES, INC. By   /s/ STEVEN BERNS                                                 STEVEN BERNS             Title: Vice President & Treasurer CITIBANK, N.A., as Agent and as Lender By   /s/ JULIO OJEA-QUINTANA                                  JULIO OJEA-QUINTANA             Title:
  EXHIBIT 10.1 LOAN AGREEMENT WELLS FARGO BANK    This Loan Agreement (this “Agreement”) is entered into by and between Fiberstars, Inc. (“Borrower”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) and sets forth the terms and conditions which govern all Borrower’s commercial credit accommodations form Bank, whether now existing or hereafter granted (each, a “Credit” and collectively, “Credits”), which terms and conditions are in addition to those set forth in any other contract, instrument or document (collectively with this Agreement, the “Loan Documents”) required by this Agreement or heretofore or at any time hereafter delivered to Bank in connection with any Credit.    I.    REPRESENTATIONS AND WARRENTIES.  Borrower makes the following representations and warranties to Bank, which representations and warranties shall be true as of the date hereof and on the date of each extension of credit under each Credit with the same effect as through make on each such date:      (a)    Legal Status.  Borrower is a corporation, duly organized and existing and in good standing under the laws of the State of California, and is qualified or licensed to do business in all jurisdictions in which such qualification or licensing is required or in which the failure to be qualified or licensed could have a material adverse effect on Borrower.      (b)   Authorization and Validity.  Each of the Loan Documents has been duly authorized, and upon its execution and delivery to Bank will constitute a legal valid and binding obligation of Borrower or the party which executes the same, enforceable in accordance with its respective terms.      (c)    No Violation.  The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of law or regulation, or contravene any provision of Borrower’s Articles of Incorporation or By-Laws, or result in any breach of or default under any agreement, indenture or other instrument to which Borrower is a party or by which Borrower may be bound.      (d)   No Litigation.  There are no pending, or to the best of Borrower’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower except as disclosed by Borrower to Bank in writing prior to the date hereof.      (e)    Financial Statements.  The most recent annual financial statement of Borrower, and all interim financial statements delivered to Bank since the date of said financial statement, true copies of which have been delivered by Borrower to Bank prior to the date hereof, are complete and correct, present fairly the financial condition of Borrower and disclose all liabilities of Borrower, and have been prepared in accordance with generally accepted accounting principles.  Since the dates of such financial statements there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing.        (f)    Tax Returns.  Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year except as disclosed by Borrower to Bank in writing prior to the date hereof. II.    ADDITIONAL TERMS.    (a)      Conditions Precedent.  The obligation of Bank to grant any Credit is subject to the condition that Bank shall have received all contracts, instruments and documents, duly executed where applicable, deemed necessary by Bank to evidence such Credit and all terms and conditions applicable thereto, all of which shall be in form and substance satisfactory to Bank.    (b) Application of Payments.  Each payment made on each Credit shall be applied first, to any interest then due, second, to any fees and charges then due, and third, to the outstanding principal balance thereof. III.    COVENANTS.  So long as any Credit remains available or any amounts under any Credit remain outstanding, Borrower shall, unless Bank otherwise consents in writing:    (a)      Insurance.  Maintain and keep in force, for each business in which Borrower is engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, public liability, flood, property damage and workers’ compensation, carried with companies an in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank’s request schedules setting forth all insurance then in effect.    (b)     Compliance; Laws and Regulations.  Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of Borrower’s business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower’s continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or its business, including without limitation, all state or federal environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any operations and/or properties of Borrower.    (c)      Other Indebtedness.  Not create, incur, assume or permit to exist any indebtedness or other liabilities, whether  secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, direct or contingent (including any contingent liability under any guaranty of the obligations of any person or entity), except (i) the liabilities of Borrower to Bank, (ii) trade debt incurred by Borrower in the normal course of its business, and (iii) any other liabilities of Borrower existing as of, and disclosed to Bank in writing prior to, the date hereof.    (d)     Merger; Consolidation; Transfer of Assets.  Not merge into or consolidate with any other entity; nor make any substantial change in the nature of Borrower’s business as conducted as of the date hereof; nor acquire all or substantially all of the assets of any other person or entity; nor sell, lease, transfer or otherwise dispose of all or substantial or material portion of Borrower’s assets except in the ordinary course of its business.    (e)      Pledge of Assets.  Not mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower’s assets now owned or hereafter acquired, except in favor of Bank and except any of the foregoing existing as of, and disclosed to Bank in writing prior to, the date hereof.    (f)      Financial Statements.  Provide to Bank all of the following, in form and detail satisfactory to Bank, together with such current financial and other information as Bank from time to time may reasonably request:              (i)  As soon as available, but in no event later than 120 days after and as of the end of each fiscal year, an audited financial statement of Borrower, prepared by an independent certified public accountant acceptable to Bank, to include a balance sheet, income statement and statement of cash flow, together with all supporting schedules and footnotes.              (ii)  As soon as available, but in no event later than 45 days after and as of the end of each fiscal quarter, a financial statement of Borrower, prepared by independent certified public accountant and certified as correct by an officer of Borrower authorized to borrow under the most current Corporate Borrowing Resolution delivered by Borrower to Bank, to include a balance sheet and income statement, together with all supporting schedules and footnotes.    (g)      Financial Condition.  Maintain Borrower’s financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices, except to the extent modified by the following definitions:              (i)          Total Liabilities divided by Tangible Net Worth not at any time grater than 0.75 to 1.0, with “Total Liabilities” defined as the aggregate of current liabilities and non-current liabilities less subordinated debt, and with “Tangible Net Worth” defined as the aggregate of total stockholders’ equity plus subordinated debt less any intangible assets.              (ii)         Quick Ratio not at any time less than 1.25 to 1.0, with “Quick Ratio” defined as the aggregate of unrestricted cash, unrestricted marketable securities and receivables convertible into cash divided by total current liabilities.              (iii)        Net income after taxes not less than $1.00 on annual basis, determined as of each fiscal year end, and pre-tax profit not less than $1.00 on a year-to-date basis, determined as of the end of each fiscal quarter of each year, and as of the end of their fiscal quarter of each year.              (iv)       EBITDA Coverage Ratio is not less than 1.50 to 1.0 as of each fiscal year end, with “EBITDA” defined as net profit before tax plus interest expense (net of capitalized interest expense), depreciation expense and amortization expense, and with “EBITDA Coverage Ratio” defined as EBITDA divided by the aggregate of interest expense plus the prior period current maturity of long-term debt and the prior period current maturity of subordinated debt.    IV.   DEFAULT; REMEDIES.      (a)  Events of Default.  The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:              (i)          The failure to pay any principal, interest, fees or other charges when due under any of the Loan Documents.              (ii)         Any representation or warranty hereunder or under any other Loan Document shall prove to be incorrect, false or misleading in any material respect when made.              (iii)        Any violation or breach of any term or condition of this Agreement or any other of the Loan Documents.              (iv)       Any default in the payment or performance of any obligation, or any defined event of default, under any provisions of any contract, instrument or document pursuant to which Borrower or any guarantor hereunder has Incurred debt or any other liability of any kind to any person or entity, including Bank.              (v)        The filing of a petition by or against Borrower or any guarantor hereunder any provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or under any similar or other law relating to bankruptcy, insolvency, reorganization or other relief for debtors; the appointment of a receiver, trustee, custodian or liquidator of or for any part o the assets or property of Borrower or any such guarantor; Borrower or any such guarantor becomes insolvent, makes a general assignment for the benefit of creditors or is generally not paying its debts as they become due; or any attachment or like levy on any property of Borrower or any such guarantor.              (vi)       Any material adverse change, as determined solely by Bank, in the financial condition of Borrower.              (vii)      The death or incapacity of any individual guarantor hereunder; or the dissolution or liquidation of Borrower or of any guarantor hereunder which is a corporation, partnership or other type of entity.              (viii)     Any change in ownership during the term hereof of an aggregate of 25% or more of the common stock of Borrower.     (b)    Remedies.  Upon the occurrence of any Event of Default: (i) the entire balance of principal, interest, fees and charges on each Credit shall, at Bank’s option, become immediately due and payable in full without presentment, demand, protest or notice of dishonor, all of which are expressly waived by Borrower; (ii) the obligation, if any, of Bank to extend any further credit to Borrower under any of the Loan Documents shall immediately cease and terminate; and (iii) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any security for any Credit.  All rights, powers and remedies of Bank shall be cumulative.    V.   MISCELLANEOUS.    (a)      No Waiver.  No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy.  Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.    (b)     Notices.  All notices, requests and demands required under this Agreement must be in writing, addressed to the applicable party at its address specified below or to such other address as any party may designate by written notice to each other party, and shall be deemed given or made as follows: (i) if personally delivered, upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or 3 days after deposit in the U.S. mail, first class and postage prepaid; and (iii) if sent by telecopy, upon receipt.    (c.)     Costs, Expenses and Attorneys’ Fees.  Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel), expended or incurred by Bank in connection with (I) the negotiation and preparation of this Agreement and the other Loan Documents, and Bank’s continued administrative of each Credit, (iii) the enforcement of Bank’s rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (iii) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action of declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.    (d)     Successors; Assignment.  This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Bank’s prior written consent.  Bank reserves the  right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank’s rights and benefits under each of the Loan Documents.  In connection therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any Credit, Borrower or its business, any guarantor or any Credit or the business of any such guarantor, or any collateral for any Credit.    (e)      Controlling Agreement; Amendment.  In the even of any direct conflict between any provision of this Agreement and any provision of any other Loan Document, the terms of this Agreement shall control.  This Agreement may be amended or modified only in writing signed by Bank and Borrower.    (f)      No Third Party Beneficiaries.  This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other Loan Document to which it is not a party.    (g)     Serverability of Provisions.  If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement.    (h)     Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California.    (i)       Cancellation of Prior Loan Agreements.  The Agreement cancels and supersedes all prior loan agreements between Borrower and Bank relating to any Credit.    VI.   ARBITRATION    (a)      Arbitration.  The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement,  default or termination; or (ii) requests for additional credit.    (b)     Governing Rules.  Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to , as applicable, as the “Rules”).  If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.    (c.)     No Waiver; Provisional Remedies, Self-Help and Foreclosure.  The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding.  This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii), and (iii) of this paragraph.    (d)     Arbitrator Qualifications and Powers; Awards.  Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of grater than $5,000,000.00.  Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state of federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated.  The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statues of limitation in determining any claim.  In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in accordance with e substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law.  Judgement upon the award rendered by the arbitrator may be entered in any court having jurisdiction.  The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.    (e)        Discovery:  In any arbitration proceeding discover will be permitted accordance with the Rules.  All Discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be competed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA.  Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discover is essential for the party’s presentation and that no alternative means for obtaining information is available.    (f)         Class Proceedings and Consolidations.  The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputees or include in any class proceedings.    (g)        Payment of Arbitration Costs And Fees.  The arbitrator shall award all costs and expenses of the arbitration proceeding.     (h)       Real Property Collateral; Judicial Reference.  Notwithstanding anything herein to the contrary, no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in whole or in part, b any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (iii) all parties to the arbitration waive any rights or benefits that might accrue them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interest securing such indebtedness and obligations, shall remain fully valid and enforceable.  If any Dispute is not submitted to arbitration, the Dispute shall be referred to a referee in accordance with California Cod of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638.  A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures.  Judgement upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.     (i)        Miscellaneous.  To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA.  No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein.  If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control.  This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.   IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of March 23, 2001.   Fiberstars, Inc.   By:  /s/ Robert A. Connors      Title: Chief Financial Officer    Address:          44259 Nobel Drive                            Fremont, CA  94538   WELLS FARGO BANK, NATIONAL ASSOCIATION   By:  /s/ Laura Zaragoza                                             Title: Wells Fargo Assistant Vice President      Address:          121 Park Center Plaza 3rd Flr                            San Jose, CA  95113    
Exhibit 10.43 DTE Energy Company 2001 Stock Incentive Plan ARTICLE I Definitions 1.01.  Accounting Firm Accounting Firm means the public accounting firm retained as the Company’s independent auditor as of the date immediately prior to the Change in Control, unless another firm is designated by the Committee. 1.02.  Administrator Administrator means (i) the Board, with respect to awards made under this Plan to members of the Board who are not employees of the Company or a Subsidiary and (ii) the Committee or the Chief Executive Officer of the Company to the extent responsibilities are delegated to him by the Committee in accordance with Article III with respect to awards made under this Plan to all other persons. 1.03.  Agreement Agreement means a written agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of a Stock Award, an award of Performance Shares, an award of Performance Units or an Option granted to such Participant. 1.04.  Board Board means the Board of Directors of the Company. 1.05.  Capped Parachute Payments Capped Parachute Payments means the largest amount of Parachute Payments that may be paid to a Participant without liability for any excise tax under Code Section 4999. 1.06.  Change in Control Change in Control means the occurrence of any of the following events:   (i) The consummation of a transaction in which the Company is merged, consolidated or reorganized into or with another corporation or other legal person, and as a result of such transaction less than 55% of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such transaction is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such transaction;     (ii) The consummation of a sale or transfer in which the Company sells or otherwise transfers all or substantially all of its assets to another corporation or other legal person, and as a result of such sale or transfer less than 55% of the combined voting power of the then-outstanding Voting Stock of such corporation or person immediately after such sale or transfer is held in the aggregate (directly or through ownership of Voting Stock of the Company or a Subsidiary) by the holders of Voting Stock of the Company immediately prior to such sale or transfer; or     (iii)  The approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1 -------------------------------------------------------------------------------- 1.07.  Code Code means the Internal Revenue Code of 1986, as amended. 1.08.  Committee Committee means the Special Committee on Compensation, or such other Board committee as may be designated from time to time by the Board, provided that any such committee is composed solely of individuals who are “Non-Employee Directors,” as the term is used in Rule 16b-3 under the Exchange Act, and “Outside Directors,” as the term is used in Section 162(m) of the Code and Treasury Regulations promulgated thereunder. 1.09.  Common Stock Common Stock means common stock of the Company. 1.10.  Company Company means DTE Energy Company, a Michigan corporation, or any successor corporation. 1.11.  Control Change Date Control Change Date means the date on which a Change in Control occurs. If a Change in Control occurs on account of a series of transactions, the Control Change Date is the date of the last of such transactions. 1.12.  Exchange Act Exchange Act means the Securities Exchange Act of 1934, as amended. 1.13.  Fair Market Value Fair Market Value means, on any given date, the average of the high and low sales prices of Common Stock as listed on the New York Stock Exchange Composite tape. If, on any given date, no share of Common Stock is traded, then Fair Market Value shall be determined with reference to the next preceding day that Common Stock was so traded. 1.14.  Incentive Stock Option Incentive Stock Option means an Option that satisfies the requirements of Section 422 of the Code and is intended by the Administrator to be an Incentive Stock Option. 1.15.  Net After Tax Amount Net After Tax Amount means the amount of any Parachute Payments or Capped Parachute Payments, as applicable, net of taxes imposed under Code Sections 1, 3101(b) and 4999 and any state or local income taxes applicable to a Participant with respect to such payments as in effect for the year for which the determination is made. The determination of the Net After Tax Amount shall be made using the highest combined marginal rate imposed by the foregoing taxes on income of the same character as the Parachute Payments or Capped Parachute Payments, as applicable, in effect for the year for which the determination is made. 1.16.  Option Option means a stock option that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an Agreement. 2 -------------------------------------------------------------------------------- 1.17.  Parachute Payment Parachute Payment means a payment that is described in Code Section 280G(b)(2) (without regard to whether the aggregate present value of such payments exceeds the limit prescribed by Code Section 280G(b)(2)(A)(ii)). The amount of any Parachute Payment shall be determined in accordance with Code Section 280G and the Treasury Regulations promulgated thereunder, or, in the absence of final regulations, the proposed Treasury Regulations promulgated under Code Section 280G. 1.18.  Participant Participant means an employee of the Company or a Subsidiary, and any member of the Board, whether or not such Board member is an employee of the Company or a Subsidiary, who satisfies the requirements of Article IV and is selected by the Administrator to receive an award of Performance Shares, a Stock Award, an Option, an award of Performance Units or a combination thereof. 1.19.  Performance Objectives Performance Objectives means objectives stated with respect to (i) shareholder value growth based on stock price and dividends, (ii) customer price, (iii) customer satisfaction, (iv) growth based on increasing sales or profitability of one or more business units, (v) performance against the companies in the Dow Jones Electric Utility Industry Group index, the companies in the S&P 500 Electric Utility Industry index, a peer group or similar benchmark selected by the Committee, (vi) earnings per share growth, (vii) employee satisfaction, (viii) nuclear plant performance achievement, (ix) return on equity, (x) economic value added, (xi) cash flow, (xii) earnings growth, (xiii) integration success, (xiv) diversity, (xv) safety, or (xvi) production cost or such other measures as may be selected by the Administrator. Each of the Performance Objectives may be stated with respect to the performance of the Company, a Subsidiary or a division of the Company or a Subsidiary. 1.20.  Performance Shares Performance Shares means an award, in the amount determined by the Administrator, stated with reference to a specified number of shares of Common Stock, that in accordance with the terms of an Agreement entitles the holder to receive a cash payment or shares of Common Stock or a combination thereof. 1.21.  Performance Units Performance Units means an award with a face amount of $1.00 per Performance Unit that in accordance with the terms of an Agreement entitles the holder to receive a cash payment or shares of Common Stock or a combination thereof. 1.22.  Plan Plan means the DTE Energy Company 2001 Stock Incentive Plan. 1.23.  Rule 16b-3 Rule 16b-3 means Rule 16b-3 under the Exchange Act. 1.24.  Stock Awards Stock Award means Common Stock awarded to a Participant under Article VII. 3 -------------------------------------------------------------------------------- 1.25.  Subsidiary Subsidiary means a corporation, partnership, joint venture, limited liability company, unincorporated association or other entity in which the Company has a direct or indirect ownership or other equity interest. 1.26.  Voting Stock Voting Stock means securities entitled to vote generally in the election of directors. ARTICLE II Purposes The Plan is intended to assist the Company and its Subsidiaries in recruiting and retaining individuals with ability and initiative by enabling such persons to participate in the future success of the Company and its Subsidiaries and to associate their interests with those of the Company and its shareholders. The Plan is intended to permit the grant of Options qualifying as Incentive Stock Options and Options not so qualifying, the grant of Stock Awards, Performance Shares and Performance Units, and to permit the deferral of income with respect to grants and awards made under the Plan in accordance with the Plan and procedures that may be established by the Administrator. No Option that is intended to be an Incentive Stock Option shall be invalid for failure to qualify as an Incentive Stock Option. The proceeds received by the Company from the sale of shares of Common Stock pursuant to this Plan shall be used for general corporate purposes. ARTICLE III Administration The Plan shall be administered by the Administrator. The Administrator shall (to the extent of its delegated authority) have authority to grant Stock Awards, Performance Shares, Performance Units, and Options upon such terms (not inconsistent with the provisions of this Plan), as the Administrator may consider appropriate. Such terms may include conditions (in addition to those contained in this Plan), on the exercisability of all or any part of an Option or on the transferability or forfeitability of Stock Awards, or an award of Performance Shares or Performance Units. Notwithstanding any such conditions, the Administrator may, in its discretion, accelerate the time at which any Option may be exercised, the time at which Stock Awards may become transferable or non-forfeitable, or the time at which an award of Performance Shares or Performance Units may be settled; and may suspend or waive the forfeiture of any award made under this Plan. In addition, the Administrator shall have complete authority to interpret all provisions of this Plan; to prescribe the form of Agreements and documents relating to the deferral of income under the Plan; to adopt, amend, and rescind rules and regulations pertaining to the administration of the Plan; to correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any award in the manner and to the extent the Administrator deems desirable; to authorize any one of its number or any officer of the Company to execute and deliver documents on its behalf; and to make all other determinations necessary or advisable for the administration of this Plan. The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator. Any decision made or action taken by the Administrator in connection with the administration of this Plan shall be final and conclusive. Neither the Administrator, any member of the Board or Committee, nor the Chief Executive Officer of the Company shall be liable for any act done in good faith with respect to this Plan or any Agreement, Option, or Stock Award, Performance Shares, or Performance Units. All expenses of administering this Plan shall be borne by the Company. The Committee, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Committee’s authority and duties with respect to grants and awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. The Committee may 4 -------------------------------------------------------------------------------- revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Committee’s delegate or delegates that were consistent with the terms of the Plan. ARTICLE IV Eligibility Any employee of the Company or a Subsidiary (including an entity that becomes a Subsidiary after the adoption of this Plan) or any member of the Board, whether or not such member is employed by the Company or a Subsidiary, is eligible to participate in this Plan if the Administrator, in its sole discretion, determines that such person has contributed significantly or can be expected to contribute significantly to the profits or growth of the Company or a Subsidiary. Notwithstanding the foregoing, Incentive Stock Options may be granted only to persons who are employees of the Company or of a “subsidiary,” as that term is defined in Section 424 of the Code, on the date of grant. ARTICLE V Common Stock Subject to Plan 5.01.  Common Stock Issued or Delivered Upon the award of Common Stock pursuant to a Stock Award or in settlement of an award of Performance Shares or Performance Units, or upon the exercise of an Option the Company may deliver Common Stock to the Participant (or his or her successor in interest or personal representative or, if the Participant so directs, his or her broker) (i) from its authorized but unissued Common Stock or (ii) outstanding Common Stock acquired by or on behalf of the Company in the name of a Participant (or his or her successor in interest, personal representative or broker) or a combination thereof. 5.02.  Aggregate Limit The maximum aggregate number of shares of Common Stock that may be issued or acquired and delivered under this Plan pursuant to the exercise of Options, the grant of Stock Awards, and the settlement of Performance Shares and Performance Units is 18,000,000 shares. The maximum aggregate number of shares of Common Stock that may be issued or delivered under this Plan shall be determined in accordance with Section 5.03 and subject to adjustment as provided in Article X. In addition, (i) the number of shares of Common Stock that may be subject to Stock Awards and Performance Shares granted under the Plan (whether or not the Performance Shares ultimately are settled in cash) plus (ii) the number of shares of Common Stock equal in value (as of the date of grant) to the value of Performance Units granted under the Plan shall not exceed 20% of the total number of shares of Common Stock authorized for issuance or delivery under this Plan. To the extent that a portion of a Stock Award, award of Performance Shares or award of Performance Units is forfeited, the number of shares of Common Stock subject to the forfeited portion of the Stock Award or Performance Shares, and the number of shares equal in value (as of the date of grant) to the value of the forfeited portion of the Performance Units shall again be available for purposes of the limit described in the preceding sentence. 5.03.  Reallocation of Shares If an Option is terminated, in whole or in part, for any reason other than its exercise, the number of shares allocated to the Option or portion thereof may be reallocated to other Options, Performance Shares, Performance Units and Stock Awards to be granted under this Plan. If an award of Performance Shares is terminated, in whole or in part, for any reason other than its settlement with shares of Common Stock, the number of shares allocated to the Performance Share award or portion thereof may be reallocated to other Options, Performance Shares, Performance Units, and Stock Awards to be granted under this Plan. If a Stock Award is forfeited, in whole or in part, for any reason, the number of shares of Common Stock 5 -------------------------------------------------------------------------------- allocated to the Stock Award or portion thereof may be reallocated to other Options, Performance Shares, Performance Units and Stock Awards to be granted under this Plan. If an award of Performance Units is terminated, in whole or in part, for any reason other than its settlement with shares of Common Stock, the number of shares allocated to the Performance Unit award or portion thereof may be reallocated to other Options, Performance Shares, Performance Units, and Stock Awards to be granted under this Plan. Upon full or partial payment of any Option price or satisfaction of tax withholding obligations by transfer or relinquishment to the Company of Common Stock, or any other payment or benefit realized under the Plan by the transfer or relinquishment of Common Stock, there shall be deemed to have been issued or delivered under the Plan only the net number of shares of Common Stock actually issued or delivered by the Company; provided, however, that the number of shares of Common Stock issued or acquired and delivered by the Company upon the exercise of Options (determined, as to each Option, as if the Option price and tax withholding obligations had been paid in cash) shall not exceed the aggregate limit on the number of shares that may be issued or delivered under this Plan under Section 5.02. ARTICLE VI Options 6.01.  Award In accordance with the provisions of Article IV, the Administrator will designate each individual to whom an Option is to be granted and will specify the number of shares of Common Stock covered by such awards; provided, however, that no Participant may be granted Options in any calendar year covering more than 500,000 shares. 6.02. Option Price The price per share for shares of Common Stock purchased on the exercise of an Option shall be determined by the Administrator on the date of grant, but shall not be less than the Fair Market Value on the date the Option is granted. 6.03. Maximum Option Period The maximum period in which an Option may be exercised shall be determined by the Administrator on the date of grant, except that no Option that shall be exercisable after the expiration of ten years from the date such Option was granted. 6.04. Non-transferability Except as provided in Section 6.05, each Option granted under this Plan shall be non-transferable except by will or by the laws of descent and distribution. Except as provided in Section 6.05, during the lifetime of the Participant to whom the Option is granted, the Option may be exercised only by the Participant. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 6.05. Transferable Options Section 6.04 to the contrary notwithstanding, if the Agreement provides, an Option that is not an Incentive Stock Option may be transferred by a Participant to such persons or entities permitted under Rule 16b-3 on such terms and conditions permitted under Rule 16b-3. The holder of an Option transferred pursuant to this Section shall be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Option except by will or the laws of descent and distribution. 6 -------------------------------------------------------------------------------- 6.06. Status as Employee or Director For purposes of determining the applicability of Section 422 of the Code (relating to Incentive Stock Options), or in the event that the terms of any Option provide that it may be exercised only during employment or within a specified period of time after termination of employment or Board service, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment or Board service. 6.07. Exercise Subject to the provisions of this Plan and the applicable Agreement, an Option may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Administrator shall determine; provided, however, that Incentive Stock Options (granted under the Plan and all plans of the Company and its subsidiary corporations, as those terms are defined in Section 424 of the Code) may not be first exercisable in a calendar year for shares of Common Stock having a Fair Market Value (determined as of the date an Option is granted) exceeding $100,000. An Option granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the Option could be exercised. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the Option. 6.08. Payment Subject to rules established by the Administrator and unless otherwise provided in an Agreement, payment of all or part of the Option price may be made in (i) cash or a cash equivalent acceptable to the Administrator, or (ii) unrestricted shares of Common Stock previously acquired by the Participant and, if those shares were acquired from the Company, that have been held by the Participant for at least six months. If shares of Common Stock are used to pay all or part of the Option price, the sum of the cash and cash equivalents and the Fair Market Value (determined as of the date of exercise) of the shares surrendered must not be less than the Option price of the shares for which the Option is being exercised. Payment in “cash” or “cash equivalents” includes delivery of cash or cash equivalents by a broker under a “cashless exercise” arrangement at the time of exercise or following the sale of shares to which the exercise relates. 6.09. Change in Control Section 6.07 to the contrary notwithstanding, but subject to Section 12.11, each outstanding Option shall be fully exercisable (in whole or in part at the discretion of the holder) on and after a Control Change Date. 6.10. Shareholder Rights No Participant shall have any rights as a shareholder with respect to shares subject to his or her Option until the date of exercise of such Option. 6.11. Disposition of Shares A Participant shall notify the Company of any sale or other disposition of shares acquired pursuant to an Option that was an incentive stock option if such sale or disposition occurs (i) within two years of the grant of an Option or (ii) within one year of the issuance of shares to the Participant. Such notice shall be in writing and directed to the Corporate Secretary of the Company. 7 -------------------------------------------------------------------------------- ARTICLE VII Stock Awards 7.01. Award In accordance with the provisions of Article IV, the Administrator will designate each individual to whom a Stock Award is to be made and will specify the number of shares covered by such awards; provided, however, that no Participant may receive Stock Awards in any calendar year for more than 150,000 shares. 7.02. Vesting The Administrator, on the date of the award, may prescribe that a Participant’s rights in a Stock Award will be forfeitable or otherwise restricted for a period of time or subject to such conditions as may be set forth in the Agreement. 7.03. Performance Objectives In accordance with Section 7.02, the Administrator may prescribe that Stock Awards will become vested or transferable or both based on Performance Objectives. In cases where a Stock Award will become non-forfeitable and transferable only upon the attainment of Performance Objectives and satisfaction of the “performance based compensation” exception to the limit on executive compensation imposed by Code Section 162(m) is intended, then the shares subject to such Stock Award shall become non-forfeitable and transferable only to the extent that the Committee certifies that such Performance Objectives have been attained. 7.04. Status as Employee or Director In the event that the terms of any Stock Award provide that shares may become transferable and non-forfeitable thereunder only after completion of a specified period of employment or Board service, the Administrator may decide in each case to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment or Board service. 7.05. Change in Control Sections 7.02, 7.03 and 7.04 to the contrary notwithstanding, but subject to Section 12.11, each outstanding Stock Award shall be transferable and non-forfeitable on and after a Control Change Date without regard to whether any Performance Objectives or other conditions to which the award is subject have been met. 7.06. Shareholder Rights Prior to their forfeiture (in accordance with the applicable Agreement and while the shares of Common Stock granted pursuant to the Stock Award may be forfeited or are non-transferable), a Participant will have all rights of a shareholder with respect to a Stock Award, including the right to receive dividends and vote the shares; provided, however, that during such period (i) a Participant may not sell, transfer, pledge, exchange or otherwise dispose of shares granted pursuant to a Stock Award, (ii) the Company shall retain custody of the certificates evidencing shares granted pursuant to a Stock Award, and (iii) the Participant will deliver to the Company a stock power, endorsed in blank, with respect to each Stock Award. After the shares granted under the Stock Award are transferable and are no longer forfeitable, the limitations set forth in the preceding sentence shall not apply, and the Company shall deliver to the Participants certificates evidencing shares of Common Stock subject to the award as soon thereafter as possible. 8 -------------------------------------------------------------------------------- ARTICLE VIII Performance Share Awards 8.01. Award In accordance with the provisions of Article IV, the Administrator will designate each individual to whom an award of Performance Shares is to be made and will specify the number of shares covered by such awards; provided, however, that no Participant may receive awards of Performance Shares in any calendar year for more than 200,000 shares of Common Stock (based on the maximum payout under the awards). 8.02. Earning the Award The Administrator, on the date of the grant of an award, may prescribe that the Performance Shares, or portion thereof, will be earned, and the Participant will be entitled to receive a payment pursuant to the award of Performance Shares, only upon the satisfaction of Performance Objectives during a performance measurement period of at least one year or such other criteria as may be prescribed by the Administrator. With respect to Performance Shares that will be earned only upon satisfaction of Performance Objectives, and as to which satisfaction of the “performance based compensation” exception to the limit on executive compensation imposed by Code Section 162(m) is intended, a payment will be made pursuant to such Performance Shares only if, and to the extent that, the Committee certifies that such Performance Objectives have been attained. 8.03. Payment In the discretion of the Administrator, the amount payable when an award of Performance Shares is earned may be settled in cash, by the issuance of shares of Common Stock, or a combination thereof. A fractional share of Common Stock shall not be deliverable when an award of Performance Shares is earned, but a cash payment will be made in lieu thereof. The Administrator will also determine when an award of Performance Shares that has been earned will be settled. 8.04. Shareholder Rights No Participant shall, as a result of receiving an award of Performance Shares, have any rights as a shareholder until and to the extent that the award of Performance Shares is earned and settled in shares of Common Stock. After an award of Performance Shares is earned and settled in shares, a Participant will have all the rights of a shareholder as described in Section 7.06. Notwithstanding the foregoing, the Administrator may provide in an Agreement that the recipient of a Performance Share award is entitled to dividend equivalents with respect in the award, payable at the time or times, and on the terms, specified in the Agreement. 8.05. Non-Transferability Except as provided in Section 8.06, Performance Shares granted under this Plan shall be non-transferable except by will or by the laws of descent and distribution. No right or interest of a Participant in any Performance Shares shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 8.06. Transferable Performance Shares Section 8.05 to the contrary notwithstanding, if the Agreement provides, an award of Performance Shares may be transferred by a Participant to such persons or entities permitted under Rule 16b-3 on such terms and conditions permitted under Rule 16b-3. The holder of Performance Shares transferred pursuant to this Section shall be bound by the same terms and conditions that governed the Performance Shares during the period that they were held by the Participant; provided, however that such transferee may not transfer Performance Shares except by will or the laws of descent and distribution. 9 -------------------------------------------------------------------------------- 8.07. Status as Employee or Director In the event that the terms of any Performance Share award provide that no payment will be made unless the Participant completes a stated period of employment or Board service, the Administrator may decide to what extent leaves of absence for government or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment or Board service. 8.08. Change in Control Section 8.02 to the contrary notwithstanding, but subject to Section 12.11, on and after a Control Change Date, each outstanding Performance Share award shall be earned as of a Control Change Date and settled as soon thereafter as practicable; provided, that, for awards that will be earned on the basis of performance criteria (as opposed to other criteria only, such as continued service, which awards shall be earned in full), the amount earned with respect to each Performance Share award shall be the greater of the amount that would have been payable on attainment of (i) target levels of performance or (ii) actual levels of performance, using performance through the Control Change Date for purposes of determining actual levels of performance. ARTICLE IX Performance Units 9.01. Award In accordance with the provisions of Article IV, the Administrator will designate each individual to whom an award of Performance Units is to be made and will specify the number of Performance Units covered by such awards; provided, however, that no Participant may receive an award of more than 1,000,000 Performance Units in any calendar year. 9.02. Earning the Award The Administrator, on the date of grant of an award, shall prescribe that the Performance Units or a portion thereof will be earned and the Participant will be entitled to receive a payment pursuant to the award of Performance Units, only upon the satisfaction of Performance Objectives and such other criteria as may be prescribed by the Administrator during a performance measurement period of at least one year. With respect to Performance Units as to which satisfaction of the “performance based compensation” exception to the limit on executive compensation imposed by Code Section 162(m) is intended, a payment will be made pursuant to such Performance Units only if, and to the extent that, the Committee certifies that Performance Objectives have been attained. 9.03. Non-Transferability Except as provided in Section 9.04, Performance Units granted under this Plan shall be non-transferable except by will or by the laws of descent and distribution. No right or interest of a Participant in an award of Performance Units shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 9.04. Transferable Performance Units Section 9.03 to the contrary notwithstanding, if provided in an Agreement, an award of Performance Units may be transferred by a Participant to such persons or entities permitted under Rule 16b-3 on such terms and conditions as may be permitted under Rule 16b-3. The holder of Performance Units transferred pursuant to this Section shall be bound by the same terms and conditions that governed the Performance Units during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Performance Units except by will or the laws of descent and distribution. 10 -------------------------------------------------------------------------------- 9.05. Status as Employee or Director If the terms of an award of Performance Units provide that a payment will be made thereunder only if the Participant completes a stated period of employment or Board service, the Administrator may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment or Board service. 9.06.  Change in Control Section 9.02 to the contrary notwithstanding, but subject to Section 12.11, any Performance Units shall be earned as of a Control Change Date and settled as soon thereafter as possible; provided, that the amount earned with respect to each award of Performance Units shall be the greater of the amount that would have been payable on attainment of (i) target levels of performance or (ii) actual levels of performance, using performance through the Control Change Date for purposes of determining actual levels of performance. 9.07.  Shareholder Rights No Participant shall, as a result of receiving an award of Performance Units, have any rights as a shareholder of the Company or any Subsidiary on account of such award. ARTICLE X Adjustment Upon Change in Common Stock The maximum number and kind of shares as to which Options, Performance Shares, Performance Units and Stock Awards may be granted; the terms of outstanding Stock Awards, Options, Performance Shares, Performance Units; and the per individual limitations on the number of shares of Common Stock for which Options, Performance Shares, Performance Units and Stock Awards may be granted shall be adjusted as the Committee shall determine to be equitably required in the event that (i) the Company (A) effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or (B) engages in any transaction to which Section 424 of the Code applies, or (ii) there occurs any other event that, in the judgment of the Committee, necessitates such action. Notwithstanding the foregoing, the Committee in its sole discretion may elect not to adjust Performance Objectives under any award if it determines that such adjustment would cause such award to cease to qualify as performance-based compensation under Section 162(m) of the Code. In addition, the Committee may provide for the replacement of any outstanding awards under the Plan (or any portion of any award) with alternative consideration (including without limitation cash) as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the surrender of all awards so replaced. Any determination, adjustment or replacement made under this Article X by the Committee shall be final and conclusive. The issuance by the Company of stock of any class, or securities convertible into stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of stock or obligations of the Company convertible into such stock or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the maximum number of shares as to which Options, Performance Shares, Performance Units and Stock Awards may be granted; the per individual limitations on the number of shares for which Options, Performance Shares, Performance Units and Stock Awards may be granted; or the terms of outstanding Stock Awards, Options, Performance Shares, Performance Units. The Committee may make Stock Awards and may grant Options, Performance Shares, and Performance Units in substitution for performance shares, phantom shares, stock awards, stock options, or similar awards held by an individual who becomes an employee or director of the Company or a Subsidiary in connection with a transaction described in the first paragraph of this Article X. Notwithstanding any provision of the Plan (other than the limitation of Section 5.02), the terms of such substituted Stock 11 -------------------------------------------------------------------------------- Awards, Options, Performance Shares or Performance Units shall be as the Committee, in its discretion, determines is appropriate. ARTICLE XI Compliance With Law and Approval of Regulatory Bodies No Option shall be exercisable, no shares of Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered, and no payment shall be made under this Plan except in compliance with all applicable Federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Company is a party, and the rules of all domestic stock exchanges on which the Company’s shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. Any stock certificate issued to evidence shares of Common Stock when a Stock Award is granted, a Performance Share or Performance Unit is settled, or for which an Option is exercised may bear such legends and statements as the Administrator may deem advisable to assure compliance with Federal and state laws and regulations. No Option shall be exercisable, no Stock Award, Performance Shares or Performance Units shall be granted, no shares of Common Stock shall be issued, no certificate for shares of Common Stock shall be delivered, and no payment shall be made under this Plan until the Company has obtained such consent or approval as the Administrator may deem advisable from regulatory bodies having jurisdiction over such matters. ARTICLE XII General Provisions 12.01.  Effect on Employment and Service Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof), shall confer upon any individual any right to continue in the employ or service of the Company or a Subsidiary or in any way affect any right and power of the Company or a Subsidiary to terminate the employment or service of any individual at any time with or without assigning a reason therefor. 12.02.  Unfunded Plan The Plan, insofar as it provides for grants, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by grants under this Plan. Any liability of the Company to any person with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. 12.03.  Rules of Construction Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law. 12.04.  Restrictions on Repriced Options The Administrator may not, without approval of the shareholders of the Company, authorize the amendment of any outstanding Option to reduce the Option price. Furthermore, no Option shall be cancelled and replaced with new awards having a lower Option price, where the economic effect would be the same as reducing the Option price of the Option, without approval of the shareholders of the Company. 12 -------------------------------------------------------------------------------- 12.05.  Restrictions on Transfer of Shares Issued or Delivered Notwithstanding any other provision of this Plan, an Agreement may provide that the Company has reserved a right of first refusal to purchase the Common Stock acquired on exercise of Options, or under a Stock Award or award of Performance Shares or Performance Units, at a price equal to the Fair Market Value per share repurchased determined as of the day preceding the day the Company notifies the Participant of its intention to repurchase the shares. If such right is reserved, the Participant must comply with the terms of the Agreement and any procedures established by the Administrator prior to any disposition of Common Stock acquired under the Agreement; provided, that the Company shall have a maximum of five days following the date on which Participant is required to notify the Company of his or her intent to dispose of the Common Stock to advise the Participant whether it will purchase the Common Stock. The Administrator may provide in an Agreement that the shares of Common Stock that are to be issued or delivered on exercise of an Option or in settlement of an award of Performance Shares or Performance Units, or shares subject to a Stock Award that are no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Article VII, shall be subject to additional restrictions on transfer. 12.06.  Effect of Acceptance of Award By accepting an award under the Plan, a Participant and his or her successor in interest or personal representative shall be conclusively deemed to have indicated his or her acceptance or ratification of, and consent to, any action taken under the Plan by the Company or the Administrator. 12.07.  Governing Law The provisions of this Plan shall be interpreted and construed in accordance with the laws of the State of Michigan, other than its choice-of-law provisions. 12.08.  Coordination with Other Plans Participation in the Plan shall not affect an employee’s eligibility to participate in any other benefit or incentive plan of the Company or any Subsidiary. Income realized as a result of the exercise, vesting or settlement of awards under the Plan shall not be considered earnings for purposes of the Employee Savings Plan, any Company-sponsored or Subsidiary-sponsored Retirement Plan, insurance or other employee benefit programs. 12.09.  Deferral The Committee may require or permit Participants to elect to defer the settlement of awards in cash or the issuance or delivery of Common Stock pursuant to the Plan under such rules and procedures as it may establish from time to time. 12.10.  Tax Withholding The Company shall, if required by law, withhold or cause to be withheld, Federal, state and/or local income and employment taxes in connection with the exercise, vesting or settlement of an award under the Plan. Unless otherwise provided in the applicable Agreement, each Participant may satisfy any such tax withholding by any of the following means or by a combination of such means: (i) a cash payment; (ii) by delivery to the Company of a number of shares of Common Stock previously acquired by the Participant having a Fair Market Value, on the date the tax liability first arises, equal to the tax liability being paid and, if the shares were acquired from the Company, that have been held by the Participant for at least six months; or (iii) by authorizing the Company to withhold from the shares of Common Stock otherwise issuable to the Participant pursuant to the exercise, vesting or settlement of an award, the number of shares of Common Stock having a Fair Market Value, on the date the tax liability first arises, 13 -------------------------------------------------------------------------------- equal to the minimum statutory withholding required for the Participant based on applicable law. If the amount required is not paid, the Company may refuse to issue or deliver shares or cash under the award. 12.11.  Limitation on Benefits Benefits, payments, accelerated vesting and other rights under this Plan may constitute Parachute Payments subject to the “golden parachute” rules of Code Section 280G and the excise tax under Code Section 4999. It is the Company’s intention to reduce any such Parachute Payments if, and only to the extent that, a reduction will allow the affected Participant to receive a greater Net After Tax Amount than he or she would receive absent a reduction. The remaining provisions of this Section describe how that intent will be effected. The Accounting Firm will first determine the amount of any Parachute Payments that are payable to a Participant. The Accounting Firm will also determine the Net After Tax Amount attributable to that Participant’s total Parachute Payments. The Accounting Firm will next determine the amount of that Participant’s Capped Parachute Payments. Thereafter, the Accounting Firm will determine the Net After Tax Amount attributable to that Participant’s Capped Parachute Payments. That Participant will receive the total Parachute Payments unless the Accounting Firm determines that the Capped Parachute Payments will yield a higher Net After Tax Amount, in which case that Participant will receive the Capped Parachute Payments. If a Participant receives Capped Parachute Payments, his or her benefits, payments, accelerated vesting or other rights under this Plan will be adjusted, if at all, in the manner determined by the Committee, in its sole discretion. The Accounting Firm will notify the Participant and the Company if it determines that the Parachute Payments must be reduced to the Capped Parachute Payments and will send the Participant and the Company a copy of its detailed calculations supporting that determination. As a result of any uncertainty in the application of Code Sections 280G and 4999 at the time that the Accounting Firm makes its determination under this Section 12.11, it is possible that amounts will have been paid, vested, earned or distributed that should not have been paid, vested, earned or distributed under this Section 12.11 (“Overpayments”), or that additional amounts should be paid, vested, earned, or distributed under this Section 12.11 (“Underpayments”). If the Accounting Firm determines, based on either controlling precedent, substantial authority or the assertion of a deficiency by the Internal Revenue Service against a Participant or the Company, which assertion the Accounting Firm believes has a high probability of success, that an Overpayment has been made, then the Participant shall have an obligation (i) to pay the Company upon demand an amount equal to the sum of the Overpayment plus interest on such Overpayment at the prime rate provided in Code Section 7872(f)(2) from the date of the Participant’s receipt of such Overpayment until the date of such repayment, or (ii) to agree to other arrangements that the Committee determines to be equitable in the circumstances; provided, however, that the Participant shall be obligated to make such repayment or agree to such other arrangements, if, and only to the extent, that the repayment or other arrangement would either reduce the amount on which the Participant is subject to tax under Code Section 4999 or generate a refund of tax imposed under Code Section 4999. If the Accounting Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the Accounting Firm will notify the Participant and the Company of that determination and the Company will (i) pay the amount of that Underpayment at the prime rate provided in Code Section 7872(f)(2) from the date such Underpayment should have been paid until actual payment, or (ii) take such other action as the Committee determines to be equitable in the circumstances. All determinations made by the Accounting Firm under this Section 12.11 are binding on the Participant and the Company and must be made as soon as practicable but no later than thirty days after a Control Change Date. Notwithstanding the foregoing, this Section 12.11 shall not apply to any Participant entitled to an indemnification of excise taxes incurred under Code Section 4999, pursuant to a Change in Control 14 -------------------------------------------------------------------------------- Severance Agreement or other arrangement or agreement with the Company, with respect to Parachute Payments otherwise subject to limitation under this Section 12.11. ARTICLE XIII Amendment The Board may amend this Plan from time to time or terminate it at any time; provided, however, that no amendment may become effective until shareholder approval is obtained if the amendment (i) increases the aggregate number of shares of Common Stock that may be issued or delivered under the Plan; or (ii) permits the exercise of an Option at an Option price less than the Fair Market Value on the date of grant of the Option. No amendment or termination shall, without a Participant’s consent, adversely affect the rights of such Participant under any award of Performance Shares or Performance Units, any Stock Award or any Option outstanding at the time such amendment is made or such termination occurs. ARTICLE XIV Duration of Plan No Stock Award, Performance Shares, Performance Units or Option may be granted under this Plan as herein amended and restated more than ten years after the earlier of the adoption by the Board of such amendment and restatement, or its approval by the Company’s shareholders. Stock Awards, Performance Shares, Performance Units and Options granted before that date shall remain valid in accordance with their terms. ARTICLE XV Effective Date of Plan Options, Stock Awards, Performance Shares and Performance Units may be granted under this Plan upon its adoption by the Board; provided that, unless amendments to this Plan presented to the Company’s shareholders at the Company’s 2001 annual meeting of shareholders are approved by shareholders at that meeting, none of such amendments that require shareholder approval under the terms of this Plan as in effect on September 15, 1999, shall be effective. 15
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.27 Anchor Gaming Anchor Gaming 1995 Stock Option Plan STOCK OPTION AGREEMENT     THIS AGREEMENT, dated as of January 3, 2000, is by and between Anchor Gaming ("Anchor Gaming"), a Nevada corporation, and the person named on the signature page to this Agreement (the "Participant"). RECITALS     WHEREAS Anchor Gaming has adopted the Anchor Gaming 1995 Stock Option Plan (the "Plan") to enable employees of Anchor Gaming and its majority-owned subsidiaries to acquire shares of Common Stock, $.01 par value, of Anchor Gaming ("Common Stock") in accordance with the provisions of the Plan.     WHEREAS The Board of Directors (the "Board") has selected Participant to participate in the Plan and has determined to grant Participant the right and option to purchase shares of Common Stock in accordance with the terms and conditions of this Agreement, provided that if any change is made in the shares of Common Stock (including, but not limited to, changes by stock dividend, stock split, merger or consolidation, but not including the issuance of additional shares for consideration), the Board of Directors or the Committee appointed to administer the Plan (the "Committee"), will make such adjustments in the number and kind of shares (which may consist of shares of a surviving corporation to a merger) that may thereafter be optioned and sold under the Plan and the number and kind of shares (which may consist of shares of a surviving corporation to a merger) and purchase price per share of shares subject to outstanding Stock Option Agreements under the Plan as the Board of Directors or the Committee determines are equitable to preserve the respective rights of the Participants under the Plan.     NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and other terms and conditions set forth in this Agreement, Anchor Gaming and Participant agree as follows: 1.Definitions.  As used in this Agreement, the following terms have the meanings indicated: (a)"Company" means Anchor Gaming and its majority-owned subsidiaries and any successor to substantially all of the business of Anchor Gaming and its majority owned subsidiaries. (b)"Change of Control" means the occurrence of any of the following events, as a result of one transaction or a series of transactions: (i) any "person" (as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), but excluding the Company, its affiliates, and any qualified or non-qualified plan maintained by the Company or its affiliates) becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Anchor Gaming representing more than 50% of the combined voting power of Anchor Gaming's then outstanding securities; (ii) individuals who constitute a majority of the Board of Directors of the Company immediately prior to a contested election for positions on the Board cease to constitute a majority as a result of such contested election; (iii) Anchor Gaming is combined (by merger, share exchange, consolidation, or otherwise) with another entity and as a result of such combination, less than 50% of the outstanding securities of the surviving or resulting entity are owned in the aggregate by the former shareholders of Anchor Gaming; (iv) the Company sells, leases, or otherwise transfers all or a majority of all of its properties or assets to another person or entity; (v) a dissolution or liquidation of Anchor 1 -------------------------------------------------------------------------------- Gaming or; (vi) any other transaction or series of transactions is consummated that results in a required disclosure under Item 1 of Form 8-K or successor form. (c)"Confidential Information" means all written, machine-reproducible, oral and visual data, information, and material, including, but not limited to, business, financial, and technical information; and computer programs, documents, and records (including those that Participant develops in the scope of his or her employment) that (i) the Company or any of its customers or suppliers treats as proprietary or confidential through markings or otherwise, (ii) relates to the Company or any of its customers or suppliers or any of their business activities, products, or services (including software programs and techniques) and is competitively sensitive or not generally known in the relevant trade or industry, or (iii) derives independent economic value from not being generally known to, and is not readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. Confidential Information does not include any information or material that is approved by Anchor Gaming for unrestricted public disclosure. (d)"Expiration Date" means the date and time as of which the Option expires, which is the earlier of (i) the close of business on the date one year after the entire Option has Vested or (ii) the date and time as of which all rights to exercise the Option are terminated under Section 2(d). (e)"Market Value" of a share of Purchased Stock on a given date means (i) if the Purchased Stock is Publicly Traded, the closing sale price for Purchased Stock, as determined in good faith by the Board of Directors, on such date or, if no closing sale price is available for such date, on the most recent prior date for which a closing sale price is available or, if no closing sale price is available, the closing bid price, as so determined, on such date or, if no closing bid price is available for such date, the closing bid price on the most recent prior date for which a closing bid price is available, or (ii) if the Purchased Stock is not Publicly Traded, its fair market value, as determined in good faith by the Board of Directors, as of such date. (f)"Net Investment Proceeds," with respect to any share of Purchased Stock sold or otherwise transferred by Participant or Participant's successor in interest, means the greater of the value of the gross proceeds received for such share or the Market Value of such share on the date of sale or transfer less, in either case, (i) the exercise price of the Option for such share, (ii) any reasonable and customary commission actually paid for the sale or transfer, and (iii) the verified amount of any income taxes paid or payable on the sale or transfer. (g)"Option" means the right and option to purchase shares of Common Stock evidenced by this Agreement. (h)"Publicly Traded" means Common Stock has been listed on a registered national securities exchange or approved for quotation in the Nasdaq® National Market ("NASDAQ") or another national securities exchange of automated quotation service. (i)"Purchased Stock" means any security purchased upon the exercise of this Option, together with any successor security, property or cash issued or distributed by Anchor Gaming or any successor entity, whether by way of merger, consolidation, share exchange, reorganization, liquidation, recapitalization, or otherwise. (j)"Termination for Substantial Misconduct" means termination of employment for commission of a felony by the Participant; actions involving moral turpitude, theft, or dishonesty by the Participant in a material matter; breach of any obligation under this Agreement or any other agreement or obligation of the Participant to the Company; failure by Participant to carry out the directions, instructions, policies, rules, regulations, or decisions of the Board or the executive officers of the Company including, without limitation, those relating to business 2 -------------------------------------------------------------------------------- ethics and the ethical conduct of the business of the Company; failure by Participant to carry out or perform his or her material duties to the Company. (k)"Transfer" or "transfer" or derivations thereof includes any sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange, or any other disposition or any interest in this Agreement, the Option, or securities issued on exercise of this Option. (l)"Vesting," or "vesting" or derivations thereof with respect to any Option issued under this Agreement, means receiving the right to exercise the Option. (m)"Vesting Period" means the period of time commencing on the date of this Agreement and ending on the date on which the entire Option has Vested. 2.Grant of Option; Purchase of Stock. (a)Subject to the terms, conditions, and restrictions set forth in the Plan and in this Agreement, Anchor Gaming hereby grants to Participant, and Participant hereby accepts from Anchor Gaming, the option to purchase from Anchor Gaming the number of shares of Common Stock specified on Attachment A to this Agreement, at the purchase price so specified, which option will Vest in Participant in accordance with the Vesting Schedule set forth on Attachment A to this Agreement. Except as provided on Attachment A, he Option shall continue to Vest only for as long as Participant is an employee of Company, unless the Board or the Committee, in its sole discretion, agrees in writing otherwise. Participant will have the right to exercise the Option and purchase Common Stock after the Option Vests as provided in Section 2(d) . (b)The purchase price of shares as to which the Option is exercised must be paid to Anchor Gaming at the time of the exercise either in cash or in such other consideration as the Board or the Committee may approve or a combination of cash and such other consideration having a total fair market value, as determined by the Board or the Committee, equal to the purchase price. (c)The Board or the Committee may elect to assist Participant in satisfying an obligation to pay or withhold taxes required as a result of the exercise of this Option by accepting shares of Purchased Stock at Market Value to satisfy the tax obligation. The shares of Purchased Stock accepted may be either shares withheld upon the exercise of this Option or other shares already owned by Participant. In determining whether to approve acceptance of Purchased Stock to satisfy such a tax obligation, the Board or the Committee may consider whether the shares proposed to be delivered are subject to any holding period or other restrictions on transfer and may waive or arrange for the waiver of any such restrictions. (d)The Option is only exercisable as to Vested Options. Once Vested, (i) if the Participant ceases to be an employee of the Company for any reason whatsoever, voluntary or involuntary, other than death, the Option may be exercised only until 5:00 p.m. Las Vegas time on the business day immediately preceding the first anniversary of such cessation the date of cessation of employment and in any case no later than the Expiration Date, and (ii) if the Participant ceases to be an Employee because of death of the Participant, the Option may be exercised by the Participant's estate only for two years after the Participant's death and in any case no later than the Expiration Date. 3.Restrictions on Transfer.  The Option may not be sold or otherwise transferred and is exercisable only by Participant during Participant's lifetime unless the transfer is by will or the laws of descent and distribution upon Participant's death. Anchor Gaming is not obligated to recognize any purported sale or other transfer of the Option or any Purchased Stock in violation of this Section 3 3 -------------------------------------------------------------------------------- and, unless it elects to do otherwise, may treat any such purported sale or transfer as null, void, and of no effect. 4.Rights to Buy Back Purchased Stock and to Require Payback of Certain Profits. (a)If the Board discovers that Participant has engaged in any conduct prohibited by Section 5 or if Participant ceases to be employed by the Company and the Board, in its sole discretion, determines that Participant's cessation of employment resulted from a Termination for Substantial Misconduct or would have resulted from a Termination for Substantial Misconduct had the relevant facts been known at the time of Participant's cessation of employment, Anchor Gaming will have (i) the right for 180 days after the Board discovers the relevant facts to cancel any unexercised Option, whether or not Vested, and to buy back from Participant any shares of Purchased Stock then owned by Participant, at a purchase price equal to the price per share paid by Participant for the shares, and (ii) the right to require Participant to pay back to Anchor Gaming in cash the Net Investment Proceeds with respect to any shares of Purchased Stock sold or otherwise transferred by Participant. (b)Whenever Anchor Gaming has a right to buy back shares of Purchased Stock or to require Participant to pay back to Anchor Gaming Participant's Net Investment Proceeds with respect to any shares of Purchased Stock under this Section 4, Anchor Gaming may exercise its right by notifying Participant or the subsequent holder of Anchor Gaming's election to exercise its right within the designated exercise period. In the case of a buyback under Section 4(a), the giving of such notice will give rise to an obligation on the part of Participant or the subsequent holder to tender to Anchor Gaming, within 10 days, any previously issued certificate representing shares of Purchased Stock to be bought back, duly endorsed in blank or having a duly executed stock power attached in proper form for transfer free and clear of any claim by any other person or entity. If any such certificate is not tendered within 10 days, Anchor Gaming may cancel any outstanding certificate representing shares to be bought back. Anchor Gaming is required to tender the purchase price for shares to be bought back under this Section 4 within 20 days of giving notice of its election to exercise its right to buy back shares. If the person from whom the shares are to be bought back has not complied with an obligation to return a certificate representing shares to be bought back, however, Anchor Gaming is not required to tender the purchase price until 20 days after the certificate is duly returned or 20 days after it cancels the certificate, whichever occurs first. 5.Competition and Non-Disclosure.  Participant acknowledges that: (i) in the course and as a result of employment with the Company, Participant will obtain special training and knowledge and will come in contact with the Company's current and potential customers, which training, knowledge, and contacts would provide invaluable benefits to competitors of the Company; (ii) the Company is continuously developing or receiving Confidential Information, and that during Participant's employment he or she will receive Confidential Information from the Company, its customers and suppliers and special training related to the Company's business methodologies; and (iii) Participant's employment by Company creates a relationship of trust that extends to all Confidential Information that becomes known to Participant. Accordingly, and as a material inducement to Anchor Gaming to grant this Option to Participant and other good and valuable consideration, Participant agrees that Anchor Gaming will be entitled to terminate all rights to exercise the Option and to exercise the rights specified in Section 4 if Participant does any of the following without the prior written consent of the Company: (a)while employed by the Company or within one year thereafter: (i)competes with, or engages in any business that is competitive with, the Company within 250 miles of any location at which the Company has done business during the employment of the Participant with the Company; 4 -------------------------------------------------------------------------------- (ii)solicits or performs services, as an employee, independent contractor, or otherwise, for any person or entity (including any affiliates or subsidiaries of that person or entity) that is or was a customer or prospect of the Company during the two years before Participant's employment with the Company ended if Participant solicited business from or performed services for that customer or prospect while employed by Company; or (iii)recruits, hires, or assist, directly or indirectly, anyone to recruit or hire anyone who was an employee of the Company, or of any of its customers for whom Participant performed services of from whom Participant solicited business, within the six months before Participant's employment with the Company ended; or (b)discloses or uses any Confidential Information, except in connection with the good faith performance of Participant's duties as an employee; or fails to take reasonable precautions against the unauthorized disclosure or use of Confidential Information; fails, upon Anchor Gaming' request, to execute and comply with a third party's agreement to protect its confidential and proprietary information; solicits or induces the unauthorized disclosure or use of Confidential Information; or fails to return on Anchor Gaming's request any and all Confidential Information in the Participant's care, custody, or control. If any court of competent jurisdiction finds any provision of this Section 5 to be unreasonable as to substantive scope, duration or geographic scope, then the Participant expressly agrees that, at Anchor's sole discretion, and in addition to any other remedies at law or equity that may be available to Anchor Gaming: (i) such provision will be considered to be amended to provide the broadest scope of protection to the Company that such court would find reasonable and enforceable or (ii) Anchor Gaming may require that this Agreement be rescinded. 6.Compliance with Securities Laws.  Participant hereby agrees that, upon demand by Anchor Gaming, any person exercising this Option, at the time of such exercise, will deliver to Anchor Gaming a written representation to the effect that the shares of Purchased Stock being acquired are being acquired for investment and not with a view to any resale or distribution thereof. Participant further agrees that neither Participant nor any successor in interest of Participant will sell or otherwise transfer the Option or any shares of Purchased Stock in any way that might result in a violation of any federal or state securities laws or regulations. Participant further acknowledges and agrees that Anchor Gaming may require Participant or any subsequent holder of the Option or of any shares of Purchased Stock to provide Anchor Gaming, prior to any sale or other transfer, with such other representations, commitments, and opinions regarding compliance with applicable securities laws and regulations as Anchor Gaming may deem necessary or advisable. 7.Stock Certificates; Rights as Shareholder.  All certificates representing shares of Purchased Stock will bear such legends as the Board determines are necessary or appropriate. Whether or not certificates representing shares of Purchased Stock have been issued or delivered, Participant will have all the rights of a shareholder of Purchased Stock, including voting, dividend and distribution rights, with respect to shares of Purchased Stock owned by Participant. Participant will not have any rights as a shareholder with respect to any shares of Common Stock subject to the Option before the date of issuance to Participant of shares upon exercise of the Option. 8.Income Tax Withholding.  Participant shall, upon request by the Company, reimburse the Company for, or the Company may withhold from sums or property otherwise due or payable to Participant, any amounts the Company is required to remit to applicable taxing authorities as income tax withholding with respect to the Option or any Purchased Stock. If shares of Purchased Stock are withheld for such purpose, they will be withheld at Market Value. If Participant fails to reimburse the Company for any such amount when requested, the Company has the right to recover that amount by selling or canceling sufficient shares of any Purchased Stock held by Participant. 5 -------------------------------------------------------------------------------- 9.Compliance with Plan.  Participant acknowledges receipt of a copy of the Plan and further acknowledges that this Agreement is entered into, and the Option is granted, pursuant to the Plan. If the provisions of the Plan are inconsistent with the provisions of this Agreement, the provisions of the Plan supersede the provisions of this Agreement. 10.Notices.  Any notice to Anchor Gaming or the Company that is required or permitted by this Agreement shall be addressed to the attention of the Secretary of Anchor Gaming at its principal office. Any notice to Participant that is required or permitted by this Agreement shall be addressed to Participant at the most recent address for Participant reflected in the appropriate records of the Company. Either party may at any time change its address for notification purposes by giving the other written notice of the new address and the date upon which it will become effective. Whenever this Agreement requires or permits any notice from one party to another, the notice must be in writing to be effective and, if mailed, shall be deemed to have been given on the third business day after the same is enclosed in an envelope, addressed to the party to be notified at the appropriate address, property stamped, sealed, and deposited in the United States mail, and, if mailed to the Company, by certified mail, return receipt requested. 11.Remedies.  Anchor Gaming is entitled, in addition to any other remedies it may have at law or in equity, to temporary and permanent injunctive and other equitable relief to enforce the provisions of this Agreement. Any action to enforce the provisions of, or relating to, this Agreement may be brought in the state or federal courts having jurisdiction in the State of Nevada. By signing this Agreement, Participant consents to the personal jurisdiction of such courts in any such action. 12.Assignment.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal representatives, successors, and assigns. However, Participant does not have the power or right to assign this Agreement without the prior written consent of Anchor Gaming. 13.Attorneys' Fees.  If any legal proceeding is brought to enforce or interpret the terms of this Agreement, the prevailing party will be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which that party may be entitled. 14.Severability.  If any provision of this Agreement is held invalid or unenforceable for any reason, the validity and enforceability of all other provisions of this Agreement will not be affected. 15.Headings.  The section headings used herein are for reference and convenience only and do not affect the interpretation of this Agreement. 16.Governing Law.  This Agreement shall be governed by and construed in accordance with the law of the State of Nevada, without regard to the choice of law rules in such law or any other principle that could require the application of the laws of another jurisdiction. 17.Entire Agreement.  This Agreement, together with the Plan and any procedure adopted by the Board or the Committee under the Plan, constitutes the entire agreement between the parties with respect to its subject matter and may be waived or modified only in writing. 6 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, and intending to be legally bound hereby, Participant and a duly-authorized representative of Anchor Gaming have executed this Agreement as of the date first above written. PARTICIPANT: Geoffrey A. Sage   ANCHOR GAMING /s/ GEOFFREY A. SAGE    --------------------------------------------------------------------------------   By: /s/ T. J. MATTHEWS    -------------------------------------------------------------------------------- Signature     Title:  CEO CONSENT OF SPOUSE     As the spouse of Participant, I consent to be bound by this Stock Option Agreement and agree that this consent will be binding on my interest under this Agreement and on my heirs, legatees, and assigns.     /s/ BRENDA M. SAGE    --------------------------------------------------------------------------------     Signature     Brenda M. Sage --------------------------------------------------------------------------------     Printed Name 7 -------------------------------------------------------------------------------- ATTACHMENT A TO STOCK OPTION AGREEMENT FOR Geoffrey A. Sage 1.   Purchase Price:   $50.00 per Share. 2.   Expiration Date:   December 31, 2005, unless earlier terminated under terms of the Agreement. 3.   Vesting Schedule:             Vesting Dates --------------------------------------------------------------------------------       Number of Options Vesting --------------------------------------------------------------------------------     June 30, 2000   5,000     December 31,2000   5,000     December 31, 2003   10,000     December 31, 2004   10,000                 Total   30,000             --------------------------------------------------------------------------------     Notwithstanding any other provision of the Agreement or of this Attachment A, in the event of a Change of Control, if that the Participant is terminated other than in a Termination for Substantial Misconduct, significantly demoted, or required to relocate to a place of work more than 60 miles from his or her prior place of work either in contemplation of a Change of Control or within one year following a Change of Control, the Options of the Participant under the Agreement will become immediately Vested and exerciseable. Such Options will remain fully Vested and exercisable for one year from the date of the termination, demotion, or requirement to relocate. 8 -------------------------------------------------------------------------------- LOGO [g901284.jpg] MEMORANDUM TO:   Stan Fulton and Mike Rumbolz FROM:   Geoff Sage /s/ GEOFF SAGE    DATE:   January 3, 2000 SUBJECT:   Summary of our recent discussions regarding my compensation structure -------------------------------------------------------------------------------- Base pay:   Increase to $150,000 effective 1/1/00     Increase to $200,000 effective 1/1/01 Bonus:   $100,000 minimum each December Stock options:   30,000 new options @ $50.00 grant price to vest as follows: 5,000 shares on 06/30/00, 5,000 shares on 12/31/00, 10,000 shares on 12/31/03, and 10,000 shares on 12/31/04     The Anchor Gaming Compensation committee (Glen Hettinger. Chairman, Mike Fulton and Mike Rumbolz, members) discussed and agreed to the above.     Please sign below to evidence our mutual understanding of the above.     /s/ MIKE RUMBOLZ    -------------------------------------------------------------------------------- Mike Rumbolz   12/31/99 -------------------------------------------------------------------------------- date Anchor Gaming  •  815 Pilot Road Suite G   •  Las Vegas, Nevada 89119 (702) 896-7568  •  Fax (702) 896-6992 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.27 Anchor Gaming Anchor Gaming 1995 Stock Option Plan STOCK OPTION AGREEMENT RECITALS CONSENT OF SPOUSE ATTACHMENT A TO STOCK OPTION AGREEMENT FOR Geoffrey A. Sage
EXHIBIT 10.1     SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Second Amendment") is made by and among Piccadilly Cafeterias, Inc. (the "Borrower"), Hibernia National Bank and Branch Banking and Trust Company (collectively, the "Banks" and individually, a "Bank"), effective as of July 31, 2001 (the "Effective Date"). This Agreement amends the Amended and Restated Credit Agreement dated as of December 21, 2000, as previously amended by First Amendment to Amended and Restated Credit Agreement dated as of June 15, 2001, made by and among the Borrower, the Banks and others (collectively, the "Restated Credit Agreement"). The Borrower has requested that the Restated Credit Agreement be further amended and the Banks have agreed to further amend the Restated Credit Agreement on the following terms and conditions. Amendment to Section 3.02. Section 3.02 of the Restated Credit Agreement is amended in its entirety to read as follows: Section 3.02 Advance Requests. For each Advance requested by the Borrower, the Borrower shall provide the Administrative Agent with a written request in a form acceptable to the Administrative Agent prior to 11:00 a.m. (New Orleans, Louisiana time), accompanied by an Officer's Certificate that includes the aggregate amount of cash and Cash Equivalents of the Borrower and all Restricted Subsidiaries as of date of the Advance request. In the event an Advance is not funded on the date of the Advance request, the Administrative Agent may request an updated Officer's Certificate that includes the aggregate amount of cash and Cash Equivalents of the Borrower and all Restricted Subsidiaries as of a date specified by the Administrative Agent. Requested Advances shall be available only in amounts of at least $500,000.00, each, and in increments of $50,000.00 above that amount. The Banks shall not be required to make any requested Advance if the amount of the requested Advance, plus the aggregate amount of cash and Cash Equivalents of the Borrower and all Restricted Subsidiaries at the time of the Advance request or the date the Advance is to be made, exceeds $1,000,000.00. Each requested Advance shall be conclusively deemed to have been made at the request of and for the benefit of the Borrower (a) when credited to any deposit account of the Borrower maintained with the Administrative Agent or any Bank, or (b)when advanced in accordance with the instructions in the written request for the Advance. All or part of a requested Advance may be initially made as a Euro-Dollar Loan, provided that the Borrower furnishes the Administrative Agent with the requisite advance written notice of a Euro-Dollar Loan election for the requested Advance. Amendment to Section 8.03. Section 8.03 of the Restated Credit Agreement is amended in its entirety to read as follows: Section 8.03 Minimum Consolidated Tangible Net Worth. As of the fiscal quarter ending September 30, 2001, the Borrower shall have a Consolidated Tangible Net Worth of at least $25,000,000.00. Beginning with the fiscal quarter ending December 31, 2001, and as of each fiscal quarter end thereafter, the Borrower shall maintain a Consolidated Tangible Net Worth of at least, (a) $24,254,000.00 (which amount is the Consolidated Tangible Net Worth of the Borrower as of June 30, 2001, minus $3,000,000.00), plus (b) 50% of the cumulative Consolidated Net Income of the Borrower and its Restricted Subsidiaries after June 30, 2001 (if positive), plus (c) 100% of the Net Proceeds of any Qualified Equity Offering after December 21, 2000. Excess Cash Flow Representations and Warranties. The Borrower hereby represents and warrants to the Banks that (a) the Excess Cash Flow of the Borrower for the fiscal year ending June 30, 2001, did not exceed $2,500,000.00, (b) the Borrower will not be obligated to make any Excess Cash Flow Offer under the Indenture or the Term Loan Credit Agreement for the fiscal year ending June 30, 2001, and (c) the Borrower will not make any Excess Cash Flow Offer or Additional Excess Cash Flow Offer under the Indenture or the Term Loan Credit Agreement for the fiscal year ending June 30, 2001. Reduced Commitments . The Borrower and the Banks acknowledge and agree that, as the result of Asset Sales allowed under the Restated Credit Agreement, as of the Effective Date, the aggregate of all Commitments under the Restated Credit Agreement has been reduced to $14,394,000.00, allocated between the Banks as follows: Hibernia National Bank $ 11,515,200.00 Branch Banking and Trust Company $ 2,878,800.00 Acceptable Accountants' Report. The Banks hereby agree that a "going concern" explanatory paragraph included in the Accountants' Report of the audited financial statements of the Borrower for the fiscal year ending June 30, 2001, shall be acceptable to the Banks, provided that the explanatory paragraph expressly states that it is based principally on the potential inability of the Borrower, in the future, to comply with the financial covenants included in Article VIII of the Restated Credit Agreement. The Banks further agree that the inclusion of such an explanatory paragraph in the Accountants' Report of the audited financial statements of the Borrower for the fiscal year ending June 30, 2001, shall not cause a Default or an Event of Default to occur under the Restated Credit Agreement. Amendment Fee. The Borrower agrees to pay an amendment fee of $21,591.00 due and payable to the Administrative Agent, in full, upon execution of this Agreement. After the amendment fee is collected, the Administrative Agent shall remit $14,394.00 to Hibernia National Bank as its share of the amendment fee, and $7,197.00 to Branch Banking and Trust Company as its share of the amendment fee. No Novation . This Second Amendment shall not in any manner constitute or be construed to constitute a novation, discharge, forgiveness, extinguishment or release of any obligation for amounts due under the Restated Credit Agreement, which obligations, as amended hereby, shall continue in full force and effect, and retain the same ranking, priority and order as prior hereto, in accordance with the terms of the Restated Credit Agreement. The Borrower hereby confirms and ratifies all of the security as described in the Restated Credit Agreement, and all notes, mortgages, pledges, security agreements, and other agreements executed in connection therewith, all of the foregoing to secure all amounts described in the Restated Credit Agreement. Representations and Warranties. The Borrower hereby confirms, reaffirms, and restates the representations, warranties, affirmative covenants and negative covenants set forth in the Restated Credit Agreement. The Borrower also represents and warrants that there has been no undisclosed material adverse change in (a) the business operations of the Borrower, (b) the management of the Borrower, and/or (c) any other facts, circumstances or conditions upon which the Banks have relied or utilized in making their decision to enter into this Second Amendment. Release. In consideration of the Banks' consent to enter into this Second Amendment, the Borrower agrees that all disputes and claims whatsoever of any kind or nature which the Borrower presently has or may have against the Administrative Agent, the Collateral Agent or any Bank are fully and finally released, compromised and settled. The Borrower, for itself and its successors in interests and assigns, does hereby expressly release and forever relieve, discharge and grant full acquittance to the Administrative Agent, the Collateral Agent and the Banks for and from any and all causes of action, suits, claims, debts, obligations or liabilities of any nature whatsoever, known or unknown, alleged or not alleged, which the Borrower has or may have against the Administrative Agent, the Collateral Agent, any Bank, or the agents, attorneys, officers, employees, directors and shareholders of the Administrative Agent, the Collateral Agent or any Bank, as of the date of the Effective Date. This release shall be construed to have the broadest possible scope. Definitions . Terms defined in the Restated Credit Agreement shall have their defined meanings when used herein, except as otherwise provided for herein. Limited Effect . Except as amended and modified herein, the Restated Credit Agreement shall continue to be and shall remain in full force and effect in accordance with its terms. Governing Law . This Second Amendment shall be governed by and construed and interpreted in accordance with the laws of the State of Louisiana. [NEXT PAGES ARE SIGNATURE PAGES]   THE BORROWER AND THE BANKS EACH ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS SECOND AMENDMENT, AND EACH AGREES TO ITS TERMS. THIS SECOND AMENDMENT IS DATED AS OF JULY 31, 2001. PICCADILLY CAFETERIAS, INC. , as the Borrower   By:    /S/ MARK L. MESTAYER             Name:    Mark L. Mestayer                       Title: Executive Vice President, Treasurer           and Chief Financial Officer 3232 South Sherwood Forrest Boulevard Baton Rouge, Louisiana 70821-2467 Attention:     Mark L. Mestayer                   Chief Financial Officer Telecopy Number: 504-296-8370 Telephone Number: 504-293-9440   HIBERNIA NATIONAL BANK , as a Bank   By:   /S/ JANET O. RACK                         Name: Janet O. Rack Title: Senior Vice President 440 Third Street -- 6th Floor Baton Rouge, Louisiana 70801 Attention:     Janet Rack                        Senior Vice President Telecopy Number: 225-381-2003 Telephone Number: 225-381-2140   BRANCH BANKING AND TRUST COMPANY , as a Bank   By:    /S/ THATCHER L. TOWNSEND III   Name: Thatcher L. Townsend III Title: Senior Vice President Lending Office : 110 South Stratford Road Post Office Box 15008 Winston-Salem, North Carolina 27113-5008 Attention: Corporate Accounts Division Telecopy Number: 336-733-3254 Telephone Number: 336-733-3245  
PLEDGE AGREEMENT   THIS PLEDGE AGREEMENT (the "Agreement") dated as of April 3, 2001, is by and between F.Y.I. INCORPORATED, a Delaware corporation ("Debtor"), and BANK OF AMERICA, N.A., as Administrative Agent for the "Lenders" as that term is defined below (the "Secured Party").   R E C I T A L S:   A.                Debtor entered into that certain Credit Agreement dated as of April 3, 2001, with the financial institutions that are parties thereto (each individually a "Lender" and collectively, the "Lenders") and the Secured Party, as Administrative Agent for the Lenders (such Agreement as it may be amended or otherwise modified from time to time herein referred to as the "Credit Agreement").   B.                The execution and delivery of this Agreement is required by the Credit Agreement as a condition to making extensions of credit thereunder on and after the Closing Date.   NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the adequacy, receipt and sufficiency of which are hereby acknowledged, and in order to induce the Administrative Agent and Lenders to enter into the Credit Agreement, the parties hereto hereby agree as follows:   ARTICLE I   Definitions   Section 1.1.  Definitions.  As used in this Agreement, the following terms have the following meanings:   "Collateral" has the meaning specified in Section 2.1 of this Agreement.   "Obligations" means as such term is defined in the Credit Agreement, and includes, without limitation, all present and future indebtedness, liabilities and obligations of Debtor to the Secured Party and the Lenders under the Credit Agreement and the other Loan Documents.   "Pledged Shares" means the shares of capital stock or other equity, partnership or membership interests described on Schedule 1.1 attached hereto or on Schedule 1 to an amendment to this Agreement in the form of Exhibit A hereto.   "Proceeds" means any "proceeds," as such term is defined in Article or Chapter 9 of the UCC and, in any event, shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Debtor from time to time with respect to any of the Collateral, (b) any and all pay­ments (in any form whatsoever) made or due and payable to Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting, or purporting to act, for or on behalf of any Governmental Authority), and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.   "UCC" means the Uniform Commercial Code as in effect in the State of Texas; provided, that if, by applicable law, the perfection or effect of perfection or non-perfection of the security interest created hereunder in any Collateral is governed by the Uniform Commercial Code as in effect on or after the date hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or the effect of perfection or non-perfection.   Section 1.2.  Other Definitional Provisions.  Terms used herein that are defined in the Credit Agreement and are not otherwise defined herein shall have the meanings therefor specified in the Credit Agreement.  References to "Sections," "subsections," "Exhibits" and "Schedules" shall be to Sections, subsections, Exhibits and Schedules, respectively, of this Agreement unless otherwise specifically provided.  All definitions contained in this Agreement are equally applicable to the singular and plural forms of the terms defined.  All references to statutes and regulations shall include any amendments of the same and any successor statutes and regulations.  References to particular sections of the UCC should be read to refer also to parallel sections of the UCC as enacted in each state or other jurisdiction where any portion of the Collateral is or may be located.  Terms used herein, which are defined in the UCC, unless otherwise defined herein or in the Credit Agreement, shall have the meanings determined in accordance with the UCC.   ARTICLE II   Security Interest   Section 2.1.  Security Interest.  As collateral security for the prompt payment and performance in full when due of the Obligations (whether at stated maturity, by acceleration or oth­erwise) and all obligations, indebtedness and liability of Debtor to Secured Party and the Lenders arising under the Loan Documents, Debtor hereby pledges and collaterally assigns to the Secured Party, and grants to the Secured Party a continuing lien on and security interest in, all of Debtor's right, title and interest in and to the following, whether now owned or hereafter arising or acquired and wherever located (collectively, the "Collateral"):   (a)           the Pledged Shares and the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed or distributable in respect of or in exchange for any or all of the Pledged Shares;   (b)           all additional shares of stock of the Subsidiaries of Debtor from time to time owned or acquired by Debtor in any manner, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed or distributable in respect of or in exchange for any or all of such shares; and   (c)           all products and Proceeds, in cash or otherwise, of any of the property described in the foregoing clauses (a) and (b).   Section 2.2.  Debtor Remains Liable.  Notwithstanding any­thing to the contrary contained herein, (a) Debtor shall remain liable under the documentation included in the Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Secured Party of any of its rights or remedies hereunder shall not release Debtor from any of its duties or obligations under such documentation, (c) the Secured Party shall not have any obligation under any of such documentation ­included in the Collateral by reason of this Agreement, and (d) the Secured Party shall not be obligated to per­form any of the obligations of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.   ARTICLE III   Representations and Warranties   To induce the Secured Party and the Lenders to enter into this Agreement and the Credit Agreement, Debtor represents and warrants to the Secured Party and the Lenders that:   Section 3.1.  Office Locations; Fictitious Names.  The chief place of business and the chief executive office of Debtor is located at the place identified on Schedule 3.1.  Schedule 3.1 also sets forth all other places where Debtor keeps its books and records and all other locations where Debtor has a place of business.  Debtor does not do business and has not done business during the past five years under any trade-name or fictitious business name except as disclosed on Schedule 3.1.   Section 3.2.  Delivery of Collateral.  Except as provided by Section 4.1, as of the date hereof Debtor has delivered to Secured Party all collateral the possession of which is necessary to perfect the security interest of Secured Party therein.  Immediately upon Debtor's receipt of any Pledged Shares, Debtor shall deliver such Pledged Shares, endorsed in blank, to Secured Party.   ARTICLE IV   Covenants   Debtor covenants and agrees with the Secured Party that until the Obligations are paid and performed in full, all Com­mitments of the Secured Party and the Lenders to Debtor have expired or have been terminated and no Letter of Credit remains outstanding:   Section 4.1.  Further Assurances.  At any time and from time to time, upon the request of the Secured Party, and at the sole expense of Debtor, Debtor shall promptly execute and deliver all such further agreements, documents and instruments and take such further action as the Secured Party may reasonably deem neces­sary or appropriate to preserve and perfect its security interest in the Collateral and carry out the provisions and purposes of this Agreement or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral.  Without limiting the generality of the forego­ing, Debtor shall, upon request by the Secured Party, (a) execute and deliver to the Secured Party such financing statements as the Secured Party may from time to time require; (b) take such action as the Secured Party may request to permit the Secured Party to have control over any Collateral; (c) deliver to the Secured Party all Collateral the possession of which is necessary to perfect the security interest therein, duly endorsed and/or accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Secured Party; except that, prior to the occurrence of an Event of Default and when the same shall no longer be continuing, Debtor may:   (i)                retain any letters of credit received in the ordinary course of business, and   (ii)                retain and utilize in the ordinary course of business all dividends and interest paid in respect to any of the Pledged Shares or any other Collateral;   and (d) execute and deliver to the Secured Party such other agreements, documents and instruments as the Secured Party may reasonably require to perfect and maintain the validity, effectiveness and priority of the Liens intended to be created by the Loan Documents.   Section 4.2.  Corporate Changes.  Debtor shall not change its name, identity or corporate structure in any manner that might make any financing statement filed in connection with this Agreement seriously misleading unless Debtor shall have given the Secured Party thirty (30) days prior written notice thereof and shall have taken all action reasonably deemed necessary or desirable by the Secured Party to protect its Liens and the perfection and priority thereof required by the Loan Documents.  Debtor shall not change its prin­cipal place of business, chief executive office or the place where it keeps its books and records unless it shall have given the Secured Party thirty (30) days prior written notice thereof and shall have taken all action reasonably deemed necessary or desirable by the Secured Party to cause its security interest in the Collat­eral to be perfected with the priority required by the Loan Documents.   Section 4.3.   Voting Rights; Distributions, Etc.  So long as no Event of Default shall have occurred and be continuing, Debtor shall be entitled to exercise any and all voting and other consensual rights (including, without limitation, the right to give consents, waivers and notifications) pertaining to any of the Pledged Shares; provided, however, that no vote shall be cast or consent, waiver or ratification given or action taken without the prior written consent of the Secured Party which would be inconsistent with or violate any provision of this Agreement or any other Loan Document.   Section 4.4.  Transfers and Other Liens; Additional Investments.  Except as may be expressly permitted by the terms of the Credit Agreement or this Agreement, Debtor agrees that it will (i) cause each issuer of any of the Collateral not to issue any shares of stock, notes or other securities or instruments in addition to or in substitution for any of the Collateral, (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such shares of stock, membership interests, notes or instruments, and (iii) promptly (and in any event within three Business Days) deliver to the Secured Party an Amendment, duly executed by Debtor, in substantially the form of Exhibit A hereto (an "Amendment"), in respect of such shares of stock, membership interests, notes or instruments, together with all certificates, notes or other instruments representing or evidencing the same.  Debtor hereby (i) authorizes the Secured Party to attach each Amendment to this Agreement, and (ii) agrees that all such shares of stock, membership interests, notes or instruments listed on any Amendment delivered to the Secured Party shall for all purposes hereunder constitute Pledged Shares.   ARTICLE V   Rights of the Secured Party   Section 5.1.  POWER OF ATTORNEY.  DEBTOR HEREBY IRREVO­CABLY CONSTITUTES AND APPOINTS THE SECURED PARTY AND ANY OFFICER OR AGENT THEREOF, WITH FULL POWER OF SUBSTITUTION, AS ITS TRUE AND LAWFUL ATTORNEY–IN–FACT WITH FULL IRREVOCABLE POWER AND AUTHORITY IN THE NAME OF DEBTOR OR IN ITS OWN NAME, TO TAKE, AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, ANY AND ALL ACTIONS AND TO EXECUTE ANY AND ALL DOCUMENTS AND INSTRUMENTS WHICH THE SECURED PARTY AT ANY TIME AND FROM TIME TO TIME DEEMS NECESSARY OR DESIRABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT.  WITHOUT LIMITING THE GENERALITY OF THE FORE­GOING, DEBTOR HEREBY GIVES THE SECURED PARTY THE POWER AND RIGHT ON BEHALF OF DEBTOR AND IN ITS OWN NAME TO DO ANY OF THE FOLLOWING AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, WITH NOTICE TO DEBTOR BUT WITHOUT THE CONSENT OF DEBTOR:   (i)                to demand, sue for, collect or receive, in the name of Debtor or in its own name, any money or property at any time payable or receivable on account of or in exchange for any of the Collateral and, in connection there­with, endorse checks, notes, drafts, acceptances, money orders, documents of title or any other instruments for the payment of money under the Collateral or any policy of insurance;   (ii)                to pay or discharge taxes, Liens or other encum­brances levied or placed on or threatened against the Collateral;   (iii)                (A) to direct account debtors and any other par­ties liable for any payment under any of the Collateral to make payment of any and all monies due and to become due thereunder directly to the Secured Party or as the Secured Party shall direct (Debtor agrees that if any Proceeds of any Collateral shall be received by Debtor while an Event of Default exists, Debtor shall promptly deliver such Proceeds to the Secured Party with any necessary endorsements, and until such Proceeds are delivered to the Secured Party, such Proceeds shall be held in trust by Debtor for the benefit of the Secured Party and shall not be commingled with any other funds or property of Debtor); (B) to receive payment of and receipt for any and all monies, claims and other amounts due and to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, proxies, stock powers, verifications and notices in connection with accounts and other documents relating to the Collateral; (D) to commence and prosecute any suit, action or proceeding at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against Debtor with respect to any Collateral; (F) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Secured Party may deem appropriate; (G) to exchange any of the Collateral for other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof and, in connection therewith, deposit any of the Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms as the Secured Party may determine; (H) to add or release any guarantor, indorser, surety or other party to any of the Collateral; (I) to renew, extend or otherwise change the terms and conditions of any of the Collateral; (J) to make, settle, compromise or adjust any claims under or pertaining to any of the Collateral (including claims under any policy of insurance); and (K) to sell, transfer, pledge, convey, make any Agreement with respect to or otherwise deal with any of the Col­lateral as fully and completely as though the Secured Party were the absolute owner thereof for all purposes, and to do, at the Secured Party's option and Debtor's expense, at any time, or from time to time, all acts and things which the Secured Party deems necessary to protect, preserve, maintain, or realize upon the Collateral and the Secured Party's security interest therein.   THIS POWER OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE.  The Secured Party shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges and options expressly or implicitly granted to the Secured Party in this Agreement, and shall not be liable for any failure to do so or any delay in doing so.  Neither the Secured Party nor any Person designated by the Secured Party shall be liable for any act or omission or for any error of judgment or any mistake of fact or law, except any of the same resulting from its or their gross negligence or willful misconduct.  This power of attorney is conferred on the Secured Party solely to protect, preserve, maintain and realize upon its security interest in the Collat­eral.  The Secured Party shall not be responsible for any decline in the value of the Collateral and shall not be required to take any steps to preserve rights against prior parties or to protect, preserve or maintain any Lien given to secure the Collateral.   Section 5.2.  Assignment by the Secured Party.  The Secured Party and each Lender may at any time assign or otherwise transfer all or any portion of their rights and obligations under this Agreement and the other Loan Documents (including, without limitation, the Obligations) to any other Person, to the extent permitted by, and upon the conditions contained in, the Credit Agreement, and such Person shall thereupon become vested with all the benefits thereof granted to the Secured Party and the Lenders, respectively, herein or otherwise.   Section 5.3.  Possession; Reasonable Care.  The Secured Party may, from time to time, in its sole discretion, appoint one or more agents to hold physical custody, for the account of the Secured Party, of any or all of the Collateral that the Secured Party has a right to possess.  The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property, it being understood that the Secured Party shall not have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Secured Party has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any parties with respect to any Collateral.   ARTICLE VI   Default   Section 6.1.  Rights and Remedies.  If an Event of Default shall have occurred and be continuing, the Secured Party shall have the following rights and remedies:   (a)                In addition to all other rights and remedies granted to the Secured Party in this Agreement or in any other Loan Document or by applicable law, the Secured Party shall have all of the rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Collateral).  Without limiting the generality of the foregoing, the Secured Party may (A) without demand or notice to Debtor, collect, receive or take possession of the Collateral or any part thereof and for that purpose the Secured Party may enter upon any premises on which the Collateral is located and remove the Collateral therefrom or render it inoperable, and/or (B) sell or otherwise dispose of the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at the Secured Party's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may reasonably deem commercially reasonable or otherwise as may be permitted by law.  The Secured Party shall have the right at any public sale or sales, and, to the extent permitted by applicable law, at any private sale or sales, to bid (which bid may be, in whole or in part, in the form of cancellation of indebtedness) and become a purchaser of the Collateral or any part thereof free of any right or equity of redemption on the part of Debtor, which right or equity of redemption is hereby expressly waived and released by Debtor.  Upon the request of the Secured Party, Debtor shall assemble the Collateral and make it available to the Secured Party at any place designated by the Secured Party that is reasonably convenient to Debtor and the Secured Party.  Debtor agrees that the Secured Party shall not be obligated to give more than ten (10) days prior written notice of the time and place of any public sale or of the time after which any private sale may take place and that such notice shall constitute reasonable notice of such matters.  The Secured Party shall not be obligated to make any sale of Collateral if it shall determine not to do so, regardless of the fact that notice of sale of Collateral may have been given.  The Secured Party 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.  Debtor shall be liable for all reasonable expenses of retaking, holding, preparing for sale or the like, and all reasonable attorneys' fees, legal expenses and other costs and expenses incurred by the Secured Party in connec­tion with the collection of the Obligations and the enforce­ment of the Secured Party's rights under this Agreement.  Debtor shall remain liable for any deficiency if the Proceeds of any sale or other disposition of the Collateral applied to the Obligations are insufficient to pay the Obligations in full.  The Secured Party may apply the Collateral against the Obliga­tions as provided in the Credit Agreement.  Debtor waives all rights of marshaling, valuation and appraisal in respect of the Collateral.  Any cash held by the Secured Party as Collateral and all cash proceeds received by the Secured Party in respect of any sale of, collection from or other realization upon all or any part of the Collateral may, in the discretion of the Secured Party, be held by the Secured Party as collateral for, and then or at any time thereafter applied in whole or in part by the Secured Party against, the Obligations in the order permitted by the Credit Agreement.  Any surplus of such cash or cash proceeds and interest accrued thereon, if any, held by the Secured Party and remaining after payment in full of all the Obligations shall be promptly paid over to Debtor or to whomsoever may be lawfully entitled to receive such surplus.   (b)                The Secured Party may cause any or all of the Collateral held by it to be transferred into the name of the Secured Party or the name or names of the Secured Party's nominee or nominees.   (c)                The Secured Party may exercise any and all rights and remedies of Debtor under or in respect of the Collateral, including, without limitation, any and all rights of Debtor to demand or otherwise require payment of any amount under, or performance of any provision of, any of the Collateral and any and all voting rights and corporate powers in respect of the Collateral.  Debtor shall execute and deliver (or cause to be executed and delivered) to the Secured Party all such proxies and other instruments as the Secured Party may reasonably request for the purpose of enabling the Secured Party to exercise the voting and other rights which it is entitled to exercise pursuant to this clause (c) and to receive the dividends, interest and other distributions which it is entitled to receive hereunder.   (d)                The Secured Party may collect or receive all money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so.   (e)                On any sale of the Collateral, the Secured Party is hereby authorized to comply with any limitation or restriction with which compliance is necessary, in the view of the Secured Party's counsel, in order to avoid any violation of applicable law or in order to obtain any required approval of the purchaser or purchasers by any applicable Governmental Authority.   Section 6.2.  Private Sales.  Debtor recognizes that the Secured Party may be unable to effect a public sale of any or all of the Collateral by reason of certain prohibitions contained in the laws of any jurisdiction outside the United States or in the Securities Act of 1933, as amended from time to time (the "Securities Act"), and applicable state securities laws, but may be compelled to resort to one or more private sales thereof 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.  Debtor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall, to the extent permitted by law, be deemed to have been made in a commercially reasonable manner.  Neither the Secured Party nor the Lenders shall be under any obligation to delay a sale of any of the Collateral for the period of time necessary to permit the issuer of such securities to register such securities under the laws of any jurisdiction outside the United States, under the Securities Act or under any applicable state securities laws, even if such issuer would agree to do so.  Debtor further agrees to do or cause to be done, to the extent that Debtor may do so under applicable law, all such other reasonable acts and things as may be necessary to make such sales or resales of any portion or all of the Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at Debtor's expense; provided, however, Debtor shall not be required to file or cause any issuer of the Pledged Shares to file a registration statement under applicable laws in connection with an initial public offering of securities.   ARTICLE VII   Miscellaneous   Section 7.1.  No Waiver; Cumulative Remedies.  No failure on the part of the Secured Party to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power, or privilege.  The rights and remedies provided for in this Agreement are cumulative and not exclusive of any rights and remedies provided by law.   Section 7.2.  Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of Debtor and the Secured Party and their respective successors and assigns, except that Debtor may not assign any of its rights or obligations under this Agreement without the prior written consent of the Lenders and Secured Party may not appoint a successor Secured Party except in accordance with the Credit Agreement.   Section 7.3.  AMENDMENT; ENTIRE AGREEMENT.  THIS AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREE­MENTS OR DISCUSSIONS OF THE PARTIES HERETO.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.  Except as set forth in Section 4.4 hereof, the provisions of this Agreement may be amended or waived only by an instrument in writ­ing signed by the parties hereto and the Required Lenders.   Section 7.4.  Notices.  All notices and other communica­tions provided for in this Agreement shall be given or made in accordance with the Credit Agreement.   Section 7.5.  Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas and applicable laws of the United States of America.   Section 7.6.  Headings.  The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.   Section 7.7.  Survival of Representations and Warranties.  All representations and warranties made in this Agreement or in any certificate delivered pursuant hereto shall survive the exe­cution and delivery of this Agreement, and no investigation by the Secured Party shall affect the representations and warranties or the right of the Secured Party to rely upon them.   Section 7.8.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.   Section 7.9.  Waiver of Bond.  In the event the Secured Party seeks to take possession of any or all of the Collateral by judicial process, Debtor hereby irrevocably waives any bonds and any surety or security relating thereto that may be required by applicable law as an incident to such possession, and waives any demand for possession prior to the commencement of any such suit or action.   Section 7.10.  Severability.  Any provision of this Agree­ment which is determined by a court of competent jurisdiction to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.   Section 7.11.  Termination.  If all of the Obligations shall have been paid and performed in full, all Commitments of the Secured Party or any Lender to Debtor shall have expired or terminated and no Letters of Credit shall remain outstanding, the Secured Party shall, upon the written request of Debtor, execute and deliver to Debtor a proper instru­ment or instruments acknowledging the release and termination of the security interests created by this Agreement, and shall duly assign and deliver to Debtor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Secured Party and has not previously been sold or otherwise applied pursuant to this Agreement.  Notwithstanding anything to the contrary contained in this Agreement, if the payment of any amount of the Obligations is rescinded, voided or must otherwise be refunded by the Secured Party or any Lender upon the insolvency, bankruptcy or reorganization of Debtor or any other Loan Party or otherwise for any reason whatsoever, then the security interests created by this Agreement will be automatically reinstated and become automatically effective and in full force and effect, all to the extent that and as though such payment so rescinded, voided or otherwise refunded had never been made and such release and termination of such security interests had never been given.   Section 7.12.  Obligations Absolute.  All rights and remedies of the Secured Party hereunder, and all obligations of Debtor hereunder, shall be absolute and unconditional irrespective of:   (a)                any lack of validity or enforceability of any of the Loan Documents;   (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 any of the Loan Documents;   (c)                any exchange, release, or nonperfection of any Collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Obligations; or   (d)                any other circumstance that might otherwise constitute a defense available to, or a discharge of, a third party pledgor.   Section 7.13.  WAIVER OF JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, DEBTOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE SECURED PARTY OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.   IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first written above.     DEBTOR:         F.Y.I. INCORPORATED         By: /s/  Barry L. Edwards     Barry L. Edwards     Executive Vice President and Chief Financial Officer         SECURED PARTY:         BANK OF AMERICA, N.A., as Administrative Agent         By: /s/  David A. Johanson     David A. Johanson     Vice President   EXHIBIT A TO PLEDGE AGREEMENT   FORM OF AMENDMENT   This Amendment, dated __________, is delivered pursuant to Section 4.4 of the Pledge Agreement (as herein defined) referred to below.  The undersigned hereby agrees that this Amendment may be attached to the Pledge Agreement dated as of April 3, 2001, between the undersigned and Bank of America, N.A., as Secured Party for the ratable benefit of the Lenders referred to therein (the "Pledge Agreement"), and that the shares of stock, membership, partnership or other equity interests, notes or other instruments listed on Schedule 1 annexed hereto shall be and become part of the Collateral referred to in the Pledge Agreement and shall secure payment and performance of all Obligations as provided in the Pledge Agreement.   Capitalized terms used herein but not defined herein shall have the meanings therefor provided in the Pledge Agreement.     F.Y.I. INCORPORATED         By:     Name:     Title:    
FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT Dated as of March 30, 1999 between and among RED RIVER ENERGY, L.L.C. and RED RIVER FIELD SERVICES, L.L.C "Borrowers" and BANK OF OKLAHOMA, NATIONAL ASSOCIATION "BANK" FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of March 30, 1999, is made and entered into between and among RED RIVER ENERGY, L.L.C., an Oklahoma limited liability company ("Energy"), and RED RIVER FIELD SERVICES, L.L.C, an Oklahoma limited liability company ("Services") (Energy and Services being collectively referred to herein as the "Borrowers") and BANK OF OKLAHOMA, NATIONAL ASSOCIATION("Bank"). WITNESSETH: WHEREAS, Energy and the Bank entered into that certain Revolving Credit Agreement dated as of August 5, 1998 (the "Existing Agreement") pursuant to which the Bank established a $25,000,0000 reducing revolving line of credit (initially subject to a Collateral Borrowing Base of $5,800,000 for the purposes therein set forth and on the conditions, limitations, terms and provisions therein provided; WHEREAS, Borrowers have applied to Bank for certain modifications and amendments to the Existing Agreement, including without limitation, an increase in the Collateral Borrowing Base to $7,700,000, elimination of the reducing borrowing base feature thereof, and with the increased funds available pursuant to the Commitment being for the purpose of funding (i) purchases of producing oil and gas properties and undivided leasehold working interests, including the acquisition by Energy of certain oil and gas properties and the acquisition by Services of a pipeline and gathering system, each from McIntosh Gas Company (the "Seller"), as more particularly described in the Amended Mortgage herein (collectively the "McIntosh Properties") for approximately $_________ concurrently herewith, (ii) workovers and exploration expenses in connection with the McIntosh Properties and other development, drilling and operating expenses pertaining thereto, (iii) the issuance of standby letters of credit on either Borrowers' account as the operator of certain of its oil and gas producing properties and/or the gathering system; and (iv) general business purposes. WHEREAS, Bank is willing to modify and amend the Commitment to the Borrowers upon the terms and conditions herein set forth, including, without limitation, Borrowers' granting in favor of Bank a continuing and continuous first and prior mortgage lien, pledge of and security interest in certain oil and gas leasehold, mineral and mining interests in certain properties, including the McIntosh Properties, all as more particularly described and defined in the First Amended Mortgage hereinafter defined as collateral and security for all Indebtedness incurred pursuant to the Commitment. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, receipt of which is acknowledged by the parties hereto, the parties agree, as follows: ARTICLE I CERTAIN DEFINITIONS When used herein, the following terms shall have the following meanings: 1.1 "Applicable Prime Rate" shall mean the annual rate of interest announced by Chase Manhattan Bank, National Association, New York, New York ("Chase") from time to time as its prime or base rate, which shall be the rate used by Chase as a base or standard for pricing purposes and which shall not necessarily be its "best" or lowest rate. Should Chase cease to announce a prime or base rate, or should it be merged, consolidated, liquidated or dissolved in such a manner that it loses its separate corporate or banking identity, then the Applicable Prime Rate shall be the Prime Rate published by the Wall Street Journal in its "Money Rates" column or a similar rate if such rate ceases to be published. Any change in the Applicable Prime Rate shall be effective as of the date of the change. 1.2 "Authorized Signatory(ies)" shall mean either Rolf Hufnagel or Robert E. Davis, Jr., or any other person(s) authorized in writing thereby or pursuant to members/managers resolutions duly adopted by each of the Borrowers' members/executive committee to request Revolving Credit Loan advances hereunder, request the issuance of standby letters of credit or direct voluntary prepayment(s) of the Note as permitted hereby. 1.3 "Base Rate Option" shall have the meaning ascribed to that term in Section 2.8(a) of this Agreement. 1.4 "Business Day" shall mean a day other than a Saturday, Sunday or a day upon which banks in the State of Oklahoma are closed to business generally. 1.5 "Cash Flow Coverage Ratio" shall mean, as of any determination date, with each component calculated in accordance with GAAP on a trailing four quarter basis, the ratio of: Numerator: EBIDA; Denominator: The sum of (i) the current maturities of all Long Term Debt, plus (ii) all interest expense of Borrowers during the preceding 12-month period. 1.6 "CERCLA" shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, together with all regulations and rulings promulgated with respect thereto. 1.7 "Closing Date" shall mean March 30, 1999. 1.8 "Collateral" shall have the meaning assigned to that term in Article IV of this Agreement. 1.9 "Collateral Borrowing Base" shall have the meaning ascribed to that term in Section 3.2 of this Agreement. 1.10 "Commitment" shall mean the agreement of Bank to make Revolving Credit Loans under Section 2.1 of this Agreement for the limited purposes therein provided. 1.11 "Commitment Termination Date" shall mean the earlier of July 31, 2001 or such date as the Commitment is otherwise terminated, canceled or extinguished in accordance with the terms and provisions of the Agreement. 1.12 "Corresponding Source of Funds" shall mean in the case of any Libor-Rate Funding Period, the proceeds of hypothetical receipts by Bank through a branch, subsidiary or affiliate of one or more Dollar deposits in the interbank eurodollar market at the beginning of the applicable thirty (30), sixty (60), ninety (90) or one hundred eight (180) day Libor-Rate Funding Period and in an aggregate amount approximately equal to the Loan advances covered by such Funding Period(s). 1.13 "Current Assets" shall mean the value of Borrowers' current assets determined in accordance with GAAP plus, as of any date, the current unused availability on the Commitment. 1.14 "Current Liabilities" shall mean the amount of Borrowers' current liabilities as determined in accordance with GAAP, excluding therefrom current maturities due on the Loans. 1.15 "Current Ratio" shall mean the ratio of Current Assets to Current Liabilities. 1.16 "Debt" shall mean and include, as of any date, all items which, in accordance with GAAP, would be included on the liabilities side of Borrowers' balance sheet, including all obligations under leases which, in accordance with GAAP, would be recorded as capital leases, but excluding stated capital, paid-in capital and retained earnings. 1.17 "Default Rate" shall mean the Applicable Prime Rate plus six percentage points (6%) per annum. 1.18 "Dollar," "Dollars," and the symbol "$" shall mean lawful money of the United States of America. 1.19 "EBIDA" shall mean, as of any determination date the sum of Borrowers' (i) net income for the preceding 12-month period; plus (ii)interest expense during the preceding 12-month period; plus (iii) depreciation and amortization of intangibles expense for the preceding 12-month period (to the extent subtracted in computing net income). 1.20 "Environmental Laws" shall mean Laws, including without limitation federal, state or local Laws, ordinances, rules, regulations, interpretations and orders of courts or administrative agencies or authorities relating to pollution or protection of the environment (including, without limitation, ambient air, surface water, groundwater, land surface and subsurface strata), including without limitation CERCLA, SARA, RCRA, HSWA, OPA, HMTA, TSCA and other Laws relating to (i) Polluting Substances or (ii) the manufacture, processing, distribution, use, treatment, handling, storage, disposal or transportation of Polluting Substances. 1.21 "ERISA" shall mean the Federal Employee Retirement Income Security Act of 1974, as amended, together with all regulations and rulings promulgated with respect thereto. 1.22 "Evaluated Property" shall mean all of the Mortgaged Property and the Other Property, collectively. 1.23 "Event of Default" shall mean any of the events specified in section 8.1 of this Agreement, and "Default" shall mean any event, which together with any lapse of time or giving of any notice, or both, would constitute an Event of Default. 1.24 "Funding Periods" shall have the meaning ascribed to that term in Section 2.8(b) of this Agreement. 1.25 "GAAP" shall mean generally accepted accounting principles applied on a consistent basis in all material respects to those applied in the preceding period. Unless otherwise indicated herein, all accounting terms will be defined according to GAAP. 1.26 "Guaranties" shall mean the limited guaranty agreements of each of the Guarantors, in the form of Exhibits H-1 through H-6, inclusive, to the Existing Agreement. 1.27 "Guarantors" shall mean Rolf Hufnagel, Robert E. Davis, Jr., Stephen J. Vogel, Janet L. McGehee, Billy L. Baysinger and Brent A. Biggs. 1.28 "hereby," "herein," "hereof," "hereunder" and similar such terms shall mean and refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which the respective word appears. 1.29 "HMTA" shall mean the Hazardous Materials Transportation Act, as amended, together with all regulations and rulings promulgated with respect thereto. 1.30 "HSWA" shall mean the Hazardous and Solid Waste Amendments of 1984, as amended, together with all regulations and rulings promulgated with respect thereto. 1.31 "Hydrocarbons" shall have the meaning assigned to that term in the Mortgage. 1.32 "Indebtedness" shall mean and include any and all: (i) indebtedness, obligations and liabilities of Borrowers to Bank incurred or which may be incurred or purportedly incurred hereafter pursuant to the terms of this Agreement or any of the other Loan Documents, and any extensions, renewals, substitutions, amendments and increases in amount thereof, including such amounts as may be evidenced by the Note and all lawful interest, service fees, commitment fees, letter of credit issuance fees and other charges, and all reasonable costs and expenses incurred in connection with the preparation, filing and recording of the Loan Documents, including attorneys fees; (ii) all reasonable costs and expenses, including attorneys' fees, paid or incurred by Bank in enforcing or attempting to enforce collection of any Indebtedness and in enforcing or realizing upon or attempting to enforce or realize upon any collateral or security for any Indebtedness and in protecting and preserving Bank's interest in the Indebtedness or any collateral or security for any Indebtedness in any bankruptcy or reorganization proceeding, including interest on all sums so expended by Bank accruing from the date upon which such expenditures are made until paid, at an annual rate equal to the Default Rate; (iii) sums expended by Bank in curing any Event of Default or Default of Borrowers under the terms of this Agreement, the other Loan Documents or any other security agreement or other writing evidencing or securing the payment of the Note together with interest on all sums so expended by Bank accruing from the date upon which such expenditures are made until paid, at an annual rate equal to the Default Rate; and (iv) all "Indebtedness" or "Secured Indebtedness" as said terms are defined in each of the Loan Documents. 1.33 "Laws" shall mean all statutes, laws, ordinances, regulations, orders, writs, injunctions, or decrees of the United States, any state or commonwealth, any municipality, any foreign country, any territory or possession, or any Tribunal. 1.34 "Letters of Credit" shall mean any and all letters of credit issued by Bank pursuant to the request of the Borrowers in accordance with the provisions of Section 2.7 hereof which at any time remain outstanding and subject to draw by the beneficiary, whether in whole or in part. 1.35 "Libor-Rate" shall have the meaning ascribed to that term in Section 2.8(a) of this Agreement. 1.36 "Libor-Rate Funding Periods" shall have the meaning ascribed to that term in Section 2.8(b) of this Agreement. 1.37 "Libor-Rate Option" shall have the meaning ascribed to that term in Section 2.8(a) of this Agreement. 1.38 "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement or other similar form of public notice under the Laws of any jurisdiction). 1.39 "Loans" shall mean the Revolving Credit Loans or any advance made by Bank under the Note. 1.40 "Loan Documents" shall mean this Agreement, the Note, the Security Instruments and all other documents, instruments and certificates executed and delivered to Bank by Borrowers pursuant to the terms of this Agreement. 1.41 "Long-Term Debt" shall mean, as of any date, all Debt of Borrowers which, in accordance with GAAP, would be classified as long-term debt or as the long-term portion of capitalized lease obligations on Borrowers' balance sheet. 1.42 "Mortgage" shall have the meaning assigned to that term in Section 4.1 of this Agreement. 1.43 "Mortgaged Property" shall have the meaning assigned to that term in the Mortgage. 1.44 "Note" shall mean the revolving credit note described in Section 2.2 of this Agreement, together with each and every extension, renewal, modification, replacement, substitution and change in form thereof which may be from time to time and for any term or terms effected. 1.45 "OPA" shall mean the Oil Pollution Act of 1990, as amended, together with all regulations and rulings promulgated with respect thereto. 1.46 "Option" shall mean the Base Rate Option or Libor-Rate Option. 1.47 "Other Property" shall have the meaning assigned to that term in Section 3.2(c) of this Agreement. 1.48 "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, and a government or any department, agency or political subdivision thereof. 1.49 "Polluting Substances" shall mean all pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes and shall include, without limitation, any flammable explosives, radioactive materials, oil, hazardous materials, hazardous or solid wastes, hazardous or toxic substances or related materials defined in CERCLA/SARA, RCRA/HSWA and in the HMTA; provided, in the event either CERCLA/SARA, RCRA/HSWA or HMTA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and, provided further, to the extent that the Laws of any State or other Tribunal establish a meaning for "hazardous substance, "hazardous waste," "hazardous material," "solid waste" or "toxic substance" which is broader than that specified in CERCLA/SARA, RCRA/HSWA, or HMTA, such broader meaning shall apply. 1.50 "RCRA" shall mean the Resource Conservation and Recovery Act of 1976, as amended, together with all regulations and rulings promulgated with respect thereto. 1.51 "Revolving Credit Borrowing Base" shall have the meaning ascribed to that term in Section 2.5 of this Agreement. 1.52 "Revolving Credit Loans" shall have the meaning assigned to that term in Section 2.1 of this Agreement. 1.53 "SARA" shall mean the Superfund Amendments and Reauthorization Act of 1987, as amended, together with all regulations and rulings promulgated with respect thereto. 1.54 "Security Instruments" shall mean the Mortgage (as defined in Section 4.1 hereof) and all other financing statements, mortgages, deeds of trust, assignments, lien entry forms, security agreements, documents or writings of any and all amendments and supplements thereto, granting, conveying, assigning, transferring or in any manner providing Bank with a security interest or mortgage lien in any property as security for the repayment of all or any part of the Indebtedness. 1.55 "Seller" shall have the meaning assigned to that term in the Preamble of this Agreement. 1.56 "Taxes" shall mean all taxes, assessments, fees, or other charges or levies from time to time or at any time imposed by any Laws or by any Tribunal. 1.57 "Tribunal" shall mean any municipal, state, commonwealth, Federal, foreign, territorial or other sovereign, governmental entity, governmental department, court, commission, board, bureau, agency or instrumentality. 1.58 "TSCA" shall mean the Toxic Substances Control Act, as amended, together with all regulations and rulings promulgated with respect thereto. 1.59 "WEHLU Properties" shall have the meaning assigned to that term in the Preamble of this Agreement. ARTICLE II REVOLVING CREDIT LOANS 2.1 Revolving Credit Loans. Bank agrees, upon the terms and subject to the conditions hereinafter set forth, to make loans ("Revolving Credit Loans") to Borrowers from the Closing Date until the Commitment Termination Date or until such later date as Bank shall have extended its Commitment in writing unless its Commitment shall be sooner terminated pursuant to the provisions of this Agreement, in such amounts as may from time to time be requested by Borrowers for the purpose of funding its purchase of the McIntosh Properties from the Seller and other acquisitions from time to time; workovers and exploration expenses in connection with the McIntosh Properties or the WEHLU Properties (as defined and described in the Existing Agreement) and other development, drilling and operating expenses for Energy's properties, including without limitation the McIntosh Properties; the issuance of standby letters of credit on either Borrowers' account as operator of certain of the Mortgaged Property; and Borrowers' general business needs, so long as the aggregate principal amount of all Revolving Credit Loans outstanding and unpaid at any time under the Note, together with the unfunded portions of all Letters of Credit outstanding or requested by Borrowers, does not exceed the Revolving Credit Borrowing Base. 2.2 Note. On the Closing Date Borrowers shall execute and deliver, to the order of Bank, Borrowers' joint and several replacement revolving credit note in the principal amount of $25,000,000, the form of which is annexed hereto as Exhibit A and hereby made a part hereof (hereinafter referred to as the "Note"). The Note shall be dated as of the Closing Date, and shall bear interest as described in Section 2.8 hereof. After maturity (whether by acceleration or otherwise) the Note shall bear interest at the Default Rate, payable on demand. Interest shall be calculated on the basis of a year of 360 days but assessed for the actual number of days elapsed in each accrual period. 2.3 Revolving Credit Advances, Payments and Voluntary Prepayment. Revolving Credit Loans requested by Borrowers from Bank shall (i) be requested in writing on the form of Revolving Loan Request annexed hereto as Exhibit B and hereby made a part hereof (the "Request"), executed by Borrowers and delivered to Bank no later than one Business Day prior to the date upon which the advance is to be made, or alternatively, requested telephonically before 12:00 noon (applicable current time in Tulsa, Oklahoma), specifying the amount and the proposed date thereof, such telephonic request to be promptly confirmed by a written request; (ii) not cause the aggregate outstanding and unpaid principal amount of the Revolving Credit Note to exceed the Revolving Credit Borrowing Base; (iii) be for one of the purposes described in Section 2.1 hereof; (iv) be in the amount of $10,000 or an integral multiple thereof; and (v) be advanced by Bank on the applicable date, provided the Revolving Loan Request is timely received by Bank in accordance with Section 2.3(i) hereof and all other conditions of funding established herein are met. All advances made by Bank shall, for mutual convenience, be deposited to the general depository account of Borrowers with Bank, and Bank shall have no responsibility to monitor the allocation or distribution of such advances in any other respect. The advance made on the Closing Date shall be for the sole purpose of funding the acquisition of the McIntosh Properties from Seller. In consideration of Bank permitting Borrowers to make requests for Revolving Credit Loans by telephone, Borrowers state that they are fully aware of the risks attendant thereto, and agree to accept all such risks and to hold Bank harmless from any loss which Borrowers may incur by reason of any such non-written request, other than such as result from Bank's gross negligence or wanton disregard. All advances made by Bank on the Note and all payments or prepayments of principal and interest thereon made by Borrowers shall be recorded by Bank in its records, and the aggregate unpaid principal amount so recorded shall be conclusive evidence of the principal amount owing and unpaid on the Note. The unfunded portion of each outstanding Letter of Credit shall be deemed a funding against the Commitment but not for the purpose of accrual of interest on the Note until the date portions thereof are actually funded by Bank. The failure to so record shall not, however, limit or otherwise affect the obligations of Borrowers hereunder or under the Note to repay the principal amount of each Revolving Credit Loan together with all interest accrued thereon. Borrowers may from time to time make prepayments of principal without premium or penalty on Base Rate Option Loans with no notice on or prior to 2:00 p.m (applicable current time in Tulsa, Oklahoma) on the date of such prepayment. Borrowers may reborrow amounts paid or prepaid subject to the limitations and conditions for Revolving Credit Loans contained herein. All payments and prepayments shall be made in lawful money of the United States of America in immediately available funds. Any payments or prepayments on the Note received by Bank after 2:00 o'clock P.M. (applicable current time in Tulsa, Oklahoma) shall be deemed to have been made on the next succeeding Business Day. All outstanding principal of and accrued interest on the Note not previously paid hereunder shall be due and payable at maturity on July 31, 2001, unless such maturity shall be extended by Bank in writing or accelerated pursuant to the terms hereof. 2.4 Authorized Signatory. An Authorized Signatory may, from time to time, notify Bank in writing of a change in the Authorized Signatories. From and after Bank's receipt of such written notice, Bank may rely on any such request or certificate purportedly signed by any individual who has been so designated as an Authorized Signatory pursuant to this Agreement unless or until it receives written notice from an Authorized Signatory of the deletion of an Authorized Signatory. 2.5 Revolving Credit Borrowing Base. Borrowers will not request, nor will they accept, the proceeds of any Revolving Credit Loan or advance under the Note (or the issuance of any Letter of Credit) at any time when the amount thereof, together with the sum of the unpaid principal amount of the Note plus the unfunded portion of all Letters of Credit outstanding or requested by Borrowers to be issued by Bank on behalf of or for the account of Borrowers at the time of such borrowing base calculation, exceeds the Revolving Credit Borrowing Base. As used in this Agreement, the term "Revolving Credit Borrowing Base" shall mean an amount equal to the lesser of (a) the Collateral Borrowing Base in effect at that time, all in accordance with the provisions of Article III of this Agreement, or (b) $25,000,000. 2.6 Variance from Borrowing Base. Any Revolving Credit Loan shall be conclusively presumed to have been made to Borrowers by Bank under the terms and provisions hereof and shall be secured by all of the Collateral and security described or referred to herein or in the Security Instruments, whether or not such loan conforms in all respects to the terms and provisions hereof. If Bank should (for the convenience of Borrowers or for any other reason) make loans or advances which would cause the unpaid principal amount of the Note to exceed the amount of the applicable Revolving Credit Borrowing Base, no such variance, change or departure shall prevent any such loan or loans from being secured by the Collateral and security created or intended to be created herein or in the Security Instruments. The Revolving Credit Borrowing Base shall not in any manner limit the extent or scope of the Collateral and security granted for the repayment of the Note (or any other Indebtedness) or limit the amount of indebtedness under the Note (or any other Indebtedness) to be secured. 2.7 Letters of Credit. Bank agrees, upon the terms and subject to the conditions hereinafter set forth and set forth in Bank's standard form letter of credit application agreement, to issue Letters of Credit at the request of Borrowers, provided that (i) no Letters of Credit will be issued on behalf of or for the account of Borrowers after July 31, 2001, and no such Letters of Credit will be issued with an expiring date later than July 31, 2001, (ii) no Letter of Credit will be issued on behalf of or for the account of Borrowers if at the time of issuance the outstanding amount of all Revolving Credit Loans under the Note would exceed the Revolving Credit Borrowing Base taking into account the issuance of such Letter of Credit, and (iii) the amount of all issued and outstanding Letters of Credit on behalf of or for the account of Borrowers shall not exceed, at any time, $500,000 in the aggregate. If any Letter of Credit is drawn upon at any time, each amount drawn, whether a full or partial draw on the Letter of Credit, shall be reflected by Bank as an advance on the Note effective as of the time of the draw. In consideration of Bank's agreement to issue the Letters of Credit hereunder, Borrowers agree to pay to Bank fees equal to one and one-half percent (1-1/2%) per annum on the face amount of each Letter of Credit prorated for the life of each Letter of Credit, which fees shall be due and payable to Bank at the time of issuance of each Letter of Credit. In the event any Letters of Credit are issued on behalf of or for the account of Borrowers with an expiring date later than July 31, 2001, (unless the Commitment is renewed in writing by Bank) Borrowers agree to fully secure such Letter of Credit on or before July 21, 2001, with a certificate of deposit or time deposit with Bank through the expiration date of such Letters of Credit, such pledge to be in form and content acceptable to Bank. 2.8 Interest Rates; Funding Period; Transactional Amounts. (a) Subject to the provisions hereof, Borrowers shall select the Base Rate Option and/or the Libor-Rate Option for Loan advances hereunder. The "Base Rate Option" is a rate per annum equal to the Applicable Prime Rate minus one-quarter of one percentage point (.25%)per annum. There shall be no minimum Funding Period under the "Base Rate Option". The "Libor-Rate Option" from which Borrowers may select is a rate per annum (based on a year of 360 days and actual days elapsed) equal to the Libor-Rate plus one and eight-tenths percentage points per annum (1.80%). "Libor-Rate" shall mean the rate of interest quoted for the "London Interbank Offered Rates (LIBOR)" category of the "Money Rates" column in the Wall Street Journal on the date of Borrowers' initial Request for a Funding Period (or, if no Wall Street Journal is published on such day, the next previous publication date thereof) as the average of quotations at major money center banks for the applicable thirty (30), sixty (60), ninety (90) or one hundred eighty (180) day Funding Period available hereunder for the Libor-Rate Option three (3) London Business Days prior to the first day of such applicable Libor-Rate Funding Period. The Libor-Rate established on the date of the initial Request for a Funding Period shall be the interest rate basis used for each day in the applicable thirty (30), sixty (60), ninety (90) or one hundred eighty (180) day Libor-Rate Funding Period. Bank shall give prompt notice to Borrowers of the Libor-Rate as so determined or adjusted, which determination or adjustment shall be conclusive if made in good faith. If the Wall Street Journal shall cease to publish such Libor-Rate quotations, Bank shall determine such rates as the average of such Libor-Rate quotations of three (3) major New York money center banks of whom Bank shall inquire. At the end of each applicable Funding Period, Borrowers may either: (i) repay all outstanding balances of principal and interest; or (ii) select the same or a different Option described above, including the same or a different Libor Rate Funding Period described below to apply to at least $500,000 of the outstanding principal balance of the Note. During any applicable Libor-Rate Funding Period, unless otherwise required by the terms of this Agreement, Borrowers may not prepay (in part or in whole) the outstanding principal balance of the Note evidenced by such Funding Period amount and the Libor-Rate Funding Period shall continue until the end of the applicable Libor-Rate Funding Period. If the Base Rate Option is selected, then at any time during the term of the Commitment, Borrowers may notify Bank that Borrowers wish to convert to the Libor-Rate Option. In such event, a minimum of $500,000 of the outstanding principal balance of principal on the applicable Note shall convert to the Libor-Rate Option. At any one time during the term of any of the Commitments not more than three (3) Libor-Rate Funding Periods may be in effect. (b) Funding Periods. At any time when Borrowers shall select, convert to or renew one of the applicable Libor-Rate Funding Periods to apply to the Loans (in no event less than $500,000), they shall fix such period during which such Libor-Rate shall apply, such periods (the "Funding Periods") being set forth in the chart below: Interest Rate Option Available Funding Periods Libor-Rate Option One month (30 days), two months (60)days, three months (90) days, or six months (180) days ("Libor-Rate Funding Periods"); provided, that each Libor-Rate Funding Period shall begin on a London business day. (c) Interest After Maturity. After the principal amount of any of the Loans outstanding shall have become past due (by acceleration or past the stated maturity date except as renewed pursuant to Section 2.9(a) hereof), such Loans shall bear interest for each day until paid (before and after judgment) at the Default Rate. (d) Libor-Rate Unascertainable; Impracticability. If (i) on any date on which a Libor-Rate would otherwise be set, Bank shall have in good faith determined (which determination shall be conclusive) that: (A) adequate and reasonable means do not exist for ascertaining such Libor-Rate, (B) a contingency has occurred which materially and adversely affects the issuance of negotiable certificates of deposit by Bank on the interbank eurodollar market, as the case may be, or (C) the effective cost to Bank for funding a Funding Period of the Libor-Rate Option from a Corresponding Source of Funds shall exceed the Libor-Rate applicable to such Funding Period, or (ii) at any time Bank shall have determined in good faith (which determination shall be conclusive) that the making, maintenance or funding of the Libor-Rate Option has been made unlawful by compliance by Bank in good faith with any Law or guideline or interpretation or administration thereof by any Tribunal charged with the interpretation or administration thereof or with any request or directive of any such Tribunal (whether or not having the force of law); then, and in any such event, Bank may notify Borrowers of such determination. Upon such effective date as shall be specified in such notice (which shall not be earlier than the date such notice is given) the obligation of Bank to allow Borrowers to select, convert to or renew the Libor-Rate Option, as the case may be, shall be suspended until Bank shall have later notified Borrowers of Bank's determination in good faith (which determination shall be conclusive) that the circumstances giving rise to such previous determination no longer exists. At the time Bank makes a determination under subsection (ii) of this Section 2.8(d), such notification by Bank to Borrowers shall be deemed to provide for conversion of then existing Libor-Rate Option amounts to the Base Rate Option on the effective date specified in such Bank's notification. Commencing on such effective date, Bank shall utilize the Base Rate Option or prepay such Libor Rate Option amounts in accordance with Section2.10 hereof. If Borrowers have previously notified Bank of the selection of one or more Libor-Rate Option Funding Periods that have not yet gone into effect as of the foregoing notification date, such notification shall be deemed to provide for selection of or conversion to or renewal of the Base Rate Option instead of the Libor-Rate Option(s). 2.9 Conversion or Renewal of Libor-Rate Options. (a) Conversion or Renewal. Subject to the provisions of Section 2.8(d) hereof Borrowers may convert the expiring portion of the Loans to a different interest rate Option and/or may renew the Libor-Rate Option in accordance with Section 2.8(a) above. Whenever Borrowers desire to convert or renew any Libor-Rate Funding Period, Borrowers shall provide Bank, at least two (2) Business Days prior to the date of the proposed conversion or renewal, with the following information: (i) the date, which shall be a Business Day, on which the proposed conversion or renewal is to be made; (ii) the then applicable Libor-Rate Funding Period selected in accordance with Section 2.8(a) hereof; and (iii) a fully completed LIBOR Option Rate Sheet, in the form of Exhibit G attached hereto, duly executed by an Authorized Signatory. Notice having been so provided, after the date specified in such notice (telephonic or where applicable, in writing) interest shall be calculated upon the entire principal amount of the Loan as so converted or renewed. Interest on the principal amount of the Loan converted or renewed (automatically or otherwise) shall be due and payable in accordance with the provisions of Section 2.11 hereof below. (b) Failure to Convert or Renew. Absent due notice from Borrowers of conversion or renewal in the circumstances described in Section 2.9(a)(ii) hereof, the Libor-Rate Funding Period for which such notice is not received shall be converted automatically to the Base Rate Option on the last day of the applicable expiring Funding Period. 2.10 Prepayments. Subject to the provisions of Section 2.12, hereof, Borrowers shall have the right at their option from time to time to prepay the Loans in whole or part without premium or penalty at any time with respect to the Base Rate Option Loans. In addition, Borrowers may prepay any part of the Loans funded under an unexpired Libor-Rate Funding Period on the date specified on a notice by Bank pursuant to Section 2.8(d) hereof. In connection with any prepayment permitted hereby, Borrowers shall provide Bank with the following information: (a) The date, which shall be a Business Day, on which the proposed prepayment is to be made; and (b) The aggregate principal amount of such partial prepayment, which shall be the sum of the principal amounts selected pursuant to this Section 2.10 and which shall be an integral multiple of $100,000 plus applicable fees or charges, if any, imposed by Bank. 2.11 Interest Payments Dates. All interest accrued on the Note shall be due and payable on the last day of each calendar month, commencing September 30, 1998, regardless of which Option applies, and on the final maturity date of the Note. After maturity of the Loans (by acceleration or otherwise), interest thereon shall be due and payable on demand. 2.12 Additional Compensation in Certain Circumstances. (a) Compensation for Taxes, Reserves and Expenses on Outstanding Loans. If any Law or guideline or interpretation or application thereof by any Tribunal charged with the interpretation or administration thereof or compliance with any request or directive of any Tribunal (whether or not having the force of law): (i) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against assets held by, credit extended by, deposits with or for the account of, or other acquisition of funds by, Bank (other than requirements expressly included herein in the determination of the Libor-Rate hereunder), or (ii) imposes upon Bank any other condition or expense with respect to this Agreement, the Note or its making, maintenance or funding of any part of the Loans or any security therefor, and the result of either of the foregoing is to increase the cost to, reduce the income receivable by or impose any expense (including loss of margin) upon Bank with respect to this Agreement, the Note or the funding of any part of the Loans by an amount which Bank deems to be material (Bank being deemed for this purpose to have made, maintained and funded each Funding Period(s) of a Libor-Rate Option from a Corresponding Source of Funds), Bank may notify Borrowers (in no event later than forty-five (45) days after commencement of such additional costs, deduction in income or additional expenses) of the amount determined in good faith by Bank together with reasonable substantiation thereof (which determination shall be conclusive) to be necessary to compensate Bank for such increase in cost, reduction in income or additional expense. Upon receiving such notice, Borrowers shall pay such amounts as determined by Bank within ten (10) Business Days after such notice is given thereto. (b) Indemnity. In addition to the compensation required by subsection (a) of this Section 2.12, Borrowers shall indemnify Bank against any loss or expense (including loss of margin) which Bank has sustained or incurred as a consequence of any attempt by Borrowers to revoke (expressly, by later inconsistent notices or otherwise) in whole or part any notice stated herein to be irrevocable or to prepay any Libor-Rate Option Loan not permitted by this Agreement(Bank having in its sole discretion the options (A) to give effect to such attempted revocation or prepayment and obtain indemnity under this Section 2.12(b) or (B) to treat such attempted revocation or prepayment as having no force or effect, as if never made). If Bank sustains or incurs any such loss or expense Bank shall from time to time notify Borrowers of the amount determined in good faith by Bank (which determination shall be conclusive absent manifest error) to be necessary to indemnify Bank for such loss or expense (Bank being deemed for this purpose to have made, maintained or funded each Funding Period(s) of the Libor-Rate Option from a Corresponding Source of Funds). Such amount shall be due and payable by Borrowers to Bank ten (10) Business Days after such notice is given. ARTICLE III COLLATERAL BORROWING BASE 3.1 Initial Collateral Borrowing Base. Until further determination by Bank in connection with the proposed refinancing by the Bank of one of Energy's subsidiary limited liability company's existing third party debt (in which event the semiannual Collateral Borrowing Base determinations set forth in Section 3.2(a) below shall continue in full force and effect as therein specified and designated; otherwise such semiannual determinations of Section 3.2(a) shall be automatically adjusted to March 31 [instead of July 31] and September 30 [instead of January 31], respectively, of each year, commencing as of September 30, 1999, with the Borrowers' data submission dates being concurrently changed to February 28 [instead of June 30] and August 31 [instead of December 31]) or otherwise pursuant to Section 3.2 of this Agreement, Bank and Borrowers agree that the initial Collateral Borrowing Base is $7,700,000. 3.2 Determination of the Collateral Borrowing Base. (a) Borrowers shall deliver to Bank at Borrowers' cost by each June 30 and December 31, commencing June 30, 1999, such current data, reports and engineering information as is necessary or appropriate for Bank's engineers or any other independent petroleum engineer acceptable to Bank to compile and prepare by each July 31 and January 31 (commencing July 31, 1999), an engineering report in form and substance satisfactory to Bank, evaluating the proven producing oil and gas reserves attributable to Borrowers' aggregate interest in the Mortgaged Property (as defined in subsection (b) below) and the Other Property (as defined in subsection (c) below), together with the expenses attributable thereto. Such well by well engineering data and information furnished to Bank by or on behalf of Borrowers shall be accompanied by such other information as shall be requested by Bank in order for it to make its determination of the Collateral Borrowing Base, and by a certificate of Borrowers certifying that Borrowers have good and defeasible title to the Mortgaged Property and the Other Property interest valued and that payments are being received from purchasers of production with respect to said interests. At any time after thirty (30) days of the receipt of such information and in no event later than each July 31 and January 31 (commencing July 31, 1999) Bank shall (i) make a determination of the present worth, using such pricing and discount factor as it deems appropriate pursuant to Bank's then applicable energy lending policies and procedures, of the future net revenue estimated by Bank to be received by Borrowers from production from the Mortgaged Property and the Other Property so evaluated, multiplied by a percentage determined by Bank to be appropriate on the basis of Bank's then applicable energy lending criteria; and (ii) report in writing to Borrowers the sum of the evaluation by Bank of such evaluated oil and gas properties (the "Collateral Borrowing Base"), which shall in no event exceed Twenty-Five Million Dollars ($25,000,000). Any increase in the amount of the Collateral Borrowing Base beyond the amount of $7,700,000 may be conditioned upon increases in the amounts of the Indebtedness guaranteed by the Guarantors, as described in Section 3.2(d) hereof. The good faith determinations of Bank in all such respects shall be conclusive. (b) The term "Mortgaged Property" shall refer only to such properties of Borrowers covered by the Mortgage (or a supplemental mortgage or deed of trust, duly executed, acknowledged and delivered by Borrowers to Bank in form satisfactory to counsel for Bank) and which properties are, at the time: (i) particularly and adequately described under the Mortgage or other supplemental mortgage and deed of trust as security for the Indebtedness evidenced by the Note; (ii) completed or developed (in the case of oil and gas leases) to the extent that value is being assigned to them by Bank in connection with its evaluation of the Collateral Borrowing Base and Bank has determined that such properties are capable of producing oil or gas in commercial quantities; and (iii) approved as to title to the satisfaction of Bank. (c) The term "Other Property" shall refer only to such properties of Borrowers which are not described in the Mortgage, but which are at the time: (i) completed or developed (in the case of oil and gas leases) to the extent that value is being assigned to them by Bank in connection with its evaluation of the Collateral Borrowing Base and Bank has determined that such properties are capable of producing oil or gas in commercial quantities; and (ii) approved as to title to the satisfaction of Bank. (d) The Collateral Borrowing Base (initially $7,700,000) shall remain in effect until otherwise changed by written agreement between Borrowers and Bank or by Bank pursuant to the procedures established herein. Bank may condition any increase in the Collateral Borrowing Base above $7,700,000 upon receiving guaranty agreements from the Guarantors, increasing the aggregate amount of Indebtedness guaranteed by such guarantors to not less than fifty percent (50%) of such new increased Collateral Borrowing Base. 3.3 Collateral Borrowing Base Deficiency. Should the unpaid outstanding principal balance of the Note, together with the unfunded portion of all outstanding and requested Letters of Credit, at any time be greater than the Collateral Borrowing Base in effect at such time, Bank may notify Borrowers in writing of the deficiency. Within fifteen (15) days from and after the date of any such deficiency notice Borrowers shall notify Bank in writing of its election to: (a) Make a prepayment upon the Note in an amount sufficient to reduce the unpaid principal amount of the Note, when added to the unfunded portion of all outstanding and requested Letters of Credit, to an amount equal to or less than the amount of the Collateral Borrowing Base; (b) Make mandatory equal monthly principal prepayments on the Note due on the next six (6) successive monthly interest installment due dates on the Note equal in an aggregate amount that will reduce the outstanding principal balance of the Note, when added to the unfunded portion of all outstanding and requested Letters of Credit, to the projected Collateral Borrowing Base as of the next immediate semi-annual redetermination thereof in accordance with the provisions of Section 3.2(a) hereof; or (c) Execute and deliver to Bank one or more supplemental mortgages, deeds of trust, security agreements or pledges encumbering such Other Property or other collateral or assets in form, substance and value satisfactory to Bank and its counsel as additional security for the Note (and all other Indebtedness) to the extent such collateral or properties are acceptable to Bank and of such value, as determined by Bank, that the Collateral Borrowing Base will be increased to an amount equal to or greater than the sum of the unpaid principal balance of the Note plus the unfunded portion of all outstanding and requested Letters of Credit. If Borrowers shall have elected to make a prepayment on the Note under Section 3.3(a) hereof, such prepayment shall be due within five (5) Business Days after Borrowers shall have notified Bank of such election, and the prepayment shall be applied, at Bank's option, to the principal payments of the Note in inverse order of maturity. If Borrowers shall elect to make six (6) equal monthly principal prepayments on the Note due to Bank under Section 3.3(b) hereof, Bank shall roll forward its then most current engineering determination and determine the projected Collateral Borrowing Base for the next successive semiannual determination date (either July 31 or January 31 as the case may be), or such other semiannual determination date for the Collateral Borrowing Base as may be effected in accordance with the provisions of Section 3.1 hereof. ARTICLE IV SECURITY 4.1 Collateral. The repayment of the Indebtedness shall be secured by a first and prior mortgage lien, deed of trust and security interest in and to all of the portions of the Mortgaged Property owned or hereafter acquired by Borrowers, which has been granted to Bank, pursuant to the terms of that certain Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment (with power of sale) dated as of August 5, 1998, from Energy (the "Original Mortgage"), that certain First Amended and Supplemental Mortgage, Deed of Trust, Security Agreement, Financing Statement and Assignment (with power of sale) dated as of the Closing Date from Energy, in form and substance satisfactory to the Bank (the "First Amended Mortgage") (the Original Mortgage and the First Amended Mortgage being collectively referred to herein as the " Energy Mortgage") and that certain Mortgage, Security Agreement, Financing Statement and Assignment (with power of sale) dated as of the Closing Date from Services, as mortgagor, in form and substance satisfactory to the Bank (the "Services Mortgage") (the Energy Mortgage and the Services Mortgage collectively being referred to herein as the "Mortgage") together with all proceeds and products of the items or types of collateral described in this Article IV including without limitation, insurance proceeds and all cash, money, deposits and deposit or demand accounts of Borrowers at any time in the possession or control of Bank (the collateral described herein and in the Security Instruments being collectively referred to as the "Collateral"). 4.2 Additional Properties. As an additional condition precedent to any Revolving Credit Loans (other than the initial Revolving Credit Loan made at the Closing) requested by Borrowers pursuant to Section 2.3 hereof, Bank has the right, in its sole discretion, to elect to take any or all of the Other Properties, or any properties to be acquired in domestic oil and gas reserve acquisitions made by Borrowers with Revolving Credit Loans funded hereunder, as Collateral for the Indebtedness pursuant to such supplemental or additional mortgages, deeds of trusts or security agreements covering such additional properties in form and substance satisfactory to Bank and its counsel and in full compliance with the criteria of clauses (i), (ii) and (iii) of subsection 3.2(b) above as additional security for the Note and the Indebtedness. All of such additional properties will be deemed part and parcel of the Collateral constituting security for the repayment of the Indebtedness. ARTICLE V CONDITIONS PRECEDENT TO LOANS 5.1 Conditions Precedent. The obligation of Bank to make the Revolving Credit Loans is subject to the satisfaction of all of the following conditions on or prior to the Closing Date (in addition to the other terms and conditions set forth herein): (a) No Default. There shall exist no Event of Default or Default on the Closing Date. (b) Representations and Warranties. The representations, warranties and covenants set forth in Article VII shall be true and correct on and as of the Closing Date, with the same effect as though made on and as of the Closing Date. (c) Loan Documents/Security Instruments. Borrowers shall have delivered to Bank the First Amended Mortgage, the Services Mortgage and the other Loan Documents, each appropriately executed by the appropriate parties and, where applicable, acknowledged to the satisfaction of Bank and dated as of the Closing Date, together with such financing statements, and other documents as shall be necessary and appropriate to perfect Bank's mortgage liens, pledge and security interests in the McIntosh Properties and the other Collateral covered by said Security Instruments. (d) Note. Borrowers shall have delivered the Note to the order of Bank, appropriately executed. (e) Certificates. Each of the Borrowers shall have delivered to Bank a Certificate, dated as of the Closing Date, and signed by all of the managers of Borrowers certifying (i) to the matters covered by the conditions specified in subsections (a) and (b) of this Section 5.1, (ii) that Borrowers and all managers and members thereof have performed and complied with all agreements and conditions required to be performed or complied with thereby prior to or on the Closing Date, (iii) to the name and signature of the manager or managers of Borrowers authorized to execute and deliver the Loan Documents and any other documents, certificates or writings and to borrow under this Agreement, and (iv) to such other matters in connection with this Agreement which Bank shall reasonably determine to be advisable. Bank may conclusively rely on such Certificates until it receives notice in writing to the contrary. (f) Proceedings. On or before the Closing Date, all limited liability company proceedings of each of the Borrowers shall be taken in connection with the transactions contemplated by the Loan Documents and shall be satisfactory in form and substance to Bank and its counsel; and Bank shall have received certified copies, in form and substance satisfactory to Bank and its counsel, of a full and complete copy of the existing limited liability company articles of organization and operating agreement of each of the Borrowers, authorizing the execution and delivery of the mortgage liens and Loan Documents, the borrowings under this Agreement, including the Note, and the granting of the mortgage liens and security interests in the Collateral pursuant to the Security Instruments, to secure the payment of the Indebtedness. (g) Guaranties. Borrowers shall have caused the Guarantors to deliver to Bank, and Bank shall have received from the each of the Guarantors, a ratification and confirmation of each of the Guaranties duly executed and delivered thereby pursuant to the Existing Agreement, all of which shall be in form and substance acceptable to the Bank. (h) Acquisition of McIntosh Properties. All conditions to the acquisition of the McIntosh Properties by the respective Borrowers shall have been met and the acquisition shall have occurred contemporaneously with the Closing Date. Bank shall have received copies of, and shall have approved in advance, all conveyance documents, and other agreements and writings relating to the McIntosh Properties. Borrowers shall have established to the satisfaction of Bank and its counsel, that prior to the conveyance, that the Seller had good and merchantable title to the McIntosh Properties, that the McIntosh Properties consisting of oil and gas producing properties meet the criteria set forth in Section 3.2(b) hereof, and that the purchasers of production with respect to the McIntosh Properties are making payments to the Seller with respect to the McIntosh Properties without set-off, claim or dispute. (i) Closing Opinion. Outside legal counsel for Borrowers acceptable to Bank shall have delivered to Bank its favorable written closing opinion concerning each Borrower's organization, capacity and due authority, enforceability of the Loan Documents and such other customary matters as Bank and its legal counsel shall reasonably deem appropriate. (j) Consents and Other Information. Bank shall have received such certificates, consents, ratifications, information, documents and assurances as shall be reasonably requested by Bank. 5.2 Conditions Precedent to All Additional Revolving Credit Loans. Bank shall not be obligated to make any Revolving Credit Loan after the initial Revolving Credit Loan (i) if at such time any Default shall have occurred and be continuing; (ii) if any of the representations, warranties and covenants contained in Article VII of this Agreement shall be false or untrue in any material respect on the date of such loan, as if made on such date; or (iii)unless Borrowers shall have provided to Bank a Request (whether a written Request or a telephonically authorized request confirmed by a written Request pursuant to Section 2.3 hereof) for any requested Revolving Credit Loan, duly executed by Borrowers and in proper form, establishing that the Revolving Credit Borrowing Base will support the additional Revolving Credit Loan and that the purpose of such request strictly complies with the limitations of Article II hereof. Each Request by Borrowers for an additional Revolving Credit Loan shall constitute a representation by Borrowers that there is not at the time of such request an Event of Default or a Default, and that all representations, warranties and covenants in Article VII of this Agreement are true and correct on and as of the date of each such request. ARTICLE VI COVENANTS Borrowers covenant and agree with Bank that from the date hereof and so long as this Agreement is in effect (by extension, amendment or otherwise) and until payment in full of all Indebtedness and the performance of all other obligations of Borrowers under this Agreement, unless Bank shall otherwise consent in writing: 6.1 Payment of Taxes and Claims. Borrowers will pay and discharge or cause to be paid and discharged all Taxes imposed upon the income or profits of Borrowers or upon the property, real, personal or mixed, or upon any part thereof, belonging to Borrowers before the same shall be in default, and all lawful claims for labor, rentals, materials and supplies which, if unpaid, might become a Lien upon its property or any part thereof; provided however, that Borrowers shall not be required to pay and discharge or cause to be paid or discharged any such Tax, assessment or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings, and adequate book reserves shall be established with respect thereto, and Borrowers shall pay such Tax, charge or claim before any property subject thereto shall become subject to execution. 6.2 Maintenance of Entity Existence. Each of the Borrowers will do or cause to be done all things necessary to preserve and keep in full force and effect its limited liability company existence, rights and franchises and will continue to conduct and operate such Borrower's business substantially as being conducted and operated presently. 6.3 Preservation of Property. Each of the Borrowers will at all times maintain, preserve and protect all of such Borrower's properties which are used or useful in the conduct of such Borrower's business whether owned in fee or otherwise, or leased, in good repair and operating condition; from time to time make, or cause to be made, all needful and proper repairs, renewals, replacements, betterments and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times; and comply with all material leases to which it is a party or under which it occupies property so as to prevent any material loss or forfeiture thereunder. 6.4 Insurance. Borrowers will keep or cause to be kept (either Borrowers or, if applicable, the operator of the Evaluated Property), adequately insured by financially sound and reputable insurers Borrowers' equipment, motor vehicles, and all other property of a character usually insured by businesses engaged in the same or similar businesses, including the Collateral and the Evaluated Property. Upon demand by Bank any insurance policies covering the Collateral and the Evaluated Property shall be endorsed to provide for payment of losses to Bank as its interest may appear, to provide that such policies may not be canceled, reduced or affected in any manner for any reason without thirty (30) days prior notice to Bank, and to provide for any other matters which Bank may reasonably require; and such insurance shall be against fire, casualty and any other hazards normally insured against and shall be in the amount of the full value (less a reasonable deductible not to exceed amounts customary in the industry for similarly situated businesses and properties) of the property insured. Borrowers shall at all times maintain or, where applicable, cause the operators of the Evaluated Property maintain adequate insurance by financially sound and reputable insurers, including without limitation, the following coverages: (i) insurance against damage to persons and property, including comprehensive general liability, worker's compensation and automobile liability and (ii) insurance against sudden and accidental environmental and pollution hazards and accidents that may occur on the Evaluated Property. 6.5 Compliance with Applicable Laws. Borrowers will comply, or, where applicable, will use its best efforts to cause the operator to comply, with the requirements of all applicable Laws and orders of any Tribunal and obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of Borrowers' properties or to the conduct of Borrowers' business. 6.6 Environmental Covenants. Borrowers will immediately notify Bank of and provide Bank with copies of any notifications of discharges or releases or threatened releases or discharges of a Polluting Substance on, upon, into or from the Collateral or the Evaluated Property which are given or required to be given by or on behalf of Borrowers to any federal, state or local Tribunal if any of the foregoing may materially and adversely affect Borrowers or any part of the Collateral or the Evaluated Property, and such copies of notifications shall be delivered to Bank at the same time as they are delivered to the Tribunal. Borrowers further agree promptly to undertake and diligently pursue to completion any appropriate and legally required or authorized remedial containment and cleanup action in the event of any release or discharge or threatened release or discharge of a Polluting Substance on, upon, into or from the Collateral or the Evaluated Property. At all times while owning and operating the Collateral or the Evaluated Property, Borrowers will maintain and retain complete and accurate records of all releases, discharges or other disposal of Polluting Substances on, onto, into or from the Collateral or Evaluated Property, including, without limitation, records of the quantity and type of any Polluting Substances disposed of on or off the Collateral or the Evaluated Property. 6.7 Environmental Indemnities. Borrowers hereby agree to indemnify, defend and hold harmless Bank and each of its officers, directors, employees, agents, consultants, attorneys, contractors and each of its affiliates, successors or assigns, or transferees from and against, and reimburse said Persons in full with respect to, any and all loss, liability, damage, fines, penalties, costs and expenses, of every kind and character, including reasonable attorneys' fees and court costs, known or unknown, fixed or contingent, occasioned by or associated with any claims, demands, causes of action, suits and/or enforcement actions, including any administrative or judicial proceedings, and any remedial, removal or response actions ever asserted, threatened, instituted or requested by any Persons, including any Tribunal, arising out of or related to: (a) the breach of any representation or warranty of Borrowers contained in Section 7.5 set forth herein; (b) the failure of Borrowers to perform any of its covenants contained in Section 6.5 or 6.6 hereunder; (c) the ownership, construction, occupancy, operation, use of the Collateral or the Evaluated Property prior to the earlier of the date on which (i) the Indebtedness and obligations secured hereby have been paid and performed in full and the Security Instruments have been released, or (ii) the Collateral or the Evaluated Property has been sold by Bank following Bank's ownership of the Collateral or the Evaluated Property by way of foreclosure of the Liens granted pursuant hereto, deed in lieu of such foreclosure or otherwise (the "Release Date"); provided, however, this indemnity shall not apply with respect to matters caused by or arising solely from Bank's activities during any period of time Bank acquires ownership of the Collateral or the Evaluated Property. The indemnities contained in this Section 6.7 apply, without limitation, to any violation on or before the Release Date of any Environmental Law and any liability or obligation relating to the environmental conditions on, under or about the Collateral or the Evaluated Property on or prior to the Release Date (including, without limitation: (a) the presence on, upon or in the Collateral or the Evaluated Property or release, discharge or threatened release on, upon or from the Collateral or the Evaluated Property of any Polluting Substances generated, used, stored, treated, disposed of or otherwise released prior to the Release Date, and (b) any and all damage to real or personal property or natural resources and/or harm or injury including wrongful death, to persons alleged to have resulted from such release of any Polluting Substances regardless of whether the act, omission, event or circumstances constituted a violation of any Environmental Law at the time of its existence or occurrence). The term "release" shall have the meaning specified in CERCLA/SARA and the terms "stored," "treated" and "disposed" shall have the meanings specified in RCRA/HSWA; provided, however, any broader meanings of such terms provided by applicable laws of the State of Oklahoma shall apply. The provisions of this Section 6.7 shall be in addition to any other obligations and liabilities Borrowers may have to Bank at common law and shall survive the Release Date and shall continue thereafter in full force and effect. Bank agrees that in the event that such claim, suit or enforcement action is asserted or threatened in writing or instituted against it or any of its officers, employers, agents or contractors or any such remedial, removal or response action is requested of it or any of its officers, employees, agents or contractors for which Bank may desire indemnity or defense hereunder, Bank shall give written notification thereof to Borrowers. Notwithstanding anything to the contrary stated herein, the indemnities created by this Section 6.7 shall only apply to losses, liabilities, damages, fines, penalties, costs and expenses actually incurred by Bank as a result of claims, demands, actions, suits or proceedings brought by Persons who are not the beneficiaries of any such indemnity. Bank shall act as the exclusive agent for all indemnified Persons under this Section 6.7. With respect to any claims or demands made by such indemnified Persons, Bank shall notify Borrowers within thirty (30) days after Bank's receipt of a writing advising Bank of such claim or demand. Such notice shall identify (i) when such claim or demand was first made, (ii) the identity of the Person making it, (iii) the indemnified Person and (iv) the substance of such claim or demand. Failure by Bank to so notify Borrowers within said thirty (30) day period shall reduce the amount of Borrowers' obligations and liabilities under this Section 6.7 by an amount equal to any damages or losses suffered by Borrowers resulting from any prejudice caused Borrowers by such delay in notification from Bank. Upon receipt of such notice, Borrowers shall have the exclusive right and obligation to contest, defend, negotiate or settle any such claim or demand through counsel of their own selection (but reasonably satisfactory to Bank) and solely at Borrowers' own cost, risk and expense; provided, that Bank, at its own cost and expense shall have the right to participate in any such contest, defense, negotiations or settlement. The settlement of any claim or demand hereunder by Borrowers may be made only upon the prior approval of Bank of the terms of the settlement, which approval shall not be unreasonably withheld. 6.8 Financial Statements. As soon as practicable after the end of each quarter of the fiscal year period and in any event within forty-five (45) days thereafter, Energy shall furnish to Bank the following consolidated financial statements, prepared on an income tax basis and certified by Energy's chief executive officer or chief financial officer: (i) a consolidated balance sheet of Energy at the end of such quarter period, (ii) a consolidated statement of income of Energy for such quarter period, and (iii) a consolidated statement of cash flows of Energy for such quarter period, setting forth in each case in comparative form the figures for the previous fiscal year for that period, if applicable, and cumulative figures for the fiscal year to date, all in reasonable detail. Upon receipt thereof, Borrowers shall also deliver to Bank a copy of each report submitted to Borrowers by independent accountants in connection with any annual, special or other audit made by them including, without limitation, any comment letter submitted thereby to management pertaining thereto or in connection with their audit. 6.9 Notice of Default. Immediately upon the happening of any condition or event which constitutes an Event of Default or Default or any default or event of default under any other loan, mortgage, financing or security agreement, Borrowers will give Bank a written notice thereof specifying the nature and period of existence thereof and what actions, if any, Borrowers are taking and propose to take with respect thereto. 6.10 Notice of Litigation. Immediately upon becoming aware of the existence of any action, suit or proceeding at law or in equity before any Tribunal, an adverse outcome in which would (i) materially impair the ability of Borrowers to carry on their respective businesses substantially as now conducted, (ii) materially and adversely affect the condition (financial or otherwise) of Borrowers, or (iii) result in monetary damages in excess of $100,000, Borrowers will give Bank a written notice specifying the nature thereof and what actions, if any, Borrowers are taking and proposes to take with respect thereto. 6.11 Notice of Claimed Default. Immediately upon becoming aware that the holder of any note or any evidence of indebtedness or other security of Borrowers have given notice or taken any action with respect to a claimed default or event of default thereunder, Borrowers will give Bank a written notice specifying the notice given or action taken by such holder and the nature of the claimed default or event of default thereunder and what actions, if any, Borrowers are taking and proposes to take with respect thereto. 6.12 Requested Information. With reasonable promptness, Borrowers will give Bank such other data and information as from time to time may be reasonably requested by Bank. 6.13 Inspection. Borrowers will keep complete and accurate books and records with respect to the Collateral and its other properties, business and operations and will permit employees and representatives of Bank, upon reasonable notice, to audit, inspect and examine the same and to make copies thereof and extracts therefrom during normal business hours. All such records shall be at all times kept and maintained at the principal offices of Borrowers in Tulsa, Oklahoma. Upon any Default or Event of Default of Borrowers, it will surrender all of such records relating to the Collateral to Bank upon receipt of any request therefor from Bank. 6.14 Maintenance of Employee Benefit Plans. Borrowers will maintain each employee benefit plan and/or pension plan as to which Borrowers may have any liability or responsibility in compliance with ERISA and all other Laws applicable thereto. 6.15 Limitation on Liens. Borrowers will not create or suffer to exist any Lien upon any of their respective properties or assets except (i) Liens in favor of Bank securing the Indebtedness; (ii) Liens arising in the ordinary course of business for sums not due or sums being contested in good faith and by appropriate proceedings and not involving any deposits, advances, borrowed money or the deferred purchase price of property or services; and (iii) Liens permitted to exist under the terms of any of the Security Instruments. 6.16 Disposition/Negative Pledge re Encumbrance of Collateral and Other Assets. Borrowers will not sell or encumber any of the Collateral without first obtaining Bank's written consent thereto and Borrowers will not sell, lease, transfer, scrap or otherwise dispose of or mortgage, pledge, grant a security interest in or otherwise encumber any of Borrowers' other properties or assets, whether for replacement or not, unless such sale or disposition shall be in the ordinary course of business and for a full and fair consideration, subject to Borrowers' limited right to sell up to $100,000 worth in the aggregate of their respective properties or assets not constituting Collateral (other than and expressly excluding oil and gas leasehold, mining or other mineral interests wherever located) in the ordinary course of business during any calendar year without obtaining Bank's prior consent. Prior to consenting to any sale of Collateral, Bank shall be entitled to redetermine the Collateral Borrowing Base as provided in Section 3.2 of this Agreement and Borrowers shall deliver to Bank at Borrowers' cost the data and information described in Section 3.2 needed to make such redetermination. In no event shall Borrowers cause or permit the voluntary or involuntary pledge, mortgage or other encumbrance, attachment or levy of or against any of the properties or assets of whatsoever nature or type to any Person (financial institution or otherwise) without first obtaining Bank's written consent thereto. 6.17 Other Agreements. Borrowers will not enter into or permit to exist any agreement (i) which would cause an Event of Default or a Default hereunder; or (ii) which contains any provision which would be violated or breached by the performance of Borrowers' obligations hereunder or under any of the other Loan Documents. 6.18 Limitation on Other Indebtedness. Borrowers will not create, incur, assume, become or be liable in any manner in respect of, or suffer to exist, any indebtedness whether evidenced by a note, bond, debenture, agreement, letter of credit or similar or other obligation, or accept any deposits or advances of any kind, except (i) trade payables and current indebtedness (other than for borrowed money) incurred in, and deposits and advances accepted in, the ordinary course of Borrowers' existing business; (ii) the Indebtedness; (iii) other indebtedness not to exceed $100,000, in the aggregate, at any time outstanding; or (iv) the existing indebtedness more particularly described on Exhibit C hereto. 6.19 Distributions. Borrowers will not declare, pay or become obligated to declare or pay any distribution or dividend on any class of its limited liability company interest or capital stock now or hereafter outstanding, make any distribution of cash or property to holders thereof or of any shares of such stock, or redeem, retire, purchase or otherwise acquire, directly or indirectly, any of its limited liability company interest or shares of any class of its capital stock now or hereafter outstanding; provided, however, that Borrowers may declare and pay cash distribution or dividends, beginning for calendar year 1998, and only for so long as and to the extent no default or event of default has occurred and remains uncured hereunder, limited in amount to Borrowers' members' aggregate tax obligations directly generated by Borrowers' income from such applicable calendar year. 6.20 Investments, Loans and Advances. Borrowers will not make loans or advances to any other Person and will not make capital contributions to or investments in any other Person except for investments or capital contributions to TCM, L.L.C., a subsidiary of Energy, in amounts not to exceed $500,000 in the aggregate at any time outstanding. 6.21 Current Ratio. Each of the Borrowers will maintain a Current Ratio, calculated as of the last day of each fiscal quarter, of not less than 1.0:1. 6.22 Cash Flow Coverage Ratio. Each of the Borrowers will maintain a Cash Flow Coverage Ratio, calculated as of the last day of each fiscal quarter, of not less than 1.2:1. 6.23 General and Administrative Expenses. The general and administrative expenses of Borrowers as shown on Borrowers' respective income statements prepared in accordance with GAAP will not, in the aggregate, exceed, during any fiscal quarter period, the greater of (i) $100,000, or (ii) twenty percent (20%) of net operating income of the respective Borrowers. On a semi-annual period, Bank shall review and consider modifications to the amounts described in subsections (i) and (ii) above. Bank shall notify Borrowers in writing of any modifications to such amounts. ARTICLE VII REPRESENTATIONS AND WARRANTIES To induce Bank to enter into this Agreement and to make the Loans to Borrowers under the provisions hereof, and in consideration thereof, Borrowers represent, warrant and covenant as follows: 7.1 Litigation. Except as set forth on Exhibit D attached hereto, there is no action, suit, investigation or proceeding threatened or pending before any Tribunal against or affecting Borrowers or any properties or rights of Borrowers, which, if adversely determined, would result in a liability of greater than $100,000 or would otherwise result in any material adverse change in the business or condition, financial or otherwise, of Borrowers. Borrowers are not in default with respect to any judgment, order, writ, injunction, decree, rule or regulation of any Tribunal. 7.2 Conflicting Agreements and Other Matters. Neither of the Borrowers is in default in the performance of any material obligation, covenant, or condition in any agreement to which they are a party or by which they are bound. Neither of the Borrowers is a party to any contract or agreement which materially and adversely affects their respective businesses, property or assets, or financial condition. None of the Borrowers is a party to or otherwise subject to any contract or agreement which restricts or otherwise affects the right or ability of either of the Borrowers to execute the Loan Documents or the performance of any of their respective terms. Neither the execution nor delivery of any of the Loan Documents, nor fulfillment of nor compliance with their respective terms and provisions will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien (except those created by the Loan Documents) upon any of the properties or assets of either of the Borrowers pursuant to, or require any consent, approval or other action by or any notice to or filing with any Tribunal (other than routine filings after the Closing Date with the Securities and Exchange Commission, any securities exchange and/or state blue sky authorities) pursuant to any award of any arbitrator, or any agreement, instrument or Law to which either of the Borrowers is subject. 7.3 Financial Statements. The consolidated financial statements of Energy furnished to Bank have been prepared on an income tax basis, show all material liabilities, direct and contingent, and fairly present the consolidated financial condition of Energy as at date thereof and the results of its operations for the periods then ended, and since such date there has been no material adverse change in the business, financial condition or operations of either of the Borrowers. 7.4 Title to Properties; Authority. Each of the Borrowers has full power, authority and legal right to own and operate the properties which it now owns and operates, and to carry on the lines of business in which it is now engaged, and as of the Closing Date will have good and marketable title to the Evaluated Property subject to no Lien of any kind except Liens permitted by this Agreement. Borrowers have full power, authority and legal right to execute and deliver and to perform and observe the provisions of this Agreement and the other Loan Documents. Borrowers further represent to Bank that any and all after acquired interest in any one or more of the Evaluated Property being concurrently or subsequently assigned of record to Borrowers is and shall be deemed encumbered by the Mortgage in all respects. 7.5 Environmental Representations. (a) Borrowers are not subject to any liability or obligation relating to (i) the environmental conditions on, under or about the Collateral or the Evaluated Property, including, without limitation, the soil and ground water conditions at the location of any of Borrowers' respective properties, or (ii) the use, management, handling, transport, treatment, generation, storage, disposal, release or discharge of any Polluting Substance; (b) Borrowers have not obtained and are not required to obtain or make application for any permits, licenses or similar authorizations to construct, occupy, operate or use any buildings, improvements, facilities, fixtures and equipment forming a part of the Collateral or the Evaluated Property by reason of any Environmental Laws; (c) Borrowers have taken all reasonable steps necessary to determine and has determined that no Polluting Substances have been disposed of or otherwise released on, onto, into, or from the Collateral or the Evaluated Property (the term "release" shall have the meanings specified in CERCLA/SARA, and the term "disposal" or "disposed" shall have the meanings specified in RCRA/HSWA; provided, in the event either CERCLA/SARA or RCRA/HSWA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and provided further, to the extent that the laws of any State or Tribunal establish a meaning for "release," "disposal" or "disposed" which is broader than that specified in CERCLA/SARA, RCRA/HSWA or other Environmental Laws, such broader meaning shall apply); (d) To the best of Borrowers' knowledge, there are no PCB's or asbestos-containing materials, whether in the nature of thermal insulation products such as pipe boiler or breech coverings, wraps or blankets or sprayed-on or troweled-on products in, on or upon the Collateral or the Evaluated Property; and (e) To the best of Borrowers' knowledge, there is no urea formaldehyde foam insulation in, on or upon the Collateral or the Evaluated Property. 7.6 Oil and Gas Contracts. All contracts, agreements and leases related to any of the oil and gas mining, mineral or leasehold properties and all contracts, agreements, instruments and leases to which either of the Borrowers is a party, are valid and effective in accordance with their respective terms, and all agreements included in the oil and gas mining, mineral or leasehold properties in the nature of oil and/or gas purchase agreements, and oil and/or gas sale agreements are in full force and effect and are valid and legally binding obligations of the parties thereto and all payments due thereunder have been made, except for those suspended for reasonable cause in the ordinary course of business; and, there is not under any such contract, agreement or lease any existing default by any party thereto or any event which, with notice or lapse of time, or both, would constitute such default, other than minor defaults which, in the aggregate, would not result in losses or damages of more than $100,000 to Borrowers. 7.7 Take or Pay Obligations, Prepayments, BTU Adjustments and Balancing Problems. To the best of Borrowers' knowledge, after diligent inquiry, there is no take or pay obligation under any gas purchase agreement comprising a portion of the Collateral or the Evaluated Property which is not matched by a commensurate and corresponding pay or take obligation binding upon the purchaser under a corresponding gas sales agreement such that with respect to the ownership and operation of the business operations of Borrowers or the Collateral or the Evaluated Property, any such obligation in favor of any seller under any gas purchase agreement to which either of the Borrowers is a "buyer" is matched by a corresponding obligation on the part of "purchasers" under corresponding gas sales agreements pursuant to which either of the Borrowers is the "seller." To the best of Borrowers' knowledge, after diligent inquiry, neither Borrowers nor the Collateral or the Evaluated Property is subject to requirements to make BTU adjustments or effect gas balancing in favor of third parties which would result in Borrowers being required to (i) deliver gas at a price below that established in applicable gas sales agreements or on behalf of and for the benefit of third parties in exchange or to otherwise compensate for prior above market or above contract purchases of gas from Borrowers or their predecessor in interest, or (ii) balance in kind by allowing other owners in the Collateral or the Evaluated Property to make up the past imbalances in gas sales, or (iii) balance in cash by paying other owners of the Collateral or the Evaluated Property for the past gas imbalances except for the matters described on Exhibit E hereto which have been disclosed to Bank. 7.8 Gas Purchase Obligations in Excess of Gas Sales Rights. The ownership and operation of the business operations of Borrowers or the Collateral or the Evaluated Property have not resulted or will not result in the existence of minimum purchase obligations under any gas purchase agreement (relating to the volume of gas to be taken thereunder or the price to be paid with respect thereto for the duration of any such gas purchase agreement) which are not matched by corresponding and commensurate rights to sell all such gas under applicable gas sales agreements at prices in excess of the amount to be paid therefor under gas purchase agreements (without regard to costs associated with transporting any such gas and risks of volume "shrinkage" occurring in the transportation process). 7.9 Purposes. Borrowers are not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any borrowing hereunder will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. If requested by Bank, Borrowers will furnish to Bank a statement in conformity with the requirements of Federal Reserve Form U-1, referred to in Regulation U, to the foregoing effect. Neither the Borrowers nor any agent acting on their behalf has taken or will take any action which might cause this Agreement or the Note to violate any regulation of the Board of Governors of the Federal Reserve System (including Regulations G, T, U and X) or to violate any Securities Laws, state or federal, in each case as in effect now or as the same may hereafter be in effect. 7.10 Compliance with Applicable Laws. Borrowers are in compliance with all Laws, ordinances, rules, regulations and other legal requirements applicable to it and the businesses conducted thereby, the violation of which could or would have a material adverse effect on its business condition, financial or otherwise. 7.11 Possession of Franchises, Licenses. Borrowers possess all franchises, certificates, licenses, permits and other authorizations from governmental political subdivisions or regulatory authorities, free from burdensome restrictions, that are necessary in any material respect for the ownership, maintenance and operation of its properties and assets, and Borrowers are not in violation of any thereof in any material respect. 7.12 Leases, Easements and Rights of Way . To the best of their knowledge, each of the Borrowers enjoys peaceful and undisturbed possession of all leases, easements and rights of way necessary in any material respect for the operation of its properties and assets, none of which contains any unusual or burdensome provisions which might materially affect or impair the operation of such properties and assets. All such leases, easements and rights of way are valid and subsisting and are in full force and effect. 7.13 Taxes. Borrowers have filed all Federal, state and other income tax returns which are required to be filed and have paid all Taxes, as shown on said returns, and all Taxes due or payable without returns and all assessments received to the extent that such Taxes or assessments have become due. All Tax liabilities of Borrowers are adequately provided for on the books of Borrowers, including any interest or penalties. No income tax liability of a material nature has been asserted by taxing authorities for Taxes in excess of those already paid. 7.14 Disclosure. Neither this Agreement nor any other Loan Document or writing furnished to Bank by or on behalf of Borrowers in connection herewith contains any untrue statement of a material fact nor do such Loan Documents and writings, taken as a whole, omit to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact known to Borrowers and not reflected in the financial statements provided to Bank which materially adversely affects its assets or in the future may materially adversely affect the business, property, or assets, or financial condition of Borrowers which has not been set forth in this Agreement, in the Loan Documents or in other documents furnished to Bank by or on behalf of Borrowers prior to the date hereof in connection with the transactions contemplated hereby. 7.15 ERISA. Since the effective date of Title IV of ERISA, no Reportable Event has occurred with respect to any Plan. For the purposes of this section the term "Reportable Event" shall mean an event described in Section 4043(b) of ERISA. For the purposes hereof the term "Plan" shall mean any plan subject to Title IV of ERISA and maintained for employees of Borrowers, or of any member of a controlled group of corporations, as the term "controlled group of corporations" is defined in Section 1563 of the Internal Revenue Code of 1986, as amended (the "Code"), of which Borrowers are a part. Each Plan established or maintained by Borrowers is in material compliance with the applicable provisions of ERISA, and Borrowers have filed all reports required by ERISA and the Code to be filed with respect to each Plan. Borrowers have met all requirements with respect to funding Plans imposed by ERISA or the Code. Since the effective date of Title IV of ERISA there have not been any nor are there now existing any events or conditions that would permit any Plan to be terminated under circumstances which would cause the lien provided under Section 4068 of ERISA to attach to the assets of Borrowers. The value of each Plan's benefits guaranteed under Title IV of ERISA on the date hereof does not exceed the value of such Plan's assets allocable to such benefits on the date hereof. 7.16 Ownership of Mortgaged Property. As of the Closing Date, Borrowers confirm that Energy owns working interests, royalty interests and net revenue interests in the oil and gas leasehold estate for the Mortgaged Property covered by the Mortgage: not less than the amounts set forth on a tract basis on Exhibit F attached to the Existing Agreement, and, insofar as the McIntosh Properties (oil and gas) are concerned, not less than the amounts set forth on a tract basis on Exhibit F attached hereto. 7.17 Organization and Capacity. Each of the Borrowers is duly organized, validly existing and in good standing under the Laws of the State of Oklahoma as a limited liability company. Each of the Borrowers has the necessary capacity and authority to enter into this Agreement, the Note, the Security Instruments and the other Loan Documents and to perform and carry out the terms and provisions hereof. Field Services is a wholly-owned subsidiary of Energy and Energy is the only member of Field Services. ARTICLE VIII EVENTS OF DEFAULT 8.1 Events of Default. If any one or more of the following events (herein called "Events of Default") shall occur and be continuing for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of Law or otherwise): (a) Borrowers shall fail to make any monthly payment of interest due on the Note, or otherwise shall fail to pay the Note after the same shall become due and payable (whether by extension, renewal, acceleration, maturity or otherwise); or (b) Any representation or warranty of Borrowers made herein or in any writing furnished in connection with or pursuant to any of the Loan Documents shall have been false or misleading in any material respect on the date when made and not subsequently cured; or (c) Borrowers shall fail to duly observe, perform or comply with any covenant, agreement or term (other than payment provisions which are governed by Section 8.1(a) hereof) contained in this Agreement or any of the Loan Documents and such default or breach shall have not been cured or remedied within the earlier of thirty (30) days after Borrowers shall know (or should have known) of its occurrence or twenty (20) days following receipt of written notice thereof from Bank; or (d) Borrowers shall default in the payment of principal or of interest on any other obligation for money borrowed or received as an advance (or any obligation under any conditional sale or other title retention agreement, or any obligation issued or assumed as full or partial payment for property whether or not secured by purchase money Lien, or any obligation under notes payable or drafts accepted representing extensions of credit) beyond any grace period provided with respect thereto, or shall default in the performance of any other agreement, term or condition contained in any agreement under which such obligation is created (or if any other default under any such agreement shall occur and be continuing beyond any period of grace provided with respect thereto) if the effect of such default is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause such obligation to become due prior to its date of maturity; or (e) Any of the following: (i) either of the Borrowers shall be unable to pay its debts as they mature, or shall make an assignment for the benefit of creditors or admit in writing its inability to pay its debts generally as they become due or fail generally to pay its debts as they mature; or (ii) an order, judgment or decree is entered adjudicating either of the Borrowers insolvent or an order for relief under the United States Bankruptcy Code is entered with respect to such Borrower; or (iii) either of the Borrowers shall petition or apply to any Tribunal for the appointment of a trustee, receiver, custodian or liquidator of such Borrower or of any substantial part of the assets of such Borrower or shall commence any proceedings relating to such Borrower under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debts, dissolution, or liquidation Law of any jurisdiction, whether now or hereafter in effect; or (iv) any such petition or application shall be filed, or any such proceedings shall be commenced, against either of the Borrowers and such Borrower by any act shall indicate its approval thereof, consent thereto or acquiescence therein, or an order, judgment or decree shall be entered appointing any such trustee, receiver, custodian or liquidator, or approving the petition in any such proceedings, and such order, judgment or decree shall remain unstayed and in effect for more than sixty (60) days; or (vi) either of the Borrowers shall fail to make timely payment or deposit of any amount of tax required to be withheld by such Borrower and paid to or deposited to or to the credit of the United States of America pursuant to the provisions of the Internal Revenue Code of 1986, as amended, in respect of any and all wages and salaries paid to employees of such Borrower; or (f) Any final judgment on the merits for the payment of money in an amount in excess of $100,000 shall be outstanding against either of the Borrowers, and such judgment shall remain unstayed and in effect and unpaid for more than thirty (30) days; or (g) Any Reportable Event described in Section 7.15 hereof which Bank determines in good faith might constitute grounds for the termination of a Plan therein described or for the appointment by the appropriate United States District Court of a trustee to administer any such Plan shall have occurred and be continuing thirty (30) days after written notice to such effect shall have been given to Borrowers by Bank, or any such Plan shall be terminated, or a trustee shall be appointed by an appropriate United States District Court to administer any such Plan or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any such Plan or to appoint a trustee to administer any such Plan; or (h) Any Guarantor shall give Bank a notice of discontinuance with respect to said Guarantor's Guaranty or otherwise indicate a refusal, unwillingness or inability to perform on the obligations of the Guaranty of such Guarantor; and within ten days after written notice thereof from Bank to the other Guarantors, the other Guarantors have not extended the amount of their Guaranties (allocated in a manner acceptable to the Bank) to an amount sufficient to cover the amount of the Guaranty which the discontinuing Guarantor asserts is not to be covered. (i) Any default or event of default under any of the other Loan Documents. 8.2 Remedies. Upon the occurrence of any Event of Default referred to in Section 8.1(e), the Commitment shall immediately and automatically terminate and the Note and all other Indebtedness shall be immediately due and payable, without notice of any kind. Upon the occurrence of any other Event of Default, and without prejudice to any right or remedy of Bank under this Agreement or the Loan Documents or under applicable Law of under any other instrument or document delivered in connection herewith, Bank may (i) declare the Commitment terminated or (ii) declare the Commitment terminated and declare the Note and the other Indebtedness, or any part thereof, to be forthwith due and payable, whereupon the Note and the other Indebtedness, or such portion as is designated by Bank shall forthwith become due and payable, without presentment, demand, notice or protest of any kind, all of which are hereby expressly waived by Borrowers. No delay or omission on the part of Bank in exercising any power or right hereunder or under the Note, the Loan Documents or under applicable law shall impair such right or power or be construed to be a waiver of any default or any acquiescence therein, nor shall any single or partial exercise by Bank of any such power or right preclude other or further exercise thereof or the exercise of any other such power or right by Bank. In the event that all or part of the Indebtedness becomes or is declared to be forthwith due and payable as herein provided, Bank shall have the right to set off the amount of all the Indebtedness of Borrowers owing to Bank against, and shall have a lien upon and security interest in, all property of either of the Borrowers in Bank's possession at or subsequent to such default, regardless of the capacity in which Bank possesses such property, including but not limited to any balance or share of any deposit, demand, collection or agency account. At any time after the occurrence of any Event of Default, Bank may, at its option, cause an audit of any and/or all of the books, records and documents of Borrowers to be made by auditors satisfactory to Bank at the expense of Borrowers. Bank also shall have, and may exercise, each and every right and remedy granted to it for default under the terms of the other Loan Documents. ARTICLE IX MISCELLANEOUS 9.1 Notices. Unless otherwise provided herein, all notices, requests, consents and demands shall be in writing and shall be either hand-delivered (by courier or otherwise) or mailed by certified mail, postage prepaid, to the respective addresses specified below, or, as to any party, to such other address as may be designated by it in written notice to the other parties: If to Borrowers, to: Red River Energy, L.L.C. 6120 South Yale Suite 813 Tulsa, Oklahoma 74136 Attention: Mr. Robert E. Davis, Jr. (as Agent for all Borrowers) If to Bank, to: Bank of Oklahoma, National Association P. O. Box 2300 Bank of Oklahoma Tower One Williams Center Tulsa, Oklahoma 74192 Attention: Energy Department All notices, requests, consents and demands hereunder will be effective when hand-delivered by Bank to the applicable notice address of Borrowers or when mailed by certified mail, postage prepaid, addressed as aforesaid by either party hereto. 9.2 Place of Payment. All sums payable hereunder shall be paid in immediately available funds to Bank, at its principal banking offices at Bank of Oklahoma Tower, One Williams Center in Tulsa, Oklahoma, or at such other place as Bank shall notify Borrowers in writing. If any interest, principal or other payment falls due on a date other than a Business Day, then (unless otherwise provided herein) such due date shall be extended to the next succeeding Business Day, and such extension of time will in such case be included in computing interest, if any, in connection with such payment. 9.3 Survival of Agreements. All covenants, agreements, representations and warranties made herein shall survive the execution and the delivery of Loan Documents. All statements contained in any certificate or other instrument delivered by Borrowers hereunder shall be deemed to constitute representations and warranties by Borrowers. 9.4 Parties in Interest. All covenants, agreements and obligations contained in this Agreement shall bind and inure to the benefit of the respective successors and assigns of the parties hereto, except that neither of the Borrowers may assign its rights or obligations hereunder without the prior written consent of Bank. 9.5 Governing Law. This Agreement and the Note shall be deemed to have been made or incurred under the Laws of the State of Oklahoma and shall be construed and enforced in accordance with and governed by the Laws of Oklahoma. 9.6 SUBMISSION TO JURISDICTION. BORROWERS HEREBY CONSENT TO THE JURISDICTION OF ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN TULSA COUNTY, OKLAHOMA AND WAIVE ANY OBJECTION WHICH BORROWERS MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OR ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS SET FORTH IN SUBSECTION 9.1 HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) BUSINESS DAYS AFTER MAILED OR DELIVERED BY MESSENGER. 9.7 Maximum Interest Rate. Regardless of any provision herein, Bank shall never be entitled to receive, collect or apply, as interest on the Indebtedness any amount in excess of the maximum rate of interest permitted to be charged by Bank by applicable Law, and, in the event Bank shall ever receive, collect or apply, as interest, any such excess, such amount which would be excessive interest shall be applied to other Indebtedness and then to the reduction of principal; and, if the other Indebtedness and principal are paid in full, then any remaining excess shall forthwith be paid to Borrowers. 9.8 No Waiver; Cumulative Remedies. No failure to exercise, and no delay in exercising, on the part of Bank, any right, power or privilege hereunder or under any other Loan Document or applicable Law shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege of Bank. The rights and remedies herein provided are cumulative and not exclusive of any other rights or remedies provided by any other instrument or by law. No amendment, modification or waiver of any provision of this Agreement or any other Loan Document shall be effective unless the same shall be in writing and signed by Bank. No notice to or demand on Borrowers in any case shall entitle Borrowers to any other or further notice or demand in similar or other circumstances. 9.9 Costs. Borrowers agree to pay to Bank on demand all costs, fees and expenses (including without limitation reasonable attorneys fees and legal expenses and the fees of Bank's engineers for evaluating the Mortgaged Property) incurred or accrued by Banking connection with the preparation, execution, closing, delivery, filing, recording and administration of this Agreement, the Note, the Security Instruments and the other Loan Documents, or any amendment, waiver, consent or modification thereto or thereof, or any enforcement thereof. In any action to enforce or construe the provisions of this Agreement or any of the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys' fees and all costs and expenses related thereto. 9.10 Headings. The article and section headings of this Agreement are for convenience of reference only and shall not constitute a part of the text hereof nor alter or otherwise affect the meaning hereof. 9.11 Severability. The unenforceability or invalidity as determined by a Tribunal of competent jurisdiction, of any provision or provisions of this Agreement shall not render unenforceable or invalid any other provision or provisions hereof. 9.12 Exceptions to Covenants. Borrowers shall not be deemed to be permitted to take any action or fail to take any action which is permitted as an exception to any of the covenants contained herein or which is within the permissible limits of any of the covenants contained herein if such action or omission would result in the breach of any other covenant contained herein. 9.13 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. 9.14 WAIVER OF JURY. BORROWERS FULLY, VOLUNTARILY AND EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTE, THE MORTGAGE OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED (OR WHICH MAY IN THE FUTURE BE DELIVERED) IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT. BORROWERS AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Tulsa, Oklahoma effective as of the day and year first above written by the undersigned duly authorized officer of the Borrowers RED RIVER ENERGY, L.L.C., an Oklahoma limited liability company By Robert E. Davis, Jr., Executive Vice President and Chief Financial Officer "Energy" RED RIVER FIELD SERVICES, L.L.C., an Oklahoma limited liability company By Robert E. Davis, Jr., Executive Vice President and Chief Financial Officer "Services" (collectively the "Borrowers") BANK OF OKLAHOMA, NATIONAL ASSOCIATION By Kevin A. Humphrey, Vice President "Bank" 613201v4 RATIFICATION BY GUARANTORS The undersigned Guarantors hereby ratify and confirm the continuing effectiveness and enforceability of their respective Limited Guaranty instruments dated as of August 5, 1998 (annexed as Exhibits H-1 through H-6, inclusive, to the Revolving Credit Agreement between Red River Energy, L.L.C., as borrower ("Energy"), and Bank of Oklahoma, National Association, as lender, dated as of August 5, 1998) for the Indebtedness (including the Note) more particularly described and defined in that certain First Amended and Restated Revolving Credit Agreement between and among Energy and Red River Field Services, L.L.C., an Oklahoma limited liability company, as borrowers, and BOK, as lender, dated as of even date herewith, for the respective maximum principal amounts therein specified with the same force and effect as if fully restated herein. Dated as of March 30, 1999. Rolf Hufnagel Janet L. McGehee Robert E. Davis, Jr. Billy L. Baysinger Stephen J. Vogel Brent A. Biggs (collectively the "Guarantors") EXHIBITS Exhibit A - Revolving Credit Note Exhibit B - Revolving Loan Request and Certification (the "Request") Exhibit C - Other Indebtedness Exhibit D - Litigation Exhibit E - Take or Pay Disputes Exhibit F - Ownership of Mortgaged Property Exhibit G - Libor Option Rate Sheet EXHIBIT C OTHER INDEBTEDNESS NONE EXHIBIT D LITIGATION NONE EXHIBIT E TAKE OR PAY DISPUTES NONE EXHIBIT F OWNERSHIP OF MCINTOSH PROPERTY ---------------------------------------- ------------------------------------- ------------------------------------- Well or Unit Name GWI NRI ---------------------------------------- ------------------------------------- ------------------------------------- EXHIBIT G LIBOR OPTION RATE SHEET
* IMPORTANT NOTE: CERTAIN MATERIAL, INDICATED BY AN ASTERISK ("*"), HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. CONFIDENTIAL AND PROPRIETARY ---------------------------- IRU AGREEMENT BY AND BETWEEN PATHNET OPERATING, INC., AS GRANTOR AND ENRON BROADBAND SERVICES, AS GRANTEE DATE: January 18, 2001 IRU AGREEMENT THIS IRU AGREEMENT (this "Agreement") is made and entered into as of January 18, 2001 (the "Effective --------- ---------- Date") by and between Pathnet Operating, Inc., a Delaware corporation ("Pathnet"), and Enron Broadband Services, ---- ------- Inc., an Oregon corporation ("Customer"). -------- RECITALS -------- A. Pathnet owns or is planning to construct a fiber optic communication system (the "Pathnet -------- System") between the city pairs and locations identified in Exhibit A, which is attached hereto and incorporated --------- herein by this reference (the "System Route"). ------------ B. Customer desires to be granted the right to use, and Pathnet is willing to grant to Customer an indefeasible right to use certain dark fibers and Associated Conduit in the Pathnet System, on the terms and conditions set forth below. C. Each defined term shall have the meaning set forth in this Agreement where such term is first used, or, if no meaning is so set forth, the meaning ascribed to such term in the Glossary of Terms which is attached hereto and incorporated herein by this reference. Accordingly, in consideration of the mutual promises set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE 1. GRANT OF IRU ------------ 1.1 Pathnet hereby grants to Customer, and Customer hereby accepts from Pathnet, an indefeasible right to use (the "IRU"): --- (a) Six (6) dark fibers on the segment from Chicago, IL to Denver, CO, which will be specifically identified by Pathnet in the Pathnet System, as more particularly described in Exhibit A, attached hereto and incorporated herein, and meeting the specifications set forth in Exhibit D, attached hereto and incorporated herein (the "Customer Fibers"); and in --------------- (b) an undivided interest in the Conduit containing the Customer Fibers, calculated pro rata and based upon the ratio of the number of Fibers in the Conduit to the total number of fibers in the Conduit (the "Associated Conduit"). ------------------ 1.2 The IRU is granted on the terms and subject to the covenants and conditions set forth in this Agreement. The IRU shall be exclusive as to the Customer Fibers, and nonexclusive as to the Associated Conduit. The IRU does not include the right of Customer to own, control, maintain, modify or revise the Customer Fibers or Associated Conduit, or the right of physical access to, the right to encumber in any manner, or other use of the Pathnet System except as expressly set forth herein. Customer's rights in the Customer Fibers and Associated Conduit are hereinafter referred to as the "Customer System"). 1.3 Each party shall have full and complete control and responsibility for determining any network and service configuration or designs, routing configurations, regrooming, rearrangement or consolidation of channels or circuits and all related functions with regard to the use of that party's fiber. 1.4 Customer acknowledges and agrees that, except as provided in section 7.2, Pathnet is not supplying nor is Pathnet obligated to supply to Customer any optronics or electronics or optical or electrical equipment or other facilities, including without limitation, generators, batteries, air conditioners, fire protection and monitoring and testing equipment, all of which are the sole responsibility of Customer, nor is Pathnet responsible for performing any work other than as specified in this Agreement. 1.5 The Acceptance Date shall be as set forth in Section 4.1. 1.6 [Intentionally omitted.] ARTICLE 2. CONSIDERATION FOR GRANT ----------------------- 2.1 In consideration of the grant of the IRU hereunder by Pathnet to Customer, Customer agrees to pay to Pathnet, within five (5) days after the Acceptance Date, an IRU fee (the "IRU Fee") of the amount of -------- "*", payable on the Delivery Date. Payment shall be made to an escrow account specified by Pathnet.. 2.2 In addition to the amounts payable under Section 2.1, Customer shall pay directly or reimburse Pathnet for all costs and expenses to be paid by Customer as set forth in this Agreement, including, without limitation, the costs and expenses described in Articles 7, 8 and 13. 2.3 The consideration for the use of the space in Pathnet's facilities described in section 7.2 shall be as provided in the Collocation Agreement attached hereto as Exhibit H, and payable as set forth therein. 2.4 Customer shall pay the IRU Fee by wire transfer of immediately available funds to the account or accounts designated by Pathnet. 2.5 If Customer fails to make any payment under this Agreement when due, such amount shall accrue interest from the date such payment is due until paid, including accrued interest compounded monthly, at an annual rate of twelve percent (12%) or, if lower, the highest percentage allowed by law. If a dispute arises concerning an amount due by Customer, and it is later determined that the amount is due and owing to Pathnet, such amount shall bear interest from the date when due until paid, at the foregoing rate. ARTICLE 3 INTENTIONALLY OMITTED ARTICLE 4. TESTING AND WARRANTY -------------------- 4.1. Testing. ------- (a) Pathnet shall test all Customer Fibers in accordance with the procedures specified in Exhibit C --------- ("Fiber Testing") to verify that the Customer Fibers have been installed and operating in accordance with the -------------- specifications described in Exhibit C. Pathnet shall deliver a copy of the test results to Customer no later --------- than ten (10) days after completion of testing. If, within ten (10) days after receipt by Customer from Pathnet of the initial test results or of the results of re-testing as set forth below, Customer reasonably determines that the test results are unacceptable, Customer shall, within such ten (10) day period, notify Pathnet of such determination and Customer shall have the right, but not the obligation, at its sole expense, to conduct its own fiber acceptance testing of the Customer Fibers to verify that they are operating in accordance with the specifications in Exhibit C ("Fiber Acceptance Testing"). Customer shall commence its Fiber Acceptance Testing ---------------------------------------- of the Customer Fibers within ten (10) days of such notice to Pathnet and shall complete such testing within fourteen (14) days thereafter. Pathnet shall have the right, but not the obligation, to have a person or persons present to observe and validate Customer's Fiber Acceptance Testing. Within ten (10) days of the conclusion of Customer's Fiber Acceptance Testing of the Customer Fibers, Customer shall provide Pathnet with a copy of the test results and notify Pathnet in writing of acceptance of the Customer Fibers or that the Customer Fibers are unacceptable. (b) In the event the results of Customer's tests of the Customer Fibers show the Customer Fibers are not operating within the parameters of the applicable specifications and Customer has so notified Pathnet in writing, Pathnet shall expeditiously take such action as shall be reasonably necessary with respect to such portion of the Customer Fibers that do not operate within the parameters of the specifications to bring the operating standards of such portion of the Customer Fibers within such parameters. After taking such actions and re-testing of the Customer Fibers, Pathnet shall provide Customer with a copy of the new test results and Customer shall again have the right to conduct its own Fiber Acceptance Testing as set forth above. The cycle described above of testing, taking corrective action and re-testing shall take place as many times as necessary to ensure that the Customer Fibers operate within the parameters of the applicable specifications. (c) Customer shall be deemed to have accepted the Customer Fibers unless it notifies Pathnet within ten (10) days of receipt of the test results, as specified in this Section 4 that such results are unacceptable. If the test results of Customer's Fiber Acceptance Testing are within the parameters of the specifications in Exhibit C, Customer shall, within ten (10) days of receipt of Customer's test results, provide --------- Assignor with a written notice accepting the Customer Fibers. The date of this notice or the date of deemed acceptance, as the case may be, of the Customer Fibers for all Assigned Segments shall be the "Acceptance Date." (d) The Customer Fibers will be terminated at a fiber distribution panel in the Facilities. Customer shall provide its own stub cables from the fiber distribution panel to Customer's equipment. 4.2 Warranty. Beginning on the Effective Date, and ending twelve months following the Effective Date, -------- Pathnet shall warrant that, except for those items that are supplied or specified by Customer the Customer Fibers shall comply with the specifications set forth in Exhibit C. If within one year following the Effective Date, --------- Customer discovers that the Customer Fibers do not meet the warranty described above, Pathnet shall, within fifteen (15) days of receipt of written notice of such defect from Customer, inspect such Customer Fibers and promptly thereafter, and at no cost to Customer, correct any such defect or notify Customer of its dispute as to any defects recited in Customer's notice. EXCEPT AS SET FORTH IN THIS SECTION OR IN ARTICLE 21, PATHNET MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE CUSTOMER FIBERS OR OTHER ASSOCIATED MATERIALS FOR THE CUSTOMER FIBERS, INCLUDING ANY WARRANTY OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE, AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED. IN ADDITION, PATHNET MAKES NO WARRANTIES OR REPRESENTATIONS OF ANY TYPE CONCERNING THE INTEGRITY OR PERFORMANCE OF THE MATERIALS FURNISHED OR DESIGNATED BY CUSTOMER. (a) With respect to items of materials furnished or specified by Customer, Pathnet agrees to pass on and assign to Customer any warranty it may have received from the manufacturer or supplier, to the extent that it is assignable. (b) Customer's sole and exclusive remedy for breach of the warranty, shall be repair and replacement, at Pathnet's expense, of the portions of Customer Fibers found to be defective. In no event shall Pathnet be liable to Customer for any indirect, exemplary, special or consequential damages, including but not limited to lost profits or the cost of providing or obtaining alternative service. ARTICLE 5. DOCUMENTATION ------------- Not later than sixty (60) days after the Facilities Delivery Date, Pathnet shall provide Customer with the following documentation: (a) As-built drawings in accordance with the requirements described in Exhibit B --------- ("As-Builts"). ----------- (b) Technical specifications of the optical fiber cable and associated splices and other equipment placed in the Pathnet System. ARTICLE 6. TERM ---- 6.1 The grant of the IRU shall become effective on the Effective Date and shall extend until June 30, 2020. The period of the IRU is herein defined as the "Initial Term." Subject to the conditions and limitations set ------------- forth below, and subject to the extension of the Underlying Rights, Customer may, by written notice, extend the IRU grant and this Agreement for an additional ten (10) year period or such shorter period as required by the Underlying Rights, and, if it has so elected to so extend, it may, by written notice, extend the IRU grant and this Agreement for a second ten (10) year period or such shorter period as required by the Underlying Rights (each of such periods being referred to herein as a "Renewal Term"). Customer shall provide such written notice ------------- at least one (1) year in advance of the date the Initial Term or the extension thereof would expire absent such notice. Within thirty (30) days after the date on which Pathnet has received Customer's written notice electing to extend the term of this IRU and requesting a report on the remaining term of the Underlying Rights, Pathnet will advise Customer of the remaining term of all applicable Underlying Rights, and, if such Underlying Rights do not extend for the entire length of the extended term, Customer shall have the right to (i) extend this Agreement for the entire renewal term or for less than the renewal term (but in either of such events Customer shall obtain renewals of such Underlying Rights, in Customer's name, at Customer's sole cost, prior to such renewal term), or, at Pathnet's option, in Customer's and Pathnet's names, in which latter case Customer and Pathnet shall share the costs, with Pathnet paying the costs attributable to all IRU holders in the same Cable who claim through Pathnet (except Customer and its assignees)), or (ii) withdraw its election to extend the term of this Agreement. Customer shall not be responsible for any IRU for any Renewal Term, but shall be liable for its Proportionate Share (as defined in Section 9.3) of the costs incurred under all Underlying Rights, and all other charges incurred under this Agreement during any such Renewal Term, including, without limitation, charges for maintenance, collocation services and Impositions. Customer shall have the right (but not the obligation) to extend or obtain modification of any Underlying Right, on Customer's own behalf and at its sole cost, to the extent Customer deems appropriate in connection with any extension of the Term. 6.2 At the end of the Initial Term or the last Renewal Term, as applicable, Pathnet shall transfer title to the Customer Fibers and Associated Conduit to Customer pursuant to a bill of sale reasonably acceptable to both parties. Upon such conveyance the IRU in the Customer Fibers shall immediately terminate and all rights of Customer pursuant to this Agreement shall cease and, except as to liabilities or obligations that accrue prior to such termination, expressly survive termination or expiration of this Agreement, or are incurred pursuant to Articles XI, XII, XIII, XV, or Article XIX, neither Party shall owe the other any additional duties or consideration hereunder. Unless Pathnet and Customer shall have entered into an Operation, Maintenance and Repair Agreement substantially in the form of Exhibit I, Customer shall, within sixty (60) days after the end of --------- the Term (unless the Parties agree to a longer period), remove all electronics and equipment from the System, including any Pathnet facilities, at Customer's sole cost, under Pathnet's supervision. In the event of failure of Customer to remove same within said period, Pathnet may remove same at Customer's sole expense, to be reimbursed by Customer within thirty (30) days of receipt of Pathnet's invoice therefor. In order for the equipment or facilities of Customer to be or remain connected to the System, Customer and Pathnet must have entered into an Operation Maintenance and Repair Agreement substantially in the form of Exhibit I. --------- 6.3 It is understood and agreed that Pathnet must and does maintain legal title to the entire Pathnet System, subject to the IRU hereunder. Notwithstanding the foregoing, it is understood and agreed as between the parties that the grant of the IRU hereunder shall be treated for accounting and federal and all applicable state and local tax purposes as the sale and purchase of the Customer Fibers, and that on or after the Effective Date, Customer shall be treated as the owner of the Customer Fibers for such purposes. The parties agree to file their respective income tax returns, property tax returns, and other returns and reports for their respective Impositions on such basis and, except as otherwise required by law, not to take any positions inconsistent therewith. Notwithstanding the foregoing, if a party's third-party financial auditors, in the exercise of their good faith judgment, determine that a different treatment is more appropriate, such party may use the treatment recommended by its auditors. In that event, such party will give written notice to the other party of the reasons for such requirement as provided by its auditors. ARTICLE 7. NETWORK ACCESS; REGENERATION FACILITIES --------------------------------------- 7.1 (a) The locations along the Pathnet System right-of-way where Pathnet regenerator, amplifier, junction and POP facilities are located are set forth in Exhibit E, that is attached hereto and --------- incorporated herein by this reference (the "Facility Locations"). Provided that Pathnet has received payment in ------------------- full of the IRU Fee, Pathnet shall provide Customer with: (1) access to the Pathnet fiber distribution panels at those locations described in Exhibit E-1; ----------- (2) the right to space in the Facilities as described in Exhibit E-2 and Exhibit H. Customer's use of ------------ --------- Facility Locations is subject to the Underlying Rights Requirements. A description of the material specifications for the Facility Locations is set forth in Exhibit F. --------- (b) Pathnet shall provide Customer with access to the Customer Fibers by cable stub taken by Pathnet from the Pathnet System and delivered to Customer's system at fiber distribution panels at the Facilities (the "Connecting Points"). Customer shall provide its own cable from the fiber distribution panel to ------------------ Customer's equipment. (c) If Customer desires additional Connecting Points on the Pathnet System, the parties will negotiate in good faith the terms and conditions for such additional Connecting Points. All Connecting Points shall be placed at splice points. (d) All connections shall be performed by Pathnet, in accordance with Pathnet's applicable specifications and operating procedures. The cost of such connections will be borne by Customer. It is the responsibility of Customer to obtain all governmental and other approvals and consents necessary for the delivery of the cable stub. (e) Customer shall pay Pathnet's Costs for each connection within thirty (30) days of the date of Customer's receipt of Pathnet's invoice therefor. In order to schedule a connection of this type, Customer shall request and coordinate such work not less than ninety (90) days in advance of the date the connection is requested to be completed. Such work will be restricted to a Planned System Work Period, unless otherwise agreed to in writing for specific projects. Subject to all applicable Underlying Rights Requirements, Pathnet shall provide Customer with reasonable access to the Connecting Points at all times. Neither Pathnet nor Customer shall have any limitations on the types of electronics or technologies employed to utilize its fibers, subject to Pathnet safety procedures and so long as such electronics or technologies do not interfere with the use of or present a risk of damage to any portion of the other party's system. (f) Pathnet may route the Customer Fibers through Pathnet's separate terminal, end link, POP or regeneration facilities at its sole discretion, and Pathnet shall be responsible for all costs and expenses associated therewith. 7.2 If Pathnet makes available to Customer space in any Facility Location, Customer's occupancy of such space shall be governed by the terms of Pathnet's standard form of collocation agreement, attached hereto as Exhibit H, as well as the terms of this Agreement. In addition, the provisions of Section 8.2 shall apply with --------- respect to sharing of operating costs. Customer shall execute and deliver the collocation agreement contemporaneously with the execution and delivery of this Agreement. ARTICLE 8. MAINTENANCE AND REPAIR OF THE PATHNET SYSTEM -------------------------------------------- 8.1 From and after the Fiber Testing, the maintenance of the Pathnet System shall be provided in accordance with the maintenance requirements and procedures set forth in Exhibit G hereto. Customer agrees to pay --------- maintenance fees in accordance with the provisions of Exhibit G. --------- 8.2 Customer shall pay its share of all set-up charges and operating costs incurred by Pathnet in connection with the operation or maintenance of the regeneration, amplifier, junction and POP or terminal facilities, in accordance with the form of collocation agreement that is attached hereto as Exhibit G, and incorporated herein by this reference. ARTICLE 9. PERMITS; UNDERLYING RIGHTS; RELOCATION -------------------------------------- 9.1 Pathnet shall obtain and maintain throughout the Initial Term all Underlying Rights necessary to permit Customer to use and enjoy the IRU Fibers, its share in the Associated Conduit and collocation space as provided herein. The IRU granted hereunder is further subject and subordinate to the prior right of the grantor of the Underlying Rights to use the right of way for other business activities, including railroad operations, telecommunications uses, pipeline operations or any other purposes, and to the prior right of Pathnet to use its rights granted under the Underlying Rights. 9.2 On Customer's written request, Pathnet shall make available for inspection by Customer, at the location where such records are kept, copies of all information, documents, agreements, reports, permits, drawings and specifications that are material to the grant of the IRU to Customer, including, without limitation and to the extent available, the Underlying Rights, to the extent that their terms or other legal restrictions permit disclosure. Pathnet may redact confidential or proprietary business terms. 9.3 If during the Term, Pathnet is required, by a party with the contractual or legal right to so require, to relocate any part of the Customer System, including any of the facilities used or required in providing the IRU, Pathnet shall proceed with such relocation, including, but not limited to, the right, in good faith, to reasonably determine the extent of, the timing of, and methods to be used for such relocation; provided that (a) any such relocation shall be constructed and tested in accordance with the specifications and drawings set forth in Exhibits B and C, and incorporate fiber meeting the specifications set forth in Exhibit D; ---------- - ---------- (b) Pathnet shall maintain the same end points and Facility locations of the Customer System; (c) the relocation shall be coordinated with Customer to minimize any effect on the Customer's System; and (d) (i) if the relocation is due to circumstances beyond the control of Pathnet, then Customer shall be responsible for its Proportionate Share (as hereinafter defined) of any costs in excess of $"*"; (ii) if the relocation is due to the negligence or willful misconduct of Pathnet, or for the convenience of Pathnet, or if it is required due to Pathnet's failure to maintain an Underlying Right during the Initial Term, the relocation shall be conducted at the sole cost and expense of Pathnet; and (iii) otherwise, the parties will negotiate in good faith to determine whether relocation is appropriate and how costs should be allocated. For purposes of determining Customer's Proportionate Share, applicable costs (net of reimbursements from third-persons not having an interest in the System) shall be allocated equally across all the conduits in the affected segment of the System, and then, with respect to a conduit, equally among the fibers (whether sold or unsold, dark or lit) in such conduit. Customer's "Proportionate Share" shall be the costs allocated to its individual fibers in such manner. 9.4 Pathnet shall deliver to Customer updated As-Builts with respect to the relocated segment not later than ninety (90) days following the completion of such relocation. 9.6 Pathnet has obtained or will obtain Underlying Rights that have a stated term of not less than the Initial Term. ARTICLE 10. USE OF PATHNET SYSTEM --------------------- 10.1 The requirements, restrictions, and/or limitations on Customer's right to use the Customer Fibers and Associated Conduit, and safety, operational and other rules and regulations imposed in connection with the Underlying Rights are referred to collectively as the "Underlying Rights Requirements." ------------------------------ 10.2 Customer represents, warrants and covenants that it will use the Customer Fibers and Associated Conduit in compliance with and subject to the Underlying Rights Requirements and all applicable government codes, ordinances, laws, rules and regulations, provided that such Underlying Rights Requirements do not unreasonably and materially interfere with Customer's use and enjoyment of the Customer Fibers and Associated Conduit. 10.3 Subject to the limitations set forth in this Agreement, Customer may use the Customer Fibers and the Associated Conduit for any lawful telecommunications purpose. Customer agrees and acknowledges that it has no right to use any of the fibers that are part of the Pathnet System, other than the Customer Fibers. Customer shall keep all portions of the Pathnet System free from any liens, rights or claims of any third party attributable to Customer, except that Customer may encumber the IRU granted to Customer in the Customer Fibers and Customer's interest in Associated Conduit, on the condition that the interest of any lien holder is subordinate to the interest of Pathnet and other interests and rights in and to the Customer Fibers and the Associated Conduit. 10.4 Pathnet acknowledges and agrees that it has no right to use the Customer Fibers during the Term hereof. 10.5 Customer and Pathnet shall promptly notify each other of any matters pertaining to, or the occurrence (or impending occurrence) of, any event which would be reasonably likely to give rise to any damage or impending damage to or loss of the Pathnet System that are known to such party. 10.6 Customer shall not use its systems in a way that interferes in any way with or adversely affects the use of the fibers or cable of any other person using the Pathnet System. The parties acknowledge that the Pathnet System includes or will include other participants, including Pathnet and other owners and users of telecommunication systems. 10.7 Customer and Pathnet each agrees to cooperate with and support the other in complying with any requirements applicable to their respective rights and obligations hereunder. ARTICLE 11 INDEMNIFICATION; ----------------- LIMITATION OF LIABILITY. ----------------------- 11.1 Subject to the provisions of Section 11.4, Customer hereby releases and agrees to indemnify, defend, protect and hold harmless Pathnet, its Affiliates, and its and their employees, officers, directors, agents, contractors, and shareholders ("Indemnified Persons"), from and against any third party claims, suits, proceedings and actions ("Claims") for: (a) Any injury, death, loss or damage to any person, tangible property or facilities of any person or entity (including reasonable attorney fees and costs at trial and appeal) to the extent arising out of or resulting from the acts or omissions, negligent or otherwise, of Customer, its officers, directors, employees, agents or contractors in connection with its performance or non-performance under this Agreement; (b) Any liabilities or damages (including reasonable attorney fees and costs at trial and appeal) arising out of any violation by Customer of regulations, rules, statutes or court orders of any local, state or federal governmental agency, court or body in connection with its performance under this Agreement; and (c) Any liabilities or damages asserted by Customer's telecommunications clients and arising directly or indirectly from any outages, disruptions or interruptions of service in the operation of the Customer Fibers or any failure of such fibers to transmit accurately any message. 11.2 Subject to the provisions of Section 11.4, Pathnet hereby releases and agrees to indemnify, defend, protect and hold harmless Customer and its Indemnified Persons from and against any third party Claims for: (a) Any injury, death, loss or damage to any person, tangible property or facilities of any person or entity (including reasonable attorney fees and costs at trial and appeal), to the extent arising out of or resulting from the acts or omissions, negligent or otherwise, of Pathnet, its officers, directors, employees, agents or contractors in connection with its performance or non-performance under this Agreement; (b) Any liabilities or damages (including reasonable attorney fees and costs at trial and appeal) arising out of any violation by Pathnet of regulations, rules, statutes or court orders of any local, state or federal governmental agency, court or body in connection with its performance under this Agreement; and (c) Any failure by Pathnet to obtain and/or maintain, throughout the Initial Term, all Underlying Rights reasonably necessary or appropriate to permit Customer to use and enjoy the Customer Fibers, Associated Conduit and collocation space, as provided herein. Customer shall be permitted to participate in any such defense at its sole cost and expense, provided it conducts such participation in a manner that does not interfere with Pathnet's defense. 11.3 Pathnet and Customer hereby expressly recognize and agree that each Party's obligation to indemnify, defend, protect and save harmless Indemnified Persons is a material obligation to the continuing performance of the Parties' other obligations, if any, hereunder. However, in the event that either Pathnet or Customer fails for any reason to so indemnify, defend, protect and save harmless, the injured Party's sole remedy in such event shall be the right to bring an arbitration proceeding pursuant to the terms of this Agreement against the other for damages as a result of such failure to indemnify, defend, protect and save harmless. The obligations of this Section 11.3 shall survive the expiration or earlier termination of this Agreement. Pathnet and Customer each affirmatively state and warrant to the other that its indemnity obligation as to property damage or personal injury will be supported by liability insurance to be furnished by it; provided that recovery -------- under or in respect of this indemnity shall not be limited to the proceeds of any such insurance. 11.4 Notwithstanding any provision of this Agreement to the contrary, neither party shall be liable to the other party for any special, incidental, indirect, punitive or consequential costs, liabilities or damages, whether foreseeable or not, arising out of, or in connection with, such party's performance of its obligations under this Agreement. Nothing contained herein shall operate as a limitation on the right of either Pathnet or Customer to bring an action for damages against any third party, including indirect, special, or consequential damages, based on any acts or omissions of such third party as such acts or omissions may affect the construction, operation or use of the Customer Fibers or the System or any portion thereof; provided, -------- however, the above limitation of liability shall apply to indirect liability including Claims against third parties who, directly or through one or more other parties, have a right of indemnification, impleader, cross-claim, contribution or other right of recovery against a Party to this Agreement. Each of Pathnet and Customer shall assign such rights or claims, execute such documents and do whatever else may be reasonably necessary to enable the other to pursue any such action against such third party. ARTICLE 12. INSURANCE --------- 12.1 At all times during the Term each party shall procure and maintain in force, at its own expense: (a) not less than $10,000,000 (which may include umbrella liability coverage) combined single limit liability insurance, on an occurrence basis, for personal injury and property damage, including, without limitation, injury or damage arising from the operation of vehicles or equipment and liability for completed operations; (b) workers' compensation insurance in amounts required by applicable law and employers' liability insurance with a limit of at least $1,000,000 per occurrence; (c) automobile liability insurance covering death or injury to any person or persons, or damage to property arising from the operation of vehicles or equipment, with limits of not less than $2,000,000 per occurrence; and (d) any other insurance coverages specifically required of such party pursuant to Pathnet's right-of-way agreements with railroads or other third parties. 12.2 Both parties expressly acknowledge that a party shall be deemed to be in compliance with the provisions of this Article if it maintains a self-insurance program providing for a retention of up to $1,000,000. If either party provides any of the foregoing coverages on a claims-made basis, such policy or policies shall be for at least a three-year extended reporting or discovery period. Unless otherwise agreed, Customer's and Pathnet's insurance policies shall be obtained and maintained with companies rated "A" or better by Best's Key Rating Guide and each party shall provide the other with an insurance certificate confirming compliance with this requirement for each policy providing such required coverage. 12.3 If either party fails to obtain the required insurance or fails to obtain the required certificates from any contractor and a claim is made or suffered, such party shall indemnify and hold harmless the other party from any and all claims for which the required insurance would have provided coverage. Further, in the event of any such failure which continues after seven (7) days' written notice thereof by the other party, such other party may, but shall not be obligated to, obtain such insurance and will have the right to be reimbursed for the cost of such insurance by the party failing to obtain such insurance. 12.4 In the event coverage is denied or reimbursement of a properly presented claim is disputed by the carrier for insurance provided above, the party carrying such coverage shall make good-faith efforts to pursue such claim with its carrier. 12.5 Customer and Pathnet hereby mutually waive their respective rights of recovery against each other and the officers, directors, shareholders, partners, joint venturers, employees, agents, customers, invitees, or business visitors of either party, for any loss arising from any cause covered or that would be covered by fire, extended coverage, All Risks or other insurance required to be carried under this Agreement or now or hereafter existing for the benefit of the respective party. Customer and Pathnet will cause from time to time their respective insurers to issue appropriate waiver of subrogation rights endorsements to all property insurance policies carried in connection with their respective property. ARTICLE 13. TAXES, FEES AND OTHER GOVERNMENTAL IMPOSITIONS ---------------------------------------------- 13.1 The parties acknowledge and agree that it is their mutual objective and intent to (a) minimize the aggregate Impositions payable with respect to the Pathnet System, and (b) share such Impositions according to their respective interests in the Pathnet System. They agree to cooperate with each other and coordinate their efforts to achieve such objectives in accordance with the provisions of this Article. 13.2 Pathnet shall be responsible for and shall timely pay any and all Impositions with respect to the construction or operation of the Pathnet System which Impositions are (a) imposed or assessed prior to the Effective Date; or (b) imposed or assessed in exchange for the approval of the original construction of the Pathnet System; or (c) that were assessed in return for the original right to install the Pathnet System on public property or in public right of way. 13.3 Except as to Impositions described in section 13.2, following the Effective Date Customer shall be responsible for and shall pay all Impositions (a) imposed on, based on, or otherwise measured by the gross receipts, gross income, net receipts or net income received by or accrued to Customer with respect to the ownership (consistent with Section 6.3) or use of the Customer Fibers; or (b) which have been separately assessed, allocated to, or imposed on the Customer Fibers. If the Customer Fibers are the only fibers located in a segment from the point where the segment leaves the Pathnet System right-of-way to a Customer POP, Customer shall be solely responsible for any and all Impositions imposed on or with respect to such segment. (a) To the extent such Impositions are not separately assessed, allocated to or imposed on the Customer Fibers, Pathnet will pay all such Impositions. Pathnet shall notify Customer of such Imposition, and Customer shall promptly reimburse Pathnet for Customer's Proportionate Share of all such Imposition. 13.4 Pathnet shall have the right to contest any Imposition (including by nonpayment of such Imposition). The out-of-pocket costs and expenses (including reasonable attorneys' fees) incurred by Pathnet in any such contest shall be shared by Pathnet and Customer in the same proportion as to which the parties would have shared in such Impositions as they were assessed. Any refunds or credits resulting from a contest brought pursuant to this Section shall be divided between Pathnet and Customer in the same proportion as separately determined or as originally assessed. In any such event, Pathnet shall provide timely notice of such challenge to Customer. 13.5 Customer shall have the right to protest by appropriate proceedings any Imposition. In such event, Customer shall indemnify and hold Pathnet harmless from any expense, legal action or cost, including reasonable attorneys' fees, resulting from Customer's exercise of its rights hereunder. (a) The foregoing notwithstanding, Pathnet, at its option and at its own expense, shall have the right to direct and manage any contest regarding an Imposition that relates to the Pathnet System that affects the interest of Pathnet; subject, however, to reasonable and appropriate consultation with Customer. Customer agrees to cooperate with Pathnet in any such contest. (b) If Customer has exhausted all its rights of appeal in protesting any Imposition and has failed to obtain the relief sought in such proceedings or appeals ("Finally Determined Taxes and Fees"), Customer and Pathnet may ---------------------------------- agree to relocate a portion of the Pathnet System to avoid the jurisdiction that imposes or assesses such Finally Determined Taxes and Fees (subject to the consent and participation of the other interest holders in the affected portion of the Pathnet System). If Customer and Pathnet do not determine to relocate the affected portion of the Pathnet System, Customer shall have the right to terminate its use of the Customer Fibers in the affected portion of the Pathnet System. Such termination shall be effective on the date specified by Customer in a notice of termination, but not earlier than ninety (90) days after the notice. Upon such termination, the IRU in the affected portion of the Pathnet System shall immediately terminate, and the Customer Fibers in the affected portion of the Pathnet System shall thereupon revert to Pathnet without reimbursement of any of the IRU Fee or other payments previously made with respect thereto. 13.6 Pathnet and Customer agree to cooperate fully in the preparation of any returns or reports relating to the Impositions. Pathnet and Customer further acknowledge and agree that the provisions of this Article are intended to allocate the Impositions on procedures and methods of computation that are in effect on the date of this Agreement. Material changes in such procedures and methods could significantly alter the fundamental economic assumptions of the parties underlying this Agreement. Accordingly, the parties agree that, if such procedures or methods of computation change materially, the parties will negotiate in good faith an amendment to this Article to preserve, to the extent reasonably practicable, the economic intent and effect of this Article. ARTICLE 14. NOTICES ------- All notices and other communications required or permitted under this Agreement shall be in writing and shall be given by United States first class mail, postage prepaid, registered or certified, return receipt requested, or by hand delivery (including by means of a professional messenger service or overnight mail) addressed as follows: All notices and other communications shall be given to Customer at: Enron Broadband Services, Inc. 1400 Smith Street Houston TX 77002 Attn: Vice President, IRU Transactions with a copy to: Enron Broadband Services, Inc. 1400 Smith Street Houston TX 77002 Attn: General Counsel All notices and other communications shall be given to Pathnet at: Pathnet 11720 Sunrise Valley Drive Reston, Virginia 20191 Attn: Vice President, Network Operations Attn: General Counsel Any such notice or other communication shall be deemed to be effective when actually received or refused. Either party may by similar notice given change the address to which future notices or other communications shall be sent. ARTICLE 15. CONFIDENTIALITY --------------- 15.1 As used herein, "Confidential Information" shall mean this Agreement and all materials, maps, ------------------------- and other documents that are marked confidential and disclosed by one party to the other in fulfilling the provisions and intent of this Agreement, as well as confidential or proprietary information that is orally disclosed, provided that, for information that is orally disclosed, the disclosing party indicates to recipient at the time of disclosure the confidential or proprietary nature of the information and confirms in writing to the recipient within 30 days after such disclosure that such information is confidential. Each party agrees to hold the Confidential Information of the other party in confidence. Neither party shall divulge or otherwise disclose the provisions of this Agreement to any third party without the prior written consent of the other party, except that either party may make disclosure to those required for the implementation of this Agreement, and to customers and prospective customers, purchasers and prospective purchasers, auditors, attorneys, financial advisors, lenders and prospective lenders, investors and prospective investors, provided that in each case the recipient agrees in writing to be bound by the confidentiality provisions set forth in this section. In addition, either party may make disclosure as required by a court order or as otherwise required by law or in any legal or arbitration proceeding relating to this Agreement. If either party is required by law or by interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process to disclose the provisions of this Agreement or the design information referred to in this Section, it will provide the other party with prompt prior written notice of such request or requirement so that such party may seek an appropriate protective order and/or waive compliance with this Section. The party whose consent to disclose information is requested shall respond to such request, in writing, within five (5) working days of the request by either authorizing the disclosure or advising of its election to seek a protective order, or if such party fails to respond within the prescribed period the disclosure shall be deemed approved. (a) Nothing herein shall be construed as granting any right or license under any copyrights, inventions, or patents now or hereafter owned or controlled by Pathnet. (b) Upon termination of this Agreement for any reason or upon request of Pathnet, Customer shall return all Confidential Information, together with any copies of same, to Pathnet. The requirements of confidentiality set forth herein shall survive return of such Confidential Information. (c) Customer shall not, without first obtaining written consent of Pathnet, use any trademark or trade name of Pathnet or refer to the subject matter of this Agreement or Pathnet in any promotional activity or otherwise, nor disclose to others any specific information about the subject matter of this Agreement. 15.2 The provisions of this Article shall survive expiration or other termination of this Agreement. ARTICLE 16. DEFAULT ------- 16.1 A party shall be in default under this Agreement in the following events: (a) in the case of a failure to pay any amount when due under this Agreement, such party fails to pay such amount within ten (10) days after written notice specifying such breach, or (b) the making by such party of a general assignment for the benefit of its creditors; (c) the filing of a voluntary petition in bankruptcy or the filing of a petition in bankruptcy or other insolvency protection against such party that is not dismissed within ninety (90) days thereafter; (d) the filing by such party of any petition or answer seeking, consenting to, or acquiescing in reorganization, arrangement, adjustment, composition, liquidation, dissolution or similar relief, (e) in the case of any other material breach of this Agreement, a party fails to cure such within thirty (30) days after notice specifying such breach, provided that if the breach is of a nature that cannot be cured within thirty (30) days, a default shall not have occurred so long as the breaching party has commenced to cure within said time period and thereafter diligently pursues such cure to completion, provided that no such cure period shall be permitted in connection with a default that materially interferes with service on the System or otherwise materially and adversely affects the integrity of the System. 16.2 A waiver by either party at any time of any of its rights as to anything herein contained shall not be deemed to be a waiver of any breach of covenant or other matter subsequently occurring. 16.3 Upon the failure by a party to timely cure any such default after notice thereof, the non-default party may: (i) take such action as it determines, in its sole discretion, to be necessary to correct the default; and (ii) pursue any legal remedies it may have under applicable law or principles of equity relating to such breach. ARTICLE 17. INTENTIONALLY OMITTED ARTICLE 18. FORCE MAJEURE ------------- Neither party shall be liable to the other party, and each party's performance under this Agreement shall be excused, if and to the extent that any failure or delay in such party's performance of one or more of its obligations hereunder is caused by any of the following conditions, and such party's performance of such obligation or obligations shall be excused and extended for and during the period of any such delay: act of God; fire; flood; fiber, Cable, or other material failures, shortages or unavailability or other delay in delivery not resulting from the responsible party's failure to timely place orders therefor; lack of or delay in transportation; government codes, ordinances, laws, rules, regulations or restrictions (collectively, "Regulations"); war or civil disorder; strikes or other labor disputes; inability of Pathnet to obtain track time or access to the Pathnet System; or any other cause beyond the reasonable control of such party. The party claiming relief under this Article shall notify the other in writing of the existence of the event relied on and the cessation or termination of said event, and the party claiming relief shall exercise reasonable commercial efforts to minimize the time of any such delay. ARTICLE 19. DISPUTE RESOLUTION ------------------ 19.1 Application. Any claim, controversy or dispute, whether sounding in contract, statute, tort, ----------- fraud, misrepresentation or other legal theory, related directly or indirectly to this Agreement, whenever brought and whether between the parties to this Agreement or between one of the parties to this Agreement and the employees, agents or affiliated businesses of the other party, shall be resolved by arbitration as prescribed in this section. The Federal Arbitration Act, 9 U.S.C.ss.ss.1-15, not state law, shall govern the arbitrability of all claims. 19.2 Arbitrator. A single arbitrator engaged in the practice of law who is knowledgeable about the ---------- subject matter of this Agreement shall conduct the arbitration under the then current rules of the American Arbitration Association (the "AAA"). The arbitrator shall be selected in accordance with AAA procedures from a --- list of qualified people maintained by the AAA. The arbitration shall be conducted in a mutually-agreeable location in the Dallas, Texas area, and all expedited procedures prescribed by the AAA rules shall apply. 19.3 Discovery. Discovery shall be conducted in accordance with the Federal Rules of Civil --------- Procedure. Each party shall bear its own costs and attorneys' fees, and the parties shall share equally the fees and expenses of the arbitrator. The arbitrator's decision and award shall be final and binding, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. 19.4 Enforcement. If any party files a judicial or administrative action asserting claims subject ----------- to arbitration as prescribed herein, and another party successfully stays such action or compels arbitration of said claims, the party filing said action shall pay the other party's costs and expenses incurred in seeking such stay or compelling arbitration, including reasonable attorneys' fees. 19.5 Limitation on Damages. In no event shall the arbitrator or arbitrators have the power to award --------------------- any damages for lost or prospective profits, or any other special, punitive, exemplary, consequential, incidental or indirect losses or damages as a result of the performance or nonperformance of its obligations under this Agreement, or its acts or omissions related to this Agreement, whether or not arising from sole, joint or concurrent negligence, strict liability, or otherwise, regardless of whether such damages may be available under applicable law. Each party hereby waives its rights, if any, to recover any such damages, whether in arbitration or litigation ARTICLE 20. ASSIGNMENT AND CUSTOMER FIBER TRANSFERS --------------------------------------- 20.1 Subject to Section 6.3, following the Effective Date, Customer may sell, lease, assign or swap an IRU in, or otherwise lease, license, or permit the use of, the Customer Fibers. Customer may not assign or otherwise transfer this Agreement or its rights or obligations hereunder to any other party without the prior written consent of Pathnet, which consent shall not be unreasonably withheld; provided, however, any such -------- ------- assignee or transferee shall agree in writing to be bound and abide by this Agreement. If any such consent is given, Customer nevertheless shall remain fully and primarily liable for all obligations under this Agreement. Customer shall have the right, without Pathnet's consent, to assign or otherwise transfer this Agreement as collateral to any lender, or to any Affiliate of Customer, or to any corporation that purchases all or substantially all of the assets of Customer; provided, however, that: (a) any such assignment or transfer shall -------- ------- be subject to Pathnet's rights under this Agreement and any assignee or transferee shall continue to perform Customer's obligations to Pathnet under the terms and conditions of this Agreement; and (b) such assignee or transferee shall agree in writing to be bound and abide by this Agreement. In the event of any permitted partial assignment of any rights hereunder or in any Customer Fibers, Customer shall remain the sole point of contact with Pathnet. 20.2 Pathnet may not assign or otherwise transfer this Agreement or its rights or obligations hereunder to any other party without the prior written consent of Customer, which consent shall not be unreasonably withheld; provided, however, any such assignee or transferee shall agree in writing to be bound and -------- ------- abide by this Agreement. Pathnet shall have the right, without Customer's consent, to assign or otherwise transfer this Agreement as collateral to any institutional lender or to any Affiliate of Pathnet, or to any entity into which Pathnet may be merged or consolidated or that purchases all or substantially all of the assets of Pathnet; provided, however, that: (a) any such assignment or transfer shall be subject to Customer's rights -------- ------- under this Agreement and any assignee or transferee shall continue to perform Pathnet' obligations to Customer under the terms and conditions of this Agreement; and (b) such assignee or transferee shall agree in writing to be bound and abide by this Agreement. In the event of any permitted partial assignment of any rights hereunder or in any fibers in the Cable, Pathnet shall remain the sole point of contact with Customer. 20.3 A transfer or assignment in violation of this Article shall constitute a material breach of this Agreement. ARTICLE 21. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS ----------------------------------------------- 21.1 Each party represents and warrants that: (a) it has the full right and authority to enter into, execute, deliver and perform its obligations under this Agreement; (b) this Agreement constitutes a legal, valid and binding obligation enforceable against such party in accordance with its terms, subject to bankruptcy, insolvency, creditors' rights and general equitable principles; and (c) its execution of and performance under this Agreement shall not violate any applicable existing regulations, rules, statutes or court orders of any local, state or federal government agency, court or body. (d) Subject to Section 21.2(d) below as to Pathnet, neither Party shall cause or permit any portion of its interest in the Customer Fibers or its interest in the Pathnet System to become subject to any material mechanics lien, materialmans' lien, vendor's lien or any similar lien whether by operation of law or otherwise. In the event either Pathnet or Customer breaches its obligations in this Section, it shall immediately notify the other in writing, shall promptly cause such lien to be discharged and released of record without cost to the other, and shall indemnify the other against all costs and expenses (including reasonable attorneys fees and court costs at trial and on appeal) incurred in discharging and releasing such lien; provided -------- that: (a) Pathnet and Customer shall each have the right to contest such lien or the validity thereof in good faith by appropriate proceeding which shall operate to prevent the collection or foreclosure of the contested lien; and (b) the contesting party shall cause any such lien to be discharged prior to the commencement of any foreclosure action on such lien. 21.2 Pathnet represents and warrants to Customer that: (a) Pathnet has obtained all permits and other governmental and third-party approvals required for the installation of the Pathnet System and the performance of its obligations under this Agreement. (b) In its ownership, operation and maintenance of the Pathnet System, Pathnet will comply with all applicable local, municipal, state or federal laws, orders and regulations. (c) Notwithstanding anything to the contrary contained herein, that it has obtained, and shall maintain throughout the term, any and all rights of way, easements, licenses and other agreements relating to the grant of rights and interests, and/or access to the real property underlying the Pathnet System (including the Associated Conduit) and such other rights, licenses, permits, authorizations, and approvals that are necessary in order to permit Pathnet to grant the IRUs, and otherwise to perform its obligations hereunder, in accordance with the terms and conditions hereof, and to permit Customer to use the Associated Conduit and Customer Fibers as dark fibers as provided and permitted hereunder and in accordance with the terms and conditions hereof (collectively, the "Underlying Rights"). Underlying Rights shall not be deemed to include franchises, municipal licenses and other approvals or permits issued by governmental authorities that may be necessary for the creation and sale of telecommunications capacity on the Customer Fibers. In the event that Pathnet receives notice that it has not obtained a necessary Underlying Right, or that an Underlying Right is or may be defective, and such failure or defect poses a significant threat to, or actually interferes with, Customer's continued use and enjoyment of the System, Pathnet will take such steps as it reasonable deems appropriate to confirm the integrity of the Underlying Rights, acquire additional Underlying Rights, or take such other action as may be appropriate to protect Customer's rights to exercise its rights hereunder. Notwithstanding the foregoing, if Customer becomes aware that a failure or defect in an Underlying Right poses an imminent threat to Customer's continued ability to exercise its rights hereunder, including, without limitation, an imminent threat of injunction threatening Customer's right to operate the system, Customer will promptly advise Pathnet, either telephonically or in writing, and will discuss in good faith the appropriate actions to be taken. If, in Customer's sole judgment, Pathnet's proposed actions are not adequate to resolve the situation, or if Pathnet takes action but, in Customer's sole judgment, such actions are not resolving the situation satisfactorily, Customer may take such action that it deems appropriate to ensure its continuing right to exercise its rights hereunder, and Pathnet shall reimburse Customer on demand for all costs and expenses incurred in doing so. (d) Pathnet owns clear, exclusive, legal title to the Customer Fibers and Associated Conduit, free and clear of all liens, security interests or other encumbrances, except that the Pathnet System, including the Customer Fibers and Associated Conduit are subject to a lien in favor of certain lenders as more particularly set forth in that certain Amended and Restated Collateral Agency Agreement and Intercreditor Agreement dated as of September 7, 2000 between Pathnet and certain lenders referenced therein that are currently parties to such Agreement or who may be added in the future. Pathnet has all necessary right and authority to perform its obligations pursuant to this Agreement. 21.3 EXCEPT AS SPECIFICALLY SET FORTH IN THIS ARTICLE AND IN SECTION 4.2, PATHNET MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE CUSTOMER FIBERS, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ALL SUCH WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. 21. 4 Pathnet will assign to Customer all manufacturers' warranties that pertain to the Customer Fibers, to the extent that they are assignable. If a manufacturer's warranty is not assignable, Pathnet will exercise reasonable efforts to enforce such warranty on behalf of Customer. ARTICLE 22. GENERAL ------- 22.1 Binding Effect. This Agreement and each of the parties' respective rights and obligations --------------- under this Agreement, shall be binding on and shall inure to the benefit of the parties hereto and each of their respective permitted successors and assigns. 22.2 Waiver1. The failure of either party hereto to enforce any of the ------ provisions of this Agreement, or the waiver thereof in any instance, shall not be construed as a general waiver or relinquishment on its part of any such provision, but the same shall nevertheless be and remain in full force and effect. 22.3 Governing Law. This Agreement shall be governed by and construed in accordance with the -------------- domestic laws of the State of New York, without reference to its choice of law principles. 22.4 Rules of Construction. The captions or headings in this Agreement are strictly for convenience ---------------------- and shall not be considered in interpreting this Agreement or as amplifying or limiting any of its content. Words in this Agreement which import the singular connotation shall be interpreted as plural, and words which import the plural connotation shall be interpreted as singular, as the identity of the parties or objects referred to may require. (a) Unless expressly defined herein, words having well known technical or trade meanings shall be so construed. All listing of items shall not be taken to be exclusive, but shall include other items, whether similar or dissimilar to those listed, as the context reasonably requires. (b) Except as set forth to the contrary herein, any right or remedy of Customer or Pathnet shall be cumulative and without prejudice to any other right or remedy, whether contained herein or not. (c) Nothing in this Agreement is intended to provide any legal rights to anyone not an executing party of this Agreement. (d) This Agreement has been fully negotiated between and jointly drafted by the parties. (e) All actions, activities, consents, approvals and other undertakings of the parties in this Agreement shall be performed in a reasonable and timely manner, it being expressly acknowledged and understood that time is of the essence in the performance of obligations required to be performed by a date expressly specified herein. Except as specifically set forth herein, for the purpose of this Agreement the standards and practices of performance within the telecommunications industry in the relevant market shall be the measure of a party's performance. 22.5 Entire Agreement. This Agreement, together with any Confidentiality Agreement entered into in ---------------- connection herewith, constitutes the entire and final agreement and understanding between the parties with respect to the subject matter hereof and supersedes all prior agreements relating to the subject matter hereof, which are of no further force or effect. The Exhibits referred to herein are integral parts hereof and are hereby made a part of this Agreement. To the extent that any of the provisions of any Exhibit hereto are inconsistent with the express terms of this Agreement, the terms of this Agreement shall prevail. This Agreement may only be modified or supplemented by an instrument in writing executed by each party and delivered to the party relying on the writing. 22.6 No Personal Liability. Each action or claim against any party arising under or relating to ---------------------- this Agreement shall be made only against such party as a corporation, and any liability relating thereto shall be enforceable only against the corporate assets of such party. No party shall seek to pierce the corporate veil or otherwise seek to impose any liability relating to, or arising from, this Agreement against any shareholder, employee, officer or director of the other party. Each of such persons is an intended beneficiary of the mutual promises set forth in this Article and shall be entitled to enforce the obligations of this Article. 22.7 Relationship of the Parties. The relationship between Customer and Pathnet shall not be that ---------------------------- of partners, agents, or joint venturers for one another, and nothing contained in this Agreement shall be deemed to constitute a partnership or agency agreement between them for any purposes, including, but not limited to federal income tax purposes. Customer and Pathnet, in performing any of their obligations hereunder, shall be independent contractors or independent parties and shall discharge their contractual obligations at their own risk subject, however, to the terms and conditions hereof. 22.8 Severability. If any term, covenant or condition contained herein is, to any extent, held ------------ invalid or unenforceable in any respect under the laws governing this Agreement, the remainder of this Agreement shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 22.9 Counterparts. This Agreement may be executed in one or more counterparts, all of which taken ------------ together shall constitute one and the same instrument. In confirmation of their consent and agreement to the terms and conditions contained in this IRU Agreement and intending to be legally bound hereby, the parties have executed this IRU Agreement as of the date first above written. PATHNET OPERATING, INC. By: /s/ William R. Smedberg V ----------------------------------------------------- Name:William R. Smedberg V Title: Vice President ENRON BROADBAND SERVICES, INC. By: /s/ Matt Harris ----------------------------------------------------- Name:Matt Harris Title: Vice President GLOSSARY OF TERMS ----------------- The following terms shall have the stated definitions in this Agreement. "As-Builts" is defined in section 5.01. "Cable" means the fiber optic cable and the fibers contained therein, and associated splicing connections, splice boxes, and vaults to be installed by Pathnet as part of the Pathnet System. "Costs" means all reasonable, actual, direct costs paid or payable in accordance with the established accounting procedures generally used by Pathnet and which it utilizes in billing third parties for reimbursable projects which costs shall include, without limitation, the following: (i) internal labor costs, including wages and salaries, and benefits, and overhead allocable to such labor costs equal to fifteen percent (15%), and (ii) other direct costs and out-of-pocket expenses on a pass-through basis (e.g., equipment, materials, supplies, contract services, etc.). "Effective Date" is defined in the introductory paragraph to this Agreement. "Impositions" means all taxes, fees, levies, imposts, duties, charges or withholdings of any nature (including, without limitation, franchise, license and permit fees), together with any penalties, fines or interest thereon arising out of the transactions contemplated by this Agreement that are imposed upon the Pathnet System by any federal, state or local government or other public taxing authority. "POP" means a point of presence or terminal. "Planned System Work Period" or "PSWP" means a prearranged period of time reserved for performing certain work on the Pathnet System that may potentially impact traffic. Generally, this will be restricted to weekends, avoiding the first and last weekend of each month and high-traffic weekends. The PSWP shall be agreed upon pursuant to Exhibit G. --------- "Pathnet System" shall have the meaning ascribed thereto in Recital A. --------- "Segment" shall mean a city pair described in Exhibit A. --------- "Underlying Rights" is defined in Section 21.2. "Best efforts" and "reasonable commercial efforts", when used herein in connection with a covenant of a party to this Agreement, shall not obligate such party, unless otherwise specifically required by the operative covenant, to make unreimbursed expenditures (other than costs or expenditures that would have been required of such party in the absence of the requirements of such covenant) that are material in amount, in light of the circumstances to which the requirement to use best efforts applies.
Exhibit 10.12 NOTE PURCHASE AGREEMENT THIS NOTE PURCHASE AGREEMENT dated as of July 12, 2001 by and between E-LOAN, INC., a Delaware corporation (the "Company"), and The Charles Schwab Corporation, a Delaware corporation ("Purchaser"). R E C I TA L S: WHEREAS, the Company has authorized the issuance and sale of a note in exchange for certain consideration; and WHEREAS, the Purchaser desires to purchase and the Company desires to sell its 8% Convertible Note (the "Note") on the terms and conditions set forth herein; and WHEREAS, the Note, attached hereto as Exhibit A, will be convertible by its holder, into shares (the "Conversion Shares") of the Company's common stock, $0.001 par value per share (the "Common Stock"); NOW, THEREFORE, in consideration of the mutual covenants and agreements, the Company and Purchaser hereby agree as follows: Purchase and Sale of the Note Purchase and Sale of the Note . Subject to the terms and conditions set forth in this Agreement and in reliance upon the Company's and Purchaser's respective representations set forth herein, on the Closing Date the Company shall sell to the Purchaser, and the Purchaser shall purchase from the Company the Note for $5,000,000 (the "Purchase Price"). The sale and purchase shall be effected on the Closing Date by the Company delivering to the Purchaser the duly executed Note against delivery by the Purchaser to the Company of cash by wire transfer of immediately available funds in the amount of the Purchase Price. The Closing. The closing of the sale and purchase of the Note hereunder (the "Closing") shall take place at the offices of Allen Matkins Leck Gamble & Mallory LLP, 333 Bush Street, 17th Floor, San Francisco, California, or such other location as Purchaser and the Company shall agree, on July 12, 2001 or such other date as the Purchaser and the Company shall agree (the "Closing Date"). Purchaser. The Purchaser may, by notice in writing to the Company, assign its rights to purchase the Note to one of its Affiliates; provided that, the representations and warranties set forth in Article III are true with regard to the assignee and the assignee shall agree to be bound by the terms of this Agreement. Representations and Warranties of the Company The Company represents and warrants to the Purchaser that except as set forth on Schedule II hereto (which schedule shall note the section of this Article II to which such exception refers and any such exception shall apply only to the section so referenced): Organization; Good Standing. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as it is presently being conducted and as proposed to be conducted. Capital Stock. Immediately prior to the Closing, the authorized capital stock of the Company consisted of: (i) 150,000,000 shares of Common Stock of which, on May 31, 2001, 53,826,637 shares were duly and validly issued, fully paid, nonassessable and outstanding, 14,237,969 are reserved for issuance upon the exercise of stock options granted or to be granted under the Company's 1997 Stock Option Plan and 2,568,984 are reserved for issuance upon purchase under the Company's 1999 Employee Stock Purchase Plan, and 13,400,000 are reserved for issuance upon the exercise of warrants issued by the Company, and (ii) 5,000,000 shares of Preferred Stock, par value $0.001 per share, of which no shares are outstanding. Except as set forth above, (i) there are no shares of capital stock or other equity securities of the Company outstanding and (ii) there are no outstanding warrants, options, agreements, convertible or exchangeable securities or other commitments pursuant to which the Company is or may become obligated to issue, sell, purchase, return or redeem any shares of capital stock or other securities of the Company, and there are not any equity securities of the Company reserved for issuance for any purpose. All issued and outstanding shares of the Company's capital stock have been duly authorized and validly issued, are fully paid and nonassessable, and were issued in compliance with all applicable state and federal laws concerning the issuance of securities. No Person has or will have any preemptive rights to subscribe for the Note or the Conversion Shares. Authority; Execution and Delivery; Enforceability. This Agreement, the Note, the Security Agreement to be entered into by and among the Company and the Purchaser on the Closing Date in substantially the form attached as Exhibit B (the "Security Agreement") and that certain Registration Rights Agreement to be entered into by and among the Company and the Purchaser on the Closing Date in substantially the form of Exhibit C attached hereto (the "Rights Agreement") (together, with the Intercreditor Agreements in substantially the forms of Exhibit D attached hereto (the "Intercreditor Agreements"), this Agreement, the Note, the Security Agreement and the Rights Agreement are collectively referred to as the "Transaction Documents") have been, or at the Closing, in the case of the Note, the Security Agreement and the Rights Agreement, will have been, duly executed and delivered by the Company and each constitutes or, in the case of the Note, the Security Agreement, and the Rights Agreement, will constitute at the Closing the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Board of Directors of the Company has duly authorized the execution, delivery, and performance of the Transaction Documents (other than the Intercreditor Agreements), and the exchange of the New Warrant for the Old Warrant. No other corporate action is necessary to authorize the execution or delivery of the Note, the Security Agreement, the Conversion Shares or the performance by the Company of its obligations hereunder and thereunder, including the exchange of the New Warrant for the Old Warrant. All approvals of any matters required by the Company's Board of Directors have been made by a majority of the directors (other than any director designated by the Purchaser). Such approval required by the preceding sentence may include a unanimous written consent signed by all of the directors of the Company in which any potential conflict which may exist for any director designated by the Purchaser shall be discussed.* Conversion Shares. At least 4,716,981 shares of Common Stock (subject to adjustment pursuant to the Company's covenant set forth in Section 6.10) have been duly authorized and reserved for issuance upon the conversion of the Note. Upon conversion in accordance with the Note, the Conversion Shares will be validly issued, fully paid and nonassessable shares of Common Stock of the Company issued free and clear of any Lien, and no Person has or will have any preemptive rights to subscribe for such Conversion Shares. (b) Assuming that the representations and warranties of the Purchaser set forth in Article III are true and correct and that any certificates evidencing the Conversion Shares shall contain a legend substantially similar to that set forth in Section 3.03, the issuance of the Conversion Shares is exempt from the registration and prospectus delivery requirements of the Act as currently in effect, and the Conversion Shares have been or will be registered or qualified (or exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws as currently in effect. No Consent. Neither the nature of the business which the Company currently conducts or proposes to conduct, nor any relationship between the Company and any other Person, nor any circumstance in connection with the creation, authorization, issuance, offer or sale of the Note or the Conversion Shares, nor the execution and performance of any of the Transaction Documents, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of the Company or the vote, consent or approval in any manner of any lender to the Company or the holders of any security of the Company as a condition to the execution, delivery and performance of the Transaction Documents other than consents or approvals of Bank One, NA, Greenwich Capital Financial Products, Inc. and GE Capital Mortgage Services, Inc. which consents the Company represents will have been obtained on or prior to the Closing. In addition to the foregoing, there are no consents or waivers, other than those which have been obtained, which the Company must obtain so as to be able to fulfill its obligations and to provide the Purchaser with all of its rights under the Transaction Documents, including the right to acquire the Conversion Shares upon the conversion of the Note. Authorization To Do Business. The Company has filed all documents necessary to qualify it to do business as a foreign corporation, and the Company is in good standing under the laws of each jurisdiction in which the conduct of the Company's business or the nature of the property owned by the Company requires such qualification. Control. The Company does not own or Control, and is not owned or Controlled by, directly or indirectly, any corporation, partnership, business trust, association or other business entity other than E-Loan International, Inc., a British Virgin Islands corporation which is a wholly-owned subsidiary of the Company, and E-Loan Japan K.K., nor does the Company hold or own, directly or indirectly, any equity investment or interest in any other Person. Property. The Company owns or leases all of the property and assets necessary for its business as currently conducted and as proposed to be conducted and no such leases may be terminated without the Company's consent where termination of any of such leases, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. The Company owns its property and assets free and clear of all Liens, except those that arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets. With respect to the property and assets which the Company leases, the Company is in compliance with such leases and holds a valid and marketable leasehold interest free of any Liens or claims which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. All such leases are enforceable in accordance with their terms and the Company has not received any notice of any default thereunder. Intellectual Property. The Company owns or possesses sufficient legal rights to all trademarks, service marks, trade names, business names, brand names, logos, domain names, copyrights, copyright registrations, designs, design registrations, trade secrets, licenses, and information and proprietary rights and processes (collectively, "Intellectual Property") for its business as now conducted and as proposed to be conducted. The conduct of the business of the Company as presently conducted and as proposed to be conducted does not violate, conflict with, misappropriate or infringe the Intellectual Property of any other Person. No claims are pending or, to the knowledge of the Company, threatened, against the Company by any Person with respect to the ownership, validity, enforceability, effectiveness or use in the business of the Company of any Intellectual Property. Except with respect to the Company's "E-Loan" trademarks, service marks and trade names, the Company is not aware of any Person which is materially infringing, misappropriating or violating any of its Intellectual Property. Litigation. There are no actions, suits, proceedings or investigations pending or, to the best of the Company's knowledge and belief, any basis therefor or threat thereof, against or affecting the Company which question the validity of any Transaction Document or the right of the Company to enter into or execute any of such agreements or documents, or to consummate the transactions contemplated thereby, or, which could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. The foregoing includes, without limitation, actions pending or threatened (or any substantive basis therefor known to the Company) involving the prior employment of any of the Company's employees, use in connection with the Company's business of any information or techniques allegedly proprietary to any former employers of the Company's employees, or obligations of the Company's employees under any agreements with their prior employers. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or Governmental Authority. There is no action, suit, proceeding or investigation by the Company currently pending or which the Company intends to initiate. Regulatory; No Violation; No Conflicts. The Company has in all material respects duly complied with, and is presently in due compliance with, and is not in default in any material respect under any applicable law, ordinance, code, rule, statute, regulation, judgment, decree, writ, ruling, injunction, order or any other requirement of any Governmental Authority relating in any way or applicable in any manner to the Company, its properties or business (collectively, "Legal Requirements"), including, without limitation, all Legal Requirements relating to, in the United States, the Federal Trade Commission Act, and all regulations issued thereunder, and there is no pending claim by the Federal Trade Commission or any other Governmental Authority, whether national, state or local, in the United States or elsewhere, that the Company is not in such compliance or is in such breach. The Company holds, and is in compliance with, all franchises, licenses, permits, waivers, registrations, certificates, consents, approvals or authorizations required by any applicable Legal Requirement (collectively, "Permits") and has not received any notice asserting any noncompliance with, or breach or violation of, any Legal Requirement or Permit. The preceding sentence shall not apply to any matter for which the failure to obtain a Permit or to comply will not result in a Material Adverse Effect. The Company possesses all Permits required for the conduct of its business as now being operated, and has no reason to believe that it will be unable to obtain any Permits which are required for the future conduct of such business. The Company is not in violation or default of any provisions of its Certificate of Incorporation or By-Laws. Neither the execution, delivery and performance of the Transaction Documents nor the conversion of the Note into the Conversion Shares will result in any violation of, be in conflict with, give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or constitute a default under, with or without the passage of time or the giving of notice: (i) any Legal Requirement or Permit; (ii) any Contract, obligation or commitment to which the Company is a party or by which it is bound; or (iii) the terms and conditions of the Certificate of Incorporation or By-Laws. The Company has not received any notice or letters of inquiry from the Nasdaq National Market in connection with the delisting or potential delisting of the Common Stock. Except as set forth in the Transaction Documents, the execution, delivery and performance of the Transaction Documents and the conversion of the Note into the Conversion Shares will not result in the creation or imposition of any Lien on any asset of the Company. Material Contracts. The Company has filed all material agreements as exhibits to filings with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the "Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are required to be filed as exhibits under the rules and regulations of the SEC. All such agreements filed as exhibits, together with any other agreements which would be required to be filed pursuant to any future filing of a Quarterly Report on Form 10-Q by the Company, are referred to as "Contracts". Each of the Contracts is valid, binding and in full force and effect and is enforceable by the Company in accordance with its terms. The Company has performed all material obligations required to be performed by it to date under each of the Contracts and is not (with or without the lapse of time or the giving of notice or both) in breach or default in any material respect thereunder and, to the knowledge of the Company, no other party to any of the Contracts is (with or without the lapse of time or the giving of notice or both) in breach or default in any material respect thereunder. The Company has avoided every condition, and has not performed any act, the occurrence of which would result in the Company's loss of any right granted under any contract which would result in a Material Adverse Effect. The Company has not granted any security interest in any of the Collateral (as such term is defined in the Security Agreement) other than to Bank One, NA, with a priority ahead of the Note or the security interest granted to Christian A. Larsen. Financial Information. The most recent audited financial statements of the Company included within reports filed by the Company with the SEC prior to the date hereof (the "Financial Statements") are complete and correct in all material respects and have been prepared in accordance with GAAP applied on a consistent basis with each other and with the financial statements of all previous fiscal periods (subject only, in the case of unaudited statements, to normal, recurring audit adjustments). The Company maintains and will continue to maintain a standard system of accounting established in accordance with GAAP. As of the date of the Financial Statements, the Company had incurred no Indebtedness other than that disclosed on the Financial Statements. Except as previously disclosed to Purchaser, since the date of those Financial Statements, the Company has not: incurred any Indebtedness, except current liabilities incurred in the ordinary course of business, none of which (individually or in the aggregate) could reasonably be expected to result in a Material Adverse Effect; discharged or satisfied any Liens other than those securing, or paid any obligation or liability other than, current liabilities shown on the Financial Statements and current liabilities incurred since the most recent date thereof, in each case in the usual and ordinary course of business; mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible other than in the usual and ordinary course of the Company's business; sold, transferred or leased any of its assets except in the usual and ordinary course of business; canceled or compromised any debt or claim, or waived or released any right of material value; suffered any physical damage, destruction or loss (whether or not covered by insurance) to Company assets which either alone or in the aggregate could reasonably be expected to result in a Material Adverse Effect; entered into any transaction other than in the usual and ordinary course of business except for the transactions contemplated by the Transaction Documents; declared or paid any dividends or other distributions with respect to its outstanding shares of Common Stock; breached any covenant of any Contract or suffered a breach in any Contract by any other party to such Contract; or suffered or experienced any other change that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No Voting Agreement. There are no outstanding stockholder agreements, voting trusts, proxies or other arrangements or understandings among the stockholders of the Company or with the Company relating to the voting of their respective shares or other securities issued by the Company which include voting rights. No Brokers or Finders. No person, firm or corporation has or will have, as a result of any act or omission by the Company, any right, interest or valid claim against the Purchaser for any commission, fee or other compensation as a finder or broker, or in any similar capacity, in connection with the transactions contemplated by the Transaction. The Company will indemnify and hold the Purchaser harmless against any and all liability with respect to any such commission, fee or other compensation which may be payable or determined to be payable as a result of the actions of the Company in connection with the transactions contemplated by the Transaction Documents. Taxes. For purposes of this Agreement: "Tax" or "Taxes" shall mean all federal, state, county, local, municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, sales, use, ad valorem, receipts, value added, profits, license, withholding, payroll, employment, excise, premium, property, customs, net worth, capital gains, transfer, stamp, documentary, social security, environmental, alternative minimum, occupation, recapture and other taxes, and including all interest, penalties and additions imposed with respect to such amounts, and all amounts payable pursuant to any agreement or arrangement with respect to Taxes. "Taxing Authority" shall mean any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority. "Tax Return" or "Tax Returns" shall mean all returns, declarations of estimated tax payments, reports, estimates, information returns and statements, including any related or supporting information with respect to any of the foregoing, filed or to be filed with any Taxing Authority in connection with the determination, assessment, collection or administration of any Taxes. (i) The Company, and any affiliated group, within the meaning of Section 1504 of the Code, of which the Company is or has been a member, has filed or caused to be filed in a timely manner (within any applicable extension periods) all material Tax Returns required to be filed by the Code or by applicable state, local or foreign tax laws, (ii) all material Taxes with respect to taxable periods covered by such Tax Returns, and all other Taxes for which the Company is or might otherwise be liable have been timely paid in full or will be timely paid in full by the due date thereof and the most recent audited financial statements for the Company reflect an adequate reserve for all Taxes payable by the Company for all taxable periods and portions thereof through the date of such financial statements, and (iii) there are no material liens for Taxes with respect to any of the assets or properties of the Company. No Tax Return of the Company has ever been examined by the Internal Revenue Service. No material Tax Return of the Company or any affiliated group of which the Company is or has ever been a member is under audit or examination by any Taxing Authority, and no written or unwritten notice of such an audit or examination has been received by the Company. Each material deficiency resulting from any audit or examination relating to Taxes by any Taxing Authority has been timely paid. No material issues relating to Taxes were raised by the relevant Taxing Authority in any completed audit or examination that can reasonably be expected to recur in a later taxable period. The relevant statute of limitations is closed with respect to the federal, foreign and material state and local Tax Returns of the Company and any affiliated group of which the Company has ever been a part for all years through December 31, 1996. The Company is not party to or bound by any tax sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Taxing Authority). The Company is not required to include in a taxable period ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in any prior taxable period as a result of the installment method of accounting, the long-term contract method of accounting, the cash method of accounting or Section 381 of the Code or any comparable provision of state, local, or foreign Tax law, or for any other reason. (i) No property of the Company is "tax exempt use property" within the meaning of Section 168(h) of the Code, (ii) the Company is not a party to any lease made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, and (iii) none of the assets of the Company are subject to a lease under Section 7701(h) of the Code or under any predecessor section thereof. (i) There are no outstanding agreements or waivers extending, or having the effect of extending, the statutory period of limitation applicable to any material Tax returns required to be filed with respect to the Company, (ii) neither the Company, nor any affiliated group, within the meaning of Section 1504 of the Code, of which the Company is or has been a member, has requested any extension of time within which to file any material Tax return, which return has not yet been filed, and (iii) no power of attorney with respect to any Taxes has been executed or filed with any Taxing Authority by or on behalf of the Company. The Company has complied in all respects with all applicable laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or any comparable provision of any state, local or foreign laws) and have, within the time and in the manner prescribed by applicable law, withheld from and paid over to the proper Taxing Authorities all amounts required to be so withheld and paid over under applicable laws. The Company is not a real property holding company within the meaning of Section 897 of the Code. The Company is not a "foreign person" within the meaning of Section 1445 of the Code. Disclosure. The Purchaser has access to a true and complete copy of each report, schedule, registration statement and definitive proxy statement, including exhibits filed therewith (but excluding exhibits incorporated therein by reference and not attached thereto), filed by the Company during the fiscal year ended December 31, 2000, and any subsequent interim periods, with the SEC (the "SEC Documents"), which are all the documents that the Company was required to file. As of their respective dates and, except to the extent information contained therein has been revised or superseded by a later filed SEC Document, as of the date hereof, none of the SEC Documents contained or contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations with respect thereto, have been prepared in accordance with GAAP during the periods presented and fairly present (subject only, in the case of the unaudited statements, to normal, recurring audit adjustments) the financial position of the Company as of the date thereof and the results of its operations and its cash flows for the periods then ended. To the best of the Company's knowledge, the financial projections provided by the Company to the Purchaser in connection with the Company's second quarter of 2001 reflect the reasonable estimates of revenues and earnings for such quarter by the Company's management. Environmental Matters. Except for matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, the Company (i) has not failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has not become subject to any Environmental Liability, (iii) has not received notice of any claim with respect to any Environmental Liability or (iv) does not know of any basis for any Environmental Liability. Investment and Holding Company Status. The Company is not (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. Insurance. The Company maintains policies of fire and casualty, liability and other forms of insurance, including directors' and officers' insurance, in such amounts, with such deductibles and against such risks and losses as are customarily maintained by companies engaged in the same or similar businesses. All such policies are in full force and effect, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that are not yet, but may be, required to be paid with respect to any period ending prior to the Closing Date), and no notice of cancellation or termination has been received with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation. The activities and operations of the Company have been conducted in a manner so as to conform in all material respects to all applicable provisions of such insurance policies. Sources of Available Funds. The Company maintains warehouse lines of credit and other credit facilities that provide sufficient amounts of financing necessary for its business as currently conducted and as proposed to be conducted. As of May 31, 2001, the total amount of mortgage loans held-for-sale was $216,505,178. All such mortgage loans are listed as current assets on the Company's most recent balance sheet. Maintenance of Common Stock. The Company at the Closing will have, a sufficient number of authorized but unissued shares of Common Stock reserved for issuance upon the conversion of the Note. Employee and Labor Matters. (i) There is not any, and during the past five years there has not been any, labor strike, dispute, work stoppage or lockout pending, or, to the knowledge of the Company, threatened, against or affecting the Company; (ii) to the knowledge of the Company, no union organizational campaign is in progress with respect to the employees of the Company and no question concerning representation of such employees exists; (iii) the Company is not engaged in any unfair labor practice; (iv) there are not any unfair labor practice charges or complaints against the Company pending, or, to the knowledge of the Company, threatened, before the National Labor Relations Board; (v) there are not any pending, or, to the knowledge of the Company, threatened, union grievances against the Company as to which there is a reasonable possibility of adverse determination and that, if so determined, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (vi) there are not any pending, or, to the knowledge of the Company, threatened, charges against the Company or any of its current or former employees before the Equal Employment Opportunity Commission or any state or local agency responsible for the prevention of unlawful employment practices; and (vii) the Company has not received written or oral communication during the past five years of the intent of any Governmental Authority responsible for the enforcement of labor or employment laws to conduct an investigation of the Company and, to the knowledge of the Company, no such investigation is in progress. Certain Regulatory Matters. The Company is not currently engaged in any activity not permitted by Section 4(c)(8) of the Bank Holding Company Act of 1956, as amended (the "Bank Act"), or Regulation Y of the Federal Reserve Board (12 CFR 225.28(b)) ("Regulation Y"). In addition, none of the sale of the Note pursuant to this Agreement; the conversion of the Note into the Conversion Shares, based on information currently known to the Company; nor the exchange of the Old Warrant for the New Warrant shall require the Company to obtain approval from any Governmental Authority, including in connection with any mortgage brokerage or other similar license, except any approval necessary (i) as a result of any matter specific to the operations or nature of the Purchaser of which the Company is not aware, (ii) in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), or (iii) any approval which if not obtained would not have a Material Adverse Effect. To the Company's knowledge, neither the acquisition by the Purchaser of the Note (or the Conversion Shares issuable upon conversion thereof), nor the exchange of the Old Warrant by Schwab for the New Warrant (or the Shares of Common Stock issuable upon the exercise or conversion thereof) to be issued to Purchaser shall require Schwab or any Purchaser to register as a real estate broker, mortgage broker, mortgage lender, or otherwise with any Governmental Authority. Acknowledgment Regarding Purchaser's Investment. The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Purchaser or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Purchaser's purchase of the Note. The Company further represents to the Purchaser that the Company's decision to enter into the Transaction Documents and the other transactions contemplated hereby and thereby has been based solely on the independent evaluation of the Company and its representatives. Representations and Warranties of Purchaser The Purchaser represents and warrants to the Company as follows: Investment for Own Account. The Purchaser is acquiring the Note hereunder for its own account for investment only and not with a view to any public distribution of the Note; and the Purchaser will not offer to sell or otherwise dispose of the Note except pursuant to Article V hereof. No other Person has been granted by the Purchaser any right with respect to or interest in the Note, nor has it agreed to give any Person any such interest or right in the future. Offering Exemption. The Purchaser understands that the Note has not been registered under the Act, nor qualified under any state securities laws, and that it is being offered and sold pursuant to an exemption from such registration and qualification based in part upon the representations of such party contained herein. The Purchaser is an "accredited investor", as defined in Rule 501 of Regulation D under the Act. Legends. The Purchaser understands that certificates representing the Note and any Conversion Shares issued prior to the effectiveness of a registration statement registering the resale of the Conversion Shares will be endorsed with the following legend: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATIONS ARE NOT REQUIRED, or (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES." Removal of Legend. The Purchaser understands and agrees that any legend endorsed on a certificate or instrument evidencing the Note or the Conversion Shares shall be removed, and the Company shall issue a certificate or instrument without such legend to the holder of such security only (a) if such security is being disposed of pursuant to registration under the Act and any applicable state acts or pursuant to Rule 144 or any similar rule then in effect, or (b) if such holder provides the Company with an opinion of counsel satisfactory to it to the effect that a sale, transfer, assignment, offer, pledge or distribution for value of such security may be made without registration and that such legend is not required to satisfy the applicable exemption from registration. Acts and Proceedings. This Agreement has been duly authorized by all necessary action on the part of Purchaser, has been duly executed and delivered by the Purchaser, and is a valid and binding agreement upon the part of the Purchaser. No Brokers or Finders. No person, firm or corporation has or will have, as a result of any act or omission by the Purchaser, any right, interest or valid claim against the Company for any commission, fee or other compensation as a finder or broker, or in any similar capacity, in connection with the transactions contemplated by the Transaction Documents. The Purchaser will indemnify and hold the Company harmless against any and all liability with respect to any such commission, fee or other compensation which may be payable or determined to be payable as a result of the actions of the Purchaser in connection with the transactions contemplated by the Transaction Documents. Covenants of the Purchaser Sales . The Purchaser covenants that it will not sell or otherwise transfer the Note or the Conversion Shares acquired by it hereunder other than pursuant to (i) Rule 144 or any similar or analogous rule or rules or (ii) an effective registration under the Act or in a transaction which, in the opinion of counsel reasonably satisfactory to the Company, qualifies as an exempt transaction under the Act and the rules and regulations promulgated thereunder. Conditions Conditions of the Purchaser's Obligations . The obligations of the Purchaser hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 7.02): The Purchaser (or its counsel) shall have received from the Company a counterpart of this Agreement, the executed Note, a counterpart of the Security Agreement and a counterpart of the Rights Agreement each signed on behalf of the Company; The Purchaser (or its counsel) shall have received from the Company counterparts of the Intercreditor Agreements executed by all of the parties thereto; The Purchaser shall have received such documents and certificates as it or its counsel may reasonably request relating to the organization, existence and good standing of the Company, the authorization of the transactions contemplated in this Agreement and the other Transaction Documents and any other legal matters relating to the Company, this Agreement or the transactions contemplated hereby or thereby, all in form and substance satisfactory to the Purchaser and its counsel; The representations and warranties of the Company under this Agreement shall be true in all material respects and the Purchaser shall have received from the Company's Financial Officer a certificate dated as of the Closing Date with the same effect as though made on and as of the Closing Date stating that the representations and warranties of the Company as set forth in this Agreement are true in all material respects as of the Closing Date and that the Company has suffered no Material Adverse Effect; The Company shall have performed and complied in all respects with the agreements and conditions required by this Agreement to be performed and complied with by it prior to or as of the Closing, including without limitation the execution and delivery by the Company of the other Transaction Documents (other than the Intercreditor Agreements); All registrations, qualifications, permits and approvals required under applicable state securities laws for the lawful execution and delivery of this Agreement and the offer, sale, issuance and delivery of the Note shall have been obtained; All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and in the other Transaction Documents and all certificates, opinions, agreements, instruments and documents mentioned herein or incident to any such transaction shall be satisfactory in form and substance to the Purchaser and its counsel; The Purchaser shall have received a favorable opinion from legal counsel to the Company in substantially the form of Exhibit E attached to this Agreement; The Company shall have issued to Purchaser the New Warrant in exchange for the Old Warrant previously issued to Schwab; provided that, the Company shall have no obligation to comply with this condition if Schwab does not tender the Old Warrant for exchange; No Legal Requirement shall have been enacted, entered, issued, promulgated or enforced by any Governmental Authority that prohibits or restricts the transactions contemplated by this Agreement and the other Transaction Documents; The Company shall have given notice to the investors under that certain Securities Purchase Agreement, dated as of April 25, 2000 (the "Original Purchase Agreement"), which are not the Purchaser, of the sale of the Note and the Conversion Shares upon conversion thereof, pursuant to Section 6.10 of the Original Purchase Agreement; All consents required for the transactions contemplated herein and the Security Agreement from the creditors under all of the Indebtedness of the Company shall have been obtained by the Company. Such consents shall be in the form as shall be satisfactory to the Purchaser; The Company's Board of Directors shall have approved the transaction in a manner to permit the Company to engage in a business combination with the Purchaser and its Affiliates pursuant to Section 203 of the Delaware General Corporation Law in the event that Purchaser exercises the New Warrant or Schwab the Continuing Warrant; The Common Stock shall then be traded on the Nasdaq National Market and not subject to any stop orders or suspensions of trading for any reason. All approvals required pursuant to the rules and regulations of the Nasdaq National Market in connection with the Transaction Documents and the issuance of the Note or the Conversion Shares shall have been obtained. Conditions of the Company's Obligations. The Company's obligation to sell the Note to the Purchaser on the Closing Date is subject to the fulfillment prior to or on the Closing Date of the conditions set forth below. In the event that any such condition is not satisfied, Company shall not be obligated to proceed with the sale of the Note. The representations and warranties of the Purchaser under this Agreement shall be true in all material respects as of the Closing with the same effect as though made on and as of the Closing Date. The Purchaser shall have performed and complied with all agreements or conditions required by this Agreement to be performed and complied with by it prior to or as of the Closing Date. Covenants of the Company The Company covenants and agrees with the Purchaser as follows: Existence; Conduct of Business. The Company will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence in good standing and the rights, licenses, permits, privileges and franchises material to the conduct of its business. Payment of Obligations. The Company will pay its Indebtedness and other obligations, including Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Company has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation, and (d) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. Maintenance of Properties. The Company will keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted. Insurance. The Company will maintain with financially sound and reputable insurance companies, insurance in such amounts and against such risks (including fire and other risks insured by extended coverage) as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury, death or property damage occurring upon, about or in connection with the use of any properties owned, occupied or controlled by it as well as such other insurance as may be required by law. Compliance with Laws. The Company will comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SEC Disclosures. Each report, schedule, registration statement and definitive proxy statement filed by the Company with the SEC from and after the date of this Agreement will comply in all material respects with the requirements of the Exchange Act and/or the Act as applicable to such documents and none of such documents will, when 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 therein, in light of the circumstances under which they were made, not misleading. The Company shall comply with all SEC filing requirements to which it is subject. Covenants in Original Purchase Agreement. Nothing in this Agreement shall affect any of the covenants contained in the Original Purchase Agreement and no Purchaser, by entering into this Agreement shall have waived any right to enforce any of the covenants set forth in the Original Purchase Agreement. Use of Proceeds. The Company will use the proceeds from the sale of the Note for general working purposes and the furtherance of the Company's business plan. Maintenance on Nasdaq National Market, Listing of Conversion Shares. The Company shall maintain the listing of its Common Stock on the Nasdaq National Market or the American Stock Exchange, Inc. or the New York Stock Exchange, Inc. and the Company shall use its reasonable best efforts to prevent the suspension of trading or a failure to be listed on any such exchange for a period in excess of 10 consecutive trading days at any time. The Company shall secure the listing (subject to official notice of issuance) of the Conversion Shares into which the Note may be converted upon the Nasdaq National Market and, in the event it lists its shares of Common Stock on any other exchange, upon such exchange, for the Conversion Shares into which the Note may be converted as of the Closing Date, promptly following the Closing Date. The Company shall maintain such listing or listings so long as any other shares of Common Stock shall be so listed. Reservation of Conversion Shares. The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, no less than the number of shares of Common Stock needed to provide for the issuance of the Conversion Shares (without regard to any limitations on conversions). Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, or any subsequent transfer agent, to issue certificates, registered in the name of the Purchaser or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by the Purchaser to the Company upon conversion of the Note (the "Irrevocable Transfer Agent Instructions"). Prior to the registration of the Conversion Shares under the Act, all such certificates shall bear the restrictive legend specified in Section 3.03 of this Agreement. Actions to Ensure Closing. The Company agrees in good faith to take any such actions as necessary to ensure the Closing. Notification of Redemption Right. The Company will immediately notify the Purchaser if it determines that an event has occurred, or is almost certain to occur within 60 days, that would give the Purchaser a right to cause the Company to redeem the Note. Perfection of Security Interest. The Company shall assist the Purchaser and provide all necessary information and sign all necessary documents in order to permit the Purchaser to perfect its interest under the Security Agreement. Amendment of Larsen Note. The Company shall not, without the Purchaser's prior written consent, amend any material term of the Larsen Note. Miscellaneous Notices . Any notice required or permitted under this Agreement shall be in writing and shall be delivered in person or mailed by certified or registered mail, return receipt requested, overnight courier or facsimile, directed to the Purchaser at The Charles Schwab Corporation, 101 Montgomery Street, San Francisco, CA 94104, attention: Christopher V. Dodds, facsimile (415) 636-5877, with a copy to Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, at Three Embarcadero Center, Seventh Floor, San Francisco, CA 94111, attention: Lawrence B. Rabkin, facsimile (415) 217-5910; or (b) the Company at E-Loan, Inc., 5875 Arnold Road, Suite 100, Dublin, CA 94568, attention: Joseph Kennedy, facsimile (925) 556-2178, with a copy to E-Loan, Inc., 5875 Arnold Road, Suite 100, Dublin, CA 94568, attention: Edward A. Giedgowd, facsimile (925) 803-3503, or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the others. The giving of any notice required hereunder may be waived in writing by the parties hereto. Every notice or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, or on the date actually received. Waivers; Amendments. No failure or delay by the Purchaser in exercising any right or power hereunder 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 Purchaser hereunder are cumulative and are not exclusive of any rights or remedies that it would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Company therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Neither this Agreement nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Company and the Purchaser. Expenses. Each party will pay all costs and expenses incurred by it in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement and the other Transaction Documents, provided that the Company shall pay the reasonable legal fees and expenses of the Purchaser, not to exceed $100,000 in the aggregate, in connection with such transactions. Survival. All covenants, agreements, representations and warranties made by the Company in the certificates delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement, regardless of any investigation made by any such other party or on its behalf. The provisions of Section 7.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby or the termination of this Agreement or any provision hereof or thereof. 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. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of California. Successors and Assigns. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties hereto. Except as expressly provided in this Agreement, nothing in this Agreement, express or implied, is intended to confer upon any person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement. Headings. Article and Section headings are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by, or prohibited to be taken by, any Person, such provision shall be applicable whether such action is taken directly or indirectly by such Person. Legal Counsel. The Company has been informed that Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation ("Howard Rice"), has previously provided legal advice to Palo Alto Funding Group ("PAFG"), a predecessor of the Company, and the Company hereby expressly waives any conflict which may arise or may have arisen due to such past provision of legal advice to PAFG arising out of the current representation by Howard Rice adverse to the Company in connection herewith. Definitions Defined Terms . As used in this Agreement, the following terms have the meanings specified below: "Act" has the meaning assigned to such term in Section 2.12. "Affiliate" means, (i) with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified or (ii) any "employee investment partnership" sponsored by Purchaser or any Person as described in clause (i) of this definition. "Bank Act" has the meaning assigned to such term in Section 2.25. "By-Laws" means the bylaws of the Company currently in force and effect and filed with the SEC as an exhibit to the Company's filings in SEC Documents under the Act or the Exchange Act. "Certificate of Incorporation" means the certificate of incorporation of the Company currently in force and effect and filed with the SEC as an exhibit to the Company's filings in SEC Documents under the Act or the Exchange Act. "Closing" has the meaning assigned to such term in Section 1.02. "Closing Date" has the meaning assigned to such term in Section 1.02. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Common Stock" has the meaning assigned to such term in the recitals to this Agreement. "Company" means E-Loan, Inc., a Delaware corporation. "Continuing Warrant" means the warrant, dated April 25, 2000, granted by the Company to Schwab which grants to Schwab the right, under the conditions set forth in the warrant, to acquire 6.5 million shares of Common Stock for $3.75 per share. "Contracts" has the meaning assigned to such term in Section 2.12. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Conversion Shares" has the meaning assigned to such term in the recitals to this Agreement. The term Conversion Shares shall include all shares of Common Stock into which the Note can be converted on the Closing Date and all additional shares of Common Stock into which the Note is convertible on or after the Closing Date (whether as a result of an interest payment on the Note or otherwise). "dollars" or "$" refers to lawful money of the United States of America. "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company 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. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Company, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Company or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Company or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Company or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Company or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Exchange Act" has the meaning assigned to such term in Section 2.12. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Company. "Financial Statements" has the meaning assigned to such term in Section 2.13. "GAAP" means generally accepted accounting principles in the United States of America. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity, whether foreign or domestic, exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "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. "HSR Act" has the meaning assigned to such term in Section 2.25. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all guarantees by such Person of Indebtedness of others, (h) all capital lease obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Intercreditor Agreements" has the meaning assigned to such term in Section 2.03. "Larsen Note" shall mean the form of promissory note attached to that certain Amended and Restated Loan Agreement dated July __, 2001 between the Company and Christian A. Larsen. "Legal Requirements" has the meaning assigned to such term in Section 2.11. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Company, (b) the ability of the Company to perform any of its obligations under this Agreement or any of the other Transaction Documents other than the Intercreditor Agreements or (c) the rights of or benefits available to Purchaser under this Agreement or any of the other Transaction Documents. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Nasdaq National Market" shall mean the Nasdaq National Market. "New Warrant" means the warrant, dated July 12, 2001, to be granted to Purchaser by the Company in exchange for the Old Warrant and in the form attached hereto as Exhibit F which grants to Purchaser the right, under the conditions set forth in the warrant, to acquire 1,389,000 million shares of Common Stock at $5.00 per share. "Old Warrant" means the warrant dated April 25, 2000, granted by the Company to Schwab which grants to Schwab the right, under the conditions set forth in the warrant, to acquire 6.6 million shares of Common Stock at $15.00 per share. "Note" has the meaning assigned to such term in the recitals to this Agreement; "Original Purchase Agreement" has the meaning assigned to such term in Section 5.01(k). "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permits" has the meaning assigned to such term in Section 2.11. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Company or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Purchaser" has the meaning assigned to such term in the recitals to this Agreement. "Regulation Y" has the meaning assigned to such term in Section 2.25. "Rights Agreement" has the meaning assigned to such term in Section 2.03. "Schwab" means Charles Schwab & Co., Inc., a subsidiary of the Purchaser. "SEC" has the meaning assigned to such term in Section 2.12. "SEC Documents" has the meaning assigned to such term in Section 2.17. "security" or "securities" has the meaning set forth in Section 2(1) of the Act. "Security Agreement" has the meaning assigned to such term in Section 2.03. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which Shares or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Transaction Documents" has the meaning assigned to such term in Section 2.03. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, the Note, accounts and contract rights. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Company notifies Purchaser that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if Purchaser notifies the Company that it requests an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. "Company" E-LOAN, INC. /s/ Joseph J. Kennedy Name: Joseph J. Kennedy Title: President and COO "Purchaser" THE CHARLES SCHWAB CORPORATION /s/ Christopher V. Dodds Name: Christopher V. Dodds Title: EVP, CFO EXHIBIT A Note EXHIBIT B Security Agreement EXHIBIT C Rights Agreement EXHIBIT D Intercreditor Agreements EXHIBIT E Legal Counsel Opinion Letter EXHIBIT F Warrant             NOTE PURCHASE AGREEMENT dated as of July 12, 2001 between E-LOAN, INC. and THE CHARLES SCHWAB CORPORATION       ARTICLE I Purchase and Sale of the Note * SECTION 1.01. Purchase and Sale of the Note * SECTION 1.02. The Closing 12 * SECTION 1.03. Purchaser * ARTICLE II Representations and Warranties of the Company * SECTION 2.01. Organization; Good Standing * SECTION 2.02. Capital Stock * SECTION 2.03. Authority; Execution and Delivery; Enforceability * SECTION 2.04. Conversion Shares * SECTION 2.05. No Consent * SECTION 2.06. Authorization * SECTION 2.07. Control * SECTION 2.08. Property conducted * SECTION 2.09. Intellectual Property * SECTION 2.10. Litigation * SECTION 2.11. Regulatory; No Violation; No Conflicts * SECTION 2.12. Material Contracts * SECTION 2.13. Financial Information * SECTION 2.14. No Voting Agreement * SECTION 2.15. No Brokers or Finders * SECTION 2.16. Taxes * SECTION 2.17. Disclosure * SECTION 2.18. Environmental Matters * SECTION 2.19. Investment and Holding Company Status * SECTION 2.20. ERISA * SECTION 2.21. Insurance * SECTION 2.22. Sources of Available Funds * SECTION 2.23. Maintenance of Common Stock * SECTION 2.24. Employee and Labor Matters * SECTION 2.25. Certain Regulatory Matters * SECTION 2.26. Acknowledgment Regarding Purchaser's Investment * ARTICLE III Representations and Warranties of Purchaser * SECTION 3.01. Investment for Own Account * SECTION 3.02. Offering Exemption * SECTION 3.03. Legends * SECTION 3.04. Removal of Legend * SECTION 3.05. Acts and Proceedings * SECTION 3.06. No Brokers or Finders * ARTICLE IV Covenants of the Purchaser * SECTION 4.01. Sales * ARTICLE V Conditions * SECTION 5.01. Conditions of the Purchaser's Obligations * SECTION 5.02. Conditions of the Company's Obligations * ARTICLE VI Covenants of the Company * SECTION 6.01. Existence; Conduct of Business * SECTION 6.02. Payment of Obligations * SECTION 6.03. Maintenance of Properties * SECTION 6.04. Insurance * SECTION 6.05. Compliance with Laws * SECTION 6.06. SEC Disclosures * SECTION 6.07. Covenants in Original Purchase Agreement * SECTION 6.08. Use of Proceeds * SECTION 6.09. Maintenance on Nasdaq National Market, Listing of Conversion Shares * SECTION 6.10. Reservation of Conversion Shares * SECTION 6.11. Transfer Agent Instructions * SECTION 6.12. Actions to Ensure Closing * SECTION 6.13. Notification of Redemption Right * SECTION 6.14. Perfection of Security Interest * ARTICLE VII Miscellaneous * SECTION 7.01. Notices * SECTION 7.02. Waivers; Amendments * SECTION 7.03. Expenses * SECTION 7.04. Survival * SECTION 7.05. Severability * SECTION 7.06. Governing Law * SECTION 7.07. Successors and Assigns * SECTION 7.08. Headings * SECTION 7.09. Directly or Indirectly * SECTION 7.10. Legal Counsel * ARTICLE VIII Definitions * SECTION 8.01. Defined Terms * SECTION 8.02. Terms Generally * SECTION 8.03. Accounting Terms; GAAP * --------------------------------------------------------------------------------
EXHIBIT 10.12 Supplemental Agreement No. 6 to Purchase Agreement No. 2060 between The Boeing Company and Continental Airlines, Inc.   Relating to Boeing Model 767-400ER Aircraft   THIS SUPPLEMENTAL AGREEMENT, entered into as of July 11, 2001, by and between THE BOEING COMPANY, a Delaware corporation with its principal office in Seattle, Washington, (Boeing) and Continental Airlines, Inc., a Delaware corporation with its principal office in Houston, Texas (Customer); WHEREAS, the parties hereto entered into Purchase Agreement No. 2060 dated October 10, 1997, (the Purchase Agreement) relating to Boeing Model 767-400ER aircraft, (Aircraft); and WHEREAS, Boeing and Customer have mutually agreed to change the delivery dates of two (2) 767-400ER aircraft from September 2003 and November 2003 to May 2003 and July 2003; and WHEREAS, Boeing and Customer have mutually agreed to amend the Purchase Agreement to incorporate the effect of these and certain other changes; NOW THEREFORE, in consideration of the mutual covenants herein contained, the parties agree to amend the Purchase Agreement as follows: 1. Table of Contents: 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. 6.   2. Tables: Remove and replace, in its entirety, "Table 1, Aircraft Delivery, Description, Price and Advance Payments" with the revised "Table 1, Aircraft Delivery, Description, Price and Advance Payments", attached hereto, to reflect a change to the delivery date of two (2) 767-400ER aircraft.   The Purchase Agreement will be deemed to be supplemented to the extent herein provided as of the date hereof and as so supplemented 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/ Charles H. Leach By: /s/ Gerald Laderman   Its: Attorney-In-Fact   Its: Senior Vice President-Finance TABLE OF CONTENTS   ARTICLES Revised By: 1. Quantity, Model and Description 2. Delivery Schedule 3. Price 4. Payment 5. Miscellaneous   TABLE 1. Aircraft Information Table SA No. 6   EXHIBIT A. Aircraft Configuration SA No. 3 B. Aircraft Delivery Requirements and Responsibilities   SUPPLEMENTAL EXHIBITS BFE1. BFE Variables CS1. Customer Support Variables EE1. Engine Escalation/Engine Warranty and Patent Indemnity [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]     TABLE OF CONTENTS   LETTER AGREEMENTS Revised By: 2060-1 not used 2060-2 Demonstration Flights 2060-3 Spares Initial Provisioning 2060-4 Flight Crew Training Spares 2060-5 Escalation Sharing 6-1162-JMG-165 Installation of Cabin Systems Equipment SA No. 2     TABLE OF CONTENTS   CONFIDENTIAL LETTER AGREEMENTS Revised By: 6-1161-GOC-084R1 [CONFIDENTIAL MATERIAL SA No. 3 OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-GOC-085 [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] 6-1162-GOC-086R1 Special Matters SA No. 4           SUPPLEMENTAL AGREEMENTS Dated as of: Supplemental Agreement No. 1 December 18, 1997 Supplemental Agreement No. 2 June 8, 1999 Supplemental Agreement No. 3 October 31, 2000 Supplemental Agreement No. 4 December 1, 2000 Supplemental Agreement No. 5 February 14, 2001 Supplemental Agreement No. 6 July 11, 2001   Table 1 to Purchase Agreement No. 2060 Aircraft Delivery, Description, Price and Advance Payments   Airframe Model/MTGW: 767-400ER 450,000 Engine Model: CF6-80C2B8F Aircraft Price: Optional Features: Sub-Total of Airframe and Features: Engine Price (Per Aircraft): Aircraft Basic Price (Excluding BFE/SPE): Seller Purchased Equipment (SPE) Estimate: Refundable Deposit per Aircraft at Proposal Acceptance: Detail Specification: D019T003-NEW (10/9/1996) Price Base Year: Jul-95   [CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
--------------------------------------------------------------------------------     FORBEARANCE AND MODIFICATION AGREEMENT           This FORBEARANCE AND MODIFICATION AGREEMENT (this "Agreement") is entered into this the 7th day of November, 2001, between and among Arguss Communications Inc., formerly known as Arguss Holdings, Inc. (the "Borrower"), certain guarantors of the Borrower identified on the signature pages hereto (the "Guarantors"), the Lenders (as defined below) and Bank of America, N.A., formerly NationsBank, N.A., as administrative agent for the Lenders (in such capacity, the "Agent"). Capitalized terms used herein but not otherwise defined shall have the meanings given to such terms in the Credit Agreement (as defined below). RECITALS           A.     The Borrower, the Agent and certain financial institutions (the "Lenders") are parties to that certain Credit Agreement dated as of March 19, 1999 (as amended and otherwise modified from time to time, the "Credit Agreement"), pursuant to which the Lenders have made and may hereafter make loans and advances and other extensions of credit to the Borrower.           B.     Certain Defaults and Events of Default exist under the Credit Agreement arising from the Borrower's failure to comply with the financial covenants set forth in Section 6.10(b) and (c) of the Credit Agreement, in each case for the applicable period ending September 30, 2001 (collectively, the "Acknowledged Events of Default").           C.     The Borrower has requested that the Agent and the Lenders (i) forbear from exercising certain rights and remedies arising from the Acknowledged Events of Default through and until December 31, 2001, (ii) continue to make Revolving Loans to the Borrower until such date, and (iii) amend the Credit Agreement in certain respects.           D.     The Agent and the Lenders have agreed to do so, but only pursuant to the terms and conditions set forth herein.           NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:           1.     Estoppel, Acknowledgement and Reaffirmation.  As of November 7, 2001, the total outstanding principal amount of Revolving Loans was not less than $62,544,543.00 (which amount includes $3,000,000.00 in issued but undrawn Letters of Credit) and the total outstanding principal amount under the Term Loan was not less than $12,500,000.00, which amounts constitute valid and subsisting obligations of the Borrower to the Lenders that are not subject to any credits, offsets, defenses, claims, counterclaims or adjustments of any kind. The Borrower and the Guarantors hereby acknowledge their obligations under the Loan Documents and reaffirm that each of the liens and security interests created and granted in or pursuant to the Loan Documents are valid and subsisting and that this Agreement shall in no manner impair or otherwise adversely effect such liens and security interests.           2.     Forbearance.  Subject to the terms and conditions set forth herein, the Agent and the Lenders agree that they shall, until the occurrence of a Forbearance Termination Event (as defined below), forbear from exercising their rights to (a) cease making Revolving Loans, and (b) accelerate the full outstanding balance of the Revolving Loans and the Term Loans, but only to the extent such rights arise exclusively as a result of the Acknowledged Events of Default; provided, however, that the Agent and the Lenders shall be free to exercise any or all of their rights and remedies arising on account of the Acknowledged Events of Default at any time upon or after the occurrence of a Forbearance Termination Event.           3.     Forbearance Termination Events.  Nothing set forth herein or contemplated hereby is intended to constitute an agreement by the Agent or the Lenders to forbear from exercising any of the rights available to them under the Credit Agreement, the other Loan Documents, or applicable law (all of which rights and remedies are hereby expressly reserved by the Agent and the Lenders) upon or after the occurrence of a Forbearance Termination Event. As used herein, a "Forbearance Termination Event" shall mean the earliest to occur of: (a) any Event of Default under any of the Loan Documents other than the Acknowledged Events of Default; (b) any Default under any of the Loan Documents, provided that a Default under the Loan Documents shall constitute a Forbearance Termination Event hereunder only if it remains uncured after the earlier of (i) the expiration of any cure period provided under the applicable Loan Document, (ii) ten (10) days from the date that the Default first existed, and (iii) December 31, 2001; (c) a breach by the Borrower of any term or condition of this Agreement; and (d) December 31, 2001. The period from the Closing Date to (but excluding) the date that a Forbearance Termination Event occurs shall be referred to as the "Forbearance Period".           4.     Aggregate Revolving Commitments.  The definition of "Aggregate Revolving Commitments" set forth in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: >          "Aggregate Revolving Commitments" means $80,000,000, as such amount > may be reduced from time to time pursuant to Sections 2.7 and 2.13.           5.     Limitation on Revolving Loans.  Notwithstanding any provision of the Credit Agreement or of any other Loan Documents, through the occurrence of a Forbearance Termination Event the Borrower shall not be entitled to and shall not request Revolving Loans such that the sum of the aggregate principal amount of outstanding Revolving Loans would exceed $70,000,000.           6.     No Eurodollar Loans.  Notwithstanding any provision of the Credit Agreement or of any other Loan Documents, each outstanding Eurodollar Loan shall be converted to a Base Rate Loan at the end of the current Interest Period, and the Borrower shall not be entitled to draw additional Eurodollar Loans, continue Eurodollar Loans or convert Base Rate Loans to Eurodollar Loans.           7.     Interest.           (a)     Effective as of October 1, 2001, the definition of "Applicable Margin" set forth in Section 1.1 of the Credit Agreement is amended by deleting the chart set forth therein in its entirety and replacing it with the following new chart: Base Rate Margin (basis points per annum) Eurodollar Rate Margin (basis points per annum) 200.0 444.0             (b)     The definition of "Interest Payment Date" set forth in Section 1.1 of the Credit Agreement is amended and restated in its entirety to read as follows: > > "Interest Payment Date" means the last day of each calendar month.           8.     Reporting. >          (a)     Section 6.1 of the Credit Agreement is amended by deleting > clause (b) thereof and restated it in its entirety to read as follows: > > >           (b)     as soon as available but in any event within twenty (20) > > days after the end of each fiscal month of the Borrower, its consolidating > > and consolidated balance sheet and related statements of earnings and cash > > flows as of the end of and for such fiscal month and the then elapsed > > portion of the fiscal year, setting forth in each case in comparative form > > (with respect to the consolidated balance sheets and related financial > > statements) the figures for the corresponding period or periods of (or, in > > the case of the balance sheet, as of the end of) the previous fiscal year, > > all certified by its Principal Financial Officer as presenting fairly in all > > material respects the financial position, results of operations and cash > > flows of the Borrower and its Consolidated Subsidiaries in accordance with > > GAAP, subject to normal year-end audit adjustments and the absence of > > footnotes. > >          (b)     Section 6.1 of the Credit Agreement is further amended by > deleting clause (h) thereof and adding the following new clauses (h), (i), > (j), (k), (l) and (m) thereto: > > >           (h)     concurrently with each delivery of financial statements > > under clause (b) above, a report, in form reasonably acceptable to the > > Agent, listing the Borrower's accounts payable and accounts receivable for > > each operating division, on a customer by customer basis, and aging > > information therefor; > > > >           (i)     as soon as available but in any event within thirty (30) > > days after the end of each fiscal quarter of the Borrower, a current > > customer order backlog, by operating division, in form reasonably acceptable > > to the Agent (a "Backlog Report"); > > > >           (j)     as soon as available but in any event within thirty (30) > > days after end of each of fiscal month of the Borrower, a written narrative > > update, in form reasonably acceptable to the Agent, of any known changes to > > the most recently delivered Backlog Report regarding jobs with revenues in > > excess of $1,000,000; > > > >           (k)     as soon as available but in any event within fifteen (15) > > days after the end of each fiscal month of the Borrower, a rolling thirteen > > (13) week forecast of cash flows for the Borrower in a form reasonably > > acceptable to the Agent (the "Forecast"); > > > >           (l)     concurrently with each delivery of the Forecast under > > clause (k) above (except for the initial Forecast) a reconciliation, in form > > reasonably acceptable to the Agent, between actual cash flows for the prior > > fiscal month and projected cash flows for such fiscal month as set forth in > > the most recent previous Forecast, including a narrative discussion of any > > material variance; and > > > >           (m)     promptly following any request therefor, such other > > information regarding the operations and financial condition of the Borrower > > or any Subsidiary, or compliance with the terms of this Agreement, as the > > Agent may reasonably request.           9.     No Acquisitions / No Distributions / Conceptronic Disposition.  Notwithstanding anything in the Credit Agreement to the contrary, the Borrower covenants and agrees that, without the express written consent of the Required Lenders, it shall not: >          (a)     make, or permit any Subsidiary to make, any Acquisitions, > including without limitation Permitted Acquisitions; > >          (b)     make, or permit any Subsidiary to make, any Distributions; or > >          (c)     Dispose of Conceptronic.           10.     Forbearance Fee.  In consideration of the willingness of the Agent and the Lenders to enter into this Agreement, the Borrower shall pay to the Agent, for the ratable benefit of the Lenders, a fee (the "Forbearance Fee") in an amount equal to two-tenths of one percent (0.20%) of the Aggregate Commitments (as amended hereby).           11.     Mortgaged Properties. >           (a)     Within fifteen days of the Closing Date, the Borrower shall > execute and deliver to the Agent mortgages and/or deeds of trust > (collectively, the "Mortgages"), in form acceptable to the Agent, with respect > to the four parcels of real property identified on Schedule I attached hereto > (collectively, the "Mortgaged Properties"); and > >           (b)     Within thirty days of the Closing Date, the Borrower shall > deliver to the Agent: > > >           (i)     ALTA mortgagee title insurance policies issued by a title > > insurance company acceptable to the Agent, in amounts not less than the > > respective amounts designated in Schedule I with respect to the Mortgages, > > assuring that each of the Mortgages creates a valid and enforceable mortgage > > lien on the applicable Mortgaged Property, having the priority set forth on > > Schedule I, which title insurance policies shall otherwise be in form and > > substance reasonably satisfactory to the Agent and shall include such > > endorsements as are reasonably requested by the Agent; and > > > >           (ii)     evidence as to whether any Mortgaged Property is in an > > area designated by the Federal Emergency Management Agency as having special > > flood or mud slide hazards (any such Mortgaged Property, a "Flood Hazard > > Property"), and if any Mortgaged Property is a Flood Hazard Property, > > whether the community in which such Mortgaged Property is located is > > participating in the National Flood Insurance Program, the Borrower's > > written acknowledgment of receipt of written notification from the Agent as > > to the fact that such Mortgaged Property is a Flood Hazard Property and as > > to whether the community in which each such Flood Hazard Property is located > > is participating in the National Flood Insurance Program and copies of > > insurance policies or certificates of insurance of the Borrower evidencing > > flood insurance satisfactory to the Collateral Agent and naming the > > Collateral Agent as sole loss payee on behalf of the Senior Creditors. > > > >           (iii)     copies of any existing appraisals and environmental site > > assessments in Borrower's possession relating to the Mortgaged Properties. > >           (c)     At the request of the Agent made from time to time, Borrower > shall (i) cause to be delivered to the Lenders copies of any additional > appraisals and environmental site assessments in Borrower's possession > relating to the Mortgaged Properties; and (ii) provide, upon reasonable > notice, access to the Mortgaged Properties and to any books, records or other > documents relating to the operation and management of the Mortgaged Properties > which may be necessary in order to conduct appraisals and environmental site > assessments. Such appraisals and site assessments shall be (i) performed by > professionals satisfactory to the Bank, (ii) in form, substance and scope > satisfactory to the Bank, and (iii) undertaken at Borrower's sole expense.           12.     Vehicle Titles.  Within thirty days of the Closing Date, the Borrower shall deliver to the Agent, or such third party designated by the Agent, original title documents for substantially all of the titled vehicles owned by the Borrower or any Subsidiary. The Agent agrees to release to the Borrower, or cause such third party designated by the Agent in possession of such title documents to release to the Borrower, the title documents for any vehicle being sold by the Borrower in the ordinary course of its business, provided that such sale is otherwise permitted by the Credit Agreement.           13.     Cooperation with Consultants / Appraisers.  The Agent has retained FTI Policano & Manzo as a consultant (together with any replacement consultant(s) engaged from time to time by the Agent, the "Consultant") to assist it in evaluating the financial situation and operations of the Borrower. In addition, the Agent may retain certain appraisers to assist it in evaluating the Collateral. The Borrower agrees to (a) cooperate with the Consultant and any such appraisers and provide the Consultant and such appraisers reasonable access to all business records and -appropriate personnel of the Borrower to facilitate their review and analysis, and (b) reimburse the Agent for all reasonable fees and expenses of the Consultant and any such appraisers when due.           14.     Expenses.  Upon demand therefor, the Borrower shall pay all reasonable out-of-pocket expenses incurred by the Agent and Lenders (including without limitation the reasonable fees and out-of-pocket expenses of counsel and of any Consultant) in connection with or related to the negotiation, drafting, and execution of this Agreement and the transactions contemplated hereby.           15.     Conditions Precedent.  As conditions precedent to the effectiveness of this Agreement: >           (a)     the Agent shall have received counterparts of this Agreement > duly executed by the Borrower and the Lenders; > >           (b)     the Borrower shall have reimbursed the Agent for the fees > and expenses of the Agent's counsel billed through October 31, 2001; > >           (c)     the Borrower shall have paid the Forbearance Fee; > >           (d)     the Borrower shall have paid all interest accrued through > the date hereof; > >           (e)     the Borrower shall have delivered to the Agent a certified > perfection certificate in the form of that attached hereto as Exhibit A; and > >           (f)     the Borrower shall have delivered to the Agent such > additional documents and information as reasonably requested by the Agent, > including without limitation certified copies of the Borrower's articles of > incorporation, bylaws, resolutions and certificates of good standing.           16.     Representations and Warranties.  The Borrower hereby represents and warrants to the Agent and Lenders that: >           (a)     other than the Acknowledged Events of Default, no Default or > Event of Default exists under any of the Loan Documents on and as of the date > hereof; > >           (b)     after giving effect to this Agreement, the representations > and warranties of the Borrower contained in Article IV of the Credit Agreement > are true, accurate and complete in all material respects on and as of the date > hereof to the same extent as though made on and as of such date except to the > extent such representations and warranties specifically relate to an earlier > date; and > >           (c)     (i) the execution, delivery and performance by the Borrower > of this Agreement are within the Borrower's corporate powers and have been > duly authorized by all necessary corporate action on the part of the Borrower, > (ii) this Agreement constitutes a legal, valid and binding obligation of the > Borrower enforceable against the Borrower in accordance with its terms and > (iii) neither this Agreement, nor the execution, delivery or performance by > the Borrower hereof (A) violates any law or regulation, or any order or decree > of any court or Governmental Authority, (B) conflicts with or results in the > breach or termination of, constitutes a default under or accelerates any > performance required by, any material indenture, mortgage, deed of trust, > lease, agreement or other instrument to which the Borrower is a party or by > which the Borrower or any of its property is bound, provided that the > Acknowledged Events of Default may constitute cross defaults under the > agreements identified on Schedule II hereto, or (C) results in the creation or > imposition of any lien upon any of the Collateral.           17.     Release.  In consideration of the willingness of the Agent and the Lenders to enter into this Agreement, the Borrower and each of the Guarantors hereby releases the Agent and the Lenders, and the officers, employees, representatives, counsel, subsidiaries, affiliates, trustees and directors of each, from any and all actions, causes of action, claims, demands, damages and liabilities of whatever kind or nature, in law or in equity, now known or unknown, suspected or unsuspected to the extent that any of the foregoing arises from any action or failure to act on or prior to the date hereof.           18.     Reference to and Effect on Credit Agreement.  Except as specifically modified herein, the Loan Documents shall remain in full force and effect. The execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any right, power or remedy of the Lenders or the Agent under any of the Loan Documents, or constitute a waiver or amendment of any provision of any of the Loan Documents, except as expressly set forth herein.           19.     Further Assurances.  The Agent, the Lenders, the Guarantors and the Borrower each agrees to execute and deliver, or to cause to be executed and delivered, all such instruments as they may reasonably request to effectuate the intent and purposes, and to carry out the terms, of this Agreement.           20.     Governing Law.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF MARYLAND (WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS THEREOF); PROVIDED THAT THE BORROWER, THE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.           21.     Miscellaneous. >           (a)     This Agreement shall be binding on and shall inure to the > benefit of the Borrower, the Guarantors, the Agent, the Lenders and their > respective successors and permitted assigns. The terms and provisions of this > Agreement are for the purpose of defining the relative rights and obligations > of the Borrower, the Guarantors, the Agent and the Lenders with respect to the > transactions contemplated hereby and there shall be no third party > beneficiaries of any of the terms and provisions of this Agreement. > >           (b)     Section headings in this Agreement are included herein for > convenience of reference only and shall not constitute a part of this > Agreement for any other purpose. > >           (c)     Wherever possible, each provision of this Agreement shall be > interpreted in such a manner as to be effective and valid under applicable > law, but if any provision of this Agreement shall be prohibited by or invalid > under applicable law, such provision shall be ineffective to the extent of > such prohibition or invalidity, without invalidating the remainder of such > provision or the remaining provisions of this Agreement. > >           (d)     Except as otherwise provided in this Agreement, if any > provision contained in this Agreement is in conflict with, or inconsistent > with, any provision in the Loan Documents, the provision contained in this > Agreement shall govern and control. > >           (e)     This Agreement may be executed in any number of separate > counterparts, each of which shall collectively and separately constitute one > agreement. Delivery of an executed counterpart of this Agreement by telecopy > shall be effective as an original and shall constitute a representation that > an original shall be delivered to the Agent.           22.     Entirety.  This Agreement and the other Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings, if any, relating to the subject matter hereof. This Agreement and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties.   [Remainder of Page Left Blank Intentionally.]         --------------------------------------------------------------------------------             IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above. BORROWER : ARGUSS COMMUNICATIONS, INC.   By:                                                                                Name:                                                                           Title:                                                                                     GUARANTORS : ARGUSS COMMUNICATIONS GROUP   By:                                                                                Name:                                                                           Title:                                                                                        ARGUSS SERVICES CORP.   By:                                                                                Name:                                                                           Title:                                                                                        CONCEPTRONIC, INC.   By:                                                                                Name:                                                                           Title:                                                                                        SCHENCK COMMUNICATIONS LIMITED PARTNERSHIP   By:                                                                                Name:                                                                           Title:                                                                                      LENDERS : BANK OF AMERICA, N.A., as Agent and as a Lender   By:                                                                                Name:                                                                           Title:                                                                                        SUNTRUST   By:                                                                                Name:                                                                           Title:                                                                                        FLEET BANK, N.A.   By:                                                                                Name:                                                                           Title:                                                                                        KEYBANK NATIONAL ASSOCIATION   By:                                                                                Name:                                                                           Title:                                                                                        UNION BANK OF CALIFORNIA   By:                                                                                Name:                                                                           Title:                                                                                        NATIONAL CITY BANK   By:                                                                                Name:                                                                           Title:                                                                                        FIRSTAR BANK, N.A.   By:                                                                                Name:                                                                           Title:                                                                                --------------------------------------------------------------------------------   Schedule I (Mortgaged Properties)   Location Record Owner Priority       250 Fischer Ave. Costa Mesa, CA 92626 Can Am Construction First       8602 Maltby Road Woodinville, WA 98072 Schenck Communications Limited Partnership First       2101 Dover Road Epsom, NH 03234 White Mountain Cable Construction Second       6 Post Road Portsmouth, NH 03801 Conceptronic, Inc. Third     --------------------------------------------------------------------------------   Schedule II (other agreements)   1.          That certain Loan Agreement, dated as of November 24, 1992 by and between the Granite State Economic Development Corporation and Conceptronic, Inc. 2.          That certain Loan Agreement, dated as of May 2, 1995 by and between the City of Portsmouth, New Hampshire and Conceptronic, Inc. 3.          That certain Mortgage and Security Agreement, dated as of May 8, 1998, by and between Citizens Bank New Hampshire and White Mountain Cable Construction Corp.       --------------------------------------------------------------------------------   Exhibit A (form of perfection certificate) (see attached)           --------------------------------------------------------------------------------
EX-10 17 umpqua10q93001ex10.htm Umpqua Form 10-Q EXHIBIT 10.1 AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization is entered into effective this 20th day of August, 2001 (the "Agreement"), by and among Umpqua Holdings Corporation ("Umpqua"), Umpqua Bank ("Umpqua Bank") and Linn-Benton Bank ("L-B Bank"). RECITALS: A. Umpqua is an Oregon corporation, and registered financial holding company, with its executive offices at 200 Market Street, Suite 1900, Portland, Oregon. B. Umpqua Bank is an Oregon state chartered bank with its principal office at 445 SE Main Street, Roseburg, Oregon. C. L-B Bank is an Oregon state chartered bank with its principal office at 333 SW Ellsworth Street, Albany, Oregon. D. The parties hereto desire to enter into a strategic business combination pursuant to the terms of this Agreement. E. The parties intend that the transactions contemplated hereby shall qualify as a tax free reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended. F. Umpqua and Umpqua Bank are parties to an Agreement and Plan of Reorganization with Independent Financial Network, Inc. dated as of the 22nd day of June ("IFN Transaction"). AGREEMENT In consideration of the mutual covenants herein contained, the parties hereby enter into this Agreement and agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the definitions given: "Alternative Acquisition Transaction" means any event or series of events pursuant to which a party or its board of directors enters into an agreement or recommends to its shareholders any agreement (other than this Agreement) pursuant to which any Person would (i) merge or consolidate with such party, with the result that the shareholders of such Person hold more than 50% of the stock of the surviving entity, (ii) acquire 50% or more of the assets or liabilities of such party or any of its subsidiaries, or (iii) purchase or otherwise acquire (including by merger, consolidation, share exchange or any similar transaction) stock or other securities representing or convertible into 50% or more of the stock of such party or any one or more of its subsidiaries.   "Code" means the Internal Revenue Code of 1986, as amended. "Daily Sales Price" means for any trading day, subject to the following sentence, the last reported trade price as such prices are reported on the Nasdaq National Market System or in the absence thereof by such other source upon which Umpqua and L-B Bank shall mutually agree. If there are no reported trades on any trading day, such day shall be deemed to be a non-trading day. "Effective Date" is the date on which the Articles of Merger for the Merger are filed with the Oregon Director. "Effective Time" is the time set forth in the Plan of Merger at which the Merger is effective. "Employee Benefit Plan" means an employee benefit plan as defined by Section 3 of ERISA. "ERISA" means the Employee Retirement Income Security Act of 1984, as amended. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and, to the extent the context requires, the rules promulgated thereunder. "Exchange Agent" means Umpqua Bank or such other company designated by Umpqua to perform the duties of Exchange Agent in this Agreement. "FDIC" means the Federal Deposit Insurance Corporation. "FHA" means the Federal Housing Administration. "FHLMC" means the Federal Home Loan Mortgage Corporation. "FNMA" means the Federal National Mortgage Association. "FRB" means Federal Reserve Board. "GNMA" means the Government National Mortgage Association. "Indemnified Parties" means each present and former director and officer of L-B Bank, determined as of the Effective Date. "L-B Bank" means Linn-Benton Bank, an Oregon state chartered bank. "L-B Bank Common Stock" means the shares of common stock, $5.00 par value, of L-B Bank. "L-B Bank Reports" means the reports, applications, statements, filings, and other information required of a state bank to be filed by L-B Bank with the FDIC or the Oregon Director, including, without limitation, the "Call Reports of Conditions and Income" filed with the FDIC, and all future reports so filed. "Merger" means the merger of L-B Bank with and into Umpqua Bank in accordance with the Plan of Merger. "Oregon Director" means the Director of the Oregon Department of Consumer and Business Services acting by and through the Administration of the Division of Finance and Corporate Securities. "Oregon Bank Act" means Chapter 706 through 716 of the Oregon Revised Statutes. "Person" means any natural person or any other entity, person, or group. For purposes of this definition, the meaning of the term "group" shall be determined in accordance with Section 13(d)(3) of the Exchange Act. "PBGC" means the Pension Benefit Guaranty Corporation. "Plan of Merger" means the Plan of Merger to be executed by Umpqua Bank and L-B Bank and delivered to the Oregon Director for filing substantially in the form attached hereto as Exhibit A. "SBA" means the Small Business Administration of the Department of Commerce. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and to the extent the context requires, the rules promulgated thereunder. "Subsidiary" means, with respect to a party to this Agreement, any entity in which such party owns, directly or indirectly, more than 50% of the voting securities, other than in such party's capacity as a fiduciary or a secured party. "Treasury Regulations" means the treasury regulations promulgated by the Secretary of the Treasury, or his delegates, under the Code. "Umpqua" means Umpqua Holdings Corporation, an Oregon corporation, and includes, unless the context otherwise suggests, each of its Subsidiaries. "Umpqua Common Stock" means shares of common stock, no par value, of Umpqua. "Umpqua Public Reports" means the reports and other information required to be filed by Umpqua with the SEC pursuant to the Exchange Act, together with the reports to shareholders required to be delivered by Umpqua to its shareholders pursuant to Exchange Act Rule 14a-3. "VA" means the Veterans Administration. "Weighted Average Sales Price" means the weighted average (based upon the reported number of shares traded and rounded to the nearest penny) of each Daily Sales Price of Umpqua Common Stock for the twenty consecutive trading days ending on and including the tenth calendar day preceding the projected Effective Date (or, if that calendar day is not a trading day, the most closely preceding day that is a trading day). Merger Transactions Pursuant to the Plan of Merger . Upon performance of all of the covenants of the parties hereto and fulfillment or waiver (to the extent waiver is permitted by law) of all of the conditions contained herein, and promptly following the Effective Time: L-B Bank will be merged with and into Umpqua Bank in accordance with the provisions of the Oregon Bank Act. The Plan of Merger, the form of which is attached hereto as Exhibit A, shall be filed with the Oregon Director for purposes of obtaining a Certificate of Merger. As of the date set forth in the Certificate of Merger, L-B Bank will merge with Umpqua Bank, with Umpqua Bank being the resulting bank and having its head office in Roseburg, Oregon. The Articles of Incorporation, Bylaws and banking charter of Umpqua Bank in effect immediately prior to the date set forth on the Certificate of Merger shall be the Articles of Incorporation, Bylaws and banking charter of the resulting bank. Each share of Umpqua Common Stock outstanding immediately prior to the Merger, all of which are held by Umpqua, shall remain outstanding. Each share of L-B Bank Common Stock outstanding immediately prior to the Effective Date shall, at the election of each L-B Bank shareholder (subject to the limitations set forth herein), be converted into the right to receive $12.75 in cash or shares of Umpqua Common Stock without par value equal to $12.75 divided by the Umpqua Stock Exchange Value (the "Merger Consideration"). The holder of each share can elect to receive all stock, all cash or a combination of stock and cash. The Umpqua Stock Exchange Value shall be equal to: (i) $13.50 per share unless the Weighted Average Sales Price is below $11.50 or above $15.50 per share. (ii) In the event the Weighted Average Sales Price of the Umpqua Common Stock is below $11.50 per share, the Umpqua Stock Exchange Value shall be determined by multiplying $13.50 by a fraction the numerator of which is the Weighted Average Sales Price and the denominator of which is $11.50 unless Umpqua notifies L-B Bank at least five (5) days prior to the Effective Date of its election to fix the Umpqua Stock Exchange Value at $13.50 per share. (iii) In the event the Weighted Average Sales Price of the Umpqua Common Stock is above $15.50 per share and Umpqua shall not have announced an Alternative Acquisition Proposal prior to the Effective Date, the Umpqua Exchange Value shall be determined by multiplying $13.50 by a fraction the numerator of which is the Weighted Average Sales Price and the denominator of which is $15.50. No Perfected Dissenting Shares (as defined in the Plan of Merger) will be converted pursuant to Section 2.1.5, but such Perfected Dissenting Shares will be subject to the provisions of Section 8 of the Plan of Merger. No factional shares of Umpqua Common Stock shall be issued in the Merger. In lieu thereof, each holder of L-B Bank Common Stock who would otherwise be entitled to receive fractional shares of Umpqua Common Stock shall receive an amount in cash equal to the Umpqua Stock Exchange Value multiplied by the fraction of the share of Umpqua Common Stock to which such holder would otherwise be entitled. No such holder shall be entitled to dividends or other rights, in respect of any fraction. On the Effective Date, all existing stock option plans of L-B Bank shall terminate, no options thereunder shall be granted, and each outstanding option to acquire L-B Bank Common Stock (each a "L-B Bank Option") shall automatically vest and be converted and exchanged into an option (a "Converted Option") issued under Umpqua's 2000 Stock Option Plan to purchase shares of Umpqua Common Stock, and each shall continue on the same terms upon which they were originally granted by L-B Bank; provided that (i) the number of shares of Umpqua Common Stock issuable upon exercise of the Converted Option shall be equal to the product of (a) the number of shares of L-B Bank Common Stock issuable upon exercise of the L-B Bank Option, and (b) the result of dividing $12.75 by the Umpqua Stock Exchange Value; and (ii) the exercise price of such Converted Option shall be equal to the result of (a) the exercise price of the L-B Bank Option, divided by (b) the result of dividing $12.75 by the Umpqua Stock Exchange Value; provided, however, that all other terms and conditions of such outstanding options, including vesting schedules, if any, and aggregate exercise price, shall not be affected by the Merger except as may be set forth in such option agreements. With respect to any L-B Bank Option that is an incentive stock option within the meaning of Section 422 of the Code, the foregoing adjustments shall be effected in a manner consistent with Section 424(a) of the Code. Election Procedure . Subject to the terms of this Agreement, each record holder of shares of L-B Bank Common Stock as of the record date set for shareholders entitle to vote at the L-B Bank's shareholder meeting date held to approve the Merger, will have the right to specify such holder's election to have his or her shares of L-B Bank Common Stock converted into (i) shares of Umpqua Common Stock, (ii) cash, or (iii) a combination of shares of Umpqua Common Stock and cash, or to specify that such holder has no election, in accordance with the following procedures: At least 18 business days prior to the anticipated Effective Date, a form of letter of transmittal and election statement providing for such a specification of election and for the tender to the Exchange Agent of the related share certificates (an "Election Statement") will be mailed to the holders of record of L-B Bank Common Stock. L-B Bank will also provide forms of the Election Statement to all persons who become holders of record of L-B Bank Common Stock during the period between such record date and the Election Deadline (as defined below) and will make such forms available at its executive offices and such other places as L-B Bank and Umpqua deem appropriate. Any record holder of L-B Bank Common Stock may specify his or her preference, in an Election Statement meeting the requirements of this Section 2.2, that, as to all shares of L-B Bank Common Stock covered by such Election Statement: (i) all such shares shall be converted to Umpqua Common Stock ("Stock Election Shares"); (ii) all such shares shall be converted to cash ("Cash Election Shares"); (iii) designate the number of such shares to be converted into cash ("Cash Election Shares") and the number of such shares to be converted into Umpqua Common Stock ("Stock Election Shares"); or (iv) the shareholder has no preference and accordingly makes no election; provided, however, any shares held by a record holder holding 100 or fewer shares of L-B Bank Common Stock will be considered Cash Election Shares. Any record holder of Any record holder of L-B Bank Common Stock who is holding such shares for a beneficial owner, or as a nominee for one or more beneficial owners, may submit an Election Statement on behalf of any such beneficial owners. An Election Statement will be effective only if a properly completed and a signed copy thereof, accompanied by stock certificates for the shares of L-B Bank Common Stock which such Election Statement covers, shall have been actually received by the Exchange Agent no later than 5:00 p.m., Pacific Time, on a day selected by Umpqua at least fifteen business days following the date on which the Election Statements were mailed to L-B Bank's shareholders (such time and day being herein referred to as the "Election Deadline"). At Umpqua sole discretion, such date may be extended from time to time by notice to L-B Bank, and Election Statements received after the Election Deadline may be accepted if honoring such elections does not result in any L-B Bank shareholder not receiving the form of consideration they had elected. An Election Statement which meets the requirements of this Section 2.2.4 is hereinafter referred to as an "Effective Election Statement." Shares of L-B Bank Common Stock as to which a record holder makes no election pursuant to an Effective Election Statement, or as to which no Effective Election Statement is submitted, are hereinafter referred to as "No Election Shares." All No Election Shares shall be converted into either Umpqua Common Stock or cash pursuant to Section 2.3. Any record holder of L-B Bank Common Stock who has submitted an Effective Election Statement may, at any time until the Election Deadline, amend such Election Statement if the Exchange Agent actually receives, no later than the Election Deadline, a later-dated, properly completed and signed, amended Effective Election Statement. Any record holder of L-B Bank Common Stock may at any time prior to the Election Deadline revoke his or her Election Statement and withdraw certificates for shares of L-B Bank Common Stock deposited therewith by written notice actually received by the Exchange Agent no later than the Election Deadline. Any notice of withdrawal will be effective only if it is executed and specifies the record holder of the shares to be withdrawn and the serial numbers shown on the certificates representing the shares to be withdrawn. If a holder of L-B Bank Common Stock withdraws his or her Election Statement and does not submit a new Election Statement, his or her shares of L-B Bank Common Stock shall be deemed to be No Election Shares. All Election Statements shall automatically be revoked if the Merger is abandoned for any reason, whereupon the certificates for the shares of L-B Bank Common Stock to which each Election Statement relates, shall be promptly returned to the person submitting the same. Umpqua and L-B Bank will have the right, by mutual agreement, to make rules, not inconsistent with the terms of this Agreement, governing the form, terms and conditions of Election Statements, the validity and effectiveness of Election Statements and the manner and extent to which they are to be taken into account in making the determinations prescribed by Section 2.2, the issuance and delivery of certificates evidencing the Umpqua Common Stock and cash into which shares of L-B Bank Common Stock are converted in the Merger. Allocation Procedures . The allocation at the Effective Date among holders of L-B Bank Common Stock (including Perfected Dissenting Shares) of Umpqua Common Stock or cash pursuant to Section 2.2 shall be effected as follows: No less than 627,000 of the outstanding shares of L-B Bank Common Stock will be converted into cash with the balance converted into Umpqua Common Stock; provided, however, Umpqua reserves the right, in its sole discretion, to reduce the minimum or increase the maximum shares of L-B Bank Common Stock to be converted into cash if by so doing, all (or additional) Effective Election Statements can be honored without invoking the following allocation procedures and the tax status of the transaction is not adversely affected thereby. If the number of Cash Election Shares and the number of Perfected Dissenting Shares total 627,000, then allocations of Umpqua Common Stock and cash shall be made in accordance with the elections made in each Effective Election Statement, and No Election Shares shall be converted into Umpqua Common Stock unless Umpqua elects, by random selection, to convert some or all of such No Election Shares into cash so long as the maximum number of shares converted into cash does not jeopardize the tax status of the transaction. If the number of Cash Election Shares and the number of Perfected Dissenting Shares total more than 627,000 shares of L-B Bank Common Stock, then the allocation of cash and Umpqua Common Stock shall be made as follows: (i) first, all Perfected Dissenting Shares will be converted into cash; (ii) second, all shares of L-B Bank shareholders who own 100 shares of L-B Bank Common Stock or less will be converted into cash; (iii) third, all No Election Shares will be treated as Stock Election Shares, and will be converted into Umpqua Common Stock; (iv) fourth, all Stock Election Shares will be converted into Umpqua Common Stock; (v) fifth, the sum of the number of shares of L-B Bank Common Stock to be converted into cash pursuant to Section 2.3.3 (i), (ii), (iii) and (iv) above, will be subtracted from 627,000 to determine the number of remaining Cash Election Shares ("Unallocated Cash Election Shares") to be allocated, which number shall be allocated pro rata among the remaining L-B Bank shareholders who hold Cash Election Shares, each such shareholder to receive cash, at $12.75 per share, for a number of shares determined by multiplying such shareholder's Cash Election Shares times a fraction the numerator of which is the number of Unallocated Cash Election Shares calculated by this Section 2.3.3 and the denominator of which is the total of all Cash Election Shares held by the remaining L-B Bank shareholders; and (vi) sixth, the remaining Cash Election Shares which are not converted into cash pursuant to Section 2.3.3 (v) above shall be converted into Umpqua Common Stock. If less than 627,000 of the outstanding shares of L-B Bank Common Stock are Cash Election Shares or Perfected Dissenting Shares, allocation of Umpqua Common Stock and cash shall be made as follows: (i) first, all Perfected Dissenting Shares shall be converted into cash; (ii) second, all shares of L-B Bank shareholders who own 100 shares of L-B Bank Common Stock or less will be converted into cash; (iii) third, all Cash Election Shares shall be converted into cash; (iv) fourth, all No Election Shares shall be treated as Cash Election Shares and converted into cash; provided, however, if the number of L-B Bank Common Stock to be converted into cash pursuant to Section 2.3.4 (i), (ii) and (iii)and together with this Section 2.3.4 (iv) were to exceed 627,000 shares, the Exchange Agent shall select No Election Shares by random selection to come as close as possible to a total of 627,000 L-B Bank Common Stock to be converted into cash. Any No Election Shares not converted into cash after this random selection shall be deemed Stock Election Shares and converted into Umpqua Common Stock; and (v) fifth, the sum of shares of L-B Bank Common Stock to be converted into cash pursuant to Section 2.3.4 (i), (ii), (iii) and (iv) above will be subtracted from 627,000 to determine the number of remaining Cash Election Shares, if any, ("Unallocated Cash Election Shares") to be allocated, which number shall be allocated pro rata among the remaining L-B Bank shareholders who hold Stock Election Shares, each such shareholder to receive cash at $12.75 per share for a number of shares determined by multiplying such shareholder's Stock Election Shares times a fraction, the numerator of which is the number of Unallocated Cash Election Shares calculated by this Section 2.3.4 and the denominator of which is the total of all Stock Election Shares. The remaining portion of such Stock Election Shares not paid in cash shall be converted into Umpqua Common Stock. Umpqua and L-B Bank by mutual agreement may make rules as to allocation procedures not provided for above. Exchange Procedures . Prior to the Effective Date, Umpqua shall appoint ChaseMellon Shareholder Services as exchange agent (the "Exchange Agent") for the purpose of exchanging certificates representing shares of Umpqua Common Stock and/or cash for L-B Bank Common Stock as required by Section 2.3. On or about the Effective Date, Umpqua will issue and deliver to the Exchange Agent certificates representing a sufficient number of shares of Umpqua Common Stock issuable in the Merger and a sufficient amount of cash payable in the Merger. As soon as practicable after the Election Deadline, the Exchange Agent will implement the procedures set forth in Section 2.3 and send written notice to each record holder of certificates representing shares of L-B Bank Common Stock pursuant to Section 2.3 of the results thereof. Upon surrender for cancellation to the Exchange Agent (either prior to the Election Deadline or otherwise duly surrendered after the Election Deadline) of one or more certificates for shares of L-B Bank Common Stock ("Old Certificates"), accompanied by a duly executed letter of transmittal in proper form, the Exchange Agent shall, promptly after the Effective Date, in the case of Old Certificates surrendered prior to the Election Deadline, and as promptly as practical in the case of Old Certificates surrendered after the Election Deadline, deliver to each holder of such surrendered Old Certificates new certificates representing the appropriate number of shares of Umpqua Common Stock ("New Certificates") together with checks for payment of cash in lieu of fractional shares to be issued in respect of the Old Certificates and/or checks for the appropriate amount of cash, as applicable. Until Old Certificates have been surrendered and exchanged for New Certificates as herein provided, each outstanding Old Certificate shall be deemed, for all corporate purposes of Umpqua to be the shares of Umpqua Common Stock and/or the cash into which the number of shares of L-B Bank Common Stock shown thereon have been converted. No dividends or other distributions which are declared on Umpqua Common Stock into which shares of L-B Bank Common Stock have been converted after the Effective Date, will be paid to persons otherwise entitled to receive the same until the Old Certificates have been surrendered in exchange for New Certificates in the manner herein provided. In no event shall the persons entitled to receive such dividends or other distributions be entitled to receive interest on such dividends or other distributions. Any Umpqua Common Stock or cash delivered to the Exchange Agent (together with any interest or dividends thereon) and not issued pursuant to this Section 2.4 at the end of twelve months from the Effective Date shall be returned to Umpqua, in which event the persons entitled thereto shall look only to Umpqua for payment thereof. Notwithstanding anything to the contrary set forth in Section 2.4 hereof, if any holder of L-B Bank Common Stock shall be unable to surrender his or her Old Certificates because such certificates have been lost or destroyed, such holder may deliver in lieu thereof a lost stock certificate affidavit and at the sole option of Umpqua or the Exchange Agent, an indemnity bond together with a surety, each in a form and substance reasonably satisfactory to Umpqua or the Exchange Agent. The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the shares of Umpqua Common Stock or L-B Bank Common Stock held by it from time to time hereunder, except that it shall receive and hold all dividends or other distributions paid or distributed with respect to such shares of Umpqua Common Stock for the account of the persons entitled hereto. Anti-Dilution Provision . If Umpqua changes or proposes to change the number of shares of Umpqua Common Stock issued and outstanding prior to the Effective Date as a result of a stock split, stock dividend, or similar transaction with respect to the outstanding Umpqua Common Stock, or exchanges Umpqua Common Stock for a different number or kind of shares or securities or is involved in any transaction resulting in any of the foregoing, and the record date therefor shall be prior to the Effective Date, the Umpqua Stock Exchange Value shall be proportionately adjusted. Umpqua Directors Promptly following the Effective Time one member of the L-B Bank Board of Directors shall become a member of the Umpqua Board of Directors and is designated to serve a term to expire with the annual Umpqua shareholders meeting to be held in 2003. The director will be nominated and recommended for reelection at the discretion of the nominating committee of Umpqua's Board of Directors subject to Umpqua's then applicable nominating procedures. The identity of such person will be determined prior to the Effective Time. The final determination of the member to be appointed will be made by Umpqua with the consent of L-B Bank, which consent will not be unreasonably withheld. Representations and Warranties of L-B Bank Except as disclosed in one or more schedules to this Agreement delivered prior to execution of this Agreement, L-B Bank represents and warrants to Umpqua as follows: Organization, Existence, and Authority . L-B Bank is a state chartered bank, duly organized, validly existing, and in good standing under the laws of the State of Oregon and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted. Authorized and Outstanding Stock, Options, and Other Rights . The authorized capital stock of L-B Bank consists of 10,000,000 shares of common stock, with $5.00 par value per share, of which 1,484,292 shares are outstanding, all of which are validly issued, fully paid and nonassessable except as set forth in Schedule 4.2. Other than as set forth in Schedule 4.2, no subscriptions, options, warrants, convertible securities or other rights or commitments which would enable the holder to acquire any shares of capital stock or other investment securities of L-B Bank, or which enable or require L-B Bank to acquire shares of its capital stock or other investment securities from any holder, are authorized, issued or outstanding. As of the date hereof, there are warrants outstanding exercisable into 83,843 shares. L-B Bank Reports . Since January 1, 1998, L-B Bank has timely filed with the FDIC and the Oregon Director all L-B Bank Reports required to be so filed and until the Effective Date, L-B Bank will continue to file such reports and furnish copies thereof to Umpqua within two days thereafter. Set forth in Schedule 4.3 are audited financial statements for L-B Bank as of or for the year ended, as the case may be, December 31, 2000, and unaudited financial statements for L-B Bank as of or for the years ended, as the case may be, December 31, 1998 and 1999. L-B Bank will provide to Umpqua, when available, copies of such other audited or unaudited interim statement, which statements together with those identified in the preceding two sentences are herein referred to as "L-B Bank Financial Statements." The financial information included in the L-B Bank Reports and L-B Bank Financial Statements has been and will be prepared in accordance with generally accepted accounting principles (or with respect to the Call Reports, regulatory accounting principals), consistently applied, and present fairly the financial position and results of operation of L-B Bank and its Subsidiaries, on the dates and for the periods covered thereby, except as may be noted in these statements. As of the date filed, each L-B Bank Public Report and L-B Bank Financial Statement has been and, as to those reports to be filed or provided on or after the date of this Agreement, will be accurate and complete in all material respects as of the date filed or provided, and each complies or will comply in all material respects with all requirements applicable to such filing. Articles of Incorporation, Bylaws, Minutes . The copies of the Articles of Incorporation, as amended, and the Bylaws of L-B Bank delivered to Umpqua are true, correct and complete copies of existing Articles of Incorporation and Bylaws of L-B Bank, as amended to date. L-B Bank is not in violation of any provision of its Articles of Incorporation or Bylaws. The minute book of L-B Bank, which has been or will be made available to Umpqua for its review, contains accurate and complete minutes of all meetings and all consents evidencing actions taken without a meeting by its Board of Directors (and any committees thereof) and by its shareholders. No Holding Company, Joint Venture, or Other Subsidiaries . Other than as set forth on Schedule 4.5, no corporation or other entity is registered or, to the knowledge of L-B Bank, is required to be registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, because of ownership or control of L-B Bank. Except as set forth on Schedule 4.5, L-B Bank does not, directly or indirectly, own or control, either by power to control the investment or power to vote, any shares of capital stock of any other corporation or entity, other than shares held in a fiduciary or custodial capacity in the ordinary course of business, and shares representing less than five percent of the outstanding shares of such corporation acquired in partial or full satisfaction of debts previously contracted. L-B Bank is not a part of any joint venture, or general or limited partnership, or a member of any unincorporated association. Shareholder Reports . L-B Bank has made available to Umpqua copies of all of L-B Bank's reports and other communications to stockholders since January 1, 2000, including all proxy statements and notices of shareholder meetings. Until the Effective Date, L-B Bank will furnish to Umpqua copies of all future communications within two days such materials are first sent by L-B Bank to stockholders. Books and Records . The books and records of L-B Bank accurately reflect in all material respects the transactions to which it is a party or by which it or its properties are bound or subject. Such books and records have been and are accurate and complete and comply in all material respects with applicable legal, regulatory and accounting requirements. Legal Proceedings . Except for regulatory examinations conducted in the normal course of regulation of L-B Bank, and except as disclosed in Schedule 4.8, there are no actions, suits, proceedings, claims or governmental investigations pending or, to the knowledge of L-B Bank, threatened against or affecting L-B Bank before any court, administrative officer or agency, other governmental body, or arbitrator that would, if determined adversely to L-B Bank, result individually or in the aggregate in any material adverse change in the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank or which might hinder or delay the consummation of the transactions contemplated by this Agreement. Compliance with Lending Laws and Regulations . Except as disclosed in Schedule 4.9 and except for such errors or oversights the financial effect of which are adequately reserved against: (a) The conduct by L-B Bank of its respective business and the operation of the properties or other assets owned or leased by it does not violate or infringe any domestic laws, statutes, ordinances, rules or regulations or, to the knowledge of L-B Bank, any foreign laws, statutes, ordinances, rules or regulations, the enforcement of which, individually or in the aggregate, would have a material adverse effect on L-B Bank, its business, properties or financial condition. Specifically, but without limitations, L-B Bank is in compliance in all material respects with every local, state or federal law or ordinance, and any regulation or order issued thereunder, now in effect and applicable to it governing or pertaining to fair housing, anti-redlining, equal credit opportunity, truth-in-lending, real estate settlement procedures, fair credit reporting and every other prohibition against unlawful discrimination in residential lending, or governing consumer credit, including, but not limited to, the Community Reinvestment Act, the Consumer Credit Protection Act, Truth-in-Lending Act, Regulation Z promulgated by the FRB, and the Real Estate Settlement Procedures Act of 1974. All loans, leases, contracts and accounts receivable (billed and unbilled), security agreements, guarantees and recourse agreements, of L-B Bank, as held in its portfolios or as sold with recourse into the secondary market, represent and are valid and binding obligations of their respective parties and debtors, enforceable in accordance with their respective terms; each of them is based on a valid, binding and enforceable contract or commitment, each of which has been executed and delivered in material compliance, in form and substance, with any and all federal, state or local laws applicable to L-B Bank, or to the other party or parties to the contract(s) or commitment(s), including without limitation the Truth-in-Lending Act, Regulations Z and U of the FRB, laws and regulations providing for nondiscriminatory practices in the granting of loans or credit, applicable usury laws, and laws imposing lending limits; and all such contracts or commitments have been administered in material compliance with all applicable federal, state or local laws or regulations. All Uniform Commercial Code filings, or filings of trust deeds, or of liens or other security interest documentation that are required by any applicable federal, state or local government laws and regulations to perfect the security interests referred to in any and all of such documents or other security agreements have been made, and all security interests under such deeds, documents or security agreements have been perfected, and all contracts have been entered into or assumed in material compliance with all applicable material legal or regulatory requirements. (b) All loan files of L-B Bank are complete and accurate in all material respects and have been maintained in accordance with good banking practice. (c) All notices of default, foreclosure proceedings or repossession proceedings against any real or personal property collateral have been issued, initiated and conducted by L-B Bank in material formal and substantive compliance with all applicable federal, state or local laws and regulations, and no loss or impairment of any security interest, or exposure to meritorious lawsuits or other proceedings against L-B Bank has been or will be suffered or incurred by L-B Bank. (d) L-B Bank is not in material violation of any applicable services or any other requirements of the FHA, VA, FNMA, GNMA, FHLMC, SBA or any private mortgage insurer which insured or guaranteed any loans owned by L-B Bank or as to which it has sold to other investors, the effect of which violation would materially and adversely affect the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank, and with respect to such loans L-B Bank has not done or failed to do, or caused to be done or omitted to be done, any act the effect of which act or omission impairs or invalidates (i) any FHA insurance or commitments of the FHA to insure, (ii) any VA guarantee or commitment of the VA to guarantee, (iii) any SBA guarantees or commitments of the SBA to guarantee, (iv) any private mortgage insurance or commitment of any private mortgage insurer to insure, (v) any title insurance policy, (vi) any hazard insurance policy, or (vii) any flood insurance policy required by the National Flood Insurance Act of 1968, as amended, which would materially and adversely affect the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank. (e) L-B Bank has not knowingly engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock. Commitments . Schedule 4.10 is a listing of all outstanding commitments, including outstanding letters of credit, repurchase agreements and unfunded agreements to lend of L-B Bank. Hazardous Wastes . Except as set forth in Schedule 4.11 and to the knowledge of the directors and officers of L-B Bank, neither L-B Bank nor any other person having an interest in any property which L-B Bank owns or leases, or has owned or leased, or in which either holds any security interest, mortgage, or other liens or interest including but not limited to as beneficiary of a trust deed ("Property") has engaged in the generation, use, manufacture, treatment, transportation, storage (in tanks or otherwise), or disposal of Hazardous Material on or from such Property. Individually or in the aggregate, there has been no: (i) presence, use, generation, handling, treatment, storage, release, threatened release, migration or disposal of Hazardous Material; (ii) condition that could result in any use, ownership or transfer restriction; or (iii) condition of nuisance on or from such Property, any of which individually or collectively would have a material adverse effect on the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank. L-B Bank has not received any notice of, or has any reason to know of, a condition that could give rise to any private or governmental suit, claim, action, proceeding or investigation against L-B Bank, any such other person or such Property as a result of any of the foregoing events. "Hazardous Material" means any chemical, substance, material, object, condition, or waste harmful to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, infectiousness or other harmful or potentially harmful properties or effects, including, without limitation, petroleum or petroleum products, and all of those chemicals, substances, materials, objects, conditions, wastes or combinations of them which are now or become listed, defined or regulated in any manner by any federal, state or local law based, directly or indirectly, upon such properties or effects. Contingent and Other Liabilities . Schedule 4.12 is a list of contingent and other material liabilities not set forth in other schedules. Except as set forth in any schedules to this Agreement, and except for FDIC insured deposits and federal funds purchased and securities sold under agreements to repurchase arising out of transactions subsequent to the date of the latest balance sheet filed with an L-B Bank Report or any L-B Bank Financial Statement, L-B Bank has no obligations or liabilities of any nature (whether accrued, absolute, contingent or otherwise) which are material or which, when combined with all other such obligations or liabilities would be material to the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank. No Adverse Changes . Except as set forth in Schedule 4.13, since June 30, 2001, (a) there has been no material adverse change in the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank; (b) no cash, stock or other dividends, or other distributions with respect to capital stock, have been declared or paid by L-B Bank, nor has L-B Bank purchased or redeemed any of its shares or shares of a subsidiary or other affiliate; and (c) there has not been any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any asset material to L-B Bank. As of the Effective Date, L-B Bank will not have any known obligations or liabilities of any nature, whether absolute, accrued, contingent or otherwise, in excess of $20,000 individually, or $50,000 in the aggregate, other than: (a) Obligations and liabilities disclosed in L-B Bank Reports or L-B Bank Financial Statements as of June 30, 2001, or in the schedules provided herewith; (b) Obligations and liabilities incurred in, or as a result of, the normal and ordinary course of business, consistent with past practices, which do not, in the aggregate, have a material adverse effect on the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank; and (c) Obligations and liabilities incurred otherwise than in or as a result of the normal and ordinary course of business consistent with past practices, provided Umpqua shall have consented thereto. Except as set forth in schedules hereto and to the best knowledge of L-B Bank, there is no basis for any claim against L-B Bank or any other obligation or liability of any nature, in excess of $20,000 individually or $50,000 in the aggregate. Regulatory Approvals Required . The nature of the business and operations of L-B Bank does not require any approval, authorization, consent, license, clearance or order of, any declaration or notification to, or any filing or registration with, any governmental or regulatory authority in order to permit L-B Bank to perform its obligations under this Agreement, or to prevent the termination of any material right, privilege, license or agreement of L-B Bank, or any material loss or disadvantage to its business, upon consummation of the Plan of Merger, except for: (a) Approval of the Plan of Merger by the Oregon Director and the FDIC; (b) Filing of the Plan of Merger with the Oregon Director; (c) Participation along with Umpqua in a fairness hearing before the Oregon Director relating to the Oregon Director's approval of the transactions contemplated hereby. Corporate and Shareholder Approval of Agreement, Binding Obligations . L-B Bank has all requisite corporate power to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement, and the transactions contemplated thereby, have been duly authorized by the Board of Directors of L-B Bank. No other corporate action on the part of L-B Bank other than shareholder approval is required to authorize this Agreement or the Plan of Merger or the consummation of the transactions contemplated thereby. This Agreement has been duly executed and delivered by L-B Bank and, assuming Umpqua's compliance with its representations, warranties and covenants, and assuming satisfaction of the conditions set forth in Article 9 of this Agreement, constitutes the legal, valid and binding obligation of L-B Bank enforceable against L-B Bank in accordance with its terms. L-B Bank has (or will have) all requisite corporate power to execute, deliver and perform its obligations under the Plan of Merger and the execution, delivery and performance of such Plan and the transactions contemplated thereby, have been duly authorized by the Board of Directors of L-B Bank. No other corporate action on the part of L-B Bank other than shareholder approval will be required to authorize the Plan of Merger or the consummation of the transactions contemplated thereby. The Plan of Merger, when duly executed and delivered by L-B Bank, will constitute the legal, valid and binding obligations of L-B Bank, enforceable against L-B Bank in accordance with its terms. No Defaults from Transaction . Subject to obtaining the governmental approvals described in Section 4.14 and the consents identified in Schedule 4.21, neither the execution, delivery and performance of this Agreement and the Plan of Merger by L-B Bank, nor the consummation of the transactions contemplated thereby will conflict with, result in any material breach or violation of, or result in any default or any acceleration of performance under, any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws of L-B Bank, or (assuming the accuracy of Umpqua's and Umpqua Bank's representations and warranties, compliance with their covenants, and the performance of their obligations under this Agreement and the Plan of Merger) of any statute, regulation or existing order, writ, injunction or decree of any court or governmental agency, or of any material contract, agreement or instrument to which either is a party or by which either is bound, or will result in the declaration or imposition of any lien, charge or encumbrance upon any of the assets of L-B Bank which are material to its business. Assuming the accuracy of Umpqua's and Umpqua Bank's representations and warranties, compliance with their covenants, and the performance of their obligations under this Agreement and the Plan of Merger, the consummation of the transactions contemplated by this Agreement will not result in any material adverse change in the business, assets, earnings, operations or conditions (financial or otherwise) of L-B Bank. Tax Returns . L-B Bank has filed all federal, state and other income, franchise or other tax returns, required to be filed by it; each such return is complete and accurate in all material respects; and all taxes and related interest and liabilities to be paid in connection therewith have been paid or adequate reserve has been established for the timely payment thereof. L-B Bank has timely and accurately filed all currency transaction reports required by the Bank Secrecy Act, as amended, and has timely and accurately filed all required information returns and reports, including without limitation Forms 1099, and has exercised due diligence in obtaining certified taxpayer identification numbers as required by the Code and Treasury Regulations. Except as disclosed in Schedule 4.17, L-B Bank has not received notice of any federal, state or other income, franchise or other tax assessment or notice of a deficiency to date which has not been paid or for which adequate reserve has not been provided, and L-B Bank does not know of any pending or threatened audit or investigation of L-B Bank with respect to any tax liabilities. There are currently no agreements in effect with respect to L-B Bank to extend the period of limitations for assessment or collection of any tax. L-B Bank has made available to Umpqua true and correct copies of L-B Bank's federal and state tax returns for years 1998 through 2000. Real Property, Leased Personal Property . Schedule 4.18 is a list setting forth all real property owned by L-B Bank as present, former or future bank premises and all real property currently held as other real estate owned. Except as set forth in that schedule or except for disposition of other real estate owned in the ordinary course of business, L-B Bank will own all of such real property, presently owned, on the Effective Date. Except as may be noted on that schedule, all real property reflected in the L-B Bank Reports or L-B Bank Financial Statements as of June 30, 2001 is included in that schedule. The leases pursuant to which L-B Bank leases real and personal property, copies of which have also been delivered to Umpqua as part of Schedule 4.18, are valid and effective in accordance with their respective terms and there is not under any such lease any default nor has there occurred any event which, with the giving of notice, lapse of time, would constitute an event of default. Except as disclosed in Schedule 4.18 or arising pursuant to the leases relating thereto, the real and personal property leased by L-B Bank is free of any adverse claims. Except as noted on Schedule 4.18, all buildings and structures on the real property, the equipment located thereon, and the real and personal property leased by L-B Bank are in all material respects in good operating condition and repair and conform in all material respects to all applicable laws, ordinances and regulations. Except as disclosed in Schedule 4.18 or arising pursuant to the leases relating thereto, L-B Bank has good and marketable title to all of its real and personal property, subject to no mortgages, pledges, encumbrances, liens or charges of any kind, except liens for taxes not delinquent. L-B Bank owns or leases all property on which its continued business operations are materially dependent. Insurance . Except as set forth in Schedule 4.19, for each of the past six years and continuing to date, L-B Bank has insured its business and real and personal property against all risks of a character usually insured against, including but not limited to financial institution bond, directors and officers liability, property and casualty and commercial liability insurance, with customary amounts of coverage, deductibles and exclusions by reputable insurers authorized to transact insurance in the State of Oregon and such other jurisdictions where it operates or owns property, and it will maintain all existing insurance through the Effective Date. L-B Bank is in material compliance with all existing insurance policies and has not failed to give timely notice of, or present properly, any known material claim thereunder. Schedule 4.19 includes a list of all insurance policies currently in force with respect to L-B Bank's business and real and personal property. Trademarks . L-B Bank owns or has valid licenses to use all patents, trademarks, copyrights or trade names which they consider to be material to their business taken as a whole, and have not been charged with infringement or violation of any patent, trademark, copyright or trade name which would be likely to have a material adverse effect on their business. Contracts and Agreements . Schedule 4.21 is a list of all outstanding contracts, agreements, leases or understandings in which the total obligation of L-B Bank exceeds $25,000 annually or $100,000 in the aggregate, except for any contracts or agreements entered into with its customers in the ordinary course of business. Such documents include, without limitation, all agreements, contracts, leases or understandings with current officers and directors and any persons who have been an officer or director within the past three years of L-B Bank, the specific terms of which are set forth in such schedule, all of which are related to, and have been entered into in the ordinary course of L-B Bank's business. Further, except as set forth in such schedule, L-B Bank has, at June 30, 2001, fully accrued in accordance with generally accepted accounting principals, for all obligations under such commitments. L-B Bank is not in material default or breach, and there has not occurred any event which with notice or lapse of time would constitute a material breach or default, under any contract, agreement, instrument, lease or understanding, and, excluding any loan agreements or notices with L-B Bank customers reflected in L-B Bank's regular delinquent loan reports which have been and will be made available to Umpqua, L-B Bank does not know of any default by any other party thereto; and no contract, agreement, lease or undertaking referred to in this Section 4.21, or in such other schedules will be modified or changed prior to the Effective Date without the prior written consent of Umpqua. Except as identified on Schedule 4.21, no consent or approval by the parties thereto is required by reason of this Agreement to maintain such contracts, agreements, leases and undertakings in effect. No waiver or indulgence has been granted by any of the landlords under any such leases. Employee Benefits . (a) Each Employee Benefit Plan sponsored or maintained by L-B Bank or any affiliate of L-B Bank as determined under Section 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") is set forth in Schedule 4.22. Except as set forth in such schedule, neither L-B Bank nor any ERISA Affiliate maintains nor has sponsored any other pension, profit sharing, thrift, savings, bonus, retirement, vacation, life insurance, health insurance, severance, sickness, disability, medical or death benefit plans, whether or not subject to ERISA. Except as set forth on Schedule 4.22, there are no employment contracts entered into by L-B Bank and no other deferred compensation contracts, agreements, arrangements or commitments maintained or agreed to by it that provide for or could result in the payment to any L-B Bank employee or former employee of any money or other property rights or accelerate the vesting or payment of such amounts or rights to any employee as a result of the transactions contemplated herein, whether or not such payment or acceleration would constitute a parachute payment within the meaning of Code Section 280G. There are no other compensation, employment or collective bargaining agreements, stock options, stock purchase agreements, life, health, accident or other insurance, bonus, deferred or incentive compensation, change-in-control, severance or separation, profit sharing, retirement, or other employee fringe benefit policies or arrangements of any kind that could result in the payment to any employees or former employees or other persons of L-B Bank of any money or other property. (b) The only "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) sponsored or maintained by L-B Bank or any ERISA Affiliate, or to which L-B Bank or any ERISA Affiliate contributes ("Welfare Benefit Plan") or is required to contribute, are as set forth in Schedule 4.22. Schedule 4.22 includes the amount of liability of L-B Bank for payments more than thirty days past due with respect to such Welfare Benefit Plans as of December 31, 2000, the amount of monthly payments due and owing for each month that such plans are continued, and the amount of liability for claims if L-B Bank was to terminate such plans and the costs involved in any such termination. Each Welfare Benefit Plan, which is a group health plan (within the meaning of Section 5000(b)(1) of the Code), complies with and has been maintained and operated in accordance with each of the requirements of Section 4980B of the Code and Part 6 of the Subtitle B of Title I of ERISA. Schedule 4.22 sets forth the individuals with rights to continuation coverage under Section 4980B of the Code or Part 6 of Subtitle B of title I of ERISA or state law, including those individuals within the applicable election period. (c) Other than as set forth in Schedule 4.22, neither L-B Bank nor any ERISA Affiliate has maintained a pension benefit plan that is subject to title 1, subtitle B, part 3 of ERISA ("Pension Benefit Plan"). With respect to any such Pension Benefit Plan, the amount of liability for any contribution paid or owing with respect to such Pension Benefit Plan for the last or current plan year and the plan year in which the Effective Date occurs is set forth on Schedule 4.22. There are no other material liabilities that would be incurred in connection with a termination of the Plan, and the Plan is fully funded. (d) To the knowledge of the executive officers and directors of L-B Bank, L-B Bank and all persons having fiduciary or other responsibilities or duties with respect to any Employee Benefit Plan, are, and since inception have been, in compliance in all material respects with, and each such Employee Benefit Plan is and has been operated in accordance with, its provisions and in compliance with the applicable laws, rules and regulations governing such Plan, including, without limitation, the rules and regulations promulgated by the Department of Labor, the Pension Benefit Guaranty Corporation and the Internal Revenue Service under ERISA or the Code. Each Pension Benefit Plan and any related trust agreements or annuity contracts (or any other funding instruments) comply currently, and have complied in the past, both as to form and operation, with the provisions of ERISA and the Code (including Section 410(b) of the Code relating to coverage), where required in order to be tax-qualified under Sections 401(a) or 403(a) or other applicable provisions of the Code, and all other applicable laws, rules and regulations; all necessary governmental approvals for the Employee Benefit Plans have been obtained; and a favorable determination as to the qualification under the Code of each Pension Benefit Plan set forth in Schedule 4.22 and each amendment thereto has been made by the Internal Revenue Service. No Plan is a "multi-employer pension plan," as such term is defined in Section 3(37) of ERISA. To the knowledge of the executive officers and directors of L-B Bank, all contributions or other amounts payable by L-B Bank as of the Effective Date with respect to each Plan in respect of current or prior plan years have been paid or accrued in accordance with GAAP and Section 412 of the Code, and there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of, or against any of the Plans or any trusts related thereto which would, individually or in the aggregate, have or be reasonably expected to have a material adverse effect on L-B Bank. (e) Each Welfare Benefit Plan and each Pension Benefit Plan has been administered to date in material compliance with the requirements of the claims procedure of the Code and ERISA. All reports required by any government agency and disclosures to participants with respect to each Welfare Benefit Plan and each Pension Benefit Plan have been timely made or filed. Each Employee Benefit Plan has been operated since inception in material compliance with the governing instruments and applicable federal or state law. In particular, but without limitation, each Welfare Benefit Plan has been administered in material compliance with federal law, including without limitation the health care continuation requirements of federal law ("COBRA"). Except as described on Schedule 4.22, no Employee Benefit Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of L-B Bank or any ERISA Affiliate beyond their retirement or other termination of service, other than (i) coverage mandated by applicable law, (ii) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (iii) any deferred compensation benefits accrued as liabilities on the books of L-B Bank or any ERISA Affiliates or (iv) benefits the full cost of which is borne by the current or former employee (or his beneficiary). (f) Neither L-B Bank nor, to its knowledge, any plan fiduciary of any Welfare Benefit Plan or Pension Benefit Plan, has engaged in any transaction in violation of Section 406(a) or (b) of ERISA (for which no exemption exists under Section 408 of ERISA) or any "prohibited transaction" (as defined in Section 4975(c)(1) of the Code) for which no exemption exists under Section 4975(c)(2) or (d) of the Code or in any prohibited transactions under predecessor provisions of the Code. To the knowledge of the executive officers and directors of L-B Bank, neither L-B Bank nor any ERISA Affiliate has engaged in a transaction in connection with which L-B Bank or any ERISA Affiliate could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code. (g) L-B Bank has not had any liability to the Pension Benefit Guaranty Corporation ("PBGC"). No material liability to the PBGC has been or will be incurred by L-B Bank or other trade or business under "common control" with L-B Bank (as determined under Section 414(c), (b), (m) or (o) of the Code) on account of any termination of an employee pension benefit plan subject to title IV of ERISA. Except as set forth in Schedule 4.22, since September 1, 1974, no filing has been made by L-B Bank (or any ERISA Affiliate) with the PBGC (and no proceeding has been commenced by the PBGC) to terminate any employee pension benefit plan subject to title IV of ERISA maintained, or wholly or partially funded by L-B Bank (or any ERISA Affiliate). Neither L-B Bank nor any ERISA Affiliate has (i) ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, (ii) withdrawn as a substantial employer so as to become subject to the provisions of Section 4063 of ERISA, (iii) ceased making contributions on or before the Effective Date to any employee pension benefit plan subject to Section 4064(a) of ERISA to which L-B Bank (or any ERISA Affiliate) made contributions during the five years prior to the Effective Date, or (iv) made a complete or partial withdrawal from a multi-employer plan (as defined in Section 3(37) of ERISA) so as to incur withdrawal liability as defined in Section 4201 of ERISA (without regard to subsequent reduction or waiver of such liability under Section 4207 or 4208 or ERISA). (h) Complete and correct copies of the following documents have been furnished to Umpqua: (i) Each Employee Benefit Plan and any related trust agreements; (ii) The most recent summary plan descriptions of each Employee Benefit Plan subject to ERISA; (iii) The most recent determination letters of the Internal Revenue Service with respect to the qualified status of a Pension Benefit Plan; (iv) Annual Reports (on form 5500 series) required to be filed with any governmental agency for the last two years; (v) Financial information which identifies (a) all asserted or unasserted claims arising under any Employee Benefit Plan, (b) all claims presently outstanding against any Employee Benefit Plan, and (c) a description of any future compliance action required with respect to any Employee Benefit Plan under ERISA, or federal or state law. (vi) Any actuarial reports and PBGC Forms 1 for the last 2 years. (i) Each Welfare Benefit Plan and each Pension Benefit Plan is legally valid and binding and in full force and effect and there are no defaults thereunder. Employment Disputes . There is no labor strike, dispute, slowdown or stoppage pending or, to the best knowledge of L-B Bank, threatened against L-B Bank, and L-B Bank does not have any knowledge of any attempt to organize any employees of L-B Bank into a collective bargaining unit. Consummation of the Plan of Merger will not (either alone or in combination with any other act or event) result in any payment of severance pay or any other payment becoming due from L-B Bank to any of its employees except as set forth in Schedule 4.23. L-B Bank is not a party to any agreement involving payments to any person or entity based upon the profits, revenues or other financial performance of L-B Bank except as set forth on Schedule 4.23. Reserve for Loan Losses . L-B Bank's reserve for loan losses, as established from time to time, is adequate as determined by the standards applied to L-B Bank by the applicable bank regulatory agencies and pursuant to generally accepted accounting principles. Since June 30, 2001, L-B Bank has not and prior to the Effective Date L-B Bank will not, reverse any provision taken for loan losses. Repurchase Agreement . L-B Bank has valid and perfected first position security interests in all government securities subject to repurchase agreements and the market value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt secured by such collateral under such agreement. Shareholder List . The list of shareholders of L-B Bank, provided to Umpqua, is a true, correct and complete list of the names, addresses and holdings of all record holders of L-B Bank common stock as of the date of such list. Based on information made available to L-B Bank, L-B Bank shall notify Umpqua of any change in such stock ownership of over one percent (1%) through the Effective Date. Interests of Directors and Others . Except as disclosed in any L-B Bank Reports or the schedules hereto, no officer or director of L-B Bank has any material interest in any assets or property (whether real or personal, tangible or intangible), of or used in the business of L-B Bank other than as an owner of outstanding securities or deposit accounts of L-B Bank, or as borrowers under loans fully performing in accordance with their terms, which terms are no more favorable than those available to unaffiliated parties made at or about the same time. Schedules to this Agreement . The information contained in each schedule to this Agreement prepared by or on behalf of L-B Bank constitutes additional representations and warranties made by L-B Bank hereunder and is incorporated herein by reference. The copies of documents furnished as part of these schedules are true, correct and complete copies and include all amendments, supplements, and modifications thereto and all express waivers applicable thereunder. No Misstatements or Omissions . No representation or warranty of L-B Bank in this Agreement or in any statement, certificate or schedule furnished or to be furnished by L-B Bank pursuant to this Agreement or in connection with the transaction contemplated by this Agreement, contains or will contain any untrue statements of a material fact or omits or will omit to state any material fact. Representations and Warranties of Umpqua Except as disclosed in one or more schedules to this Agreement delivered prior to execution of this Agreement, Umpqua represents and warrants to L-B Bank as follows: Organization, Existence, and Authority . Umpqua is a corporation duly organized and validly existing under the laws of the State of Oregon and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted and as proposed to be conducted. Umpqua Bank is a bank duly organized, validly existing, and in good standing under the laws of the State of Oregon and has all requisite corporate power and authority to own, lease, and operate its properties and assets and carry on its business in the manner now being conducted. Each of Umpqua and Umpqua Bank is qualified to do business and is in good standing in every jurisdiction in which such qualification is required except where the failure to so qualify would not result in any material adverse effect on its business operation, financial condition or properties. Authorized and Outstanding Stock, Options, and Other Rights . The authorized capital stock of Umpqua consists of (i) 2,000,000 shares of undesignated preferred stock, with no par value per share, of which no shares are issued or outstanding, and (ii) 20,000,000 shares of common stock, with no par value per share, of which 14,435,412 shares are outstanding, all of which are validly issued, fully paid and nonassessable. The authorized capital stock of Umpqua Bank consists of 2,000,000 shares of undesignated preferred stock, with no par value per share, of which no shares are issued and outstanding and 20,000,000 shares of common stock with no par value per share, of which 7,664,752 shares are outstanding, all of which are validly issued, fully paid and nonassessable and all of which are held by Umpqua. Other than as set forth in the Umpqua Public Reports or Schedule 5.2, no subscriptions, options, warrants, convertible securities or other rights or commitments which would enable the holder to acquire any shares of capital stock or other investment securities of Umpqua, or which enable or require Umpqua to acquire shares of its capital stock or other investment securities from any holder, are authorized, issued or outstanding. Public Reports . Since January 1, 1998, Umpqua has timely filed with the SEC all Umpqua Public Reports required to be filed. Until the Effective Date, Umpqua will file with the SEC (and will furnish copies to L-B Bank within two days thereafter) all additional Umpqua Public Reports required to be filed from time to time, and all other reports Umpqua otherwise files with the SEC. The financial information included in the Umpqua Public Reports has been and will be prepared in accordance with generally accepted accounting principles, consistently applied and present fairly the financial position and results of operation of Umpqua and its subsidiaries on the dates and for the periods covered thereby. As of the date filed, each Umpqua Public Report has been and, as to those reports filed after the date hereof, will be, accurate and complete as of the date filed, and each complies or will comply with all requirements applicable to such filing. Articles of Incorporation, Bylaws, Minutes . The copies of the Articles of Incorporation, as amended, and the Bylaws of each of Umpqua and Umpqua Bank delivered to L-B Bank are true, correct and complete copies of existing Articles of Incorporation and Bylaws of Umpqua and Umpqua Bank, as the case may be, as amended to date. Neither Umpqua nor Umpqua Bank is in violation of any provision of its Articles of Incorporation or Bylaws. The minute books of Umpqua and Umpqua Bank which have been or will be made available to L-B Bank for its review contain accurate and complete minutes of all meetings and all consents evidencing actions taken without a meeting by its Board of Directors (and any committees thereof) and by its shareholders. No Adverse Changes . Except as set forth in Schedule 5.5, since June 30, 2001, (a) there has been no material adverse change in the business, assets, earnings, operation or condition (financial or otherwise) of Umpqua; (b) no cash, stock or other dividends, or other distributions with respect to capital stock, have been declared or paid by Umpqua, nor has Umpqua purchased or redeemed any of its shares; and (c) there has not been any damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting any asset material to Umpqua. As of the Effective Date, Umpqua will have no obligations or liabilities of any nature, whether absolute, accrued, contingent or otherwise, in excess of $250,000 individually, or $500,000 in the aggregate, other than: (a) Obligations and liabilities disclosed in Umpqua Public Reports as of June 30, 2001, or schedules provided herewith; (b) Obligations and liabilities incurred in, or as a result of, the normal and ordinary course of business, consistent with past practices, which do not, in the aggregate, have a material adverse effect on the business, assets, earnings, operation or condition (financial or otherwise) of Umpqua; and (c) Obligations and liabilities incurred otherwise than in or as a result of the normal and ordinary course of business consistent with past practices, provided L-B Bank shall have consented thereto. To the best knowledge of Umpqua, there is no basis for any claim against Umpqua or any other obligation or liability of any nature, in excess of $250,000 individually or $500,000 in the aggregate. Shareholder Reports . Umpqua has delivered to L-B Bank copies of all of Umpqua's reports and other communications to stockholders since January 1, 2000, including all proxy statements and notices of shareholder meetings, to the extent such reports and communications have not been filed with any Umpqua Public Reports. Until the Effective Date, Umpqua will furnish to L-B Bank copies of all future communications within two days such materials are first sent by Umpqua to such shareholders. Regulatory Approvals Required . The nature of the business and operations of Umpqua does not require any approval, authorization, consent, license, clearance or order of, any declaration or notification to, or any filing or registration with, any governmental or regulatory authority in order to permit Umpqua to perform its obligations under this Agreement, or to prevent the termination of any material right, privilege, license or agreement of Umpqua, or any material loss or disadvantage to its business, upon consummation of the Plan of Merger, except for: (a) Approval of the Plan of Merger by the Oregon Director and the FDIC; (b) Filing of the Plan of Merger with the Oregon Director; (c) Registration with the Oregon Director of the Umpqua Common Stock to be issued to the L-B Bank shareholders and a finding that the transaction is fair, just and equitable and free from fraud in accordance with ORS 59.095; (d) Registration with, the issuance of permits from, or the perfection of exemptions from registration from applicable state blue sky administrators of the Umpqua Common Stock to be issued to the L-B Bank shareholders; and (e) Approval by the Nasdaq Stock Market of the listing application relating to the Umpqua Common Stock to be issued in connection herewith. Corporate and Shareholder Approval of Agreement, Binding Obligations . Umpqua and Umpqua Bank each has all requisite corporate power to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement, and the transactions contemplated thereby, have been duly authorized by the Board of Directors of each of Umpqua and Umpqua Bank. No other corporate action on the part of Umpqua or Umpqua Bank other than shareholder approval by Umpqua Bank is required to authorize this Agreement or the Plan of Merger or the consummation of the transactions contemplated thereby. This Agreement has been duly executed and delivered by Umpqua and Umpqua Bank and, assuming compliance by L-B Bank with its representations, warranties and covenants herein, and assuming satisfaction of the conditions set forth in Article 8, this Agreement constitutes the legal, valid and binding obligation of each of them enforceable in accordance with its terms. The Plan of Merger, when duly executed and delivered by Umpqua Bank will constitute the legal, valid and binding obligations of Umpqua Bank enforceable in accordance with their terms. No Defaults from Transaction . Subject to obtaining the governmental approvals described in Section 5.7, neither the execution, delivery and performance of this Agreement and the Plan of Merger by Umpqua Bank, nor the consummation of the transactions contemplated thereby will conflict with, result in any breach or violation of, or result in any default or any acceleration of performance under, any of the terms, conditions or provisions of the Articles of Incorporation or Bylaws of either Umpqua or Umpqua Bank, or (assuming the accuracy of L-B Bank representations and warranties, compliance with its covenants, and the performance of its obligations under this Agreement and the Plan of Merger of any statute, regulation or existing order, writ, injunction or decree of any court or governmental agency, or of any contract, agreement or instrument to which either is a party or by which either is bound, or will result in the declaration or imposition of any lien, charge or encumbrance upon any of the assets of Umpqua or its Subsidiaries which are material to the business of Umpqua or Umpqua Bank. Assuming the accuracy of Umpqua's and Umpqua Bank's representations and warranties, compliance with their covenants, and the performance of their obligations under this Agreement and the Plan of Merger, the consummation of the transactions contemplated by this Agreement will not result in any material adverse change in the business, assets, earnings, operations or conditions (financial or otherwise) of Umpqua or Umpqua Bank. Schedules to this Agreement . The information contained in each schedule to this Agreement prepared by or on behalf of Umpqua constitutes additional representations and warranties made by Umpqua hereunder and is incorporated herein by reference. The copies of documents furnished as part of these schedules are true, correct and complete copies and include all amendments, supplements, and modifications thereto and all express waivers applicable thereunder. No Misstatements or Omissions . No representation or warranty of Umpqua or Umpqua Bank in this Agreement or in any statement, certificate or schedule furnished or to be furnished by Umpqua pursuant to this Agreement or in connection with the transaction contemplated by this Agreement, contains or will contain any untrue statements of a material fact or omits or will omit to state any material fact. Covenants of L-B Bank Certain Actions . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank covenants to Umpqua that, without first obtaining the written approval of Umpqua: (a) It shall not amend its Articles of Incorporation or Bylaws; (b) It shall not declare or pay any dividend, redeem, repurchase or otherwise acquire or agree to acquire any of L-B Bank's stock; or make or commit to make any other distribution to L-B Bank's stockholders; (c) It shall not, except under options and convertible securities identified in Schedule 4.2, issue, sell, or deliver; agree to issue, sell or deliver; or grant or agree to grant any shares of any class of the stock of L-B Bank; any securities convertible into any of such shares; or any options, warrants, or other rights to purchase such shares; (d) It shall not, except in the ordinary course of business (including under its Federal Home Loan Bank line of credit), borrow or agree to borrow any funds or voluntarily incur, assume or become subject to, whether directly or by way of guarantee or otherwise, any commitment, obligation or liability (absolute or contingent); or cancel or agree to cancel any debts or claims; (e) It shall not, except in the ordinary course of business, lease, sell or transfer; agree to lease, sell or transfer; or grant or agree to grant any preferential rights to lease or acquire, any of its assets, property or rights; make or permit any amendment or termination of any contract, agreement, instrument or other right to which it is a party and which is material to its business, assets, earnings, operation or condition (financial or otherwise); or mortgage, pledge or subject to a lien or any other encumbrance any of its assets, tangible or intangible; (f) It shall not violate, or commit a breach of or default under any contract, agreement or instrument to which it is a party or to which any of its assets may be subject and which is material to its business, assets, earnings, operation or condition (financial or otherwise); or knowingly violate any applicable law, regulation, ordinance, order, injunction or decree or any other requirements of any governmental body or court, relating to its assets or business; (g) Other than with respect to agreements in effect on the date of this Agreement, it shall not increase or agree to increase the compensation payable to any officer, director, employee or agent, except for merit increases to non-management personnel (including branch managers) in the ordinary course of business consistent with past practices; enter into any contract of employment (i) for a period greater than 30 days or (ii) providing for severance payments upon termination of employment or upon the occurrence of any other event including but not limited to the consummation of the Merger; or enter into or make any material change in any Employee Benefit Plan except as required by law; provided that this Section 6.1(g) shall not preclude (x) the payment in January 2002 of bonuses earned by L-B Bank employees during fiscal year 2001 and prior to the Effective Date under existing bonus plans and (xx) the payment of retention bonuses, not to exceed $100,000 in the aggregate with the consent of Umpqua which consent will not be unreasonably withheld; (h) It shall not, except in the ordinary course of business through foreclosure or transfer in lieu thereof in the collection of loans to customers, acquire control of or any other ownership interest in any other corporation, association, joint venture, partnership, business trust or other business entity; acquire control or ownership of all or a substantial portion of the assets of any of the foregoing; merge, consolidate or otherwise combine with any other corporation; or enter into any agreement providing for any of the foregoing except in connection with the enforcement of bona fide security interests; (i) It shall not acquire an ownership or leasehold interest in any real property whether by foreclosure, deed in lieu of foreclosure or otherwise without making an environmental evaluation that, in its opinion, is reasonably appropriate; (j) It shall not make any payment in excess of $25,000 in settlement of any pending or threatened legal proceeding involving a claim against L-B Bank; (k) It shall not engage in any activity or transaction (i) which is other than in the ordinary course of business including the sale of any properties, securities, servicing rights, loans or other assets except as specifically contemplated hereby, (ii) which would be reasonably expected to have a material adverse effect on the business, assets, earnings, operation or condition (financial or otherwise) of L-B Bank or (iii) would result in the breach of any representation or warranty hereunder or the failure of a condition of closing hereunder within the control of L-B Bank; (l) It shall not acquire, open or close any office or branch; (m) It shall not do any act which causes it not to remain in material compliance with the regulations, permits and orders issued by regulatory authorities having jurisdiction over its business operations; (n) It shall not make or commit to make any capital expenditures, capital additions or capital improvements involving an amount in excess of $40,000; provided, however, written consent shall not be required if prior consultation with Umpqua has taken place; (o) It shall not make, renew, commit to make, or materially modify any loan over $300,000 or a series of loans or commitments over $300,000 to any person or group of related persons without furnishing to Umpqua, within three (3) business days after approval, a copy of the report provided to the L-B Bank's loan committee; and It shall not enter into or modify any agreement or arrangement (except for renewals of previously disclosed indebtedness) which alone or together with all similar arrangements exceeds $50,000, with any director or officer of L-B Bank, any person who, to the knowledge of L-B Bank, owns more than five percent (5%) of the outstanding capital stock of L-B Bank, or any business or entity in which such director, officer or beneficial owner has an ownership interest in excess of ten percent (10%) without furnishing a copy of the report provided to L-B Bank's loan committee to Umpqua within three (3) business days after approval. Since June 30, 2001, it has not and will not sell any investment securities at a gain except as necessary to provide liquidity or in accordance with past practices, without the prior consent of Umpqua which consent will not be unreasonably withheld. No Solicitation . Between the date hereof and the Effective Date, neither L-B Bank nor any of its officers, directors or other agents shall directly or indirectly initiate contact with any person or entity in an effort to solicit any Alternative Acquisition Transaction. Between the date hereof and the Effective Date, L-B Bank shall not authorize or knowingly permit any officer, director or any other person representing or retained by L-B Bank to directly furnish or cause to be furnished any non-published information concerning its business, properties, or assets to any person or entity in connection with any possible Alternative Acquisition Transaction other than to the extent specifically authorized by its Board of Directors in the good faith exercise of its fiduciary duties based upon the advice of Graham & Dunn PC. L-B Bank shall promptly orally notify Umpqua followed by written notice, of any Alternative Acquisition Transaction, whether oral or written, communicated by any Person to L-B Bank, or any indication from any Person that such a Person is considering making any Alternative Acquisition Transaction. Each L-B Bank director further agrees to use his or her best efforts to obtain the approval of the Agreement and the Plan of Merger by L-B Bank shareholders and to vote his or her L-B Bank Common Stock and any shares over which he or she has voting control in favor of the Agreement and the Plan of Merger. Neither L-B Bank nor any of its directors or officers shall be required by this section to violate the duties imposed by law on L-B Bank's directors or officers to L-B Bank's shareholders. Filing Reports and Returns, Payment of Taxes . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank shall duly and timely file (by the due date or any duly granted extension thereof), all reports and returns required to be filed with federal, state, local, foreign and other regulatory authorities, including, without limitation, reports required to be filed with the FDIC or Oregon Director and all required federal, state and local tax returns. Unless it is contesting the same in good faith and, if appropriate, has established reasonable reserves therefore, L-B Bank will promptly pay all taxes and assessments indicated by tax returns as due or otherwise lawfully levied or assessed upon it or any of its properties and withhold or collect and pay to the proper governmental authorities or hold in separate bank accounts for such payment all taxes and other assessments which are required by law to be so withheld or collected. Preservation of Business . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank shall use its commercially reasonable efforts (i) to preserve intact its business organization; (ii) to preserve its relationships and goodwill with its customers, employees and others having business dealings with it; and (iii) to keep available the services of its present officers, agents and employees. L-B Bank will not institute any novel, unusual or material change in its methods of management, lending policies, personnel policies, accounting, marketing, investments or operations. Best Efforts . L-B Bank will use its commercially reasonable efforts to obtain and to assist Umpqua in obtaining all necessary approvals, consents and orders, including but not limited to approval of the FDIC and the Oregon Director, to the transactions contemplated by this Agreement and the Plan of Merger, and to obtain the approval of the shareholders of L-B Bank to Agreement and the Plan of Merger. Further, L-B Bank will use its commercially reasonable efforts to cause the Directors of L-B Bank to execute this Agreement in their individual capacities as provided for at the end of this Agreement and to cause the directors of L-B Bank to execute the Plan of Merger in their individual capacities as provided for at the end of the Plan of Merger. Continuing Accuracy of Representations and Warranties . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank will not take nor knowingly permit any action which would cause or constitute a breach of any of the representations or warranties of L-B Bank contained in this Agreement or which would cause any such representations or warranties, if made on and as the date of such event or the Effective Date, to be untrue or inaccurate in any material respect (other than an event so affecting a representation or warranty which is permitted hereby or is expressly limited to a state of facts existing at a time prior to the occurrence of such event). Promptly upon becoming aware of the occurrence of or the pending or threatened occurrence of any event which would cause or constitute such a breach or inaccuracy, L-B Bank will give detailed written notice thereof to Umpqua and will use its best efforts to prevent or promptly remedy such breach or inaccuracy. Updating Schedules . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank will, no later than fifteen (15) days prior to the anticipated Effective Date hereof, revise and supplement the schedules hereto prepared by or on behalf of L-B Bank to ensure that such schedules remain accurate and complete. Notwithstanding anything to the contrary contained herein, supplementation of such schedules following the execution of this Agreement shall not be deemed a modification of L-B Bank's representations or warranties contained herein. Rights of Access . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank agrees to permit Umpqua, and its employees, agents and representatives full access to the premises of L-B Bank on reasonable notice and to all books, files and records of L-B Bank, including but not limited to loan files, litigation files and federal and state examination reports, and to furnish to Umpqua such financial and operating data and other information with respect to the business and assets of L-B Bank as Umpqua shall reasonably request. Proxy Statement . L-B Bank shall provide to Umpqua such information and assistance as may be reasonably necessary to permit Umpqua to file with the Oregon Director a registration statement covering the issuance of the Umpqua Shares and to prepare a proxy statement to solicit proxies from the shareholders of Umpqua and L-B Bank for a shareholder meeting at which shareholders will be asked to consider and vote on this Agreement and the Plan of Merger, and the transactions contemplated hereby and thereby (in its combined, definitive form, the "Proxy Statement"). When delivered to shareholders of L-B Bank, to the knowledge of the directors and officers of L-B Bank, the Proxy Statement will fairly describe the transaction with respect to the business, financial condition and operations of L-B Bank, and will contain no untrue statement of any material fact and will not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, except those statements in or omission from the Proxy Statement that are not descriptive of or otherwise attributable to L-B Bank. L-B Bank will promptly advise Umpqua in writing if at any time prior to the Effective Date L-B Bank shall obtain knowledge of any facts that would, in the opinion of L-B Bank or its counsel, make it necessary or appropriate to amend or supplement the Proxy Statement in order to make the statements therein not misleading or to comply with applicable law. Delivery of Reports . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank will deliver to Umpqua promptly upon preparation copies of: (a) Approved minutes of meetings of L-B Bank's shareholders, Board of Directors, and management or director committees; and (b) L-B Bank's loan committee reports and reports of loan delinquencies, foreclosures and other adverse developments regarding loans; and of developments regarding other real estate owned or other assets acquired through foreclosure or action in lieu thereof. Payment of Obligations . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, L-B Bank will promptly pay, upon receipt of billings, all accounts payable, including professional fees for legal, financial and accounting services, and will maintain its assets in accordance with good business practices. Shareholder Meeting . L-B Bank shall promptly call a meeting of its shareholders to consider and approve this Agreement, the Plan of Merger, and the transactions contemplated hereby and thereby. L-B Bank shall deliver to its shareholders notice of the meeting, together with the Proxy Statement, in accordance with applicable Oregon law. Provided that the representations and warranties of Umpqua contained herein continue to be accurate, the Board of Directors of L-B Bank will recommend to the shareholders approval of this Agreement, the Plan of Merger and the transactions contemplated hereby unless, upon advice of counsel, its fiduciary duties otherwise require, and each of L-B Bank's directors hereby and thereby agrees to vote all L-B Bank shares held or controlled by him or her for the approval of all such matters. Approval of Plan of Merger . Promptly following execution of this Agreement, L-B Bank shall promptly call or cause to be called a meeting of L-B Bank's shareholders to vote upon the Plan of Merger. Title Reports . Prior to the Effective Date, L-B Bank will provide Umpqua with either copies of title reports or a preliminary title report with respect to all material real property held as other real estate or used or held for future use in its business. Loan Loss Reserve . Prior to the Effective Date, L-B Bank's consolidated loan loss reserve will comply with the representation of Section 4.24 and not be less than 1.3% of the total lease and loan receivables. Agreements and Plans . L-B Bank agrees to take, or use its commercially reasonable efforts to effect, the actions set forth in Schedule 6.16 within the time lines set forth in such schedule. Other Actions . L-B Bank covenants and agrees to execute, file and record such documents and do such other acts and things as are necessary or appropriate to obtain required government and regulatory approvals for, and to otherwise take such other necessary and appropriate actions to consummate the transactions contemplated by this Agreement and the Plan of Merger. Covenants of Umpqua Certain Actions . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, Umpqua covenants, for itself and on behalf of its subsidiaries, that, without first obtaining the written approval of L-B Bank: (a) It shall not declare or pay any dividend (except its regular quarterly dividends of $0.04 per share), or make or commit to make any other distribution to Umpqua's stockholders; and (b) It shall not do any act which causes it not to remain in material compliance with the regulations, permits and orders issued by regulatory authorities having jurisdiction over its business operations; and (c) It shall not violate, or commit a breach of or default under any contract, agreement or instrument to which it is a party or to which any of its assets may be subject and which is material to its business, assets, earnings, operation or condition (financial or otherwise); or knowingly violate any applicable law, regulation, ordinance, order, injunction or decree or any other requirements of any governmental body or court, relating to its assets or business. Filing Reports and Returns, Payment of Taxes . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, Umpqua shall duly and timely (by the due date or any duly granted extension thereof) file all reports and returns required to be filed with federal, state, local, foreign and other regulatory authorities, including, without limitation, reports required to be filed with the SEC, FRB, FDIC and the Oregon Director and all required federal, state and local tax returns. Unless it is contesting the same in good faith and, if appropriate, has established reasonable reserves therefore, Umpqua will promptly pay all taxes and assessments indicated by tax returns as due or otherwise lawfully levied or assessed upon it or any of its properties and withhold or collect and pay to the proper governmental authorities or hold in separate bank accounts for such payment all taxes and other assessments which are required by law to be so withheld or collected. Preservation of Business . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, Umpqua shall use its best efforts to preserve intact its business organization; to preserve its relationships and goodwill with its customers, employees and others having business dealings with it; and to keep available the services of its present officers, agents and employees. Umpqua will not institute any novel, unusual or material change in its methods of management, lending policies, personnel policies, accounting, marketing, investments or operations. Best Efforts . Umpqua will use its commercially reasonable efforts to obtain and to assist L-B Bank in obtaining, all necessary approvals, consents and orders, including but not limited to approvals of the FRB, FDIC and the Oregon Director, to the transactions contemplated by this Agreement and the Plan of Merger, and to obtain the approval of the shareholders of Umpqua to the Agreement and the Plan of Merger, and the issuance of the Umpqua Common Stock pursuant to the Merger. Continuing Accuracy of Representations and Warranties . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, Umpqua will not take any action which would cause or constitute a breach of any of the representations or warranties of Umpqua contained in this Agreement, or which would cause any such representations or warranties, if made on and as the date of such event or the Effective Date, to be untrue or inaccurate in any material respect (other than an event so affecting a representation or warranty which is permitted hereby or is expressly limited to a state of facts existing at a time prior to the occurrence of such event). Promptly upon becoming aware of the occurrence of or the pending or threatened occurrence of any event which would cause or constitute such a breach or inaccuracy, Umpqua will give detailed written notice thereof to L-B Bank and will use its best efforts to prevent or promptly remedy such breach or inaccuracy. Updating Schedules . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, Umpqua will, no later than fifteen (15) days prior to the anticipated Effective Date, revise and supplement the schedules hereto prepared by or on behalf of Umpqua to ensure that such schedules remain accurate and complete. Notwithstanding anything to the contrary contained herein, supplementation of such schedules following the execution of this Agreement shall not be deemed a modification of Umpqua's representations or warranties contained herein. Rights of Access . During the period between the date hereof and the earlier of the Effective Date or the termination of this Agreement, Umpqua agrees to permit L-B Bank and its employees, agents and representatives full access to the premises of Umpqua on reasonable notice and to all books, files and records of Umpqua, including but not limited to loan files, litigation files and federal and state examination reports, and to furnish to L-B Bank such financial and operating data and other information with respect to the business and assets of Umpqua as L-B Bank shall reasonably request. Proxy Statement . Umpqua shall prepare the Proxy Statement. When delivered to shareholders, the Proxy Statement will fairly describe the transaction with respect to the business, financial condition and operations of Umpqua and will contain no untrue statement of any material fact and will not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, except those statements in or omission from the Proxy Statement that are not descriptive of or otherwise attributable to Umpqua. Umpqua will promptly advise L-B Bank in writing if at any time prior to the Effective Date Umpqua shall obtain knowledge of any facts that would, in the opinion of Umpqua or its counsel, make it necessary or appropriate to amend or supplement the Proxy Statement in order to make the statements therein not misleading or to comply with applicable law. Securities Registration; Fairness Hearing . Promptly following execution of this Agreement, Umpqua will take all necessary and appropriate steps to register under Oregon securities laws the shares of Umpqua Common Stock to be issued to L-B Bank shareholders under the Plan of Merger. Umpqua shall, in connection with the application for registration of the shares, request a hearing pursuant to ORS 59.095 on the fairness of the transactions contemplated by this Agreement and the Plan of Merger. Listing of Securities . Umpqua shall, promptly following the execution of this Agreement, file with the Nasdaq Stock Market, Inc., a listing application covering the Umpqua Shares and shall continue to take such steps as may be necessary to cause the Umpqua Shares to be listed on the Nasdaq National Market System on or before the Effective Date. Other Actions . Umpqua covenants and agrees to execute, file and record such documents and do such other acts and things as are necessary or appropriate to obtain required government and regulatory approvals to and to otherwise accomplish this Agreement and the Plan of Merger. Appointment to Umpqua Board of Directors . Effective with the filing of the Plan of Merger, the Umpqua Board of Directors shall by resolution, and the accordance with Umpqua Bylaws, increase the number of directors consisting such board, and shall appoint the L-B Bank Director selected pursuant to Section 3 to fill the vacancy created by such action. Employee Matters . Promptly after the Effective Date, Umpqua shall ensure that L-B Bank employees are permitted to participate in the employee benefit programs then made available to Umpqua employees with credit for service with L-B Bank deemed service with Umpqua for eligibility and vesting purposes, and that such employees shall receive benefits for 2001 prorated to reflect the portion of that year such employees were actually employed by Umpqua or Umpqua Bank, as the case may be. For purposes of participation in Umpqua bonus plans, profit sharing plans and arrangements, and similar benefits, L-B Bank employees shall receive credit for length of service and (except as may otherwise be provided in employment contracts) shall be entitled to participate in bonus compensation plans and awards beginning on the Effective Date, it being expressly recognized that previous L-B Bank employees continuing in the employ of Umpqua or Umpqua Bank at December 31, 2001 are to be paid in January 2002 their accrued bonus compensation under L-B Bank's bonus plans, profit sharing plans and arrangements, and similar programs through the Effective Date, in accordance with the terms thereof, and further recognized that for purposes of calculating the benefits due thereunder L-B Bank's financial performance for the 2001 fiscal year shall be determined without respect to any restructuring charge or any increase in the provision for loan and lease losses accrued by L-B Bank in excess of that required by this Agreement. IFN Transaction . Umpqua shall promptly inform L-B Bank of any material developments in the IFN Transaction and shall make appropriate disclosures of such developments in communications with L-B Bank shareholders, the FDIC, the FRB, the SEC and the Oregon Director. Indemnification and Insurance . (a) Umpqua agrees that from and after the Effective Date until 6 years following the Effective Date, Umpqua will indemnify and hold harmless each present and former director and officer of L-B Bank, determined as of the Effective Date (the "Indemnified Parties"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Date, whether asserted or claimed prior to, at or after the Effective Date, to the extent provided in the articles of incorporation or bylaws of L-B Bank in effect on the date of this Agreement to indemnify such person (and Umpqua will also advance expenses as incurred to the extent required under applicable law; provided, that the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification). (b) To the extent that paragraph (a) will not serve to indemnify and hold harmless an Indemnified Party, for a period of six years after the Effective Time, Umpqua agrees that it will, subject to the terms set forth herein, indemnify and hold harmless, to the fullest extent permitted under applicable law (and Umpqua will also advance expenses as incurred to the fullest extent permitted under applicable law, provided, that the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification), each Indemnified Party against any Costs incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the transactions contemplated by this Agreement. In the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims will continue until final disposition of any and all such claims. (c) Any Indemnified Party wishing to claim indemnification under paragraph (a) or (b), upon learning of any such claim, action, suit, proceeding or investigation, will promptly notify Umpqua, but the failure to so notify will not relieve Umpqua of any liability it may have to such Indemnified Party if such failure does not materially prejudice Umpqua. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Date), Umpqua will have the right to assume the defense thereof and Umpqua will not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that, if Umpqua elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between Umpqua and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Umpqua will pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received. If such indemnity is not available with respect to any Indemnified Party, then Umpqua and the Indemnified Party will contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. Conditions to Obligations of Umpqua The obligations of Umpqua under this Agreement and the Plan of Merger to consummate the Merger shall be subject to the satisfaction, on or before the Effective Date, of the following conditions (unless waived by Umpqua in writing and not required by law): Shareholders Approvals . Approval of this Agreement and the Plan of Merger by the shareholders of L-B Bank. No Litigation . Absence of any suit, action, or proceeding (made or threatened) against Umpqua, L-B Bank, or any of their directors or officers, seeking to challenge, restrain, enjoin, or otherwise affect this Agreement or the Plan of Merger or the transactions contemplated thereby; seeking to restrict the rights of the parties or the operation of the business of L-B Bank or Umpqua after consummation of the Merger; or seeking to subject the parties to this Agreement or the Plan of Merger or any of their officers or directors to any liability, fine, forfeiture or penalty on the grounds that the parties hereto or their directors or officers have violated or will violate their fiduciary duties to their respective shareholders or will violate any applicable law or regulation in connection with the transactions contemplated by this Agreement and the Plan of Merger. No Banking Moratorium . Absence of a banking moratorium or other suspension of payment by banks in the United States or any new material limitation on extension of credit by commercial banks in the United States. Regulatory Approvals . Procurement of all consents, orders and approvals required by law, and the satisfaction of all other necessary or appropriate legal requirements, including but not limited to approvals by FRB, FDIC and the Oregon Director of the transactions contemplated by the Agreement and the Plan of Merger, without any conditions which Umpqua determines to be materially disadvantageous or burdensome, and the expiration of all regulatory waiting periods. Compliance with Securities Laws . Receipt of an order of registration from the Oregon Director relating to the shares of Umpqua Common Stock to be issued under the Plan of Merger, and receipt of such other registration and qualification orders as may be necessary under applicable laws and regulations. Other Consents . Receipt of all other consents and approvals necessary for consummation of the transactions contemplated by this Agreement and the Plan of Merger. Corporate Documents . Receipt by Umpqua of: (a) Current good standing certificate for L-B Bank issued by the appropriate governmental officer as of a date immediately prior to the Effective Date; and (b) A copy, certified by the Secretary of L-B Bank, of resolutions adopted by the Board of Directors and shareholders of L-B Bank approving this Agreement and the Plan of Merger. Continuing Accuracy of Representations and Warranties . Except as expressly contemplated hereby, the representations and warranties of L-B Bank being true at and as of the Effective Date as though such representations and warranties were made at and as of the Effective Date; provided that, in the case of Section 4.13, the discovery of a claim against L-B Bank or any other obligation or liability of L-B Bank, not previously known, of less than $20,000 individually or $50,000 in the aggregate shall not be deemed a breach of L-B Bank's representation and warranties hereunder. Compliance with Covenants and Conditions . Compliance by L-B Bank with all agreements, covenants and conditions on its part required by this Agreement to be performed or complied with prior to or at the Effective Date. No Adverse Changes . Between June 30, 2001 and the Effective Date, the absence of any material adverse change in the business, assets, liabilities, income, or conditions, financial or otherwise, of L-B Bank, except changes contemplated by this Agreement and such changes as may have been previously approved in writing by Umpqua. Certificate . Receipt by Umpqua of a Certificate of the Chief Executive Officer and the Controller of L-B Bank, dated as of the Effective Date, certifying to the best of their knowledge the fulfillment of the conditions specified in Sections 8.1, 8.2, 8.4, 8.6, 8.8, 8.9 and 8.10 hereof, that the average deposits of L-B Bank for the month preceding the Effective Date are at least 95% of the average deposits of L-B Bank for the month of June 2001, that there has been no net reduction in regulatory capital of L-B Bank, taken as a whole, since June 30, 2001 (excluding the affect of the action taken by L-B Bank as required by Schedule 6.16), and such other matters with respect to the fulfillment by L-B Bank of any of the conditions of this Agreement as Umpqua may reasonably request. L-B Bank Fairness Opinion . L-B Bank will have received from D.A. Davidson an opinion, dated as of the date the Board of Directors of L-B Bank shall have approved this Agreement and updated immediately before each mails the Proxy Statement to its shareholders, to the effect that the terms of the Merger are fair to its shareholders from a financial point of view. Umpqua will provide D.A. Davidson such information as it may reasonably request in order to render its opinions. Umpqua Fairness Opinion . Umpqua will have received from Columbia Financial Advisors an opinion, updated immediately before it mails the Proxy Statement to its shareholders, to the effect that the terms of the Merger are fair to its shareholders from a financial point of view. L-B Bank will provide Columbia Financial Advisors such information as it may reasonably request in order to render its opinions. Employment Contracts . The President of L-B Bank shall have entered into an employment letter agreement in the form previously discussed by the parties. Affiliate Letters . Umpqua shall have received from the affiliates of L-B Bank the letter agreements provided for in Section 12.17 hereof. Director Commitments . Each of the L-B Bank directors shall have executed this Agreement in their individual capacities as provided at the end of this Agreement. Conditions to Obligations of L-B Bank The obligations of L-B Bank under this Agreement and the Plan of Merger to consummate the Merger, shall be subject to the satisfaction, on or before the Effective Date, of the following conditions (unless waived by L-B Bank in writing and not required by law): Shareholder Approval . Approval of this Agreement and the Plan of Merger by the shareholders of L-B Bank. No Litigation . Absence of any suit, action, or proceeding (made or threatened) against Umpqua, Umpqua Bank, L-B Bank, any of L-B Bank or their directors or officers, seeking to challenge, restrain, enjoin, or otherwise affect this Agreement or the Plan of Merger or the transactions contemplated thereby; or seeking to subject any of them or their officers or directors to any liability, fine, forfeiture or penalty on the grounds that such parties have violated or will violate their fiduciary duties to their respective shareholders or will violate any applicable law or regulation in connection with the transactions contemplated by this Agreement and the Plan of Merger. No Banking Moratorium . Absence of a banking moratorium or other suspension of payment by banks in the United States or any new material limitation on extension of credit by commercial banks in the United States. Regulatory Approvals . Procurement of all consents, orders and approvals required by law, and the satisfaction of all other necessary or appropriate legal requirements, including but not limited to approvals by FRB, FDIC and the Oregon Director of the transactions contemplated by the Agreement and the Plan of Merger, without any conditions which L-B Bank determines to be materially disadvantageous or burdensome, and the expiration of all regulatory waiting periods. Other Consents . Receipt of all other consents and approvals necessary for consummation of the transactions contemplated by this Agreement and the Plan of Merger. Corporate Documents . Receipt by L-B Bank of: (a) A certificate of existence for Umpqua and a good standing certificate for Umpqua Bank, issued by the appropriate governmental officer dated as of a date immediately prior to the Effective Date; (b) A copy, certified by each Secretary of Umpqua and Umpqua Bank, of the resolutions adopted by the Board of Directors of each approving this Agreement and the Plan of Merger. Continuing Accuracy with Representations and Warranties . Except as contemplated hereby, the representations and warranties of Umpqua being true at and as of the Effective Date as though such representations and warranties were made at and as of the Effective Date; provided that, in the case of Section 5.5, the discovery of a claim against Umpqua or any other obligation or liability of Umpqua, not previously known, of less than $ 500,000 individually or $ 1,000,000 in the aggregate shall not be deemed a breach of Umpqua's representation and warranties hereunder. Compliance with Covenants and Conditions . Umpqua having complied with all agreements, covenants and conditions on their part required by this Agreement to be performed or complied with prior to or at the Effective Date. No Adverse Changes . Between June 30, 2001 and the Effective Date, the absence of any material adverse change in the business, assets, liabilities, income or condition, financial or otherwise, of Umpqua and its Subsidiaries taken as a whole, except changes contemplated by this Agreement and such changes that may have been previously approved in writing by L-B Bank. Certificates . Receipt by L-B Bank of a Certificate of the President and Chief Financial Officer of Umpqua, dated as of the Effective Date, certifying to the best of their knowledge the fulfillment of the conditions specified in Sections 9.1, 9.2, 9.4, 9.5, 9.8, 9.9, and 9.10 hereof and such other matters with respect to the fulfillment by Umpqua of any of the conditions of this Agreement as L-B Bank may reasonably request. L-B Bank Fairness Opinion . L-B Bank will have received from D.A. Davidson an opinion, dated as of or prior to the date the Board of Directors shall have approved this Agreement and the Plan of Merger and updated or confirmed as of a date immediately before each mails the Proxy Statement to its shareholders, to the effect that the terms of the Merger is fair, from a financial point of view, to its shareholders. Umpqua will provide D.A. Davidson such information as it may reasonably request in order to render its opinions. Opinion of Counsel . Receipt by L-B Bank of a favorable opinion of Foster Pepper & Shefelman LLP, special counsel to Umpqua, dated as of the Effective Date, in form and substance satisfactory to L-B Bank and its counsel to the effect that: (a) The Umpqua Common Stock to be issued in accordance with the Plan of Merger, when delivered in exchange (or in partial exchange) for the shares of L-B Bank Common Stock, will be authorized, validly issued, fully paid and nonassessable; (b) The Umpqua Common Stock to be issued to the L-B Bank shareholders has been registered under Oregon securities laws, and is exempt from registration under the Securities Act and to the best of Foster Pepper & Shefelman LLP's knowledge, no stop order suspending the effectiveness of the Oregon registration or the issuance of the shares in any jurisdiction has been issued and no proceeding for the purpose has been initiated or pending or are contemplated under the Act or any other securities laws. The issuance of Umpqua Common Stock has been registered or qualified or is exempt from registration or qualification except when such failure would not (i) be material to Umpqua, or (ii) pose a material risk of material liability to any person who was, immediately prior to the Effective Date, an officer, director, employee or agent of L-B Bank. The Umpqua Common Stock to be issued to the L-B Bank shareholders has been listed for trading on the Nasdaq National Market System, and is not "restricted securities" as that term is defined in Rule 144 (a) (3) under the Act (other than that Umpqua Common Stock issued to persons to whom Rule 145 applies); and (c) On the basis of facts, representations and assumptions set forth in such opinion, which shall be consistent with the state of facts existing at the Effective Date, the Merger constitutes a "reorganization" within the means of Section 368(a) of the Code and that, accordingly, (i) no gain or loss will be recognized by L-B Bank, Umpqua Bank or Umpqua as a result thereof and (ii) no gain or loss will be recognized by a shareholder of L-B Bank who receives Umpqua Common Stock in exchange for shares of L-B Bank Common Stock, except with respect to cash received in exchange for L-B Bank Common Stock or cash received in lieu of fractional share interests. In rendering such opinion, counsel may require and rely upon representations contained in certificates of officers of L-B Bank, Umpqua Bank, Umpqua and others. Closing The transactions contemplated by this Agreement and the Plan of Merger will close in the office of Foster Pepper & Shefelman LLP at such time and on such date within seven (7) days following the satisfaction of all conditions to closing set forth in Sections 8 and 9 (not waived or to be satisfied by delivery of documents or opinions or a state of facts to exist at closing), as set by notice from Umpqua to L-B Bank, or at such other time and place as the parties may agree. Termination Procedure for Termination . This Agreement may be terminated before the Effective Date: (a) By the mutual consent of the Boards of Directors of Umpqua and L-B Bank acknowledged in writing; (b) By Umpqua or L-B Bank acting through their Boards of Directors upon written notice to the other party, if (i) at the time of such notice the Merger shall not have become effective by April 30, 2002 (or such later date as shall have been agreed to in writing by Umpqua and L-B Bank acting through their respective Boards of Directors) or (ii) shareholders of L-B Bank shall not have approved the Agreement, the Plan of Merger and the transactions contemplated thereby prior to April 30, 2002; (c) By Umpqua, acting through its Board of Directors upon written notice to L-B Bank, if there has been a material misrepresentation or material breach on the part of L-B Bank in its representations, warranties or covenants set forth herein or if there has been any material failure on the part of L-B Bank to comply with its obligations hereunder which misrepresentation, breach or failure is not cured within thirty (30) days notice to L-B Bank of such misrepresentation, breach or failure; or by L-B Bank, acting through its Board of Directors upon written notice to Umpqua, if there has been a material misrepresentation or material breach by Umpqua in its representations, warranties or covenants set forth herein or if there has been a material failure on the part of Umpqua to comply with its obligations hereunder which misrepresentation, breach or failure is not cured within thirty (30) days notice to Umpqua of such misrepresentation, breach or failure; (d) By L-B Bank upon advice of Graham & Dunn P.C. that the fiduciary duties of the L-B Bank directors so require. (e) By L-B Bank at any time during the five-business-day period preceding the Effective Date, if the Weighted Average Sales Price is less than $11.50 per share and Umpqua elected to fix the Umpqua Stock Exchange Value at $13.50 per share. Effect of Termination . In the event this Agreement is terminated pursuant to Section 11.1(a), it shall become wholly void and of no further force and effect and there shall be no liability on the part of any party or their respective Boards of Directors as a result of such termination or abandonment. If the Agreement is terminated by L-B Bank or Umpqua pursuant to Section 11.1(b)(ii), by Umpqua pursuant to Section 11.1(c) or by L-B Bank pursuant to Section 11.1(d) or (e), then L-B Bank agrees to pay to Umpqua its reasonable expenses incurred in entering into and attempting to consummate the transaction up to a maximum $500,000. In lieu of the foregoing, if, prior to December 31, 2002, L-B Bank enters into an Alternative Acquisition Transaction and (a) an Alternative Acquisition Transaction had been proposed prior to the date of the L-B Bank shareholder meeting or (b) at the time of such shareholder meeting L-B Bank or its Directors fail to materially comply with the covenants set forth in Section 6, and in either event if at the time of L-B Bank's shareholder meeting there was no material failure by Umpqua to meet the conditions set forth in Section 9, then L-B Bank will, within thirty (30) days after Umpqua's request, pay Umpqua $1,000,000. The payment called for in the foregoing sentence shall not be paid or payable if Umpqua elects to exercise all or any portion of that certain Stock Option Agreement dated contemporaneously herewith, the form of which is attached hereto as Exhibit B. In the event Umpqua elects to receive the payment set forth in this Section 11.2.2, this Section shall be the sole remedy in favor of Umpqua for termination of this Agreement pursuant to the sections named in the preceding sentence, and Umpqua specifically waives the protections of any equitable remedies that otherwise might be available to Umpqua. If the Agreement is terminated by Umpqua or L-B Bank pursuant to Section 11.1(b)(i) and the L-B Bank shareholders have approved the Merger, or by L-B Bank pursuant to Section 11.1(c), then Umpqua agrees to pay to L-B Bank its reasonable expenses incurred in entering into and attempting to consummate the transaction up to a maximum of $500,000. This Section 11.2.3 shall be the sole remedy in favor of L-B Bank for termination of this Agreement pursuant to the sections named in the preceding sentence, and L-B Bank specifically waives the protections of any equitable remedies that otherwise might be available to L-B Bank. Documents from L-B Bank . In the event of termination of this Agreement, Umpqua will promptly deliver to L-B Bank all originals and copies of documents and work papers obtained by Umpqua from L-B Bank, whether so obtained before or after the execution hereof, and will not use any information so obtained, and will not disclose or divulge such information so obtained; provided, however, that any disclosure of such information may be made to the extent required by applicable law or regulation or judicial or regulatory process; and provided further that Umpqua shall not be obligated to treat as confidential any such information which is publicly available or readily ascertainable from public sources, or which was known to Umpqua at the time that such information was disclosed to it by L-B Bank or which is rightfully received by Umpqua from a third party. The obligations arising under this Section 11.3 shall survive any termination or abandonment of this Agreement. Documents from Umpqua . In the event of termination of this Agreement, L-B Bank will promptly deliver to Umpqua all originals and copies of documents and work papers obtained by L-B Bank from Umpqua, whether so obtained before or after the execution hereof, and will not use, disclose or divulge any information so obtained; provided, however, that any disclosure of such information may be made to the extent required by applicable law, regulation or judicial or regulatory process; and provided further, L-B Bank shall not be obligated to treat as confidential any information which is publicly available or readily ascertainable from public sources, or which was known to L-B Bank at the time that such information was disclosed to it by Umpqua or which is rightfully received by L-B Bank from a third party. The obligations arising under this Section 11.4 shall survive any termination or abandonment of this Agreement. Miscellaneous Provisions Amendment or Modification . Prior to the Effective Date, this Agreement and the Plan of Merger may be amended or modified, either before or after approval by the shareholders of L-B Bank and Umpqua, only by an agreement in writing executed by the parties hereto upon approval of their respective boards of directors; provided, however, that no such amendment or modification shall increase the amount or modify the form of consideration to be received by the L-B Bank shareholders pursuant to the Plan of Merger without the approval of the Umpqua shareholders, or decrease the amount or modify the form of consideration to be received by the L-B Bank shareholders pursuant to the Plan of Merger without the approval of such shareholders. Public Statements . No party to this Agreement shall issue any press release or other public statement concerning the transactions contemplated by this Agreement without first providing the other parties hereto with a written copy of the text of such release or statement and obtaining the consent of the other parties to such release or statement, which consent will not be unreasonably withheld. The consent provided for in this section shall not be required if the delay would preclude the timely issuance of a press release or public statement required by law or any applicable regulations. The provisions of this section shall not be construed as limiting the parties from communications consistent with the purposes of this Agreement, including but not limited to seeking regulatory and shareholder approvals necessary to complete the transactions contemplated by this Agreement and the Plan of Merger. Confidentiality . Each party shall use the non-public information that it obtains from the other parties to this Agreement solely for the effectuation of the transactions contemplated by this Agreement and the Plan of Merger or for other purposes consistent with the intent of this Agreement and shall not use any such information for other purposes, including but not limited to the competitive detriment of the other parties. Each party shall maintain strictly confidential all non-public information it receives from the other parties and shall, upon termination of this Agreement prior to the Effective Date, return such information in accordance with Sections 11.3 and 11.4 hereof. The provisions of this section shall not prohibit the use of information consistent with the provisions of those sections or prohibit disclosure of information to the parties respective counsel, accountants, tax advisors, and consultants, provided that those persons also agree to maintain such information confidential in accordance with this section and Sections 11.3 and 11.4 hereof. Waivers and Extensions . Each of the parties hereto may, by an instrument in writing, extend the time for or waive the performance of any of the obligations of the other parties hereto or waive compliance by the other parties hereto of any of the covenants or conditions contained herein or in the Plan of Merger, other than those required by law. No such waiver or extension of time shall constitute a waiver of any subsequent or other performance or compliance. No such waiver shall require the approval of the shareholders of any party. Expenses . Each of the parties hereto shall pay their respective expenses in connection with this Agreement and the Plan of Merger and the transactions contemplated thereby, except as otherwise may be specifically provided. Financial Advisors . Each party is solely responsible for the payment of their own financial advisor fees. Binding Effect, No Assignment . This Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder, shall be assigned by any of the parties hereto without the prior written consent of the other parties. Representations and Warranties . The respective representations and warranties of each party hereto contained herein shall not be deemed to be waived or otherwise affected by any investigation made by the other parties, and except for claims based upon fraud of the parties or their representatives, shall not survive the closing hereof. Remedies . Except for claims based upon fraud of the parties or their representatives, the only remedy available to any party hereunder is for amounts payable pursuant to Section 11.2. No Benefit to Third Parties . Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person or entity, other than the parties hereto, any right or remedy under or by reason hereof. Notices . Any notice, demand or other communication permitted or desired to be given hereunder shall be in writing and shall be deemed to have been sufficiently given or served for all purposes if personally delivered or mailed by registered or certified mail, return receipt requested, or sent via confirmed facsimile to the respective parties at their addresses or facsimile numbers set forth below: If to Umpqua: Umpqua Holdings Corporation 200 Market Street, Suite 1900 Portland, Oregon 97201 Attn: Raymond P. Davis, President Fax: (503) 546-2498 Copies of Notices to Umpqua to: Kenneth E. Roberts, Esq. Foster Pepper & Shefelman LLP One Main Place, 15th Floor 101 SW Main Street Portland, OR 97204-3223 Fax: (800) 601-9234 If to L-B Bank: Linn-Benton Bank 333 SW Ellsworth Street PO Box 809 Albany, Oregon 97321 Attn: R.B. "Rod" Tibbatts, President & CEO Fax: (541) 967-4216 Copies of Notices to L-B to: Stephen M. Klein, Esq. Graham & Dunn PC 1420 5th Avenue, 33rd Floor Seattle, WA 98101-4087 Fax: (206) 340-9599 Any party from time to time may change such address or facsimile number by so notifying the other parties hereto of such change, which address or number shall thereupon become effective for purposes of this section. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon. Entire Agreement . This Agreement, including all of the schedules and exhibits hereto and other documents or agreements referred to herein constitute the entire agreement between the parties with respect to the Merger and other transactions contemplated hereby and supersedes all prior agreements and understandings between the parties with respect to such matters. Headings . The article and section headings in this Agreement are for the convenience of the parties and shall not affect the interpretation of this Agreement. Counterparts . At the convenience of the parties, this Agreement may be executed in counterparts, and each such executed counterpart shall be deemed to be an original instrument, but all such executed counterparts together shall constitute but one Agreement. Non-Competition Agreement . Except as may be consented to in writing by Umpqua, each member of the Board of Directors of L-B Bank signing at the end of this Agreement agrees that he or she will not, for a period of two years following his or her service on the Board of Directors of L-B Bank be associated in any way with any financial institution other than Umpqua (or any of its affiliates) with branches in Linn or Benton Counties, Oregon, whether directly or indirectly, alone or as a member of a partnership, or as an officer, director, stockholder or employee. Ownership of less than one percent of the stock of a publicly held corporation shall not be deemed to be prohibited by this provision, nor shall ownership of any number of shares of stock in Umpqua. Restrictions On Transfer . Umpqua will not deliver any Umpqua Common Stock to any shareholder who, in the opinion of counsel for Umpqua, is or may be an "affiliate" (as defined in Rule 144 promulgated by the SEC pursuant to the Securities Act) of L-B Bank except upon receipt by Umpqua of a letter or other written commitment from that shareholder to comply with Rule 145 as promulgated by the SEC, in a form reasonably acceptable to its counsel. The certificates representing shares to be issued to "affiliates" of L-B Bank will bear the following legend until such time as Umpqua shall have received an opinion of counsel satisfactory to Umpqua to the effect that the shares may be transferred without restriction and that the legend is no longer needed, or until such time as Umpqua shall reasonably have reached the same determination: "The shares represented by this certificate (i) were issued pursuant to a business combination and (ii) may be sold only in accordance with the provisions of Rule 145 under the Securities Act of 1933, as amended (the "Act"), or pursuant to an effective registration statement under the Act or an exemption therefrom." (Continued on Next Page)   IN WITNESS WHEREOF, the parties hereto, pursuant to the approval and authority duly given by resolutions adopted by a majority of their respective Boards of Directors, have each caused this Agreement to be executed by its duly authorized officers. UMPQUA HOLDINGS CORPORATION LINN-BENTON BANK By:   By:     Chief Executive Officer   Chief Executive Officer By:   By:     Secretary   Secretary UMPQUA BANK   By: President   By: Secretary                                   (Continued on Next Page)   The undersigned members of the Board of Directors of L-B Bank execute this Agreement for the limited purposes of Sections 6.2, 6.5, 6.12, 12.16, and 12.17 hereof.                      
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 2001 THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT     THIS 2001 THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is made as of the      day of January 2001, by and between MedicaLogic/Medscape, Inc., an Oregon corporation (the "Company"), and the shareholders of the Company listed on the signature pages hereof. RECITALS     A. As of May 28, 1999, the Company entered into a 1999 Amended and Restated Investor Rights Agreement with certain investors (as amended and supplemented, the "1999 MedicaLogic Agreement") that, among other things, provided certain registration rights to holders of capital stock of the Company.     B. As of August 4, 1999, Medscape, Inc., a Delaware corporation ("Medscape"), entered into an Amended and Restated Stockholders Agreement with certain of its stockholders (as amended and supplemented, the "1999 Medscape Agreement") that, among other things, provided certain registration rights to holders of Medscape capital stock.     C. As of August 3, 1999, Medscape entered into a Registration Rights Agreement (the "CBS Agreement") with CBS Corporation ("CBS") that provided certain registration rights to CBS with respect to Medscape common stock owned by CBS.     D. As of August 25, 1999 and September 8, 1999, the 1999 Medscape Agreement was amended, among other things, to provide certain registration rights to America Online, Inc. ("AOL") with respect to Medscape common stock underlying warrants issued to AOL by Medscape.     E. As of February 21, 2000, the Company, Medscape and Moneypenny Merger Corp., a Delaware corporation, entered into an Agreement of Reorganization and Merger (the "Merger Agreement") under which Medscape will become a wholly owned subsidiary of the Company (the "Merger") and the Company's name will be changed to MedicaLogic/Medscape, Inc.     F. In accordance with the Merger Agreement, as of May 19, 2000, the Company entered into a 2000 Amended and Restated Investor Rights Agreement (the "2000 Agreement") with the parties having registration rights prior to the Merger.     G. As of January 4, 2000, the Company entered into a 2000 Second Amended and Restated Investor Rights Agreement (the "Second Restatement") in connection with the Company's sale and issuance of up to 5,933,332 shares of Series 1 Convertible Redeemable Preferred Stock, without par value (the "Series 1 Preferred Stock"), and warrants to purchase up to 4,537,254 shares of common stock, without par value (the "Series 1 Warrant Shares") in a closing pursuant to the Preferred Stock and Warrant Purchase Agreement among the Company and certain investors listed on Signature Page I dated as of December 22, 2000, as amended.     H. The Company proposes to sell and issue to General Motors Corporation ("GM") a warrant to purchase up to 5,000,000 shares of common stock, without par value (the "GM Warrant Shares") pursuant to a Strategic Alliance Agreement (the "Alliance Agreement") between the Company and GM.     I. As a condition to entering into the Alliance Agreement, GM has requested that the Company extend to it registration rights with respect to the GM Warrant Shares.     J. The undersigned shareholders include the holders of more than fifty percent (50%) of the Company's common stock subject to the Second Restatement on the date hereof as required by Sections 4.7 and 1.14 of the Second Restatement. -------------------------------------------------------------------------------- AGREEMENT     In consideration of the mutual promises and covenants set forth herein, the parties hereto agree to amend and restate the 2000 Agreement to eliminate parties that are no longer subject hereto and to further provide as follows:     1.  Registration Rights.  The Company covenants and agrees as follows:     1.1  Definitions.  For purposes of this Section 1:     (a) The term "Act" means the Securities Act of 1933, as amended.     (b) The term "Common Stock" means the common stock of the Company.     (c) The term "Existing Registrable Securities" means all the shares of Common Stock of Medscape, other than Investor Registrable Securities, that were owned on the date of the Merger by any Holder who was a party to the 1999 Medscape Agreement.     (d) The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.     (e) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.13 hereof.     (f)  The term "Investor Registrable Securities" means all the shares of Common Stock of Medscape issued upon the conversion of the shares of the Series C Preferred Stock or Series D Preferred Stock of Medscape; excluding in all cases, however, (i) any Investor Registrable Securities sold pursuant to registration under the Act or (ii) any Investor Registrable Securities sold, subsequent to Medscape's initial public offering of securities registered under the Act, pursuant to SEC Rule 144 (or similar or successor rule) promulgated under the Act.     (g) The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.     (h) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act and the declaration or ordering of effectiveness of such registration statement or document.     (i)  The term "Registrable Securities" means (i) the Common Stock of the Company issued upon conversion of the Company's Series A Preferred Stock, Series A-1 Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series E Preferred Stock, Series E-1 Preferred Stock, Series F Preferred Stock, Series F-1 Preferred Stock, Series J Preferred Stock, and Series J-1 Preferred Stock as listed on Signature Page A hereto; (ii) the Common Stock of the Company purchased pursuant to the Common Stock Purchase Agreement by and among the Company, Mark A. Leavitt, Richard Samco, Sequoia Capital Growth Fund, Sequoia Technology Partners III, New Enterprise Associates VI, Limited Partnership and Stanford University, dated August 3, 1994, as listed on Signature Page B hereto; (iii) the Common Stock of the Company issued in the Merger upon conversion of the Existing Registrable Securities and Investor Registrable Securities; (iv) the Common Stock of the Company issued upon exercise of the Medscape warrants issued to AOL (the "Warrant Shares"); (v) the Series 1 Preferred Stock; (vi) the Common Stock of the Company issued or issuable upon conversion of the Series 1 Preferred Stock; (vii) the Series 1 Warrant Shares; (viii) the GM Warrant Shares, and (ix) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued 2 -------------------------------------------------------------------------------- as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which such person's rights under this Section 1 are not assigned or assignable and any Registrable Securities sold to the public or sold pursuant to Rule 144 promulgated under the Act.     (j)  The number of shares of "Registrable Securities then outstanding" shall be (x) the aggregate number of shares of Common Stock outstanding which are Registrable Securities plus (y) the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are Registrable Securities.     (k) The term "SEC" shall mean the Securities and Exchange Commission.     1.2  Request for Registration.       (a) If     (i)  the Company shall receive a written request from (A) Holders of at least fifteen percent (15%) of the Registrable Securities then outstanding referred to in clauses (i) and (ii) of subsection 1.1(i) or (B) Holders of at least thirty percent (30%) of the Registrable Securities then outstanding held by the former holders of the Company's Series J Preferred Stock (a "Series J Investor") that the Company file a registration statement under the Act covering the registration of the Registrable Securities then outstanding, or     (ii) the Company shall receive a written request from (W) Holders of at least fifty percent (50%) of the Registrable Securities then outstanding held by the former holders of Investor Registrable Securities (excluding Holders described in clause (X), (Y) or (Z) hereof) as listed on Signature Page C hereto, (X) any Holder who purchased more than 650,000 shares of the Series D Preferred Stock of Medscape (a "Series D Holder"), (Y) any Holder who purchased more than 260,000 shares of the Series E Preferred Stock of Medscape as listed on Signature Page E hereto (a "Series E Holder"), or (Z) any Holder of Warrant Shares, that the Company file a registration statement on Form S-1 (or similar successor forms) under the Act covering the registration of Registrable Securities issued in exchange for Investor Registrable Securities, or     (iii) the Company shall receive a written request from Holders of at least twenty-five percent (25%) of the Registrable Securities issued or issuable upon conversion of the Series 1 Preferred Stock that the Company file a registration statement under the Act covering the Registrable Securities held by such Holders, or     (iv) the Company shall receive a written request from the Holders of the Registrable Securities referred to in clause (viii) of subsection 1.1(i) that the Company file a registration statement under the Act covering the Registrable Securities held by such Holders, then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders in accordance with Section 4.5 (the "Notice of Demand") and shall, subject to the limitations of subsection 1.2(b), use its reasonable best efforts to effect as soon as practicable, and in any event within one hundred twenty (120) days) (or sixty (60) days if such registration under the Act is on Form S-3) of the receipt of such request, the registration under the Act of all Registrable Securities that the Holders request to be registered within twenty (20) days of the receipt of the Notice of Demand, provided that the Registrable Securities requested by the Holders to be registered pursuant to such request must have an anticipated aggregate public offering price of not less than $5,000,000. 3 --------------------------------------------------------------------------------     (b) If the Holders initiating the registration request hereunder ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Initiating Holders and shall be reasonably acceptable to the Company, provided that such underwriter shall be of nationally recognized standing and shall agree to firmly underwrite such offering. In such event, the right of any Holder to include Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provisions of this Section 1.2, if the underwriter, with respect to a registration requested under subsection 1.2(a), advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then such Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including such Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting; and provided, further, that (i) Registrable Securities held by Holders referred to in subsection 1.2(a)(ii) shall be entirely excluded from the underwriting before any Registrable Securities held by Holders referred to in subsections 1.2(a)(i), 1.2(a)(iii) and 1.2(a)(iv), (ii) all Registrable Securities held by Holders referred to in subsection 1.2(a)(i) shall be entirely excluded from the underwriting before any Registrable Securities held by Holders referred to in subsections 1.2(a)(iii) and 1.2(a)(iv) are excluded, and (iii) all Registrable Securities held by Holders referred to in subsection 1.2(a)(iv) shall be entirely excluded from the underwriting before any Registrable Securities held by Holders referred to in subsection 1.2(a)(iii) are excluded. In a registration pursuant to subsection 1.2(a), if Registrable Securities held by a Series J Investor are excluded from the registration pursuant to the previous sentence as a result of election of Holders other than Series J Investors to participate in the registration, then that registration will not be deemed to be a registration requested by the Series J Investors for the purposes of Section 1.2(d)(i).     (c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction involving the Company and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period.     (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, 4 --------------------------------------------------------------------------------     (i)  any registration pursuant to subsection 1.2(a)(i):     (A) After the Company has effected three (3) registrations pursuant to subsection 1.2(a)(i), two (2) of which may only be initiated by Series J Investors under subsection 1.2(a)(i)(B), and such registrations have been declared or ordered effective; or     (B) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date ninety (90) days after the effective date of, a registration subject to Section 1.3 hereof, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or     (ii) any registration pursuant to subsection 1.2(a)(ii):     (A) After the Company has effected seven (7) registrations pursuant to subsection 1.2(a)(ii), two (2) of which may only be initiated by a Series D Holder, one (1) of which may only be initiated by a Series E Holder, two (2) of which may only be initiated by a Holder of Warrant Shares, and two (2) of which may only be initiated by Holders who are not Series D Holders, Series E Holders or Holders of Warrant Shares; or     (B) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date ninety (90) days after the effective date of, a registration subject to Section 1.3 hereof, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or     (C) If the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request made under Section 1.12 hereof.     (iii) any registration pursuant to subsection 1.2(a)(iii):     (A) After the Company has effected three (3) registrations pursuant to subsection 1.2(a)(iii); or     (B) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date ninety (90) days after the effective date of, a registration subject to Section 1.3 hereof, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective.     (iv) any registration pursuant to subsection 1.2(a)(iv):     (A) After the Company has effected three (3) registrations pursuant to subsection 1.2(a)(iv); or     (B) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date ninety (90) days after the effective date of, a registration subject to Section 1.3 hereof, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective.     1.3  Company Registration.  If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its stock or other securities under the Act in connection with the public 5 -------------------------------------------------------------------------------- offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Company shall, at such time, promptly, but at least thirty (30) days prior to filing such registration statement, give each Holder written notice of such registration in accordance with Section 3.5 (the "Piggy-Back Notice"). Upon the written request of each Holder given within twenty (20) days after receipt of the Piggy-Back Notice, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered.     1.4  Obligations of the Company.  Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:     (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its diligent efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred eighty (180) days; provided, however, that (i) such 180-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous or delayed basis, such 180-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Act, permits an offering on a continuous or delayed basis; and provided further that applicable rules under the Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (I) includes any prospectus required by Section 10(a)(3) of the Act or (II) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (I) and (II) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the registration statement.     (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement.     (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them.     (d) Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Act. 6 --------------------------------------------------------------------------------     (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.     (f)  Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.     (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed.     (h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.     (i)  Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.     1.5  Furnish Information.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities.     1.6  Expenses of Demand Registration.  All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 1.2 (which right may be assigned as provided in Section 1.13), including (without limitation) all registration, filing, qualification, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the Company; provided, however, that such counsel shall submit reasonably detailed invoices for review by the Company's General Counsel prior to payment; and provided further, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Initiating Holders agree to forfeit the applicable demand registration right pursuant to Section 1.2; provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with 7 -------------------------------------------------------------------------------- reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 1.2.     1.7  Expenses of Company Registration.  The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 1.3 for each Holder (which right may be assigned as provided in Section 1.13), including (without limitation) all registration, filing, qualification, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders; provided, however, that such counsel shall submit reasonably detailed invoices for review by the Company's General Counsel prior to payment; but excluding underwriting discounts and commissions relating to Registrable Securities.     1.8  Underwriting Requirements.  In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Holders of a majority of the Registrable Securities that indicated they would like to be included in the underwriting, the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according to the total amount of securities entitled and requested to be included therein owned by each selling shareholder or in such other proportions as shall mutually be agreed to by such selling shareholders) but in no event shall (i) the amount of securities of the selling Holders included in the offering be reduced below thirty percent (30%) of the total amount of securities included in such offering, or (ii) notwithstanding (i) above, Section 1.2 governs the exclusion of shares being sold by a shareholder exercising a demand registration right granted thereunder. For purposes of the preceding parenthetical concerning apportionment, for any selling shareholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and shareholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling shareholder," and any pro-rata reduction with respect to such "selling shareholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling shareholder," as defined in this sentence.     1.9  Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.     1.10  Indemnification.  In the event any Registrable Securities are included in a registration statement under this Section 1:     (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject 8 -------------------------------------------------------------------------------- under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law, or any rule or regulation promulgated under the Act, and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person.     (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person or any such underwriter or Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, however, that in no event shall any indemnity under this subsection 1.10(b) exceed the net proceeds from the offering received by such Holder.     (c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written 9 -------------------------------------------------------------------------------- notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10.     (d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, (i) no Holder shall be required to contribute any amount in excess of the public offering price of all Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.     (e) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise.     1.11  Reports Under Securities Exchange Act of 1934.  With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:     (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times;     (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective;     (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and     (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Act, and the 1934 Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may 10 -------------------------------------------------------------------------------- be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.     1.12  Form S-3 Registration.  In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will:     (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders in accordance with Section 3.5 (the "S-3 Notice"); and     (b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within twenty (20) days after receipt of the S-3 Notice; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.12: (1) if Form S-3 is not available for offering by the Holders; (2) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $1,000,000; (3) if the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction involving the Company, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than one hundred twenty (120) days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period; (4) if the Company has, within the six (6) month period preceding the date of such request, already effected one registration on Form S-3 for the Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.     (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. The Company shall bear and pay all expenses incurred in connection with a registration requested pursuant to Section 1.12, including (without limitation) all registration, filing, qualification, printer's and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holder or Holders; provided, however, that such counsel shall submit reasonably detailed invoices for review by the Company's General Counsel prior to payment; but excluding underwriting discounts and commissions relating to Registrable Securities; and provided further, that the Company shall not be obligated to pay registration expenses under this paragraph if the Company has already effected two registrations on Form S-3 pursuant to this Section 1.12 after the date hereof. Registrations effected pursuant to this Section 1.12 shall not be counted as registrations effected pursuant to Section 1.2 or 1.3.     1.13  Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related 11 -------------------------------------------------------------------------------- obligations) by a Holder to a transferee or assignee of such securities, provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee acquires from the Holder more than 100,000 shares; (c) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.15 below; and (d) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act.     1.14  Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 1.2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration which could result in such registration statement being declared effective within one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 1.2. If the Company grants registration rights to holders of any security of the Company which are more favorable to such holders than the registration rights granted hereunder without the prior written consent of the Holders of a majority of the outstanding Registrable Securities, then such more favorable registration rights shall also be deemed to be granted to the Holders of Registrable Securities hereunder, and the Company covenants and agrees to take any and all steps necessary to modify the terms of this Agreement to so provide.     1.15  [Deleted]       1.16  Termination of Registration Rights.       (a) No Holder shall be entitled to exercise any right provided for in this Section 1 after December 10, 2009.     (b) In addition, the right of any Holder to request registration or inclusion in any registration pursuant to Section 1 shall terminate on such date that all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any 90-day period; provided, however, that the provisions of this Section 1.16(b) shall not apply to any Holder who owns at least one percent (1%) of the Company's outstanding Common Stock.     2.  Covenants of the Company.       2.1  Right of First Offer.  Subject to the terms and conditions specified in this Section 2.1, the Company hereby grants to each holder of at least 300,000 shares of Series 1 Preferred Stock or Common Stock issued upon the conversion of shares of Series 1 Preferred Stock (or a combination thereof) a right of first offer to purchase its Pro Rata Share (as hereinafter defined) (in whole or in part) with respect to future sales by the Company of its Shares (as hereinafter defined). For purposes of this Section 2.1, a holder's "Pro Rata Share" of Shares shall mean that number of Shares that equals the proportion that (i) the number of shares of Common Stock issuable upon conversion of the Series 1 Preferred Stock plus the Series 1 Warrant Shares plus any other shares of Common Stock, in each case, held by such holder (other than shares purchased in the open market or directly from the Company not pursuant to this Section 2.1) bears to (ii) the total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of all convertible or exercisable securities then outstanding). 12 --------------------------------------------------------------------------------     Each time the Company proposes to offer any shares of, or securities convertible into, exercisable or exchangeable for any shares of any class of its capital stock ("Shares"), the Company shall first make an offering of such Shares to each such holder of Series 1 Preferred Stock in accordance with the following provisions:     (a) The Company shall deliver a notice by confirmed facsimile transmission, certified mail or a nationally recognized overnight courier service ("Notice") to each holder of Series 1 Preferred Stock stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares to be offered, and (iii) the price and a summary of the terms, if any, upon which it proposes to offer such Shares.     (b) By written notification received by the Company within ten (10) calendar days after receipt of the Notice, each holder of Series 1 Preferred Stock may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to its Pro Rata Share of such Shares.     (c) If all Shares that the holders of Series 1 Preferred Stock are entitled to obtain pursuant to Section 2.1(b) are not elected to be obtained as provided in Section 2.1(b) hereof, the Company may, during the sixty (60)-day period following the expiration of the period provided in Section 2.1(b) hereof, offer the remaining unsubscribed portion of such Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered to the holders of Series 1 Preferred Stock in accordance herewith.     (d) The right of first offer in this Section 2.1 shall not be applicable to (i) shares of Common Stock issued pursuant to a dividend or distribution to shareholders generally, including a split or subdivision of the outstanding shares of the Company; (ii) shares of Common Stock issuable or issued to employees, consultants or directors of this corporation pursuant to a stock option plan or stock purchase plan approved by the Board of Directors of the Corporation on or prior to the date of this Agreement; (iii) shares of Common Stock issued to Baylor College of Medicine or assignees in connection with the sale of software licenses by the Corporation in the Houston, Texas market through December 31, 2002; (iv) shares of Common Stock issuable or issued in consideration for services rendered to the Corporation or its subsidiaries (other than shares issuable or issued pursuant to (ii) above), in an aggregate amount not to exceed 200,000 shares per annum; (v) shares of Common Stock issuable or issued in connection with acquisitions, business combinations or strategic alliances, including corporate partnering agreements, not to exceed 500,000 shares in the aggregate (as adjusted for stock dividends, splits and combinations); (vi) shares of Common Stock the issuance of which has been approved in writing by the holders of at least a majority of the then outstanding shares of Series 1 Preferred Stock; (vii) shares of Common Stock issuable upon (w) the conversion of the Series 1 Preferred Stock, (x) the exercise of the Series 1 Warrants, (y) the exercise of the warrant dated February 15, 2000, issued to Lazard Freres & Co. LLC, not to exceed 32,300 shares in the aggregate (as adjusted for stock dividends, splits and combinations), or (z) the exercise of the warrants dated September 3, 1999, issued to America Online, not to exceed 727,911 shares in the aggregate (as adjusted for stock dividends, splits and combinations); (viii) the exercise of the Warrant dated September 14, 1999, issued to Stoel Rives LLP, not to exceed 10,000 shares (as adjusted for stock dividends, splits, and combinations); or (ix) shares of Common Stock issued pursuant to Sections 2.3 and 2.4 of the Stock Purchase Agreement, dated April 17, 2000, between the Company and the founders of AnywhereMD.com, Inc. (including pursuant to employment agreements of even 13 -------------------------------------------------------------------------------- date therewith between the Company and such founders), not to exceed 600,000 shares in the aggregate (as adjusted for stock dividends, splits and combinations).     2.2  Tax Matters.       (a) The Company covenants that it will not become a U.S. real property holding corporation ("USRPHC") at any time while any Series 1 Purchaser owns any Registrable Securities or any securities exercisable or convertible into Registrable Securities (the "Stock").     (b) In the event that a Series 1 Purchaser desires to sell or dispose of any Stock, and upon demand by such Series 1 Purchaser, the Company agrees to deliver to such Series 1 Purchaser a letter (the "Letter") which complies with Sections 1.1445-2(c)(3) and 1.897-2(h) of the Treasury Regulations during the period equal to the lesser of (i) the period beginning five years prior to the date of the Letter through the date of the Letter and (ii) the period from the date of this Agreement through the date of the Letter. The Letter shall be delivered to the Series 1 Purchaser one business day prior to the close of any sale or disposition of the Stock by the Series 1 Purchaser (the "Delivery Date"). The Letter shall be dated as of the Delivery Date and signed by a corporate officer who must verify under penalties of perjury that the statement is correct to his knowledge and belief pursuant to Section 1.897-2(h) of the Treasury Regulations.     (c) The parties hereto agree and acknowledge that, unless in the opinion of outside counsel to the relevant party such action is necessary to comply with its obligations under the Internal Revenue Code of 1986, as amended (the "Code"), (i) no party hereto will take the position that any amount will be includable in income with respect to the Series 1 Preferred Stock under Section 305 of the Code and that no parties shall file Tax Returns (as defined in the Series 1 Agreement) to the contrary (the "Reporting Agreement") and (ii) no party hereto shall take any position inconsistent with the Reporting Agreement upon examination of any Tax Return in any refund claim, in any litigation or otherwise.     3.  Agreement to Vote Shares.       3.1  Voting.  Each of the undersigned shareholders agrees that at any meeting of the shareholders of the Company, however called, and in any action taken by written consent of shareholders of the Company without a meeting, the shareholder shall vote the shareholder's shares of Common Stock and/or Series 1 Preferred Stock, and shall cause any holder of record of the shareholder's shares of Common Stock or Series 1 Preferred Stock, to vote in favor of the shareholder approval contemplated by Section 4.2(b) of the Preferred Stock and Warrant Purchase Agreement dated as of December 22, 2000 between the Company and certain investors named therein.     4.  Miscellaneous.       4.1  Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.     4.2  Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Oregon.     4.3  Counterparts.  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. 14 --------------------------------------------------------------------------------     4.4  Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.     4.5  Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid or upon delivery to a recognized courier service and addressed to the party to be notified at the address indicated for such party on the signature pages hereof, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. Any notice given to the Company under this Section 3.5 shall be copied via email to [email protected].     4.6  Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.     4.7  Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of more than two-thirds (2/3) of the Registrable Securities then outstanding, except as follows:     (a) any amendment or waiver affecting only the rights of holders of Registrable Securities described in subsection 1.1(i)(i) shall require only the consent of the Company and the holders of more than fifty percent (50%) of such Registrable Securities, except that any amendment or waiver affecting the rights of Series J Investors shall require the consent of the holders of more than fifty percent (50%) of the Registrable Securities held by the Series J Investors;     (b) any amendment or waiver affecting only the rights of holders of Registrable Securities held by former Holders of Investor Registrable Securities, excluding Series D Holders and Series E Holders, shall require only the consent of the Company and the holders of more than sixty-six and two-thirds percent (662/3%) of such Registrable Securities;     (c) any amendment or waiver affecting only the rights of holders of Registrable Securities who were Series D Holders shall require only the consent of the Company and the holders of more than sixty-six and two-thirds percent (662/3%) of such Registrable Securities;     (d) any amendment or waiver affecting only the rights of holders of Registrable Securities who were Series E Holders shall require only the consent of the Company and the holders of more than fifty percent (50%) of such Registrable Securities;     (e) any amendment or waiver affecting only the rights of holders of Registrable Securities described in subsections 1.1(i)(v), 1.1(i)(vi) and 1.1(i)(vii) shall require only the consent of the Company and the holders of more than sixty-six and two-thirds percent (662/3%) of such Registrable Securities, acting as a single class; and     (f)  any amendment or waiver affecting only the rights of holders of Registrable Securities described in subsection 1.1(i)(viii) shall require only the consent of the Company and the holders of more than fifty percent (50%) of such Registrable Securities. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of such Registrable Securities and the Company. 15 --------------------------------------------------------------------------------     4.8  Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.     4.9  Aggregation of Stock.  All shares of Registrable Securities (including the Common Stock issuable upon conversion thereof), as applicable, held or acquired by a Holder shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.     4.10  Entire Agreement; Amendment; Waiver.  This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and supersedes the Second Restatement. 16 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.     COMPANY: MEDICALOGIC, INC.     By: -------------------------------------------------------------------------------- Printed Name: David Moffenbeier Title: Chief Executive Officer SHAREHOLDERS:   See Attached Signature Pages 17 -------------------------------------------------------------------------------- QuickLinks 2001 THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT RECITALS AGREEMENT
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.20 SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE AND COVENANT NOT TO SUE     This Settlement Agreement and Mutual Release and Covenant Not to Sue (the "Agreement") is made and entered into as of the date of the last Party to execute this Agreement by and between HearMe, a Delaware corporation ("HearMe"), and GameSpy Industries, Inc., a California corporation ("GameSpy") (collectively, the "Parties"). RECITALS     WHEREAS, HearMe and GameSpy entered into an Asset Purchase Agreement on or about December 18, 2000 ("APA");     WHEREAS, pursuant to the APA, GameSpy executed a promissory note on or about January 19, 2001 in favor of HearMe in the principal amount of $4,521,099.55 ("Note");     WHEREAS, HearMe and GameSpy entered into a Transition Services Agreement dated as of January 19, 2001 ("TSA") pursuant to which GameSpy was to make particular payments to HearMe;     WHEREAS, on or about May 30, 2001, eFront Media, Inc. filed an Action against HearMe and GameSpy for breach of written contract in Orange County, California as Case No. 01CC06979 (the "Action");     WHEREAS, HearMe contends that GameSpy is in breach of its obligations to pay to HearMe (i) approximately $4,717,702.00 in principal and accrued interest under the Note, and (ii) approximately $153,523.00 pursuant to or in connection with the TSA (collectively, the "Claimed Amounts"), and GameSpy disputes HearMe's contentions (the "Dispute"); and     WHEREAS, except as otherwise set forth herein, the Parties have decided to compromise, settle and dispose of all claims between them arising out of the Dispute in order to avoid litigation and the attorneys' fees and costs associated therein.     NOW, THEREFORE, in consideration of the promises, covenants, representations and warranties and other good and valuable consideration contained herein, it is hereby agreed by and between the parties hereto as follows: AGREEMENT     1.  GameSpy's Obligations       In consideration of the releases set forth below and the transfer by HearMe to GameSpy of the GameSpy Shares (as defined in and pursuant to Section 2 below), and in full payment of all claims arising out of or relating to the Dispute, now or in the future, GameSpy agrees that:     1.1 Simultaneously with the execution of this Agreement (the "Effective Time"), GameSpy shall pay to HearMe the amount of $2,435,613.00 (the "Payment") by wire transfer to the bank account separately designated by HearMe to GameSpy; and     1.2 GameSpy shall fully defend and indemnify HearMe without reservation of rights against any and all liability, losses, damages, judgment, settlement payments, attorneys' fees and other costs and expenses which HearMe would otherwise suffer or incur in or relating to the Action.     1.3 GameSpy has validly assumed all of HearMe's obligations and liabilities under the Assumed Contracts (as defined in the APA) and shall meet all such obligations and liabilities following the Effective Time (as defined in the APA). --------------------------------------------------------------------------------     2.  HearMe's Obligations       In consideration of the releases set forth below, GameSpy's performance of its obligations set forth in section 1 above and the representations and warranties set forth below, and in full payment of all claims arising out of or relating to the Dispute, at the Effective Time HearMe shall transfer to GameSpy 2,332,743 shares of Common Stock of GameSpy held by HearMe (the "GameSpy Shares"). The Parties acknowledge and agree that 360,733 of the GameSpy Shares (the "Escrow Shares") have been deposited with U.S. Bank Trust, National Association (the "Escrow Agent"), as Escrow Agent pursuant to the Escrow Agreement dated as of January 19, 2001 by and among HearMe, GameSpy and the Escrow Agent (the "Escrow Agreement"). At the Effective Time, HearMe shall deliver to GameSpy (a) a stock certificate representing at least 1,972,010 of the GameSpy Shares (the "Non-Escrow Shares"), (b) an executed Stock Assignment Separate From Certificate in substantially the form attached hereto as Exhibit A with respect to the transfer of the Non-Escrow Shares, (c) an executed Stock Assignment Separate From Certificate in substantially the form attached hereto as Exhibit B with respect to the transfer of the Escrow Shares, and (d) an executed copy of the Joint Escrow Agent Instructions in substantially the form attached hereto as Exhibit C (the "Joint Instructions"). GameSpy represents and warrants to HearMe that GameSpy has paid all amounts due and payable to the Escrow Agent pursuant to Section 5(j) of the Escrow Agreement, and promptly after the Effective Time GameSpy shall execute and deliver the Joint Instructions to the Escrow Agent. If, following the transfer of the GameSpy Shares to GameSpy, HearMe still holds shares of common stock of GameSpy, then GameSpy agrees to promptly (and in any event within five (5) business days) execute and deliver to HearMe a certificate representing such shares.     3.  Mutual and General Release       3.1 In consideration of HearMe's covenants and obligations hereunder, GameSpy, on behalf of itself, and its agents, employees (past and present), officers (past and present), directors (past and present), attorneys, parents (direct or indirect), subsidiaries, predecessors in interest, assigns and successors, hereby forever releases, acquits and discharges HearMe, and its agents, employees (past and present), officers (past and present), directors (past and present), subsidiaries, attorneys, parents (direct or indirect), predecessors in interest, assigns and successors, from any and all claims, causes of action (whether at law or in equity, or otherwise), demands, debts, obligations, liabilities, payments, transfers of money or things of value, accounts, obligations, costs, attorneys fees, expenses, liens, rights of indemnity (legal or equitable), rights of subrogation, rights of contribution, rights of reimbursement, civil penalties and remedies, of any nature whatsoever, that relate to and/or arise out of the Dispute or any past agreement between the parties except as explicitly provided for in this agreement, provided, however, that HearMe is not released from its obligations under this Agreement.     3.2 In consideration of GameSpy's covenants and obligations hereunder, HearMe, on behalf of itself, and its agents, employees (past and present), officers (past and present), directors (past and present), attorneys, parents (direct or indirect), subsidiaries, predecessors in interest, assigns and successors, hereby forever releases, acquits and discharges GameSpy, and its agents, employees (past and present), officers (past and present), directors (past and present), attorneys, parents (direct or indirect), subsidiaries, predecessors in interest, assigns and successors from any and all claims, causes of action (whether at law or in equity, or otherwise), demands, debts, obligations, liabilities, payments, transfer of money or things of value, accounts, obligations, costs, attorneys fees, expenses, liens, rights, rights of indemnity (except as provided in Section 1 or Section 12 of this Agreement), rights of subrogation, rights of contribution, rights of reimbursement, civil penalties and remedies, of any nature whatsoever, that relate to and/or arise out of the Dispute or any past agreement between the parties except as explicitly provided for in this agreement, provided, however, that GameSpy is not released from its obligations under this Agreement. 2 --------------------------------------------------------------------------------     3.3 The Parties each represent and warrant that none of the matters released that are required to be released by such Party under Sections 3.1 and 3.2 above has been assigned or transferred by such Party in whole or in part, and that such Party is fully entitled and authorized to cause all of said respective matters released, actually to be released in full as provided in Sections 3.1 and 3.2 above.     3.4 The parties expressly understand and acknowledge that it is possible that unknown losses or claims exist or that present losses may have been underestimated in amount or severity, and that the parties expressly took that into account in agreeing to execute this Agreement, and a portion of said consideration and the mutual covenants contained herein, having been bargained for between the Parties with the knowledge of the possibility of such unknown claims, were given in exchange for a full accord, satisfaction and discharge of all claims except as specifically set forth in Section 1, Section 9, Section 10 or Section 12 of this agreement.     4.  Civil Code Section 1542.  Consequently, except as set forth in Section 1 or Section 10, as to the matters being released pursuant to this Agreement, the Parties expressly waive all rights under California Civil Code Section 1542, which provides 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.     5.  General Representations and Warranties.       5.1 Each Party to this Agreement represents and acknowledges that it is executing it completely voluntarily, and without any duress or undue influence of any kind, from any source, and that it has full power, authority and legal right to execute, deliver and perform all actions required under this Agreement.     5.2 Each Party to this Agreement hereby represents and warrants to each other Party hereto that in entering into this Agreement it has relied upon the legal advice of its respective attorneys, who are the attorneys of its own choice, and that the terms and legal effect of this Agreement have been completely read and explained to it by its attorney and those terms and legal effect are fully understood and voluntarily accepted it. This Agreement is the product of negotiation and preparation by and amongst each Party hereto and their respective attorneys, and each Party represents it has freely and voluntarily consented to and authorized this Agreement. Accordingly, all parties hereto acknowledge and agree that this Agreement shall not be deemed prepared or drafted by one Party or another, or by the attorneys for one Party or another.     5.3 The Parties covenant and agree that except as otherwise set forth herein they will not permit to be filed or commenced in their name or on their behalf, any lawsuit, arbitration or administrative claim against the other Party based upon any claim related to and/or arising out of the Dispute.     6.  Representations and Warranties of GameSpy.  GameSpy represents and warrants to HearMe as follows:     GameSpy has provided to HearMe its audited financial statements (including balance sheet, income statement and statement of cash flows) as of and for the year ended December 31, 2000 and its unaudited financial statements (including balance sheet, income statement and statement of cash flows) as of the date of this agreement (collectively, the "Financial Statements"). The balance sheet as of the date of this agreement included in the Financial Statements (the "Current Balance Sheet") accurately reflects the current assets of GameSpy, as determined in accordance with generally accepted accounting principles, including, but not limited to, cash and cash equivalents, short-term investments, and accounts receivable ("Current Assets"). Except as set forth in the Financial Statements, GameSpy has 3 -------------------------------------------------------------------------------- no material assets, accounts receivable or other rights to payments or financing, contingent or otherwise (collectively, "Other Rights"), other than assets, accounts receivables or other rights under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in both cases, individually or in the aggregate are not material to the financial condition of the Company.     7.  No Admission of Liability.  This Agreement is the result of good faith compromise of disputed claims and shall never at any time or for any purpose be considered an admission of the correctness of the claims advanced by either Party, or of any liability by any Party, all of whom continue to deny all liability, disclaim all responsibility, and dispute the factual allegations claimed by the other Party.     8.  Confidentiality.       8.1 Each Party to this Agreement shall not disclose the fact of this Agreement, or any of its terms to any person except to their accountants and lawyers, or as otherwise required by law (including, but not limited to, HearMe's disclosure obligations under the federal securities laws) or in the good faith operation of the Parties' respective businesses.     8.2 This covenant not to disclose is subject to the following exception: If either Party is asked about the status or outcome of the Dispute or any claim potentially asserted by the other party with respect to the Dispute, the Party may reply with the words: "the matter has been resolved," but shall not otherwise indicate the terms or nature of the resolution of this Dispute.     8.3 Disclosure of any of the terms of this Agreement by anyone to whom any Party or Parties disclose shall be treated as an unauthorized disclosure by said Party or Parties themselves.     9.  Liquidated Damages.  HearMe is entering into this Agreement, transferring the GameSpy Shares to GameSpy and compromising valuable rights to the full Claimed Amount based in significant part upon reliance on GameSpy's representations and warranties set forth above in Section 6. Accordingly, in the event that GameSpy's actual Current Assets as of the date of this agreement (the "Actual Current Assets") exceed the Current Assets reflected on the Current Balance Sheet (the "Balance Sheet Current Assets") by more than ten percent (10%), then GameSpy shall pay to HearMe as full and complete liquidated damages a cash payment equal to 50% of the amount by which the Actual Current Assets exceed the Balance Sheet Current Assets; provided, however, that the amount of such liquidated damages shall in no event exceed $2,435,612.00 (the "Liquidated Damages Amount"). Without admitting liability with respect to the Claimed Amount, the Parties acknowledge and agree that the Claimed Amount exceeds the Payment received by HearMe hereunder by the Liquidated Damages Amount. Accordingly, the Parties acknowledge and agree that this Section 9 is a specifically negotiated, agreed upon portion of the transactions contemplated by this Agreement and that the Liquidated Damages Amount constitutes reasonable and fair compensation for the breaches of the representations and warranties of GameSpy referenced above in light of the compromise of HearMe's rights to the full Claimed Amount hereunder and the transfer of the GameSpy Shares to GameSpy.     10.  Other Transactions.  The parties acknowledge and agree that HearMe is entering into this Agreement, transferring the GameSpy Shares to GameSpy and compromising valuable rights to the full Claimed Amount based upon its understanding that certain types of transactions are not imminent for GameSpy. Accordingly, the parties agree that it is fair and reasonable for HearMe to receive additional payments from GameSpy in the event that GameSpy engages in certain transactions prior to December 31, 2001, as follows:     10.1 Acquisition.  In the event that prior to December 31, 2001 GameSpy shall enter into any agreement, letter of intent or other arrangement with respect to any merger, consolidation, acquisition, or other transaction or series of related transactions resulting in the holders of the outstanding shares of capital stock of GameSpy holding less than 50% of the voting power of the surviving entity (an "Acquisition Transaction"), then, payable immediately prior to the closing of 4 -------------------------------------------------------------------------------- the Acquisition Transaction, HearMe shall be entitled to receive a cash payment equal to the product of (a) the consideration per share of common stock of GameSpy received by the shareholders of GameSpy in the Acquisition Transaction, and (b) the number of GameSpy Shares as defined in Section 2 of this agreement (as adjusted for any stock split, stock dividend, recapitalization and the like).     10.2 Sale of Assets.  In the event that prior to December 31, 2001 GameSpy shall enter into any agreement, letter of intent or other arrangement with respect to the sale of all or substantially all of its assets in a transaction or series of transactions (an "Asset Sale"), then, payable immediately following the closing of the Asset Sale, HearMe shall be entitled to receive 10% of the aggregate consideration to GameSpy in the Asset Sale.     10.3 Equity Financing.  In the event that prior to December 31, 2001 GameSpy shall enter into any agreement, letter of intent or other arrangement relating to an equity financing of GameSpy (including, but not limited to, pursuant to notes or other securities or instruments convertible into equity securities of GameSpy) in a transaction or series of related transactions resulting in gross proceeds to GameSpy of an aggregate of at least $1,000,000 (an "Equity Financing"), then, payable immediately following the closing of the Equity Financing, HearMe shall be entitled to receive a payment equal to 10% of the gross proceeds to GameSpy in the Equity Financing.     10.4 Negotiated Transaction.  Due in significant part to the transfer of the GameSpy Shares by HearMe to GameSpy and the loss by HearMe of the rights and benefits of such equity interest in GameSpy, the parties acknowledge and agree that this Section 10 is a specifically negotiated, agreed upon portion of the transactions contemplated by this Agreement and that the amounts and payments set forth in this Section 10 are reasonable and fair in light of the compromise of HearMe's rights to the full Claimed Amount hereunder and the transfer of the GameSpy Shares to GameSpy.     11.  Audit Rights.  HearMe shall have the right to designate independent accountants to audit GameSpy's books and records upon reasonable notice to GameSpy and during normal business hours to determine the compliance by GameSpy of its obligations under Sections 6, 9 and 10 of this Agreement. HearMe shall have the right to conduct one such audit at any time prior to June 30, 2002. GameSpy shall cooperate with such independent accountants and provide them with all information as may be reasonably requested in connection with such audit. HearMe shall bear the fees and expenses of such independent accountants; provided, however, that if the audit shall determine the trigger of a liquidated damages payment by GameSpy to HearMe as outlined in Section 9, then GameSpy shall bear such fees and expenses.     12.  Other Agreements.  Notwithstanding anything to the contrary in this Agreement, the Parties hereby agree that the effect of this Agreement upon certain provisions of other agreements between the Parties is as follows:     12.1 Asset Purchase Agreement.  Section 9.3(a) (indemnification by HearMe) of the APA shall be terminated in its entirety and shall be of no further force or effect. Section 9.3(b) (indemnification by GameSpy) of the APA shall continue in full force and effect, and GameSpy shall meet its obligations thereunder. Notwithstanding Section 9.3(d)(i) of the APA, the representations and warranties of HearMe contained in the APA shall not survive and have terminated, and no action can be brought with respect to any breach of any such representation and warranty.     12.2 Escrow Agreement.  Pursuant to the Joint Instructions, the Escrow Agreement shall be terminated in its entirety and shall be of no further force or effect. 5 --------------------------------------------------------------------------------     12.3 License Agreements.  In consideration for the transfer of the GameSpy Shares to GameSpy and the other provisions and agreements set forth herein, HearMe shall have no liability, now or in the future, under rights of indemnity or otherwise, under the Non-Exclusive Patent License Agreement dated as of January 19, 2001 by and between the Parties, the Roger Wilco Source Code License Agreement dated as of January 19, 2001 by and between the Parties or the Technology and Source Code License Agreement dated as of January 19, 2001 by and between the Parties (collectively, the "License Agreements"), except for any liability resulting from the intentional misconduct or gross negligence of HearMe, and the Parties agree that any provisions to the contrary in the License Agreements shall be of no further force or effect.     13.  Waiver Of Defenses to Enforcement of This Contract.  To the extent permitted by law, and only to that extent, all Parties hereto waive all public policy and other defenses, if any exist, to the enforcement of this Agreement or any part thereof.     14.  Attorneys Fees and Costs.  Each Party to this Agreement shall bear its own costs, expenses, and attorneys fees, whether taxable or otherwise, incurred or arising out of, or in any way related to the matters released herein.     15.  Severability.  Should this Agreement, or any part of it, be determined by any court, tribunal, arbitrator, or agency to be unenforceable, void, or voidable, or should any court, tribunal, arbitrator, or agency refuse or decline to enforce this Agreement or any part of it, the remainder of this Agreement and all parts of it shall remain in effect, valid and enforceable.     16.  Headings.  The various headings used in this Agreement are solely for the convenience of the Parties and shall not be used to interpret this Agreement.     17.  Signature Photocopies and Facsimiles.  A photocopy of a signature or a facsimile of a signature shall be as valid as an original. 6 --------------------------------------------------------------------------------     18.  Counterparts.  This Agreement may be executed by way of identical counterparts, so that there is at least one identical counterpart signed by each Party. This Agreement shall become effective when so signed and delivered by all Parties on any combination of identical counterparts, in which case all said identical counterparts shall be treated as a single Agreement.     19.  Modifications.  No amendment, change or modification of this Agreement shall be valid or binding to any extent unless it is in writing and signed by all of the Parties affected by it.     20.  Entire Agreement.  This Agreement constitutes the complete, final and entire agreement among the Parties with respect to the subject matter hereof, and supercedes any other prior and contemporaneous oral or written agreements, negotiations and discussions with respect to the subject matter hereof.     21.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California, without consideration of its principles of conflict of laws.     22.  Arbitration.       22.1 All disputes between the Parties arising under, or relating to, this Agreement shall be resolved by binding arbitration before a single Arbitrator selected according to the rules of the American Arbitration Association.     22.2 This agreement to arbitrate will survive the rescission or termination of this Agreement. All arbitration will be conducted pursuant to and in accordance with the following order of priority (i) the terms of this Agreement, (ii) the Commercial Arbitration Rules of the American Arbitration Association, (iii) the Federal Arbitration Act and (iv) to the extent the foregoing are inapplicable, unenforceable or invalid, the laws of the State of California. The arbitrator used will be selected from impartial arbitrators designated by the American Arbitration Association who are familiar with the nature of the subject matter of the dispute. Any hearing regarding arbitration will be held in San Jose, California, or at another location mutually acceptable to the parties. The arbitrator will use his/her best efforts to conduct the arbitration hearing no later than three months from the date of the arbitrator's appointment and will use best efforts to render a decision within four (4) months from such date.     22.3 Each party may submit in writing to the other party, and the other party shall respond to a maximum of any combination of thirty-five (35) (none of which may be subparts) of the following: interrogatories, demands to produce documents and requests for admissions. Each party is also entitled to take the oral deposition of no more than five (5) individuals. Additional discovery may be permitted upon mutual agreement of the parties. The arbitrator will resolve any discovery disputes by such pre-hearing conferences as may be needed. All parties agree that the arbitrator will have the power of subpoena process as provided by law. Disputes concerning the scope of depositions or document production, its reasonableness and enforcement of discovery requests will be subject to agreement by the parties or will be resolved by the arbitrator. All discovery requests will be subject to the proprietary rights and rights of privilege and other protections granted by applicable law to the parties and the arbitrator will adopt procedures to protect such rights. With respect to any dispute, each party agrees that all discovery activities will be expressly limited to matters directly relevant to the dispute and the arbitrator will be required to fully enforce this requirement.     22.4 An arbitration proceeding commenced pursuant to this Section 22 is a condition precedent to and is a complete defense to the commencement of any suit, action or proceeding in any court or before any tribunal with respect to any dispute. Either party may bring an action in court to compel arbitration. Any party who fails or refuses to submit to binding arbitration following demand by the other party shall, if the dispute is within the scope of this Section 20, bear all costs and expenses incurred by the opposing party in compelling arbitration. 7 --------------------------------------------------------------------------------     22.5 The arbitrator is empowered to resolve disputes by summary rulings substantially similar to summary judgments and motions to dismiss. The arbitrator will resolve all disputes in accordance with the applicable substantive law. The arbitrator may grant any remedy or relief deemed just and equitable and within the scope of this Agreement and may also grant such ancillary relief as is necessary to make effective any award.     22.6 Any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The decision of the arbitrator will be enforceable in any court of competent jurisdiction. To the extent permitted by applicable law, the arbitrator will have the power to award recovery of all costs and fees (including attorneys' fees, administrative fees, and arbitrator' fees) to the prevailing party.     22.7 No provision of, nor the exercise of any rights under, this Agreement will limit the right of any party, during any dispute, to seek, use, and employ ancillary or provisional equitable remedies. Such rights may be exercised at any time except to the extent such action is contrary to an award or decision of the arbitrator. The pursuit of provisional or ancillary equitable remedies will not constitute a waiver of the right of any party, including the plaintiff, to submit a dispute to arbitration, nor render inapplicable the compulsory arbitration provisions of this Section 22.     22.8 Unless otherwise ordered by the Arbitrator, (i) each party will be responsible for one-half of the expenses and fees of the arbitrator and (ii) each party will bear its own attorney's and expert's fees.     22.9 Notwithstanding any other provision of this Section 22 no dispute regarding the ownership of intellectual property will be subject to the dispute resolution provisions of this Section 22. Any such dispute will be resolved by negotiation or if the parties are unable to agree, by any court of competent jurisdiction.     22.10Except to the extent necessary to enforce the rights of the parties, the parties agree to keep confidential the existence, content and results of any arbitration proceeding conducted pursuant to this Section 22. [Signature Page Follows] 8 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Agreement is executed by the undersigned as of the date first set forth above. HereMe   Dated: September  , 2001 By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     GameSpy Industries, Inc.   Dated: September  , 2001 By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     9 -------------------------------------------------------------------------------- Exhibit A ASSIGNMENT SEPARATE FROM CERTIFICATE     FOR VALUE RECEIVED and in connection with that certain Settlement Agreement and Mutual General Release and Covenant Not to Sue of even date herewith (the "Agreement") by and between GameSpy Industries, Inc., a California corporation (the "Company"), and HearMe, a Delaware corporation ("HearMe"), HearMe hereby sells, assigns and transfers unto the Company two million three hundred thirty-two thousand seven hundred forty-three (2,332,743) shares of the Common Stock of the Company standing in HearMe's name on the Company's books and represented by Certificate No. 19 and does hereby irrevocably constitute and appoint              to transfer said stock on the books of the Company with full power of substitution in the premises. Dated: September  , 2001             HEARME     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit B ASSIGNMENT SEPARATE FROM CERTIFICATE     FOR VALUE RECEIVED and in connection with that certain Settlement Agreement and Mutual General Release and Covenant Not to Sue of even date herewith (the "Agreement") by and between GameSpy Industries, Inc., a California corporation (the "Company"), and HearMe, a Delaware corporation ("HearMe"), HearMe hereby sells, assigns and transfers unto the Company three hundred sixty thousand seven hundred thirty-three (360,733) shares of the Common Stock of the Company standing in HearMe's name on the Company's books and represented by Certificate No. 20 and does hereby irrevocably constitute and appoint              to transfer said stock on the books of the Company with full power of substitution in the premises. Dated: September  , 2001             HEARME     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit C JOINT ESCROW AGENT INSTRUCTIONS September  , 2001 U.S. Bank Trust, National Association Corporate Trust Services One California Street, Suite 400 San Francisco, CA 94111 Attention: Ann Gabsby     Escrow No. 94423020 Dear Ann:     Pursuant to the Escrow Agreement dated as of January 19, 2001 (the "Escrow Agreement") by and among GameSpy Industries, Inc., a California corporation "GameSpy"), HearMe, a Delaware corporation ("HearMe"), and U.S. Bank Trust, National Association, as escrow agent ("Escrow Agent"), this letter shall constitute joint instructions of GameSpy and HearMe to Escrow Agent as follows:     1.  Pursuant to a certain Settlement Agreement and Mutual General Release and Covenant Not to Sue of even date herewith by and between GameSpy and HearMe, GameSpy and HearMe have agreed (a) to terminate the Escrow Agreement and the escrow thereunder, and (b) that HearMe shall transfer the Escrow Shares (as defined in the Escrow Agreement) to GameSpy.     2.  As Escrow Agent, you are hereby instructed to deliver the certificate representing the Escrow Shares to GameSpy at your earliest convenience. Following such delivery, you shall have no further duties as Escrow Agent pursuant to the Escrow Agreement.     If you have any questions or concerns, please do not hesitate to contact Mark Surfas of GameSpy at (949) 798-4200 or James Schmidt of HearMe at (650) 429-3900.     GAMESPY INDUSTRIES, INC.     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     HEARME     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QuickLinks SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE AND COVENANT NOT TO SUE Exhibit A ASSIGNMENT SEPARATE FROM CERTIFICATE Exhibit B ASSIGNMENT SEPARATE FROM CERTIFICATE Exhibit C JOINT ESCROW AGENT INSTRUCTIONS
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.41 AMENDMENT NO. 4 TO AGENCY AGREEMENT     This Amendment No. 4 to Agency Agreement (this "Amendment") is entered into as of the 30th day of November 2000 with reference to that certain Agency Agreement between PAULA Insurance Company and Agri-Comp Insurance Agency, Inc. (fka Oregon Risk Management, Inc.) dated as of December 8, 1994, as amended (the "Agreement"). All capitalized terms used herein without definition shall have the meaning ascribed to them in the Agreement.     In consideration of the mutual covenants set forth herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Agent and the Company agree to amend the Agreement as follows:     1.  The relevant provisions of Schedule C to the Agreement are hereby amended as follows:     "The Company agrees to pay to the Agent the following bonus commission during the 2000 calendar year contingent upon the Agent meeting the following quarterly premium volume thresholds: Invoiced Quarterly 2000 Premium Volume --------------------------------------------------------------------------------   Bonus Commission -------------------------------------------------------------------------------- $250,000   1% of Invoiced Premium $425,000   Additional 1% of Invoiced Premium $600,000   Additional 1% of Invoiced Premium     The foregoing bonus will be paid quarterly based on invoiced premium written prior to the end of the applicable quarter. The bonus will apply to all premium written, not merely the amount of premium over the premium threshold. The bonus will be subject to offset to the same extent as commissions payable under this Agreement."     2.  In all other respects, the Agreement (including the unamended provisions of Schedule C) shall continue in full force and effect.     IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written above: PAULA INSURANCE COMPANY dba AGRI-COMP INSURANCE CO.   AGRI-COMP INSURANCE AGENCY, INC. By: /s/ JEFFREY A. SNIDER    --------------------------------------------------------------------------------   By: /s/ JAMES A. NICHOLSON    -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.41 AMENDMENT NO. 4 TO AGENCY AGREEMENT
BUSINESS LOAN AGREEMENT (ASSET BASED) Principal $5,000,000.00 Loan Date 06-28-2001 Maturity 05-15-2002 Loan No 530037155 Call / Coll            2000 Account Officer 602 Initials References in the shaded area for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containg "***" has been omittted due to text length limitations.   Borrower: Versant Corporation 6539 Dumbarton Circle Freemont, CA 94555   Lender: Greater Bay Bank A Division of Mid-Peninsula Bank 39470 Paseo Padre Parkway Fremont, CA 94538 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- THIS BUSINESS LOAN AGREEMENT (ASSET BASED) dated June 28, 2001, is made and executed between Versant Corporation ("Borrower") and Greater Bay Bank ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement ("Loan"). Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement, and (B) all such Loans shall be and remain subject to the terms and conditions of this Agreement. TERM. This Agreement shall be effective as of June 28, 2001, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement. LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows: Conditions Precedent to Each Advance. Lender's obligation to make any Advance to or for the account of Borrower under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required under this Agreement to be in form and substance satisfactory to Lender:   (1) Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized,     executed, and delivered by Borrower to Lender.         (2) Lender shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request.         (3) The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall be in full force and effect.         (4) All guaranties required by Lender for the credit facility(ies) shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect.         (5) Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower's Accounts, books, records, and operations, and Lender shall be satisfied as to their condition.         (6) Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable.         (7) There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled "Compliance Certificate." Making Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower's accounts, may be requested orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit ' of Borrower (1) when credited to any deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been requested on the next succeeding Business Day. Mandatory Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid. Loan Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic statements of Borrower's account, which statements shall be considered to be correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower's receipt of any such statement which Borrower deems to be incorrect. COLLATERAL. To secure payment of the Primary Credit Facility and performance of all other Loan, obligations and duties owed by Borrower to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may require. Lender's Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees and represents and warrants to Lender: Perfection of Security Interests. Borrower agrees to execute such financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's Security Interests in the Collateral. Upon request of Lender, Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Contemporaneous with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as may be required by applicable law, and Lender will file such financing statements and all such similar statements in the appropriate location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue any Security Interest. Lender may at any time, and without further authorization from Borrower, file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender's security interest in the Collateral. Borrower promptly will notify Lender of any change in Borrower's name including any change to the assumed business names of Borrower. Borrower also promptly will notify Lender of any change in Borrower's Social Security Number or Employer Identification Number. Borrower further agrees to notify Lender in writing prior to any change in address or location of Borrower's principal governance office or should Borrower merge or consolidate with any other entity. Collateral Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of which records shall be available to Lender or Lender's representative upon demand for inspection and copying at any reasonable time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without limitation information concerning Eligible Accounts and Account balances and agings. Records related to Accounts (Receivables) are or will be located at 6539 Dumbarton Circle, Fremont, CA 94555.  The above is an accurate and complete list of all locations at which Borrower keeps or maintains business records concerning Borrower's collateral. Collateral Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender schedules of Accounts and schedules of Eligible Accounts in form and substance satisfactory to the Lender. Thereafter supplemental schedules shall be delivered according to the following schedule: With respect to Eligible Accounts, schedules shall be delivered as follows: Monthly accounts receivable and accounts payable agings within fifteen (15) days of month end with Borrowing Base Certificate. Representations and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (1) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition of an Eligible Account; (2) All Account information listed on schedules delivered to Lender will be true and correct, subject to immaterial variance; and (3) Lender, its assigns, or agents shall have the right at any time and at Borrower's expense to inspect, examine, and audit Borrower's records and to confirm with Account Debtors the accuracy of such Accounts. Remittance Account. Borrower agrees that Lender may at any time require Borrower to institute procedures whereby the payments and other proceeds of the Accounts shall be paid by the Account Debtors under a remittance account or lock box arrangement with Lender, or Lender's agent, or with one or more financial institutions designated by Lender. Borrower further agrees that, if no Event of Default exists under this Agreement, any and all of such funds received under such a remittance account or lock box arrangement shall, at Lender's sole election and discretion, either be (1) paid or turned over to Borrower; (2) deposited into one or more accounts for the benefit of Borrower (which deposit accounts shall be subject to a security assignment in favor of Lender); (3) deposited into one or more accounts for the joint benefit of Borrower and Lender (which deposit accounts shall likewise be subject to a security assignment in favor of Lender); (4) paid or turned over to Lender to be applied to the Indebtedness in such order and priority as Lender may determine within its sole discretion; or (5) any combination of the foregoing as Lender shall determine from time to time. Borrower further agrees that, should one or more Events of Default exist, any and all funds received under such a remittance account or lock box arrangement shall be paid or turned over to Lender to be applied to the Indebtedness, again in such order and priority as Lender may determine within its sole discretion. CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents. Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender's counsel. Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require. Fees and Expenses Under This Agreement. Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and payable. Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct. No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document. REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: Organization.  Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of California. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreigncorporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 6539 Dumbarton Circle Fremont, CA 94555. Unless Borrower has designated otherwise in writing, the principle office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender of any change in the location of Borrower's principle office. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower's business activities. Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None. Authorization. Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of Borrower's articles of incorporation or organization, or bylaws, or any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties. Financial Information. Each of Borrower's financial statements supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements Or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used, or filed a financing statement under, any other name for at least the last five (5) years. Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower's ownership of Borrower's Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on. under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise. Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided. Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral. Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will: Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor. Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times. Financial Statements. Furnish Lender with the following:              Annual Statements. As soon as available, but in no event later than ninety (90) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Lender.              Interim Statements. As soon as available, but in no event later than 15 days after the end of each month, Borrower's balance sheet and profit and loss statement for the period ended, prepared by Borrower.              Tax Returns. As soon as available, but in no event later than thirty (30) days after the applicable filing date for* the tax reporting period ended, Federal and other governmental tax returns, prepared by Borrower. All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct. Additional Information. Furnish such additional information and statements, as Lender may request from time to time. Financial Covenants and Ratios. Comply with the following covenants and ratios:              Working Capital Requirements. Borrower shall comply with the following working capital ratio requirements:              Quick Ratio. Maintain a Quick Ratio in excess of 1.300 to 1.000. Minimum Income and Cash flow Requirements. Maintain not less than the following Minimum Net Income level: Maintain a minimum quarterly Net Profit Before Interest, Income and Franchise Taxes, Depreciation, amortization and Depletion Expenses plus other Noncash Charges-Extraordinary Income (Gains/Losses) beginning September 30, 2001.  Tangible Net Worth Requirements. Maintain a minimum Tangible Net Worth of not less than: $6,500,000.00. Other Requirements. Borrower agrees to provide to Lender 10K report annually within ninety (90) days and 10Q report within forty five (45) days of quarter end. Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require. Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower. Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements. Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing. Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement. Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner. Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, [eased or used by Borrower. Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest. Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense. Compliance Certificates. Unless waived in writing by Lender, provide Lender within fifteen (15) days after the end of each month, with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement. Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower's part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources. Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests. RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation or guideline, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other obligations which would (A) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (B) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (C) reduce the rate of return on Lender's capital as a consequence of Lender's obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after Lender's written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error. LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender: Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower's accounts, except to Lender. Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of Borrower's stock, or purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure. Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Loan. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's or any Grantor's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement, the Note, or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death, Lender, at its option, may, but shall not be required to, permit the Guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired. Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured (and no Event of Default will have occurred) if Borrower or Grantor, as the case may be, after receiving written notice from Lender demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any  other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies. ACCOUNTS RECEIVABLE AUDITS. Audits of accounts receivable may be conducted annually and within forty five (45) days of documentation or prior to initial line advance, or at such frequency as Lender shall require. It is agreed that Lender will be reimbursed for the costs of any such audits . ADDITIONAL FINANCIAL REPORTING. Borrower to provide Lender with 1 O-K report annually within ninety (90) days and 1 O-Q report quarterly within forty five (45) days. DEPOSIT RELATIONSHIP. Borrower agrees that until such time as Borrower is no longer subject to the terms of any credit agreement(s) with Lender, the primary deposit account(s) maintained by Borrower will be placed with Lender, or a bank affiliated with Lender. EXHIBIT A.  Exhibit A is attached to this Agreement, and by this reference is made a part of this Agreement just as if all the provisions, terms and conditions of the Exhibit had been fully set forth in this Agreement. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement. Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender. Governing Law. This Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State of California. This Agreement has been accepted by Lender in the State of California. Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Alameda County, State of California. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the Part of Lender in exercising any right shall operate as a waive  r of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement. Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates. Successors and Assigns. All covenants and agreements contained by or on behalf of Borrower shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower's rights under this Agreement or any interest therein, without the prior written consent of Lender. Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. Time is of the Essence. Time is of the essence in the performance of this Agreement. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement: Account. The word "Account" means a trade account, account receivable, other receivable, or other right to payment for goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender). Advance. The word "Advance" means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf under the terms and conditions of this Agreement. Agreement. The word "Agreement" means this Business Loan Agreement (Asset Based), as this Business Loan Agreement (Asset Based) may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement (Asset Based) from time to time. Borrower. The word "Borrower" means Versant Corporation, and all other persons and entities signing the Note in whatever capacity. Borrowing Base. The words "Borrowing Base" mean, as determined by Lender from time to time, the lesser of (1) $5,000,000.00 or (2) 80.000% of the aggregate amount of Eligible Accounts (not to exceed in corresponding Loan amount based on Eligible Accounts $5,000,000.00). Business Day. The words "Business Day" mean a day on which commercial banks are open in the State of California. Cash & Equivalent. The words "Cash & Equivalent" mean all of Borrower's cash, marketable securities, and other near-cash items, excluding sinking funds. Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise. The -word Collateral also includes without limitation all collateral described in the Collateral section of this Agreement. Eligible Accounts. The words "Eligible Accounts" mean at any time, all of Borrower's Accounts which contain selling terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not include: (1) Accounts with respect to which the Account Debtor is employee or agent of Borrower. (2) Accounts with respect to which the Account Debtor is a subsidiary of, or affiliated with Borrower or its shareholders, officers, or directors. (3) Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional. (4) Accounts with respect to which the Account Debtor is not a resident of the United States, except to the extent such Accounts are supported by insurance, bonds or other assurances satisfactory to Lender. (5) Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower. (6) Accounts which are subject to dispute, counterclaim, or setoff. (7) Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor. (8) Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory. (9) Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due. (10) Accounts with respect to which the Account Debtor is the United States government or any department or agency of the United States. (11) Accounts which have not been paid in full within 90 days from the invoice date. The entire balance of any Account of any single Account Debtor will be ineligible whenever the portion of the Account which has not been paid within 90 days from the invoice date is in excess of 20.000% of the total amount outstanding on the Account. (1 2) That portion of the Accounts of any single Account Debtor which exceeds 25.000% of all of Borrower's Accounts. (13) C.O.D. accounts, cash accounts, noncustomer miscellaneous accounts and finance charges incurred on past due account balances. (14) Accounts in which the borrower fails to provide Lender with requested financial information concerning the subject accounts (Although certain concentrations are examined on a case-by-case basis, Lender's standard procedure is to request D & B reports or financial statements on all potential concentrations greater than 25%.) (15) Unbilled accounts receivable. (16) Dated and/or extended-term accounts receivable. (17) Refundable maintenance contract accounts receivable. (18) Bonded accounts receivable. (19) Retainages (amounts withheld from billing and which may not be due depending on acceptable performance or completion of a contract.) (20) Any accounts that in the sole discretion of the Lender are considered to be ineligible for the purposes of the transaction(s) contemplated. Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto. Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement. Expiration Date. The words "Expiration Date" mean the date of termination of Lender's commitment to lend under this Agreement. GAAP. The word "GAAP" means generally accepted accounting principles. Grantor. The word "Grantor" means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest. Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan. Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents. Lender. The word "Lender" means Greater Bay Bank, its successors and assigns. Loan. The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. Note.  The word "Note" means the Note executed by Borrower in the principal amount of $5,000,000.00 dated June 28, 2001, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement. Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or-other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets. Primary Credit Facility. The words "Primary Credit Facility" mean the credit facility described in the Line of Credit section of this Agreement. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan. Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. Security Interest. The words "Security Interest" mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise. Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold Improvements) less total debt. Trade Receivables. The words "Trade Receivables" mean all of Borrower's accounts from trade, net of allowance for doubtful accounts. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED JUNE 28, 2001 VERSANT CORPORATION   By: /s/ LEE McGRATH   --------------------------------------------------------------------------------     Lee McGrath, Chief Financial Officer of Versant   Corporation     LENDER:     GREATER BAY BANK   By:   --------------------------------------------------------------------------------     Authorized Signer EXHIBIT "A" TO BUSINESS LOAN AGREEMENT Principal $5,000,000.00 Loan Date 06-28-2001 Maturity 05-15-2002 Loan No 530037155 Call / Coll            2000 Account Officer 602 Initials References in the shaded area for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containg "***" has been omittted due to text length limitations.   Borrower: Versant Corporation 6539 Dumbarton Circle Freemont, CA 94555   Lender: Greater Bay Bank A Division of Mid-Peninsula Bank 39470 Paseo Padre Parkway Fremont, CA 94538 This EXHIBIT "A" TO BUSINESS LOAN AGREEMENT is attached to and by this reference is made a part of the Business Loan Agreement (Asset Based), dated June 28, 2001, and executed in connection with a loan or other financial accommodations between GREATER BAY BANK and Versant Corporation. ADDITIONAL PROVISION As applicable, the definition(s) of the following financial covenants and/or defined terms contained in this Business Loan Agreement are amended to read as follows: Working Capital. The words "Working Capital" mean Borrower's current assets less current liabilities. Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total assets excluding all intangible assets (i.e., goodwill, trademarks, patents, copyrights, franchises, capitalized software, covenants not to compete, organizational costs, investments, employee/owner and intercompany accounts receivable and similar intangible items) less total debt, excluding subordinated debt. Cash Flow. The words "Cash Flow" mean Borrower's net income after taxes, exclusive of extraordinary gains and income, plus depreciation and amortization less cash dividends, distributions and withdrawals, and repurchase of treasury stock. Debt / Worth Ratio. The ratio "Debt / Worth" means Borrower's Total Liabilities, excluding subordinated debt, divided by Borrower's Tangible Net Worth. THIS EXHIBIT "A" TO BUSINESS LOAN AGREEMENT IS EXECUTED ON JUNE 28, 2001. BORROWER VERSANT CORPORATION   By: /s/ LEE McGRATH   --------------------------------------------------------------------------------     Lee McGrath, Chief Financial Officer of Versant   Corporation     LENDER:     GREATER BAY BANK   By:   --------------------------------------------------------------------------------     Authorized Signer   Addendum to Business Loan Agreement Dated 06/28/01 as applicable, the definition of the following financial covenants and/or terms contained in this Business Loan Agreement are amended to read as follows: Quick Ratio:  Defined as cash and equivalent plus 80% of eligble receivables divided by current liabilities (excluding deferred revenue).    /s/ LEE McGRATH --------------------------------------------------------------------------------   Lee McGrath, CFO of Versant Corporation  
RESTRICTED UNIT AWARD AGREEMENT UNDER THE AMENDED AND RESTATED ALLIANCE PARTNERS COMPENSATION PLAN           You have been granted restricted Units under the Amended and Restated Alliance Partners Compensation Plan (the “Plan”), as specified below, in connection with your 2000 award under the Plan:           Participant (“you”): David Brewer           Amount of Award (to be           converted to Restricted Units):   $500,000.00           Date of Grant:    December 31, 2000           Vesting Commencement Date:    January 31, 2001           In connection with your grant of restricted Units, you, Alliance Capital Management Holding L.P. and Alliance Capital Management L.P. (“Alliance”) agree as set forth in this agreement (the “Agreement”).  The Plan provides a description of the terms and conditions governing restricted Units.  If there is any inconsistency between the terms of this Agreement and the terms of the Plan, the Plan’s terms completely supersede and replace the conflicting terms of this Agreement.  All capitalized terms have the meanings given them in the Plan, unless specifically stated otherwise in the Agreement.  The restricted Units granted under this Agreement are referred to in the Agreement as the “Restricted Units.”           1.       Restrictions.  Until restrictions lapse as described in Paragraph 2, you may not sell, transfer, pledge or otherwise assign or dispose of any Restricted Units.           2.       Vesting of Restricted Units. (a) Except as provided in Paragraph 2(b) below, restrictions will lapse with respect to the Restricted Units in equal annual installments during the applicable Vesting Period (as defined below), with restrictions as to the first such installment lapsing on the first anniversary of the Vesting Commencement Date set forth above, and restrictions as to the remaining installments lapsing on the subsequent anniversaries of the Vesting Commencement Date, provided in each case that you are employed by a Company on such anniversary.  The Vesting Period is as set forth in the following table, based on your age as of December 31, 2000:     Your Age   As of December 31, 2000 -------------------------------------------------------------------------------- Vesting Period -------------------------------------------------------------------------------- Up to and including 47 8 years 48 7 years 49 6 years 50-57 5 years 58 4 years 59 3 years 60 2 years 61 1 year 62 or older Fully vested at grant             (b)  If your employment with the Companies terminates due to death or Disability, restrictions on any remaining Restricted Units that you hold as of the date of your termination shall immediately lapse.           3.       Forfeitures.   If your employment with the Companies terminates for reasons other than death or Disability, you will immediately forfeit all of your rights and interests in any Restricted Units as to which restrictions have not previously lapsed, unless the Committee determines, in its sole discretion, to accelerate the vesting of those Restricted Units.           4.       Unit Certificates.  Your Restricted Units will be held for you by Alliance.  After your Restricted Units have vested, a certificate for those Units will be released to you.           5.       Distributions.  Any distributions paid by Alliance Capital Management Holding L. P. in connection with Restricted Units (whether or not vested) will be paid directly to you.           6.       Section 83(b) Election.  You agree not to make an election under section 83(b) of the Code with respect to your Restricted Units unless, before you file the election with the Internal Revenue Service, you (i) notify the Committee of your intention to file the election, (ii) furnish the Committee with a copy of the election to be filed and (iii) pay (or make satisfactory arrangements for paying) the necessary tax withholding amount to Alliance in accordance with Section 8.           7.       Tax Withholding.  If the Committee determines that any federal, state or local tax or any other charge is required by law to be withheld with respect to the Restricted Units, the vesting of Restricted Units, or an election under Section 83(b) of the Code (a “Withholding Amount”) then, in the discretion of the Committee, either (a) prior to or contemporaneously with the delivery to you of Restricted Units, you agree to pay the Withholding Amount to Alliance in cash or in vested Units that you already own (which are not subject to a pledge or other security interest), or a combination of cash and such Units, having a total fair market value equal to the Withholding Amount; (b) Alliance Capital Management Holding L.P. will retain from any vested Restricted Units to be delivered to you that number of Units having a fair market value, as determined by the Committee, equal to the necessary Withholding Amount; or (c) if Restricted Units are delivered without the payment of the Withholding Amount under either clause (a) or (b) above, you agree promptly to pay the Withholding Amount to Alliance on at least seven business days notice from the Committee either in cash or in vested Units  that you already own (which are not subject to a pledge or other security interest), or a combination of cash and such Units, having a total fair market value equal to the Withholding Amount.  You agree that if you do not pay the Withholding Amount to Alliance or make satisfactory payment arrangements as described above, Alliance may withhold any unpaid portion of the Withholding Amount from any amount otherwise due to you.           8.       Adjustments in Authorized Units.  In the event of a partnership restructuring, extraordinary distribution or similar event, the Committee has the sole discretion to adjust the number of Restricted Units in accordance with the Plan.           9.       Administration.  It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon you.  The Committee is under no obligation to treat you or your award consistently with the treatment provided for other participants in the Plan.           10.     Miscellaneous.           (a)      This Agreement does not confer upon you any right to continuation of employment by a Company, nor does this Agreement interfere in any way with a Company’s right to terminate your employment at any time.           (b)      This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.           (c)      This Agreement will be governed by, and construed in accordance with, the laws of the state of New York (without regard to conflict of law provisions).           (d)      This Agreement and the Plan constitute the entire understanding between you and the Companies regarding this award.  Any prior agreements, commitments or negotiations concerning this award are superseded.  This Agreement may be amended only by another written agreement, signed by both parties.           BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed effective as of December 31, 2000. Alliance Capital Management L.P. By: Alliance Capital Management Corporation, General Partner   Participant   /s/ David Brewer                        David Brewer    
QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.4 (Not for Residential Use - N.J.S.A. 56:12-1; 46.8-48)   Preparer's Name (Print signer's name below signature) Lease Agreement   ........................................................................ This Agreement is made as of September 1, 2000,       Between           PALISADES PARK PLAZA NORTH, INC.     having an address at 2050 CENTER AVE. in the BOROUGH of FORT LEE BERGEN and State of NEW JERSEY,   in the County of , herein designated as the Landlord,   And NARA BANK     having a address at 29 West 30th Street in the City of New York and State of New York   in the County of , herein designated as the Tenant;     Witnesseth that, the Landlord does hereby lease to the Tenant and the Tenant does hereby rent from the Landlord, the following described premises:     SPACE KNOWN AS:   N-11 PALISADES PARK PLAZA NORTH     118 BROAD AVENUE, PALISADES PARK, NEW JERSEY for a term of FIVE (5) YEARS commencing on SEPTEMBER 1, 2000, and ending on AUGUST 31, 2005, to be used and occupied only and for no other purpose than     BANKING OPERATION     Upon the following Conditions and Covenants:     1st: The Tenant covenants and agrees to pay the Landlord, as rent for and during the term hereof, the sum of                                                  in the following manner: ANNUAL RENTAL RATE OF $25,200 ($2,100.00) per month. SUCH RENT WILL INCREASE PER YEAR AT RATE OF 5% ANNUM COMPOUND AND LANDLORD WAIVE THE FIRST MONTH'S RENT FROM THE DATE OF AGREEMENT.     2nd: The Tenant has examined the premises and has entered into this lease without any representation on the part of the Landlord as to the condition thereof. The Tenant shall take good care of the premises and shall at the Tenant's own cost and expense, make all repairs, including painting and decorating, and shall maintain the premises in good condition and state of repair, and at the end or other expiration of the term hereof, shall deliver up the rented premises in good order and condition, wear and tear from a reasonable use thereof, and damage by the elements not resulting from the neglect or fault of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and maintain the same in a clean condition, free from debris, trash, refuse, snow and ice.     3rd: The Tenant shall promptly comply with all laws, ordinances, rules, regulations, requirements, and directives of the Federal, State, and Municipal Governments or Public Authorities and of all their departments, bureaus and subdivisions, applicable to and affecting the said premises, their use and occupancy, for the correction, prevention and abatement of nuisances, violations or other grievances in, upon or connected with the said premises, during the term hereof: and shall promptly comply with all orders, regulations, requirements and directives of the Board of Fire Underwriters or similar authority and of any insurance companies which have issued or are about to issue policies of insurance covering the said premises and its contents, for the prevention of fire or other casualty, damage or injury, at the Tenant's own cost and expense. --------------------------------------------------------------------------------     4th: The Tenant shall not assign, mortgage or hypothecate this lease, nor sublet or sublease the premises or any part thereof; nor occupy or use the leased premises or any part thereof, nor permit or suffer the same to be occupied or used for any purposes other than as herein limited, nor for any purpose deemed unlawful, disreputable, or extra hazardous, on account of fire or other casualty.     5th: No alterations, additions or improvements shall be made, and no climate regulating, air conditioning, cooling, heating or sprinkler systems, television or radio antennas, heavy equipment, apparatus and fixtures, shall be installed in or attached to the leased premises, without the written consent of the Landlord. Unless otherwise provided herein, all much alterations, additions or improvements and systems, when made, installed in or attached to the said premises, shall belong to and become the property of the Landlord and shall be surrendered with the premises and as part thereof upon the expiration or sooner termination of this lease, without hindrance, molestation or injury.     6th: In case of fire or other casualty, the Tenant shall give immediate notice to the Landlord. If the premises shall be partially damaged by fire, the elements or other casualty, the Landlord shall repair the same as speedily as practicable, but the Tenant's obligation to pay the rent hereunder shall not cease. If, in the opinion of the Landlord, the premises be so extensively and substantially damaged as to render them untenantable, then the rent shall cease until such time as the premises shall be made tenantable by the Landlord. However, if, in the opinion of the Landlord, the premises be totally destroyed or so extensively and substantially damaged as to require practically a rebuilding thereof, then the rent shall be paid up to the time of such destruction and then and from thenceforth this lease shall come to an end. In no event however, shall the provisions of this clause become effective or be applicable, if the fire or other casualty and damage shall be the result of the carelessness, negligence or improper conduct of the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors. In such case, the Tenant's liability for the payment of the rent and the performance of all the covenants, conditions and terms hereof on the Tenant's part to be performed shall continue and the Tenant shall be liable to the Landlord for the damage and loss suffered by the Landlord. If the Tenant shall have been insured against any of the risks herein covered, then the proceeds of such insurance shall be paid over to the Landlord to the extent of the Landlord's costs and expenses to make the repairs hereunder, and such insurance carriers shall have no recourse against the Landlord for reimbursement.     7th: The Tenant agrees that the Landlord and the Landlord's agents, employees or other representatives, shall have the right to enter into and upon the said premises or any part thereof, at all reasonable hours, for the purpose of examining the same or making such repairs or alterations therein as may be necessary for the safety and preservation thereof. This clause shall not be deemed to be a covenant by the Landlord nor be construed to create an obligation on the part of the Landlord to make such inspection or repairs.     [ILLEGIBLE] show the premises to persons wishing to rent or purchase the same, and Tenant agrees that on and after next preceding the expiration of the term hereof, the Landlord or the Landlord's agents, employees or other representatives shall have the right to place notices on the front of said premises or any part thereof offering the premises for rent or for sale; and the Tenant hereby agrees to permit the same to remain thereon without hindrance or molestation.     9th: In case of the destruction of or any damage to the glass in the leased premises, or the destruction of or damage of any kind whatsoever to the said premises, caused by the carelessness, negligence or improper conduct on the part of the Tenant or the Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors, the Tenant shall repair the said damage or replace or restore any destroyed parts of the premises, as speedily as possible, at the Tenant's own cost and expense.     10th: The Tenant shall not place nor allow to be placed any signs of any kind whatsoever, upon, in or about the said premises or any part thereof, except of a design and structure and in or at such places as may be indicated and consented to by the Landlord in writing. In case the Landlord or the Landlord's agents, employees, or representatives shall deem it necessary to remove any such signs in order to paint or make any repairs, alterations or improvements in or upon said premises or any part thereof, they may be so removed, but shall be replaced at the Landlord's expense when the said repairs, alterations or improvements -------------------------------------------------------------------------------- shall have been completed. Any signs permitted by the Landlord shall at all times conform with all municipal ordinances or other laws and regulations applicable thereto.     11th: The Landlord shall not be liable for any damage or injury which may be sustained by the Tenant or any other person, as a consequence of the failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or soil pipes, roof, drains, lenders, gutters, valleys, downspouts or the like or of the electrical, gas, power, conveyor, refrigeration, sprinkler, airconditioning or heating systems, elevators or hoisting equipment; or by reason of the elements; or resulting from the carelessness, negligence or improper conduct on the part of any other Tenant or of the Landlord or the Landlord's or this or any other Tenant's agents, employees, guests, licensees, invitees, subtenants, assignees or successors; or attributable to any interference with, interruption of or failure, beyond the control of the landlord, of any services to be furnished or supplied by the Landlord.     12th: This lease shall not be a lien against the said premises in respect to any mortgages that may hereafter be placed upon said premises. The recording of such mortgage or mortgages shall have preference and precedence and be superior and prior in lien to this lease, irrespective of the date of recording and the Tenant agrees to execute any instruments, without cost, which may be deemed necessary or desirable, to further effect the subordination of this lease to any such mortgage or mortgages. A refusal by the Tenant to execute such instruments shall entitle the Landlord to the option of cancelling this lease, and the term hereof is hereby expressly limited accordingly.     13th: The Tenant has this day deposited with the Landlord the sum of 3 month's security $7,500.00 as security for the payment of rent hereunder and the full and faithful performance by the Tenant of the covenants and conditions on the part of the Tenant to be performed. Said sum shall be returned to the Tenant, without interest, after the expiration of the term hereof, provided that the Tenant has fully and faithfully performed all such covenants and conditions and is not in arrears in rent. During the term hereof, the Landlord may, if the Landlord so elects, have recourse to such security, to make good any default by the Tenant, in which event the Tenant shall, on demand, promptly restore said security to its original amount. Liability to repay said security to the Tenant shall run with the reversion and title to said premises, whether any change in ownership thereof be by voluntary alienation or as the result of judicial sale, foreclosure or other proceedings, or the exercise of a right of taking or entry by any mortgages. The Landlord shall assign or transfer said security, for the benefit of the Tenant, to any subsequent owner or holder of the reversion or title to said premises, in which case the assignee shall become liable for the repayment thereof as herein provided, and the assignor shall be deemed to be release by the Tenant from all liability to return such security. This provision shall be applicable to every alienation or change in title and shall in no wise be deemed to permit the Landlord to retain the security after termination of the Landlord's ownership of the reversion or title. The Tenant shall not mortgage, encumber or assign said security without the written consent of the Landlord.     14th: If for any reason it shall be impossible to obtain fire and other hazard insurance on the buildings and improvements on the leased premises, in an amount and in the form and in insurance companies acceptable to the Landlord, the Landlord may, if the Landlord so elects at any time thereafter, terminate this lease and the term hereof, upon giving to the Tenant fifteen days notice in writing of the Landlord's intention so to do, and upon the giving of such notice, this lease and the term thereof shall terminate. If by reason of the use to which the premises are put by the Tenant or character of or the manner in which the Tenant's business is carried on, the insurance rates for fire and other hazards shall be increased, the Tenant shall upon demand, pay to the Landlord, as rent, the amounts by which the premiums for such insurance are increased. Such payment shall be paid with the next installment of rent but in no case later than one month after such demand, whichever occurs sooner.     15th: The Tenant shall pay when due all the rents or charges for water or other utilities used by the Tenant, which are or may be assessed or imposed upon the leased premises or which are or may be charged to the Landlord by the suppliers thereof during the term hereof, and if not paid, such rents or charges shall be added to and become payable as additional rent with the installment of rent next due or within 30 days of demand therefor, whichever occurs sooner. --------------------------------------------------------------------------------     16th: If the land and premises leased herein, or of which the leased premises are a part, or any portion thereof, shall be taken under eminent domain or condemnation proceedings, or if suit or other action shall be instituted for the taking or condemnation thereof, or if in lieu of any formal condemnation proceedings or actions, the Landlord shall grant an option to purchase and or shall sell and convey the said premises or any portion thereof, to the governmental or other public authority, agency, body or public utility, seeking to take said land and premises or any portion thereof, then this lease, at the option of the Landlord, shall terminate, and the term hereof shall end as of such date as the Landlord shall fix by notice in writing; and the Tenant shall have no claim or right to claim or be entitled to any portion of any amount which maybe awarded as damages or paid as the result of such condemnation proceedings or paid as the purchase price for such option, sale or conveyance in lieu of formal condemnation proceedings; and all rights of the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant agrees to execute and deliver any instruments, at the expense of the Landlord, as may be deemed necessary or required to expedite any condemnation proceedings or to effectuate a proper transfer of title to such governmental or other public authority, agency, body or public utility seeking to take or acquire the said lands and premises or any portion thereof. The Tenant covenants and agrees to vacate the said premises, remove all the Tenant's personal property therefrom and deliver up peaceable possession thereof to the Landlord or to such other party designated by the Landlord in the aforementioned notice. Failure by the Tenant to comply with any provisions in this clause shall subject the Tenant to such costs, expenses, damages and losses as the Landlord may incur by reason of the Tenant's breach hereof.     17th: If there should occur any default on the part of the Tenant in the performance of any conditions and covenants herein contained, or if during the term hereof the premises or any part thereof shall be or become abandoned or deserted, vacated or vacant, or should the Tenant be evicted by summary proceedings or otherwise, the Landlord, in addition to any other remedies herein contained or as may be permitted by law, may either by force or otherwise, without being liable for prosecution therefor, or for damages, re-enter the said premises and the same have and again possess and enjoy; and as agent for the Tenant or otherwise, re-let the premises and receive the rents therefor and apply the same, first to the payment of such expenses, reasonable attorney fees and costs, as the Landlord may have been put to in re-entering and repossessing the same and in making such repairs and alterations as may be necessary; and second to the payment of the rents due hereunder. The Tenant shall remain liable for such rents as may be in arrears and also the rents as may accrue subsequent to the re-entry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any, received by the Landlord during the remainder of the unexpired term hereof, after deducting the aforementioned expenses, fees and costs; the same to be paid as such deficiencies arise and are ascertained each month.     18th: Upon the occurrence of any of the contingencies set forth in the preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent or placed in receivership, or should proceedings be instituted by or against the Tenant for bankruptcy, insolvency, receivership, agreement of composition or assignment for the benefit of creditors, or if this lease or the estate of the Tenant hereunder shall pass to another by virtue of any court proceedings, writ of execution, levy, sale or by operation of law, the Landlord may, if the Landlord so elects, at any time thereafter, terminate this lease and the term hereof, upon giving to the Tenant or to any trustee, receiver, assignee, or other person in charge of or acting as custodian of the assets or property of the Tenant, five days notice in writing, of the Landlords' intention so to do. Upon the giving of such notice, this lease and the term hereof shall end on the date fixed in such notice as if the said date was the date originally fixed in this lease for the expiration hereof; and the Landlord shall have the right to remove all persons, goods, fixtures and chattels therefrom, by force or otherwise, without liability for damages.     19th: Any equipment, fixtures, goods or other property of the Tenant, not removed by the Tenant upon the termination of this lease, or upon any quitting, vacating or abandonment of the premises by the Tenant, or upon the Tenant's eviction, shall be considered as abandoned and the Landlord shall have the right, without any notice to the Tenant, to sell or otherwise dispose of the same, at the expense of the Tenant, and shall not be accountable to the Tenant for any part of the proceeds of such sale, if any.     20th: If the Tenant shall fail or refuse to comply with and perform any conditions and covenants of the within lease, the Landlord may, if the Landlord so elects, carry out and perform such conditions and -------------------------------------------------------------------------------- covenants, at the cost and expense of the Tenant, and the said cost and expense shall be payable on demand, or at the option of the Landlord shall be added to the installment of rent due immediately thereafter but in no case later than one month after such demand, whichever occurs sooner, and shall be due and payable as such. This remedy shall be in addition to such other remedies as the Landlord may have hereunder by reason of the breach by the Tenant of any of the covenants and conditions in this lease contained.     21st: This lease and the obligation of the Tenant to pay the rent hereunder and to comply with the covenants and [ILLEGIBLE]     22nd: The terms, conditions, covenants and provisions of this lease shall be deemed to be severable. If any clause or provision herein contained shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision herein, but such other clauses or provisions shall remain in full force and effect.     23rd: The various rights, remedies, options and elections of the Landlord, expressed herein, are cumulative, and the failure of the Landlord to enforce strict performance by the Tenant of the conditions and covenants of this lease or to exercise any election or option or to resort or have recourse to any remedy herein conferred or the acceptance by the Landlord of any installment of rent after any breach by the Tenant, in any one or more instances, shall not be construed or deemed to be a waiver or a relinquishment for the future by the Landlord of any such conditions and covenants, options, elections or remedies, but the same shall continue in full force and effect.     24th: All notices required under the terms of this lease shall be given and shall be complete by mailing such notices by certified or registered mail, return receipt requested, to the address of the parties as shown at the head of this lease, or to such other address as may be designated in writing, which notice of change of address shall be given in the same manner.     25th: The Landlord covenants and represents that the Landlord is the owner of the premises herein leased and has the right and authority to enter into, execute and deliver this lease; and does further covenant that the Tenant on paying the rent and performing the conditions and covenants herein contained, shall and may peaceably and quietly have, hold and enjoy the leased premises for the term aforementioned.     26th: This lease contains the entire contract between the parties. No representative, agent or employee of the Landlord has been authorized to make any representations or promises with reference to the within letting or to vary, alter or modify the terms hereof. No additions, changes or modifications, renewals or extensions hereof, shall be binding unless reduced to writing and signed by the Landlord and the Tenant.     27th: Sublet Assignment: Tenant shall not have the right to sublet the rented premises in question. However, Tenant shall have the right to assign this lease to a new Tenant upon receiving the consent of the Landlord, which consent shall not be reasonably withheld. An assignment of this Lease shall not relieve the Tenant of the obligations of this Lease.     28th: Late Charge: Tenant agree that a 5% late charge will be paid when rent is paid after the 10th of the month. SUBJECT TO TWO RIDERS AND EXHIBIT "A" ANNEXED HERETO AND MADE A PART HEREOF.     The Landlord may pursue the remedy sought in any invalid clause, by conforming the said clause with the provisions of the statutes or the regulations of any governmental agency in such case made and provided as if the particular provisions of the applicable statutes or regulations were set forth herein at length.     In all references herein to any parties, persons, entities or corporations the use of any particular gender or the plural or singular number is intended to include the appropriate gender or number as the text of the within instrument may require. All the terms, covenants and conditions herein contained shall be for and shall insure to the benefit of and shall bind the respective parties hereto, and their heirs, executors, administrators, personal or legal representatives, successors and assigns. --------------------------------------------------------------------------------     In Witness Whereof, the parties hereto have hereunto set their hands and seals, or caused these presents to be signed by their proper corporate officers and their proper corporate seal to be hereto affixed, the day and year first above written. Signed, Sealed and Delivered   PALISADES PARK PLAZA NORTH, INC. in the presence of         or Attested by   By: /s/ KWANG KEH    --------------------------------------------------------------------------------     KWANG KEH/PRESIDENT   Landlord --------------------------------------------------------------------------------             --------------------------------------------------------------------------------     NARA BANK   Tenant     By: /s/ JUNG W. RYU    --------------------------------------------------------------------------------     JUNG W. RYU, VICE PRESIDENT   Tenant -------------------------------------------------------------------------------- Addendum to Lease Between Palisades Park Plaza North, Inc. hereinafter referred to as Landlord and NARA BANK hereinafter referred to as Tenant.     28:  Tenant shall pay in each tax year during the term, as additional rent as N-11, 5.62% percent of the entire real estate and other ad valorm taxes (including, without limitation, special assessments, with respect to the entire premises including all building and other improvements situated thereon). These taxes included, but are not limited to the real estate tax, real estate rental receipts, or gross receipt tax or any other tax imposed by Federal, State or Local taxing authorities as a substitute for or an addition to the current method of property taxation used for the funding of governmental services.     Total taxes payable shall also include the cost of any contest or field pursued in an effort to reduce the tax or assessment on which any tax or other impositon provided for in this section is based, including attorneys and appraisal fees.     The tax payments required hereunder shall be paid by Tenant within thirty (30) days in a lump sum payment of receipt by Tenant of tax bill from Landlord.     In addition thereto, Tenants shall also pay, as additional rent, 5.62% of all maintenance and common charges for the entire building of which this space is a part thereof. Said payments shall be made in the same manner as the tax payments noted above.     29:  Tenant has inspected the premises and accepts same as is. Any improvements done by the Tenant, or required to be done in order for the Tenant to obtain a Certificate of Occupancy for the premises in question, shall be done at the sole and exclusive expense of the Tenant.     30:  All trade fixtures and apparatus (as distinguished from Leasehold improvements) owned by the Tenant and installed in the premises shall remain the property of Tenant and shall be removable at any time, including the expiration of the Term, provided Tenant shall not at such time be in default of any terms of covenants of this Lease. If Tenant is in default, Landlord shall have the benefit of any applicable lien on Tenant's property located in or on the premises as may be permitted under the laws of the State where the premises are located and in the event a lien is asserted by Landlord in any manner or by operation of law. Tenant shall remove or permit the removal of said property until the lien has been removed and all defaults have been cured.     31:  In regard to use and occupancy of the premises and the common facilities, Tenant will, at its expense: (a) keep the inside and outside of all glass doors and windows of the premises clean; (b) replace promptly any cracked or broken glass of the premises with glass of like kind and quaility; (c) maintain the premises in a clean, orderly, and sanitary condition and free of insects, rodents, vermin and other pests; (d) keep any garbage, trash, rubbish or refuse in containers within the interior or the premises until removed: (e) have such garbage, trash, rubbish, and refuse removed on a daily basis: (f) keep all mechanical apparatus free of vibration and noise which may be transmitted beyond the premises: (g) comply with all rules, laws, ordinances, and regulations of governmental authorities and all recommendations of the Fire Underwriter's Rating Bureau now or hereafter in effect: (h) conduct its business in all respects in a dignified manner in accordance with high standards of operation consistent with the quality of operation of the entire premises as reasonably determined by Landlord.     B.  In regard to use and occupancy of the premises and common facilities, Tenant will not: (a) place or maintain any merchandise, trash, refuse, or other articles in any vestibule or entry of the premises, on the footwalks or corridors adjacent thereto or elsewhere on the exterior of the premises so as to obstruct any driveway, footwalk, parking area, or any other common facility: (b) permit the parking of delivery vehicles so as to interfere with the use of any driveway, footwalk, parking area, or other common facility in the entire premises: (c) receive or ship articles of any kind except through services facilities provided by the Landlord: (d) conduct or permit to be conducted any auction, fire, going out of business, bankruptcy, or other similar type of sale in or connected with the premises: (e) use or permit the use of any portion of the premises for any unlawful purpose: and (f) place a load upon any floor which exceeds the floor load which the was designed to carry or allowed by law. --------------------------------------------------------------------------------     32.  Landlord shall have the obligation to make all structural repairs to the exterior of the premises, excluding any doors, door frames, windows or glass: provided Tenant shall give Landlord written notice of the necessity for such repairs and provided that the damage thereto shall not have been caused by negligence of Tenant, its agents, officers, employees, licensees or contractors, in which event Tenant shall be responsible therefor. Landlord shall be under no liability for repair, maintenance, alteration, or any other action with respect to the premises or, any part thereof, or any plumbing, electrical, or other mechanical installations therein, exterior of the premises, doors, door frames, windows and glass with respect to which Tenant shall make all repairs. Landlord shall be responsible for the care and maintenance of the roof.     33.  Tenant will keep all non-structural elements and other items, aforementioned, and the interior of the premises, together with all electrical, plumbing, and other mechanical installations therein, in good order and repair and will make all replacements thereto at its expense; and will surrender the premises at the expiration of the terms or at such other times as it may vacate the premises in as good condition as when received, excepting depreciation caused by ordinary wear and tear, damage by fire, and unavoidable accidents or Acts of God. Tenant will not overload the electrical wiring serving the premises or within the premises, and will install at its expense any additional electrical wiring which may be required in connection with Tenant's apparatus.     B.  Any damage sustained by any party caused by mechanical, electrical, plumbing, or any other equipment or installations, whose maintenance and repair is the responsibility of Tenant shall be paid by Tenant, and Tenant shall indemnify and hold Landlord harmless from and against any and all claims, actions, damages, and liability in connection therewith, including but not limited to reasonable attorneys' and other professional fees, and any other cost which Landlord might reasonably incur.     34.  Tenant will pay for its own gas, water and electric services, which the parties anticipate will be separately provided and metered to the premises, at tenant's cost, and if separately charge to Tenant, sewer, refuse removal, sprinkler, and any other utility or other charges against the premises. It is the intention of the parties that Tenant will pay in full all utilities and services directly charged or billed against the premises and that Tenant will pay in full the costs and charges billed against the premises so that the annual basic rental provided herein shall be absolutely net to Landlord.     B.  Landlord shall incur no liability whatsoever should any utility become unavailable from any public utility company, public authority, or any other person, firm or corporation, including Landlord, supplying such utility.     35.  Tenant will keep in force at its expense as long as this Lease remains in effect and during such other time as Tenant occupies the premises or any part thereof, public liability, insurance, including contractual liability, with respect to the premises in companies and in form acceptable to the Landlord with minimum limits of $100,000.00 on account of bodily injuries to or death of one person and $300,000.00 on account of bodily injuries to or death of more than one person as a result of any one accident or disaster; property damage insurance with minimum limits of $100/$300 Thousand and all-risk insurance at replacement cost value on Tenant's personal property, including inventory, trade fixtures, wall and floor coverings, furniture and other property removable by Tenant and leasehold improvements either existing within the premises at the commencement of this Lease, or installed by Tenant during the term of this Lease: provided, however, that Tenant's insuring of the leasehold improvements used by it shall in no way confer on Tenant any property rights to same. Tenant will further deposit the policy or policies of such insurance or certificates thereof with Landlord, which policies shall name Landlord or its designee and any mortgage of the entire premises as additional named insured, and shall also contain a provision stating that such policy or policies shall not be cancelled or modified except after thirty (30) days written notice to Landlord. If the nature of Tenant's operation is such as to place any or all of its employees under the coverage of local workmen's compensation or similar statutes, Tenant shall also keep in force, at its expense, so long as this Lease remains in effect and during such other times as Tenant occupies the premises or any part thereof, workmen's compensation or similar insurance affording statutory coverage and containing statutory limits. All policies of insurance shall be issued by insurers authorized to conduct that type of business -------------------------------------------------------------------------------- in New Jersey, which shall, at all times, have policyholders rating of 'A' or better, and financial rating of 'AAA' or better, in the then current edition of Best's Insurance Guide. If Tenant shall comply with its covenants made in this Section 36. Landlord may cause insurance as aforesaid to be issued, and that event, Tenant agrees to pay, as additional rental, the premiums for such insurance upon Landlord's demand together with interest at 18% per annum. Tenant shall pay in each calendar year during the term of this Lease as additional rent to N-11, 5.62% percent of the entire Fire Insurance Policy that Landlord has on the entire premises in question including all buildings and other improvements. The Fire Insurance payments required hereunder shall be paid by Tenant within thirty (30) days in a lump sum payment of receipt by Tenant of the Fire Insurance bill from Landlord.     36.  Tenant will indemnify Landlord and save it harmless from and against any and all claims, actions, damages, liabilities, and expenses, including reasonable attorney's and other professional fees, in connection with loss of life, personal injury, and/or damage to property arising from or out of the occupancy or use by Tenant of the premises or any part thereof or any part of the Landlord's property.     B.  Landlord shall not be liable for any damage or injury which may be sustained by Tenant or any other person as a consequence of the failure, breakage, leakage, or obstruction of the water, plumbing, steam, gas, sewer, waste, or spoil pipes, roof, drains, leaders, gutters, valleys, downspouts, or the like, or of the electrical, ventilation, air-conditioning, gas, power, conveyor, refrigeration, sprinkler, heating or other systems, elevators, or hoisting equipment, if any, in the premises or the entire premises or by reason of the elements; or resulting from acts, conduct, or omissions on the part of Tenant or of Tenant's agents, employees, guests, licensees, invitees, assignees, or successors, or on the part of any other person or entity except Landlord's own negligence.     37.  Wherever written consent of the Landlord is required, in the main lease of this rider, it shall be deemed that such consent shall not be unreasonably withheld.     38.  Tenant acknowledges that it has the obligation to obtain all necessary Federal, State, Municipal and County approvals for the Use and Occupancy of the demised premises in question.     39.  Prior to Tenant vacating the premises in question the Tenant shall be obligated in complying with all applicable environmental statutes and codes of the State of New Jersey which codes include Tenants compliance with ECRA. -------------------------------------------------------------------------------- DATED: As of September 1,2000   PALISADES PARK PLAZA NORTH, INC.     By: /s/ KWANG KEH    --------------------------------------------------------------------------------     Kwang Keh, President/Landlord         NARA BANK         By: /s/ JUNG W. RYU    --------------------------------------------------------------------------------     Jung W. Ryu, Vice President & L.P.O./ Tenant Manager     -------------------------------------------------------------------------------- SECOND RIDER TO LEASE AGREEMENT     The provisions of this rider are hereby incorporated into and made a part of the lease dated as of September 1, 2000, between PALISADES PARK PLAZA NORTH, INC., having an address at 2050 Center Avenue, Fort Lee, N.J. 07024 ("Landlord", and NARA BANK, having an address at 29 West 30th Street, New York, N.Y. 10001 ("Tenant") for that certain premises located in the Borough of Palisades Park, County of Bergen and State of New Jersey, commonly known as 118 Broad Avenue, Suite N-11, Palisades Park, N.J. 07650 (the "Premises"). If there is any conflict between the provisions of this second rider and the remainder of this lease, the provisions of this rider shall govern. R1.   Notwithstanding anything in this lease to the contrary, Landlord represents and warrants that the heating, air conditioning, electrical, plumbing and all other systems in the Premises shall be in good working order and condition at the time of the commencement of the term of this Lease and the roof and structure of the Premises shall be free of water leaks or in need of repair at the time of the commencement of the term of this Lease. R2.   It is expressly agreed and understood that whenever Landlord's prior consent or approval shall be required, such prior consent or approval shall not be unreasonably or arbitrarily withheld, delayed, conditioned or denied. Landlord's failure to respond to the Tenant's written request for any such consent or approval within ten (10) business days shall be construed as Landlord's consent. R3.   Landlord represents and warrants as a condition of this lease that it possesses good marketable fee title to the Premises; that it is authorized to make this lease for the term aforesaid; that the provisions of this lease do not or will not conflict with or violate the provisions of existing or future agreements between Landlord and third parties; that the certificate of occupancy for the Premises allows Tenant to use and enjoy the Premises and for the purposes set forth in this lease; that the Premises and, the uses thereof for the purposes specified in this lease are in conformity with all applicable laws, and that Landlord will deliver the Premises to Tenant, free of all tenants and occupants and claims thereto unless otherwise agreed in this lease. R4.   Further supplementing Paragraph 6 of the printed lease, it is agreed as follows:     (A)  If any portion of the Premises is damaged by fire, earthquake, flood or other casualty, or by any other cause of any kind or nature (the "Damaged Property") and the Damaged Property can, in the opinion of Landlord's architect reasonably exercised, be repaired within sixty (60) days from the date of the damage, Landlord shall proceed immediately to make all of such repairs. This lease shall not terminate, but Tenant shall be entitled to a pro rata abatement of all rents payable during the period commencing on the date of the damage and ending on the date the Damaged Property is repaired as aforesaid and the Premises are delivered to Tenant. The extent of rent abatement shall be based upon the portion of the Premises rendered untenantable, unfit or inaccessible for use by Tenant for the purposes stated in this lease during such period. When required by this provision, the architect's opinion shall be delivered to Tenant within fifteen (15) days from the date of the damage. The architect's opinion shall be made in good faith after a thorough investigation of the facts required to make an informed judgment. The architect shall consider and include as part of his evaluation the period of time necessary to obtain the required approvals of the mortgagee and insurer, to order and obtain materials, and to engage contractors.     1 --------------------------------------------------------------------------------     (B)  If (i) in the opinion of Landlord's architect reasonably exercised, damage to the Damaged Property cannot be repaired within sixty (60) days from the date of the damage, or (ii) Landlord commences and proceeds with due diligence but fails to complete the repair of the Damaged Property as required by Section R4(A) within the sixty (60) day period, or (iii) the term will expire within one (1) year from the date of the damage and Tenant fails to extend the term in accordance with any right granted elsewhere under this Lease within sixty (60) days from the date of the damage, either party may terminate this Lease as follows: (a) for the reason stated in subparagraph (i), by notice to the other within twenty (20) days from the date on which the architect's opinion is delivered to Tenant; (b) for the reason stated in subparagraph (ii), by such notice within twenty (20) days from the end of the sixty (60) day period, and (c) for the reason stated in subparagraph (iii), by such notice within thirty (30) days from the date of the damage. Upon termination, all rents shall be apportioned as of the date of the damage and all prepaid rents shall be repaid.     (C)  If neither party exercises its option to terminate hereunder, Landlord shall, with due diligence, repair the Damaged Property as a complete architectural unit of substantially the same usefulness, design and construction existing immediately prior to the damage. Tenant shall be entitled to a pro rata abatement of all rents in the manner and to the extent provided in Section R4(A).     (D)  The word "repair" shall include rebuilding, replacing and restoring the Damaged Property. R5.   Further supplementing Paragraph 8 of the printed lease, it is agreed that Landlord's entry upon the Premises for the purposes described therein shall be only upon prior notice to the management of Tenant and at reasonable times, and not earlier than ninety (90) days before expiration of the term of this lease. R6.   Further supplementing Paragraph 12 of the printed lease, it is agreed that so long as Tenant is not in default (beyond any period given Tenant to cure such default) in the payment of the rents or in the performance of any of the terms, covenants or conditions of this lease, Tenant will not be joined as a party defendant in any action or proceeding for the purpose of terminating Tenant's interest and estate under this lease. R7.   Notwithstanding anything in Paragraph 13 of the printed lease to the contrary, it is agreed as follows:     (A)  The rent security deposit will be held in escrow by the law firm of David Watkins, Esq., 285 Closter Dock Road, Closter, New Jersey 07624 (the "Escrow Agent") until October 1, 2000. In the event this lease is canceled by Tenant in accordance with the terms set forth in Paragraph R13 hereof prior to October 1, 2000, the rent security deposit will be immediately refunded by the Escrow Agent to Tenant. In the event this lease is not canceled by Tenant in accordance with the terms set forth in Paragraph R13 hereof prior to October 1, 2000, the rent security deposit will be turned over by the Escrow Agent to Landlord.     (B)  Except as stated above, the rent security deposit will be refunded to Tenant not later than within thirty (30) days after the expiration of the term of this lease. If, however, this lease is canceled by Tenant in accordance with the terms set forth in Paragraph R13 hereof after October 1, 2000, the rent security deposit will be refunded to Tenant not later than within thirty (30) days after the effective date of such cancellation.     2 -------------------------------------------------------------------------------- R8.   Notwithstanding anything in this lease to the contrary, Tenant may assign or sublet the whole or any part of the Premises to an affiliated corporation, or to any corporation with which it shall be merged or consolidated or which shall acquire the assets of Tenant, provided Tenant first supplies Landlord with all written evidence necessary to satisfy Landlord of the relationship between Tenant and the affiliated or merged corporation. As used herein, affiliated corporation with respect to Tenant shall mean any corporation related to Tenant as a parent, subsidiary or brother-sister corporation so that such corporation and Tenant and other corporations constitute a controlled group as determined under Section 1563 of the Internal Revenue Code of 1986, as amended and as elaborated by the Treasury Regulations promulgated thereunder. R9.   Landlord hereby represent to Tenant that to the best of Landlord's knowledge, information and belief, Landlord, its predecessor in title and/or any of the present or prior occupants of the building where the Premises is located never violated any environmental laws applicable to the Building, inclusive of but not limited to the Industrial Sire Recovery Act (ISRA) and Liquid Underground Storage Tank Act (LUST). Landlord agrees and it hereby does indemnify and hold Tenant harmless from and against any and all claims, expenses, losses and liability arising by virtue of any violation of any applicable environmental laws arising, caused, created or in any manner related to an event prior to the commencement date of this lease. R10.   It is agreed that during the term of the lease, Tenant shall have the reserved use of one (1) designated and marked parking space within the parking area of the building where the Premises is located. R11.   Tenant is hereby granted the right to install within the building where the Premises is located an Automated Teller Machine (ATM) and Landlord agrees to provide Tenant with the adequate space to accommodate such installation. Tenant shall have the right to determine the selection of the type of ATM. Tenant shall supply insurance in the same manner as set forth in Paragraph 35 of this lease. R12.   Notwithstanding any other provision of this Lease, in the event Tenant or its successors or assignees shall become insolvent, bankrupt or make any assignment for the benefit of creditors, or if it or their interests hereunder shall be levied upon or sold under execution or other legal process, or in the event the bank to operated on the Premises is closed or taken over by the Superintendent of Banks of the State of New York, State of New Jersey or any other bank supervisory authority, Landlord may terminate this Lease only with the concurrence of said Superintendent or other bank supervisory authority, and any such authority shall in any event have the choice to either continue or terminate this Lease, provided that if this Lease is so terminated, the maximum claim of Landlord for damages or indemnity resulting from such rejection or early termination of this Lease shall be the amount equal to the unpaid rent accrued without acceleration until the date of the surrender of the premises to the Landlord or the date of re-entry of Landlord, whichever shall be earlier. R13.   Notwithstanding anything in this lease to the contrary, it is agreed as follows:     (A) This Lease and Tenant's duty of performance thereunder are expressly contingent upon Tenant's ability to obtain any and all required governmental approvals for the opening of a loan office from the New Jersey State Banking Department and Federal Deposit Insurance Corporation. Tenant agrees to promptly apply for such approvals, pursue its applications with due diligence, and promptly notify Landlord upon its receipt thereof. In the event Tenant fails to secure all required approvals within sixty (60) days from the execution of this lease by both parties, then either party may, at such party's option, cancel this lease upon ten (10) business days notice to the other party.     3 --------------------------------------------------------------------------------     (B) In the event Landlord shall elect to cancel this lease pursuant to the terms of the within provision, Tenant shall have the right to waive this contingency within three (3) business days after Tenant's receipt of Landlord's notice of cancellation in which event this lease shall remain in full force and effect except that the contingency described Paragraph R13(A) shall be deemed fully satisfied.     (C) In the event this lease is canceled by either party pursuant to the terms of this provision, the rent shall be adjusted as of the effective date of such cancellation. R14.   Tenant is hereby granted one (1) option to renew the term of this lease for an additional term of five (5) years, commencing in September 1, 2005, and ending on August 31, 2010, upon the same terms and conditions as set forth in this lease. Said option shall be exercised, in writing, served upon Landlord not later than three (3) months prior to the term of this lease. R15.   Intentionally omitted. R16.   Landlord hereby consents to Tenant's placement of a sign upon the building where the Premises is located, with the design and size of such sign and the position of its placement to be as shown on Exhibit A annexed hereto. It is understood that such sign shall be in full compliance with all applicable municipal laws and regulations. Attest:       NARA BANK By:   --------------------------------------------------------------------------------   By:   /s/ JUNG W. RYU    --------------------------------------------------------------------------------             Jung W. Ryu, Vice President & L.P.O Manager Witness:       PALISADES PARK PLAZA NORTH, INC. --------------------------------------------------------------------------------   By:   /s/ KWANG KEH    --------------------------------------------------------------------------------             Kwang Keh, President 8/28/2000 4 -------------------------------------------------------------------------------- EXHIBIT "A"      [GRAPHIC - NARA BANK STORE FRONT] 5 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.4 Addendum to Lease Between Palisades Park Plaza North, Inc. hereinafter referred to as Landlord and NARA BANK hereinafter referred to as Tenant. SECOND RIDER TO LEASE AGREEMENT EXHIBIT "A"
Exhibit 10.4 TAX SHARING AGREEMENT       THIS TAX SHARING AGREEMENT dated as of June 28, 1999 is made and entered into by Waterhouse Investor Services, Inc. a Delaware corporation (“WISI”) and TD Waterhouse Group, Inc., a Delaware corporation (“TD Waterhouse”) and their Affiliates. RECITALS       WHEREAS, WISI is the common parent corporation of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the “CODE”) and of combined groups as defined under similar laws of other jurisdictions (“WISI GROUP”) and TD Waterhouse and their Affiliates are members of such groups; and       WHEREAS, the groups of which WISI is the common parent and TD Waterhouse and their Affiliates are members file or intend to file Consolidated Returns and Combined Returns; and       WHEREAS, WISI and TD Waterhouse desire to provide for the allocation of liabilities, procedures to be followed, and other matters with respect to certain taxes for taxable periods beginning with the first period in which TD Waterhouse becomes a member of the WISI Group. AGREEMENT       NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. DEFINITIONS       1.1. “AFFILIATE” means any corporation or other entity directly or indirectly controlled by WISI or TD Waterhouse which is includible in the WISI or WSI Group.       1.2. “WSI GROUP” means the affiliated group of corporations as defined in Section 1504(a) of the Code, or similar group of entities as defined under similar laws of other jurisdictions, of which TD Waterhouse would be the common parent if it were not a subsidiary of WISI, and any corporation or other entity which may be or become a member of such group from time to time.       1.3. “WSI GROUP COMBINED TAX LIABILITY” means, with respect to any taxable year, the WSI GroupÎs liability for Non-Federal Combined Taxes as determined under Section 2.4 of this Agreement.   -------------------------------------------------------------------------------- 2       1.4. “WSI GROUP FEDERAL INCOME TAX LIABILITY” means, with respect to any taxable year, the WSI Group's liability for Federal Income Taxes as determined under Section 2.3 of this Agreement.       1.5. “AUDIT” includes any audit, assessment of Taxes, other examination by any Tax Authority, proceeding, or appeal of such proceeding relating to Taxes, whether administrative or judicial.       1.6. “COMBINED GROUP” means a group of corporations or other entities that files a Combined Return.       1.7. “COMBINED RETURN” means any Tax Return with respect to Non-Federal Taxes filed on a consolidated, combined (including nexus combination, worldwide combination, domestic combination, line of business combination or any other form of combination) or unitary basis wherein one or more members of the WSI Group join in the filing of a Tax Return with WISI or a WISI subsidiary that is not also a member of the WSI Group.       1.8. “CONSOLIDATED GROUP” means the affiliated group of corporations within the meaning of Section 1504(a) of the Code of which WISI is the common parent and which includes the WSI Group.       1.9. “CONSOLIDATED RETURN” means any Tax Return with respect to Federal Income Taxes filed by the Consolidated Group pursuant to Section 1501 of the Code.       1.10. Intentionally left blank.       1.11. “DECONSOLIDATION” means any event pursuant to which TD Waterhouse and the WSI Group cease to be includible in the Consolidated Group or the Combined Group.       1.12. “DECONSOLIDATION DATE” means the close of business on the day on which a Deconsolidation occurs. Unless otherwise required by the relevant Tax Authority or a court of competent jurisdiction, WISI and TD Waterhouse, for itself and the WSI Group, agree to file all Tax Returns, and to take all other actions, relating to Federal Income Taxes or Non-Federal Combined Taxes in a manner consistent with the position that TD Waterhouse and the WSI Group are includible in the Consolidated Group and the Combined Group for all days from the date hereof through and including a Deconsolidation Date.       1.13. “ESTIMATED TAX INSTALLMENT DATE” means the installment due dates prescribed in Section 6655(c) of the Code (presently April 15, June 15, September 15 and December 15).       1.14. “FEDERAL INCOME TAXES” means any tax imposed under Subtitle A of the Code (including the taxes imposed by Sections 11, 55, 59A, and 1201(a) of the Code), -------------------------------------------------------------------------------- 3 including any interest, additions to tax, or penalties applicable thereto, and any other income based United States federal taxes which are hereinafter imposed upon corporations.       1.15. “FINAL DETERMINATION” means (a) the final resolution of any tax (or other matter) for a taxable period, including any related interest or penalties, that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise, including (1) by the expiration of a statute of limitations (giving effect to any extension, waiver or mitigation thereof) or a period for the filing of claims for refunds, amended returns, appeals from adverse determinations, or recovering any refund (including by offset), (2) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable, (3) by a closing agreement or an accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreements under laws of other jurisdictions, (4) by execution of an Internal Revenue Service Form 870 or 870AD, or by a comparable form under the laws of other jurisdictions (excluding, however, any such form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Taxing Authority to assert a further deficiency), or (5) by any allowance of a refund or credit, but only after the expiration of all periods during which such refund or credit may be recovered (including by way of offset) or (b) the payment of tax by any member of the Consolidated Group or Combined Group with respect to any item disallowed or adjusted by a Taxing Authority provided that WISI determines that no action should be taken to recoup such payment.       1.16. Intentionally left blank.       1.17. “NON-FEDERAL COMBINED TAXES” means any Non-Federal Taxes with respect to which a Combined Return is filed.       1.18. “NON-FEDERAL SEPARATE TAXES” means any Non-Federal Tax that is not a Non-Federal Combined Tax.       1.19. “NON-FEDERAL TAXES” includes all state and local charges, fees, levies, imposts, duties, or other assessments of a similar nature, including without limitation, income, alternative or add-on minimum, gross receipts, excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, withholding, Social Security, unemployment, disability, ad valorem, estimated, highway use, commercial rent, capital stock, paid up capital, recording, registration, property, real property gains, value added, business license, custom duties, or other tax or governmental fee of any kind whatsoever, imposed or required to be withheld by any Tax Authority (excluding any governmental agency of the United States) including any interest, additions to tax, or penalties applicable thereto.       1.20. “PRE-DECONSOLIDATION PERIOD” means a taxable period ending on or prior to the Deconsolidation Date.       1.21. “PRO FORMA WSI GROUP COMBINED RETURN” means a pro forma non-federal combined tax return or other schedule prepared pursuant to Section 2.4 of this Agreement. -------------------------------------------------------------------------------- 4       1.22. “PRO FORMA WSI GROUP CONSOLIDATED RETURN” means a pro forma consolidated federal income tax return prepared pursuant to Section 2.3 of this Agreement.       1.23. “POST-DECONSOLIDATION PERIOD” means a taxable period beginning after the Deconsolidation Date.       1.24. “REDETERMINATION AMOUNT” means, with respect to any taxable year, the amount determined under Section 3.8 of this Agreement.       1.25. “STRADDLE PERIOD” means a taxable period beginning on or prior to and ending after the Deconsolidation Date.       1.26. “TAX ASSET” means any net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction or any other deduction, credit or tax attribute which could reduce taxes (including without limitation deductions and credits related to alternative minimum taxes).       1.27. “TAX AUTHORITY” includes the Internal Revenue Service and any state, local, or other governmental authority responsible for the administration of any Taxes.       1.28. “TAXES” means Federal Income Taxes and Non-Federal Taxes.       1.29. “TAX RETURN” means any return, declaration, statement, report, schedule, certificate, form, information return or any other document (and any related or supporting information) including an amended tax return required to be supplied to, or filed with, a Tax Authority with respect to Taxes. SECTION 2. TAX SHARING       2.1. TD WATERHOUSE LIABILITY FOR FEDERAL INCOME TAXES AND NON-FEDERAL COMBINED TAXES. Each taxable year, TD Waterhouse shall pay to WISI an amount equal to the sum of the WSI Group Federal Income Tax Liability and the WSI Group Combined Tax Liability for such taxable year.       2.2. Intentionally left blank.       2.3. WSI GROUP FEDERAL INCOME TAX LIABILITY. (a) IN GENERAL. With respect to any taxable year, the WSI Group Federal Income Tax Liability shall be the sum, for such taxable year, of (1) the WSI GroupÎs liability for Federal Income Taxes as determined on the Pro Forma WSI Group Consolidated Return, and (2) any interest, penalties and other additions to such taxes.       (b) PRO FORMA FEDERAL RETURN. Each taxable year, WISI shall prepare or cause to be prepared (and, as requested by WISI, TD Waterhouse shall cooperate in preparing) a pro forma consolidated federal income tax return for the WSI Group (“PRO FORMA WSI GROUP CONSOLIDATED RETURN”) as if the WSI Group were not and never were part of the -------------------------------------------------------------------------------- 5 Consolidated Group, but rather were a separate affiliated group of corporations of which TD Waterhouse were the common parent filing a consolidated federal income tax return pursuant to Section 1501 of the Code.       (c) OPERATING RULES. The Pro Forma WSI Group Consolidated Return shall be prepared:         (1) reflecting the elections, methods of accounting, and positions with respect to specific items made or used in the Consolidated Return;           (2) taking into account any Tax Assets;           (3) the highest applicable tax rate without regard to any graduated rate of tax; and           (4) reflecting transactions with members of the Consolidated Group that are not also members of the WSI Group according to the provisions of the consolidated return regulations promulgated under the Code governing intercompany transactions (no item (including income, gains, losses, deductions and credits) of any member of the Consolidated Group that is not a member of the WSI Group shall otherwise be taken into account).       2.4. WSI GROUP COMBINED TAX LIABILITY. (a) IN GENERAL. With respect to any taxable year, the WSI Group Combined Tax Liability shall be the sum, for such taxable year, of (1) the WSI Group's liability for Non-Federal Combined Taxes as determined on the Pro Forma WSI Group Combined Return, (2) any interest, penalties and other additions to such taxes       (b) PRO FORMA COMBINED RETURN. Each taxable year, WISI shall prepare or cause to be prepared (and, as requested by WISI, TD Waterhouse shall cooperate in preparing) a pro forma combined tax return or other schedule for the WSI Group (“PRO FORMA WSI GROUP COMBINED RETURN”) determined as if the WSI Group were not and never were part of the Combined Group, but rather were a separate group of which TD Waterhouse were the common parent filing a combined tax return.       (c) OPERATING RULES. The Pro Forma WSI Group Combined Return shall be prepared by reference to:         (1) the WSI GroupÎs taxable income or loss from Line 28 of the Pro Forma WSI Group Consolidated Return, adjusted to take into account (i) those members of the WSI Group which are included in the Combined Return, (ii) net operating loss carryforwards, and (iii) material adjustments necessary to reflect the laws of the applicable jurisdiction (e.g., to exclude “SUBPART F INCOME” and “GROSS-UP”);           (2) apportionment factors determined by taking into account only those members of the WSI Group which are included in the Combined Return; and -------------------------------------------------------------------------------- 6         (3) the highest applicable tax rate without regard to any graduated rates.       (d) ADDITIONAL OPERATING RULES. The following additional provisions shall apply in determining the WSI Group Combined Tax Liability:         (1) WISI shall not pay the WSI Group for any Tax Asset relating to any Non-Federal Combined Tax, including any net operating loss carrybacks or carryovers, not otherwise taken into account under Section 2.4(b) of this Agreement;           (2) the WSI Group liability with respect to unemployment taxes for which a Combined Return is filed shall be the lesser of (i) the liability for such taxes of the members of the WSI Group which are included in the Combined Return determined utilizing the tax rate applicable to the Combined Return and (ii) the liability for such taxes of the members of the WSI Group which are included in the Combined Return determined as if such members of the WSI Group were not and never were part of the Combined Group, but rather were a separate group filing a combined unemployment tax return.       2.5. Intentionally left blank. SECTION 3. PAYMENT OF TAXES AND TAX SHARING AMOUNTS       3.1. FEDERAL INCOME TAXES. WISI shall pay to the Internal Revenue Service all Federal Income Taxes, if any, of the Consolidated Group (including the WSI Group) due and payable for all Pre-Deconsolidation Periods.       3.2. NON-FEDERAL COMBINED TAXES. WISI shall pay to the appropriate Tax Authorities all Non-Federal Combined Taxes, if any, of the Combined Group (including the WSI Group) due and payable for all Pre-Deconsolidation Periods and Straddle Periods.       3.3. NON-FEDERAL SEPARATE TAXES. TD Waterhouse shall pay to the appropriate Tax Authorities all Non-Federal Separate Taxes, if any, of the WSI Group due and payable for all Pre-Deconsolidation Periods and Straddle Periods.       3.4. OTHER FEDERAL TAXES. The parties shall each pay to the appropriate governmental authorities all of their respective Federal Taxes (excluding Federal Income Taxes for Pre-Deconsolidation Periods, which are governed by Section 3.1 of this Agreement), if any, due and payable for all Pre-Deconsolidation Periods, Straddle Periods, and Post-Deconsolidation Periods.       3.5. TAX SHARING INSTALLMENT PAYMENTS. (a) FEDERAL INCOME TAXES. Not later than five business days prior to each Estimated Tax Installment Date with respect to any Pre-Deconsolidation Period or Straddle Period, WISI shall determine under Section 6655 of the Code the estimated amount of the related installment two days prior to of the WSI Group Federal Income Tax Liability. TD Waterhouse shall then pay to WISI not later than such Estimated Tax Installment Date the amount thus determined. -------------------------------------------------------------------------------- 7       (b) NON-FEDERAL COMBINED TAXES. Not later than November 15 of each taxable year with respect to any Pre-Deconsolidation Period or Straddle Period, WISI shall deliver to TD Waterhouse an estimate of the WSI Group Combined Tax Liability for the taxable year determined by using the previous yearÎs apportionment factors. TD Waterhouse shall then pay to WISI, not later than 10 business days after receipt of such estimate, the amount thus determined.       3.6. TAX SHARING TRUE-UP PAYMENTS. (a) FEDERAL INCOME TAXES. Not later than 30 business days after the Consolidated Return is filed with respect to any Pre-Deconsolidation Period or Straddle Period, WISI shall deliver to TD Waterhouse a Pro Forma WSI Group Consolidated Return or other comparable schedule reflecting the WSI Group Federal Income Tax Liability. Not later than 10 business days after the date such pro forma or other schedule is delivered, TD Waterhouse shall pay to WISI, or WISI shall pay to TD Waterhouse, as appropriate, an amount equal to the difference, if any, between the WSI Group Federal Income Tax Liability for the taxable year and the aggregate amount paid by TD Waterhouse with respect to such taxable year under Section 3.5(a) of this Agreement.       (b) NON-FEDERAL COMBINED TAXES. Not later than November 15 following each taxable year with respect to any Pre-Deconsolidation Period or Straddle Period, WISI shall deliver to TD Waterhouse a Pro Forma WSI Group Combined Return or other comparable schedule reflecting the WSI Group Combined Tax Liability for the taxable year. Not later than 10 business days following delivery of such pro forma or other schedule, TD Waterhouse shall pay to WISI, or WISI shall pay to TD Waterhouse, as appropriate, an amount equal to the difference, if any, between the WSI Group Combined Tax Liability for the taxable year and the amount paid by TD Waterhouse with respect to such taxable year under Section 3.5(b) of this Agreement.       3.7. Intentionally left blank.       3.8. REDETERMINATION AMOUNTS. (a) IN GENERAL. In the event of any redetermination of any item of income, gain, loss, deduction or credit of any member of the Consolidated Group or Combined Group as a result of a Final Determination or any settlement or compromise with any Tax Authority (including any amended tax return or claim for refund filed by WISI), TD Waterhouse shall pay WISI or WISI shall pay TD Waterhouse, as the case may be, the Redetermination Amount.       (b) COMPUTATION. The Redetermination Amount shall be the difference, if any, between all amounts previously determined under Section 2 of this Agreement and all amounts that would have been determined under Section 2 of this Agreement taking such redetermination into account (including any additions to tax or penalties applicable thereto), together with interest for each day calculated (1) with respect to redeterminations affecting Federal Income Taxes, at the rate determined, in the case of payment by TD Waterhouse to WISI, under Section 6621(a)(2) of the Code and, in the case of payment by WISI to TD Waterhouse, under Section 6621(a)(1) of the Code, and (2) with respect to redeterminations affecting Non-Federal Combined Taxes, under similar laws, if any, of other jurisdictions. -------------------------------------------------------------------------------- 8       (c) PAYMENT. WISI shall deliver to TD Waterhouse a schedule reflecting the computation of any Redetermination Amount with respect to any taxable year. Not later than 5 days after the date such schedule is delivered, TD Waterhouse shall pay WISI, or WISI shall pay TD Waterhouse such Redetermination Amount.       3.9. INTEREST. Payments under this Section 3 that are not made within the prescribed period shall thereafter bear interest at the Federal short-term rate established pursuant to Section 6621 of the Code. SECTION 4. PROCEDURAL MATTERS       4.1. AGENT; PREPARATION AND FILING OF RETURNS. WISI shall be the sole and exclusive agent of TD Waterhouse and any member of the WSI Group in any and all matters relating to (a) Federal Income Taxes of the Consolidated Group and (b) any Non-Federal Combined Taxes for all Pre-Deconsolidation Periods and Straddle Periods. WISI shall have the sole and exclusive responsibility for the preparation and filing of any (a) Consolidated Return or (b) Combined Return for all Pre-Deconsolidation Periods and Straddle Periods. In its sole discretion, WISI shall have the exclusive right with respect to any such Consolidated Return or Combined Return (a) to determine (1) the manner in which such Tax Return shall be prepared and filed, including, without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported, (2) whether any extensions may be requested, (3) the elections that will be made by any member of the Consolidated Group or Combined Group, and (4) whether any amended tax returns should be filed, (b) to control, contest, and represent the interests of the Consolidated Group and Combined Group in any Audit and to resolve, settle, or agree to any adjustment or deficiency proposed, asserted or assessed as a result of any Audit, (c) to file, prosecute, compromise or settle any claim for refund, and (d) to determine whether any refunds, to which the Consolidated Group or Combined Group may be entitled, shall be paid by way of refund or credited against the tax liability of the Consolidated Group and Combined Group. TD Waterhouse, for itself and its subsidiaries, hereby irrevocably appoints WISI as its agent and attorney-in-fact to take such action (including the execution of documents) as WISI may deem appropriate to effect the foregoing.       4.2. FURNISHING INFORMATION. Each member of the WSI Group shall (a) furnish to WISI in a timely manner such information and documents as WISI may reasonably request for purposes of (1) preparing any original or amended Consolidated Return or Combined Return, (2) contesting or defending any Audit, and (3) making any determination or computation necessary or appropriate under this Agreement, (b) cooperate in any Audit of any Consolidated Return or Combined Return, (c) retain and provide on demand books, records, documentation or other information relating to any tax return until the later of (1) the expiration of the applicable statute of limitations (giving effect to any extension, waiver, or mitigation thereof) and (2) in the event any claim is made under this Agreement for which such information is relevant, until a Final Determination with respect to such claim, and (d) take such action as WISI may deem appropriate in connection therewith. WISI shall provide the WSI Group any assistance reasonably required in providing any information requested pursuant to this Section 4.2. -------------------------------------------------------------------------------- 9       4.3. EXPENSES. TD Waterhouse shall reimburse WISI for any outside legal and accounting expenses incurred by WISI in the course of the conduct of any Audit regarding the tax liability of the Combined Group or Consolidated Group, and for any other expense incurred by WISI in the course of any litigation relating thereto, to the extent such costs are reasonably attributable to the WSI Group and provided WISI has conferred with TD Waterhouse as to the portion of the Audit relating to the WSI Group. Notwithstanding the foregoing, WISI shall have the sole discretion to control, contest, represent, file, prosecute, challenge or settle any Audit pursuant to Section 4.1. SECTION 5. DECONSOLIDATION       5.1. CONTINUING COVENANTS. TD Waterhouse, for itself and the TD Waterhouse Affiliates, covenants that on or after a Deconsolidation it will not, nor will it cause or permit any member of the WSI Group to make or change any tax election, change any accounting method, amend any tax return or take any tax position on any tax return, take any action, omit to take any action or enter into any transaction that results in any increased tax liability or reduction of any Tax Asset of the WISI Group in respect of any Pre-Deconsolidation Period or Straddle Period.       5.2. REATTRIBUTION OF TAX ASSETS. In the event of a Deconsolidation, WISI may, at its option, elect to reattribute to itself certain Tax Assets of the WSI Group pursuant to Treasury Regulations Section 1.1502-20(g) or similar provisions of other jurisdictions. If WISI makes such an election, TD Waterhouse shall comply with any applicable requirements, including those of Treasury Regulations Section 1.1502-20(g)(5).       5.3. CARRYBACKS. WISI agrees to pay to TD Waterhouse the actual tax benefit received by the WISI Group from the use in any Pre-Deconsolidation Period of a carryback of any Tax Asset of the WSI Group from a Post-Deconsolidation Period. Such benefit shall be considered equal to the lesser of (a) the amount WISI would have paid TD Waterhouse had such Tax Asset arisen in a Pre-Deconsolidation Period and (b) the excess of (1) the amount of Federal Income Taxes imposed on the Consolidated Group or the amount of Combined Taxes imposed on the Combined Group, as the case may, that would have been payable by the Consolidated Group or Combined Group in the absence of such carryback over (2) the amount of Federal Income Taxes or Combined Taxes, as the case may be, actually paid. Payment of the amount of such benefit shall be made within 90 days of the filing of the applicable tax return for the taxable year in which the Tax Asset is utilized. If subsequent to the payment by WISI to TD Waterhouse of any such amount, there shall be (a) a Final Determination which results in a disallowance or a reduction of the Tax Asset so carried back or (b) a reduction in the amount of the benefit realized by the WISI Group as a result of any other Tax Asset that arises in a Post-Deconsolidation Period, TD Waterhouse shall repay to WISI, within 90 days of such event any amount which would not have been payable to TD Waterhouse pursuant to this Section 5.3 had the amount of the benefit been determined in light of these events. TD Waterhouse shall hold WISI harmless for any penalty, addition to tax or interest payable by any member of the WISI Group as a result of any such event. Any such amount shall be paid by TD Waterhouse to WISI within 90 days of the payment by WISI or any member of the Consolidated Group or -------------------------------------------------------------------------------- 10 Combined Group of any such penalty, addition to tax, or interest. Nothing in this Section 5.3 shall require WISI to file a claim for refund of Federal Income Taxes or Combined Taxes. SECTION 6. MISCELLANEOUS       6.1. TERM. Except as provided in Section 6.14 and this Section 6.1, this Agreement shall expire upon the Deconsolidation Date. However, all rights and obligations arising hereunder with respect to a Pre-Deconsolidation Period or Straddle Period shall survive until they are fully effectuated or performed. Further, notwithstanding anything in this Agreement to the contrary, all rights and obligations arising hereunder with respect to a Post-Deconsolidation Period shall remain in effect and its provisions shall survive for the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof).       6.2. ALLOCATIONS. All computations with respect to the Pre-Deconsolidation Period ending on the Deconsolidation Date, the immediately following taxable period of TD Waterhouse and the WSI Group and any Straddle Period shall be made pursuant to the principles of Treasury Regulations Section 1.1502-76(b), taking into account such elections thereunder as WISI, in its sole discretion, shall make.       6.3. CHANGES IN LAW. Any reference to a provision of the Code or a similar law of another jurisdiction shall include a reference to any successor provision to such provision.       6.4. CONFIDENTIALITY. Each party shall hold and cause its advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other parties hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (a) previously known by the party to which it was furnished, (b) in the public domain through no fault of such party, or (c) later lawfully acquired from other sources not under a duty of confidentiality by the party to which it was furnished), and each party shall not release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants who shall be advised of and agree to be bound by the provisions of this Section 6.4. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentiality for its own similar information.       6.5. SUCCESSORS. This Agreement shall be binding on and inure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any of the parties hereto (including any successor of WISI and TD Waterhouse succeeding to the tax attributes of such party under Section 381 of the Code), to the same extent as if such successor had been an original party.       6.6. AUTHORIZATION, ETC. Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that -------------------------------------------------------------------------------- 11 this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of each such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding on such party.       6.7. ENTIRE AGREEMENT. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements.       6.8. SECTION CAPTIONS. Section captions used in this Agreement are for convenience and reference only and shall not affect the construction of this Agreement.       6.9. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to laws and principles relating to conflicts of law.       6.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.       6.11. WAIVERS AND AMENDMENTS. This Agreement shall not be waived, amended or otherwise modified except in writing, duly executed by all of the parties hereto.       6.12. SEVERABILITY. In case any one or more of the provisions in this Agreement should be invalid, illegal or unenforceable, the enforceability of the remaining provisions hereof will not in any way be effected or impaired thereby.       6.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the benefit of the parties to this Agreement and the other members of the Affiliated Group and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other rights in excess of those existing without this Agreement. -------------------------------------------------------------------------------- 12       IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by a duly authorized officer as of the date first above written.   WATERHOUSE INVESTOR SERVICES, INC.   on behalf of itself and its Subsidiaries   By:  /s/ Richard H. Neiman                   Name: Richard H. Neiman       Title: Executive Vice President   TD WATERHOUSE GROUP, INC.   on behalf of itself and its subsidiaries   By:  /s/ Frank J. Petrilli                           Name: Frank J. Petrilli       Title: President and COO
PMA CAPITAL CORPORATION 401(k) EXCESS PLAN MARCH 2001 -------------------------------------------------------------------------------- TABLE OF CONTENTS Page         ARTICLE I - INTRODUCTION 1 1.1 Introduction 1   ARTICLE II - DEFINITIONS 1 2.1 Administrator 1 2.2 Affiliated Employer 1 2.3 Annual Distribution Period 1 2.4 Beneficiary 1 2.5 Board of Directors 2 2.6 Change of Control 2 2.7 Code 2 2.8 Compensation 2 2.9 Deferred Compensation Plan 2 2.10 Determination Date 2 2.11 Effective Date 2 2.12 Eligible Employee 2 2.13 Employee Pre-Tax Contributions 2 2.14 Employee Pre-Tax Credits 2 2.15 Employer Matching Contributions 3 2.16 Employer Matching Credits 3 2.17 Employment Termination Date 3 2.18 ERISA 3 2.19 Excess 401(k) Plan Account 3 2.20 Excess Salary Reduction Agreement 3 2.21 Participant 3 2.22 Participating Company 3 2.23 Payroll Period 3 2.24 Plan 3 2.25 Plan Sponsor 3 2.26 Plan Year 3 2.27 Qualified Plan 3 2.28 Total Disability 3 2.29 Valuation Date 3 2.30 Vanguard Funds 3   ARTICLE III - PARTICIPATION 4 3.1 Eligibility to Participate 4 3.2 Procedure for and Effect of Admission 4   ARTICLE IV - CREDITS TO EXCESS 401(K) PLAN ACCOUNTS 4 4.1 Establishment of Plan Accounts 4 4.2 Investment Obligation of the Plan Sponsor 4 4.3 Employee Pre-Tax Credit 4 4.4 Salary Reduction Agreement 5 4.5 Employer Matching Credits 5 4.6 Allocation Among Investment Options 5 4.7 Administration of Investments 5 4.8 Valuation of Excess 401(k) Plan Accounts 5   ARTICLE V - VESTING 6 -i- --------------------------------------------------------------------------------         5.1 Immediate Vesting 6   ARTICLE VI - PAYMENT OF BENEFITS 6 6.1 Benefit upon Termination of Employment 6 6.2 Payment of Benefits at Retirement 6 6.3 Payment of Benefits Following Death 7 6.4 Earnings where Installment Payments Are Made 7 6.5 Form of Payment 7 6.6 Change of Control where Installment Payments Are Made 7 6.7 Reduced Benefit upon Request following a Change of Control 7 6.8 Total Disability 7   ARTICLE VII - ADMINISTRATION OF THE PLAN 7 7.1 Administrator 7 7.2 Committee Action 7 7.3 Powers and Duties of the Administrator 8 7.4 Decisions of Administrator 8 7.5 Administrative Expenses 8 7.6 Eligibility to Participate 9 7.7 Insurance and Indemnification for Liability 9 7.8 Agent for Service of Legal Process 9 7.9 Delegation of Responsibility 9 7.10 Claims Procedure 9   ARTICLE VIII - AMENDMENT AND TERMINATION 10 8.1 Amendment or Termination 10   ARTICLE IX - MISCELLANEOUS 11 9.1 Funding 11 9.2 Status of Employment 11 9.3 Payments to Minors and Incompetents 11 9.4 Inalienability of Benefits 11 9.5 Governing Law 12 9.6 Severability 12 9.7 Required Information to Administrator 12 9.8 Income and Payroll Tax Withholding 12 9.9 Application of Plan 12 9.10 No Effect on Other Benefits 12 9.11 Inurement 12 9.12 Notice 13 9.13 Captions 13 9.14 Acceleration of Payments 13 9.15 Reporting and Disclosure Requirements 13 9.16 Gender and Number 13   ARTICLE X - ADOPTION BY AFFILIATED EMPLOYERS 13 10.1 Adoption of Plan 13 10.2 Withdrawal from Plan 14 10.3 Application of Withdrawal Provisions 14 10.4 Plan Sponsor Appointed Agent of Participating Companies 14   APPENDIX A - INVESTMENT OPTIONS AVAILABLE FOR MEASUREMENT OF              INVESTMENT EARNINGS OR LOSSES UNDER PLAN 15 -ii- --------------------------------------------------------------------------------           APPENDIX B - LIST OF PARTICIPATING COMPANIES 16   PLAN EXHIBIT A - PLAN ADOPTION AGREEMENT 17   PLAN ADOPTION AGREEMENT - PENNSYLVANIA MANUFACTURERS'             ASSOCIATION INSURANCE COMPANY 18   PLAN ADOPTION AGREEMENT - PMA CAPITAL INSURANCE COMPANY             (FORMERLY PMA REINSURANCE CORPORATION) 19   PLAN ADOPTION AGREEMENT - CALIBER ONE INDEMNITY COMPANY 20   PLAN ADOPTION AGREEMENT - CALIBER ONE MANAGEMENT COMPANY, INC. 21   PLAN ADOPTION AGREEMENT - PMA MANAGEMENT CORP 22   PLAN ADOPTION AGREEMENT - PMA RE MANAGEMENT COMPANY 23 -iii- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION 401(k) EXCESS PLAN ARTICLE I —INTRODUCTION         1.1 Introduction. PMA Capital Corporation (then known as the Pennsylvania Manufacturers Corporation) (the “Plan Sponsor”) previously established the PMA Capital Corporation Executive Deferred Compensation Plan (then known as the PMC Executive Deferred Compensation Plan) (the “Deferred Compensation Plan”) to provide certain benefits in excess of the benefit provided under the PMA Capital Corporation 401(k) Plan (then known as The PMC 401(k) Plan) (the “Qualified Plan”). The Plan Sponsor has decided to provide certain benefits previously provided under the Deferred Compensation Plan in a separate plan to be known as the PMA Capital Corporation 401(k) Excess Plan (the “Plan”), as set forth herein, and has restated the Deferred Compensation Plan to, among other things, reflect the removal from the Deferred Compensation Plan of those provisions set forth herein.         The Plan is established for the purpose of providing certain employees of the Plan Sponsor and certain of its affiliated employers with certain benefits that would be provided under the Qualified Plan but for the limitations imposed by Sections 401(k), 401(m), 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended. The Plan is intended to be an unfunded arrangement, maintained primarily for the purpose of providing deferred compensation for a select group of management and/or highly compensated employees of the Plan Sponsor and its affiliated employers within the meaning of Sections 201(2) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended. ARTICLE II —DEFINITIONS         The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:         2.1 Administrator means the committee (hereinafter referred to as “Committee”) appointed by the President of the Plan Sponsor to serve as the Administrator of the Plan. If no such Committee is appointed, the Plan Sponsor shall be the Administrator of the Plan.         2.2 Affiliated Employer means a member of a group of employers, of which the Plan Sponsor is a member and which group constitutes:        (a) A controlled group of corporations (as defined in Section 414(b) of the Code);        (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code);        (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in Section 414(m) of the Code); or        (d) Any other entity required to be aggregated with the Plan Sponsor pursuant to Section 414(o) of the Code and the Treasury regulations thereunder.         2.3 Annual Distribution Period means the first 60 days of a Plan Year.         2.4 Beneficiary means the Participant’s designated beneficiary under the Qualified Plan, unless the Participant designates a different beneficiary (or, in the event there is no designated beneficiary under the Qualified Plan, (a) the Participant’s surviving spouse, or (b) if there is no surviving spouse, the Participant’s beneficiary under the Plan -1- -------------------------------------------------------------------------------- Sponsor’s group term life insurance program, or (c) if neither (a) nor (b) is applicable, the executors and/or administrators of the Participant’s estate).         2.5 Board of Directors means the Board of Directors of the Plan Sponsor, as from time to time constituted, or any committee thereof which is authorized to act on behalf of the Board of Directors.         2.6 Change of Control means a change of control of the Plan Sponsor of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or Item 1(a) of a Current Report on Form 8-K or any successor rule, whether or not the Plan Sponsor is then subject to such reporting requirements; provided that, without limitation, such a Change of 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) is or first becomes the “beneficial owner”(as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, in a transaction or series of transactions, of securities of the Plan Sponsor representing more than 50% of the voting power of the Plan Sponsor’s voting capital stock (the “Voting Stock”); or        (b) The consummation of a merger, or other business combination after which the holders of the Voting Stock do not collectively own 50% or more of the voting capital stock of the entity surviving such merger or other business combination, or the sale, lease, exchange or other transfer in a transaction or series of transactions of all or substantially all of the assets of the Plan Sponsor; or        (c) At any time individuals who were either nominated for election by the Plan Sponsor’s Board of Directors or were elected by the Plan Sponsor’s Board of Directors cease for any reason to constitute at least a majority of the Plan Sponsor’s Board of Directors.         2.7 Code means the Internal Revenue Code of 1986, as amended. Reference to a specific Section of the Code shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such Section.         2.8 Compensation means a Participant’s Compensation as such term is defined in the Qualified Plan, without taking into account the Code Section 401(a)(17) limitation and before reduction for employee contributions under this or any other nonqualified savings plan.         2.9 Deferred Compensation Plan means the PMA Capital Corporation Executive Deferred Compensation Plan (formerly known as the PMC Executive Deferred Compensation Plan).         2.10 Determination Date means March 31, June 30, September 30 and December 31 of each Plan Year.         2.11 Effective Date means January 1, 1999.         2.12 Eligible Employee means an officer of a Participating Company, provided such officer is a member of a select group of management and highly compensated employees within the meaning of Section 201(2) of ERISA.         2.13 Employee Pre-Tax Contributions means the employee pre-tax contributions (i.e., Basic Contributions) that a Participant may elect to make to the Qualified Plan.         2.14 Employee Pre-Tax Credits means the amounts credited to a Participant’s Excess 401(k) Plan Account pursuant to Section 4.3. -2- --------------------------------------------------------------------------------         2.15 Employer Matching Contributions means the employer matching contributions made by the Participating Company on behalf of a Participant to the Qualified Plan.         2.16 Employer Matching Credits means the amounts credited to a Participant’s Excess 401(k) Plan Account pursuant to Section 4.5.         2.17 Employment Termination Date means the date on which the Participant’s status as an employee of a Participating Company terminates.         2.18 ERISA means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific Section of ERISA shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such Section.         2.19 Excess 401(k) Plan Account means the separate account established and maintained, solely as a bookkeeping entry, by the Plan Sponsor in the name of each Participant pursuant to, and in accordance with, Section 4.1.         2.20 Excess Salary Reduction Agreement means the written salary reduction agreement entered into by a Participant and the Participating Company pursuant to this Plan and which is made on a form prescribed by the Administrator.         2.21 Participant means an Eligible Employee who is participating in the Plan in accordance with the provisions of Article III.         2.22 Participating Company means the Plan Sponsor and each of its Affiliated Employers which, upon the approval of the Board of Directors, has agreed to participate in this Plan in accordance with the provisions of Article X. Each Participating Company is listed on Appendix B.         2.23 Payroll Period means the regular payroll period used by the Participating Company for the payment of wages and salaries to employees.         2.24 Plan means the PMA Capital Corporation 401(k) Excess Plan, as set forth in this document and as amended from time to time.         2.25 Plan Sponsor means PMA Capital Corporation (formerly known as Pennsylvania Manufacturers Corporation), a Pennsylvania corporation.         2.26 Plan Year means the calendar year.         2.27 Qualified Plan means the PMA Capital Corporation 401(k) Plan, as amended from time to time.         2.28 Total Disability shall mean a medically determinable physical or mental condition of such severity and probable prolonged duration as to render the Participant, as determined by the Administrator, upon the advice of a licensed physician the Administrator may consult, unable to meet the requirements of his or her customary employment in a satisfactory manner. A Participant’s Total Disability shall be determined by the Administrator upon the basis of a medical examination and of such other evidence as the Administrator deems necessary and desirable. However, a Participant’s eligibility for disability benefits under Title II of the Federal Social Security Act or under the Plan Sponsor’s insured long term disability plan shall be conclusive proof of the Participant’s Total Disability.         2.29 Valuation Date shall mean each day on which the NYSE is open for business and such other date(s), if any, as the Administrator shall determine.         2.30 Vanguard Funds means any of the mutual funds of The Vanguard Group of Investment Companies listed in Appendix A. -3- -------------------------------------------------------------------------------- ARTICLE III —PARTICIPATION         3.1 Eligibility to Participate. Any Eligible Employee who is participating in the Qualified Plan shall be eligible to become a Participant in this Plan.         3.2 Procedure for and Effect of Admission. An Eligible Employee shall become a Participant once he/she has completed an Excess Salary Reduction Agreement and such other forms and provided such data as are reasonably required by the Administrator. By becoming a Participant, an Eligible Employee shall for all purposes be deemed conclusively to have assented to the provisions of this Plan and all amendments hereto. ARTICLE IV —CREDITS TO EXCESS 401(K) PLAN ACCOUNTS         4.1 Establishment of Plan Accounts. The Plan Sponsor shall establish and maintain on its books and records, solely as a bookkeeping entry, an Excess 401(k) Plan Account for each Participant. Each Excess 401(k) Plan Account will be used to record:        (a) The Employee Pre-Tax Credits and Employer Matching Credits credited under this Plan on behalf of the Participant pursuant to Sections 4.3 and 4.5;        (b) The credits or debits for investment earnings or losses under Section 4.6; and        (c) The payments of benefits to the Participant or the Participant's Beneficiary under Article VI.         4.2 Investment Obligation of the Plan Sponsor. Benefits are payable as they become due irrespective of any actual investments the Plan Sponsor may make to meet its obligations. Neither the Plan Sponsor, nor any trustee (in the event the Plan Sponsor elects to use a grantor trust to accumulate funds) shall be obligated to purchase or maintain any asset, and any reference to investments or Vanguard Funds is solely for the purpose of computing the value of benefits. To the extent a Participant or any person acquires a right to receive payments from the Plan Sponsor under this Plan, such right shall be no greater than the right of any unsecured creditor of the Plan Sponsor. Neither this Plan nor any action taken pursuant to the terms of this Plan shall be considered to create a fiduciary relationship between the Plan Sponsor and the Participants or any other persons or to establish a trust in which the assets are beyond the claims of any unsecured creditor of the Plan Sponsor.         4.3 Employee Pre-Tax Credit.        (a) Manner of Election. A Participant may elect, by completing an Excess Salary Reduction Agreement, to reduce the amount of Compensation that the Participant would otherwise receive from the Participating Companies and have the amount of such reduction credited to the Participant’s Excess 401(k) Plan Account as an Employee Pre-Tax Credit.        (b) Condition Precedent to Employee Pre-Tax Credits under Plan. In order to be eligible to have the Plan Sponsor credit amounts as Employee Pre-Tax Credits to the Participant’s Excess 401(k) Plan Account under this Plan, the Participant must have elected to make the maximum Employee Pre-Tax Contributions (i.e.,Basic Contributions) permitted by the Qualified Plan after taking into account any limitations imposed on such Employee Pre-Tax Contributions by Sections 401(a)(17), 401(k), 401(m), 402(g), or 415 of the Code or any other limitation imposed by the Qualified Plan. Further, in no event shall any Employee Pre-Tax Contributions (i.e.,Basic Contributions) or Employer Matching Contributions contributed to the Qualified Plan on behalf of any Participant be transferred to this Plan from the Qualified Plan.        (c) Participant Employed during Plan Year. For purposes of determining the Employee Pre-Tax Credit of a Participant who (1) was previously employed by an unrelated employer, (2) was covered by a qualified cash or deferred arrangement described in Section 401(k)(2) of the Code of such unrelated employer, and (3) is first employed by a Participating Company during a Plan Year, the maximum salary deferral that such -4- --------------------------------------------------------------------------------   Participant may have credited to his or her Excess 401(k) Plan Account for any Plan Year as an Employee Pre-Tax Credit under the Plan shall be the amount determined by multiplying his or her Compensation by the salary deferral percentage elected by the Participant under this Plan after taking into account (i) the Employee Pre-Tax Contributions for such Plan Year under the Qualified Plan, plus (ii) the elective deferrals made by such Participant under the unrelated employer’s qualified cash or deferred arrangement for such Plan Year.         4.4 Salary Reduction Agreement. An Excess Salary Reduction Agreement for any Plan Year shall be made before the beginning of that Plan Year and shall remain in full force and effect for subsequent Plan Years unless revoked by the Participant. In the case of an Eligible Employee who is hired during a Plan Year or an employee who becomes an Eligible Employee during a Plan Year, such Eligible Employee may enter into an Excess Salary Reduction Agreement within sixty days after the date he/she becomes eligible. In the case of the Plan Year in which the Plan is first implemented, Eligible Employees may enter into an Excess Salary Reduction Agreement within two months prior to the Effective Date of the Plan.         4.5 Employer Matching Credits. For each Payroll Period, the Plan Sponsor shall credit each Participant’s Excess 401(k) Plan Account with Employer Matching Credits in an amount equal to:        (a) The lesser of: (1) 5% of the Eligible Employee's Compensation for the Payroll Period; or (2) the sum of the Employee Pre-Tax Contributions and Employee Pre-Tax Credits on behalf of the Participant for the Payroll Period; minus        (b) The amount of Employer Matching Contributions made to the Qualified Plan on behalf of the Participant for the Payroll Period.         4.6 Allocation Among Investment Options. A Participant may direct that the Employee Pre-Tax Credits and the Employer Matching Credits credited to his or her Excess 401(k) Plan Accounts be valued, in accordance with Section 4.8, as if the balance credited to the Excess 401(k) Plan Account were invested in one or more Vanguard Funds or other investments selected by the Participant. The Participant may select any of the investment options set forth in Appendix A in multiples of 5% (or such smaller percentage as the Administrator may determine). The designation of one or more investment options, whether a Vanguard Fund or otherwise, by a Participant under this Section 4.6 shall be used solely to measure the amounts of investment earnings or losses that will be credited or debited to the Participant’s Excess 401(k) Plan Account on the Plan Sponsor’s books and records, and the Plan Sponsor shall not be required under the Plan to establish any account in the Vanguard Funds or to purchase any Vanguard Fund shares or other investment on the Participant’s behalf. The designation by a Participant of any investment option under this Section 4.6 shall be made in accordance with the rules and procedures prescribed by the Administrator.         4.7 Administration of Investments. The investment gain or loss with respect to Employee Pre-Tax Credits and the Employer Matching Credits credited to the Participant’s Excess 401(k) Plan Account on behalf of such Participant shall continue to be determined in the manner selected by the Participant pursuant to Section 4.6 until a new designation is filed with the Administrator or its appointee. If any Participant fails to file a designation, he or she shall be deemed to have elected to continue to follow the investment designation, if any, in effect for the immediately preceding Plan Year. A designation filed by a Participant changing his or her investment option selection shall apply to either future contributions, amounts already accumulated in his or her Excess 401(k) Plan Account, or both. A Participant may change his or her investment selection on any Valuation Date and such change shall be effected as soon as administratively practicable.         4.8 Valuation of Excess 401(k) Plan Accounts. The Excess 401(k) Plan Account of each Participant shall be valued on each Valuation Date based upon the performance of the investment option or options selected by the Participant. Such valuation shall reflect the net asset value expressed per share of each designated investment option. Each Excess 401(k) Plan Account shall be valued separately. A valuation summary shall be prepared on each Determination Date and/or such other dates as may be determined by the Administrator. -5- -------------------------------------------------------------------------------- ARTICLE V —VESTING         5.1 Immediate Vesting. At all times, a Participant will be 100% vested in his or her Excess 401(k) Plan Account. ARTICLE VI —PAYMENT OF BENEFITS         6.1 Benefit upon Termination of Employment. Upon a Participant’s Employment Termination Date, the Plan Sponsor shall pay to the Participant an amount equal to the balance in the Participant’s Excess 401(k) Plan Account in two installments:        (a) The first installment, in an amount equal to 50% of the balance in the Excess 401(k) Plan Account, shall be paid within 60 days following his/her Employment Termination Date; and        (b) The second installment, in an amount equal to the then remaining balance in the Excess 401(k) Plan Account, shall be paid during the first Annual Distribution Period following the date on which the first installment was paid.         6.2 Payment of Benefits at Retirement. If a Participant remains continuously employed by a Participating Company until he or she reaches his or her “Early Retirement Date” (as such term is defined in the PMA Capital Corporation Pension Plan), the Plan Sponsor shall pay the Participant a benefit either:        (a) In two installments, according to the provisions of Section 6.1 above; or        (b) If the Participant makes an irrevocable election at least 90 days prior to the Plan Year in which he or she retires, in the following five annual installments:        (1) During the first Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 20% of the balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made;        (2) During the second Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 25% of the then balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made;        (3) During the third Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 33% of the then balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made;        (4) During the fourth Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 50% of the then balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made; and        (5) During the fifth Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to the then remaining balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made. -6- --------------------------------------------------------------------------------         6.3 Payment of Benefits Following Death. Upon a Participant’s date of death, the Administrator shall reduce the balance in the Participant’s Excess 401(k) Plan Account by the amount that the Participant has previously received or shall receive pursuant to Section 6.2. Thereafter, the Plan Sponsor shall pay to the Participant’s Beneficiary a single sum payment, in cash, equal to the balance credited to the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made. Payment under this Section 6.3 shall be made as soon as practicable following the receipt by the Plan Sponsor of acceptable proof of the Participant’s death.         6.4 Earnings where Installment Payments Are Made. Where any benefit is paid in annual installments, the undistributed balance credited to the Account during the period of the installment payments and ending on the date of the last installment payment shall be credited with investment earnings or debited with investment losses in accordance with Section 4.6.         6.5 Form of Payment. All payments under this Plan shall be in cash only and no Participant or Beneficiary shall have any right to receive a distribution in any other form of payment.         6.6 Change of Control where Installment Payments Are Made. In the event of a Change of Control of the Plan Sponsor, a terminated or retired Participant, who has not received his or her entire balance under Section 6.1 or 6.2, shall be paid by the Plan Sponsor any undistributed balance credited to the Participant’s Excess 401(k) Plan Account, in a single sum payment, in cash, as soon as practicable following such Change of Control.         6.7 Reduced Benefit upon Request following a Change of Control. Within 60 days following a Change of Control, a Participant may elect in writing to receive an immediate distribution of a reduced benefit under the Plan. If the Participant makes such an election under this Section 6.7, the amount of the reduced benefit shall equal the balance credited to the Participant’s Excess 401(k) Plan Account, reduced by the lesser of 5% of the balance or $25,000.         6.8 Total Disability. If a Participant incurs a Total Disability, he or she will be deemed to have incurred his or her Employment Termination Date on the date that is 26 weeks after the date he or she commenced receiving short term disability benefits under the Plan Sponsor’s Health and Welfare Plan and the provisions of Section 6.1 shall apply to such Participant. ARTICLE VII —ADMINISTRATION OF THE PLAN         7.1 Administrator. The Committee appointed by the President of the Plan Sponsor is hereby designated as the administrator of the Plan. If no Committee is appointed by the Plan Sponsor as the Administrator, the Plan Sponsor shall be the Administrator of the Plan. The Administrator shall have the authority to control and manage the operation and administration of the Plan. The President of the Plan Sponsor may appoint another person to be the Administrator at any time. The President of the Plan Sponsor may also remove an Administrator and fill any vacancy which may arise.         7.2 Committee Action. If a Committee is appointed as Administrator, the following rules apply:        (a) On all matters within the jurisdiction of the Committee, the decision of a majority of the members of the Committee shall govern and control. The Committee may take action either at a meeting or in writing without a meeting, provided that in the latter instance all members of the Committee shall have been advised of the action contemplated and that the written instrument evidencing the action shall be signed by a majority of the members.        (b) The President of the Plan Sponsor shall appoint the Chair of the Committee. The Committee may appoint, either from among its members or otherwise, a secretary who shall keep a record of all meetings and actions taken by the Committee. Either the Chair of the Committee or any member of the Committee designated by the Chair shall execute any certificate, instrument or other written direction on behalf of the Committee. Any action taken on matters within the discretion of the -7- --------------------------------------------------------------------------------   Committee. Any action taken on matters within the discretion of the Committee shall be final and conclusive as to the parties thereto and as to all Participants or beneficiaries claiming any right under the Plan.         7.3 Powers and Duties of the Administrator. The Administrator shall have all powers necessary to supervise the administration of the Plan and to control its operation in accordance with its terms, including, without limiting the generality of the foregoing, the power to:        (a) Appoint, retain, and terminate such persons as it deems necessary or advisable to assist in the administration of the Plan or to render advice with respect to the responsibilities of the Administrator under the Plan, including accountants, attorneys and physicians;        (b) Make use of the services of the employees of the Participating Company in administrative matters;        (c) Obtain and act on the basis of all valuations, certificates, opinions and reports furnished by the persons described in (a) or (b) above;        (d) Review the manner in which benefit claims and other aspects of the Plan administration have been handled by the employees of the Participating Company;        (e) Determine all benefits and resolve all questions pertaining to the administration and interpretation of the Plan provisions, either by rules of general applicability or by particular decisions; to the maximum extent permitted by law, all interpretations of the Plan and other decisions of the Administrator shall be conclusive and binding on all parties;        (f) Adopt such forms, rules and regulations as it shall deem necessary or appropriate for the administration of the Plan and the conduct of its affairs, provided that any such forms, rules and regulations shall not be inconsistent with the provisions of the Plan;        (g) Remedy any inequity from incorrect information received or communicated or from administrative error;        (h) Commence or defend any litigation arising from the operation of the Plan in any legal or administrative proceeding;        (i) Determine all considerations affecting the eligibility of any Eligible Employee to become a Participant or remain a Participant in the Plan;        (j) Determine the status and rights of Participants and their Beneficiaries;        (k) Direct the Plan Sponsor to pay benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan; and        (l) Be responsible for the preparation, filing and disclosure on behalf of the Plan of such documents and reports as are required by any applicable federal or state law.         7.4 Decisions of Administrator. All decisions of the Administrator, and any action taken by it in respect of the Plan shall be conclusive and binding on all persons, subject to the claims and appeal procedure described in Section 7.10 hereof.         7.5 Administrative Expenses. All expenses incident to the operation and administration of the Plan reasonably incurred, including, without limitation by way of specification, the fees and expenses of attorneys and -8- -------------------------------------------------------------------------------- advisors, and for such other professional, technical and clerical assistance as may be required, shall be paid by the Plan Sponsor.         7.6 Eligibility to Participate. No member of the Administrator who is also an Eligible Employee shall be precluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Administrator, to act or pass upon any matters pertaining specifically to his or her own benefit under the Plan.         7.7 Insurance and Indemnification for Liability. The rules relating to the insurance and indemnification for liability are as follows:        (a) Insurance.The Plan Sponsor may, in its discretion, obtain, pay for, and keep current a policy or policies of insurance, insuring members of the Administrator and other employees to whom any responsibility with respect to administration of the Plan has been delegated against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable federal or state law.        (b) Indemnity.If the Plan Sponsor does not obtain, pay for, and keep current the type of insurance policy or policies referred to in Section 7.7(a) above, or if such insurance is provided but any of the members of the Administrator or other employees referred to in Section 7.7(a) above incur any costs or expenses which are not covered under such policies, then, in either event, the Plan Sponsor shall, to the extent permitted by law, indemnify and hold harmless such parties against any and all costs, expenses and liabilities incurred by such parties in performing their duties and responsibilities under this Plan, provided such party or parties were acting in good faith within what was reasonably believed to have been in the best interests of the Plan and its Participants.         7.8 Agent for Service of Legal Process. The name and address of the person designated as the agent for service of legal process are: Plan Administrator PMA Capital Corporation 1735 Market Street, 27th Floor Philadelphia, PA 19103         7.9 Delegation of Responsibility. The Administrator may designate a committee of one or more persons to carry out any of the responsibilities or functions assigned or allocated to the Administrator under the Plan. Each reference to the Administrator in this Plan shall include the Administrator as well as any person to whom the Administrator may have delegated the performance of a particular function or responsibility under this Section 7.9.         7.10 Claims Procedure.        (a) Claim for Benefits.All claims for benefits under the Plan shall be made in writing and shall be signed by the applicant. Claims shall be submitted to a representative designated by the Administrator and hereinafter referred to as the “Claims Coordinator”.        Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 60 days following the receipt by the Claims Coordinator of the information necessary to process the claim.        In the event the Claims Coordinator denies a claim for benefits, in whole or in part, the Claims Coordinator shall notify the applicant in writing of the denial of the claim and notify such applicant of his or her right to a review of the Claims Coordinator’s decision by the Administrator. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the applicant, the specific reason for such denial, the specific Plan provisions on which the denial is based, a description of any additional -9- --------------------------------------------------------------------------------   material or information necessary to perfect the claim, with an explanation of why such material or information is necessary, and an explanation of the Plan’s claims review procedure as set forth in this Section 7.10.        If no action is taken by the Claims Coordinator on an applicant’s claim within 60 days after receipt by the Claim Coordinator, such application shall be deemed to be denied for purposes of the following appeals procedure.        (b) Appeals Procedure.Any applicant whose claim for benefits is denied in whole or in part (“Claimant”) may appeal from such denial to the Administrator for a review of the decision by the Administrator. Such appeal must be made within six months after the Claimant has received written notice of the denial as provided above in Section 7.10(a). An appeal must be submitted in writing within such period and must:        (1) Request a review by the Administrator of the claim for benefits under the Plan;        (2) Set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and        (3) Set forth any issues or comments which the Claimant deems pertinent to the appeal.        The Administrator shall regularly review appeals by Claimants. The Administrator shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing the Claimant’s request for review. If such an extension of time for processing is required, written notice of the extension shall be forwarded to the Claimant prior to the commencement of the extension. In no event shall such extension exceed a period of 120 days after the request for review is received by the Administrator.        The Administrator shall make a full and fair review of each appeal and any written materials submitted by the Claimant and/or the Participating Company in connection therewith. The Administrator may require the Claimant and/or the Participating Company to submit such additional facts, documents or other evidence as the Administrator in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Administrator, provided the Administrator finds the requested documents or materials are pertinent to the appeal.        On the basis of its review, the Administrator shall make an independent determination of the Claimant’s eligibility for benefits under the Plan. The decision of the Administrator on any claim for benefits shall be final and conclusive upon all parties thereto.        In the event the Administrator denies an appeal, in whole or in part, the Administrator shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent Plan provisions on which the Administrator’s decision was based.        (c) Compliance with Regulations.It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 CFR § 2560.503-1. ARTICLE VIII —AMENDMENT AND TERMINATION         8.1 Amendment or Termination.        (a) The Board of Directors shall have the right to alter, amend, modify, restate or terminate the -10- --------------------------------------------------------------------------------   Plan, or any part thereof, through the adoption of a written resolution when in its absolute discretion, it determines such action to be advisable; provided, however, that no such action by the Board of Directors shall reduce the amount credited to a Participant’s Excess 401(k) Plan Account at the time of the adoption of the amendment, modification or restatement and no such amendment, modification or restatement or termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control. Each amendment shall be set forth in a written instrument.        (b) In the event of termination, the Plan Sponsor, at its option, may pay each Participant an amount equal to the total amount credited to the Participant’s Excess 401(k) Plan Account in a single sum payment of cash or, in the alternative, pay such amount in accordance with the provisions of Article VI. Termination of the Plan shall not serve to reduce the amount credited to a Participant’s Excess 401(k) Plan Account on the date of termination. Moreover, no such termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control. ARTICLE IX —MISCELLANEOUS         9.1 Funding. Nothing contained in this Plan and no action taken pursuant to this Plan will create or be construed to create or require a funded arrangement or any kind of fiduciary duty between the Plan Sponsor and/or the Administrator and a Participant. Benefits payable under this Plan to a Participant or Beneficiary, if applicable, shall be paid directly by the Plan Sponsor from a grantor trust (the “Trust”) within the meaning of Section 671 of the Code, to the extent that such benefits are not paid from the general assets of the Plan Sponsor or other Participating Company. The Trust must be an irrevocable grantor trust, the assets of which are subject to the claims of the general creditors of the Plan Sponsor in the event of its insolvency, defined for the purposes of this provision as the Plan Sponsor’s inability to pay its debts as they become due or that the Plan Sponsor is subject to a pending proceeding under the United States Bankruptcy Code. Except as to any amounts paid or payable to the Trust, the Plan Sponsor shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan, and the Participant and his or her Beneficiary shall not have any property interest in any specific assets of the Plan Sponsor other than an unsecured right to receive payments from the Plan Sponsor as provided herein. To the extent any person acquires a right hereunder, such right(s) shall be no greater than those of a general, unsecured creditor of the Plan Sponsor. In the event that the amounts accumulated in the Trust are not sufficient to pay the benefits payable under this Plan, such benefits shall be paid directly from the general assets of the Plan Sponsor or other Participating Company.         9.2 Status of Employment. Neither the establishment or maintenance of the Plan, nor any action of the Plan Sponsor or any Participating Company or the Administrator shall be held or construed to confer upon any individual any right to be continued as an employee nor, upon dismissal, any right or interest in any assets of the Plan Sponsor or a Participating Company nor to affect any Participant’s right to terminate his/her employment at any time.         9.3 Payments to Minors and Incompetents. If a Participant or Beneficiary entitled to receive any benefits hereunder is a minor or is deemed by the Administrator or is adjudged to be legally incapable of giving a valid receipt and discharge for such benefits, they will be paid to the duly appointed guardian of such minor or incompetent or to such other legally appointed person as the Administrator may designate. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan.         9.4 Inalienability of Benefits.        (a) Benefits payable under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, whether voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits under the Plan shall be void. The Plan Sponsor or other Participating Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan.        (b) Notwithstanding Section 9.4(a), if a Participant is indebted to the Plan Sponsor or other -11- --------------------------------------------------------------------------------   Participating Company at any time when payments are to be made by the Plan Sponsor to the Participant under the provisions of the Plan, the Plan Sponsor shall have the right to reduce the amount of payment to be made to the Participant (or the Participant’s Beneficiary) to the extent of such indebtedness. Any election by the Plan Sponsor not to reduce such payment shall not constitute a waiver of its claim for such indebtedness.         9.5 Governing Law. Except to the extent preempted by federal law, the Plan shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania.         9.6 Severability. In case any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provisions had never been set forth.         9.7 Required Information to Administrator. Each Participant will furnish to the Administrator such information as the Administrator considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments thereunder are conditional upon the Participant’s furnishing promptly such true, full and complete information as the Administrator may request. The Administrator, in its sole discretion, may request a Participant to submit proof of his/her age. The Administrator will, if such proof of age is not submitted when requested, use as conclusive evidence thereof such information as is deemed by it to be reliable, regardless of the lack of proof. Any notice or information which, according to the terms of the Plan or the rules of the Administrator, must be filed with the Administrator, shall be deemed so filed if addressed and either delivered in person or mailed to and received by the Administrator at the following address: Plan Administrator PMA Capital Corporation 1735 Market Street, 27th Floor Philadelphia, PA 19103 Failure on the part of the Participant or Beneficiary to comply with any such request within a reasonable period of time shall be sufficient grounds for delay in the payment of benefits under the Plan until such information or proof is received by the Administrator.         9.8 Income and Payroll Tax Withholding. To the extent required by the laws in effect at the time payments are made under this Plan, the Plan Sponsor shall withhold from such deferred compensation payments any taxes required to be withheld for federal, state or local tax purposes.         9.9 Application of Plan. The Plan, as set forth herein, shall apply to any Participant terminating employment on or after the Effective Date. The Deferred Compensation Plan, as in effect on a Participant’s Employment Termination Date, shall apply to any such Participant terminating employment before the Effective Date.         9.10 No Effect on Other Benefits. No amount credited under this Plan shall be deemed part of the total compensation for the purpose of computing benefits to which a Participant may be entitled under any pension plan or other supplemental compensation arrangement, unless such plan or arrangement specifically provides to the contrary. The amounts payable to the Participant hereunder will be in addition to any benefits paid or payable to the Participant under any other pension, disability, annuity or retirement plan or policy whatsoever. Nothing herein contained will in any manner modify, impair or affect any existing or future rights of the Participant to participate in any other employee benefits plan or receive benefits in accordance with such plan or to participate in any current or future pension plan of the Plan Sponsor or any supplemental arrangement which constitutes a part of the Plan Sponsor’s regular compensation structure.         9.11 Inurement. The Plan shall be binding upon, and shall inure to, the benefit of the Participating Company and its successors and assigns, and the Participant and the Participant’s Beneficiaries, successors, heirs, executors and administrators. -12- --------------------------------------------------------------------------------         9.12 Notice. Any notices or elections required or permitted to be given or made under this Plan will be sufficient if in writing and if sent by first class, postage paid mail to the Participant’s last known address as shown on the Participating Company’s personnel records or to the principal office of the Participating Company, as the case may be. The date of such mailing shall be deemed the date of notice, consent or demand. Either party may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.         9.13 Captions. The captions contained in, and the table of contents prefixed to, the Plan are inserted only as a matter of convenience and for ease of reference in no way define, limit, enlarge or describe the scope or intent of this Plan or in any way affect the Plan or the construction of any provision thereof.         9.14 Acceleration of Payments. Notwithstanding any other provision of the Plan, if the Administrator determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his/her delegate, a decision by a court of competent jurisdiction involving a Participant, or a closing agreement involving a Participant made under Section 7121 of the Code that is approved by the Commissioner, that such Participant or Beneficiary has recognized or will recognize income for federal income tax purposes with respect to benefits that are or will be payable to the Participant under the Plan before they otherwise would be paid to the Participant or Beneficiary (as applicable), upon the request of the Participant or Beneficiary, the Administrator shall immediately make distribution to the Participant or Beneficiary of the amount so taxable.         9.15 Reporting and Disclosure Requirements. In order to comply with the requirements of Title I of ERISA, the Administrator shall:        (a) File a statement with the Secretary of Labor that includes the name and address of the employer, the employer identification number assigned by the Internal Revenue Service, a declaration that the employer maintains the Plan primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and a statement of the number of such plans and the number of employees in each; and        (b) Provide plan documents, if any, to the Secretary of Labor upon request as required by Section 104(a)(1) of ERISA. It is intended that this provision comply with the requirements of 29 CFR §2520.104-23.         This method of compliance is available to the Plan only so long as the Plan is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and for which benefits are paid as needed solely from the general assets of the employer or are provided exclusively through insurance contracts or policies, the premiums for which are paid directly by the employer from its general assets, issued by an insurance company or similar organization which is qualified to do business in any State, or both.         9.16 Gender and Number. Whenever any words are used herein in any specific gender, they shall be construed as though they were used in any other applicable gender. The singular form, whenever used herein, shall mean or include the plural form where applicable and vice versa. ARTICLE X — ADOPTION BY AFFILIATED EMPLOYERS         10.1 Adoption of Plan. The following rules shall apply with respect to the adoption of the Plan:        (a) Adoption by Affiliated Employers. The terms of this Plan may be adopted by any Affiliated Employer, provided:        (1) The Board of Directors consents to such adoption by an appropriate written resolution; -13- --------------------------------------------------------------------------------        (2) The board of directors of the Affiliated Employer adopts this Plan by an appropriate written resolution which defines the Eligible Employees; and        (3) The Affiliated Employer executes a Plan Adoption Agreement in the form attached hereto as Plan Exhibit A, applicable to the Eligible Employees of such Affiliated Employer. The Affiliated Employer may elect in such Adoption Agreement to have special provisions apply with respect to the Eligible Employees of the Affiliated Employer which differ from the provisions of the Plan applicable to other Eligible Employees; and        (4) The Affiliated Employer executes such other documents as may be required to make such Affiliated Employer a party to the Plan as a Participating Company.        (b) Effect of Adoption. An Affiliated Employer that adopts the Plan is thereafter a Participating Company with respect to its Eligible Employees.         10.2 Withdrawal from Plan. Any Participating Company may at any time withdraw from the Plan upon giving the Board of Directors at least 30 days prior written notice of its intention to withdraw.         10.3 Application of Withdrawal Provisions. The withdrawal provisions contained in Section 10.2 shall be applicable only if the withdrawing Participating Company continues to cover its Participants under a plan similar to this Plan. Otherwise the termination provisions of the Plan shall apply.         10.4 Plan Sponsor Appointed Agent of Participating Companies. As a condition precedent to the adoption of the Plan, each Affiliated Employer must appoint the Board of Directors as its agent to exercise on its behalf all of the power and authority conferred upon the Plan Sponsor by the Plan, including, without limitation, the power to amend or to terminate the Plan.         TO RECORD the adoption of this Plan, the Plan Sponsor on behalf of itself and each other Participating Company has caused this document to be executed by its duly authorized officers as of the 29th day of March, 2001. ATTEST: PMA CAPITAL CORPORATION       /s/ Robert L. Pratter -------------------------------------------------------------------------------- By: /s/ Francis W. McDonnell -------------------------------------------------------------------------------- Robert L. Pratter, Secretary Francis W. McDonnell, Senior Vice President, Treasurer & Chief Financial Officer -14- -------------------------------------------------------------------------------- APPENDIX A - INVESTMENT OPTIONS AVAILABLE FOR MEASUREMENT OF INVESTMENT EARNINGS OR LOSSES UNDER PLAN         (a)   Morgan Growth Fund         (b)   Total Bond Market Index Fund         (c)   LIFEStrategy - Moderate Growth Fund (not available after March 31, 2001)         (d)   LIFEStrategy - Growth Fund (not available after March 31, 2001)         (e)   500 Index Fund         (f)   Treasury Money Market Fund         (g)   STAR Fund         (h)   Windsor II Fund         (i)   International Growth Fund         (j)   Retirement Savings Trust         (k)   Any other investment option selected by the Administrator -15- -------------------------------------------------------------------------------- APPENDIX B —LIST OF PARTICIPATING COMPANIES         (a)   PMA Capital Corporation         (b)   Pennsylvania Manufacturers’Association Insurance Company         (c)   PMA Capital Insurance Company (formerly PMA Reinsurance Corporation)         (d)   Caliber One Indemnity Company         (e)   Caliber One Management Company, Inc.         (f)   PMA Management Corp.         (g)   PMA Re Management Company -16- -------------------------------------------------------------------------------- PLAN EXHIBIT A —PLAN ADOPTION AGREEMENT [INSERT NAME OF ADOPTING AFFILIATED EMPLOYER] PMA CAPITAL CORPORATION 401(k) EXCESS PLAN [NOTE: Plan Exhibit A is not to be completed or executed. If an Affiliated Employer adopts the Plan, a separate instrument following the form of this Plan Exhibit A shall be completed and filed with the Administrator.] By executing this Adoption Agreement, [ NAME OF ADOPTING AFFILIATED EMPLOYER], on this __________ day of ____, 19___ hereby adopts the PMA CAPITAL CORPORATION 401(k) EXCESS PLAN (“Plan”), the terms of which Plan are incorporated herein by reference, and by adopting said Plan hereby becomes a Participating Company in said Plan effective , 20 .         1. The Effective Date of the Plan hereby created or continued is ______________, 20__.         2. The Board of Directors of PMA CAPITAL CORPORATION consented to the adoption of the Plan by the Affiliated Employer named herein on ________________, 20__.         3. The Board of Directors of [NAME OF ADOPTING AFFILIATED EMPLOYER] adopted the Plan on ________________, 20__. Attest: Name of Participating Company       [SEAL]       -------------------------------------------------------------------------------- By Secretary -------------------------------------------------------------------------------- President       Attest: ADOPTION CONSENTED TO BY:       PMA CAPITAL CORPORATION       [SEAL]       -------------------------------------------------------------------------------- By Secretary -------------------------------------------------------------------------------- President -17- --------------------------------------------------------------------------------
March 5, 2001 Mr. Kevin Brown 4212 Lake Forest Drive West Ann Arbor, MI 48108 Dear Kevin, I am very pleased to extend to you Donnelly Corporation's offer of employment to fill the position of Senior Vice President, Chief Financial Officer for Donnelly Corporation (Donnelly). We believe you bring outstanding skills to our company and that you will find Donnelly an excellent environment in which to invest your career. You will report to Dwane Baumgardner, Chairman of the Board, Chief Executive Officer and President. As a Senior Vice President, you will be part of the senior management team and an officer of the company. You will work from the Donnelly offices located in Holland, Michigan. The details of your offer are as follows: 1. A base salary of $ 22,916.66 per month. This equates to an annual salary of $275,000. Our policy is to review salaries for all positions annually. 2. The annual bonus incentive plan presently provided is linked to the achievement of specific business and individual goals. Achieving plan performance would result in a target bonus of 50% of base salary, prorated for the year 2001. Payment of the bonus may range from 0 to 150% of the target, based on a combination of exceeding individual and company performance targets. Dwane will meet with you shortly after your start to establish specific goals for the remainder of fiscal year 2001. The annual incentive bonus is paid after the announcement of fiscal year results. Your annual bonus incentive plan is governed by the terms of the Donnelly plan for this program. 3. To demonstrate our interest in you joining Donnelly, you will be given a gross lump-sum-signing bonus of $ 75,000.00. This bonus would be paid after completing your 90-day probationary period. You will also be given a gross lump-sum-signing bonus of $50,000 paid on your one-year anniversary date.   -------------------------------------------------------------------------------- 4. It is customary for Donnelly to consider stock options for executives annually based on competitive market comparisons and on individual contributions made to the business. The initial stock option grants will be priced on the date of your start of employment. Subsequent grants will be priced as of the date granted. Stock options become exercisable in three equal annual installments, beginning 12 months after the date of grant and expire ten years after receiving them. A special one-time consideration is being offered to you to recognize the adjustments that will be required in making a transition to Donnelly. This one-time consideration will include an initial stock offering of 15,000 shares upon your start at Donnelly. These shares are subject to approval by the Donnelly Board of Directors Stock Option Committee and will be governed by the terms of the Donnelly plans for these programs. 5. As a member of the corporate management team, you will receive a company provided car valued at approximately $40,000. You will be reimbursed each month for car expenses including insurance, maintenance, and business fuel expenses. You will be responsible for the tax consequences of the personal use portion of the car, as this allowance is not reported on your W-2. 6. Donnelly offers a very comprehensive package of group health insurance and group life insurance. Your medical and dental coverage will be effective as of your date of hire provided you complete and return the necessary election forms within thirty days from your start date. The employee cost and level of coverage that you will have is determined by your elections under Donnelly's Flexible Benefits Plan. Brief descriptions of these plans are enclosed. You will be provided with detailed descriptions of all plans and I believe you will find our flexible benefit options very strong in protecting you and your dependents. 7. Donnelly also offers a retirement plan and a 401(k) plan, a tuition reimbursement program, and an employee stock purchase program. Currently Donnelly contributes 50 cents to your 401(k) account for every dollar that you contribute up to 5% of eligible wages. Eligibility for 401(k) is after 30 days of employment, eligibility for tuition reimbursement is after ninety days of employment and eligibility for employee stock purchase discount is after three months of employment. Each plan is governed by the terms of the Donnelly plan for these programs.   -------------------------------------------------------------------------------- 8. Vacation is accrued at the rate of six weeks per year (4.615 hours per week). Donnelly has 10 paid holidays per year. 9. To assist your relocation to West Michigan our relocation package, to be exercised within one year, includes: * A three-day house hunting trip including meals, transportation, and lodging in West Michigan. * Lodging at the Residence Inn, not to exceed 30 days, for the purposes of finding temporary housing in West Michigan. * Temporary living reimbursement to cover the cost of an apartment or equivalent temporary condo or townhouse for up to five months in West Michigan. You will be eligible for this benefit at the start of your employment. These costs will be "grossed-up" for taxes. * Reimbursement of typical closing costs on a primary residence in West Michigan. These costs shall include the costs listed on the Closing Statement and includes insurance, surveys, appraisals, loan origination fee (not to exceed 1%) and processing fees. Points or mortgage buy downs are not reimbursed. * Moving of your household goods to West Michigan. Donnelly has contracts with two national carriers and can select the carrier for you. These reimbursements are not reported as taxable income to the IRS Full buyout option via a third-party relocation company for the sale of your home in Ann Arbor. The buyout price is based on the average value of two independent appraisals. Once you receive the buyout price you will have 60 days to get a bonafide offer exceeding the buyout price or accept the buyout price. The tax consequences of selling the home are covered in the buyout option. 10. In the event you are separated from Donnelly for any reason other than cause, we will provide a severance plan that provides 12 months of base salary and benefits subject to a non-compete agreement in our specific area of business and closure on a separation agreement.   --------------------------------------------------------------------------------   11. If you choose to leave Donnelly within the first two years of your start date, you agree to reimburse Donnelly, on a prorated basis, the signing bonus in Item 3 and any relocation costs identified in Item 9 paid to you or on your behalf by Donnelly. You also will receive all benefits for which you are vested per plan descriptions. This offer of employment is contingent upon you successfully passing a pre-employment drug and alcohol test, signing an Employee Confidentiality and Non-Competition Agreement and Ethical Guidelines Statement. This offer is also contingent upon the satisfactory completion of an investigation into your background. This investigation will consist of a criminal background report. You are required to provide the company with your date of birth to facilitate the background investigation. This investigation will not be conducted without your written authorization on the Notice and Authorization Form. All matters not specified here will be handled in accordance with company policy. We will provide you with all appropriate policies and plan descriptions forthrightly upon request. I believe that you will find all of them very competitive and supportive. Of course we understand that you will need time to assess this opportunity. This offer will remain open until the close of the business day Monday March 12, 2001. Your start date will be on or before Monday April 2, 2001. Donnelly continues to grow and develop as a global organization that is technology driven, customer focused and growth oriented. We have positioned the organization to continue our 15% compounded annual growth rate through the next decade. With your proven skills in the automotive industry and experience in operations and finance, the prospects for this growth should be strong. On behalf of Dwane Baumgardner and the corporate management team, we look forward to having you join our team. I am convinced that you will help make this an even stronger company. We are all looking forward to working with you. Sincerely, DONNELLY CORPORATION /s/JAMES J. WUJKOWSKI          /s/KEVIN BROWN                                           James. J. Wujkowski Kevin Brown                                     Date Manager, Global Recruiting  
Exhibit 10.2 RESTRICTED STOCK AGREEMENT                THIS AGREEMENT, made effective as of this 9th day of March, 2001, by and between PW Eagle, Inc., a Minnesota corporation (the “Company”), and N. Michael Stickel (“Employee”). W I T N E S S E T H:              WHEREAS, Employee on the date hereof is the Senior Vice President – Sales and Marketing of the Company; and              WHEREAS, the Company wishes to provide Employee the opportunity to obtain a greater equity interest in the Company by granting Employee certain performance-based cash bonuses in the form of restricted stock; and              WHEREAS, the Company’s Board of Directors has authorized the grant of restricted stock awards to Employee pursuant to this Agreement;              NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:              1.          Restricted Stock Award.  The Company hereby grants to Employee a restricted stock award of 25,000 shares of the Company’s Common Stock, subject to the terms of this Agreement.  The Company shall cause to be issued a stock certificate representing such shares of Common Stock in Employee’s name, and the Company shall hold such shares until such time as the risks of forfeiture described in Section 2 have lapsed.  Until such risks of forfeiture have lapsed or the shares subject to such restricted stock award have been forfeited pursuant to Section 2 below, Employee shall be entitled to vote the shares represented by such stock certificates and shall receive all dividends attributable to such shares, but Employee shall not have any other rights as a shareholder with respect to such shares.              2.          Vesting of Restricted Stock.                            a.          The shares of Common Stock subject to the restricted stock award shall remain forfeitable until vesting according to the following schedule (the “vesting date”): Vesting Date -------------------------------------------------------------------------------- Cumulative Percentage of Shares Vested --------------------------------------------------------------------------------     March 9, 2004 20% March 9, 2005 50% March 9, 2006 100% If Employee’s employment with the Company is terminated for any reason, including Employee’s voluntary resignation or retirement but excluding death or total disability, at any time prior to the vesting date for the restricted stock award, Employee shall immediately forfeit all shares of Common Stock subject to such award that have not vested.  If Employee’s employment is terminated by death or total disability prior to the vesting date for the restricted stock award, all risks of forfeiture on the shares of Common Stock subject to such award shall immediately lapse.                            b.          At such time as the risks of forfeiture on such restricted stock award lapse, the certificates representing the shares of Common Stock shall be distributed to Employee.  If the shares are forfeited, the certificates representing such shares shall be cancelled.              3.          Change of Control.  Notwithstanding anything in this Agreement to the contrary, all risks of forfeiture applicable to Employee’s restricted stock awards shall immediately lapse upon a “change of control.”  For purposes of this Section 3, a “change of control” shall mean the occurrence of any of the following events: (i) all or substantially all of the Company's assets, on a consolidated basis, are sold as an entirety to any person or related group of persons or there shall be consummated any consolidation or merger of the Company (A) in which the Company is not the continuing or surviving company (other than a consolidation or merger with a wholly-owned Subsidiary in which all shares of Common Stock outstanding immediately prior to the effectiveness thereof are changed into or exchanged for the same consideration) or (B) pursuant to which the Common Stock would be converted into cash, securities or other property, in any case, other than a sale of assets or consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the sale of assets or consolidation or merger have, directly or indirectly, at least a majority of the Common Stock of the transferee or continuing or surviving company immediately after such sale of assets or consolidation or merger, (ii) any "person" (as such term is used in Sections 13(d) and 14 (d) of the Exchange Act) other than the Spell Group, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act provided that such person shall be deemed to have "beneficial ownership" of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the outstanding voting securities of the Company; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board cease for any reason to constitute a majority of the Board, then in office.              4.          General Provisions.                            a.          Employment; Rights as Shareholder.  This Agreement shall not confer on Employee any right with respect to continuance of employment by the Company, nor will it interfere in any way with the right of the Company to terminate such employment.                            b.          Securities Law Compliance.  Employee may be required by the Company, as a condition of the effectiveness of any restricted stock award, to agree in writing that all Common Stock subject to such awards shall be held, until such time that such Common Stock is registered and freely tradable under applicable state and federal securities laws, for Employee’s own account without a view to any further distribution thereof, that the certificates for such shares shall bear an appropriate legend to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.                            c.          Mergers, Recapitalizations, Stock Splits, Etc.  In the event of an increase or decrease in the number of shares of Common Stock resulting from a subdivision or consoli­dation of shares or the payment of a stock dividend or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company, the number of shares of Common Stock subject to each outstanding restricted stock award shall be adjusted by the Board to reflect such change.  Additional shares which may be credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which the adjustment relates.                            d.          Shares Reserved .  The Company shall at all times during the term of Employee’s restricted stock awards reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.                            e.          Withholding Taxes .  In order to provide the Company with the opportunity to claim the benefit of any income tax deduction which may be available to it as from the grant of restricted stock awards to Employee under this Agreement and to permit the Company to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to insure that, if necessary, all applicable federal or state payroll, income or other taxes are withheld from any amounts payable by the Company to Employee.  If the Company is unable to withhold such federal and state taxes, for whatever reason, the Employee hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the transfer of any certificates for the shares of Common Stock subject to such restricted stock awards.                            f.           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.                            g.          Supersedes Previous Agreements.  This Agreement supersedes all prior or contemporaneous negotiations, commitments, agreements (written or oral) and writings between the Company and Employee with respect to the subject matter hereof.  All such other negotiations, commitments, agreements and writings will have no further force or effect, and the parties to any such other negotiation, commitment, agreement or writing will have no further rights or obligations thereunder.                            h.          Governing Law .  All matters affecting this Agreement, including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of Minnesota.                            i.           Notices.  Any notice hereunder by either party to the other shall be given in writing by personal delivery, by telecopy (with confirmation of transmission) or by certified mail, return receipt requested.  If addressed to Employee, the notice shall be delivered or mailed to Employee at the address specified under Employee’s signature hereto, or if addressed to the Company, the notice shall be delivered or mailed to the Company at its executive offices to the attention of its President.  A notice shall be deemed given, if by personal delivery or by telecopy, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt.                            j.           Headings .  The headings of Sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.                            k.          Scope of Agreement .  This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and of Employee and his successors.                IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written.   PW EAGLE, INC.   (the “Company”)           By: /s/ Roger R. Robb --------------------------------------------------------------------------------      Its: Chief Financial Officer --------------------------------------------------------------------------------               /s/ N. Michael Stickel --------------------------------------------------------------------------------   N. Michael Stickel   (“Employee”)         Address: PW Eagle, Inc. --------------------------------------------------------------------------------     1550 Valley River Drive --------------------------------------------------------------------------------     Eugene, Oregon 97401 --------------------------------------------------------------------------------  
  YAHOO! INC. 1995 STOCK PLAN (MAY 1999 AMENDMENT)    1.  Purposes of the Plan.  The purposes of this 1995 Stock Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business.  Options granted under the Plan may be incentive stock options (as defined under Section 422 of the Code) or nonstatutory stock options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of Section 422 of the Code, as amended, and the regulations promulgated thereunder.  Stock purchase rights may also be granted under the Plan.  2.  Definitions.  As used herein, the following definitions shall apply:           (a)      "Administrator" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan.           (b)      "Affiliate" shall mean an entity (including a partnership or limited liability company) in which the Company, directly or indirectly through any subsidiary, owns an equity interest, but which entity is not a Subsidiary.           (c)      "Applicable Laws" has the meaning set forth in Section 4(a) below.           (d)      "Board" means the Board of Directors of the Company.           (e)      "Code" means the Internal Revenue Code of 1986, as amended.           (f)      "Committee" means the Committee appointed by the Board of Directors in accordance with Section 4(a) of the Plan.           (g)      "Common Stock" means the Common Stock of the Company.           (h)      "Company" means Yahoo! Inc., a California corporation.           (i)       "Consultant" means any person, including a Director, who is engaged by the Company or any Parent, Subsidiary or Affiliate to render services and is compensated for such services.           (j)       "Continuous Status as an Employee or Consultant" means the absence of any interruption or termination of service as an Employee or Consultant.  Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of:  (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Administrator, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or their respective successors.  For purposes of this Plan, a change in status from an Employee to a Consultant or from a Consultant to an Employee will not constitute an interruption of Continuous Status as an Employee or Consultant.           (k)      "Director" means a member of the Board.           (l)       "Employee" means any person, including Named Executives, Officers and Directors, employed by the Company or any Parent, Subsidiary or Affiliate of the Company, with the status of employment determined based upon such minimum number of hours or periods worked as shall be determined by the Administrator in its discretion, subject to any requirements of the Code.  The payment of a director's fee by the Company to a Director shall not be sufficient to constitute "employment" of the Director by the Company.           (m)     "Exchange Act" means the Securities Exchange Act of 1934, as amended.           (n)      "Fair Market Value" means, as of any date, the fair market value of Common Stock determined as follows:           (i)       If the Common Stock is listed on any established stock exchange or a national market system including without limitation the National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales price for such stock as quoted on such system on the date of determination (if for a given day no sales were reported, the closing bid on that day shall be used), as such price is reported in The Wall Street Journal or such other source as the Administrator deems reliable;           (ii)      If the Common Stock is quoted on the Nasdaq System (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the bid and asked prices for the Common Stock on the date of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or           (iii)     In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator.           (o)      "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, as designated in the applicable written option agreement.           (p)      "Named Executive" means any individual who, on the last day of the Company's fiscal year, is the chief executive officer of the Company (or is acting in such capacity) or among the four highest compensated officers of the Company (other than the chief executive officer).  Such officer status shall be determined pursuant to the executive compensation disclosure rules under the Exchange Act.           (q)      "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option, as designated in the applicable written option agreement.           (r)      "Option" means a stock option granted pursuant to the Plan.           (s)      "Optioned Stock" means the Common Stock subject to an Option or a Stock Purchase Right.           (t)       "Optionee" means an Employee or Consultant who receives an Option or a Stock Purchase Right.           (u)      "Parent" means a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code, or any successor provision.           (v)      "Plan" means this 1995 Stock Plan.           (w)     "Reporting Person" means an Officer, Director, or greater than ten percent shareholder of the Company within the meaning of Rule 16a–2 under the Exchange Act, who is required to file reports pursuant to Rule 16a–3 under the Exchange Act.           (x)      "Restricted Stock" means shares of Common Stock acquired pursuant to a grant of a Stock Purchase Right under Section 11 below.           (y)      "Rule 16b–3" means Rule 16b–3 promulgated under the Exchange Act, as the same may be amended from time to time, or any successor provision.           (z)      "Share" means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.           (aa)    "Stock Exchange" means any stock exchange or consolidated stock price reporting system on which prices for the Common Stock are quoted at any given time.           (bb)    "Stock Purchase Right" means the right to purchase Common Stock pursuant to Section 11 below.           (cc)    "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code, or any successor provision.  3.  Stock Subject to the Plan.  Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 126,000,000 shares of Common Stock.  The Shares may be authorized, but unissued, or reacquired Common Stock.  If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares that were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. In addition, any Shares of Common Stock which are retained by the Company upon exercise of an Option or Stock Purchase Right in order to satisfy the exercise or purchase price for such Option or Stock Purchase Right or any withholding taxes due with respect to such exercise shall be treated as not issued and shall continue to be available under the Plan.  4.  Administration of the Plan.            (a)  Multiple Administrative Bodies.  If permitted by Rule 16b–3 and by the legal requirements relating to the administration of incentive stock option plans, if any, of applicable securities laws and the Code (collectively the "Applicable Laws"), grants under the Plan may be made by different bodies with respect to Directors, Officers who are not Directors and Employees or Consultants who are not Reporting Persons.           (b)  Administration With Respect to Reporting Persons.  With respect to grants of Options or Stock Purchase Rights to Employees or Consultants who are Reporting Persons, grants under the Plan shall be made by (A) the Board, if the Board may make grants under the Plan in compliance with Rule 16b–3, or (B) a Committee designated by the Board to make grants under the Plan, which committee shall be constituted in such a manner as to permit grants under the Plan to comply with Rule 16b–3, to qualify grants of Options to Named Executives as performance–based compensation under Section 162(m) of the Code and otherwise so as to satisfy the Applicable Laws.           (c)  Administration With Respect to Other Persons.  With respect to grants of Options or Stock Purchase Rights to Employees or Consultants who are not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which committee shall be constituted in such a manner as to satisfy the Applicable Laws.           (d)  General.  If a Committee has been appointed pursuant to subsection (ii) or (iii) of this Section 4(a), such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.  From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws, and, in the case of a Committee appointed under subsection (ii), to the extent permitted by Rule 16b–3, and to the extent required under Section 162(m) of the Code to qualify grants of Options to Named Executives as performance–based compensation.           (e)  Powers of the Administrator.  Subject to the provisions of the Plan and in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, including the approval, if required, of any Stock Exchange, the Administrator shall have the authority, in its discretion:           (i)       to determine the Fair Market Value of the Common Stock, in accordance with Section 2(m) of the Plan;           (ii)      to select the Consultants and Employees to whom Options and Stock Purchase Rights may from time to time be granted hereunder;           (iii)     to determine whether and to what extent Options and Stock Purchase Rights or any combination thereof are granted hereunder;           (iv)     to determine the number of shares of Common Stock to be covered by each such award granted hereunder;           (v)      to approve forms of agreement for use under the Plan;           (vi)     to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder, including, but not limited to, the share price and any restriction or limitation, the vesting of any Option or the acceleration of vesting or waiver of a forfeiture restructure, based in each case on such factors as the Administrator shall determine, in its sole discretion;           (vii)    to determine whether and under what circumstances an Option may be settled in cash under Section 10(g) instead of Common Stock;           (viii)    to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted;           (ix)     to determine the terms and restrictions applicable to Stock Purchase Rights and the Restricted Stock purchased by exercising such Stock Purchase Rights; and           (x)      to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;           (xi)     in order to fulfill the purposes of the Plan and without amending the Plan, to modify grants of Options or Stock Purchase Rights to participants who are foreign nationals or employed outside of the United States in order to recognize differences in local law, tax policies or customs.           (f)  Effect of Administrator's Decision.  All decisions, determinations and interpretations of the Administrator shall be final and binding on all holders of Options or Stock Purchase Rights.  5.  Eligibility.            (a)  Recipients of Grants.  Nonstatutory Stock Options and Stock Purchase Rights may be granted to Employees and Consultants; provided, however, that no person subject to the reporting requirements of Section 16 of the Exchange Act may receive an option or stock purchase right unless such person is employed by or a consultant to the Company or any Parent or Subsidiary. Incentive Stock Options may be granted only to Employees, provided, however, that Employees of an Affiliate shall be not be eligible to receive Incentive Stock Options.  An Employee or Consultant who has been granted an Option or Stock Purchase Right may, if he or she is otherwise eligible, be granted additional Options or Stock Purchase Rights.           (b)  Type of Option.  Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.  However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options.  For purposes of this Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares subject to an Incentive Stock Option shall be determined as of the date of the grant of such Option.           (c)  No Employment Rights.  The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with such Optionee's right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause.  6.  Term of Plan.  The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company as described in Section 20 of the Plan.  It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 16 of the Plan.  7.  Term of Option.  The term of each Option shall be the term stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement and provided further that, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the written option agreement.  8.  Limitation on Grants to Employees.  Subject to adjustment as provided in this Plan, the maximum number of Shares which may be subject to Options granted to any one Employee under this Plan for any fiscal year of the Company shall be 6,000,000.  9.  Option Exercise Price and Consideration.            (a)  Exercise Price.  The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board and set forth in the applicable agreement, but shall be subject to the following:         (i)       In the case of an Incentive Stock Option that is:           (A)     granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.           (B)     granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.         (ii)      In the case of a Nonstatutory Stock Option that is:           (A)     granted to a person who, at the time of grant of such Option, is a Named Executive of the Company, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant; and           (B)     granted to any person other than a Named Executive, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant.           (b)  Permissible Consideration.  The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares that (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender or such other period as may be required to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) authorization for the Company to retain from the total number of Shares as to which the Option is exercised that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option is exercised, (6) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price and any applicable income or employment taxes, (7) any combination of the foregoing methods of payment, or (9) such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws.  In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company.  10.  Exercise of Option.            (a)  Procedure for Exercise; Rights as a Shareholder.  Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, and reflected in the written option agreement, which may include vesting requirements and/or performance criteria with respect to the Company and/or the Optionee.       An Option may not be exercised for a fraction of a Share.           An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and the Company has received full payment for the Shares with respect to which the Option is exercised.  Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 9(b) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, not withstanding the exercise of the Option.  The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option.  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 provided in Section 13 of the Plan.           Exercise of an Option in any manner shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.  (b)  Termination of Employment or Consulting Relationship.  Subject to Section 10(c), in the event of termination of an Optionee's Continuous Status as an Employee or Consultant with the Company, such Optionee may, but only within three (3) months (or such other period of time not less than thirty (30) days and not more than twelve (12) months as is determined by the Administrator, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option and not exceeding three (3) months) after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent that the Optionee was entitled to exercise it at the date of such termination.  To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.  No termination shall be deemed to occur and this Section 10(b) shall not apply if (I) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee is an Employee who becomes a Consultant.  (c)  Disability of Optionee.  Notwithstanding Section 10(b) above, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his or her total and permanent disability (within the meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination.  To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.  (d)  Death of Optionee.  In the event of the death of an Optionee during the period of Continuous Status as an Employee or Consultant, or within thirty (30) days following the termination of the Optionee's Continuous Status as an Employee or Consultant, the Option may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death or, if earlier, the date of termination of the Continuous Status as an Employee or Consultant.  To the extent that Optionee was not entitled to exercise the Option at the date of death or termination, as the case may be, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate.  (e)  Extension of Exercise Period.  Notwithstanding the limitations set forth in Sections 10(b), (c) and (d) above, the Administrator has full power and authority to extend the period of time for which any Option granted under the Plan is to remain exercisable following termination of an Optionee's Continuous Status as an Employee or Consultant from the limited period set forth in the written option agreement to such greater period of time as the Administrator shall deem appropriate; provided, however, that in no event shall such Option be exercisable after the specified expiration date of the Option term.  (f)  Rule 16b–3.  Options granted to Reporting Persons shall comply with Rule 16b–3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption for Plan transactions.  (g)  Buyout Provisions.  The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.  11.  Stock Purchase Rights.   (a)  Rights to Purchase.  Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan.  After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid (which price shall not be less than 85% of the Fair Market Value of the Shares as of the date of the offer), and the time within which such person must accept such offer, which shall in no event exceed thirty (30) days from the date upon which the Administrator made the determination to grant the Stock Purchase Right.  The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator.  Shares purchased pursuant to the grant of a Stock Purchase Right shall be referred to herein as "Restricted Stock."  (b)  Repurchase Option.  Unless the Administrator determines otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's employment with the Company for any reason (including death or disability).  The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original purchase price paid the purchaser and may be paid by cancellation of any indebtedness of the Purchaser to the Company.  The repurchase option shall lapse at such rate as the Administrator may determine.  (c)  Other Provisions.  The Restricted Stock purchase agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.  In addition, the provisions of Restricted Stock purchase agreements need not be the same with respect to each purchaser.  (d)  Rights as a Shareholder.  Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company.  No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.  12.  Stock Withholding to Satisfy Withholding Tax Obligations.  At the discretion of the Administrator, Optionees may satisfy withholding obligations as provided in this paragraph.  When an Optionee incurs tax liability in connection with an Option or Stock Purchase Right, which tax liability is subject to tax withholding under applicable tax laws, and the Optionee is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Optionee may satisfy the withholding tax obligation by one or some combination of the following methods: (a) by cash payment, or (b) out of Optionee's current compensation, (c) if permitted by the Administrator, in its discretion, by surrendering to the Company Shares that (I) in the case of Shares previously acquired from the Company, have been owned by the Optionee for more than six months on the date of surrender, and (ii) have a fair market value on the date of surrender equal to or less than Optionee's marginal tax rate times the ordinary income recognized, or (d) by electing to have the Company withhold from the Shares to be issued upon exercise of the Option, or the Shares to be issued in connection with the Stock Purchase Right, if any, that number of Shares having a fair market value equal to the amount required to be withheld.  For this purpose, the fair market value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the "Tax Date").           Any surrender by a Reporting Person of previously owned Shares to satisfy tax withholding obligations arising upon exercise of this Option must comply with the applicable provisions of Rule 16b–3.           All elections by an Optionee to have Shares withheld to satisfy tax withholding obligations shall be made in writing in a form acceptable to the Administrator and shall be subject to the following restrictions:             (a)      the election must be made on or prior to the applicable Tax Date;           (b)      once made, the election shall be irrevocable as to the particular Shares of the Option or Stock Purchase Right as to which the election is made; and           (c)      all elections shall be subject to the consent or disapproval of the Administrator.           In the event the election to have Shares withheld is made by an Optionee and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Optionee shall receive the full number of Shares with respect to which the Option or Stock Purchase Right is exercised but such Optionee shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date.  13.  Adjustments Upon Changes in Capitalization, Corporate Transactions.            (a)  Changes in Capitalization.  Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Common Stock that have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or that have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, the maximum number of Shares of Common Stock for which Options may be granted to any Employee under Section 8 of the Plan and the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration."  Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive.  Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right.           (b)  Corporate Transactions.  In the event of the proposed dissolution or liquidation of the Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Administrator.  The Administrator may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Administrator and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable.  In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Option shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the Administrator determines, in the exercise of its sole discretion and in lieu of such assumption or substitution, that the Optionee shall have the right to exercise the Option as to some or all of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable.  If the Administrator makes an Option exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option shall be exercisable for a period of thirty (30) days from the date of such notice, and the Option will terminate upon the expiration of such period.  14.  Non–transferability of Options and Stock Purchase Rights.  Options and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution; provided, however, that the Administrator may in its discretion grant transferable Nonstatutory Stock Options pursuant to option agreements specifying (i) the manner in which such Nonstatutory Stock Options are transferable and (ii) that any such transfer shall be subject to the Applicable Laws.  Options and Stock Purchase Rights may be exercised or purchased during the lifetime of the Optionee or Stock Purchase Rights Holder only by the Optionee, Stock Purchase Rights Holder or a transferee permitted by this Section 14.  15.  Time of Granting Options and Stock Purchase Rights.  The date of grant of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Board.  Notice of the determination shall be given to each Employee or Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant.  16.  Amendment and Termination of the Plan.            (a)  Amendment and Termination.  The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable; provided that, the following revisions or amendments shall require approval of the shareholders of the Company in the manner described in Section 20 of the Plan:           (i)       any increase in the number of Shares subject to the Plan, other than an adjustment under Section 14 of the Plan;           (ii)      any change in the designation of the class of persons eligible to be granted Options; or           (iii)     any change in the limitation on grants to employees as described in Section 8 of the Plan or other changes which would require shareholder approval to qualify options granted hereunder as performance–based compensation under Section 162(m) of the Code.           (b)  Shareholder Approval.  If any amendment requiring shareholder approval under Section 16(a) of the Plan is made subsequent to the first registration of any class of equity securities by the Company under Section 12 of the Exchange Act, such shareholder approval shall be solicited as described in Section 20 of the Plan.           (c)  Effect of Amendment or Termination.  Any such amendment or termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company.  17.  Conditions Upon Issuance of Shares.  Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any Stock Exchange.  As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by law.  18.  Reservation of Shares.  The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.  The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.  19.  Agreements.  Options and Stock Purchase Rights shall be evidenced by written agreements in such form as the Administrator shall approve from time to time.  20.  Shareholder Approval.            (a)      Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted.  Such shareholder approval shall be obtained in the manner and to the degree required under applicable federal and state law and the rules of any stock exchange upon which the Shares are listed.           (b)      In the event that the Company registers any class of equity securities pursuant to Section 12 of the Exchange Act, any required approval of the shareholders of the Company obtained after such registration shall be solicited substantially in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.           (c)      If any required approval by the shareholders of the Plan itself or of any amendment thereto is solicited at any time otherwise than in the manner described in Section 20(b) hereof, then the Company shall, at or prior to the first annual meeting of shareholders held subsequent to the later of (1) the first registration of any class of equity securities of the Com– pany under Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an officer or director after such registration, do the following:           (i)       furnish in writing to the holders entitled to vote for the Plan substantially the same information that would be required (if proxies to be voted with respect to approval or disapproval of the Plan or amendment were then being solicited) by the rules and regulations in effect under Section 14(a) of the Exchange Act at the time such information is furnished; and           (ii)      file with, or mail for filing to, the Securities and Exchange Commission four copies of the written information referred to in subsection (i) hereof not later than the date on which such information is first sent or given to shareholders.  21.  Information to Optionees.  The Company shall provide to each Optionee, during the period for which such Optionee has one or more Options outstanding, copies of all annual reports and other information which are provided to all shareholders of the Company.
  EXHIBIT 10.1       -------------------------------------------------------------------------------- 4SIGMA (BERMUDA) LTD. --------------------------------------------------------------------------------     BONDHOLDERS CONVERSION AGREEMENT         THIS AGREEMENT is made on November 8, 2001 -------------------------------------------------------------------------------- BETWEEN (1)         4SIGMA (BERMUDA) LTD. (the "Issuer"); and (2)         THE  PARTIES  NAMED IN SCHEDULE 2  (the "Preference  Share  Subscribers"). WHEREAS (A)        The Issuer has issued to the Preference Share Subscribers (a) USD 450,000 in aggregate principal amount of 8 per cent. convertible bonds due 30 June 2003 pursuant to a subscription agreement dated 23 March 2001 and (b) USD 800,000 in aggregate principal amount of 8 per cent. convertible bonds due 30 June 2003 pursuant to a rights offer document dated 25 May 2001 (together, the "Bonds"). (B)         The Preference Share Subscribers intend to convert the Bonds (including accrued interest) which they hold into 8% class E non-voting redeemable and convertible preference shares of nominal value of USD0.01 each (the "Preference Shares"), the terms of which are substantially set out in the Term Sheet.  This shall take effect by way of issue of Preference Shares by the Issuer to the relevant Preference Share Subscribers in accordance with the terms herein in return for transfer of the Bonds by the Preference Share Subscribers to the Issuer. IT IS AGREED  AS FOLLOWS: 1.         INTERPRETATION 1.1       DEFINITIONS In this Agreement the following expressions have the following meanings: "Assets" means all the undertaking, property, assets, rights and revenues whatsoever of the Issuer, present and future, wherever situated in the world, and includes each and any of them. "Bond Certificate" means a certificate representing one or more Bonds. "Closing Date" means such later date as the parties hereto may agree. "Intellectual Property Rights" means all patents, trade marks, service marks (including any goodwill associated with them), all brands and trade names, all copyrights and rights in the nature of copyright, database rights, design rights and registered designs and documented trade secrets and know-how and all other intellectual property rights now or in the future owned or enjoyed by the Issuer, all applications for the protection of any such rights in any part of the world and the benefit of all agreements and licences now or in the future entered into or enjoyed by the Issuer relating to the use of exploitation of any such rights. "Land" means includes freehold and leasehold land and immovable property and in each case all buildings and structures upon and all things affixed (including trade and tenant's fixtures) thereto. "Preference Share Certificate" means a certificate representing one or more Preference Shares. "Preference Share Issue Price" means an issue price for each Preference Share of USD1.00 (that is, one Preference Share for each USD1.00 in aggregate principal amount of Bonds except that fractions of Preference Shares shall not be delivered and no compensation shall be payable in respect of any non-delivery of a fraction of a Preference Share). "Term Sheet" means the term sheet as set out in Schedule 1 hereto. 1.2       STATUTES Any reference in this Agreement to a statute, any provision thereof or to any statutory instrument, order or regulation made thereunder shall be construed as a reference to such statute, provision, statutory instrument, order or regulation as the same may have been, or may from time to time be, amended or re-enacted. 2.              SUBSCRIPTION, ISSUE AND ALLOTMENT 2.1           UNDERTAKING TO ISSUE AND ALLOT PREFERENCE SHARES The Issuer undertakes to the Preference Share Subscribers that, subject to and in accordance with the provisions of this Agreement, the Preference Shares will be issued and allotted to the Preference Share Subscribers on the Closing Date. 2.2          UNDERTAKING TO SUBSCRIBE PREFERENCE SHARES Each Preference Share Subscriber undertakes to the Issuer that, subject to and in accordance with the provisions of this Agreement, it will on the Closing Date subscribe for such number of Preference Shares as is set out against its name in Schedule 2 at the Preference Share Issue Price and transfer to the Issuer the aggregate principal amount of Bonds as set out against its name in Schedule 2 as payment of the Preference Share Issue Price for each such Preference Share. 2.3       CANCELLATION OF BONDS Upon the transfer of the Bonds to the Issuer pursuant to Clause 2.2 above, the Issuer shall, in accordance with the terms and conditions of the Bonds, cancel such Bonds and the Issuer shall not reissue or resell such Bonds. 3.         SELLING RESTRICTIONS Each party hereto acknowledges, represents, warrants and undertakes as set out in Schedule 3. 4.           CLOSING 4.1         CLOSING The closing of the issue ("Closing") shall take place on the Closing Date, whereupon: 4.1.1         DELIVERY OF SHARES: THE ISSUER SHALL DELIVER TO EACH PREFERENCE SHARE SUBSCRIBER THE PREFERENCE SHARES TO WHICH SUCH PREFERENCE SHARE SUBSCRIBER IS ENTITLED (BY APPROPRIATE ENTRY IN THE SHARE REGISTER AND THE FURNISHING TO SUCH SUBSCRIBER THE RELEVANT PREFERENCE SHARE CERTIFICATE). 4.1.2         PAYMENT OF ISSUE PROCEEDS: SUBJECT TO CLAUSE 4.2 (CONDITIONS PRECEDENT), EACH PREFERENCE SHARE SUBSCRIBER SHALL PAY FOR ITS RESPECTIVE PREFERENCE SHARES BY THE SURRENDER OF THE RELEVANT BOND CERTIFICATE WITH THE ENDORSED FORM OF TRANSFER DULY COMPLETED, AT THE REGISTERED OFFICE OF THE ISSUER TOGETHER WITH SUCH EVIDENCE AS THE ISSUER MAY REASONABLY REQUIRE TO PROVE THE TITLE OF THE RELEVANT PREFERENCE SHARE SUBSCRIBER AND THE AUTHORITY OF THE INDIVIDUALS WHO HAVE EXECUTED THE FORM OF TRANSFER AND THE ISSUER SHALL INSTRUCT ITS REGISTRARS TO AMEND THE REGISTER MAINTAINED BY EACH OF THEM IN RELATION TO THE BONDS SO THAT THE BONDS ARE SHOWN AS HAVING BEEN TRANSFERRED TO THE ISSUER AND CANCELLED. 4.2       CONDITIONS PRECEDENT Each Preference Share Subscriber shall only be under an obligation to subscribe and pay for the Preference Shares if (a) all other Preference Share Subscribers duly subscribe and pay for the Preference Shares at the Closing, (b) the Issuer has fully performed all of its obligations hereunder and (c) all authorisations, consents and approvals required by the Issuer for or in connection with the creation, issue and allotment of the Preference Shares have been obtained and are in full force and effect. 5.           PROXIES AND WAIVER 5.1       PROXIES Each of Jörg Menten, Roman Schenk and Dietrich Nord hereby irrevocably appoints Gerald Möller as his proxy with respect to all voting rights under all shares in the Issuer owned by each of them respectively and agrees further to execute any proxy forms, deeds or any other documents to give effect to such appointment under Bermudan law. 5.2         WAIVERS Solely for the purpose of giving effect to this Agreement and the subscription agreement dated on or about the date of this Agreement between the Issuer, ESG Re Limited and HMI Partners L.L.C. relating to the issue of up to 3,000,000 Preference Shares (the "Subscription Agreement"), each Preference Share Subscriber hereby irrevocably waives: (a)             all class rights with respect to any preference shares which it owns; (b)            all pre-emption rights relating to and which may affect the issue and allotment of Preference Shares herein and under the Subscription Agreement; and (c)             all pre-emption rights with respect to any Ordinary Shares which it owns. If such class rights or pre-emption rights would otherwise be breached by the issue of Preference Shares, each Subscriber further agrees to execute any documents and to vote in favour of, or sign written resolutions to pass, any resolutions required to give effect to such waiver. 6.           NEGATIVE PLEDGE The Issuer shall not, for as long as any Preference Shares are outstanding, without the prior written consent of the Preference Share Subscribers: (a)             create, or agree or attempt to create, or permit to subsist any mortgage, fixed or floating charge, pledge or other security of any kind (including any security conferring power to convert a floating charge into a fixed charge in relation to any Asset) or any trust over any Asset, or permit any lien (other than a lien arising by operation of law in the ordinary course of the Issuer's business) to arise or subsist over any Asset; (b)            sell, assign, lease, licence or sub-license, or grant any interest in any of its Land or Intellectual Property Rights, or purport to do any such act, or part with possession or ownership of them, or allow any third party access or the right to use any copy of any of its Intellectual Property Rights. 7.           SURVIVAL The provisions of this Agreement shall continue in full force and effect notwithstanding the completion of the arrangements set out herein for the issue and allotment of the Preference Shares and regardless of any investigation by any party hereto. 8.           TIME Any date or period specified herein may be postponed or extended by mutual agreement among the parties but, as regards any date or period originally fixed or so postponed or extended, time shall be of the essence. 9.           NOTICES 9.1         Addresses for notices All notices and other communications hereunder shall be made in writing and in English (by letter or fax) and shall be sent as follows: 9.1.1         IF TO THE ISSUER, TO IT AT: 4sigma (Bermuda) Ltd. Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda Fax:                          00-1-441-292-8666 Attention:                 Shari L. Simons with a copy to: 4sigma Limited c/o Clifford Chance Punder Cecilienallee 6-040474 Dusseldorf Germany Fax:                          + 49-211-43-555-600 Attention:                 Herbert Palmberger 9.1.2         IF TO ANY PREFERENCE SHARE SUBSCRIBER, TO IT AT ITS ADDRESS FOR THE TIME BEING FOR THE GIVING OF NOTICES TO IT BY THE ISSUER IN ITS CAPACITY AS A SHAREHOLDER OF THE ISSUER. 9.2         Effectiveness Every notice or other communication sent in accordance with Clause 9.1 shall be effective upon receipt by the addressee. 10.         LAW AND  JURISDICTION 10.1       Governing law This Agreement is governed by, and shall be construed in accordance with, the laws of Bermuda. 10.2       Jurisdiction Each party hereto agrees that the courts of Bermuda shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Agreement (respectively, "Proceedings" and "Disputes") and, for such purposes, irrevocably submits to the jurisdiction of such courts. 10.3       Appropriate forum Each party hereto irrevocably waives any objection which it might now or hereafter have to the courts of Bermuda being nominated as the forum to hear and determine any Proceedings and to settle any Disputes, and agrees not to claim that any such court is not a convenient or appropriate forum. 10.4       Non-exclusivity The submission to the jurisdiction of the courts of Bermuda shall not (and shall not be construed so as to) limit the right of any party hereto to take Proceedings in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by law. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SCHEDULE 1 TERM SHEET (1)       Description of E Shares There shall be created a class E convertible non voting redeemable preference shares of US$0.01 each in the Company ("E Share" or "E Shares"). (2)       Definitions Terms used in this Schedule, unless otherwise defined, shall have the meanings given to them in the Bye-laws of the Company. (3)       Dividends (a)             The holders of the E Shares will be entitled to receive dividends at the rate of 8% per annum on the amount paid up or credited as paid up thereon (together with any premium paid at the date of issue) (the "E Fixed Dividend").   Dividends on the E Shares shall be cumulative and shall accrue and be compounded daily. (b)            No dividend will be paid on the A Shares, the Ordinary Shares, the B Shares, the C Shares or the D Shares unless and until all accrued and unpaid dividends have been paid on the E Shares. (4)       Capital Subject at all times to any relevant insolvency laws or regulations in Bermuda and/or other applicable jurisdictions, in the event of a winding up of the Company or upon a reduction or return of capital, the holders of E Shares shall be entitled in priority to the holders of Ordinary Shares, A Shares, B Shares, C Shares and D Shares out of the assets of the Company remaining after payments of its debts and liabilities and of the costs, charges and expenses of such winding up or reduction or return of capital an amount per E Share equal to the sum of (a) the amount paid up or credited as being paid up on such E Share (including the premium (if any)) and (b) any accrued but unpaid E Fixed Dividend. (5)       Conversion of E Shares to Ordinary Shares (a)             At the option of any holder of E Shares, each of the E Shares held by such member and which such member wishes to convert shall be converted into and re-designated as one Ordinary Share. (b)            All accrued and unpaid E Fixed Dividends with respect to any E Shares being converted shall concurrently be converted into Ordinary Shares at the rate of one Ordinary Share to every US$1.00, provided that the Company shall not issue fractions of Ordinary Shares but shall round any fractional amounts due to any member up or down to the nearest whole Ordinary Share (0.5 being rounded up). (c)             To effect such conversion, the relevant member shall deliver to the Company a notice setting out the number of E Shares to be converted and enclosing the share certificate(s) relating to such E Shares.  The Company shall effect such conversions within 7 days of receipt of such conversion notice and shall immediately upon such conversion issue to the relevant members share certificates for the total number of Ordinary Shares converted from the E Shares and the E Fixed Dividends (if any). (d)            The Ordinary Shares resulting from the conversion shall rank for the full amount of all dividends on the Ordinary Shares paid by reference to a record date after, or declared or resolved to be paid after, the date of conversion corresponding to the proportion of the whole period in respect of which dividends are declared or resolved to be paid during which the Ordinary Shares have existed. (6)       Voting The holders of the E Shares shall have no right to vote other than as a class with respect to (a) any rights of such E Shares in accordance with the Bye-laws in which case the provisions relating to class meetings contained in the Bye-Laws shall apply and (b) any resolution relating to any merger, reorganisation, amalgamation or business combination of the Company. (7)       Redemption (a)             The Company shall redeem all the E Shares on the earlier of: (i)        1 October 2006; or (ii)       the occurrence of an Event. (b)            At least seven days (or such lesser period as shall be agreed between the Company and the holders of 75% of the E Shares) prior to redemption of any shares under Paragraph (a) above, the Company shall give notice to the relevant Shareholders specifying the total amount of shares to be redeemed, the number of such holder's shares to be redeemed and the applicable redemption date and place at which the certificates of such shares are to be procured for the redemption.  Upon such redemption date each of the Shareholders to which such notice was addressed shall be bound to deliver to the Company at such place the certificates for such of the shares concerned as are held by it.  Upon delivery of the certificates the Company shall pay to such holder the amount due to him in respect of such redemption.  If any certificate so delivered to the Company includes any shares not to be redeemed on the relevant date, a new certificate for such shares shall be issued free of charge to the holder delivering such certificate to the Company. (c)             On such redemption the holders of the E Shares redeemed shall be paid the amount paid-up or credited as paid-up on the E Shares (including the premium (if any)) together with a sum equal to any arrears on deficiency or accruals of dividend (whether earned or declared or not) calculated to and including the date of such redemption. (8)       Pre-emption Rights (a)             The Company shall not allot any equity securities on any terms to a person unless it has made an offer (an "Offer") to each holder of E Shares, on the same or more favourable terms, of a proportion of those securities which is equal (or as nearly as practicable equal) to the proportion of (i) the nominal value of Ordinary Shares which would be held by such holder if it exercised fully its option to convert all its E Shares into Ordinary Shares to (ii) the nominal value of all outstanding Ordinary Shares plus such number of Ordinary Shares outstanding as would be issued if all the holders of E Shares fully exercised their options to convert their E Shares into Ordinary Shares. For this purpose, the Directors shall determine the number of Ordinary Shares into which the E Shares would convert on the basis of Paragraph (5) above.  The Company shall not allot any of those securities to a person unless the period during which any such offer may be accepted has expired or the Company has received notice of the acceptance or refusal of every offer so made. (b)            At least 10 days prior to the date of the proposed issue of equity securities, the Company shall make an Offer in writing to the holders of the E Shares either personally or by post to him at the address for the time being for the giving of notices to him by the Company in his capacity as a Shareholder of the Company.  The Offer must state a period of not less than 10 days during which it may be accepted and the offer shall not be withdrawn before the end of such period.   SCHEDULE 2 BOND HOLDINGS/PREFERENCE SHARE COMMITMENTS Preference Share   Aggregate   Accrued   Total   Number of   Subscriber   Principal Amount   Interest   (USD)   Preference       of Bonds (USD)   (USD)       Shares                       ESG Re Limited   854,545.45   30,176.84   884,722.29   884,722                       Head Company Profit Sharing Plan   5,340.91   188.61   5,529.52   5,530                       HMI Partners L.L.C.   315,113.64   11,127.71   326,241.35   326,241                       Jörg Menten   7,500   332.05   7,832.05   7,832                       Gerald Möller   30,000   1,121.10   31,121.10   31,121                       Dietrich Nord   15,500   560.55   15,560.55   15,561                       Roman Schenk   15,000   560.55   15,560.55   15,561     SCHEDULE 3       SELLING RESTRICTIONS 1.         General Each party hereto acknowledges that no action has been or will be taken in any jurisdiction by the Issuer or any Preference Share Subscriber that would permit a public offering of the Preference Shares, or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Each party hereto undertakes to each other party hereto that it will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers the Preference Shares or has in its possession or distributes such offering material, in all cases at its own expense. 2.         United States The Preference Shares have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the United States Securities Act of 1933, as amended. Each party hereto represents, warrants and undertakes to each other party hereto that neither it nor any of its affiliates (including any person acting on behalf of any party hereto or any of its affiliates) has offered or sold, or will offer or sell, any Preference Shares in any circumstances which would require the registration of any of the Preference Shares under the United States Securities Act of 1933, as amended, or the registration of the Issuer, the Preference Shares under the United States Investment Company Act of 1940, as amended. Terms used in this paragraph have the meanings given to them in the United States Securities Act of 1933, as amended, and the regulations thereunder. 3.         Bermuda The Issuer has applied for and secured the consent of the Bermuda Monetary Authority (the "Authority") to the issuance to the Preference Share Subscribers of the Preference Shares. In granting such consent, the Authority accepts no responsibility for the financial soundness of any proposal or for the correctness of any statements made or opinions expressed with respect to the Preference Shares or the Issuer. Any transfer of the Preference Shares will also require the consent of the Authority. 4.         Germany Each Preference Share Subscriber confirms that it has complied and will comply with the Securities Sales Prospectus Act (the "Act") of the Federal Republic of Germany (Wertpapier-Verkaufsprospektgesetz).  Each Preference Share Subscriber further represents, warrants and undertakes that it has not engaged in, and will not engage in, a public offering (öffentliches Angebot) within the meaning of the Act with respect to any Preference Share otherwise than in accordance with all applicable legal and regulatory requirements. SIGNATURES The Issuer   4SIGMA (BERMUDA) LTD. By: s/Gerald Möller By:   GERALD MÖLLER The Preference Share Subscribers ESG RE LIMITED By: s/Margaret L. Webster   Corporate Secretary     HEAD COMPANY PROFIT SHARING PLAN By: s/John C Head III   Trustee     HMI PARTNERS L.L.C. By: s/John C Head III         JÖRG MENTEN s/Jörg Menten ______________________________________________________________________ GERALD MÖLLER   ______________________________________________________________________ DIETRICH NORD   ______________________________________________________________________ ROMAN SCHENK   ______________________________________________________________________   4SIGMA (BERMUDA) LTD. 8 PER CENT NON-VOTING REDEEMABLE AND CONVERTIBLE PREFERENCE SHARES   -------------------------------------------------------------------------------- SUBSCRIPTION AGREEMENT --------------------------------------------------------------------------------   THIS AGREEMENT is made on November 8, 2001 -------------------------------------------------------------------------------- BETWEEN (1)           4SIGMA (BERMUDA) LTD. (the "Issuer");  and (2)           THE PARTIES NAMED IN SCHEDULE 2 (each, a "Subscriber"). WHEREAS The Issuer has authorised the creation and issue of 5,000,000 8% class E non-voting redeemable and convertible preference shares of nominal value of USD0.01 each (the "Preference Shares"), the terms of which are substantially set out in the Term Sheet, of which 3,000,000 will be issued for cash.  Each of the Subscribers intends to make further investments in the Issuer by agreeing to subscribe for the Preference Shares in the terms set out herein. IT IS AGREED as follows: 1.         INTERPRETATION 1.1      Definitions In this Agreement the following expressions have the following meanings: “Availability Period” means the period from and including the date hereof to 31 December 2002 (inclusive). “Business Day” means a day on which banks are generally open for business in Bermuda and the United States. “Commitment” means, in relation to each Subscriber, the number of Preference Shares opposite its name in Schedule 2. “Issue Notice” means a notice in writing substantially in the form set out in Schedule 4. “Issue Price” means USD1.00 per Preference Share. “Minimum Number” means 100,000 Preference Shares. “Share Certificate” means a certificate representing one or more Preference Shares. “Subscription Date” means the Business Day stated as such in the relevant Issue Notice, provided that such day may not be less than two Business Days after the date on which the Issue Notice is received by each Subscriber. “Term Sheet” means the term sheet set out in Schedule 1. “Total Commitment” means 3,000,000 Preference Shares. 1.2       Statutes Any reference in this Agreement to a statute, any provision thereof or to any statutory instrument, order or regulation made thereunder shall be construed as a reference to such statute, provision, statutory instrument, order or regulation as the same may have been, or may from time to time be, amended or re-enacted. 2.         SUBSCRIPTION, ISSUE AND ALLOTMENT 2.1       Undertaking to subscribe Each of the Subscribers, severally and not jointly, undertakes to the Issuer that, subject to and in accordance with the provisions of this Agreement, it will on each Subscription Date during the Availability Period, subscribe and pay for such number of Preference Shares required by the Issue Notice provided that: (i)              the total number of Preference Shares to be issued on that Subscription Date shall not be less than the Minimum Number and shall be in multiples of 100,000 (representing USD100,000); (ii)            the number of Preference Shares to be subscribed by each Subscriber shall be in the same proportion to the total number of Preference Shares to be issued on that Subscription Date as such Subscriber’s Commitment be as to the Total Commitment; (iii)           the total number of Preference Shares subscribed by each Subscriber shall not exceed its respective Commitment; and (iv)           the issue of the relevant Issue Notice by the Issuer is duly authorised by the unanimous approval of the board of directors of the Issuer. 2.2       Undertaking to issue and allot The Issuer undertakes to each Subscriber that, subject to and in accordance with the provisions of this Agreement, such number of Preference Shares as set out in the relevant Issue Notice will be issued and allotted to the Subscriber on each Subscription Date. 3.         SELLING RESTRICTIONS Each party hereto acknowledges, represents, warrants and undertakes as set out in Schedule 3. 4.         CLOSING 4.1       Closing The closing of each issue shall take place on the relevant Subscription Date, whereupon: 4.1.1          DELIVERY OF PREFERENCE SHARES: THE ISSUER SHALL DELIVER TO THE SUBSCRIBERS THE RELEVANT PREFERENCE SHARES (BY APPROPRIATE ENTRY IN THE SHARE REGISTER AND FURNISHING TO EACH SUBSCRIBER THE SHARE CERTIFICATE IN RESPECT OF THE RELEVANT PREFERENCE SHARES). 4.1.2          PAYMENT OF ISSUE PROCEEDS: SUBJECT TO CLAUSE 4.2, EACH SUBSCRIBER SHALL PAY FOR THE RELEVANT PREFERENCE SHARES BY CREDIT TRANSFER IN UNITED STATES DOLLARS TO SUCH ACCOUNT AS THE ISSUER HAS DESIGNATED TO THE SUBSCRIBERS IN THE RELEVANT ISSUE NOTICE OR OTHERWISE AS AGREED BETWEEN THE ISSUER AND THE SUBSCRIBERS. 4.2       Conditions precedent EACH SUBSCRIBER SHALL ONLY BE UNDER AN OBLIGATION TO SUBSCRIBE AND PAY FOR THE PREFERENCE SHARES ON A SUBSCRIPTION DATE IF (A) THE ISSUER HAS FULLY PERFORMED ALL OF ITS OBLIGATIONS HEREUNDER AND (B) ALL AUTHORISATIONS, CONSENTS AND APPROVALS REQUIRED BY THE ISSUER FOR OR IN CONNECTION WITH THE CREATION, ISSUE AND ALLOTMENT OF THE PREFERENCE SHARES HAVE BEEN OBTAINED AND ARE IN FULL FORCE AND EFFECT, AS OF THE RELEVANT SUBSCRIPTION DATE. 5.         DISCHARGE The Subscribers shall be discharged from their obligation to subscribe for the Preference Shares hereunder upon the occurrence of the following events: (I)        ANY ACTION, STEP OR LEGAL PROCEEDING, THREATENED OR OTHERWISE, IS TAKEN BY THE ISSUER OR ANY OTHER PERSON FOR THE WINDING-UP, DISSOLUTION, ADMINISTRATION OR RE-ORGANISATION (WHETHER BY WAY OF VOLUNTARY ARRANGEMENT, SCHEME OF ARRANGEMENT OR OTHERWISE) OR FOR THE APPOINTMENT, THREATENED OR OTHERWISE, OF A LIQUIDATOR, RECEIVER, ADMINISTRATOR, ADMINISTRATIVE RECEIVER, CONSERVATOR, CUSTODIAN, TRUSTEE OR SIMILAR OFFICER OF IT OR ANY OF ITS SUBSIDIARIES OR OF ANY OR ALL OF ITS REVENUES AND ASSETS OR THAT OF ANY SUBSIDIARY; (II)       THE ADMISSION OF ANY OF THE ISSUER’S ORDINARY SHARES TO LISTING AND TRADING ON A RECOGNISED STOCK EXCHANGE; OR (III)      THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE ISSUER’S SHARES OR ASSETS. 6.         SURVIVAL The provisions of this Agreement shall continue in full force and effect notwithstanding the completion of the arrangements set out herein for the issue and allotment of the Preference Shares and regardless of any investigation by any party hereto. 7.         TIME Any date or period specified herein may be postponed or extended by mutual agreement among the parties but, as regards any date or period originally fixed or so postponed or extended, time shall be of the essence.   8.         NOTICES 8.1       Addresses for notices All notices and other communications hereunder shall be made in writing and in English (by letter or fax) and shall be sent as follows: 8.1.1          IF TO THE ISSUER, TO IT AT: 4sigma (Bermuda) Ltd. Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda Fax:                          00-1-441-292-8666 Attention:                 Shari L. Simons with a copy to: 4sigma Limited c/o Clifford Chance Punder Cecilienallee 6-040474 Dusseldorf Germany   Fax:                          + 49-211-43-555-600 Attention:                 Herbert Palmberger 8.1.2          IF TO THE SUBSCRIBER, TO IT AT ITS ADDRESS FOR THE TIME BEING FOR THE GIVING OF NOTICES TO IT BY THE ISSUER IN ITS CAPACITY AS A SHAREHOLDER OF THE ISSUER. 8.2       Effectiveness Every notice or other communication sent in accordance with Clause 8.1 shall be effective upon receipt by the addressee. 9.         LAW AND JURISDICTION 9.1       Governing law This Agreement is governed by, and shall be construed in accordance with, the laws of Bermuda. 9.2       Jurisdiction Each party hereto agrees that the courts of Bermuda shall have jurisdiction to hear and determine any suit, action or proceedings, and to settle any disputes, which may arise out of or in connection with this Agreement (respectively, “Proceedings” and “Disputes”) and, for such purposes, irrevocably submits to the jurisdiction of such courts. 9.3       Appropriate forum Each party hereto irrevocably waives any objection which it might now or hereafter have to the courts of Bermuda being nominated as the forum to hear and determine any Proceedings and to settle any Disputes, and agrees not to claim that any such court is not a convenient or appropriate forum. 9.4       Non-exclusivity The submission to the jurisdiction of the courts of Bermuda shall not (and shall not be construed so as to) limit the right of any party hereto to take Proceedings in any other court of competent jurisdiction, nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not) if and to the extent permitted by law.   AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written.     SCHEDULE 1 Term Sheet (1)       Description of E Shares There shall be created a class E convertible non voting redeemable preference shares of US$0.01 each in the Company ("E Share" or "E Shares"). (2)       Definitions Terms used in this Schedule, unless otherwise defined, shall have the meanings given to them in the Bye-laws of the Company. (3)       Dividends (a)             The holders of the E Shares will be entitled to receive dividends at the rate of 8% per annum on the amount paid up or credited as paid up thereon (together with any premium paid at the date of issue) (the “E Fixed Dividend”).   Dividends on the E Shares shall be cumulative and shall accrue and be compounded daily. (b)             No dividend will be paid on the A Shares, the Ordinary Shares, the B Shares, the C Shares or the D Shares unless and until all accrued and unpaid dividends have been paid on the E Shares. (4)       Capital Subject at all times to any relevant insolvency laws or regulations in Bermuda and/or other applicable jurisdictions, in the event of a winding up of the Company or upon a reduction or return of capital, the holders of E Shares shall be entitled in priority to the holders of Ordinary Shares, A Shares, B Shares, C Shares and D Shares out of the assets of the Company remaining after payments of its debts and liabilities and of the costs, charges and expenses of such winding up or reduction or return of capital an amount per E Share equal to the sum of (a) the amount paid up or credited as being paid up on such E Share (including the premium (if any)) and (b) any accrued but unpaid E Fixed Dividend. (5)       Conversion of E Shares to Ordinary Shares (a)             At the option of any holder of E Shares, each of the E Shares held by such member and which such member wishes to convert shall be converted into and re-designated as one Ordinary Share. (b)            All accrued and unpaid E Fixed Dividends with respect to any E Shares being converted shall concurrently be converted into Ordinary Shares at the rate of one Ordinary Share to every US$1.00, provided that the Company shall not issue fractions of Ordinary Shares but shall round any fractional amounts due to any member up or down to the nearest whole Ordinary Share (0.5 being rounded up). (c)             To effect such conversion, the relevant member shall deliver to the Company a notice setting out the number of E Shares to be converted and enclosing the share certificate(s) relating to such E Shares.  The Company shall effect such conversions within 7 days of receipt of such conversion notice and shall immediately upon such conversion issue to the relevant members share certificates for the total number of Ordinary Shares converted from the E Shares and the E Fixed Dividends (if any). (d)            The Ordinary Shares resulting from the conversion shall rank for the full amount of all dividends on the Ordinary Shares paid by reference to a record date after, or declared or resolved to be paid after, the date of conversion corresponding to the proportion of the whole period in respect of which dividends are declared or resolved to be paid during which the Ordinary Shares have existed. (6)       Voting The holders of the E Shares shall have no right to vote other than as a class with respect to (a) any rights of such E Shares in accordance with the Bye-laws in which case the provisions relating to class meetings contained in the Bye-Laws shall apply and (b) any resolution relating to any merger, reorganisation, amalgamation or business combination of the Company. (7)       Redemption (a)           The Company shall redeem all the E Shares on the earlier of: (i)        1 October 2006; or (ii)       the occurrence of an Event. (b)             At least seven days (or such lesser period as shall be agreed between the Company and the holders of 75% of the E Shares) prior to redemption of any shares under Paragraph (a) above, the Company shall give notice to the relevant Shareholders specifying the total amount of shares to be redeemed, the number of such holder's shares to be redeemed and the applicable redemption date and place at which the certificates of such shares are to be procured for the redemption.  Upon such redemption date each of the Shareholders to which such notice was addressed shall be bound to deliver to the Company at such place the certificates for such of the shares concerned as are held by it.  Upon delivery of the certificates the Company shall pay to such holder the amount due to him in respect of such redemption.  If any certificate so delivered to the Company includes any shares not to be redeemed on the relevant date, a new certificate for such shares shall be issued free of charge to the holder delivering such certificate to the Company. (c)                    On such redemption the holders of the E Shares redeemed shall be paid the amount paid-up or credited as paid-up on the E Shares (including the premium (if any)) together with a sum equal to any arrears on deficiency or accruals of dividend (whether earned or declared or not) calculated to and including the date of such redemption.   (8)       Pre-emption Rights (a)           The Company shall not allot any equity securities on any terms to a person unless it has made an offer (an “Offer”) to each holder of E Shares, on the same or more favourable terms, of a proportion of those securities which is equal (or as nearly as practicable equal) to the proportion of (i) the nominal value of Ordinary Shares which would be held by such holder if it exercised fully its option to convert all its E Shares into Ordinary Shares to (ii) the nominal value of all outstanding Ordinary Shares plus such number of Ordinary Shares outstanding as would be issued if all the holders of E Shares fully exercised their options to convert their E Shares into Ordinary Shares. For this purpose, the Directors shall determine the number of Ordinary Shares into which the E Shares would convert on the basis set out in Paragraph (5) above.  The Company shall not allot any of those securities to a person unless the period during which any such offer may be accepted has expired or the Company has received notice of the acceptance or refusal of every offer so made. (b)             At least 10 days prior to the date of the proposed issue of equity securities, the Company shall make an Offer in writing to the holders of the E Shares either personally or by post to him at the address for the time being for the giving of notices to him by the Company in his capacity as a Shareholder of the Company.  The Offer must state a period of not less than 10 days during which it may be accepted and the offer shall not be withdrawn before the end of such period.   SCHEDULE 2 Commitments Subscriber   Number of   Commitments       Preference Shares   (USD)               ESG Re Limited   1,800,000   1,800,000               HMI Partners L.L.C.   1,200,000   1,200,000     SCHEDULE 3 SELLING RESTRICTIONS 1.         General Each party hereto acknowledges that no action has been or will be taken in any jurisdiction by the Issuer or each Subscriber that would permit a public offering of the Preference Shares, or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Each party hereto undertakes to each other party hereto that it will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers the Preference Shares or has in its possession or distributes such offering material, in all cases at its own expense. 2.         United States The Preference Shares have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the United States Securities Act of 1933, as amended. Each party hereto represents, warrants and undertakes to each other party hereto that neither it nor any of its affiliates (including any person acting on behalf of any party hereto or any of its affiliates) has offered or sold, or will offer or sell, any Preference Shares in any circumstances which would require the registration of any of the Preference Shares under the United States Securities Act of 1933, as amended, or the registration of the Issuer, the Preference Shares under the United States Investment Company Act of 1940, as amended. Terms used in this paragraph have the meanings given to them in the United States Securities Act of 1933, as amended, and the regulations thereunder. 3.         Bermuda The Issuer has applied for and secured the consent of the Bermuda Monetary Authority (the "Authority") to the issuance to each Subscriber of the Preference Shares. In granting such consent, the Authority accepts no responsibility for the financial soundness of any proposal or for the correctness of any statements made or opinions expressed with respect to the Preference Shares or the Issuer. Any transfer of the Preference Shares will also require the consent of the Authority. 4.         Germany Each Subscriber confirms that it has complied and will comply with the Securities Sales Prospectus Act (the “Act”) of the Federal Republic of Germany (Wertpapier-Verkaufsprospektgesetz). Each Subscriber further represents, warrants and undertakes that it has not engaged in, and will not engage in, a public offering (öffentliches Angebot) within the meaning of the Act with respect to any Preference Share otherwise than in accordance with all applicable legal and regulatory requirements.   SCHEDULE 4 Issue Notice [on letterhead of the Issuer] To:      ESG Re Ltd HMI Partners L.L.C. Dated: Dear Sirs, 1.         We refer to the agreement (the "Subscription Agreement") dated [insert date of Subscription Agreement] 2001 between us, ESG Re Ltd and HMI Partners L.L.C. relating to the issue of up to 3,000,000 Preference Shares. 2.         Terms used here have the meaning given to them in the Subscription Agreement. 3.         We hereby give you notice that, pursuant to the Subscription Agreement on [insert Subscription Date], we wish to issue [•] Preference Shares, of which you will subscribe for [•]. 4.             We confirm that our board of directors have unanimously approved the issuing of this Issue Notice. Yours faithfully     ………………………………… Authorised Signatory for and on behalf of 4sigma (Bermuda) Ltd. SIGNATURES The Issuer 4SIGMA (BERMUDA) LTD.   By: s/Gerald Möller By:       The Subscribers   ESG RE LIMITED   By: s/Margaret L. Webster     Corporate Secretary         HMI PARTNERS L.L.C.   By: s/John C Head III          
TENTH AMENDMENT TO FORBEARANCE AGREEMENT AND EIGHTH AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT             THIS TENTH AMENDMENT TO FORBEARANCE AGREEMENT AND EIGHTH AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT (the "Agreement") is effective as of this 4th day of June, 2001, among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation in its capacity as Agent and Lender ("Agent"), each of the financial institutions party to the Loan Agreement (each is referred to herein as a "Lender" and collectively as the "Lenders"), TRISM, INC., a Delaware corporation ("Trism"), TRISM SECURED TRANSPORTATION, INC., a Delaware corporation ("Trism Secured"), TRI-STATE MOTOR TRANSIT CO., a Delaware corporation ("TSMT"), DIABLO SYSTEMS INCORPORATED D/B/A DIABLO TRANSPORTATION, INC., a California corporation ("Diablo"), TRISM EASTERN, INC. D/B/A C.I. WHITTEN TRANSFER, a Delaware corporation ("CI Whitten"), TRISM HEAVY HAUL, INC., a Delaware corporation ("Heavy Haul"), TRISM SPECIALIZED CARRIERS, INC., a Georgia corporation ("Specialized"), TRISM SPECIAL SERVICES, INC., a Georgia corporation ("Special Services"), TRISM LOGISTICS, INC., a Delaware corporation ("Logistics"), TRISM EQUIPMENT, INC., a Delaware corporation ("TEI") (each of Trism, Trism Secured, TSMT, Diablo, CI Whitten, Heavy Haul, Specialized, Special Services, Logistics and TEI is herein referred to individually as a "Borrower" and collectively as the "Borrowers"), AERO BODY AND TRUCK EQUIPMENT, INC., a Delaware corporation ("Aero Body"), E.L. POWELL & SONS TRUCKING CO., INC., an Oklahoma corporation ("EL Powell"), TRISM TRANSPORT, INC., a Delaware corporation ("Transport"), and TRISM TRANSPORT SERVICES, INC. ("Transport Services") (each of Aero Body, EL Powell, Transport and Transport Services is individually referred to herein as a "Guarantor" and collectively as the "Guarantors"). W I T N E S S E T H:             WHEREAS , Borrowers, Agent and Lenders are party to that certain Post-Confirmation Loan and Security Agreement, dated February 9, 2000 (as the same has been amended from time to time, the "Loan Agreement");             WHEREAS , Borrowers, Agent and Lenders desire to amend the Loan Agreement as set forth herein; and             WHEREAS , Borrowers, Guarantors, Agent and Lenders are party to that certain Forbearance Agreement, dated as of November 8, 2000 (as the same has been amended from time to time, the "Forbearance Agreement;" all capitalized terms used herein and not otherwise expressly defined herein shall have the respective meanings given to such terms in the Forbearance Agreement); and             WHEREAS , Agent, Lenders, Borrowers and Guarantors desire to amend the Forbearance Agreement as set forth herein.   --------------------------------------------------------------------------------               NOW, THEREFORE , in consideration of the foregoing premises, and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Amendments to Loan Agreement and Forbearance Agreement. A. Amendments to Loan Agreement. Section 1.1 of Article 1 of the Loan Agreement is hereby amended by deleting therefrom the definition of "Initial Anniversary Date" in its entirety and inserting the following in lieu thereof: "Initial Anniversary Date" shall mean June 8, 2001. B. Amendments to Forbearance Agreement. Paragraph 2 of the Forbearance Agreement is hereby amended by deleting therefrom the reference to the date "June 4, 2001" and inserting in lieu thereof the date "June 8, 2001." 2. Representations, Warranties, Covenants and Acknowledgments. To induce Agent and Lenders to enter into this Agreement: Each Borrower and Guarantor does hereby represent and warrant that (i) as of the date hereof, all of the representations and warranties made or deemed to be made under the Forbearance Agreement and the other Loan Documents are true and correct, (ii) as of the date hereof, after giving effect to the terms hereof, there exists no (A) default or breach of the Forbearance Agreement or (B) Default or Event of Default under the Loan Agreement or any of the Loan Documents, other than any Default or Event of Default which may arise from the failure of Borrowers to pay, during the Forbearance Period, certain interest payments with respect to the Senior Notes (as defined below), (iii) such Borrower and Guarantor has the power and is duly authorized to enter into, deliver and perform this Agreement, and (iv) this Agreement and each of the Forbearance Agreement and the other Loan Documents is the legal, valid and binding obligation of the such Borrower and Guarantor enforceable against it in accordance with its terms; and Each Borrower and Guarantor does hereby reaffirm each of the agreements, covenants, and undertakings set forth in the Forbearance Agreement and each and every other Loan Document executed in connection therewith or pursuant thereto as if such Borrower or Guarantor were making said agreements, covenants and undertakings on the date hereof; and Each Borrower and Guarantor does hereby acknowledge and agree that no right of offset, defense, counterclaim, claim, causes of action or objection in favor of any Borrower or Guarantor against Agent or any Lender exists arising out of or with respect to (i) the Secured Obligations, this Agreement, the Forbearance Agreement, the Loan Agreement or any of the other Loan Documents, (ii) any other documents now or heretofore evidencing, securing or in any way relating to the foregoing or (iii) the administration or funding of the Revolving Credit Loans; and Each Borrower and Guarantor does hereby acknowledge and agree that any and all references to the Loan Agreement herein or in the Forbearance Agreement shall mean and refer to the Loan Agreement, as amended by (i) that certain First Amendment to Post-Confirmation Loan and Security Agreement, dated August 31, 2000, (ii) that certain Second Amendment to Post-Confirmation Loan and Security Agreement, dated January 26, 2001, (iii) that certain Third Amendment to Post-Confirmation Loan and Security Agreement, dated February 28, 2001, (iv) that certain Fourth Amendment to Post-Confirmation Loan and Security Agreement, dated March 30, 2001, (v) that certain Fifth Amendment to Post-Confirmation Loan and Security Agreement, dated April 13, 2001, (vi) that certain Sixth Amendment to Post-Confirmation Loan and Security Agreement, dated April 27, 2001, (vii) that certain Seventh Amendment to Post-Confirmation Loan and Security Agreement, dated May 18, 2001 and (viii) that certain Eighth Amendment to Post-Confirmation Loan and Security Agreement, as contained herein. -------------------------------------------------------------------------------- 3. Releases; Indemnities. In further consideration of Agent's and each Lender's execution of this Agreement, each Borrower and each Guarantor, individually and on behalf of its successors (including, without limitation, any trustees acting on behalf of such Borrower or Guarantor and any debtor-in-possession with respect to such Borrower or Guarantor), assigns, subsidiaries and Affiliates, hereby forever releases Agent and each Lender and their respective successors, assigns, parents, subsidiaries, Affiliates, officers, employees, directors, agents and attorneys (collectively, the "Releasees") from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions and causes of actions (whether at law or in equity) and obligations of every nature whatsoever, whether liquidated or unliquidated, whether known or unknown, matured or unmatured, fixed or contingent (collectively, "Claims") that such Borrower or Guarantor may have against the Releasees which arise from or relate to any actions which the Releasees may have taken or omitted to take in connection with the Forbearance Agreement or other Loan Documents prior to the date this Agreement was executed including without limitation with respect to the Secured Obligations, any Collateral, the Loan Agreement, the Forbearance Agreement, any other Loan Document and any third parties liable in whole or in part for the Secured Obligations. This provision shall survive and continue in full force and effect whether or not such Borrower or Guarantor shall satisfy all other provisions of this Agreement, the Forbearance Agreement, the Loan Documents or the Loan Agreement including payment in full of all Secured Obligations. Each Borrower hereby agrees that its obligation to indemnify and hold the Releasees harmless as set forth in Section 3(a) above shall include an obligation to indemnify and hold the Releasees harmless with respect to any and all liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by the Releasees, or any of them, whether direct, indirect or consequential, as a result of or arising from or relating to any proceeding by, or on behalf of any Person, including, without limitation, officers, directors, agents, trustees, creditors, partners or shareholders of such Borrower or Guarantor any subsidiary or Affiliate of such Borrower, such Guarantor whether threatened or initiated, asserting any claim for legal or equitable remedy under any statutes, regulation or common law principle arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Agreement or any other document executed in connection herewith. The foregoing indemnity shall survive the payment in full of the Secured Obligations and the termination of this Agreement, the Forbearance Agreement, the Loan Agreement and the other Loan Documents -------------------------------------------------------------------------------- 4. Conditions Precedent. The effectiveness of this Agreement is subject to the following conditions precedent: A. Delivery of Documents. Borrowers and Guarantors shall have delivered to Agent, on behalf of Lenders, all in form and substance acceptable to Agent in its sole discretion, (i) executed counterpart originals of this Agreement, and (ii) such other documentation as Agent may reasonably require in connection herewith; and B. Accuracy of Representations and Warranties. All of the representations and warranties made or deemed to be made in this Agreement and under the Forbearance Agreement and the other Loan Documents shall be true and correct as of the date of this Agreement, except such representations and warranties which, by their terms, are applicable to a prior specific date or period; and C. Expenses. Borrowers and Guarantors shall have agreed to jointly and severally pay to Agent the costs and expenses referred to in Section 6 hereof; and D. Fees. Borrowers and Guarantors shall have paid to Agent, for the ratable benefit of Lenders, an amendment fee in an amount equal to $37,500.00, which amendment fee shall be deemed fully earned as of the date hereof. 5. Effect of this Agreement; Relationship of Parties. As expressly amended hereby, the Forbearance Agreement and the other Loan Documents shall be and remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders. The relationship of Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, has been and shall continue to be, at all times, that of creditor and debtor and not as joint venturers or partners. Nothing contained in this Agreement, any instrument, document or agreement delivered in connection herewith or in the Forbearance Agreement, the Loan Agreement or any of the other Loan Documents shall be deemed or construed to create a fiduciary relationship between or among the parties. 6. Expenses. Borrowers and Guarantors agree to jointly and severally pay on demand all reasonable costs and expenses of Agent and Lenders in connection with the preparation, execution, delivery and enforcement of this Agreement and all other documents and any other transactions contemplated hereby, including, without limitation, the reasonable fees and out-of-pocket expenses of legal counsel to Agent and Lenders. Borrowers authorize Agent to charge the foregoing expenses to the Borrowers' loan account by increasing the principal amount of the Revolving Credit Loans by the amount of such expenses owed by Borrowers in connection herewith. -------------------------------------------------------------------------------- 7. Miscellaneous. Borrowers and Guarantors agree to take such further action as Agent or any Lender shall reasonably request in connection herewith to evidence the amendments herein contained to the Forbearance Agreement. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written negotiations, agreements and understandings of the parties with respect to the subject matter hereof, except the agreements embodied in the Forbearance Agreement, the Loan Agreement and the other Loan documents (as modified herein). Time is of the essence of this Agreement and of the Forbearance Agreement and the Loan Agreement.             IN WITNESS WHEREOF , Borrowers, Guarantors, Lenders and Agent have caused this Agreement to be duly executed as of the date first above written.   BORROWERS:    TRISM, INC.                    By:                                                                                 Name:     Ralph Nelson    Title:     Senior Vice President and General Counsel          TRISM SECURED TRANSPORTATION, INC.    By:                                                                                Name:  Ralph Nelson Title: Senior Vice President and General Counsel       TRI-STATE MOTOR TRANSIT CO.    By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel      --------------------------------------------------------------------------------   DIABLO SYSTEMS INCORPORATED,  D/B/A DIABLO TRANSPORTATION, INC.       By:                                                                                Name:     Ralph Nelson Title:     Senior Vice President and General Counsel       TRISM EASTERN, INC., D/B/A C. I. WHITTEN TRANSFER    By:                                                                                Name:     Ralph Nelson Title:     Senior Vice President and General Counsel       TRISM HEAVY HAUL, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM SPECIALIZED CARRIERS, INC.        By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM SPECIAL SERVICES, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM LOGISTICS, INC.       By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel               --------------------------------------------------------------------------------       TRISM EQUIPMENT, INC.    By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel GUARANTORS: AERO BODY AND TRUCK EQUIPMENT, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel       E.L. POWELL & SONS TRUCKING, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel TRISM TRANSPORT, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel   --------------------------------------------------------------------------------   TRISM TRANSPORT SERVICES, INC. By:                                                                                Name:   Ralph Nelson Title:  Senior Vice President and General Counsel   --------------------------------------------------------------------------------   LENDERS:    FLEET CAPITAL CORPORATION                  By:                                                                                  Name:                                                                             Title:                                                                                            THE CIT GROUP/BUSINESS CREDIT,   INC.               By:                                                                                  Name:                                                                             Title:                                                                                            AGENT:         THE CIT GROUP/BUSINESS CREDIT,      INC.                  By:                                                                                  Name:                                                                             Title:                                                                               
EMPLOYMENT AGREEMENT   THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 11th day of November, 1999 between Barry Diamond (the "Employee") and SED International, Inc., a Georgia corporation (the "Subsidiary") and wholly-owned subsidiary of SED International Holdings, Inc., a Georgia corporation (the "Company"). W I T N E S S E T H : WHEREAS, the Subsidiary desires to enter into this Agreement regarding Employee's employment by the Subsidiary and Employee desires to accept the terms of said employment; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. Employment of Employee. This Agreement is effective for a period of three (3) years commencing as of November 11, 1999, unless this Agreement is sooner terminated pursuant to the provisions hereof. Employee agrees to such employment on the terms and conditions herein set forth and agrees to devote his best efforts to his duties under this Agreement and to perform such duties diligently and efficiently and in accordance with the directions of the Subsidiary. During the term of this Agreement, Employee shall be employed as Vice President -- Cellular Division of the Subsidiary reporting to the President. In Employee's capacity as Vice President -- Cellular Division of the Subsidiary, Employee shall be responsible for all management of wireless phone sales, purchasing and pricing of the Subsidiary and otherwise have the duties and responsibilities accorded to such position as set forth in the Subsidiary's Bylaws, and such other and further duties as may from time to time become necessary for the management of the Subsidiary, as determined by the Board of Directors. Employee shall devote substantially all of Employee's business time, attention and energies to the business of the Subsidiary shall act at all times in the best interests of the Subsidiary and shall not during the term of this Agreement be engaged in any other significant business activity, whether or not such business is pursued for gain, profit or other pecuniary advantage, except as contemplated by this Agreement. 2. Compensation and Benefits. (a) Employee's annual base salary during the term of this Agreement shall be $160,000.00. (b) Employee's base salary shall be paid by the Subsidiary pursuant to its customary payroll practices. (c) Commencing on November 11, 2000 and on each November 11 thereafter during the term of this Agreement, the annual base salary shall be increased (but not decreased) by an amount equal to five percent (5%) of the then annual base salary, together with such other increases, if any, as shall be approved by the Subsidiary's Board of Directors. (d) The Subsidiary shall provide Employee such medical coverage and other benefits as are provided to its other employees, subject to Employee meeting any eligibility or other requirements of such coverages or benefits. The Subsidiary has the right to change or eliminate any of its benefits plans at any time. The Employee shall also be entitled during the term of this Agreement to the use of an automobile, with the premiums for the automobile insurance coverage thereon, together with the reasonable cost of maintenance and other expenses (including gasoline) being payable by the Subsidiary or its designee. The Employee shall have the option to have the use of a new (replacement) automobile on the third anniversary of this Agreement. The amount of insurance coverage shall be determined by the Subsidiary or its designee in accordance with the policies of the Subsidiary, from time to time in effect. As a condition to the use of such automobile, Employee shall cooperate fully with the Subsidiary or its designee in connection with obtaining and maintaining in effect any such policy of insurance. (e) Employee shall be entitled to four (4) weeks of paid vacation per year. 3. Personnel Policies. Employee shall conduct himself at all times in a businesslike and professional manner as appropriate for a person in his position and shall represent the Subsidiary in all respects as complies with good business and ethical practices. In addition, Employee shall be subject to and abide by the policies and procedures of the Subsidiary. 4. Business Expenses. Employee shall be reimbursed by the Subsidiary for ordinary, necessary and reasonable business expenses consistent with the Subsidiary's policies concerning reimbursement of such expenses; provided that, Employee shall first document said business expenses in the manner generally required by the Subsidiary under its policies and procedures, and in any event, the manner required to meet applicable regulations of the Internal Revenue Service relating to the deductibility of such expenses. 5. Location of Employment. At no time during the term of this Agreement shall the Employee be asked or required to transfer his place of employment to a location that is of a radius more than thirty five (35) miles from the Subsidiary's current offices located at 4916 North Royal Atlanta Drive, Tucker, Georgia 30085. 6. Termination. (a) This Agreement may be terminated for good cause by the Subsidiary upon written notice to Employee. As used herein, "good cause" means: (i) any act of fraud or dishonesty; (ii) any act of theft or embezzlement; (iii) the breach of any material provision of this Agreement by Employee (provided that such breach is not cured by Employee within 30 days of receiving written notice of such breach from the Subsidiary); (iv) violation of the policies and procedures of the Subsidiary; (v) failure to comply with the directions of the Board of Directors of the Subsidiary; (vi) engaging in any unlawful harassment or discrimination; (vii) the conviction of Employee of any crime involving moral turpitude (whether felony or misdemeanor) or involving any felony; (viii) any act of moral turpitude by Employee that materially adversely affects the Subsidiary or its business reputation; (ix) violation of state or federal securities laws; (x) violation of the laws, rules and regulations of any stock exchange, over-the-counter trading system, including the Nasdaq Stock Market, Inc., or the National Association of Securities Dealers, Inc.; or (xi) any other matter constituting "good cause" under the laws (including, inter alia, statutes, regulations or judicial case law) of the State of Georgia. (b) This Agreement also shall terminate immediately upon the death of Employee, or immediately upon written notice to Employee if Employee shall at any time be unable to perform the essential functions of his job hereunder, by reason of a physical or mental illness or condition, with or without reasonable accommodation, for a continuous period of 180 consecutive days, as certified by a physician or physicians selected by the Board of Directors of the Subsidiary. (c) In the event of termination under subsections (a) of this Section 6, the base salary, less applicable withholdings, and other benefits provided herein shall be paid to Employee up to the effective date of termination of this Agreement, and not thereafter, subject to any benefit continuation requirements under applicable laws or regulations. (d) In the event of termination under subsection (b) of this Section 6, the Subsidiary shall pay to Employee or Employee's estate or personal representative, as appropriate, the greater of (i) Employee's base salary, less applicable withholdings, plus benefits, for the remaining period of the Agreement or (ii) twelve (12) months of base salary, less applicable withholdings, plus benefits for such monthly period. (e) The Subsidiary may terminate this Agreement at any time without "good cause" upon written notice to Employee. In the event of such termination, the Subsidiary shall pay to Employee the greater of (i) Employee's base salary, less applicable withholdings, plus benefits, for the remaining period of the Agreement or (ii) twelve (12) months of base salary, less applicable withholdings. (f) All such payments owing under this Section 6 shall be payable concurrently at the time of termination. Other than the payments of the base salary and benefits amounts as specified herein, no further payments of any kind shall be made to Employee. 7. Products, Notes, Records and Software. All memoranda, notes, records and other documents and computer software created, developed, compiled or used by Employee or made available to Employee during the term of this Agreement concerning or relative to the business of the Subsidiary, including without limitation, all customer data, marketing and sales information, billing information, service data and other technical material of the Subsidiary, is the Subsidiary's property. Employee agrees to deliver all such materials to the Subsidiary within three (3) business days after the termination of this Agreement. 8. Nondisclosure. Employee acknowledges and agrees that during the term of this Agreement, he will have access to and become familiar with information that the parties acknowledge to be confidential, valuable and uniquely proprietary information regarding the Subsidiary, its customers and employees. Employee further acknowledges that the disclosure or unauthorized use of Trade Secrets, as defined under applicable state law, or confidential information by Employee would harm the Subsidiary's business. Employee therefore promises and agrees that, during the term of Employee's employment and for two (2) years thereafter, Employee shall not use or disclose, directly or indirectly, for any purpose any such confidential or proprietary information which includes, without limitation, technical materials of the Subsidiary, sales and marketing information, customer account records, billing information, training and operations information, materials and memoranda, personnel records and pricing and financial information relating to the business, accounts, vendors, suppliers, customers, prospective customers, employees and affairs of the Subsidiary. Employee further agrees that Employee will not, at any time during or after the term of Employee's employment with the Subsidiary, use, reveal or divulge any Trade Secrets. 9. Restrictive Covenants. Employee acknowledges and agrees that, because of his employment he has access to confidential or proprietary information concerning vendors, suppliers and customers of the Subsidiary and has established relationships with such vendors, suppliers and customers. In exchange for valuable consideration to be given by the Subsidiary to Employee, as provided herein, Employee agrees to the following provisions: (a) Employee agrees that during the term of his employment and for a period of one (1) year thereafter, Employee shall not, directly or indirectly, either individually, in partnership, jointly, or in conjunction with, or on behalf of, any person, firm, partnership, corporation, or unincorporated association or entity of any kind, (i) provide domestic or international sales, purchasing, human resources, distribution operations, marketing services as an officer or management level employee to any competitor of the Subsidiary listed on Exhibit A attached hereto, which purchase, market and sell computer and related products and/or cellular telephones and related products (collectively, the "Business"); or (ii) otherwise obtain any interest in (except as a stockholder holding less than two percent (2%) interest in a corporation which is traded on a national exchange or in an automated quotations system), or perform consulting services for, or otherwise participate in the ownership, management, or control of, the companies listed on Exhibit A attached hereto; (b) Employee agrees that during the term of his employment and for a period of one (1) year thereafter, Employee shall not, directly or indirectly, either individually, in partnership, jointly, or in conjunction with, or on behalf of, any person, firm, partnership, corporation, unincorporated association or other entity of any kind, solicit or contact, for the purpose of providing products or services the same as or substantially similar to those provided by the Subsidiary in connection with the Business, any person or entity that, during the term of Employee's employment with the Subsidiary, was a vendor, supplier or customer of the Subsidiary with whom Employee had contact during the last twelve (12) months of his employment, or was a prospective vendor, supplier or customer of the Subsidiary with whom Employee had contact during the last twelve (12) months of his employment; and (c) Employee agrees that during the term of his employment and for a period of one (1) year thereafter, Employee shall not, directly or indirectly, either individually, in partnership, jointly, or in conjunction with, or on behalf of, any person, firm, partnership, corporation, unincorporated association or other entity of any kind, hire or solicit, or attempt to hire or solicit, for employment any person who was employed by the Subsidiary up to 90 days prior to the date of termination of the Employee's employment or persuade or attempt to persuade any such person to terminate or modify his or her employment relationship, whether or not pursuant to a written agreement, with the Subsidiary. Employee acknowledges that the time restrictions and scope included in this Section 9 are as narrow as possible and cannot be reduced and still adequately protect the Subsidiary's business interests. Employee acknowledges that the scope of this Section 9 is reasonable and necessary to protect the Subsidiary's legitimate business interests. 10. Remedy for Breach. Employee agrees that the damage to the Subsidiary resulting from any actual or threatened breach by Employee of any of the covenants contained in Sections 7, 8 and 9 of this Agreement would be immediate, irreparable and difficult to measure, and that money damages would not be an adequate remedy. Therefore, Employee agrees that the Subsidiary shall be entitled to specific performance of the covenants in any of such sections or injunctive relief, by temporary or permanent injunction or other appropriate judicial remedy, writ or order, or both, in addition to any damages and legal expenses (including attorneys' fees) which the Subsidiary may be legally entitled to recover. 11. Survival. The provisions of Sections 7, 8, 9 and 10 shall survive termination of this Agreement. 12. Change of Control. If a Change of Control occurs while the Employee is employed by the Subsidiary during the term of this Agreement, or during any extension thereof, and: (a) the Employee's employment is terminated involuntarily, or voluntarily by the Employee based on (i) material changes in the nature or scope of the Employee's duties or employment, (ii) a reduction in compensation of the Employee made without the Employee's consent, (iii) a relocation of the Subsidiary's executive offices outside the Atlanta, Georgia Metropolitan Area or farther than 35 miles from the present location of the executive offices, or (iv) a good faith determination made by the Employee, upon consultation with the Board of Directors of the Subsidiary, that it is necessary or appropriate for the Employee to relocate from the Atlanta, Georgia Metropolitan Area to enable Employee to perform his duties hereunder, the Employee may, in his sole discretion, give written notice within thirty (30) days after the date of termination of employment to the Secretary or Assistant Secretary of the Subsidiary that he is exercising his rights hereunder and requests payment of the amounts provided for under this Section 12; or (b) the Employee gives written notice of his termination of employment for any reason concurrently with the time a Change of Control occurs or any time within thirty (30) days after the date the Change of Control becomes effective to the Secretary or Assistant Secretary of the Subsidiary, he may exercise his rights hereunder and request payment of the amounts provided for under this Section 12 (the notice provided pursuant to Subsection 12(a) or Subsection 12(b) is referred to as the "Notice of Exercise"). If the Employee gives a Notice of Exercise to receive the payments provided for hereunder, the Subsidiary shall pay to or for the benefit of the Employee, immediately upon the Subsidiary's receipt of the Notice of Exercise, a single cash payment for damages suffered by the Employee by reason of the Change in Control (the "Executive Payment") in an amount equal to 2.99 times the aggregated of Employee's annual base salary, bonuses and other benefits owing to Employee, subject to the provisions of Sections 21, 22 and 23. The Executive Payment shall be in addition to and shall not be offset or reduced by (i) any other amounts that have been earned or accrued or that have otherwise become payable or will become payable to the Employee or his beneficiaries, but have not been paid by the Subsidiary at the time the Employee gives the Notice of Exercise including, without limitation, salary, bonuses, severance pay, consulting fees, disability benefits, termination benefits, retirement benefits, life and health insurance benefits or any other compensation or benefit payment that is part of any previous, current or future contract, plan or agreement, written or oral, and (ii) any indemnification payments that may have accrued but not paid or that may thereafter become payable to the Employee pursuant to the provisions of the Subsidiary's Articles of Incorporation, Bylaws or similar policies, plans or agreements relating to the indemnification of Employee under certain circumstances. The Executive Payment shall not be reduced by any present value calculations. In the event the Employee dies after giving the Notice of Exercise but prior to receipt of the Executive Payment, then the Employee's estate or legal representative shall be entitled to receive the Executive Payment. 13. Certain Additional Definitions. "Affiliate" or "Affiliated" means any person, firm, corporation, partnership, association or entity, either directly or indirectly, that controls, is controlled by, or is under common control with a specified person, firm, corporation, partnership, association or entity. "Associate" means (1) any corporation, partnership or other entity of which a specified person is an officer or partner, or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities thereof, (2) any trust or estate in which the specified person has a substantial beneficial interest or as to which the specified person serves as trustee or in a similar fiduciary capacity, (3) any relative or spouse of such specified person, or any relative of such spouse, who has the same home as such specified person, and (4) any person who is a trustee, officer or partner of such specified person or of any corporation, partnership or other entity that is an Affiliate of such specified person. "Atlanta, Georgia Metropolitan Area" means the counties of Clayton, Cobb, DeKalb, Fulton and Gwinnett, Georgia "Beneficial Owner" shall be defined by reference to Rule 13d-3 under the Exchange Act as such Rule may be amended from time to time; provided, however, that any individual, corporation, partnership, Group, association or other person or entity which, directly or indirectly, owns or has the right to acquire any of the Company's or the Subsidiary's outstanding securities entitled to vote generally in the election of directors at any time in the future, whether such right is contingent, absolute, direct or indirect, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options or otherwise, shall be deemed the Beneficial Owner of such securities. "Change of Control" shall be deemed to have occurred if and when (1) any individual, corporation, partnership, Group, association or other person or entity, together with his, its or their Affiliates or Associates (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company) hereafter becomes the Beneficial Owner of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities entitled to vote generally in the election of directors; (2) the Continuing Directors of the Company shall at any time fail to constitute a majority of the members of the Board of Directors of the Company; (3) all or substantially all of the assets of the Company are sold, conveyed, transferred or otherwise disposed of, whether through one event or a series of related events, without being Duly Approved by the Continuing Directors of the Company; (4) any individual, corporation, partnership, Group, association or other person or entity, together with his, its or their Affiliates or Associates, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Subsidiary, becomes the Beneficial Owner of securities of the Subsidiary representing thirty percent (30%) or more of the combined voting power of the Subsidiary's then outstanding securities entitled to vote generally in the election of directors; or (5) all or substantially all of the assets of the Subsidiary are sold, conveyed, transferred or otherwise disposed of, whether through one event or a series of related events, without being Duly Approved by the Continuing Directors of the Subsidiary. "Continuing Director" means a director who either was a member of the Board of Directors of either the Company or the Subsidiary, as the case may be, on the date hereof, or who becomes a member of the Board of Directors of either the Company or the Subsidiary, as the case may be, subsequent to such date and whose election or nomination for election by the Board of Directors of that company was Duly Approved by the Continuing Directors of that company at the time of such election or nomination, either by a specific vote or by approval of the proxy statement issued by that company on behalf of the Board of Directors of that company in which such person is named as a nominee for director. "Duly Approved by the Continuing Directors" means an action approved by the vote of at least a majority of the Continuing Directors then on the Board of Directors of either the Company or the Subsidiary, as the case may be; provided, however, if the votes of such Continuing Directors in favor of such action would be insufficient to constitute an act of the entire Board of Directors of that company as if a vote by all of its members had been taken, or if the number of persons constituting the Continuing Directors of that company shall be equal to or less than three, then the term Duly Approved by the Continuing Directors shall mean an action approved by the unanimous vote of the Continuing Directors then on the Board of Directors of that company. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Group" means persons who act in concert as described in Section 13(d)(3) of the Exchange Act as may be amended from time to time. 14. Invalidity of Any Provision. It is the intent of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies of each state and jurisdiction in which such enforcement is sought, but that the unenforceability (or the modification to conform with such laws or public policies) of any provision hereof shall not render unenforceable or impair the remainder of this Agreement which shall be deemed amended to delete or modify, as necessary, the invalid or unenforceable provisions. The parties further agree to alter the balance of this Agreement in order to render the same valid and enforceable. 15. Applicable Law. This Agreement is being executed in the State of Georgia and shall be construed and enforced in accordance with the laws of said jurisdiction. 16. Waiver of Breach. The waiver by the Subsidiary of a breach by Employee of any provision of this Agreement may only be made in writing and shall not operate or be construed as a waiver of any subsequent breach by Employee. 17. Successors and Assigns. This Agreement shall inure to the benefit of the Subsidiary, its subsidiaries and affiliates, and their respective successors and assigns. 18. Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes all prior agreements regarding Employee's employment by the Subsidiary, including, but not limited to, oral discussions, letter agreements, or any other document concerning the possibility of employment with the Subsidiary. This Agreement may only be changed by an agreement in writing signed by the party against whom enforcement of any waiver, changes, modification, extension or discharge is sought. It cannot be changed orally. 19. Headings. The headings of the Sections of this Agreement are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. 20. Interest on Amounts Payable. If any amounts that are required or determined to be paid or payable or reimbursed or reimbursable to the Employee under this Agreement, under any other plan, agreement, policy or arrangement with the Subsidiary are not paid promptly at the times provided herein or therein, such amounts shall accrue interest at an annual percentage rate of ten percent (10%) from the date such amounts were required or determined to have been paid or payable or reimbursed or reimbursable to the Employee until such amounts and any interest accrued thereon are finally and fully paid; provided, however, that in no event shall the amount of interest contracted for, charged or received hereunder exceed the maximum non-usurious amount of interest allowed by applicable law. 21. Limitation on Payment. If the benefits provided to Employee under this Agreement or under any other agreement with, or plan of, the Subsidiary (in the aggregate, the "Total Payment") constitute a payment so that an excise tax (the "Excise Tax") is due under Section 280G, Section 4999 or other provision of the Internal Revenue Code of 1986, as amended (the "Code"), then the benefits provided under this Agreement shall be limited to the Reduced Amount. The "Reduced Amount" shall be the largest amount that could be received by Employee under this Agreement such that no part of the Total Payment provided to Employee shall be subject to the Excise Tax. The Reduced Amount shall be calculated by a nationally recognized benefits consulting firm or accounting firm, and such amount shall be presented to Employee for review and approval. If the amount payable to Employee is limited to the Reduced Amount, Employee shall have the right, in Employee=s sole discretion, to designate the portion of the Total Payment that should be reduced or eliminated so as to avoid having the benefits provided to Employee under this Agreement be subject to the Excise Tax. 22. Notification. If the Internal Revenue Service claims in writing that any benefit received under this Agreement constitutes an "excess parachute payment" under Section 280G of the Code, Employee shall notify the Subsidiary in writing of such claim within 10 business days of the claim. Employee shall apprise the Subsidiary of the nature of such claim and the date on which such claim is requested to be paid. Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which Employee provides notice of the claim to the Subsidiary (or such shorter period ending on the date that any payment of taxes with respect to the claim is due). If the Subsidiary notifies Employee in writing prior to the expiration of such period that it desires to contest such claim, Employee shall (i) give the Subsidiary any information reasonably requested by the Subsidiary relating to such claim; (ii) take such action in connection with contesting such claim as the Subsidiary shall reasonably request in writing from time to time; (iii) cooperate with the Subsidiary in good faith in order to effectively contest such claim; and (iv) permit the Subsidiary to participate in any proceedings relating to such claim; provided, however, that the Subsidiary shall bear and pay directly all costs and expenses (including, but not limited to, additional interest and penalties and related legal, consulting or similar fees) incurred in connection with such contest and shall indemnify and hold Employee harmless, on an after-tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. 23. Excise Tax Refund. If, after the receipt by Employee of an amount advanced by the Subsidiary in connection with the contest of the Excise Tax claim, Employee becomes entitled to receive any refund with respect to such claim, Employee shall promptly pay to the Subsidiary the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto); provided, however, that if the amount of that refund exceeds the amount advanced by the Subsidiary or it is otherwise determined for any reason that additional amounts could be paid to Employee without incurring any Excise Tax, any such amount will be promptly paid by the Subsidiary to Employee. If, after the receipt of an amount advanced by the Subsidiary in connection with an Excise Tax claim, a determination is made that Employee shall not be entitled to any refund with respect to such claim and the Subsidiary does not notify Employee in writing of its intent to contest the denial of such refund prior to the expiration of 30 days after such determination, such advance shall be forgiven and shall not be required to be repaid and shall be deemed to be in consideration for services rendered after date of the termination of Employee's employment. 24. Employee's Expenses. All costs and expenses, including reasonable legal, accounting and other advisory fees, incurred by the Employee to prepare responses to an Internal Revenue Service audit of, and otherwise defend, his personal income tax return for any year that is the subject of any such audit or an adverse determination, administrative proceeding or civil litigation arising therefrom that is occasioned by, or related to, an audit by the Internal Revenue Service of the Subsidiary's consolidated income tax returns are, upon written demand by the Employee explaining the basis for the request for such reimbursement or advancement, to be promptly advanced or reimbursed to the Employee or paid directly, on a current basis, by the Subsidiary or its successors. Subject to the first paragraph of this Section 24 and except as otherwise provided in this Agreement, if at any time during the term of this Agreement or afterwards there should arise any litigation, hearing or arbitration as to the interpretation or application of any term or condition of this Agreement, the Subsidiary agrees, upon written demand by the Employee (and the employee shall be entitled upon application to any court of competent jurisdiction, to the entry of a mandatory injunction, without the necessity of posting any bond with respect thereto, compelling the Subsidiary), promptly to provide sums sufficient to pay on a current basis, either directly or by reimbursing the Employee, the Employee's costs and reasonable attorneys' fees, including, without limitation, expenses of investigation and disbursements for the fees and expenses of experts, incurred by the Employee in connection with any such litigation, hearing or arbitration; provided, however, if the Employee is not the prevailing party in such litigation, hearing or arbitration, then Employee shall pay or reimburse the Subsidiary for its costs and reasonable attorneys' fees, including, without limitation, expenses of investigation and disbursements for the fees and expenses of experts (other than Affiliates), incurred by the Subsidiary in connection with any such litigation, hearing or arbitration, together with all such costs and fees previously paid by the Subsidiary to or for the benefit of Employee in connection with such litigation, hearing or arbitration. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the date first above shown. Employee:   _____________________________(SEAL) BARRY DIAMOND   Subsidiary: SED INTERNATIONAL, INC. By: ________________________________ Title:_______________________________ (CORPORATE SEAL) EXHIBIT A Competitors ASI Corp. Brightpoint, Inc. Cellstar, Corp. CHS Electronics, Inc. Ingram Micro, Inc. Merisel, Inc. Microage, Inc. Supercom, Inc. Tech Data Corp. or any of their respective Affiliates.    
THIRD AMENDMENT TO CREDIT AGREEMENT   THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as of August 31, 2001, by and between DATALINK CORPORATION, a Minnesota Corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, successor in interest to Wells Fargo Bank Minnesota, National Association ("Bank").   RECITALS   WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of June 30, 2000, as amended from time to time ("Credit Agreement").   WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.   NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:   1.             Section 1.2 is hereby amended by deleting “August 31, 2001” as the last day on  which Bank will make advances under the Line A, and by substituting for said date “June 30, 2002,” with such change to be effective upon the execution and delivery to Bank of a promissory note substantially in the form of Exhibit A attached hereto (which promissory not shall replace and be deemed the Line of Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts, instruments and documents required by Bank to evidence such change.   2.             Section 2.2 is hereby amended by deleting “August 31, 2001” as the last day on which Bank will make advances under the Line B, and by substituting for said date “June 30, 2002,” with such change to be effective upon the execution and delivery to Bank of a promissory note substantially in the form of Exhibit B attached hereto (which promissory note shall replace and be deemed the line of Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts, instruments and documents required by Bank to evidence such change.   3.             Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification.  All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment.  This Amendment and the Credit Agreement shall be read together, as one document.   4.             Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein.  Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.   IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.   DATALINK CORPORATION WELLS FARGO BANK,   NATIONAL ASSOCIATION     By: /s/ Daniel J. Kinsella   By: /s/ Jason Paulnock     Daniel J. Kinsella     Jason Paulnock, Vice President     Chief Financial Office           REVOLVING LINE OF CREDIT NOTE A   $10,000,000.00   Minneapolis, Minnesota     August 31, 2001   FOR VALUE RECEIVED, the undersigned DATALINK CORPORATION ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at Minn RCBO-REG Coml Mpls Mid Mkt, Sixth & Marquette, Minneapolis, MN 55479, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Ten Million Dollars ($10,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.   DEFINITIONS:   As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:   (a)           "Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in Minnesota are authorized or required by law to close.   (b)           "Fixed Rate Term" means a period commencing on a Business Day and continuing for 1, 2, 3 or 4 months, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.   (c)           "LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula:     LIBOR = Base LIBOR     100% - LIBOR Reserve Percentage     (i)            "Base LIBOR" means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies.  Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.   (ii)           "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency   Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.   (d)           "Prime Rate" means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank's base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate.   INTEREST:   (a)           Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum one percent (1.00%) below the Prime Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be equal to the margin described in Section 4.3 of the Agreement plus LIBOR in effect on the first day of the applicable Fixed Rate Term.  When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank.  With respect to each LIBOR selection hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.  The initial margin applicable to LIBOR based borrowings as of the date of this Note shall be ________ %.   (b)           Selection of Interest Rate Options.  At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed Rate Term.  Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at it's sole option but without obligation to do so, accepts Borrower's notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.   (c)           Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.   (d)           Payment of Interest.  Interest accrued on this Note shall be payable on the last day of each month, commencing September 30, 2001.   (e)           Default Interest.  At any time that the Borrower’s Funded Debt to EBITDA Ratio, as described in Section 4.3 of the Agreement, is in excess of 1.65 to 1.0, or at any time from and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to two percent (2.0%) above the rate of interest from time to time applicable to this Note.   BORROWING AND REPAYMENT:   (a)           Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above.  The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and payable in full on June 30, 2002.   (b)           Advances.  Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) _____________________ or ________________________ or _______________________, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account.  The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.   (c)           Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.  All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first.   PREPAYMENT:   (a)           Prime Rate.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty.   (b)           LIBOR.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.  In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:   (i)            Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.   (ii)           Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.   (iii)          If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.   Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.  Each Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).  Each change in the rate of interest on any such past due prepayment fee shall become effective on the date each Prime Rate change is announced within Bank.   EVENTS OF DEFAULT:   This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of June 30, 2000, as amended from time to time (the "Credit Agreement").  Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note.   MISCELLANEOUS:   (a)           Remedies.  Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate.  Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.   (b)           Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.   (c)           Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Minnesota.   IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.   Datalink Corporation       By:  /s/ Daniel J. Kinsella       Daniel J. Kinsella       Chief Financial Officer       REVOLVING LINE OF CREDIT NOTE B   $5,000,000.00   Minneapolis, Minnesota     August 31, 2001   FOR VALUE RECEIVED, the undersigned DATALINK CORPORATION ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at Minn RCBO-REG Coml Mpls Mid Mkt, Sixth & Marquette, Minneapolis, MN 55479, Minnesota, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Five Million Dollars ($5,000,000.00), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.   DEFINITIONS:   As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:   (a)           "Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in Minnesota are authorized or required by law to close.   (b)           "Fixed Rate Term" means a period commencing on a Business Day and continuing for 1, 2, 3 or 4 months as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than One Hundred Thousand Dollars ($100,000.00); and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.   (c)           "LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula:   LIBOR = Base LIBOR     100% - LIBOR Reserve Percentage     (i)            "Base LIBOR" means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies.  Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.   (ii)           "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.   (d)           "Prime Rate" means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank's base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate. INTEREST:   (a)           Interest.  The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum one percent (1.00%) below the Prime Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be one and one hundredths percent (1.10%) above LIBOR in effect on the first day of the applicable Fixed Rate Term.  When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank.  With respect to each LIBOR selection hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.   (b)           Selection of Interest Rate Options.  At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone (or such other electronic method as Bank may permit) so long as, with respect to each LIBOR selection, (A) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at it's sole option but without obligation to do so, accepts Borrower's notice and quotes a fixed rate to Borrower.  If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate.  If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied.   (c)           Taxes and Regulatory Costs.  Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR.  In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.   (d)           Payment of Interest.  Interest accrued on this Note shall be payable on the last day of each month, commencing September 30, 2001.   (e)           Default Interest.  From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to two percent (2.0%) above the rate of interest from time to time applicable to this Note.   BORROWING AND REPAYMENT:   (a)           Borrowing and Repayment.  Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above.  The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder.  The outstanding principal balance of this Note shall be due and payable in full on June 30, 2002.   (b)           Advances.  Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (i) _____________________ or ________________________, or_______________________ any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any deposit account of any Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account.  The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower.   (c)           Application of Payments.  Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.  All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first.   PREPAYMENT:   (a)           Prime Rate.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty.   (b)           LIBOR.  Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof.  In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:   (i)            Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.   (ii)           Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.   (iii)          If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.   Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities.  Each Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).  Each change in the rate of interest on any such past due prepayment fee shall become effective on the date each Prime Rate change is announced within Bank.   EVENTS OF DEFAULT:   This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of June 30, 2000, as amended from time to time (the "Credit Agreement").  Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note.   MISCELLANEOUS:   (a)           Remedies.  Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate.  Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.   (b)           Obligations Joint and Several.  Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.   (c)           Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of Minnesota.   IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.     DATALINK CORPORATION       By:  /s/ Daniel J. Kinsella       Daniel J. Kinsella       Chief Financial Officer      
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.800(b)(4), 200.83 and 240.24b-2 EXHIBIT 10.71 PUT OPTION AGREEMENT      This Put Option Agreement is effective as of April 30, 2001 (the "Agreement”), by and between Gene Logic, Inc., a Delaware corporation (“Gene Logic”) and Neuralstem, Inc., a Delaware corporation (“Neuralstem” and "Optionholder”). Recitals      A.     Gene Logic and Neuralstem have entered into a Stock Repurchase Agreement of even date herewith, whereby Neuralstem repurchased [***] shares of Neuralstem’s Series A Preferred Stock from Gene Logic in exchange for a promissory note in the principal sum of Two Million Six Hundred Fifty-three Thousand Seven Hundred One ($2,653,701) (the “Promissory Note”).      B.     In order to induce Neuralstem to enter into the Stock Repurchase Agreement, Neuralstem and Gene Logic are entering into this Agreement giving Neuralstem the option to require Gene Logic to purchase back (pursuant to the terms and conditions contained herein) up to a certain number of shares of Neuralstem’s Series A Preferred Stock. Agreement      Now, Therefore, in consideration of the foregoing premises and the mutual representations, warranties, covenants and agreements contained herein, the parties to this Agreement hereby, intending to be legally bound, agree as follows:      1.     Put Option. Gene Logic hereby grants to Optionholder an irrevocable right and option to require Gene Logic to purchase all or any portion of up to [***] shares of Neuralstem’s Series A Preferred Stock (the “Option Shares”) pursuant to the terms and conditions contained in this Agreement (the “Put Option”); provided, however, that Optionholder may not exercise the Put Option right more than one time. The Put Option is only exercisable if after such exercise, Gene Logic’s voting stock interest in Neuralstem is less than fifteen percent (15%) of the outstanding voting securities of Neuralstem on an as converted basis. The Put Option, if exercisable under this Section, is exercisable commencing as of the date hereof and the exercise period shall terminate at 5:00 p.m. (Eastern Standard Time) on April 30, 2002 (the “Put Option Expiration”); and this Agreement shall terminate the earlier to occur of (i) the Put Option Expiration or (ii) the closing of the purchase of the Option Shares pursuant to Optionholder’s one time exercise of the Put Option under this Section 1.      2.     Exercise Price. Optionholder shall have the option under the Put Option to require Gene Logic to repurchase all or any portion of the Option Shares for a purchase price per share equal to the original face amount of the Promissory Note (i.e. $2,653,701) plus all accrued and unpaid interest thereon as of the date of exercise, divided by [***] (“Put Option Exercise Price,” the aggregate purchase price referred to herein as the “Put Option Purchase Price”). The Put Option Purchase Price shall be paid in accordance with Section 3, and Gene Logic shall be entitled to pay for any or all of the Put Option Purchase Price, at Gene Logic’s option, in cash   *Confidential Treatment Requested -------------------------------------------------------------------------------- or by offset against any indebtedness owing to Gene Logic by Optionholder, or by a combination of both.      3.     Manner Of Exercise. To exercise the Put Option, Optionholder shall give written notice to Gene Logic, which notice shall state that the Put Option is being exercised (subject to Section 1) and shall set forth: (a) the number of Option Shares to be sold and (b) the date of Optionholder’s written notice of the exercise of the Put Option (the “Exercise Date”). The Put Option shall be deemed to be exercised on the Exercise Date, at which time the decision to exercise the Put Option shall be deemed irrevocable. Gene Logic shall have the right to designate the date on which shares of the Option Shares are purchased (the “Put Option Closing Date”). At the Put Option Closing Date, Optionholder shall deliver to Gene Logic stock certificates for the number of Option Shares being purchased against delivery of the Put Option Purchase Price.      4.     Transfer Of Title. Transfer of title to the Option Shares is subject to exercise of the Put Option and shall be deemed to occur automatically on the Put Option Closing Date, notwithstanding the failure of Optionholder to tender a certificate(s) representing the Option Shares. Upon payment of the Put Option Purchase Price, Optionholder agrees that the Option Shares shall be transferred free and clear of any and all encumbrances of any kind whatsoever.      5.     Representations and Warranties of Neuralstem. Neuralstem hereby represents and warrants to Gene Logic that:           (a)  Neuralstem has full power and authority to sell the Option Shares under the terms of this Agreement; and           (b)  All action on the part of Neuralstem necessary for the authorization, execution, delivery and performance of this Agreement, the issuance of the Option Shares and the performance of other obligations hereunder has been taken;           (c)  This Agreement is a valid and binding agreement of Neuralstem which has been duly executed and which is enforceable in accordance with its terms; and           (d)  The execution and delivery of, and compliance with the terms of, this Agreement will not, with or without the passage of time, or giving of notice, result in a violation, or be in conflict with or constitute a default or require the prior written consent of any third party under any term or provision of any mortgage, indenture, contract, agreement or instrument or of the charter or bylaws of Neuralstem as of the date hereof.      6.     Assignment. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Notwithstanding the foregoing, Gene Logic may not assign, pledge, or otherwise transfer this Agreement without the prior written consent of the Optionholder, except (a) for transfers to its affiliates or (b) upon (i) a sale, lease or other disposition of all or substantially all of the assets of Gene Logic, (ii) a merger or consolidation in which Gene Logic is not the surviving corporation; (iii) a consolidation, merger, reorganization of Gene Logic in which the stockholders of Gene Logic immediately prior to such transaction own less than 50% of Gene Logic’s voting power immediately after such transaction, or any transaction or series of related transactions in which in 2. -------------------------------------------------------------------------------- excess of 50% of Gene Logic’s voting power is transferred, or (iv) a reverse merger in which Gene Logic is the surviving corporation but the shares of 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. The Optionholder may not assign, pledge or otherwise transfer this Agreement without the prior written consent of Gene Logic.      7.     Entire Agreement. This Agreement sets forth and constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes any and all prior and contemporaneous agreements, understandings, promises and representations (oral and written) made by any party to another concerning the subject matter hereof and the terms applicable hereto.      8.     Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of law.      9.     Construction; Headings. 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 masculine and feminine genders. The parties 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. 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.” Except as otherwise indicated, all references in this Agreement to “Sections” and “subsection” are intended to refer to Sections and subsections of this Agreement. The headings in this Agreement are included only for convenience, do not in any manner modify or limit any of the provisions of this Agreement, and may not be used in the interpretation of this Agreement.      10.     Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement (except as otherwise provided herein) shall be effective unless in writing signed by both parties hereto. The provisions of this Agreement shall terminate in accordance with Section 1.      11.     Notices. All notices, requests and other communications hereunder shall be in writing (including telecopy or similar electronic transmissions), shall refer specifically to this Agreement and shall be personally delivered or sent by telecopy or other electronic facsimile transmission (confirmation receipt received), by certified mail, return receipt requested, postage prepaid or by a reliable overnight courier service, in each case to the respective address specified below (or such other address as may be specified in writing to the other party hereto): 3. --------------------------------------------------------------------------------   If to Gene Logic:     Gene Logic, Inc. 708 Quince Orchard Road Gaithersburg, Maryland 20878 Attention: Chief Executive Officer Fax: (301) 987-1701   with a copy to:   Venable, Baetjer, Howard & Civiletti, LLP 1201 New York Avenue, NW, Suite 1000 Washington, DC 20005 Attention: Ariel Vannier, Esq. Fax: (202) 962-8300   If to Optionholder:   Neuralstem, Inc. 387 Technology Drive, 3rd Floor College Park, Maryland 20742 Attention: Chief Executive Officer Fax: (301) 405-7393   with a copy to:   Cooley Godward llp One Freedom Square Reston Town Center 11951 Freedom Drive Reston, Virginia 20190-5601 Attention: Christian Plaza, Esq. Fax: (703) 456-8100      Any notice or communication given in conformity with this Section 11 shall be deemed to be effective when received by the addressee.      12.     Counterparts. This Agreement may be executed in counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. [Signature Page Follows] 4. --------------------------------------------------------------------------------      The parties hereto have caused this Put Option Agreement to be executed and delivered as of the date first set forth above.       GENE LOGIC:   Gene Logic, Inc.,         By: /s/ Philip L. Rohrer, Jr.           Philip L. Rohrer, Jr.           Chief Financial Officer       OPTIONHOLDER:   Neuralstem, Inc.         By: /s/ I. Richard Garr           I. Richard Garr           Chief Executive Officer           [Put Option Signature Page]
June 18, 2001 Werner Heid 2390 King Arthur Court La Jolla, CA 92037 Dear Werner: On behalf of the Board of Directors of Iomega Corporation ("Iomega"), I am pleased to offer you the position of President and Chief Executive Officer of Iomega ("CEO") reporting to the Board of Directors. As CEO, you will be responsible for Iomega's strategic and operational leadership and will devote your entire business time, attention and energies to the business and interests of Iomega. We would like you to join us as soon as possible. The following sets forth the terms and conditions of your employment. Base Salary Your base salary for the balance of 2001 and for calendar year 2002 will be at the rate of $475,000 per year, payable in monthly installments, subject to withholding taxes and other normal deductions and Iomega's standard payroll policies. Annual Incentive Your targeted incentive award will be equal to 100% of your annual base salary for the balance of 2001 and for the calendar year 2002, prorated over the period of your actual employment during each year. You will be paid at this rate for the balance of 2001 and for the calendar year 2002 and payments will be made monthly. In future years, incentive awards will be based on goals and performance criteria determined by mutual agreement of you and the Board of Directors and may vary from 0% to 200% of your then annual base salary. Our normal practice is to determine and pay annual incentive awards in cash by mid-March following the close of the fiscal year on December 31st. Option Loss Payment In consideration of your loss of potential gain from your stock options with your current employer, Iomega will pay you the sum of $200,000 upon your commencement of employment. Long Term Incentives You will be granted options to purchase an aggregate of 1,000,000 shares of Iomega common stock with an exercise price equal to the Fair Market Value per share on the date of grant. Fair Market Value means the average of the high and low New York Stock Exchange price on the day preceding the day on which the option or options are granted. The date(s) of grant of such option(s) shall be determined mutually by you and the Chairman of Iomega's Board of Directors. Each option shall be exercisable and the shares subject thereto (the "Option Shares") shall vest as follows: 33% of the Option Shares on the date of grant and an additional 16.75% of the Option Shares on each of the first, second, third and fourth anniversaries of the date of your commencement of employment with Iomega. Each option will be subject to a stock option agreement, which contains, among other terms, requirements regarding confidentiality, non-solicitation, and non-competition. Benefits Iomega provides a comprehensive program of employee benefits, including: o Medical expense protection, including hospitalization, major medical and dental coverage; o 401(k) retirement savings plan; o Vacation and Holidays; o Participation in the Executive Life Insurance Program at two times annual base salary, subject to medical underwriting; o Participation in the Executive Long Term Disability Program; o Participation in the Executive Tax Planning Services provided by Price Waterhouse. Termination Payment Your employment with the Company is on an "at will" basis, which means that either you or Iomega may terminate the employment relationship at any time for any reason or for no reason and with or without advanced notice. However, if the Company terminates your employment without "cause", the Company will: o Continue to pay you your then base salary (prorated and payable monthly) for a period of 12 months following the date of your termination; o Pay you your target incentive award for the year in which such termination occurs (which amount shall be paid on a prorated basis during a period of 12 months following the date of your termination); and o Continue to provide you the benefits described above until the earlier of (i) 12 months following the date of your termination and (ii) the date that you commence a new employment relationship; provided, however, that if you become employed or otherwise engage in gainful employment during the 12 month period following your termination, fifty percent (50%) of the amount that you obtain from such other employment will be applied against and reduce the post-employment termination payments payable by Iomega; provided, however, that notwithstanding the application of such mitigation payments, Iomega shall be obligated to pay you a minimum of six months of your then base salary and 50% of your target incentive award. For purposes of this agreement, "cause" for termination shall be deemed to exist upon (a) a good faith finding by Iomega's Board of Directors of (i) your failure to perform your assigned duties for Iomega, after written notice furnished to you by Iomega of such failure and your failure or inability to remedy the same within 30 days after such notice, or (ii) your dishonesty, gross negligence or misconduct, or (b) your conviction of, or the entry of a pleading of guilty or nolo contendere by you to, any crime involving moral turpitude or any felony. Mitigation You agree that if you are terminated without cause, you will engage in diligent and reasonable efforts to seek other employment so as to mitigate, in part, the amount of payments which Iomega is required to pay you, as set forth under "Termination Payment" above. Other Agreements You agree that your service as a director of Iomega will automatically terminate, without any further action by you or Iomega, upon the date that you cease to be the CEO of Iomega, unless the Board of Directors and you otherwise agree. As a condition of your employment, you will be required to sign and deliver Iomega's standard form of agreement regarding confidentiality, non-competition and non-solicitation and to produce proof of your eligibility under federal immigrations laws to work in the United States. In addition, Iomega will offer you the opportunity to enter into Iomega's standard form of Executive Retention Agreement for its executive officers, which provides certain rights and benefits in the event of a change in control of Iomega. The start of your employment is contingent upon your acceptance of this offer and the terms and conditions described in this letter. Additionally, it is Iomega's policy that all employees successfully pass a drug screen at an Iomega approved facility prior to beginning employment. The actual test date is at Iomega's discretion. You represent that you are not bound by the terms of any employment contract, restrictive covenant or other agreement or restriction preventing you from accepting employment with or carrying out your responsibilities for Iomega as contemplated. This letter and the related agreements shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule, and supersede any prior understandings or agreements, whether oral or written, between you and Iomega. This letter may not be amended or modified except by an express written agreement signed by you and an authorized officer of Iomega. We are looking forward to your joining Iomega. If this letter correctly sets forth the terms under which you will be employed by Iomega, please sign the enclosed duplicate original copy of this letter and return it to me, whereupon this letter shall constitute a binding agreement between you and Iomega with respect to the subject matter set forth herein. The date you sign this agreement, as set forth below, will constitute your employment commencement date. IOMEGA CORPORATION By: /s/ David J. Dunn -------------------------------------- David J. Dunn, Chairman Accepted and Agreed this 18th day of June, 2001 /s/ Werner T. Heid ------------------------------- Werner T. Heid
EXHIBIT 10(e)   SECURITY AGREEMENT THIS SECURITY AGREEMENT, dated as of June 29, 2001 (as amended, modified, or supplemented from time to time, "this Agreement"), among each of the undersigned (each, together with its successors and assigns, and together with any other Person which may become party to this Agreement as an Assignor as provided for below, an "Assignor" and, collectively, the "Assignors") and WACHOVIA BANK, N.A., a national banking association, as collateral agent (herein, together with its successors and assigns in such capacity, the "Collateral Agent"), for the benefit of the Secured Creditors (as defined below): PRELIMINARY STATEMENTS: (1)               Except as otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. Certain terms used herein are defined in Section 1 hereof.   (2)               This Agreement is one of the "Collateral Documents" described in, and is made pursuant to, that certain Amended and Restated Credit Agreement dated as of the Closing Date by and among Airborne Express, Inc., a Delaware corporation ("Express") and formerly known as Airborne Freight Corporation, a Delaware corporation ("AFC"), ABX Air, Inc., a Delaware corporation ("ABX" and Express, each, a "Borrower" and together, jointly and severally, the "Borrowers"), Airborne, Inc., a Delaware corporation, as the "Parent," the financial institutions named as lenders therein (together with their respective successors and assigns, the "Lenders" and, each individually, a "Lender"), and Wachovia Bank, N.A., a national banking association ("Wachovia"), as the Administrative Agent for the Lenders under the agreement and in its capacity as collateral agent, which agreement amends and restates that certain Credit Agreement dated as of July 27, 2000, by and among AFC, the Lenders, and Wachovia as Administrative Agent, as amended by that certain First Amendment to Credit Agreement dated as of April 20, 2001, by and among Airborne, Inc., a Delaware corporation ("Airborne"), the Lenders, and Wachovia as Administrative Agent, as further amended by that certain Second Amendment to Credit Agreement dated as of May 31, 2001, by and among Airborne, the Lenders, and Wachovia as Administrative Agent (collectively, together with any and all concurrent or subsequent exhibits, schedules, extensions, supplements, amendments or modifications thereto, the "Credit Agreement"). Pursuant to a Joinder Agreement dated as of December 26, 2000, Airborne assumed AFC's obligations as "Borrower" under the Credit Agreement, and AFC was released from its obligations as "Borrower" under the Credit Agreement.  (3)               The Credit Agreement provides for, among other things, loans or advances, the issuance of letters of credit, and other extensions of credit to or for the benefit of the Borrowers of up to $275,000,000, with such loans or advances being evidenced by promissory notes (the "Facility Notes").  (4)               AFC entered into an Indenture dated as of December 15, 1992, as supplemented by that certain First Supplemental Indenture dated as of September 15, 1995, relating to Express' 7.35% Notes Due 2005, as further supplemented by that certain Second Supplemental Indenture Relating to AFC's 8-7/8% Notes Due 2002 dated February 12, 1997, and as further supplemented by that certain Third Supplemental Indenture dated as of the Closing Date (herein, as amended or otherwise modified, restated, supplemented or replaced from time to time, the "Indenture"), pursuant to which Express, formerly known as AFC, (i) may issue and sell its debentures, notes, or other evidences of indebtedness and (ii) has, prior to the date hereof, issued and sold to certain purchasers (the "Noteholders," such term to include their successors and assigns) (A) $100,000 aggregate original principal amount of its "7.35% Notes Due 2005" (the "1995 Notes") and (B) $100,000 aggregate original principal amount of its "8-7/8% Notes Due December 15, 2002" (the "1992 Notes," and together with the 1995 Notes, the "Indenture Debt," such term to include all debentures, notes, or other evidences of indebtedness issued pursuant to the Indenture in addition to, issued in exchange for, or issued in replacement of any Indenture Debt existing on the date hereof). Express, in its capacity as issuer of the Indenture Debt, together with its successors and assigns, shall be referred to herein as the "Indenture Debt Issuer."  (5)               Subject to certain exceptions which are not applicable hereto, Section 1008 of the Indenture prohibits the any Assignor from creating any security interests in certain of the Assignors' property unless the Indenture Debt is equally and ratably secured by such security interest.  (6)               This Agreement is made in favor of the Collateral Agent for the benefit of the Lenders and the Noteholders (collectively the "Secured Creditors") to equally and ratably secure the Secured Obligations (as defined herein).  (7)               It is a condition precedent to the making of Loans and the issuance of, and participation in, Letters of Credit under the Credit Agreement that the Assignors shall have executed and delivered to the Collateral Agent this Agreement. (8) The Assignors desire to execute this Agreement to satisfy the conditions described in the preceding paragraphs (5) and (7). NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent and hereby covenants and agrees with the Collateral Agent as follows: 1.                  CERTAIN DEFINITIONS. The following terms shall have the meanings herein specified unless the context otherwise requires. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Aggregate Principal Obligations" shall mean the sum of (a) the Indenture Principal Obligations, plus (b) the Facility Principal Obligations. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement, and shall include any Person who executes and delivers to the Collateral Agent a joinder agreement in form satisfactory to the Collateral Agent, thereby becoming an Assignor for purposes of this Agreement. "Avoided Payment" shall have the meaning given such term in Section 5.4(c). "Borrower" shall have the meaning provided in the Preliminary Statements of this Agreement. "Collateral" shall have the meaning provided in Section 2.1(a). "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Collateral Agent Expenses" shall mean (a) all costs or expenses which any Assignor is required to pay or cause to be paid under this Agreement or any other Collateral Document and which are paid or advanced by the Collateral Agent pursuant to the provisions of the Collateral Documents; (b) all taxes and insurance premiums of every nature and kind which any Assignor is required to pay or cause to be paid under this Agreement or any other Collateral Document and which are paid or advanced by the Collateral Agent pursuant to the provisions of any Collateral Document; (c) all filing, recording, publication and search fees paid or incurred by the Collateral Agent in connection with the transactions contemplated by this Agreement or the other Collateral Documents; (d) all costs and expenses paid or incurred by the Collateral Agent (with or without suit), to correct any default or enforce any provisions of any Collateral Document or in gaining possession of, maintaining, handling, preserving, storing, refurbishing, appraising, selling, preparing for sale and/or advertising to sell the Collateral, whether or not a sale is consummated; (e) all costs and expenses of suit paid or incurred by the Collateral Agent in enforcing or defending this Agreement or any other Collateral Document; and (f) attorneys' fees and expenses paid or incurred by the Collateral Agent in advising, structuring, drafting, reviewing, amending, terminating, enforcing, defending or concerning this Agreement or any other Collateral Document, whether or not suit is brought, and including any action brought in any Insolvency Proceeding. "Contract Rights" shall mean all rights of an Assignor under any Scheduled Contract but shall not include the right to payment thereunder. "Copyrights" shall mean any copyright to which an Assignor now or hereafter has title, as well as any application for a copyright currently pending or hereafter made by such Assignor. "Credit Agreement" shall have the meaning provided in the Preliminary Statements of this Agreement. "Distributable Amount" shall have the meaning given such term in Section 5.4(b). "Documents" shall have the meaning assigned that term under the UCC. "Event of Default," as used in this Agreement, unless otherwise stated, shall have the same meaning given such term in the Credit Agreement. "Facility Notes" shall have the meaning given such term in the Preliminary Statements. "Facility Obligations" shall mean all "Obligations" as such term is defined in the Credit Agreement. "Facility Principal Obligations" shall mean, at any time, the sum of (a) aggregate outstanding principal amount of all Loans under the Credit Agreement, plus (b) the outstanding principal amount of all Reimbursement Obligations under the Credit Agreement, plus (c) the Outstanding Letter of Credit Exposure, plus (d) the principal amount of all other loans or advances which constitute a portion of the Facility Obligations. "General Intangibles" shall have the meaning assigned that term under the UCC. "Goods" shall have the meaning assigned that term under the UCC. "Indemnitee" shall have the meaning provided in Section 6.1. "Indenture" shall have the meaning given such term in the Preliminary Statements of this Agreement. "Indenture Debt" shall have the meaning provided in the Preliminary Statements of this Agreement. "Indenture Debt Issuer" shall the meaning given such term in the Preliminary Statements of this Agreement. "Indenture Documents" shall mean the Indenture, all documents or instruments evidencing the Indenture Debt and all other documents now or hereafter executed and delivered by the Indenture Debt Issuer, either of the Borrowers, or any other Assignor for the benefit of the Trustee or Noteholders. "Indenture Principal Obligations" shall mean, at any time, the outstanding principal amount of all debentures, notes, or other evidences of indebtedness issued under or pursuant to the Indenture Documents. "Information Disclosure Certificate" shall mean, as to any Assignor, the Information Disclosure Certificate delivered by or on behalf of such Assignor pursuant to the Credit Agreement. "Instrument" shall have the meaning assigned that term under the UCC. "Insolvency Proceeding" shall mean any proceeding commenced by or against any person or entity, under any provision of the federal Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including, but not limited to, assignments for the benefit of creditors, formal or informal moratoriums, compositions or extensions with some or all creditors. "Lender" and "Lenders" shall have the meaning provided in the Preliminary Statements of this Agreement. "Lenders' Percentage" shall mean, with respect to a given amount, the portion of such amount determined by the ratio by which the Facility Principal Obligations bear to the Aggregate Principal Obligations. "Letter of Credit Reserve Account" shall have the meaning given such term in Section 5.4(b). "Marks" shall mean any and all trademarks and service marks (whether registered or unregistered) and trade dress (including without limitation any logos or designs used in connection with any trademarks or service marks) now owned by, or hereafter acquired by, any Assignor. "Noteholder" shall have the meaning provided in the Preliminary Statements of this Agreement. "Noteholders' Percentage" shall mean, with respect to a given amount, the portion of such amount determined by the ratio by which the Indenture Principal Obligations bear to the Aggregate Principal Obligations. "Outstanding Letters of Credit Exposure" shall mean at any time the undrawn face amount of all outstanding Letters of Credit then issued and outstanding under the Credit Agreement (assuming compliance with all requirements for drawing). "Parts" shall mean all appliances, avionics (including, without limitation, radio, radar, navigation systems, or other electronic equipment), parts, components, instruments, appurtenances, attachments, accessories, furnishings and other equipment of whatever nature and any replacements of the foregoing, which may from time to time be incorporated or installed in or attached to an airframe or any aircraft engine or aircraft propeller or located on the ground (and includes, without limitation, the terms "Spare Parts" and "Appliances" as defined in 49 U.S.C. Sec. 40102(a)). "Patents" shall mean any patent to which an Assignor now or hereafter has title, as well as any application for a patent currently pending or hereafter made by an Assignor. "Permitted Encumbrances" shall have the meaning given such term in the Credit Agreement. "Proceeds" shall have the meaning assigned that term under the UCC or under other relevant law and, in any event, shall include, but not be limited to (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or an Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to an Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority); (iii) any and all accounts, general intangibles, contract rights, inventory, equipment, money, drafts, instruments, deposit accounts, or other tangible and intangible property of the Assignors resulting from the sale (authorized or unauthorized) or other disposition of the Collateral, including, without limitation, the net earnings of any lease or other agreement relative to the use of the Collateral, or any portion thereof, and any proceeds of such proceeds; and (iv) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "PTO" means the United States Patent and Trademark Office. "Scheduled Contracts" shall mean, to the extent permitted to be assigned by the terms thereof or by applicable law, each of those contracts identified on Schedule 1, attached hereto and made a part hereof. "Scheduled Equipment" shall mean (a) all Parts, (b) each specific item listed on Schedule 2, attached hereto and made a part hereof, and (c) all items of the type or types described on Schedule 2, regardless, in each of the foregoing cases, whether such items constitute "equipment" as such term is defined in the UCC or other relevant law. "Scheduled Inventory" shall mean (a) all Parts, (b) all materials, regardless of where stored or maintained, which constitute fuel for use in any aircraft, including, without limitation, jet or propeller powered aircraft, and (c) all materials of the type or types described on Schedule 3, attached hereto and made a part hereof, regardless, in each of the foregoing cases, whether such items constitute "inventory" as such term is defined in the UCC or other relevant law. "Scheduled Permits" shall mean, to the extent permitted to be assigned by the terms thereof or by applicable law, each of those permits listed on Schedule 4, attached hereto and made a part hereof. "Secured Creditors" shall have the meaning provided in the Preliminary Statements of this Agreement. "Secured Obligations" shall mean each of the following: (a)               the Borrowers' full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise), and the due performance, of all Facility Obligations; and (b)               the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all principal of, and interest on, the Indenture Debt, and the due performance of all other obligations of any Assignor arising under or in connection with the Indenture Documents; and (c)               all obligations and liabilities of any Assignor under this Agreement, any Subsidiary Guaranty, Parent Guaranty, or any other Loan Document to which any Assignor is a party; and (d)               all obligations and liabilities of any Assignor under the Indenture Documents to which it is a party; and (e)               all other obligations and liabilities owing by any Assignor to any of the Administrative Agent, the Collateral Agent, the Trustee, any Lender, or any Noteholder under this Agreement, the Credit Agreement or any other Loan Document, or the Indenture Documents (including, without limitation, indemnities, fees and other amounts payable thereunder); and (f)                 the full and prompt payment when due of any and all Collateral Agent Expenses; in all cases whether now existing, or hereafter incurred under, arising out of, or in connection with, this Agreement, the Credit Agreement or any other Loan Document, or the Indenture Documents, including any such interest or other amounts which, but for any automatic stay under Section 362(a) of the Bankruptcy Code, would become due. It is acknowledged and agreed that the term "Secured Obligations" shall include, without limitation, extensions of credit and issuances of securities of the types described above, whether outstanding on the date of this Agreement or extended or purchased from time to time after the date of this Agreement.   "Security Interest Termination Date" shall mean the date on which each of the following shall have occurred: (i) each and every Lender's Commitment under the Credit Agreement shall have been terminated; (ii) no Facility Note shall be outstanding; (iii) no Letter of Credit issued under or pursuant to the Credit Agreement shall be outstanding; (iv) no other amounts shall then be payable by either of the Borrowers or any Assignor to the Administrative Agent or any Lender under the Credit Agreement or any other Loan Document; and (v) all Facility Obligations shall have been fully, finally, and indefeasibly paid or performed to the Administrative Agent's satisfaction, unless at such time (x) an Event of Default relating to a default in the payment when due of principal of or interest on the Indenture Debt, shall have occurred and be continuing; (y) the maturity of any portion of the Indenture Debt shall have been accelerated; and (z) the Collateral Agent shall have received written notice from any Noteholder or the Trustee to such effect. "Trustee" shall mean the trustee under the Indenture and includes its successors and assigns. "UCC" shall mean the Uniform Commercial Code as enacted by the State of Georgia, as amended from time to time, and any and all terms used in this Agreement which are defined in the UCC shall be construed and defined in accordance with the meaning and definition ascribed to such terms under the UCC. "Wachovia" has the meaning given such term in the Preliminary Statements of this Agreement. 2.                  SECURITY INTERESTS. 2.1.            Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due of all of the Secured Obligations, each Assignor does hereby sell, assign and transfer unto the Collateral Agent, and does hereby grant to the Collateral Agent, for the benefit of the Collateral Agent and the Secured Creditors, a continuing security interest of first priority in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired (collectively, the "Collateral"): (i)                  all Scheduled Contracts, together with all Contract Rights arising thereunder, (ii)                all Scheduled Inventory, (iii)               all Scheduled Equipment, (iv)              all Scheduled Permits, (v)                all General Intangibles, including, without limitation, (A) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor associated with or attributable to such Marks, (B) all Patents and Copyrights, and (C) all computer programs of such Assignor and all intellectual property rights therein, and (vi)              all Proceeds and products of any and all of the foregoing. (b)               The Collateral Agent's security interest in and lien upon the Collateral shall attach to all of the Collateral upon the execution and delivery of this Agreement, without further act being required on the part of either the Collateral Agent or any Assignor. The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kinds, items, types and descriptions which are the subject of this Agreement and to which any Assignor now has, or hereafter acquires, rights. 2.2.            Power of Attorney. Each Assignor hereby irrevocably appoints the Collateral Agent as its attorney‑in‑fact and agent with full power of substitution and re-substitution for such Assignor and in its name to do, at the Collateral Agent's option, any one or more of the following acts, upon the occurrence of an Event of Default: (a) to receive, open and examine all mail addressed to such Assignor and to retain any such mail relating to the Collateral and to return to such Assignor only that mail which is not so related; (b) to endorse the name of such Assignor on any checks or other instruments or evidences of payment or other documents, drafts, or instruments arising in connection with or pertaining to the Collateral, to the extent that any such items come into the possession of the Collateral Agent; (c) to compromise, prosecute or defend any action, claim, or proceeding concerning the Collateral; (d) to do any and all acts which such Assignor is obligated to do under this Agreement, the Credit Agreement or any other Loan Document, or the Indenture Documents; (e) to exercise such rights as such Assignor might exercise relative to the Collateral, including, without limitation, the leasing, chartering, or other utilization thereof; (f) to give notice of the Collateral Agent's security interest in and Lien upon the Collateral, including, without limitation, notification to lessees and/or other account debtors of the Collateral Agent's security interest in the accounts, general intangibles, rents, and other payments due to such Assignor relative to the Collateral, and the collection of any such rents or other payments; and (g) to execute in such Assignor's name and file any notices, financing statements, and other documents or instruments the Collateral Agent determines are necessary or required to fully carry out the intent and purpose of this Agreement or to perfect the Collateral Agent's security interest and Lien in and upon the Collateral. Each Assignor hereby ratifies and approves all that the Collateral Agent shall do or cause to be done by virtue of the power of attorney granted in this Section 2.2 and agrees that neither the Collateral Agent, nor any of its employees, agents, officers, or its attorneys, will be liable for any acts or omissions or for any error of judgment or mistake of fact or law made while acting pursuant to the provisions of this Section 2.2 and in good faith. The appointment of the Collateral Agent as such Assignor's attorney-in-fact, and each and every one of the Collateral Agent's rights and powers in connection therewith, being coupled with an interest, are and shall remain irrevocable until the Security Interest Termination Date. 3.                  GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Assignor jointly and severally represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 3.1.            Necessary Filings. Assuming the filing in the appropriate filing offices of those UCC-1 financing statements delivered to the Collateral Agent pursuant to Section 4.01 of the Credit Agreement and any filings of patent, trademark and copyright security agreements with the PTO and the United States Copyright Office which may be required under applicable law, all filings, registrations and recordings necessary or appropriate to create, preserve, protect and perfect the security interest granted by such Assignor to the Collateral Agent hereby in respect of the Collateral have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral constitutes a perfected security interest therein, superior and prior to the rights of all other Persons therein and subject to no other Liens other than Permitted Encumbrances, and is entitled to all the rights, priorities and benefits afforded by the UCC or other relevant law as enacted in any relevant jurisdiction to perfected security interests, subject to compliance with the Assignment of Claims Act of 1940, as amended. 3.2.            No Liens. Each Assignor is, and as to Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of all Collateral free from any Lien other than Permitted Encumbrances, and such Assignor shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent's interest in such Collateral. 3.3.            Other Financing Statements. There is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral except as disclosed in Schedule 6.17 of the Credit Agreement; and, prior to the Security Interest Termination Date, no Assignor will execute or authorize to be filed in any public office any financing statement or statements (or similar statement or instrument of registration under the law of any jurisdiction) relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted to the Collateral Agent under this Agreement. 3.4.            Chief Executive Office, etc; Records. The chief executive office (and the registered office of each Assignor which is a corporation) of each Assignor is located at the address indicated on such Assignor's Information Disclosure Certificate. The U.S. Federal Tax I.D. Number of each Assignor is set forth on such Assignor's Information Disclosure Certificate. No Assignor will move its chief executive office (or registered office in the case of an Assignor which is a corporation) except to such new location as such Assignor may establish in accordance with the last sentence of this Section 3.4. The originals of all documents evidencing all Contract Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, or at such new locations as such Assignor may establish in accordance with the last sentence of this Section 3.4. All Contract Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above, or such new locations as such Assignor may establish in accordance with the last sentence of this Section 3.4. No Assignor shall establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request, and (ii) with respect to such new location, it shall have taken all action, satisfactory to the Collateral Agent, to maintain the first priority security interest of the Collateral Agent in the Collateral intended to be granted hereby, at all times fully perfected and in full force and effect. 3.5.            Location of Scheduled Inventory and Scheduled Equipment. All Scheduled Inventory and Scheduled Equipment (other than Scheduled Inventory or Scheduled Equipment which (a) constitutes fuel and (b) has been dispensed into an aircraft as fuel for such aircraft) held on the date hereof by each Assignor is located at one of the locations shown on such Assignor's Information Disclosure Certificate. Each Assignor agrees that all Scheduled Inventory and Scheduled Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to or from) any one of such locations, or such new location as such Assignor may establish in accordance with the last sentence of this Section 3.5. An Assignor may establish a new location for Scheduled Inventory and Scheduled Equipment only if (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request, and (ii) with respect to such new location, it shall have taken all action satisfactory to the Collateral Agent to maintain the first priority security interest of the Collateral Agent in the Collateral intended to be granted hereby, or in any other Collateral Document, at all times in fully perfected and in full force and effect. 3.6.            Trade Names; Change of Name. No Assignor has or operates in any jurisdiction under, or in the preceding five years has had or has operated in any jurisdiction under, any trade names, fictitious names or other names (including, without limitation, any names of divisions or operations) except its legal name and such other trade, fictitious or other names as are listed on such Assignor's Information Disclosure Certificate. Each Assignor has operated only under each name set forth in such Assignor's Information Disclosure Certificate in the jurisdiction or jurisdictions set forth opposite each such name on such Information Disclosure Certificate. No Assignor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on its Information Disclosure Certificate and in the jurisdictions listed with respect to such names and new names (including, without limitation, any names of divisions or operations) and/or jurisdictions established in accordance with the last sentence of this Section 3.6. No Assignor shall assume or operate in any jurisdiction under any new trade, fictitious or other name or operate under any existing name in any additional jurisdiction until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and/or jurisdiction and, in the case of a new name, the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may request, and (ii) with respect to such new name and/or new jurisdiction, it shall have taken all action to maintain the first priority security interest of the Collateral Agent in the Collateral intended to be granted hereby, at all times fully perfected and in full force and effect. 3.7.            Recourse. This Agreement is made with full recourse to the relevant Assignor and pursuant to and upon all the warranties, representations, covenants, and agreements on the part of such Assignor contained herein, in the other Loan Documents, in the Indenture Documents, and otherwise in writing in connection herewith or therewith. 4.                  PROVISIONS CONCERNING COLLATERAL. 4.1.            Protection of Collateral Agent's Security. Each Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Scheduled Inventory and Scheduled Equipment insured in favor of the Collateral Agent, at its own expense, to the extent required of the Parent and the Borrowers under the Credit Agreement against fire, theft and all other risks to which such Collateral may be subject; all policies or certificates with respect to such insurance shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as an additional insured and loss payee) and copies thereof shall be delivered upon request to the Collateral Agent. If an Assignor shall fail to insure such Scheduled Inventory and/or Scheduled Equipment to the extent required of the Parent and the Borrowers under the Credit Agreement, or if such Assignor shall fail to so endorse all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to reimburse the Collateral Agent for all costs and expenses of procuring such insurance. Any proceeds of such insurance shall be applied in accordance with the Credit Agreement. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it, and the liability of such Assignor to pay its obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 4.2.            Further Actions. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent reasonably deems appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 4.3.            Financing Statements. Each Assignor agrees to sign and deliver to the Collateral Agent such financing statements, in form acceptable to the Collateral Agent, as the Collateral Agent may from time to time request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. The Assignors will pay any applicable filing fees and related expenses. Each Assignor authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor. 5.                  REMEDIES; APPLICATION OF PROCEEDS, ETC. 5.1.            Remedies; Obtaining the Collateral Upon Default. Each Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, subject to any mandatory requirements of applicable law then in effect, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may: (a)               personally, or by agents or attorneys, immediately retake possession of the Collateral or any part thereof, from such Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; (b)               sell, assign or otherwise liquidate, or direct such Assignor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; (c)               take possession of the Collateral or any part thereof, by directing such Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense; (i)                  forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, (ii)                store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 5.2, and (iii)               while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; it being understood that such Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by the Assignor of said obligation. 5.2.            Remedies; Disposition of the Collateral. Upon the occurrence and continuance of an Event of Default, any Collateral repossessed by the Collateral Agent under or pursuant to Section 5.1 and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale of the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to such Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of the relevant Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the city where such Collateral is then located. To the extent permitted by any such requirement of law, the Collateral Agent on behalf of the Secured Creditors (or certain of them) may bid for and become the purchaser (by bidding in Secured Obligations or otherwise) of the Collateral or any item thereof, offered for sale in accordance with this section without accountability to the relevant Assignor (except to the extent of surplus money received as provided in Section 5.4). If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the Assignor as hereinabove specified, the Collateral Agent need give the relevant Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. 5.3.            Waiver of Claims. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the extent permitted by law: (i)                  all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (ii)                all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (iii)               all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against the relevant Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the relevant Assignor. 5.4.            Application of Proceeds. (a)               The Proceeds actually collected by the Collateral Agent as a result of the exercise of any of the rights, powers and remedies of the Collateral Agent herein granted, shall be applied as follows: (i)                  First, to the payment or reimbursement of all Collateral Agent Expenses, to the extent such costs and expenses have not been indefeasibly paid or reimbursed by the Assignors; (ii)                Second, subject to Section 5.4(b) and until all Secured Obligations owed to the Secured Creditors have been fully, finally, and indefeasibly paid or performed, each Lender's Commitment has been terminated, and the Letter of Facility Obligations have been reduced to zero, on a pari passu basis without any preference or priority to the Noteholders or the Lenders, to the Trustee, in an amount equal to the Noteholders' Percentage of such Proceeds, and to the Administrative Agent, in an amount equal to the Lenders' Percentage of such Proceeds, for distribution by the Trustee under the Indenture Documents and by the Administrative Agent under the Loan Documents; (iii)               Finally, to the relevant Assignor or such other Person or Persons as shall be lawfully entitled thereto. (b)               The amount of any Proceeds distributed to the Administrative Agent on account of any Outstanding Letter of Credit Exposure shall be held by the Administrative Agent and deposited by the Administrative Agent in a special interest bearing account (the "Letter of Credit Reserve Account") under the sole dominion and control of the Administrative Agent, and shall be applied and distributed to the appropriate Issuer of the applicable Letter of Credit if and to the extent that such Letter of Credit is honored. If such Letter of Credit is not drawn upon, or is not fully drawn upon, the balance of the funds in the Letter of Credit Reserve Account attributable to such Letter of Credit shall be distributed to the Secured Creditors pursuant to clause (ii) of Section 5.4(a) hereof. (c)               Notwithstanding Section 5.4(a), (i)                  if any payment by the Collateral Agent to a Secured Creditor pursuant to Section 5.4(a) would cause any amount recovered by the Collateral Agent from or in respect of the Collateral to be invalidated, declared fraudulent or preferential, set aside or required to be repaid, returned or restored to a trustee, receiver, or any other Person under any bankruptcy, reorganization, insolvency, or liquidation statute, state or federal law, common law or equitable cause (an "Avoided Payment"), such Secured Creditor shall not participate in the distribution of any portion of the Avoided Payment; instead the Avoided Payment shall be distributable to the Trustee and Administrative Agent pro rata in accordance with Section 5.4(a)(ii), for the benefit of the remaining Secured Creditors as to whom no such repayment, return or restoration would be applicable; (ii)                the Collateral Agent may condition a payment to the Trustee or the Administrative Agent on behalf of a Secured Creditor pursuant to Section 5.4(a) on the specific condition that, in the event such amount is subsequently determined to be an Avoided Payment, such Secured Creditor will be required, upon written demand, to return promptly to the Collateral Agent all or its ratable part, as the case may be, of the Avoided Payment (and any interest thereon to the extent the same is required to be paid in respect of the return or restoration of the Avoided Payment), for distribution pro rata in accordance with Section 5.4(a)(ii) to the remaining Secured Creditors as to whom no such repayment, return or restoration would be applicable, or to the applicable obligor, as the case may be; and (iii)               the Collateral Agent, in making any payments to the Trustee and the Administrative Agent on behalf of the Secured Creditors under Section 5.4(a), may require the Secured Creditors to agree that if any amounts are not distributed to a particular Secured Creditor pursuant to clause (i) above or are returned by a Secured Creditor under clause (ii) above, the Secured Creditors will make such adjustments or arrangements among themselves, whether by purchasing undivided interests in the Secured Obligations or otherwise, in order to equitably adjust for any non-pro rata distribution under clause (i) above and/or the return of all or part of any payment or amount under clause (ii) above, and to give effect to the intended equal and ratable benefits of this Agreement as security for the Secured Obligations. (d)               All payments required to be made to (i) the Lenders hereunder shall be made to the Administrative Agent on behalf of and for the account of the respective Lenders, and (ii) the Noteholders hereunder shall be made to the Trustee on behalf of and for the account of the Noteholders. (e)               For purposes of applying payments received in accordance with this Section 5.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent for a determination (which the Administrative Agent agrees to provide upon request by the Collateral Agent) of the outstanding Facility Principal Obligations, and (ii) the Trustee for determinations of the outstanding Indenture Principal Obligations owed to the Noteholders. (f)                 It is understood and agreed that each Assignor shall remain liable to the extent of any deficiency between (i) the amount of the proceeds of the Collateral applied pursuant to Section 5.4(a) and (ii) the aggregate outstanding amount of the Secured Obligations. 5.5.            Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement or any of the other Loan Document or Indenture Document or now or hereafter existing at law or in equity, or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Secured Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 5.6.            Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Secured Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. 5.7.            Collateral Agent to Act on Behalf of Secured Creditors. No Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised only by the Collateral Agent, for the benefit of the Secured Creditors, by itself or upon instructions from the Required Lenders, and the Secured Creditors agree by their acceptance of any of the benefits or Proceeds hereof that this Agreement may be enforced on their behalf only by the action of the Collateral Agent, acting in accordance with the terms of this Agreement. 5.8.            Separate Actions. A separate action or actions may be brought and prosecuted against any Assignor whether or not action is brought against any other Assignor or guarantor of any of the Secured Obligations, or either of the Borrowers, and whether or not any other Assignor, guarantor or either of the Borrowers be joined in any such action or actions. 6.                  INDEMNITY. 6.1.            Indemnity. (a) The Assignors jointly and severally agree to indemnify, reimburse and hold the Collateral Agent, each Secured Creditor and its respective successors, assigns, employees, agents and servants (hereinafter in this Section 6.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, suits, judgments and any and all reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees and expenses) (for the purposes of this Section 6.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any other Loan Document, Indenture Document, or the documents executed in connection herewith and therewith or in any other way connected with the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract claim; provided that no Indemnitee shall be indemnified pursuant to this Section 6.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Person to be indemnified or of any other Indemnitee who is such Person or an affiliate of such Person. If any claim is asserted against any Indemnitee, such Indemnitee shall promptly notify the Assignor and each Indemnitee may, and if requested by the Assignor shall, in good faith, contest the validity, applicability and amount of such claim with counsel selected by such Indemnitee, and shall permit the Assignor to participate in such contest. In addition, in connection with any claim covered by this Section 6.1(a) against more than one Indemnitee, all such Indemnitees shall be represented by the same legal counsel selected by such Indemnitees; provided, however, that if such legal counsel determines in good faith that representing all such Indemnitees would or could result in a conflict of interest under the laws or ethical principles applicable to such legal counsel or that a defense or counterclaim is available to an Indemnitee that is not available to all such Indemnitees, then to the extent reasonably necessary to avoid such a conflict of interest or to permit unqualified assertion of such defense or counterclaim, each Indemnitee shall be entitled to separate representation by a legal counsel selected by that Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, loss, damage, penalty, claim, demand, action, judgment or suit, such Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the relevant Assignor of any such assertion of which such Indemnitee has knowledge. (b)               Without limiting the application of Section 6.1(a), the Assignors jointly and severally agree to pay, or reimburse the Collateral Agent for all Collateral Agent Expenses as incurred. (c)               Without limiting the application of Section 6.1(a) or (b), the Assignors jointly and severally agree to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any material misrepresentation by an Assignor in this Agreement, or in any statement or writing contemplated by or made or delivered pursuant to or in connection with this Agreement. (d)               If and to the extent that the obligations of any Assignor under this Section 6.1 are unenforceable for any reason, each Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 6.2.            Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Secured Obligations secured by the Collateral. The indemnity obligations of the Assignors contained in this Section 6 shall continue in full force and effect notwithstanding the full, final, and indefeasible payment and performance of all of the Secured Obligations, the termination of each Lender's Commitment, and the reduction of the Letter of Credit Obligations to zero. 7.                  THE COLLATERAL AGENT. The Collateral Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Collateral Agent shall act hereunder on the terms and conditions set forth herein and in Section 8 of the Credit Agreement. Unless the Collateral Agent has received written notice from a Noteholder or the Trustee to the effect that an "Event of Default" (as defined in the Indenture) has occurred and is continuing under any of the Indenture Documents, the Collateral Agent may assume that no such "Event of Default" is in existence. 8.                  TERMINATION. After the Security Interest Termination Date, this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 6 hereof shall survive any such termination) and the Collateral Agent, at the request and expense of the relevant Assignor, will execute and deliver to the relevant Assignor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as provided above, and will duly assign, transfer and deliver to the relevant Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Collateral Agent hereunder. 9.                  NOTICES, ETC. Any notice given with respect to this Agreement may be personally served or given in writing by depositing such notice in the United States mail, first class postage prepaid, or by telex or telegram, charges prepaid, addressed to any Assignor at the address and telecopy number set forth next to such Assignor's signature on the signature pages hereto, or at such other address and telecopy number as such Assignor may from time to time designate in writing to the Collateral Agent, and, to the Collateral Agent at the address and telecopy number for notices set forth in the Credit Agreement, or at such other address and telecopy number as the Collateral Agent may designate by written notice to the Parent or either of the Borrowers. 10.              WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Assignor and the Collateral Agent (with the consent of the Required Lenders or, to the extent required by Section 10.06 of the Credit Agreement, all of the Lenders). 11.              MISCELLANEOUS. 11.1.        Successors and Assigns. This Agreement shall be binding upon each Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and its successors and assigns, provided that no Assignor may transfer or assign any or all of its rights or obligations hereunder without the written consent of the Collateral Agent. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement and the other Loan Documents and the Indenture Documents regardless of any investigation made by the Secured Creditors or on their behalf. 11.2.        Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.3.        Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.4.        Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF GEORGIA. 11.5.        Assignors' Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of an Assignor under or with respect to any Collateral. 11.6.        Counterparts. This Agreement may be executed in multiple counterparts, and by different parties in separate counterparts, each of which shall be an original and all of which collectively shall constitute one and the same Agreement. 11.7.        WAIVER OF JURY TRIAL. EACH OF THE ASSIGNORS, THE COLLATERAL AGENT, AND EACH LENDER AND NOTEHOLDER WHICH ACCEPTS ANY PROCEEDS UNDER THIS AGREEMENT OR ANY OTHER COLLATERAL DOCUMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. [SIGNATURES BEGIN ON NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered under seal by their duly authorized officers as of the date first above written. ASSIGNORS:   AIRBORNE EXPRESS, INC. (SEAL)     By: _/s/ Lanny H. Michael   Title:_Senior Vice President and CFO   P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005         ABX AIR, INC. (SEAL)     By: _/s/ Joseph C. Hete   Title:__President and COO   P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005       AIRBORNE, INC. (SEAL)     By: _/s/ Lanny H. Michael   Title:_Senior Vice President and CFO   P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005       WILMINGTON AIR PARK, INC. (SEAL)     By: _/s/ Joseph C. Hete   Title:__President   P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005         SKY COURIER, INC. (SEAL)     By: _________________________________   Title:________________________________   P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005       AVIATION FUEL, INC. (SEAL)     By: __/s/ Robert R. Hanke   Title:___President_______________   P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005       SOUND SUPPRESSION, INC. (SEAL)     By: _________________________________   Title:________________________________   P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005       AIRBORNE FTZ, INC. (SEAL)     By: _/s/ Joseph C. Hete   Title:__President     P.O. Box 662 Seattle, Washington 98111 Attention: Chief Financial Officer and General Counsel CFO Telecopier number: 206-281-1444 Confirmation number: 206-281-1003 GC Telecopier number: 206-281-1444 Confirmation number: 206-281-1005       COLLATERAL AGENT:   WACHOVIA BANK, N.A.       By: __/s/ Howard Kim   Title: Senior Vice President       SCHEDULE 1 to SECURITY AGREEMENT   SCHEDULED CONTRACTS   NONE. SCHEDULE 2 to SECURITY AGREEMENT   SCHEDULED EQUIPMENT   NONE. SCHEDULE 3 to SECURITY AGREEMENT   SCHEDULED INVENTORY   NONE. SCHEDULE 4 to SECURITY AGREEMENT   SCHEDULED PERMITS   NONE.
      $252,200,000.00 RESTRUCTURED TERM CREDIT AGREEMENT Among UNITED ARTISTS THEATRE COMPANY, a Delaware corporation; UNITED ARTISTS THEATRE CIRCUIT, INC., a Maryland corporation; UNITED ARTISTS REALTY COMPANY, a Delaware corporation; UNITED ARTISTS PROPERTIES I CORP., a Colorado corporation; and UNITED ARTISTS PROPERTIES II CORP., a Colorado corporation; and THE LENDERS PARTY HERETO and BANK OF AMERICA, N.A., as Administrative Agent and Collateral Agent Dated as of _______________, 2001 TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS   1 1.1 Defined Terms   1 1.2 Other Interpretive Provisions   20   (a) Defined Terms 20   (b) The Agreement 20   (c) Certain Common Terms 20   (d) Performance; Time 20   (e) Contract 21   (f) Laws 21   (g) Captions 21   (h) Independence of Provision 21 1.3 Accounting Principles   21 1.4 Rounding   21 1.5 Exhibits and Schedules   22 ARTICLE 2. THE TERM CREDIT   22 2.1 Amounts and Terms of Credit Commitments   22 2.2 Notes   22 2.3 Mandatory Prepayments   22 2.4 Repayments   23 2.5 Joint Borrower Provisions   23 2.6 Interest   28 2.7 Fees   28   (a) Administrative Agents Fees 29   (b) Collateral Agent Fees 29   (c) Agent Work Fee 29   (d) Working Group and E.N. Fee 29 2.8 Computation of Fees and Interest   29 2.9 Payments of Borrowers   29 2.10 Sharing of Payments, Etc.   30 ARTICLE 3. TAXES AND YIELD PROTECTION   31 3.1 Taxes   31 3.2 Illegality   34 3.3 Increased Costs and Reduction of Return   34 3.4 Funding Losses   35 3.5 Inability to Determine Rates   35 3.6 Reserves on LIBO Rate Loans   36 3.7 Certificates of Lenders   36 3.8 Survival   36 ARTICLE 4. CONDITIONS PRECEDENT   36 4.1 Conditions of Loans   36 4.2 Loan Documents   36   (a) Resolutions; Incumbency 37   (b) Articles of Incorporation, By-laws and Good Standing 37   (c) Legal Opinion 37   (d) Payment of Fees 37   (e) Certificate 37   (f) Confirmation Order 38   (g) Insurance Certificates 38   (h) Other Documents 38   (i) [Intentionally Omitted] 38   (j) Stock Pledge Agreement 38   (k) UAPH II Stock Pledge Agreement 39   (l) Security Agreement 39   (m) Deeds of Trust, etc. 39   (n) No Litigation 39 ARTICLE 5. REPRESENATATIONS AND WARRANTIES   39 5.1 Corporate Existence and Power   39 5.2 Corporate Authorization, No Contravention   40 5.3 Governmental Authorization   40 5.4 Binding Effect   40 5.5 Litigation   40 5.6 No Default   41 5.7 ERISA   41 5.8 [Intentionally Omitted]   43 5.9 Title to Properties   43 5.10 Taxes   43 5.11 [Intentionally Omitted]   43 5.12 Environmental Matters   43 5.13 Regulated Entities   44 5.14 Labor Relations   44 5.15 Copyrights, Patents, Trademarks and Licenses   44 5.16 Subsidiaries   45 5.17 [Intentionally Omitted]   45 5.18 Insurance   45 5.19 Full Disclosure   45 5.20 Locations of Collateral and Places of Business   45 5.21 Locations of, and Information with Respect to, Deposit Accounts 46 5.22 [Intentionally Omitted]   46 5.23 Validity of Security Interest   46 5.24 Existing Liens   46 5.25 Financial Statements   47 5.26 Compliance With Laws   47 5.27 Material Adverse Change   47 5.28 [Intentionally Omitted]   47 ARTICLE 6. AFFIRMATIVE COVENANTS   47 6.1 Financial Reporting   47 6.2 Certificates; Other Information   48 6.3 Notices   49 6.4 Preservation of Corporate Existence, Etc.   50 6.5 Maintenance of Property and Other Collateral   51 6.6 Insurance   51 6.7 Payment of Obligations   51 6.8 Compliance with Laws   52 6.9 Inspection of Property and Books and Records   52 6.10 Environmental Laws   52 6.11 [Intentionally Omitted]   53 6.12 Update of Collateral and Deposit Account Schedules   53 6.13 [Intentionally Omitted]   53 6.14 [Intentionally Omitted]   53 ARTICLE 7. NEGATIVE COVENANTS   53 7.1 Limitation on Liens   53 7.2 Disposition of Assets   55 7.3 Fundamental Changes, Corporate Documents   56 7.4 Loans and Investment   57 7.5 Limitation on Indebtedness   58 7.6 Transactions with Affiliates   59 7.7 [Intentionally Omitted]   60 7.8 [Intentionally Omitted]   60 7.9 [Intentionally Omitted]   60 7.10 [Intentionally Omitted]   60 7.11 Lease Obligations   60 7.12 Capital Expenditures   60 7.13 Change in Business   60 7.14 Accounting Changes   61 7.15 Relocation of Collateral, Chief Executive Offices, or Deposit Accounts 61 7.16 No Negative Pledges in Favor of Others   61 7.17 [Intentionally Omitted]   61 7.18 [Intentionally Omitted]   61 7.19 [Intentionally Omitted]   61 7.20 Certain Restrictions   61 7.21 Financial Covenants   62 7.22 Restricted Payments   62 7.23 Priority of Loan Payments   63 7.24 Investments in Margin Stock   63 7.25 Amendments to Certain Agreements   63 ARTICLE 8. EVENTS OF DEFAULT   64 8.1 Event of Default   64   (a) Non-Payment 64   (b) Representation of Warranty 64   (c) Specific Defaults 64   (d) Other Defaults 64   (e) Cross-Default 64   (f) Bankruptcy Orders 65   (g) [Intentionally Omitted] 65   (h) Pre-Petition Obligations 65   (i) [Intentionally Omitted] 65   (j) Judgements 65   (k) Change in Control 65   (l) Material Adverse Effect 65   (m) Loan Documents Cease to be in Effect 66   (n) Bankruptcy; Insolvency 66 8.2 Rights and Remedies   66 8.3 Remedies; Obtaining the Collateral Upon Default   67 8.4 Remedies; Disposition of the Collateral   67 8.5 Recourse   68 8.6 Rights Not Exclusive   68 ARTICLE 9. THE ADMINISTRATIVE AGENT AND COLLATERAL AGENT 69 9.1 Appointment and Authorization   69 9.2 Delegation of Duties   69 9.3 Liability of Administrative Agent and Collateral Agent   69 9.4 Reliance by Administrative Agent and Collateral Agent   69 9.5 Notice of Default   70 9.6 Credit Decision   70 9.7 Indemnification   71 9.8 Administrative Agent in Individual Capacity   72 9.9 Successor Administrative Agent and Successor Collateral Agent 72 ARTICLE 10. MISCELLANEOUS   73 10.1 Amendments and Waivers   73 10.2 Notices   73 10.3 No Waiver; Cumulative Remedies   74 10.4 Costs and Expenses   74 10.5 Indemnity   75 10.6 Marshaling, Payments Set Aside   76 10.7 Successors and Assigns   76 10.8 Assignments; Participations; etc.   77 10.9 Set-off   79 10.10 Debits of Fees   79 10.11 Notification of Addresses, Lending Offices, Etc.   80 10.12 Counterpart   80 10.13 Severability   80 10.14 No Third Parties Benefited   80 10.15 Time   80 10.16 Governing Law and Jurisdiction   80 10.17 Waiver of Right to Jury Trial   81 10.18 Entire Agreement   81 10.19 Interpretation   82 10.20 [Intentionally Omitted]   82 10.21 Fees and Claims   82 10.22 Release   82 10.23 Further Assurances   82 10.24 Non-liability of Lender   82 10.25 Headings   83 RESTRUCTURED TERM CREDIT AGREEMENT This RESTRUCTURED TERM CREDIT AGREEMENT, dated as of __________, 2001 is entered into by and among UNITED ARTISTS THEATRE COMPANY, a Delaware corporation ("UAT"), UNITED ARTISTS THEATRE CIRCUIT, INC., a Maryland corporation and a Subsidiary of UAT ("UATC"), UNITED ARTISTS REALTY COMPANY, a Delaware corporation and a Subsidiary of UAT ("UARC"), UNITED ARTISTS PROPERTIES I CORP., a Colorado corporation and a Subsidiary of UARC ("Prop I"), and UNITED ARTISTS PROPERTIES II CORP. ("Prop II"), a Colorado corporation and a Subsidiary of UARC (UAT, UATC, UARC, Prop I and Prop II being hereinafter collectively referred to as "Borrowers," and each individually as a "Borrower"), jointly and severally, the several lenders party to this Agreement as identified on Schedule "A" hereto (collectively, the "Lenders"; individually, a "Lender"), and BANK OF AMERICA, N.A. ("BofA"), as administrative agent and collateral agent for and on behalf of the Lenders (the "Administrative Agent" or "Collateral Agent," as the case may be). RECITALS A. UAT, the several lenders party thereto (collectively, the "Credit Lenders"), and the Administrative Agent are parties to that certain CREDIT AGREEMENT dated as of April 21, 1998 (the "Credit Agreement"); as amended by that certain FIRST AMENDMENT TO CREDIT AGREEMENT AND MASTER ASSIGNMENT AND ACCEPTANCE AGREEMENT dated as of June 11, 1998 (the "First Amendment"); as amended by that certain SECOND AMENDMENT TO CREDIT AGREEMENT dated as of March 31,1999 (the "Second Amendment"); and as amended by that certain WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT dated as of September 27, 1999 (the "Third Amendment") (the Credit Agreement, together with the First Amendment, the Second Amendment and the Third Amendment, the "Original Credit Agreement"). B. On September 5, 2000, Borrowers and certain of their Subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court, for the District of Delaware (the "Bankruptcy Court"), with all of such cases being jointly administered for procedural purposes under the Case No. 00-00-3514 (SRL). C. On January ___, 2001, the Bankruptcy Court entered its Order confirming Borrowers' Plan of Reorganization (as defined below). NOW, THEREFORE, in consideration of the above recitals and in order to induce the Lenders to make such a term credit facility available to Borrowers, the parties hereto agree as follows: DEFINITIONS 1. Defined Terms   In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings: "Additional Debt" means additional indebtedness for borrowed money, Capital Lease Obligations, and related Swap Contracts, on an unsecured or secured (relating to Capital Expenditures only) basis, not to exceed $5,000,000 in the aggregate. "Administrative Agent" means BofA, in its representative capacity as Administrative Agent for the Lenders hereunder, and any permitted successor Administrative Agent. "Administrative Agent-Related Persons" means BofA and any successor Administrative Agent pursuant to Section 9.9, together with, their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Administrative Agent's Payment Office" means the address for payments set forth on the signature page hereto in relation to the Administrative Agent or such other address as the Administrative Agent may from time to time specify in writing in accordance with Section 10.2. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  A Person shall be deemed to control another Person if the controlling person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise.  Without limitation, any director, executive officer or beneficial owner of 10% or more of the equity of a Person shall for the purposes of this Agreement, be deemed to control the other Person.  In no event shall the Lenders be deemed an "Affiliate" of Borrowers or of any Subsidiary of Borrowers.  For the purposes of this definition in relation to any Affiliate of Borrowers, in no event shall Anschutz or its Subsidiaries or Affiliates (other than Borrowers and their Subsidiaries) be deemed as an Affiliate herein defined. "Agreement" means this Restructured Term Credit Agreement, as amended, modified, supplemented, renewed, replaced, or restated from time to time in accordance with the terms hereof. "Aggregate Commitment" means the combined Credit Commitments of the Lenders, in the initial amount of Two Hundred Fifty-Two Million Two Hundred Thousand Dollars $252,200,000.00, as such amount may or shall be reduced from time to time pursuant to this Agreement, including without limitation the provisions of Section 2.3 hereof. "Annual Retained Proceeds" has the meaning specified in Section 2.3. "Anschutz" means The Anschutz Corporation. "Anschutz Sub Debt" means additional subordinated indebtedness for borrowed money incurred by Borrowers or preferred stock issued by Borrowers, not to exceed $25,000,000 in the aggregate, with PIK interest or PIK dividends, payable to Anschutz or any of its Affiliates. "Applicable Margin" means 4% per annum. "Assignee" has the meaning specified in Section 10.8(b). "Assignment and Acceptance" has the meaning specified in Section 10.8(a). "Assistant Secretary" means any Assistant Secretary of a Borrower. "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel, including the reasonable cost of retaining consultants and financial advisors. "Audited Financial Statement" means the audited consolidated balance sheet of Borrowers and their Subsidiaries for the fiscal year ended December 30, 1999, and the related consolidated statements of income and cash flows for such fiscal year of Borrowers and their Subsidiaries. "Auditors" means Arthur Andersen LLP or other independently certified public accountants of recognized national standing reasonably acceptable to the Lenders. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. Section 101, et seq.). "Bankruptcy Court" shall have the meaning ascribed to such term in the Recitals to this Agreement. "Base Rate" means, for any day, a rate per annum (rounded upwards to the next 1/100 of 1%) equal to the higher of (a) the Reference Rate in effect on such day and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. "Base Rate Loan" means a Loan that bears interest based on the Base Rate. "BofA" means Bank of America, N.A., a national banking association. "Borrowers" means UAT, UATC, UARC, Prop I and Prop II, and each of them, and any one or more of them, collectively and individually, jointly and severally. "Borrowing" means a borrowing hereunder consisting of Loans made to Borrowers by the Lenders pursuant to Section 2.1. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial lenders in Los Angeles are authorized or required by law to close. "Capital Expenditures" means, for any reporting period and with respect to any Borrower the aggregate of all principal amounts for any acquisition and the amount of any financing or leasing by such Borrower and its Subsidiaries for the acquisition, financing or leasing of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period and all amounts paid or accrued on Capital Leases and Indebtedness incurred or assumed to acquire capital assets) which are placed into service and should be capitalized under GAAP on a consolidated balance sheet of such Borrower and its Subsidiaries.  For purposes of this definition, the purchase price of equipment that is purchased substantially contemporaneously with the trade-in of existing equipment or with insurance proceeds paid on account of loss or of damage to the assets being replaced or restored, or with the proceeds from the sale of assets being replaced or restored, shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of proceeds from insurance or asset sale, as the case may be.  Except where otherwise specified in this Agreement, Capital Lease Obligations for leases of theatres (including any related real property interests) shall be excluded from the definition of "Capital Expenditures." "Capital Lease" has the meaning specified in the definition of Capital Lease Obligations. "Capital Lease Obligations" means all monetary obligations of Borrowers or any of their Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be capitalized or the balance sheet of such Person. "Cases" means the Chapter 11 cases concerning Borrowers and certain of their Subsidiaries, commenced on the Petition Date, described in Recital B hereof and pending in the Bankruptcy Court. "Cash Equivalent" means: a. securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than six months from the date of acquisition; b. certificates of deposit, time deposits, Eurodollar time deposits, repurchase agreements, reverse repurchase agreements, or bankers' acceptances, having in each case a tenor of not more than six months, issued by any Lender, or by any U.S. commercial lender or any branch or agency of a non-U.S. lender licensed to conduct business in the U.S. having combined capital and surplus of not less than $500,000,000 whose short-term debt securities are rated at least A-1 by Standard & Poor's Corporation or any successor rating agency or P-1 by Moody's Investors Service, Inc. or any successor rating agency; and c. commercial paper rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service Inc. and in either case having a tenor of not more than six months. "CERCLA" has the meaning specified in the definition of "Environmental Laws." "Change of Control Event" means, with respect to any Person, an event or series of events by which: d. [Intentionally Omitted]. e. during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of such Person 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 or where election or nomination to that board or other equivalent governing body was approved by persons or entities having the power to appoint or nominate the persons referred to in clauses (i)  and (ii) above. f. Anschutz and/or any Affiliates of Anschutz cease to beneficially own and control, directly or indirectly, at least [25%] of the issued and outstanding shares of capital stock of each Borrower entitled (without regard to the occurrence of any contingency) to vote for the election of members of the board or other equivalent governing body of such Borrower. Closing Date " means the date on which all conditions precedent set forth in Section 4.1 are satisfied or waived by all the Lenders. "Code" means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. "Collateral" means any property or assets of Borrowers, whether real property or personal property, tangible or intangible, that now or hereafter are subject to a security interest pursuant to this Agreement and the Security Agreements including, without limitation, any assets acquired by Borrowers and financed by the Lenders pursuant to this Agreement. "Collateral Agent" means BofA, in its representative capacity as Collateral Agent for the Lenders hereunder, and any permitted successor Collateral Agent. "Collateral Agent-Related Person" means BofA and any successor Collateral Agent pursuant to Section 9.9, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Commitment Percentage" means, as to any Lender, the percentage equivalent of such Lender's Credit Commitment divided by the Aggregate Commitment. "Confirmation Date" means the date upon which the Confirmation Order is entered by the Bankruptcy Court in its docket, within the meaning of Bankruptcy Rules 5003 and 9021. "Confirmation Order" means the order of the Bankruptcy Court confirming the Plan of Reorganization pursuant to Section 1129 of the Bankruptcy Code. "Consolidated" means, as applied to any financial or accounting term with reference to any Person, such term determined on a consolidated basis for such Person in accordance with GAAP, including principles of consolidation, consistently applied. "Contingent Obligation" means, as to any Borrower (a) any Guaranty Obligation of that Borrower; and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Borrower, (i) in respect of any letter of credit or similar instrument issued for the account of that Borrower or as to which that Borrower is otherwise liable for reimbursement of drawings or payments or (ii) to purchase any materials, supplies or other property from, or to obtain the services of, another Borrower if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered. The amount of any Contingent Obligation shall (subject, in the case of Guaranty Obligations, to the last sentence of the definition of "Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof. "Contractual Obligations" means, as to any Borrower, any provision of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Borrower is a party or by which it or any of its property is bound. "Controlled Group" means Borrowers and all Persons (whether or not incorporated) under common control or treated as a single employer with Borrowers or any of their Subsidiaries pursuant to Section 414(b), (c), (m) or (o) of the Code. "Credit Commitment" with respect to each Lender, has the meaning specified in Section 2.1. "Credit Lenders" shall have the meaning ascribed to such term in the Recitals to this Agreement. "Creditors' Committee(s)" means the Official Committee(s) of Unsecured Creditors or similarly appointed committee(s) appointed by the United States Trustee in the Cases. "Deeds of Trust" means those certain Deeds of Trust with Security Agreement, Assignment of Leases and Rents and Fixture Filing, entered into between UATC and the Administrative Agent, in connection with the Original Credit Agreement, all as modified by the Modifications of Deed of Trust. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Disposition" means, to the extent that any of the following arises out of the Ordinary Course of Business, (a) the sale, lease, conveyance, transfer or other disposition of Property, including but not limited to a Sale-and-Leaseback Transaction, (b) the sale or transfer by Borrowers or any Subsidiary of Borrowers of any equity securities issued by any Subsidiary of Borrowers and held by such transferor Person (other than grant of stock options pursuant to the Term Sheet and the issuance of equity securities upon the exercise thereof), and (c) sale or transfer of any accounts and notes receivables, with or without recourse. "Dollars," "dollars" and "$" each mean lawful money of the United States. "EBITDA" means, with respect to any Person for any period, (a) the gross operating revenues of such Person for such period derived in the ordinary course of its business from operations (including, in the case of Borrowers, revenues received as management fees under agreements entered into by Subsidiaries of Borrowers), minus, (b) all operating expenses from operations of such Person for such period, including without limitation, technical, film, actual operating lease rent (including actual operating lease rent payable to an Affiliate of such Person), selling, advertising, general and administrative expenses and corporate overhead of such Person during such period, plus (c) depreciation, amortization, deferred taxes and other non-cash charges in each case including, without limitation, any increase or decrease, resulting from any adjustments for appreciation or depreciation in the value of any option to acquire the common stock of Borrowers to the extent deducted in calculating operating income from continuing operations of such Person for such period, but only to the extent not paid in cash. In the calculation of EBITDA there shall be excluded interest expense, interest income, extraordinary items and gains or losses on (and proceeds from) sales or dispositions of assets outside the Ordinary Course of Business.  With respect to the consolidated EBITDA of any Person, the effect of revenues and expenses associated with any minority interest in Subsidiaries of such Person, and intercompany transactions, including the payment of dividends by Subsidiaries of such Person shall be excluded.  All dividends of unconsolidated (owned 50% or less) subsidiaries or other Persons shall be included to the extent they are paid in cash. In the case of the sale, transfer or other disposition, or an acquisition of an operating theatre by any such Person during any period, EBITDA shall be adjusted as it would have been if such acquisition, sale, transfer or other disposition had been consummated on the first day of the most recently completed last twelve month period of such Person. In the case of newly constructed theatres or screens which have not had 12 complete months of operations during a measurement period, the EBITDA for such theatres or screens shall be PPEBITDA plus PFEBITDA.  PFEBITDA shall be calculated by annualizing the EBITDA for those complete months during which such new theatre or screen has been in operation based on the monthly annualization factors for such month(s) set forth in Schedule 1.1(a) hereto in accordance with the following formula:   PFEBITDA = EBITDAM - PPEBITDA AF Where         PFEBITDA = Pro Forma EBITDA.   EBITDAM = Sum of actual EBITDA for each Included Month. "Included Month" is each full month that such theatre or screen was in operation covered by the most recent compliance certificate (the "Prior Period EBITDA") plus each full month that such theatre or screen was in operation from the end of the period covered by the compliance certificate to the date of calculation.   AF = Sum of annualization factors set forth in Schedule 1.1(a) for the Included Months.   PPEBITDA = Prior Period EBITDA, which is the actual aggregate cash flow for the theatres or screens included in the measurement period. "Eligible Assignee" means (a) a financial institution organized under the laws of the United States, or any state thereof and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; (d) another Lender; (e) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933, as amended) which extends credit or buys loans as one of its businesses, including but not limited to, insurance companies, mutual funds and lease financing companies; or (f) other lenders or institutional investors consented to in writing in advance by the Administrative Agent and Borrowers. "Employee Benefit Plan" means a "pension plan"(as defined in Section 3(2) of ERISA) maintained by Borrowers or any of their respective ERISA Affiliates or as to which Borrowers or any such ERISA Affiliate has contributed or otherwise may have any liability. "E.N." means E.N. Investment Company, a wholly owned Subsidiary of Anschutz. "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any applicable Environmental Law, or for release or injury to the environment or threat to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon (a) the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and non-negligent, sudden or non-sudden, accidental or non-accidental placement, spills, leaks, discharges, emissions or releases) of any Hazardous Material at, in, or from Property, whether or not owned by Borrowers, or (b) any other circumstances forming the basis of any violation, or alleged violation, of any applicable Environmental Law. "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities applicable to Borrowers, in each case relating to environmental, health, safety and land use matters; including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Emergency Planning and Community Right-to-Know Act, and any similar state or local law in effect, each as amended from time to time. "Environmental Permits" has the meaning specified in subsection 5.12(b). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) which is under common control or would be considered a single employer with such person pursuant to Section 414(b), (c), (n) or (o) of the Code or pursuant to Section 4001(b) of ERISA. "Event of Default" means any of the events or circumstances specified in Section 8.1. "Event of Loss" means, with respect to any property or asset (tangible or intangible, real or personal) any of the following: (a) any loss, destruction or damage of such property or asset; or (b) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation of such property or asset or the requisition of the use of such property or asset. "Exchange Act" means the Securities and Exchange Act of 1934 and regulations promulgated thereunder. "Exit Facility" means that certain $35 million credit facility to be provided to Borrowers pursuant to the terms and conditions of the Exit Facility Commitment. "Exit Facility Commitment" means that certain commitment letter dated November 3, 2000 from Bankers Trust Company and containing the salient terms and conditions of the Exit Facility, as ultimately approved by an order of the Bankruptcy Court on or before the Confirmation Date. "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 Lender of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.  For purposes of this Agreement, any change in the Base Rate due to a change in the Federal Funds Rate shall be effective as of the opening of business on the effective date of such change.  If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Rate for any reason, including, without limitation, the inability or failure of the Administrative Agent to obtain sufficient bids or publications in accordance with the terms hereof, the Base Rate shall be the Reference Rate until the circumstances giving rise to such inability no longer exist. "Filing Subsidiaries" means, collectively, those Subsidiaries of Borrowers who filed the Plan of Reorganization with the Bankruptcy Court in the Cases. "First Principal Payment Date" means the date which is the last Business Day of the first calendar quarter after the calendar quarter in which the Confirmation Date occurs. "Funded Indebtedness" means, without duplication, all Indebtedness for borrowed money and all Contingent Obligations relating thereto, Capital Lease Obligations and any net obligations of such Person under Swap Contracts on or after termination of the applicable Swap Contract. "GAAP" means generally accepted accounting principles 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 Standards Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied.  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 Borrowers or the Lenders shall so request, the Administrative Agent, the Lenders and Borrowers 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 Lenders), provided that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrowers 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. "Governmental Authority" means (a) any federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, central bank or public body, or (c) any court, administrative tribunal or public utility having jurisdiction over Borrowers. "Guaranty Obligation" means, as applied to any Borrower any direct or indirect liability of that Borrower with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Borrower (the "primary obligor"), including any obligation of that Borrower whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof.  The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the related primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Hazardous Materials" means all those substances which are regulated by, or which may form the basis of liability under, any applicable Environmental Law, including all substances identified under any applicable Environmental Law as a pollutant, contaminant, hazardous waste, hazardous constituent, special waste, hazardous substance, hazardous material, or toxic substance, or petroleum or petroleum derived substance or waste. "Indebtedness" means, as to any Person at a particular time without duplication, all of the following: g. all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; h. any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker's acceptances, bank guaranties, surety bonds and similar instruments; i. net obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, the termination value thereof, or (ii) if such Swap Contract has not been closed out, the mark-to-market value thereof determined on the basis of readily available quotations provided by any recognized dealer in such Swap Contract; j. whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and 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; k. lease payment obligations under Capital Leases or Synthetic Lease Obligations; l. all Guaranty Obligations of such Person in respect of any of the foregoing; and m. all Contingent Obligations; provided that obligations constituting contingent liabilities of such Person as a general partner in respect of operating liabilities of the partnership in which it is such a general partner shall constitute Indebtedness only when and to the extent that such contingent liabilities become due and payable obligations of such general partner. "Indebtedness Proceeds" has the meaning specified in Section 2.3(b). "Indemnified Liabilities" has the meaning specified in Section 10.5. "Indemnified Person" has the meaning specified in Section 10.5. "Interest Coverage Ratio" means the ratio, determined as of the end of each fiscal quarter of Borrowers, listed in the corresponding column under Section 7.21, of (i) consolidated EDITDA of Borrowers and their Subsidiaries for the trailing four quarters to (ii) consolidated Interest Expense of Borrowers and their Subsidiaries for the trailing four quarters. "Interest Expense" means, for any Person for any fiscal period, the sum of the amount of all interest on total Indebtedness that was paid, payable and/or accrued for such fiscal period. "Interest Payment Date" means the last Business Day of each Interest Period applicable to each Loan. "Interest Period" means the period commencing on the Closing Date and ending on the date one, two or three months thereafter, as selected by Borrowers in their notice to the Administrative Agent from time to time; provided that: (a) if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (b) any Interest Period that 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; (c) no Interest Period for any Loan shall extend beyond the Termination Date; and (d) no Interest Period applicable to any Loan shall extend beyond the next Quarterly Principal Payment Date. "Joint Venture" means a single-purpose corporation, partnership, limited liability company, joint venture or other similar legal arrangement (whether created pursuant to contract or conducted through a separate legal entity) now or hereafter formed by Borrowers or any of their Subsidiaries with another Person in order to conduct a common venture or enterprise with such Person. "Laws" or "Law" means all applicable 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. "Leasehold Deeds of Trust" means those certain Leasehold Deeds of Trust and Fixture Filing and Assignment of Leases and Rents, substantially in the form of Exhibit I, entered into between UATC, a trustee appointed in each relevant jurisdiction and the Administrative Agent, as modified to conform to the requirements of any given jurisdiction. "Lender" has the meaning specified in the introductory clause hereto and includes successors and permitted assigns pursuant to Section 10.8. "Lender Affiliate" means a Person which is an Affiliate of a Lender. "Lending Office" means, with respect to any Lender, the office or offices of the Lender specified as its "Lending Office" opposite its name on the applicable signature page hereto, or such other office or offices of the Lender as it may from time to time specify in writing to Borrowers and the Administrative Agent. "Letter Agreement" has the meaning specified in Section 2.7(a). "LIBO Rate" means with respect to any Borrowing for the Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "LIBO Rate Loan" means a Loan that bears interest based on the LIBO Rate. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement (in the nature of compensating balances, cash collateral accounts or security interests), encumbrance, lien (statutory or other), charge, or priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable Laws of any jurisdiction), including the interest of a purchaser of accounts receivable. "Loan(s)" means extensions of credit by a Lender to or for the benefit of Borrowers pursuant to Section 2.1. "Loan Documents" means this Agreement, the Notes, the Security Agreements, UCC Financing Statements, the Release of Claims, all documents, agreements, certificates, or instruments delivered to the Administrative Agent, or the Lenders in connection therewith, and any amendments, supplements, modifications, renewals, or restatements of any thereof. "Majority Lenders" means, at any time, the Lenders then having or holding more than fifty percent (50%) of the Aggregate Commitment. "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the Federal Reserve Board. "Material Adverse Effect" means any set of circumstances or events (other than the filing and prosecution of the Cases and as may be contemplated by the Plan of Reorganization) which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business, assets or operations of Borrowers and their Subsidiaries, taken as a whole, or (c) materially impairs or could reasonably be expected to materially impair the ability of Borrowers and their Subsidiaries, taken as a whole, to perform the Obligations. "Material Subsidiary" means, at any particular time, any Wholly-Owned Subsidiary of Borrowers that, together with the Subsidiaries of such Subsidiary, (a) accounted for more than five percent of EBITDA for the most recently completed four fiscal quarters of Borrowers and their Subsidiaries on a Consolidated basis or (b) was the owner of more than five percent of the Consolidated assets of Borrowers and their Subsidiaries as at the end of the most recent fiscal quarter of Borrowers. "Modifications of Deed of Trust" means the instruments, substantially in the form of Exhibit J, pursuant to which the Deeds of Trust are modified in connection with the execution of this Agreement. "Multiemployer Plan" means a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) and to which any member of the Controlled Group makes, is making, or is obligated to make contributions or has within the immediately preceding period including five full Plan years made, or been obligated to make, contributions. "Mortgages" means the deeds of trust, mortgages and other documents executed and delivered by Borrowers to the Administrative Agent, at the Administrative Agent's option, in connection with encumbering in favor of the Administrative Agent, on behalf of the Lenders, the real property more specifically described in Schedule 1.2 attached hereto. "Negative Pledge" means a Contractual Obligation that contains a covenant binding on Borrowers or any of their Subsidiaries that prohibits Liens on any of their property in favor of the Collateral Agent for the Lenders party hereto, other than any such covenant contained in a Contractual Obligation which affects only the-property that is the subject of such Contractual Obligation. "Net Proceeds" means proceeds in cash, checks or other cash equivalent financial instruments (including Cash Equivalent) as and when received by Borrowers or their Subsidiaries making a Disposition (other than a Permitted Disposition), net of (a) the direct costs relating to such Disposition (including fees, expenses and commissions with respect to legal, accounting, financial advisory, brokerage and other professional services provided in connection with such disposition) excluding amounts payable to Borrowers or any Affiliate of Borrowers, (b) sale, use or other transaction taxes paid or payable as a result thereof, and (c) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured by a Lien on the asset which is the subject of such Disposition.  "Net Proceeds" shall also include proceeds received by any Person in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents in respect of any Event of Loss net of (i) all money actually applied (or committed to be applied within six months of the Disposition) to repair or reconstruct the damaged property or property affected by the condemnation or taking, (ii) all of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other payments and (iii) any amounts retained by or paid to parties having superior rights to such proceeds, awards or other payments. "Note" means a promissory note of Borrowers payable to the order of a Lender in substantially the form of Exhibit A, evidencing the aggregate indebtedness of Borrowers to such Lender resulting from a Loan made by such Lender which indebtedness constitutes the joint and several obligations of each of Borrowers and its Subsidiaries. "Notice of Lien" means any notice of lien or similar document intended to be filed or recorded with any court, registry, recorder's office, central filing office or other Governmental Authority for the purpose of evidencing, creating, perfecting or preserving the priority of a Lien securing obligations owing to a Governmental Authority. "Notice to Depositary Institution" means, with respect to each deposit account in which any of Borrowers have an interest, a notice signed by the relevant Borrower and the Administrative Agent, in the form of Exhibit B, to be given to the depositary institution where such deposit account is maintained, for the purpose of notifying such depositary institution of the security interest of the Administrative Agent in such deposit account, and for the purpose of perfecting such security interest to the extent that it may be perfected by the giving of such a notice. "Obligations" means all Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owing by Borrowers to any Lender or the Administrative Agent, of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement or under any other Loan Document, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, 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. "Operating Lease" means, as applied to any Borrower, any lease of Property which is not a Capital Lease. "Ordinary Course of Business" means, in respect of any transaction involving Borrowers or any Subsidiary of Borrowers, the ordinary course of such Person's business, as conducted by any such Person reasonably in accordance with past practice and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document. "Organization Documents" means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of shareholders of such corporation. "Original Credit Agreement" shall have the meaning ascribed to such term in the Recitals to this Agreement. "Other Taxes" has the meaning specified in subsection 3.1(b) "Participant" has the meaning specified in subsection 10.8(d). "Permitted Disposition" has the meaning specified in Section 7.2. "Permitted Liens" has the meaning specified in Section 7.1. "Person" means any individual, trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, joint venture, Governmental Authority, or otherwise. "Petition Date" means September 5, 2000, the date on which Borrowers filed their respective petitions for relief commencing the Cases. "PIK" means Paid-in-Kind. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which Borrowers or any member of the Controlled Group sponsors or maintains or to which Borrowers or member of the Controlled Group makes or is obligated to make contributions, and includes any Multiemployer Plan or a Qualified Plan. "Plan of Reorganization" means the Chapter 11 Joint Plan of Reorganization of Borrowers and their Filing Subsidiaries filed in the Cases on September 5, 2000, as amended and may be further modified or amended from time to time. "Pledged Subsidiaries" means Subsidiaries of Borrowers, all the issuing and outstanding capital stock or other ownership interest of which are pledged pursuant to the Security Agreements. "Property" means any estate or interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible including, without limitation, all Capital Leases and Operating Leases, and any assets constituting Collateral under the terms of this Agreement. "Qualified Plan" means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified under Section 40.1(a) of the Code and which any member of the Controlled Group sponsors, maintains, or to which it makes or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period including five full Plan years; but excluding any Multiemployer Plan. "Quarterly Principal Payment Date" means the last Business Day of each calendar quarter after the First Principal Payment Date up to and including the Termination Date. "Reference Rate" means the rate per annum determined by BofA from time to time as its Reference Rate of interest and publicly announced as such from time to time by BofA.  The Reference Rate is set by BofA based upon various factors including its costs and desired return, general economic conditions and other factors, and such rate is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in the reference rate announced shall take effect at the opening of business on the day BofA publicly announces such rate. "Release of Claims" means the Release of Claims attached on Schedule 10.22 hereto in favor and for the benefit of the Administrative Agent and the Lenders. "Requisite Notice" means, unless otherwise provided herein, (a) irrevocable written notice to the intended recipient or (b) irrevocable telephonic notice to the intended recipient, promptly confirmed by a written notice to such recipient.  Such notices shall be (i) delivered or made to such recipient at the address, telephone number or facsimile number set forth on Schedule 1.1(b) or as otherwise designated by such recipient by Requisite Notice to the Administrative Agent and (ii) if made by Borrowers, given or made by a Responsible Officer.  Any written notice shall be in the form, if any, prescribed in the applicable section herein and may be given by facsimile provided such facsimile is promptly confirmed by a telephone call to such recipient. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Responsible Officer" means the president or chief financial officer of a Borrower.  Any document or certificate hereunder that is signed by a Responsible Officer of a Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Borrower. "Sale-and-Leaseback Transaction" means any transaction or series of related transactions pursuant to which any of Borrowers or their Subsidiaries sells or transfers any real or tangible property or asset in connection with the leasing, or the resale against installment payments, or as part of an arrangement involving the leasing or the resale against installment payments, of such property or asset to the seller or transferor. "SEC" means the Securities and Exchange Commission, or any successor thereto. "Secretary" means the Secretary of a Borrower. "Security Agreement" means that certain Security Agreement of even date herewith, entered into between Borrowers and the Administrative Agent, at the option of the Administrative Agent, substantially in the form of Exhibit F. "Security Agreements" means the Security Agreement, the UAPH II Stock Pledge Agreement, the Stock Pledge Agreement, the Modifications of Deed of Trust, the Deeds of Trust, the Mortgages, the Leasehold Deeds of Trust, UCC Financing Statements and any one or more of them, together with all other Collateral documents, if any, executed in connection with this Agreement. "Stock Pledge Agreement" means that certain Stock Pledge Agreement dated of even date herewith, entered into between Borrowers and the Administrative Agent, at the option of the Administrative Agent, substantially in the form of Exhibit G. "Subsidiary" of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which greater than fifty percent (50%) of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of Borrowers. "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, as amended, restated, extended supplemented or otherwise modified in writing from time to time, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement. "Synthetic Lease Obligations" means all monetary obligations 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 which 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" has the meaning specified in subsection 3.1(a). "Term Sheet" means that certain Term Sheet, dated as of August 11, 2000, attached as Schedule B hereto, among BofA, the Lenders, Borrowers, Morgens, Waterfall, Vintiadis & Company, Inc., Van Kampen Prime Rate Income Trust, Van Kampen Senior Income Trust, the Anschutz Corporation, E.N. Investment Company, UAB, Inc., UAB II, Inc., Tallthe, Inc., UA Theatre Amusements, Inc., UA Property Holding II, Inc., Beth Page Theatre Co., Inc., U.A.P.R., Inc., King Reavis Amusement Company, UA International Property Holding, Inc., United Artists International Management Company, and United Film Distribution Company of South America. "Termination Date" means the earliest to occur of: i. the first Business Day which is four (4) years after the Confirmation Date; and ii. the date on which the Credit Commitments shall terminate, or shall be reduced to zero, in accordance with the provisions of this Agreement including, without limitation, due to a Default or an Event of Default. "Theatre" or "Theatres" means theatres owned or operated by any of Borrowers or their Subsidiaries from time to time. "Total Leverage Ratio" means the ratio, determined as of the end of each fiscal quarter of Borrowers, listed in the corresponding column under Section 7.21, of (i) consolidated total Funded Indebtedness of Borrowers and their Subsidiaries for the trailing four quarters to (ii) consolidated EBITDA of Borrowers and their Subsidiaries for the trailing four quarters. "Transferee" has the meaning specified in subsection 10.8(e). "UAPH II" means UA Property Holding II, Inc., a Colorado corporation. "UAPH II Stock Pledge Agreement" means that certain Stock Pledge Agreement dated of even date herewith, entered into between UAPH II and the Administrative Agent, at the option of the Administrative Agent, substantially in the form of Exhibit H. "UARC Leases" means (a) the Lease Agreement, dated as of November 1, 1988, between Prop I and UAT, as amended or otherwise modified by (i) the First Amendment thereto, dated as of May 1, 1990, (ii) the Second Amendment thereto, dated as of September 1, 1990, and (iii) the Assignment of Lease Agreement, dated as of November 1, 1988, from Prop I to The Connecticut Lender, and (b) the Master Lease Agreement and Master Sublease Agreement, each dated as of the date of the Indenture, between UARC and UAT, in each case, as such agreements are amended, supplemented or otherwise modified as permitted hereunder. "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "UCC Financing Statements" means the financing statements to be signed and delivered by Borrowers to the Administrative Agent, at the Administrative Agent's option, to perfect the security interests granted in the Security Agreements (to the extent that such security interests may be perfected by the filing of financing statements), in form and substance satisfactory to the Administrative Agent, as they may from time to time be amended, modified, or continued. "Unfunded Pension Liabilities" means the excess of the present value of a Plan's accrued benefits, as defined in Section 3(23) of ERISA, as of the most recent valuation date for such Plan utilizing the actuarial assumptions set forth in such valuation, over the current value of that Plan's assets, as defined in Section 3(26) of ERISA, as of such date. "United States" and "U.S." each means the United States of America. "Wholly-Owned Subsidiary" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by Borrowers, or by one or more of the other direct or indirect Wholly-Owned Subsidiaries, or both. "Working Group" means BofA, Morgens, Waterfall, Vintiadis & Company, Inc. and Van Kampen Investment Advisory Corp. in their respective capacity as Lenders. 1. Other Interpretive Provisions a. Defined Terms .  Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto.  The meaning of defined terms shall be equally applicable to the singular and plural forms of the defined terms.  Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the California UCC shall have the meanings therein described. b. The Agreement .  The words "hereof," "herein," "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, section, schedule and exhibit references are to this Agreement unless otherwise specified.  All exhibits and schedules to this Agreement are hereby deemed incorporated herein by this reference as a part of this Agreement. c. Certain Common Terms The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced; The term "including" is not limiting and means "including without limitation"; and The term "or" is not exclusive and has the meaning commonly associated with the phrase "and/or." d. Performance; Time .  Whenever any performance obligation hereunder shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day.  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."  If any provision of this Agreement refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all commercially reasonable means, direct or indirect, of taking, or not taking, such action. e. Contract .  Unless otherwise expressly provided herein or therein, references in the Loan Documents to agreements and other contractual instruments shall be deemed to include all subsequent amendments, modifications, renewals, extensions, replacements, supplements to, and restatements thereto, but only to the extent the same are not prohibited by the terms of any Loan Document. f. Laws .  References to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. g. Captions .  The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. h. Independence of Provision .  The parties acknowledge that this Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each be performed, except as expressly stated to the contrary in this Agreement. 2. Accounting Principles a. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. b. References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of Borrowers, for example, "Fiscal Year 1999" refers to the fiscal year of Borrowers ended December 30, 1999. 3. Rounding .  Any financial ratios required to be maintained by Borrowers 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 in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 4. Exhibits and Schedules .  All exhibits and schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference.  A matter disclosed on any Schedule shall be deemed disclosed on all Schedules. THE TERM CREDIT 1. Amounts and Terms of Credit Commitments .  Each Lender severally agrees, on the terms and conditions hereinafter set forth, to maintain a Loan to Borrowers in an aggregate amount not to exceed the amount set forth opposite such Lender's name in Schedule 2.1 under the heading "Credit Commitment" (such amount as the same may or shall be reduced pursuant to Section 2.3 or as a result of one or more assignments pursuant to Section 10.8, the Lender's "Credit Commitment"). Notes .  The Loan maintained by each Lender shall be evidenced by a Note payable to the order of that Lender in an amount equal to its Credit Commitment. Mandatory Prepayments a. The Credit Commitments shall be automatically reduced by an amount equal to seventy-five percent (75%) of the Net Proceeds.  During the occurrence and continuance of a Default or Event of Default, the Credit Commitments shall be automatically reduced by one hundred percent (100%) of the Net Proceeds; provided, however, that Borrowers may, at their election, retain the Net Proceeds of up to $3 million per year following the Confirmation Date (the "Annual Retained Proceeds") (in addition to the twenty-five percent (25%) of the Net Proceeds that Borrowers may retain pursuant to this Section 2.3(a)); provided further that if in any year following the Confirmation Date Borrowers and their Subsidiaries have retained no Net Proceeds, or the Net proceeds so retained are less than $3 million, then the difference between $3 million and the amount so retained may be carried forward only to the next succeeding year.  Borrowers shall immediately notify the Administrative Agent of the occurrence of any such transaction giving rise to the Net Proceeds. b. The Credit Commitments shall be automatically reduced by one hundred percent (100%) of the proceeds of any indebtedness incurred for borrowed money and/or equity securities (other than grant of stock options pursuant to the Term Sheet and the issuance of equity securities upon the exercise thereof) issued by Borrowers or any of their Subsidiaries (the "Indebtedness Proceeds") except for the following: i. indebtedness incurred by a Subsidiary that is not directly or indirectly wholly owned by UA or UATC; ii. Additional Debt; iii. Anschutz Sub Debt (subject to the provisions set forth below); iv. Exit Facility; and v. indebtedness (1) secured by liens or negative pledges on Property, which liens or negative pledges were created pursuant to Contractual Obligations in effect when such Property was purchased; and (2) secured by purchase money security interests incurred in the Ordinary Course of Business. Notwithstanding any other provision contained herein, any Anschutz Sub Debt:  (i) shall be subordinate to Borrowers' Obligations under this Agreement; (ii) shall be payable from Borrowers only, with no upstream credit support of any Subsidiaries of Borrowers; (iii) shall have no cash payment (whether principal, interest, dividend or otherwise) until the later of (x) the maturity of the Anschutz Sub Debt or (y) payment in full in cash of all Obligations (other than Continent Obligations and indemnities that survive the repayment of the Loans) under this Agreement; and (iv) shall have a maturity date no earlier than one (1) year after the Termination Date. Repayments .  Commencing on the First Principal Payment Date and for each Quarterly Principal Payment Date thereafter, Borrowers shall repay to the Lenders in full the Loans as follows:  (a) one quarter of one percent (1%) per quarter of the Aggregate Commitment for each of the first three (3) years; (b) two and one-half percent (2.5%) per quarter of the Aggregate Commitment on each Quarterly Principal Payment Date for the final year; and (c) a final payment of the unpaid principal balance of the Aggregate Commitment on the Termination Date.  Notwithstanding the foregoing, Borrowers may, subject to the terms of Section 10.4(d) and upon at least three (3) Business Days' notice to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given Borrowers will on such proposed date, prepay the outstanding principal amount of the Loans in whole or in part in the aggregate amount stated in such notice, without penalty or premium but with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that each partial prepayment shall be in the aggregate principal amount of $1,000,000 or an integral multiple of $500,000 in excess thereof. Joint Borrower Provisions .  Each Borrower represents to the Lenders that each is an integral part of a consolidated enterprise, and that each Borrower will receive direct and indirect benefits from the availability of the joint credit facility provided for herein, and from the ability to access the collective credit resources of the consolidated enterprise that are Borrowers.  Each Borrower irrevocably authorizes each other Borrower to act on its behalf in requesting, authorizing, and using the proceeds of the Loans made hereunder, and each Borrower agrees to be bound by the acts of each of the others in connection with the Loan Documents. Each Borrower is, and at all times shall be, jointly and severally liable for each and every one of the Obligations hereunder, regardless of which Borrower requested, received, used, or directly enjoyed the benefit of the extensions of credit hereunder.  Unless otherwise expressly set forth to the contrary in any of the Security Agreements, all of the Collateral provided under the Security Agreements shall secure all of the Obligations.  Each Borrower's Obligations under this Agreement are independent Obligations and are absolute and unconditional.  Each Borrower, to the extent permitted by law, hereby waives any defense to such Obligations that may arise by reason of the disability or other defense or cessation of liability of any other Borrower for any reason other than payment in full.  Each Borrower also waives any defense to such Obligations that it may have as a result of any holder's election of or failure to exercise any right, power, or remedy, including, without limitation, the failure to proceed first against such other Borrower or any security it holds for such other Borrower's Obligations under any Loan Document, if any.  Without limiting the generality of the foregoing, each Borrower expressly waives all demands and notices whatsoever (except for any demands or notices, if any, that such Borrower expressly is entitled to receive pursuant to the terms of any Loan Document), and agrees that the Lenders and the Administrative Agent may, without notice (except for such notice, if any, as such Borrower expressly is entitled to receive pursuant to the terms of any Loan Document) and without releasing the liability of such Borrower, extend for the benefit of any other Borrower the time for making any payment, waive or extend the performance of any agreement or make any settlement of any agreement for the benefit of any other Borrower, and may proceed against each Borrower, directly and independently of any other Borrower, as such obligee may elect in accordance with this Agreement. Each Borrower acknowledges that the Obligations of such Borrower undertaken herein or in the other Loan Documents, and the grants of security interests and liens by such Borrower to secure Obligations of the other Borrowers could be construed to consist, at least in part, of the guaranty of Obligations of the other Borrowers and, in full recognition of that fact, each Borrower consents and agrees as hereinafter set forth in the balance of this Section 2.5.  The consents, waivers, and agreements of the Borrowers that are contained in the balance of this Section 2.5 are intended to deal with the suretyship aspects of the transactions evidenced by the Loan Documents (to the extent that a Borrower may be deemed a guarantor or surety for the Obligations of another Borrower) and thus are intended to be effective and applicable only to the extent that any Borrower has agreed to answer for the Obligations of another Borrower or has granted a lien or security interest in Collateral to secure the Obligations of another Borrower.  Conversely, the consents, waivers, and agreements of the Borrowers that are contained in the balance of this Section 2.5 shall not be applicable to the direct Obligations of a Borrower with respect to credit extended directly to such Borrower, and shall not be applicable to security interests or liens on Collateral of a Borrower given to directly secure direct Obligations of such Borrower where no aspect of guaranty or suretyship is involved.  Each Borrower consents and agrees that the Lenders may, at any time and from time to time, without notice or demand, whether before or after any actual or purported termination, repudiation or revocation of this Agreement by any one or more Borrowers, and without affecting the enforceability or continuing effectiveness hereof as to such Borrower, in accordance with the terms of the Loan Documents:  (a) supplement, restate, modify, amend, increase, decrease, extend, renew, accelerate or otherwise change the time for payment or the terms of the Obligations or any part thereof, including any increase or decrease of the rate(s) of interest thereon; (b) supplement, restate, modify, amend, increase, decrease or waive, or enter into or give any agreement, approval or consent with respect to, the Obligations or any part thereof, or any of the Loan Documents or any security or guarantees granted or entered into by any Person(s) other than such Borrower, or any condition, covenant, default, remedy, right, representation or term thereof or thereunder; (c) accept new or additional instruments, documents or agreements in exchange for or relative to any of the Loan Documents or the Obligations or any part thereof, (d) accept partial payments on the Obligations; (e) receive and hold additional security or guarantees for the Obligations or any part thereof, (f) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer or enforce any security or guarantees, and apply any security and direct the order or manner of sale thereof as the Lenders in their sole and absolute discretion may determine; (g) release any other Person (including, without limitation, any other Borrower) from any personal liability with respect to the Obligations or any part thereof, (h) with respect to any Person other than such Borrower (including, without limitation, any other Borrower), settle, release on terms satisfactory to the Lenders or by operation of applicable laws or otherwise liquidate or enforce any Obligations and any security therefor or guaranty thereof in any manner, consent to the transfer of any security and bid and purchase at any sale; or (i) consent to the merger, change or any other restructuring or termination of the corporate or partnership existence of any other Borrower or any other Person, and correspondingly agree, in accordance with all applicable provisions of the Loan Documents, to the restructure of the Obligations, and any such merger, change, restructuring or termination shall not affect the liability of any Borrower or the continuing effectiveness hereof, or the enforceability hereof with respect to all or any part of the Obligations. Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent may enforce the Loan Documents independently as to each Borrower and independently of any other remedy or the Administrative Agent at any time may have or hold in connection with the Obligations, and, subject to the provisions of Section 8.3, it shall not be necessary for the Administrative Agent to marshal assets in favor of any Borrower or any other Person or to proceed upon or against or exhaust any security or remedy before proceeding to enforce this Agreement.  Each Borrower expressly waives, subject to the provisions of Section 8.3, any right to require the Administrative Agent to marshal assets in favor of any Borrower or any other Person or to proceed against any other Borrower or any collateral provided by any Person, and agrees that, subject to the provisions of Section 8.3, the Administrative Agent may proceed against Borrowers or any collateral in such order as it shall determine in its sole and absolute discretion. The Administrative Agent may file a separate action or actions against any Borrower, whether action is brought or prosecuted with respect to any security or against any other Person, or whether any other Person is joined in any such action or actions.  Each Borrower agrees, for itself, that the Administrative Agent and any other Borrower, or any Affiliate of any other Borrower (other than such Borrower itself), may deal with each other in connection with the Obligations or otherwise, or alter any contracts or agreements now or hereafter existing between any of them, in any manner whatsoever, all without in any way altering or affecting the continuing efficacy as to such Borrower of the Loan Documents. The Administrative Agent's and the Lenders' rights hereunder shall be reinstated and revived, and the enforceability of this Agreement shall continue, with respect to any amount at any time paid on account of the Obligations which thereafter shall be required to be restored or returned by the Administrative Agent or the Lenders (including, without limitation, the restoration or return of any amount pursuant to a court order or judgment (whether or not final or non-appealable), or pursuant to a good faith settlement of a pending or threatened avoidance or recovery action, or pursuant to good faith compliance with a demand made by a Person believed to be entitled to pursue an avoidance or recovery action (such as a bankruptcy trustee or a Person having the avoiding powers of a bankruptcy trustee, or similar avoiding powers), and without requiring the Administrative Agent or the Lenders to oppose or litigate avoidance or recovery demands or actions that it believes in good faith to be meritorious or worthy of settlement or compliance, or pursue or exhaust appeals), all as though such amount had not been paid.  The rights of the Administrative Agent or the Lenders created or granted herein and the enforceability of the Loan Documents at all times shall remain effective to cover the full amount of all the Obligations even though the Obligations, including any part thereof or any other security or guaranty therefor, may be or hereafter may become invalid or otherwise unenforceable as against any other Borrower and whether or not any other Borrower shall have any personal liability with respect thereto. To the maximum extent permitted by applicable law, each Borrower, for itself, expressly waives any and all defenses now or hereafter arising or that otherwise might be asserted by reason of (a) any disability or other defense of any other Borrower with respect to the Obligations or with respect to the enforceability of the Administrative Agent's security interest in or lien on any collateral securing any of the Obligations (including, without limitation, the Collateral), (b) the unenforceability or invalidity of any security or guaranty for the Obligations or the lack of perfection or continuing perfection or failure of priority of any security for the Obligations, (c) the cessation for any cause whatsoever of the liability of any other Borrower (other than by reason of the full payment and performance of all Obligations), (d) any failure of the Administrative Agent to give notice of sale or other disposition of Collateral to any other Borrower or any other Person other than such waiving Borrower, or any defect in any notice that may be given to any other Borrower for any other Person other than such waiving Borrower, in connection with any sale or disposition of any collateral securing the Obligations or any of them (including, without limitation, the Collateral), (e) any failure of the Administrative Agent to comply with applicable law in connection with the sale or other disposition of any collateral or other security for any Obligation that is owned by another Borrower or by any other Person other than such waiving Borrower, including any failure of the Administrative Agent to conduct a commercially reasonable sale or other disposition of any such collateral or other security for any Obligation, (f) any act or omission of the Administrative Agent or others that directly or indirectly results in or aids the discharge or release of any other Borrower, or the Obligations of any other Borrower, or any security or guaranty therefor, by operation of law or otherwise, or (g) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety's or guarantor's obligation in proportion to the principal obligation.  Until such time, if any, as all of the Obligations (other than contingent obligations and indemnities which survive repayment of the Loans) have been paid and performed in full and no portion of any commitment of the Lenders to any Borrower under any Loan Document remains in effect, no Borrower shall have any right of subrogation, contribution, reimbursement or indemnity, and each Borrower expressly waives any right to enforce any remedy that the Administrative Agent now has or hereafter may have against any other Person and waives the benefit of, or any right to participate in, any collateral now or hereafter held by the Administrative Agent.  Except to the extent expressly provided for in any Loan Document, each Borrower expressly waives, to the maximum extent permitted by applicable law, all rights or entitlements to presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Obligations, and all notices of acceptance of the Loan Documents or of the existence, creation or incurring of new or additional Obligations. In the event that all or any part of the Obligations at any time should be or become secured by any one or more deeds of trust or mortgages or other instruments creating or granting liens on any interests in real property, each Borrower authorizes the Administrative Agent, upon the occurrence of and during the continuance of any Event of Default, at its sole option, without notice or demand except as is or may be expressly required by the terms of any Loan Document or by the provisions of any applicable law, to foreclose any or all of such deeds of trust or mortgages or other instruments by judicial or non-judicial sale, without affecting or diminishing, except to the extent of the effect of the application of the proceeds realized therefrom, and except to the extent mandated by any non-waivable provision of applicable law, the Obligations of any Borrower (other than the Obligations of a grantor of a foreclosed deed of trust, mortgage, or other instrument, to the extent, if any, that applicable law affects or diminishes the Obligations of such grantor), the enforceability of this Agreement or any other Loan Document, or the validity or enforceability of any remaining security interests or liens of, or for the benefit of, the Lenders on any Collateral. Each Borrower hereby agrees to keep each other Borrower fully apprised at all times as to the status of its business, affairs, finances, and financial condition, and its ability to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect thereto.  Each Borrower hereby agrees to undertake to keep itself apprized at all times as to the status of the business, affairs, finances, and financial condition of each other Borrower, and of the ability of each other Borrower to perform its Obligations under the Loan Documents, and in particular as to any adverse developments with respect to any thereof.  Each Borrower hereby agrees, in light of the foregoing mutual covenants to inform each other, and to keep themselves and each other informed as to such matters, that the Lenders shall have no duty to inform any Borrower of any information pertaining to the business, affairs, finances, or financial condition of any other Borrower, or pertaining to the ability of any other Borrower to perform its Obligations under the Loan Documents, even if such information is adverse, and even if such information might influence the decision of one or more of the Borrowers to continue to be jointly and severally liable for, or to provide Collateral for, Obligations of one or more of the other Borrowers.  To the fullest extent permitted by applicable law, each Borrower hereby expressly waives any duty of the Lenders to inform any Borrower of any such information, Borrowers and each of them warrant and agree that each of the waivers and consents set forth herein are made after consultation with legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, or otherwise adversely affect rights that Borrowers otherwise may have against other Borrowers, Lenders, or others, or against Collateral, and that, under the circumstances, the waivers and consents herein given are reasonable and not contrary to public policy or law.  If any of the waivers or consents herein are determined to be contrary to any applicable law or public policy, such waivers and consents shall be effective to the maximum extent permitted by law. Interest a. Subject to subsections 2.6(c) and 2.6(d), each Loan shall bear interest on the outstanding principal amount thereof from the Closing Date until it becomes due at a rate per annum equal to the LIBO Rate plus the Applicable Margin. b. Interest on each Loan shall be paid in arrears on each Interest Payment Date.  Interest shall also be paid on the date of any prepayment of Loans pursuant to Section 2.4 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand. c. While any Event of Default exists, subject to the following paragraph of this subsection 2.6(c), Borrowers shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of the Loans outstanding, at a rate per annum equal to the LIBO Rate plus the Applicable Margin plus an additional 2%. The foregoing notwithstanding, if any amount of principal of or interest on any Loan, or any other amount payable hereunder or under any of the other Loan Documents is not paid in full when due (whether at stated maturity, by acceleration, demand or otherwise), Borrowers agree to pay interest on such unpaid principal or other amount, from the date such amount becomes due until the date such amount is paid in full, and after as well as before any entry of judgment thereon to the extent permitted by law, payable on demand, at a rate per annum equal to the LIBO Rate plus the Applicable Margin plus an additional 2%. d. Anything herein to the contrary notwithstanding, the Obligations of Borrowers hereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by the respective Lender would be contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest which may be lawfully contracted for, charged or received by such Lender, and in such event Borrowers shall pay such Lender interest at the highest rate permitted by applicable law. Fees a. Administrative Agent Fees .  Borrowers shall pay to the Administrative Agent an administrative agent fee in the amount set forth in a letter agreement dated as of August 16, 2000, by and between the Administrative Agent and UAT (the "Letter Agreement"), payable on the Confirmation Date, and on each anniversary thereafter.  The administrative agent fee is for the services to be performed by the Administrative Agent in acting as Administrative Agent and is fully earned on the date paid.  The administrative agent fee paid to the Administrative Agent is solely for its own account and is non-refundable. b. Collateral Agent Fees .  Borrowers shall pay to the Collateral Agent a collateral agent fees in the amounts set forth in the Letter Agreement, payable on the Confirmation Date, and on each anniversary thereafter.  The collateral agent fees are for the services to be performed by the Collateral Agent in acting as Collateral Agent and are fully earned on the date paid.  The collateral agent fees paid to the Collateral Agent are solely for its own account and are non-refundable. c. Agent Work Fee .  Borrowers shall pay to the Administrative Agent an agent work fee in the amount set forth in the Letter Agreement, payable on the Confirmation Date.  The agent work fee is for the services performed by the Administrative Agent in arranging the restructured term credit facility and is fully earned on the date paid.  The agent work fee paid to the Administrative Agent is solely for its own account and is non-refundable. d. Working Group and E.N. Fee .  Borrowers shall pay to the Administrative Agent on the Confirmation Date (to be held in trust for the Working Group and E.N.) a Working Group and E.N. fee in an amount equal to $1,000,000.  On the Confirmation Date, or as soon thereafter as practicable, the Working Group and E.N. shall pay such fee (provided that said fee has been actually received) to the equity holders of Borrowers existing as of the Confirmation Date in exchange for a covenant not to sue certain third parties on certain causes of action related to Borrowers and their Subsidiaries. Computation of Fees and Interest .  Computation of interest (including, without limitation, interest pursuant to subsection 2.6(a)) and fees for any Loan shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to the Lenders than a method based on a year of 365 or 366 days.  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 bear interest for one day. Payments by Borrowers a. All payments (including prepayments) to be made by Borrowers on account of principal, interest, fees and other amounts required hereunder shall be made without set-off, recoupment or counterclaim and shall, except as otherwise expressly provided herein, be made to the Administrative Agent for the account of the Lenders at the Administrative Agent's Payment Office, in dollars and in immediately available funds, no later than 11:00 a.m. (Los Angeles time) on the date specified herein.  The Administrative Agent will promptly distribute to each Lender its Commitment Percentage of such principal, interest, fees or other amounts, in like funds as received.  Any payment which is received by the Administrative Agent later than 2:00 p.m. (Los Angeles time) shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. b. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. c. Unless the Administrative Agent shall have received notice from Borrowers prior to the date on which any payment is due to the Lenders hereunder that Borrowers will not make such payment in full as and when required hereunder, the Administrative Agent may assume that Borrowers have made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, 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 Borrowers shall not have made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest thereon 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, at the Federal Funds Rate as in effect for each such day. Sharing of Payments, Etc .  If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Commitment Percentage of payments on account of the Loans obtained by all the Lenders, such Lender shall forthwith (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter required to be restored or returned by the purchasing Lender (including, without limitation, the restoration or return of any amount pursuant to a court order or judgment (whether or not final or non-appealable), or pursuant to a good faith settlement of a pending or threatened avoidance or recovery action, or pursuant to good faith compliance with a demand made by a Person believed to be entitled to pursue an avoidance or recovery action (such as a bankruptcy trustee or a Person having the avoiding powers of a bankruptcy trustee, or similar avoiding powers), and without requiring such purchasing Lender to oppose or litigate avoidance or recovery demands or actions that it believes in good faith to be meritorious or worthy of settlement or compliance, or pursue or exhaust appeals), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's Commitment Percentage (according to the proportion of (i)  the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.  Borrowers each agree that any Lender so purchasing a participation from another Lender pursuant to this Section 2.10 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.9) with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation.  The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased pursuant to this Section 2.10 and will in each case notify the Lenders following any such purchases or repayments. TAXES AND YIELD PROTECTION 1. Taxes a. Subject to Section 3.01(g), any and all payments by Borrowers to each Lender or the Administrative Agent under this Agreement shall be made free and clear of, and without deduction or withholding for, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Administrative Agent, such taxes (including income taxes or franchise taxes) as are imposed on or measured by each Lender's net income by the jurisdiction under the laws of which such Lender or the Administrative Agent, as the case may be, is organized or maintains a Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). b. In addition, Borrowers shall pay any present or future stamp or documentary taxes or any other excise taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents (hereinafter referred to as "Other Taxes"). c. Subject to Section 3.01(g), Borrowers shall indemnify and hold harmless each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 3.1) paid by such Lender or the Administrative Agent and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted; provided, however, that any Person receiving from Borrowers such an indemnification payment shall provide to Borrowers proof of payment of such Taxes or Other Taxes, accompanied by a certificate stating that such Person reasonably believes that such amount was properly due and payable, or, if reasonable grounds exist on which to contest such payment, so notifying Borrowers thereof, so that appropriate remedies may be pursued.  Payment under this indemnification shall be made within 30 days from the date such Lender or the Administrative Agent makes written demand therefor. d. If Borrowers shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, then, subject to Section 3.01(g): 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 3.1) such Lender or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made; ii. Borrowers shall make such deductions; and iii. Borrowers shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. e. Within 30 days after the date of any payment by Borrowers of Taxes or Other Taxes, Borrowers shall furnish to the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment satisfactory to the Administrative Agent. f. Subject, in the case of clauses (f)(i), (ii) and (iii) below, to Section 3.10, each Lender which is a foreign Person (i.e., a Person other than a United States Person for United States Federal income tax purposes) agrees that:  (i) it shall, no later than the Closing Date (or, in the case of a Lender which becomes a party hereto pursuant to Section 10.8 after the Closing Date, the date upon which the Lender becomes a party hereto) deliver to Borrowers through the Administrative Agent: (A) if any Lending Office is located in the United States, two accurate and complete signed originals of Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), and (B) if any Lending Office is located outside the United States, two accurate and complete signed originals of Internal Revenue Service Form 1001 or any successor thereto ("Form 1001"), in each case indicating that the Lender is on the date of delivery thereof entitled to receive payments of principal, interest and fees for the account of each such Lending Office under this Agreement free from withholding of United States Federal income tax; (ii) if at any time the Lender changes its Lending Office or selects an additional Lending Office as herein provided, it shall within 30 days thereof deliver to Borrowers through the Administrative Agent in replacement for, or in addition to, the forms previously delivered by it hereunder:  (A) if such changed or additional Lending Office is located in the United States, two accurate and complete signed originals of Form 4224, or (B) otherwise, two accurate and complete signed originals of Form 1001, in each case indicating that the Lender is on the date of delivery thereof entitled to receive payments of principal, interest and fees for the account of such changed or additional Lending Office under this Agreement free from withholding of United States Federal income tax; (iii) it shall, before or promptly after the occurrence of any event (including the passing of time but excluding any event mentioned in (ii) above) requiring a change in the most recent Form 4224 or Form 1001 previously delivered by such Lender and if the delivery of the same be lawful, deliver to Borrowers through the Administrative Agent two accurate and complete, original signed copies of Form 4224 or Form 1001 in replacement for the forms previously delivered by the Lender; and (iv) it shall, promptly upon the Borrowers' reasonable request to that effect, deliver to Borrowers such other forms or similar documentation as may be required from time to time by any applicable law, treaty, rule or regulation in order to establish such Lender's tax status for withholding purposes. g. Borrowers will not be required to pay any additional amounts in respect of United States Federal income tax pursuant to Section 3.1 (a), (c) or (d) to any Lender for the account of any Lending Office of such Lender:  (i) if the obligation to pay such additional amounts would not have arisen but for a failure by such Lender to comply with its obligations under Section 3.1(f) and (j) in respect of such Lending Office; (ii) if such Lender shall have delivered to the Administrative Agent and Borrowers a Form 4224 in respect of such Lending Office pursuant to Section 3.1(f)(i)(A), and such Lender shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by Borrowers hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or in the official interpretation of such law or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the Closing Date; (iii) if the Lender shall have delivered to the Administrative Agent and Borrowers a Form 1001 in respect of such Lending Office pursuant to Section 3.1(f)(i)(B), and such Lender shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by Borrowers hereunder for the account of such Lending Office for any reason other than a change in United States law or regulations or any applicable tax treaty or regulations or in the official interpretation of any such law, treaty or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the Closing Date; or (iv) if the Lender shall have delivered to the Administrative Agent and Borrowers a Form W-9 and Nonbank Certificate (as defined below) pursuant to Section 3.1(j), and such Lender shall not at any time be entitled to exemption from deduction or withholding of United States Federal income tax in respect of payments by Borrowers hereunder for any reason other than a change in United States law or regulations or in the official interpretation of such law or regulations by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of law) after the Closing Date. h. If, at any time, Borrowers request any Lender to deliver any forms or other documentation pursuant to Section 3.1(f)(iv), then Borrowers shall, on demand of such Lender, reimburse such Lender for any costs and expenses (including expenses of outside legal counsel and the allocated costs of in-house counsel) reasonably incurred by such Lender in the preparation or delivery of such forms or other documentation. i. If Borrowers are required to pay additional amounts to any Lender or the Administrative Agent pursuant to subsection 3.1(d), then such Lender shall use its reasonable best efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by Borrowers which may thereafter accrue if such change in the reasonable judgment of such Lender is not otherwise disadvantageous to such Lender. j. Any Lender organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof that is not legally able to deliver IRS Form 1001 or 4224 pursuant to Section 3.1 (f)(i) agrees that: (i)  it shall deliver to Borrowers through the Administrative Agent prior to or at the time such Lender becomes a registered holder of any Note, two accurate and complete signed originals of (A) IRS Form W-8 (Certificate of Foreign Status of the U.S. Department of Treasury) (or such successor and related forms as may from time to time be adopted by the relevant U.S. taxing authorities), and (B) a certificate stating that such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Code and that such Lender is on the date of delivery thereof entitled to receive payments of principal, interest and fees under this Agreement free from withholding of United States Federal income tax (a "Nonbank Certificate"); (ii) it shall, before or promptly after the occurrence of any event (including the passing of time) requiring a change in the most recent Form W-8 or Nonbank Certificate previously delivered by such Lender and if the delivery of the same be lawful, deliver to Borrowers through the Administrative Agent two accurate and complete original signed copies of Form W-8 and Nonbank Certificate in replacement for the forms previously delivered by the Lender; and (iii) such Lender shall promptly notify the Administrative Agent if, at any time, such Lender determines that it has become subject to taxes of the type described in Section 3.1(a), (c) or (d) or is no longer in a position to provide such Form W-8 and Nonbank Certificate to the Administrative Agent and Borrowers (or any other form or certification adopted by the relevant U.S. taxing authorities). Illegality. a. If a Lender shall determine that it is unlawful to maintain any LIBO Rate Loan, Borrowers shall prepay in full all LIBO Rate Loans of the Lender then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if the Lender may lawfully continue to maintain such LIBO Rate Loans to such day, or immediately, if the Lender may not lawfully continue to maintain such LIBO Rate Loans, together with any amounts required to be paid in connection therewith pursuant to Section 3.4. b. If Borrowers are required to prepay any LIBO Rate Loan immediately as provided in Section 3.2(a), then concurrently with such prepayment, Borrowers shall borrow from the affected Lender, in the amount of such prepayment, a Base Rate Loan. c. If the obligation of any Lender to maintain a LIBO Rate Loan has been terminated, Borrowers may elect, by giving Requisite Notice to the Lender through the Administrative Agent that such Loan which would otherwise be maintained by the Lender as a LIBO Rate Loan shall be instead a Base Rate Loan. d. Before giving any notice to the Administrative Agent pursuant to this Section 3.2, the affected Lender shall designate a different Lending Office with respect to its LIBO Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Lender, be illegal or otherwise disadvantageous to the Lender. Increased Costs and Reduction of Return. a. If any Lender shall determine that, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost (except for any increase relating to taxes) to such Lender of agreeing to maintaining any LIBO Rate Loans, then Borrowers shall be liable for, and shall from time to time, upon demand therefor by such Lender (with a copy of such demand to the Administrative Agent), pay to such Lender, additional amounts as are sufficient to compensate such Lender for such increased costs. b. If any Lender shall have determined that the introduction of any applicable law, rule, regulation or guideline regarding capital adequacy, or any change therein or any change in the interpretation or administration thereof by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or compliance by the Lender (or its Lending Office) or any corporation controlling the Lender, with any request, guideline or directive regarding capital adequacy (whether or not having the force of law) of any such central Lender or other authority, affects or would affect the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender and (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy and such Lender's desired return on capital) determines that the amount of such capital is increased as a consequence of its obligation under this Agreement, then, upon demand of such Lender, Borrowers shall immediately pay to the Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate the Lender for such increase. Funding Losses .  Borrowers agree to reimburse each Lender and to hold each Lender harmless from any reasonable loss or expense which the Lender may sustain or incur as a consequence of (a) the failure of Borrowers to make any payment or prepayment of principal of any Loan (including payments to be made after any acceleration thereof); (b)  the failure of Borrowers to make any prepayment after Borrowers have given Requisite Notice in accordance with Section 2.3 or 2.4; or (c)  the prepayment of a Loan on a day which is not the last day of the Interest Period with respect thereto; including any such reasonable loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Loan hereunder or from fees payable to terminate the deposits from which such funds were obtained.  This covenant shall survive the payment in full of all other Obligations; provided, however, any Lender desiring to make a claim for reimbursement under this Section 3.4, shall do so within 180 days after the Termination Date. Inability to Determine Rates .  If (a) BofA shall have determined that for any reason adequate and reasonable means do not exist for ascertaining the LIBO Rate for any requested Interest Period with respect to the LIBO Rate Loan, or (b) if Majority Lenders shall have determined and notified the Administrative Agent that the LIBO Rate applicable for any requested Interest Period with respect to a LIBO Rate Loan does not adequately and fairly reflect the cost to such Lenders of maintaining such Loan, then the Administrative Agent will forthwith give notice of such determination to Borrowers and each Lender.  The Lenders shall convert or continue the LIBO Rate Loans, as proposed by Borrowers, in the amount specified in the applicable notice submitted by Borrowers, but such Loans shall be converted or continued as Base Rate Loans instead of LIBO Rate Loans. Reserves on LIBO Rate Loans .  Borrowers shall pay to each Lender, as long as such Lender shall be required under regulations of the Federal Reserve Board to maintain any reserve, special deposit, compulsory loan, or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, any Lender, additional costs on the unpaid principal amount of each LIBO Rate Loan equal to actual costs of such reserves allocated to such Loan by the Lender (as determined by the Lender in good faith, which determination shall be conclusive), payable on each date on which interest is payable on such Loan, provided Borrowers shall have received at least 15 days' prior written Requisite Notice (with a copy to the Administrative Agent) of such additional interest from the Lender.  If a Lender fails to give Requisite Notice 15 days prior to the relevant Interest Payment Date, such additional interest shall be payable 15 days from receipt of such notice.  This covenant shall survive the payment in full of all other Obligations; provided, however, any Lender desiring to make a claim for reimbursement under this Section 3.6, shall do so within 270 days after the Termination Date. Certificates of Lenders .  Upon any claim for reimbursement or compensation pursuant to this Article III, the Lenders shall deliver to Borrowers (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to the Lenders hereunder and such certificate shall be conclusive and binding on Borrowers in the absence of manifest error. Survival .  The agreements and obligations of Borrowers in this Article III shall survive the payment of all other Obligations (other than contingent obligations and indemnities which survive repayment of the Loans) and the termination of the Loan Documents. CONDITIONS PRECEDENT 1. Conditions of Loans .  The obligation of each Lender to maintain its Loan hereunder is subject to the condition that the Administrative Agent shall have received on or before the Closing Date all of the following, in form and substance satisfactory to the Administrative Agent and each Lender and, with respect to original Loan Documents other than the Notes, in sufficient copies for each Lender: Loan Documents .  The Loan Documents, executed by each Borrower, the Administrative Agent and each Lender, as applicable: a. Resolutions; Incumbency i. copies of the resolutions of the board of directors of each Borrower approving and authorizing the execution, delivery and performance by such Person of this Agreement and the other Loan Documents to be delivered hereunder, and authorizing the Loans, certified as of the Closing Date by the Secretary or an Assistant Secretary of such Person; ii. a certificate of the Secretary or Assistant Secretary of each Borrower certifying the names and true signatures of the offices of such Person authorized to execute and deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered hereunder. b. Articles of Incorporation, By-laws and Good Standing .  For each Borrower, each of the following documents: i. the articles or certificate of incorporation of such Person, as in effect on the Closing Date, certified by the Secretary of State of the state of incorporation of the Person as of a recent date and by the Secretary or Assistant Secretary of the Person as of the Closing Date; and ii. a good standing certificate from the Secretary of State or equivalent officer with respect to each state specified with respect to such Borrower on Schedule 4.2(b)(ii). c. Legal Opinion .  An opinion of counsel to Borrowers, addressed to the Administrative Agent and the Lenders, substantially in the form of Exhibit C. d. Payment of Fees .  Borrowers shall have paid all accrued and unpaid reasonable fees, costs and expenses due hereunder to the extent then due and payable on the Closing Date, together with reasonable Attorney Costs accrued hereunder to the extent invoiced prior to or on the Closing Date. e. Certificate .  A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: i. the representations and warranties contained in Article V and in the Security Agreements are true and correct in all material respects on and as of such date, as though made on and as of such date; ii. no Default or Event of Default exists or would result from the Borrowing; and iii. other than the filing of the Cases, there has not occurred, since June 30, 2000, any event or circumstance that could reasonably be expected to result in a Material Adverse Effect. f. Confirmation Order .  No later than 15 days after the Confirmation Date, the Administrative Agent shall have received a copy of the Confirmation Order, which (i) shall be in form and substance reasonably satisfactory to Administrative Agent (without limiting the generality of the foregoing, the Confirmation Order shall confirm a Plan of Reorganization that conforms in all material respects to the Term Sheet), (ii) shall have been entered upon an application of Borrowers reasonably satisfactory in form and substance to the Administrative Agent, and (iii) shall be in full force and effect.  Notwithstanding the foregoing, the Lenders shall have the right, exercisable by action of the Majority Lenders, but not the obligation, to record any lien and/or security interest granted hereby pursuant to any applicable state or other law method.  Borrowers shall bear all reasonable costs and expenses incurred by the Lenders in recording any lien or security interest granted hereby, and shall pay such reasonable costs and expenses to the Administrative Agent for the account of the Lenders. g. Insurance Certificates .  Receipt of the following (in form and substance reasonably satisfactory to the Administrative Agent):  (i) evidence that the Administrative Agent, on behalf of the Lenders, has been named lender loss payee for all insurance maintained by Borrowers relating to encumbered real property, contents, earthquake and employee dishonesty, (ii) evidence of business interruption insurance and (iii) evidence that 30 days cancellation notice will be sent to the Administrative Agent for each insurance policy maintained by Borrowers. h. Other Documents .  Such other approvals, opinions, or documents as the Administrative Agent may reasonably request.  Without limiting the generality of the foregoing sentence, except to the extent, if any, that the Administrative Agent in its discretion may have agreed that all or some of the preceding items listed in sub-paragraphs (a) through (h) above, may be delivered within a specified interval of time after the Closing Date as conditions subsequent to the obligations of the Administrative Agent and the Lenders hereunder, and only to such extent, if any, the Administrative Agent shall have received, with respect to each deposit account identified on a schedule delivered to the Administrative Agent before the Closing Date, a properly completed Notice to Depositary Institution signed by the Borrower having rights in or with respect to such deposit account. i. [Intentionally Omitted]. j. Stock Pledge Agreement .  The Stock Pledge Agreement, duly executed and delivered to the Administrative Agent by Borrowers, together with all certificates and instruments representing all stock and other equity ownership interests in the Subsidiaries of Borrowers, as more particularly described in the Stock Pledge Agreement, together with undated stock transfer powers duly executed in blank for each such stock certificate. k. UAPH II Stock Pledge Agreement .  The UAPH II Stock Pledge Agreement, duly executed and delivered to the Administrative Agent by UAPH II, together with all certificates and instruments representing all stock and other equity ownership interests in the Subsidiaries of UAPH II, as more particularly described in the UAPH II Stock Pledge Agreement, together with undated stock transfer powers duly executed in blank for each such stock certificate. l. Security Agreement .  The Security Agreement, duly executed and delivered to the Administrative Agent by Borrowers. m. Deeds of Trust, etc.   The Deeds of Trust, the Modifications of Deed of Trust, the Mortgages, the Leasehold Deeds of Trust, and UCC Financing Statements, all duly executed and delivered to the Administrative Agent by Borrowers. n. No Litigation .  No law or regulation shall have been adopted, no order, final judgment or decree of any Governmental Authority (other than the Confirmation Order) shall have been issued, and no litigation shall be pending or threatened (other than the Cases), which could reasonably be expected to have a Material Adverse Effect. REPRESENTATIONS AND WARRANTIES Borrowers represent and warrant to the Administrative Agent and each Lender that: 1. Corporate Existence and Power .  Each Borrower: a. is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; b. subject to the entry of the Confirmation Order, has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under, the Loan Documents, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect; c. is duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; and d. is in compliance with all Requirements of Law, except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 2. Corporate Authorization, No Contravention .  Subject to the entry of the Confirmation Order, the execution, delivery and performance by Borrowers of this Agreement, and any other Loan Document to which such Person is party, have been duly authorized by all necessary corporate action, and do not and will not: a. contravene the terms of any of that Person's Organization Documents; b. conflict with or result in any breach or contravention of any order, injunction, writ or decree of any Governmental Authority to which such Person or its Property is subject, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect; or c. violate any Requirement of Law except to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 3. Governmental Authorization .  All consents and approvals of, filings and registrations with, and other actions in respect of, all governmental agencies, authorities or instrumentalities which are or will be required in connection with the execution, delivery and performance of the Loan Documents have been or, prior to the time when required, will have been, obtained, given, filed or taken and are or will be in full force and effect, other than any which the failure to obtain, give, file or take would not have a Material Adverse Effect under the Loan Documents or on the ability of Borrowers, to perform timely their respective obligations under or in connection with the Loan Documents. 4. Binding Effect .  Upon entry of the Confirmation Order, this Agreement and each other Loan Document to which Borrowers are a party will constitute the legal, valid and binding obligations of Borrowers, enforceable against Borrowers in accordance with their respective terms and the Confirmation Order (subject to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting creditors' rights generally and to general principles of equity). 5. Litigation .  Except as set forth in Schedule 5.5 hereto, there are no actions, suits, proceedings, claims or disputes pending, or to the actual knowledge of Borrowers, threatened or contemplated that are not stayed, at law, in equity, in arbitration or before any Governmental Authority, against Borrowers, or their Subsidiaries or any of their respective Properties which: a. purport to affect or pertain to this Agreement, or any other Loan Document, or any of the transactions contemplated hereby or thereby; or b. if determined adversely to Borrowers or their Subsidiaries, could reasonably be expected to have a Material Adverse Effect.  No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery and performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 6. No Default .  No Default or Event of Default exists or would result from the incurring of any Obligations by Borrowers.  Neither Borrowers nor any of their Subsidiaries is in default under or with respect to any post-petition Contractual Obligation in any respect which, taken as a whole, could reasonably be expected to have a Material Adverse Effect. 7. ERISA a. Schedule 5.7 lists all Plans maintained or sponsored by Borrowers or to which it is obligated to contribute as of the Closing Date, and separately identifies Plans intended to be Qualified Plans and Multiemployer Plans as of the Closing Date. b. Each Plan set forth on Schedule 5.7, which is maintained or sponsored by Borrowers, is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state law, including all requirements under the Code or ERISA for filing reports (which are true and correct in all material respects as of the date filed), and benefits have been paid in accordance with the provisions of the Plan, except as would not have a reasonable likelihood of having a Material Adverse Effect. c. Except as set forth in Schedule 5.7, each Qualified Plan has been determined by the Internal Revenue Service to qualify under Section 401 of the Code, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the Code, and to the best knowledge of Borrowers nothing has occurred which would cause the loss of such qualification or tax-exempt status, except as would not have a reasonable likelihood of having a Material Adverse Effect. d. Except as set forth in Schedule 5.7, there is no outstanding liability under Title IV of ERISA with respect to any Plan maintained or sponsored by Borrowers or any ERISA Affiliate (as to which Borrowers is or may be liable), nor with respect to any Plan to which Borrowers or any ERISA Affiliate (wherein Borrowers is or may be liable) contribute or are obligated to contribute which has a reasonable likelihood of having a Material Adverse Effect. e. Except as set forth on Schedule 5.7, none of the Qualified Plans subject to Title IV of ERISA has any Unfunded Pension Liability as to which Borrowers are or may be liable which if such Plan were to be terminated has a reasonable likelihood of having a Material Adverse Effect. f. Except as set forth in Schedule 5.7, no Plan maintained or sponsored by Borrowers provides medical or other welfare benefits or extends coverage relating to such benefits beyond the date of a participant's termination of employment with Borrowers, except to the extent required by Section 4980B of the Code and at the sole expense of the participant or the beneficiary of the participant to the fullest extent permissible under such Section of the Code.  Borrowers have complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Code, except as would not have a reasonable likelihood of having a Material Adverse Effect. g. Except as set forth in Schedule 5.7, no ERISA Event has occurred or is reasonably expected to occur with respect to any Plan maintained or sponsored by Borrowers or to the knowledge of Borrowers, to which Borrowers are obligated to contribute, which has a reasonable likelihood of having a Material Adverse Effect. h. There are no pending or, to the best knowledge of the executive management of Company, threatened claims, actions or lawsuits, other than routine claims for benefits in the usual and ordinary course, asserted or instituted against (i) any Plan maintained or sponsored by Borrowers or its assets, (ii) any member of the Controlled Group with respect to any Qualified Plan of Borrowers, or (iii) any fiduciary with respect to any Plan for which Borrowers may be directly or indirectly liable, through indemnification obligations or otherwise, in each case, which has a reasonable likelihood of having a Material Adverse Effect. i. Except as set forth in Schedule 5.7, Borrowers have not incurred nor reasonably expect to incur (i) any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability under Title IV of ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan, in each case, which has a reasonable likelihood of having a Material Adverse Effect. j. Except as set forth in Schedule 5.7, Borrowers have not engaged in a transaction that could reasonably be subject to Section 4069 or 4212(c) of ERISA, except as would not have a reasonable likelihood of having a Material Adverse Effect. k. Borrowers have not engaged, directly or indirectly, in a non-exempt prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Plan which has a reasonable likelihood of having a Material Adverse Effect. 8. [Intentionally Omitted]. 9. Title to Properties .  Schedule 5.9 sets forth all the real Property owned or leased by Borrowers and their Subsidiaries and identifies the street address (where possible), the current owner (and current record owner, if different) and whether such property is leased or owned, and if such property is leased, the length of the lease term.  Borrowers and each of their Subsidiaries have good record and marketable title in fee simple to, or valid leasehold interests in, all such real Property necessary or used in the ordinary conduct of their business, except for Permitted Liens and such defects in title as could not reasonably be expected, individually or in the aggregate, have a Material Adverse Effect.  As of the Closing Date, the Property owned by Borrowers and their Subsidiaries is not subject to any Liens, other than Permitted Liens. 10. Taxes .  Except as set forth in Schedule 5.10, Borrowers and their Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their Properties (except for taxes set forth in Schedule 5.10), income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP and no Notice of Lien has been filed or recorded or, there is no proposed tax assessment against Borrowers or any of their Subsidiaries which could, if the assessment were made, reasonably be expected to have a Material Adverse Effect. 11. [Intentionally Omitted]. 12. Environmental Matters a. Except as specifically identified in Schedule 5.12, the operations of Borrowers and their Subsidiaries comply in all material respects with all Environmental Laws except such non-compliance which would not result in liability in excess of $5,000,000 in the aggregate. b. Except as specifically identified in Schedule 5.12, Borrowers and their Subsidiaries have obtained all licenses, permits, authorizations and registrations required under any Environmental Law ("Environmental Permits") necessary for their operations, and all such Environmental Permits are in good standing, and Borrowers and their Subsidiaries are in compliance with all terms and conditions of such Environmental Permits except to the extent that any noncompliance therewith will not result in a Material Adverse Effect. c. Except as specifically identified in Schedule 5.12, none of Borrowers, any of their Subsidiaries or any of their present property or operations is subject to any outstanding written order from or agreement with any Governmental Authority or other Person, nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Material, except such orders, agreements, or proceedings which are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. d. Except as specifically identified in Schedule 5.12, Borrowers are not aware of any conditions or circumstances which may give rise to any Environmental Claim arising from the operations of Borrowers or their Subsidiaries, including Environmental Claims associated with any operations of Borrowers or their Subsidiaries with a potential liability in excess of $5,000,000 in the aggregate.  Without limiting the generality of the foregoing, (i) neither Borrowers nor any of their Subsidiaries, to their knowledge, has any underground storage tanks (x) that are not properly registered or permitted under applicable Environmental Laws or (y) that are leaking or disposing of Hazardous Materials off-site, either of which reasonably would be likely to have a Material Adverse Effect, except such underground storage tanks that Borrowers have obtained knowledge of 90 days or less prior to the date of giving the representation set forth herein and, if removal is required under any Requirement of Law, as to which the removal have been contractually committed by Borrowers or one or more of their Subsidiaries, or, if not contractually committed, Borrowers or one or more of their Subsidiaries are engaged in reasonable activities to secure such commitments, and (ii) Borrowers and their Subsidiaries have used their reasonable best efforts to notify all of their employees of the existence, if any, of any health hazard arising from the conditions of their employment and to meet all notification requirements under Title III of CERCLA or any other Environmental Law. 13. Regulated Entities .  None of Borrowers, any Person controlling Borrowers, or any Subsidiaries of Borrowers, is (a) an "Investment Company" within the meaning of the Investment Company Act of 1940, or (b) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Law limiting its ability to incur Indebtedness. 14. Labor Relations .  There are no strikes, lockouts or other labor disputes against Borrowers or any of their Subsidiaries, or, to the Borrowers' actual knowledge, threatened against or affecting Borrowers or any of their Subsidiaries, and no significant unfair labor practice complaint is pending against Borrowers or any of their Subsidiaries or, to the actual knowledge of Borrowers, threatened against any of them before any Governmental Authority, which is reasonably likely to have a Material Adverse Effect. 15. Copyrights, Patents, Trademarks and Licenses .  Borrowers or their Subsidiaries own or are licensed or otherwise have the right to use all of the material patents, trademarks, service marks, trade names, copyrights, licenses, easements, permits, qualifications, accreditations, franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, which is reasonably likely to have a Material Adverse Effect.  To the actual knowledge of Borrowers, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed by Borrowers or any of their Subsidiaries infringe upon any rights held by any other Person; no claim or litigation that is not stayed regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the actual knowledge of Borrowers, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 16. Subsidiaries .  As of the Closing Date, Borrowers have no Subsidiaries other than those specifically disclosed in part (a) of Schedule 5.16 hereto and has no equity investments in any other corporation or Person other than those specifically disclosed in part (b) of Schedule 5.16 hereto.  Schedule 5.16 indicates all first tier Wholly-Owned Subsidiaries and Material Subsidiaries as of the Closing Date. 17. [Intentionally omitted]. 18. Insurance .  The Properties of Borrowers and their Subsidiaries are insured with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where Borrowers or such Subsidiaries operate. 19. Full Disclosure .  None of the representations or warranties made by Borrowers or any of their Subsidiaries in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in each exhibit, report, statement or certificate furnished by or on behalf of Borrowers or any of their Subsidiaries in connection with the Loan Documents, contains any untrue statement of a material fact or makes any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading. 20. Locations of Collateral and Places of Business .  Except for locations of Borrowers that have changed during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering an updated Schedule of Collateral location to the Administrative Agent pursuant to the penultimate sentence of Section 6.12, the Collateral location schedule delivered to the Administrative Agent prior to the Closing Date contains a complete disclosure of all locations at which any of the Collateral consisting of tangible Property is located, or at which any of the Borrowers maintains offices or a place of business.  As to each such location, except for the effect of any changes that may have occurred during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering an updated Schedule of Collateral location to the Administrative Agent pursuant to the penultimate sentence of Section 6.12, the Collateral location schedule delivered to the Administrative Agent prior to the Closing Date indicates which Borrowers own Collateral at such location or maintain offices or a place of business at such location. 21. Locations of, and Information with Respect to, Deposit Accounts .  Except for the effect of changes that have occurred during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent an updated schedule of deposit account locations pursuant to the penultimate sentence of Section 6.12, the schedule of deposit locations delivered to the Administrative Agent prior to the Closing Date contains a complete disclosure of all deposit accounts of any type or nature in which any Borrower has any interest.  With respect to each such deposit account, except for the effect of changes that have occurred during a fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent an updated schedule of deposit account locations pursuant to the penultimate sentence of Section 6.12, the schedule of deposit locations delivered to the Administrative Agent prior to the Closing Date accurately discloses the following information:  (a)  The name in which such deposit account is maintained and the identity of which Borrower may have any interest therein; (b) The name of the depositary institution with which such account is maintained; (c) The address of the branch or office of such depositary institution at which such deposit account is maintained; (d) The telephone number of such branch or office of such depositary institution; (e) The account number of such deposit account and the related ABA routing number; and (f) A brief description of the nature and purpose of such deposit account. 22. [Intentionally Omitted]. 23. Validity of Security Interest .  Borrowers and their Subsidiaries represent and warrant that the security interests in and Liens on the Collateral in favor of the Collateral Agent for the benefit of the Lenders under this Agreement are valid, effective, perfected and enforceable.  This Agreement creates, as security for the Obligations, valid and enforceable security interests in and Liens on all of the Collateral, in favor of the Collateral Agent for the benefit of the Lenders.  Such security interests in and Liens on the Collateral shall be superior to and prior to the rights of all third parties (other than any Liens granted in connection with the Exit Facility) upon the filing of UCC Financing Statements, and such further recordings or filings are or will be required in connection with the creation, perfection or enforcement of such security interests and Liens have been taken as of the Closing Date. 24. Existing Liens .  There are no Liens on any assets of Borrowers other than (A) Liens (including pledges) in favor of the Collateral Agent for the benefit of the Lenders under or in connection with this Agreement, (B) Liens granted in connection with the Exit Facility, (C) other Liens in existence on the Confirmation Date as listed on Schedule 7.1, and (D) Permitted Liens.  Schedule 7.1 to this Agreement is a complete and correct list, as of the Closing Date, of each Lien securing Indebtedness of Borrowers and their Subsidiaries and covering any Property of Borrowers and their Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by each such Lien and the Property covered by each such Lien is correctly described in Schedule 7.1. 25. Financial Statements .  Borrowers and their Subsidiaries represent and warrant that 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 Borrowers and their Subsidiaries as of the 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 Borrowers and their Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness in accordance with GAAP consistently applied throughout the period covered thereby. 26. Compliance With Laws .  Borrowers and their Subsidiaries represent and warrant that Borrowers and their Subsidiaries are in compliance in all material respects with all material Laws that are applicable to them. 27. Material Adverse Change .  Other than the filing of the Cases, since June 30, 2000, there has not occurred any event, act or condition which has had, or could have, a Material Adverse Effect. 28. [Intentionally Omitted]. AFFIRMATIVE COVENANTS Borrowers covenant and agree that, so long as any Lender shall have any Credit Commitment hereunder, or any Loan or other Obligations shall remain unpaid or unsatisfied (other than contingent obligations and indemnities which survive repayment of the Loans), unless the Majority Lenders waive compliance in writing: 1. Financial Reporting .  Borrowers shall deliver to the Administrative Agent in form and detail satisfactory to the Administrative Agent and the Majority Lenders, with sufficient copies for the Lenders: a. within 25 days after the close of each fiscal quarter, the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such fiscal quarter and the related consolidated statements of income for such fiscal quarter and for the elapsed portion of the fiscal year ended with the last day of such fiscal quarter, and in each case setting forth comparative figures for the related periods in the prior fiscal year; b. within 50 days after the close of each of the first three quarterly accounting periods in each fiscal year of Borrowers, the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such quarterly period and the related consolidated statements of income, cash flow and retained earnings for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in each case setting forth comparative figures for the related periods in the prior fiscal year; c. within 105 days after the close of each fiscal year of Borrowers, the consolidated balance sheet of Borrowers and their Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, cash flow and retained earnings for such fiscal year, setting forth comparative figures for the preceding fiscal year and, with respect to such consolidated financial statements, certified by the Auditors, in each case together with a report stating that in the course of its regular audit of the consolidated financial statements of Borrowers, which audit was conducted in accordance with GAAP, the Auditors have obtained no knowledge of any Default or Event of Default, or if in the opinion of the Auditors such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, together with copies of any Auditors' letters received by management in connection with such Auditors' findings during its audit in respect of such fiscal year, and d. within 45 days after the first day of each fiscal year of Borrowers beginning with fiscal year 2002, a budget and financial forecast of results of operations and sources and uses of cash (in form and substance reasonably satisfactory to the Majority Lenders) prepared by Borrowers for such fiscal year in respect of themselves and their Subsidiaries, accompanied by a written statement of the assumptions used in connection therewith, together with a certificate of the chief financial officer of Borrowers to the effect that such budget and financial forecast and assumptions are reasonable and represent Borrowers' good faith estimate of themselves and their Subsidiaries' future financial requirements and performance.  The financial statements required to be delivered under clauses (a), (b) and (c) above shall be accompanied by a comparison of the actual financial results set forth in such financial statements to those contained in the forecasts delivered pursuant to this clause (d)  together with an explanation of any material variations from the results anticipated in such forecasts. 2. Certificates; Other Information .  Borrowers shall furnish to the Administrative Agent, with sufficient copies for the Lenders: a. at the time of the delivery of the financial statements under clauses 6.1 (a), (b) and (c) above, a certificate of the Responsible Officer (each a "Compliance Certificate") which certifies (x) that such financial statements fairly present in all material respects the financial condition and the results of operations of Borrowers and their Subsidiaries as at the dates and for the periods indicated, subject, in the case of interim financial statements, to normal year-end adjustments and (y) that such Responsible Officer has reviewed the terms of the Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the business and condition of Borrowers and their Subsidiaries during the accounting period covered by such financial statements, and that as a result of such review such officer has no knowledge that any Default or Event of Default has occurred during the period commencing at the beginning of the accounting period covered by the financial statements accompanied by such certificate and ending on the date of the related accounting period or, if any Default or Event of Default has occurred, specifying the nature and extent thereof and, if continuing, the action Borrowers propose to take in respect thereof.  Such certificate shall set forth the calculations required to establish whether Borrowers were in compliance with the provisions of Section 7.21 during and as at the end of the accounting period covered by the financial statements accompanied by such certificate; b. promptly upon transmission thereof, copies of all regular and periodic financial information, proxy materials and other information and reports, if any, which any Borrower shall file with the Securities and Exchange Commission or any governmental agencies or which any Borrower shall send to its stockholders; c. [Intentionally omitted]; and d. from time to time, such other information or documents (financial or otherwise) as the Lenders may reasonably request. 3. Notices .  Borrowers shall promptly, and in any event within three (3) Business Days after a Borrower obtains knowledge thereof, notify the Administrative Agent and each Lender: a. of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default; b. of (i) any material breach or non-performance of, or any material default under, any material Contractual Obligation of Borrowers or any of their Subsidiaries; and (ii) any dispute, litigation, investigation, proceeding or suspension which with respect to clauses (i) and (ii) above may exist at any time between Borrowers or any of their Subsidiaries and any Governmental Authority which with respect to clauses (i) and (ii) above could reasonably be expected to have a Material Adverse Effect; c. of the commencement of, or any material development in, any litigation or proceeding that is not stayed affecting Borrowers or any Subsidiaries (i) in which the amount of damages claimed is $5,000,000 (or its equivalent in another currency or currencies) or more, (ii) in which injunctive or similar relief is sought, except for such relief sought that could not reasonably be expected to have a Material Adverse Effect; or (iii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any Loan Document; d. upon, but in no event later than ten (10) Business Days after, becoming aware of (i) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against Borrowers or any of their Subsidiaries or any of their respective Properties pursuant to any applicable Environmental Laws, (ii) all other material Environmental Claims and (iii) any environmental or similar condition on any real property adjoining or in the vicinity of the Property of Borrowers or any Subsidiaries that could reasonably be anticipated to cause such Property or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use of such Property under any applicable Environmental Laws; e. [Intentionally omitted]; f. any Material Adverse Effect subsequent to the later of the date of the most recent audited financial statements of Borrowers delivered to the Lenders pursuant to subsection 6.1(c) or the Closing Date; g. of any material change in accounting policies or financial reporting practices by Borrowers or any of their Subsidiaries; h. of any labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other labor disruption against or involving Borrowers or any of their Subsidiaries which could reasonably be expected to have a Material Adverse Effect; and i. [Intentionally omitted]. Each notice pursuant to this Section shall be accompanied by a written statement by a Responsible Officer of Borrowers setting forth details of the occurrence referred to therein, and stating what action Borrowers propose to take with respect thereto and at what time. 4. Preservation of Corporate Existence, Etc.   Except as contemplated by the Plan of Reorganization or the Confirmation Order, Borrowers shall, and shall cause each of their Subsidiaries to: a. preserve and maintain in full force and effect their corporate existence and good standing under the laws of their respective states or jurisdictions of incorporation, unless the failure to maintain or preserve such status could not reasonably be expected to have a Material Adverse Effect; b. preserve and maintain in full force and effect all material rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in thc normal conduct of their business, unless the failure to maintain or preserve such qualifications could not reasonably be expected to have a Material Adverse Effect; c. use their reasonable efforts, in the Ordinary Course of Business, to preserve their business organization and preserve the goodwill and business of the customers, suppliers and others having material business relations with them, unless the failure to maintain or preserve such status could not reasonably be expected to have a Material Adverse Effect; and d. preserve or renew all of their respective registered trademarks, trade names and service marks, material patents, copyrights, franchises, licenses, permits, certifications, easements, rights of way and other rights, consents or approvals, unless the failure to maintain or preserve such rights could not reasonably be expected to have a Material Adverse Effect. 5. Maintenance of Property and Other Collateral .  Borrowers shall maintain, and shall cause each of their Subsidiaries to maintain, and preserve all Collateral (including their respective Properties) which are material to their business in good working order and condition, ordinary wear and tear excepted, and will forthwith, or in the case of any material loss or damage to any of such Collateral, as soon as practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end.  Borrowers will promptly furnish to the Administrative Agent a statement respecting any material loss or damage to any such Collateral. 6. Insurance .  Borrowers shall maintain, and shall cause their Subsidiaries to maintain, with financially sound and reputable independent insurers, insurance with respect to their respective Property and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business (including, but not limited to, comprehensive property and liability coverage, and general umbrella coverage, including general liability and product liability), of such types and in such amounts as are customarily carried under similar circumstances by such other Persons, which insurance may not be cancelled except upon at least 30 days' written notice to the Administrative Agent and which policies name the Administrative Agent, on behalf of the Lenders, as lender loss payee and/or under a mortgagee endorsement, as the Administrative Agent shall reasonably require, thereunder. 7. Payment of Obligations .  Borrowers shall, and shall cause their Subsidiaries to, pay and discharge as the same shall become due and payable, all of their respective obligations and liabilities, including: a. other than pre-petition claims, all material tax liabilities, assessments and governmental charges or levies upon them or their properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by Borrowers or such Subsidiaries and except to the extent that the failure to pay is not reasonably likely to have a Material Adverse Effect; b. other than pre-petition claims, all material lawful claims which, if unpaid, would by law become a Lien upon their respective Properties, except for Permitted Liens; c. all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, excluding reclamation claims and except to the extent that the failure to pay is not reasonably expected to have a Material Adverse Effect; and d. all obligations arising under the Exit Facility. 8. Compliance with Laws .  Borrowers shall comply, and shall cause each of their Subsidiaries to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over them or their business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist and except to the extent that the failure to comply therewith is not reasonably expected to have Material Adverse Effect. 9. Inspection of Property and Books and Records .  Borrowers shall maintain and shall cause each of their Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of Borrowers and such Subsidiaries.  Borrowers shall permit, and shall cause each of their Subsidiaries to permit, representatives and independent contractors of the Administrative Agent or any Lender, upon reasonable request to visit (during normal business hours), in the presence of a representative of Borrowers to inspect and have reasonable access to any of their respective Properties and premises, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, independent public accountants and other professional representatives, all at the expense of Borrowers and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to Borrowers including, without limitation, semi-annual inspections to be conducted by a representative of the Lenders; provided, however, when an Event of Default exists the Administrative Agent or any Lender may do any of the foregoing at the expense of Borrowers at any time during normal business hours and without advance notice. 10. Environmental Laws a. Borrowers shall, and shall cause each of their Subsidiaries to, conduct their respective operations and keep and maintain their respective Properties in compliance in all material respects with all applicable Environmental Laws, except to the extent that the failure to comply is not reasonably expected to have a Material Adverse Effect. b. Upon the written request of the Administrative Agent or any Lender, Borrowers shall submit and cause each of their Subsidiaries to submit, to the Administrative Agent and with sufficient copies for each Lender, at Borrowers' sole cost and expense, at reasonable intervals, 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 required pursuant to subsection 6.3, that could, individually or in the aggregate, result in liability in excess of $5,000,000. 11. [Intentionally Omitted]. 12. Update of Collateral and Deposit Account Schedules .  Subject to the penultimate sentence of this Section 6.12, Borrowers shall at all times ensure that Schedule 6.12 attached hereto, describing the location of Collateral and deposit accounts delivered to the Administrative Agent prior to the Closing Date, are accurate and up-to-date.  Subject to the penultimate sentence of this Section 6.12, if for any reason any of the information disclosed thereon becomes out-of-date or inaccurate in any material respect, Borrowers promptly will cause such schedules to be updated and redistributed to the Administrative Agent at Borrowers' sole expense.  Notwithstanding the foregoing, Borrowers shall not be required to update such schedules more than once with respect to any specific fiscal quarter of Borrowers (unless Borrowers choose to update such schedules more often) and Borrowers may comply with their obligations under this Section 6.12 by delivering to the Administrative Agent, with respect to any fiscal quarter of Borrowers during which any changes occurred relating to the information required to be disclosed on such schedules, updated versions of such schedules reflecting any such changes with respect thereto that occurred during such fiscal quarter, which updated schedules shall be delivered to the Administrative Agent not later than the eighteenth (18th) Business Day following the last day of the fiscal quarter of Borrowers to which such updated schedules relate.  Each updated schedule delivered to the Administrative Agent pursuant to this Section shall either:  (a) be marked to show changes, additions, or deletions from the most recent prior version provided to the Administrative Agent, or (b) be accompanied by a cover letter or memorandum signed by a Responsible Officer of one of Borrowers explaining the nature of any changes, additions, or deletions from the most recent prior version provided to the Administrative Agent. 13. [Intentionally Omitted]. 14. [Intentionally Omitted] NEGATIVE COVENANTS Borrowers hereby covenant and agree that, so long as any Lender shall have any Credit Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied (other than contingent obligations and indemnities which survive repayment of the Loans), unless the Majority Lenders waive compliance in writing: 1. Limitation on Liens .  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of their Property, whether now owned or hereafter acquired, other than the following permitted Liens ("Permitted Liens"): a. any Lien existing on the Property of Borrowers or their Subsidiaries on the Closing Date and set forth in Schedule 7.1 securing Indebtedness outstanding on such date; b. any Lien and Negative Pledge created under any Loan Document; c. Liens securing taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty or being contested in good faith, or to the extent that non-payment thereof is permitted by Section 6.17, provided that no Notice of Lien has been filed or recorded under the Code; d. carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens imposed by Law, arising in the Ordinary Course of Business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the Property subject thereto; e. Liens consisting of pledges or deposits required in the Ordinary Course of Business in connection with workers' compensation, unemployment insurance and other social security benefits; f. Liens on the Property of Borrowers or any of their Subsidiaries securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the Ordinary Course of Business, provided all such Liens in the aggregate would not (even if enforced), result in an impairment of the ability of Borrowers or any of their Subsidiaries to use any material Property thereof, g. Zoning restrictions, easements, rights-of-way, licenses, reservations, provisions, covenants, conditions, waivers, restrictions on the use of property, minor irregularities of title or similar encumbrances incurred in the Ordinary Course of Business (and with respect to leasehold interests, mortgages, obligations, liens and other encumbrances incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner of the leased property, with or without consent of the lessee), which do not in any case materially detract from the value of the Property subject thereto or interfere with the ordinary conduct of the businesses of Borrowers and their Subsidiaries; h. Purchase money security interests on any equipment acquired or held by Borrowers or their Subsidiaries in the Ordinary Course of Business securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such equipment; provided that (i) any such Lien attaches to such equipment concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the equipment so acquired in such transaction and (iii) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such equipment; i. Liens securing Capital Lease Obligations on assets subject to such Capital Leases; j. Liens in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and which are within the general parameters customary in the banking industry; k. Liens arising out of the existence of judgments or awards not constituting an Event of Default under Sections 8.1(k) and (l); l. Leases or subleases of real Property granted to others not interfering in any material respect with the business of Borrowers and any interest or title of a lessor under any lease not in violation of this Agreement; m. the replacement , extension or renewal of any Lien permitted hereunder; provided that (i) the principal amount of Indebtedness secured by any such Lien immediately prior to such refinancing, extension, renewal or refunding is not increased or the maturity thereof reduced, (ii) any such Lien is not extended to any other property and (iii) immediately after such refinancing, extension, renewal or refunding no Default or Event of Default would exist; n. [Intentionally omitted]; o. any Lien granted in connection with the Exit Facility; p. Liens and Negative Pledges on the Collateral securing obligations of Borrowers or any Subsidiary in respect of Swap Contracts permitted by Section 7.5(n), in each case, on a pari passu basis with the Obligations; and q. Liens and Negative Pledges (other than Liens and Negative Pledges on the Collateral) existing on the Property of Borrowers or their Subsidiaries or created pursuant to Contractual Obligations existing on the Closing Date and set forth in Schedule 7.1 securing, in the case of Indebtedness, Indebtedness permitted under Section 7.5(b). 2. Disposition of Assets .  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, directly or indirectly, without the consent of the Majority Lenders, make any Dispositions, other than the following permitted Dispositions ("Permitted Dispositions"): a. Dispositions made in the Ordinary Course of Business; b. the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; c. Dispositions of inventory, or used, worn-out or surplus property and other property or assets, all in the Ordinary Course of Business; d. Dispositions of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; e. transactions permitted under Sections 7.3 and 7.11; and f. Dispositions of assets for fair market value in an arm's length transaction not otherwise prohibited under this Agreement, the Net Proceeds of which are paid to the Administrative Agent for the account of the Lenders to the extent required under Section 2.3. 3. Fundamental Changes, Corporate Documents a. Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to merge or consolidate with or into any Person or liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or dissolution, discontinue its business or convey, lease, transfer or otherwise dispose, or sell all or substantially all of their assets, except, that so long as no Default or Event of Default exists or would result therefrom: i. any Borrower may merge with any other Borrower; ii. any Subsidiary may merge with (i) Borrowers provided that Borrowers shall be the continuing or surviving corporation, (ii) any one or more Subsidiaries, and (iii) any joint venture, partnership or other Person, so long as such joint venture, partnership and other Person will, as a result of making such merger and all other contemporaneous related transactions, become a Subsidiary; provided that when any Wholly-Owned Subsidiary is merging into another Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or surviving Person; iii. any Subsidiary may sell all or substantially all of their assets (upon voluntary liquidation or otherwise), to Borrowers or to another Subsidiary; provided that when any wholly-owned Subsidiary is selling all or substantially all of their assets to another Subsidiary, the Subsidiary acquiring such assets shall be a Wholly-Owned Subsidiary; and iv. Borrowers or their Subsidiaries may make Permitted Dispositions pursuant to Section 7.2. b. Borrowers shall not and shall not permit any of their Subsidiaries to, amend their articles of incorporation (or other formation document) or by-laws, in any manner reasonably likely to cause a Material Adverse Effect. 4. Loans and Investment .  Borrowers shall not purchase or acquire, or suffer or permit any of their Subsidiaries to purchase or acquire, or make any commitment therefor, any capital stock, equity interest, all or substantially all of the assets of, or any obligations or other securities of, or any interest in, any Person, or make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of Borrowers, except for: a. investments in Cash Equivalent; b. investments of a Person that becomes a Subsidiary or is merged, consolidated or amalgamated with or into, or transfers all or substantially all of its assets to, or is liquidated into, any Borrowers or any of their Subsidiaries; c. extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the Ordinary Course of Business; d. extensions of credit by one Borrower to another Borrower; e. loans, existing investments and Contingent Obligations described on Schedule 7.4, as the same may be extended, renewed, refunded or refinanced; provided, however, that after giving effect to such extension, renewal, refunding or refinancing, (1)  the principal amount thereof is not increased, and (2) neither the tenor nor the remaining average life thereof is reduced; f. any endorsement of a check or other medium of payment for deposit or collection, or any similar transaction in the Ordinary Course of Business; g. investments acquired by Borrowers (i) in exchange for any other investment or indebtedness held by a Borrower in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment, (ii) as a result of a foreclosure by a Borrower with respect to any secured investment or other transfer of title with respect to any secured investment in default, or (iii) as a result of dispute settlement; h. investments acquired by any Borrower in connection with a Disposition permitted by Section 7.2; i. loans, equity interests and investments existing on the Closing Date and listed on Schedule 7.4 and, except as may be otherwise provided in any Loan Document, any accretions or increases in such equity interests and investments and may extend, renew, refund, or refinance any such loan; provided, that after giving effect to such extension, renewal, refunding or refinancing, the principal amount thereof is not increased; j. other investments in Persons, including Subsidiaries of Borrowers which are not Pledged Subsidiaries not exceeding the sum of (i) $10,000,000 in the aggregate from the Closing Date plus (ii) an amount equal to dividends and other distributions received from such Subsidiaries from time to time; provided, however, that the total of such investments under this subsection (j) shall not exceed $25,000,000 in the aggregate from the Closing Date, and immediately before and after giving effect to such investment, no Default or Event of Default shall exist; k. exchanges of theatre properties to the extent there are no additional incremental investments in connection with such exchanges; l. redemptions, purchases, retirements or other acquisitions for consideration of shares of capital stock of any Subsidiary of Borrowers; provided, that (i) such stock is not owned by Borrowers or their Subsidiaries and (ii) such redemption or acquisition is not otherwise prohibited under this Agreement; m. loans permitted under Sections 7.5 and 7.6; or n. investments by any Subsidiary of Borrowers. Under no circumstances shall any Borrower extend any credit or make any loans to any employees of any Borrower, the aggregate principal amount outstanding of which shall, at any given time, exceed $100,000. 5. Limitation on Indebtedness .  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: a. Indebtedness incurred pursuant to this Agreement; b. Indebtedness existing on the Closing Date, as set forth in Schedule 7.5, as the same may be extended, renewed, refunded or refinanced; provided, however, that after giving effect to such extension, renewal, refunding or refinancing, (i) the principal amount thereof is not increased, and (ii) neither the tenor nor the remaining average life thereof is reduced; c. purchase money liens and Capital Leases; d. endorsements for collection or deposit in the Ordinary Course of Business; e. accounts payable to trade creditors for goods and services and current operating liabilities (not the result of the borrowing of money) incurred in the Ordinary Course of Business of Borrowers and their Subsidiaries in accordance with customary terms and paid within the specified time, unless contested in good faith by appropriate proceedings and reserved for in accordance with GAAP; f. Indebtedness consisting of Contingent Obligations permitted pursuant to Section 7.8; g. Indebtedness secured by Liens permitted by subsections 7.1(f), (h), (i), (j), (k) and (m). h. Indebtedness incurred in connection with leases permitted pursuant to Sections 7.11; i. Indebtedness of any Borrower to any of their Wholly-Owned Subsidiaries or any Subsidiary of any Borrower to any Borrower; j. Additional Debt, subject to Section 2.3(b); k. Anschutz Sub Debt, subject to Section 2.3(b); l. Indebtedness incurred in connection with the Exit Facility, subject to Section 2.3(b); m. Indebtedness secured by Liens permitted by Section 7.1(s); n. Swap Contracts entered into with respect to obligations incurred or existing in the Ordinary Course of Business; o. Contingent Obligations comprised of endorsements for collection or deposit in the Ordinary Course of Business and accounts payable to suppliers incurred in the Ordinary Course of Business and paid in the Ordinary Course of Business; p. Contingent Obligations incurred in connection with various employee benefit plans or collective bargaining agreements to the extent not otherwise prohibited and subject to any restrictions in this Agreement or any other Loan Document; q. Indebtedness contemplated by Sections 7.4 and 7.6; and r. Indebtedness of any Person that becomes a Subsidiary after the Confirmation Date in accordance with the terms of Section 7.4 which Indebtedness is existing at the time such Person becomes a Subsidiary (other than Indebtedness incurred solely in contemplation of such Person Becoming a Subsidiary of Borrowers). 6. Transactions with Affiliates .  Borrowers shall not, and shall not permit any of their Subsidiaries to, sell or transfer any assets to, purchase or acquire any assets of, enter into any lease, make any loan or investment in, or otherwise engage in any material transaction with any Affiliate, except in the Ordinary Course of Business and upon fair and reasonable terms no less favorable than Borrowers or any such Subsidiary could obtain or could become entitled to in an arm's length transaction with a Person which was not an Affiliate; except: a. payments to Prop I under theatre leases and subleases entered into prior to the Closing Date and under other UARC Leases as in effect on the Closing Date; b. payments of management fees or similar fees paid by any Subsidiary of Borrowers to Borrowers or any Subsidiary; c. transactions done pursuant to the agreements and arrangements set forth on Schedule 7.6 hereto; d. transactions among Borrowers and their Subsidiaries in connection with the management and operation of such Subsidiaries in the Ordinary Course of Business as conducted as of the Closing Date; e. transactions among Borrowers and Pledged Subsidiaries; and f. transactions permitted under Sections and 7.3 and 7.4. 7. [Intentionally omitted]. 8. [Intentionally omitted]. 9. [Intentionally omitted]. 10. [Intentionally omitted]. 11. Lease Obligations .  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, create or suffer to exist any obligations for the payment of rent for any Property under lease or agreement to lease, entered into pursuant to any Sale-and-Leaseback Transaction except Sale-and-Leaseback Transactions entered into in an arm's length transaction with a Person other than a Subsidiary of Borrowers; provided, that: (a) immediately prior to giving effect to such lease, the property or asset subject to such lease was sold by Borrowers or any such Subsidiary to the lessor under such lease for not less than fair market value; (b) the Net Proceeds of such sale are applied simultaneously to reduce the Loans to the extent required by Section 2.3; and (c) no Default or Event of Default would occur as a result of such sale and subsequent lease. 12. Capital Expenditures .  Borrowers and their Subsidiaries shall not make or commit to make Capital Expenditures except:  (i) up to $50,000,000 for each fiscal year after the year 2000 (excluding any unused carry over from the prior year only); and (ii) up to $10,000,000 of unused carry over from the prior year only. 13. Change in Business .  Borrowers shall not, and shall not permit any of their Subsidiaries, to engage in any material line of business substantially different from those lines of business carried on by them on the date hereof. 14. Accounting Changes .  Borrowers shall not, and shall not suffer or permit any of their Subsidiaries to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of Borrowers or of any of their consolidated Subsidiaries, without the prior approval of the Majority Lenders. 15. Relocation of Collateral, Chief Executive Offices, or Deposit Accounts .  No Borrower shall (a) relocate any of the Collateral to any location not specified as a location where such Borrower maintains Collateral on a schedule delivered to the Administrative Agent, except for relocations during any fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent an updated version of a Collateral location schedule in accordance with the penultimate sentence of Section 6.12, (b) relocate its chief executive office, or (c) establish any new deposit account or modify any existing deposit account such that the schedule delivered to the Administrative Agent prior to the Closing Date fails accurately to disclose the relevant information with respect to same, except to the extent that such establishment or modification occurs during any fiscal month of Borrowers with respect to which Borrowers are not past due in delivering to the Administrative Agent an updated version of a deposit account location schedule in accordance with the penultimate sentence of Section 6.12. 16. No Negative Pledges in Favor of Others .  Borrowers shall not agree to, and shall not permit or allow any of their Subsidiaries to agree to, any contractual provision whereby Borrowers or any Subsidiaries of Borrowers restrict their ability to grant Liens on their Property, except for Negative Pledges (a) in favor of the Administrative Agent and the Lenders contained in the Loan Documents or (b) in respect of the Indebtedness Proceeds as permitted under Section 2.3(b). 17. [Intentionally Omitted]. 18. [Intentionally Omitted] [Intentionally Omitted]. 19. Certain Restrictions .  Borrowers shall not, and shall not permit any of their Wholly-Owned Subsidiaries to, enter into any agreements (other than the Loan Documents) which restrict the ability of Borrowers or any of their Subsidiaries to (a) enter into amendments, modifications or waivers of the Loan Documents, or (b) create, incur, assume, suffer to exist or otherwise become liable with respect to any Indebtedness. 20. Financial Covenants .  Neither Borrowers nor any of their Subsidiaries shall permit, with respect to the twelve-month trailing EBITDA, Total Leverage Ratio and Interest Coverage Ratio, determined on a Consolidated basis for the twelve-month period ending on the quarters set forth below, to be less than the amounts set forth next to such quarters: Min. Adj. Total Interest 12 Mo. Trailing Leverage Coverage Year EBITDA ($mil) Ratio Ratio 2001 Q1 $         60.0 4.75 2.00 Q2 60.0 4.75 2.00 Q3 60.0 4.60 2.00 Q4 60.0 4.60 2.00 2002 Q1 60.0 4.60 2.00 Q2 60.0 4.60 2.00 Q3 62.5 4.35 2.15 Q4 62.5 4.35 2.15 2003 Q1 65.0 4.35 2.20 Q2 65.0 4.15 2.20 Q3 67.5 4.00 2.35 Q4 67.5 4.00 2.35 2004 Q1 70.0 4.00 2.50 Q2 70.0 3.75 2.50 Q3 72.5 3.50 2.75 Q4 72.5 3.50 2.75 Restricted Payments .  Borrowers shall not, nor permit any of their Subsidiaries to, declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of their capital stock, or purchase, redeem or otherwise acquire for value any shares of their capital stock or any warrants, rights or options to acquire such shares, now or hereafter outstanding, or enter into derivative transactions related to the foregoing; except: a. dividends or distributions by Subsidiaries of Borrowers on their capital stock to Borrowers or their Subsidiaries; provided, however, that dividends or distributions by non Wholly-Owned Subsidiaries of Borrowers shall be paid ratably to holders of their capital stock; b. repurchase of their common stock held by retired, or former officers and employees (or from the estate, heirs or legatees of any deceased officer or employee); provide however, that the aggregate cash amount expended for such purpose shall not exceed $2,000,000 during any consecutive period of twelve months and shall not exceed $10,000,000 in the aggregate from and after the Closing Date; c. transactions permitted by Section 7.3 and 7.4; and d. dividends in the form of stock (which stock dividends paid to Borrowers shall be pledged under the Loan Documents if required thereby. Priority of Loan Payments .  Borrowers shall not, and shall not permit any of their Subsidiaries to, directly or indirectly make any optional or other voluntary payment, prepayment, retirement, repurchase or redemption on account of the principal of or interest on any Indebtedness or set aside money or securities for a sinking or other similar fund for the payment of principal of or premium or interest in respect of any Indebtedness or set apart money for the defeasance of any Indebtedness; except for: a. the Obligations; b. prepayments of existing Indebtedness permitted under Section 7.5(b) from the proceeds of Dispositions not required to prepay Loans pursuant to Section 2.3; c. refinancing or refunding of Indebtedness otherwise permitted under this Agreement; and d. payments otherwise permissible under Sections 7.4 and 7.22. Investments in Margin Stock .  Borrowers shall not, and shall not permit any of their Subsidiaries to, acquire or hold any Margin Stock, or permit any Subsidiary of Borrowers so to do, unless not more than 25% of the value of the assets of Borrowers, or Borrowers on a Consolidated basis, as the case may be, is represented by assets consisting of Margin Stock. Amendments to Certain Agreements .  Borrowers shall not, and shall not permit any of their Subsidiaries to, without the prior written consent of Majority Lenders, amend, waive or modify, or take or refrain from taking any action which has the effect of amending, waiving or modifying, any provision of: a. any other agreements with Affiliates to the extent the such amendment, waiver, modification or action could have a Material Adverse Effect or could have an adverse effect on the rights of the Administrative Agent, any Lender under this Agreement or any Loan Document; provided, however, that Borrowers and their Subsidiaries shall not be permitted to amend, waive or modify any material agreement with an Affiliate if a Default or Event of Default has occurred and is continuing, or b. any documents (other than documents referred to in (a) above) evidencing Indebtedness; provided, however, that notwithstanding anything to the contrary contained in this Section 7.25, amendments may be made to documents evidencing Indebtedness to the extent that the terms and conditions hereof permit Borrowers or their Subsidiaries to enter into an initial agreement which has the same effect as such amendment. EVENTS OF DEFAULT 1. Event of Default .  Any of the following shall constitute an "Event of Default": a. Non-Payment .  Borrowers fail to pay, (i) when and as required to be paid herein, any amount of principal of any Loan or any amount required hereunder or (ii) within five days after the same shall become due, any interest, fee or any other amount payable hereunder or pursuant to any other Loan Document; or b. Representation or Warranty .  Any material representation or warranty by Borrowers or any of their Subsidiaries made or deemed made herein, in any Loan Document, or which is contained in any certificate, document or financial or other statement by Borrowers, any of their Subsidiaries, or their respective Responsible Officers, furnished at any time under this Agreement, or in or under any Loan Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or c. Specific Defaults .  Borrowers fail to perform or observe any term, covenant or agreement contained in Sections 6.9, 6.11, 6.13 or Article VII; or d. Other Defaults .  Borrowers fail to perform or observe any other term or covenant contained in this Agreement or any Loan Document, and such default shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer of Borrowers knew or should have known of such failure or (ii) the date upon which written notice thereof is given to Borrowers by the Administrative Agent or any Lender; or Cross-Default .  Borrowers or any of their Subsidiaries (i) fail to make any payment in respect of any Indebtedness (including, but not limited to, the Exit Facility but excluding non-recourse indebtedness and indebtedness of non Wholly-Owned Subsidiaries) or Contingent Obligation 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 $5,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) fail to perform or observe any other condition or covenant, or any other event shall occur or condition exist, (irrespective of whether such non-performance or non-observance shall be waived or otherwise excused by the holder or holders of such Indebtedness) under any agreement or instrument relating to any such Indebtedness (including, but not limited to, the Exit Facility) or Contingent Obligation, if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or Administrative Agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable, prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or e. Bankruptcy Orders .  Borrowers or any of their Subsidiaries, without the prior express written consent of the Majority Lenders, breach, modify, terminate, amend or seek to vacate the order approving the Confirmation Order; or f. [Intentionally Omitted]; g. Pre-Petition Obligations .  Borrowers or any of their Subsidiaries shall make any payments of Indebtedness relating to pre-Petition Date obligations other than as permitted under the Confirmation Order, in connection with the Term Sheet or as otherwise approved by the Bankruptcy Court; or h. [Intentionally omitted]; i. Judgments .  One or more judgments or decrees that does or could reasonably be expected to have a Material Adverse Effect shall be entered by a court or courts of competent jurisdiction against Borrowers or their Subsidiaries (other than any judgment as to which, and only to the extent, a reputable insurance company has acknowledged coverage of such claim in writing) and any such judgments or decrees shall not be stayed, discharged, paid, bonded or vacated within 30 days; or j. Change in Control .  A Change of Control Event shall occur; or k. Material Adverse Effect .  There shall occur any event or condition after the Confirmation Date that does or could reasonably be expected to have a Material Adverse Effect and as to which event or condition the Administrative Agent has delivered a notice to Borrowers within 30 days of the occurrence thereof and which event or condition shall not have been cured by Borrowers or their Subsidiaries within 30 days after receipt of such notice from the Administrative Agent; or l. Loan Documents Cease to be in Effect .  Any Loan Document shall cease to be in full force and effect for any reason other than the indefeasible payment and satisfaction in full of the Obligations, the agreement of the Lenders, or the termination thereof in accordance with its terms, any court of competent jurisdiction shall declare any Loan Document, or any material provision thereof to be void, ineffective, or unenforceable, any Lien on any material type, item, or portion of Collateral provided for in any Loan Document shall be set aside, avoided, or declared by a court of competent jurisdiction to be void, ineffective, or unenforceable, or any Borrower shall challenge, dispute, or repudiate all or any material portion of its Obligations under any material provision of any of the Loan Documents or the Lenders shall cease to have a first priority Lien on all Collateral (subject to Permitted Liens); or m. Bankruptcy; Insolvency .  After the Confirmation Date, Borrowers or any of their Subsidiaries shall:  (i) become insolvent or be unable to pay their debts as they mature; (ii) make an assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of their properties and assets; (iii) file a voluntary petition in bankruptcy or seeking reorganization or to effect a plan or other arrangement with creditors; (iv) file an answer admitting the material allegations of an involuntary petition relating to bankruptcy or reorganization or join in any such petition; (v) become or be adjudicated as bankrupt; (vi) apply for or consent to the appointment of, or consent that an order be made, appointing any receiver, custodian or trustee, for themselves or any of their properties, assets or businesses; or (vii) in an involuntary proceeding, any receiver, custodian or trustee shall have been appointed for all or substantial part of Borrower's or any of their Subsidiaries' properties, assets or businesses and shall not be discharged within 30 days after the date of such appointment. Rights and Remedies .  Upon the occurrence of any Event of Default specified in Sections (f), (g) or (n) above, the Credit Commitments shall automatically and immediately terminate and the unpaid principal amount of and any and all accrued interest on the Loans and any and all accrued fees and other Obligations shall automatically become immediately due and payable, with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by Borrowers or their Subsidiaries, and upon the occurrence and during the continuance of any other Event of Default, the Administrative Agent shall at the request, or may with the consent of the Majority Lenders, by written notice to Borrowers, (i) declare that the Credit Commitments are terminated, whereupon the Credit Commitments shall immediately terminate, (ii) declare the unpaid principal amount of and any and all accrued and unpaid interest on the Loans and any and all accrued fees and other Obligations to be, and the same shall thereupon be, immediately due and payable with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by Borrowers.  The rights and remedies of the Lenders hereunder shall be binding upon a Chapter 11 or Chapter 7 Trustee in any Bankruptcy case relating to Borrowers. Remedies; Obtaining the Collateral Upon Default .  Upon the occurrence and during the continuance of an Event of Default, to the extent any such action is not inconsistent with the Confirmation Order, the Lender shall have all rights as a secured creditor under the UCC in all relevant jurisdictions and may: a. perform all acts attendant to the Loans extended hereunder and to exercise all remedies in the case of any Event of Default hereunder; b. personally, or by agents or attorneys, retake possession of the Collateral or any part thereof, from Borrowers and their Subsidiaries or any other Person who then has possession of any part thereof with or without notice or process of law (but subject to any applicable laws), and for that purpose may enter upon Borrowers' or any of their Subsidiaries' premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of Borrowers or any of their Subsidiaries; c. sell, assign or otherwise liquidate, or direct Borrowers or any of their Subsidiaries to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession of the proceeds of any such sale or liquidation; d. apply any and all funds held by the Collateral Agent, on behalf of the Lenders, to the Obligations hereunder; and e. take possession of the Collateral or any part thereof, by directing Borrowers and any of their Subsidiaries in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event Borrowers and any of their Subsidiaries shall at their own expense: (1) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (2) while the Collateral shall be stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and it being understood that Borrowers or any of their Subsidiaries obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to the Bankruptcy Court, the Collateral Agent shall be entitled to a decree requiring specific performance by Borrowers or any of their Subsidiaries of such obligation. Remedies, Disposition of the Collateral .  Upon the occurrence and during the continuance of an Event of Default, and to the extent not inconsistent with the Confirmation Order, any Collateral repossessed by the Collateral Agent, and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any applicable laws, determined to be commercially reasonable.  Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable.  Any such disposition which shall be a private sale or other private proceeding permitted by applicable laws shall be made upon not less than 30 days' written notice to Borrowers specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 30 days after the giving of such notice, to the right of Borrowers or any nominee of Borrowers to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified.  Any such disposition which shall be a public sale permitted by applicable laws shall be made upon not less than 30 days' written notice to Borrowers specifying the time and place of such sale and, in the absence of applicable laws, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 30 days prior thereto in two newspapers in national circulation.  To the extent permitted by any applicable laws, the Collateral Agent on behalf of the Lenders may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section 8.4 without accountability to Borrowers or any of their Subsidiaries or the Credit Lenders (except to the extent of surplus money received).  If, under applicable laws, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to Borrowers as herein above specified, the Collateral Agent need give Borrowers only such notice of disposition as shall be reasonably practicable. Recourse .  Except as required by the Bankruptcy Code or by order of the Bankruptcy Court, Borrowers shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to satisfy the Obligations.  Borrowers shall also be liable for all reasonable expenses of the Collateral Agent incurred in connection with collecting such deficiency, including, without limitation, the reasonable fees and disbursements of any attorneys employed by the Collateral Agent to collect such deficiency. Rights Not Exclusive .  The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. THE ADMINISTRATIVE AGENT AND COLLATERAL AGENT 1. Appointment and Authorization .  Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent and Collateral Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, including, without limitation, pursuant to Section 6.9 hereof, together with such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Administrative Agent and Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent and Collateral Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent or Collateral Agent. Delegation of Duties .  The Administrative Agent and Collateral Agent may execute any of their respective duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Administrative Agent and Collateral Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that they select with reasonable care. Liability of Administrative Agent and Collateral Agent .  None of the Administrative Agent-Related Persons or Collateral Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document (except for their own gross negligence or willful misconduct) or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by Borrowers or any Subsidiary or Affiliate of Borrowers, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent or Collateral Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrowers or any other party to any Loan Document (except the Administrative Agent or Collateral Agent) to perform its obligations hereunder or thereunder.  No Administrative Agent-Related Person Agent or Collateral Agent-Related Persons shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of this Agreement or any other Loan Document, or to inspect the Properties, books or records of Borrowers or any of Borrowers' Subsidiaries or Affiliates. Reliance by Administrative Agent and Collateral Agent a. The Administrative Agent and Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by them to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent or Collateral Agent.  The Administrative Agent and Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless they shall first receive such advice or concurrence of the Majority Lenders as they deem appropriate and, if they so request, they shall first be indemnified to their satisfaction by the Lenders against any and all liability and expense which may be incurred by them by reason of taking or continuing to take any such action.  The Administrative Agent and Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Lenders and such request and any action taken or failure to act pursuant thereto, if taken in accordance with the terms of this Agreement, shall be binding upon all of the Lenders. b. For purposes of determining compliance with the conditions specified in Sections 4.1 and 4.2, each Lender shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document or other matter either sent by the Administrative Agent or Collateral Agent to such Lender for consent, approval, acceptance, or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender. Notice of Default .  The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender (other than BofA) or Borrowers referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default."  In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders.  The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be requested by the Majority Lenders in accordance with Article VIII; provided, however, that unless and until the Administrative Agent shall have received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. Credit Decision .  Each Lender expressly acknowledges that none of the Administrative Agent-Related Persons has made any representation or warranty to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of Borrowers and their Subsidiaries shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender.  Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrowers and their Subsidiaries, and all applicable Lender regulatory laws relating to the transactions contemplated thereby, and made its own decision to enter into this Agreement and extend credit to Borrowers hereunder.  Each Lender also represents that it will, independently and without reliance upon the Administrative Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrowers.  Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Administrative Agent, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrowers which may come into the possession of any of the Administrative Agent-Related Persons. Indemnification .  Whether or not the transactions contemplated hereby shall be consummated, the Lenders shall indemnify upon demand the Administrative Agent-Related Persons and Collateral Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrowers and without limiting the obligation of Borrowers to do so), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind whatsoever which may at any time (including at any time following the repayment of the Loans and the termination or resignation of the related Administrative Agent and Collateral Agent) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by any such Person under or in connection with any of the foregoing; provided, however, that the Lenders shall not be liable for the payment to the Administrative Agent-Related Persons or Collateral Agent-Related Persons of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Person's gross negligence or willful misconduct.  Without limitation of the foregoing, the Lenders shall reimburse the Administrative Agent and Collateral Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent and Collateral Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein to the extent that the Administrative Agent and Collateral Agent are not reimbursed for such expenses by or on behalf of Borrowers.  Without limiting the generality of the foregoing, if the Internal Revenue Service or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Administrative Agent under this Section, together with all costs and expenses and attorneys' fees (including Attorney Costs).  The obligation of the Lenders in this Section shall survive the payment of all Obligations hereunder. Administrative Agent in Individual Capacity .  BofA and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory or other business with Borrowers and their Subsidiaries and Affiliates as though BofA were not the Administrative Agent hereunder or without notice to or consent of the Lenders.  With respect to its Loans, BofA shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include BofA in its individual capacity. Successor Administrative Agent and Successor Collateral Agent .  The Administrative Agent and Collateral Agent may, and at the request of the Majority Lenders shall, resign as Administrative Agent and Collateral Agent, as the case may be, upon 30 days' notice to the Lenders.  If the Administrative Agent and Collateral Agent shall resign as Administrative Agent and Collateral Agent under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor Administrative Agent and a successor Collateral Agent, as the case may be, for the Lenders which successor Administrative Agent and successor Collateral Agent shall be approved by Borrowers (which approval shall not be unreasonably withheld).  If no successor Administrative Agent and no successor Collateral Agent, as the case may be, are appointed prior to the effective date of the resignation of the Administrative Agent and Collateral Agent, the Administrative Agent and Collateral Agent may appoint, after consulting with the Lenders and Borrowers, a successor Administrative Agent and a successor Collateral Agent, as the case may be, from among the Lenders.  Upon the acceptance of their appointment as successor Administrative Agent and successor Collateral Agent hereunder, such successor Administrative Agent and successor Collateral Agent, as the case may be, shall succeed to all the appointment, powers and duties of the retiring Administrative Agent and the retiring Collateral Agent.  The term "Administrative Agent" shall mean such successor Administrative Agent and the term "Collateral Agent" shall mean such successor Collateral Agent.  The retiring Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated and the retiring Collateral Agent's rights, powers and duties as Collateral Agent shall be terminated.  After a retiring Administrative Agent's resignation as Administrative Agent hereunder and a retiring Collateral Agent's resignation as Collateral Agent hereunder, as the case may be, the provisions of this Article IX and Sections 10.4 and 10.5 shall inure to their respective benefit as to any actions taken or omitted to be taken by them while they were Administrative Agent and Collateral Agent under this Agreement.  If no successor Administrative Agent and no successor Collateral Agent have accepted appointment as Administrative Agent and Collateral Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation and a retiring Collateral Agent's notice of resignation, the retiring Administrative Agent's resignation and the retiring Collateral Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent and Collateral Agent hereunder until such time, if any, as the Majority Lenders appoint a successor Administrative Agent and a successor Collateral Agent, as the case may be, as provided for above. MISCELLANEOUS 1. Amendments and Waivers .  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by Borrowers therefrom, shall be effective unless the same shall be in writing and signed by, or consented to in writing by the Majority Lenders, Borrowers and the Administrative Agent, and then such amendment, 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 all the Lenders, do any of the following: (1) waive any of the conditions precedent specified in Article 4; (2) increase the Aggregate Commitment of the Lenders; (3) reduce the principal of, or interest on, the Notes or any fees hereunder; (4) postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees hereunder; (5) change the respective percentage of the Credit Commitments or of the aggregate unpaid principal amount of the Notes or the number of Lenders which shall be required for the Lenders or any of them to take action hereunder; or (6) amend, modify or waive any provision of this Section 10.1; and provided further that 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 any of the Loan Documents. Notices a. All notices, requests and other communications provided for hereunder shall be in writing (which, unless the context expressly otherwise provides, may be by facsimile transmission, provided that any matter transmitted by Borrowers by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on the applicable signature page hereof, and (ii) shall be followed promptly by a hard copy (original thereof) sent by mail or delivery, and mailed or delivered, to the address specified for notices on the applicable signature page hereof, or, as directed to Borrowers, the Administrative Agent, or Collateral Agent to such other address as shall be designated by such party in a written notice to the other parties, and directed as to each other party, at such other address as shall be designated by such party in a written notice to Borrowers, the Administrative Agent and Collateral Agent. b. All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted by facsimile machine, respectively, or if delivered, upon deposit with the delivery company, except that notices pursuant to Article II or VIII shall not be effective until actually received by the Administrative Agent and Collateral Agent. c. The Administrative Agent, Collateral Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by Borrowers to give such notice and believed by them to be genuine and correct and the Administrative Agent, Collateral Agent or the Lenders shall not have any liability to Borrowers or other Person on account of any action taken or not taken by the Administrative Agent, Collateral Agent and the Lenders in reliance upon such facsimile notice.  The obligation of Borrowers to repay the Loans shall not be affected in any way or to any extent by any failure by the Administrative Agent, Collateral Agent and the Lenders to receive written confirmation of any facsimile notice or the receipt by the Administrative Agent, Collateral Agent and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent, Collateral Agent and the Lenders to be contained in the facsimile notice. No Waiver; Cumulative Remedies .  No failure to exercise and no delay in exercising, on the part of the Administrative Agent, Collateral Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. Costs and Expenses .  Borrowers shall whether or not the transactions contemplated hereby shall be consummated: a. pay or reimburse each Lender, the Administrative Agent and Collateral Agent within 30 days after demand (subject to subsection 4.2 d)) for all reasonable costs and expenses incurred by each Lender, the Administrative Agent and Collateral Agent (including fees and expenses described in subsection (c) below) in connection with the negotiation, development, preparation, delivery and execution of this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including title insurance, recording and other fees incurred by the Administrative Agent or the Collateral Agent with respect thereto and the reasonable Attorney Costs incurred by each Lender and the Administrative Agent with respect thereto; b. pay or reimburse each Lender, the Administrative Agent and Collateral Agent within 30 days after demand (subject to subsection 4.2(d)) for all reasonable costs and expenses incurred by them in connection with the negotiation, renegotiation, restructure, workout, enforcement, attempted enforcement, or preservation of any rights or remedies (including in connection with any "workout" or restructuring regarding the Loans and including in any insolvency proceeding or appellate proceeding) under this Agreement, any other Loan Document, and any such other documents, including reasonable Attorney Costs incurred by the Administrative Agent, Collateral Agent and any Lender; and c. pay or reimburse each Lender, the Administrative Agent and Collateral Agent within 30 days after demand (subject to Subsection 4.2(d)) for all reasonable costs and expenses incurred by each Lender, the Administrative Agent and Collateral Agent subsequent to the Closing Date in connection with this Agreement including, without limitation, all reasonable costs and expenses incurred in connection with the administration and enforcement of this Agreement and Loan Documents. d. pay or reimburse each Lender within 30 days after demand (subject to Section 4.2(d)) for all reasonable costs and expenses incurred by such Lender by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to maintain such Loan if any payment of principal of any Loan is made by Borrowers to or for the account of any Lender as a result of a prepayment or payment pursuant to Section 2.4. The agreements of Borrowers set forth in this Section shall survive the termination of this Agreement. Indemnity .  Borrowers shall pay, indemnify, and hold each Lender, the Administrative Agent, the Collateral Agent and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including reasonable Attorney Costs) of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement and any other Loan Documents, or the transactions contemplated hereby and thereby, and with respect to any investigation, litigation or proceeding (including any insolvency proceeding or appellate proceeding) related to this Agreement, the Loan Documents, or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, however, that Borrowers shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of such Indemnified Person. Borrowers hereby agree to indemnify, defend and hold harmless each Indemnified Person, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses or disbursements (including reasonable Attorney Costs and the allocated cost of internal environmental audit or review services), which may be incurred by or asserted against such Indemnified Person in connection with or arising out of any pending or threatened investigation, litigation or proceeding, or any action taken by any Person, with respect to any Environmental Claim arising out of or related to any Property subject to a Mortgage in favor of the Collateral Agent or any Lender.  No action taken by legal counsel chosen by the Administrative Agent, the Collateral Agent or any Lender in defending against any such investigation, litigation or proceeding or requested remedial, removal or response action shall vitiate or in any way impair Borrowers' obligation and duty hereunder to indemnify and hold harmless the Administrative Agent, the Collateral Agent and each Lender. In no event shall any site visit, observation, or testing by the Administrative Agent, the Collateral Agent or any Lender (or any contractor of the Administrative Agent, the Collateral Agent or any Lender) be deemed a representation or warranty that Hazardous Materials are or are not present in, on, or under the site, or that there has been or shall be compliance with any Environmental Law.  Neither Borrowers nor any other Person is entitled to rely on any site visit, observation, or testing by the Administrative Agent, the Collateral Agent or any Lender.  Neither the Administrative Agent, the Collateral Agent nor any Lender owes any duty of care to protect Borrowers or any other Person against, or to inform Borrowers or any other party of, any Hazardous Materials or any other adverse condition affecting any site or Property.  Neither the Administrative Agent, the Collateral Agent nor any Lender shall be obligated to disclose to Borrowers or any other Person any report or findings made as a result of, or in connection with, any site visit, observation, or testing by the Administrative Agent, the Collateral Agent or any Lender. At the election of any Indemnified Person, Borrowers shall defend such Indemnified Person using legal counsel satisfactory to such Indemnified Person in such Person's reasonable discretion, at the sole cost and expense of Borrowers.  All amounts owing under this Section 10.05 shall be paid within 30 days after demand. Without limiting the generality of the foregoing, any amount required to be paid by any Lender to the Administrative Agent, the Collateral Agent or any Administrative Agent-Related Person pursuant to Section 9.7 shall constitute an Indemnified Liability recoverable by such Lender from Borrowers, so long as such Indemnified Liability does not arise from the gross negligence or willful misconduct such Lender.  The agreements in this Section shall survive payment of all other Obligations. Marshaling, Payments Set Aside .  Except as set forth in Section 8.2 hereof, neither the Administrative Agent nor the Lenders shall be under any obligation to marshal any assets in favor of Borrowers or any other Person or against or in payment of any or all of the Collateral Obligations.  The Administrative Agent and the Lenders shall have the right to foreclose and liquidate any of the Collateral in any order without incurring any liability to Borrowers.  To the extent that Borrowers make a payment or payments to the Administrative Agent or the Lenders, or the Administrative Agent or the Lenders enforce their Liens or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or set-off 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 in connection with any insolvency proceeding, or otherwise, then 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 enforcement or set-off had not occurred. Successors and Assigns .  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Borrowers may not assign or transfer any of their rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender. Assignments; Participations; etc. a. Any Lender may at any time assign and delegate to one or more Lender Affiliates all or any portion of the Loans, the Credit Commitments and the other rights and obligations of such Lender hereunder; provided that (i) all such assignments shall be in a minimum amount of $1,000,000 if made to another Lender party hereto or $5,000,000 if made to any other Lender Affiliate; (ii) no Lender shall have Credit Commitments, immediately following an assignment, of an aggregate amount of less than $1,000,000 unless such Lender shall have assigned all of its Loans, Credit Commitments, rights and obligations hereunder, and no Lender Affiliate, other than a Lender party hereto, shall have Credit Commitments immediately following an assignment of an aggregate amount of less than $5,000,000, unless such Lender Affiliate shall have assigned all of its Loans, Credit Commitments, rights and obligation hereunder; provided, further, that Borrowers and the Administrative Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to such Lender Affiliate until (A) written notice of such assignment, together with payment instructions, addresses and related information with respect to such Lender Affiliate, shall have been given to Borrowers and the Administrative Agent by such Lender and such Lender Affiliate; (B) such Lender and such Lender Affiliate shall have delivered to Borrowers and the Administrative Agent an Assignment and Acceptance in the form of Exhibit F ("Assignment and Acceptance") together with any Note or Notes subject to such Assignment and (C) such Lender Affiliate has paid to the Administrative Agent a processing fee in the amount of $3,000. b. Upon the occurrence and continuance of an Event of Default, any Lender may, with the written consent of the Administrative Agent, which consent shall not be unreasonably withheld or delayed, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Administrative Agent shall be required in connection with any assignment and delegation by a Lender to its Lender Affiliate) (each an "Assignee") all or any portion of the Loans, the Credit Commitments and the other rights and obligations of such Lender hereunder; provided, however, that Borrowers and the Administrative Agent may continue to deal solely and directly with such Lender in connection with the interest so assigned to an Assignee until (A) written notice of such assignment together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to Borrowers and the Administrative Agent by such Lender and the Assignee; (B) such Lender and its Assignee shall have delivered to Borrowers and the Administrative Agent an Assignment and Acceptance together with any Note or Notes subject to such Assignment and (C) the Assignee has paid to the Administrative Agent a processing fee in the amount of $3,000. c. From and after the date that the Administrative Agent notifies the assignor Lender that it has received an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder and under the Loan Documents have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of the assignor Lender under the Loan Documents and (ii)  the assignor Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. d. Within five Business Days after its receipt of notice by the Administrative Agent that it has received an executed Assignment and Acceptance, which notice shall also be sent by the Administrative Agent to each Lender, and payment of the processing fee, Borrowers shall execute and deliver to the Administrative Agent, new Notes evidencing such Assignee's assigned Loans and Credit Commitment and, if the assignor Lender has retained a portion of its Loans and its Credit Commitment, replacement Notes in the principal amount of the Loans and Credit Commitment retained by the assignor Lender (such Notes to be in exchange for, but not in payment of, the Notes held by such Lender).  Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance, this Agreement, shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Credit Commitments arising therefrom.  The Credit Commitment allocated to each Assignee shall reduce such Credit Commitment of the assigning Lender pro tanto. e. Any Lender may at any time sell to one or more commercial lenders or other Persons not affiliates of Borrowers (a "Participant") participating interests in any Loans, the Credit Commitment of that Lender and the other interests of that Lender (the "originating Lender") hereunder and under the other Loan Documents; provided, however, that (i) the originating Lender's obligations under this Agreement shall remain unchanged, (ii) the originating Lender shall remain solely responsible for the performance of such obligations, (iii) Borrowers and the Administrative Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document.  In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents, and all amounts payable by Borrowers hereunder shall be determined as if such Lender had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. f. Each Lender agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" by Borrowers and provided to it by Borrowers or any Subsidiary of Borrowers, or by the Administrative Agent on such Company's or such Subsidiary's behalf, in connection with this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement; except to the extent such information (i) was or becomes generally available to the public other than as a result of a disclosure by any Lender or (ii) was or becomes available on a non-confidential basis from a source other than Borrowers, provided that such source is not bound by a confidentiality agreement with Borrowers known to such Lender; provided further, however, that the Lender may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which such Lender is subject or in connection with an examination of the Lender by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; and (D) to such Lender's independent auditors and other professional advisors.  Notwithstanding the foregoing, Borrowers authorize each Lender to disclose to any Participant or Assignee (each, a "Transferee") and to any prospective Transferee, such financial and other information in such Lender's possession concerning Borrowers or their Subsidiaries which has been delivered to Administrative Agent or the Lenders pursuant to this Agreement or which has been delivered to the Administrative Agent or the Lenders by Borrowers in connection with the Lenders' credit evaluation of Borrowers prior to entering into this Agreement; provided that, unless otherwise agreed by Borrowers, such Transferee agrees in writing to such Lender to keep such information confidential to the same extent required of the Lenders hereunder. g. Notwithstanding any other provision contained in this Agreement or any other Loan Document to the contrary, any Lender may assign all or any portion of the Loans or Notes held by it to any Federal Reserve Lender or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Lender, provided that any payment in respect of such assigned Loans or Notes made by Borrowers to or for the account of the assigning and/or pledging Lender in accordance with the terms of this Agreement shall satisfy Borrowers' obligations hereunder in respect to such assigned Loans or Notes to the extent of such payment.  No such assignment shall release the assigning Lender from its obligations hereunder. Set-off .  In addition to any rights and remedies of the Lenders provided by law, if an Event of Default exists, each Lender is, subject to Section 8.2, authorized at any time and from time to time, without prior notice to Borrowers, any such notice being waived by Borrowers 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 by, and other indebtedness at any time owing to, such Lender to or for the credit or the account of Borrowers against any and all Obligations owing to such Lender, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured.  Each Lender agrees promptly to notify Borrowers and the Administrative Agent after any such set-off and application made by such Lender; 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 under this Section 10.9 are in addition to the other rights and remedies (including other rights of set-off) which the Lender may have. Debits of Fees .  With respect to any agency fee, or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Administrative Agent, any Lender or BofA under the Loan Documents, Borrowers may choose to authorize BofA to debit any deposit account of Borrowers with BofA in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost of expense.  If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in BofA's sole discretion) and such amount not debited shall be deemed to be unpaid.  No such debit under this Section 10.10 shall be deemed a setoff. Notification of Addresses, Lending Offices, Etc.   Each Lender shall notify the Administrative Agent in writing of any changes in the address to which notices to the Lender should be directed, of addresses of its Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Administrative Agent shall reasonably request. Counterpart .  This Agreement may be executed by one or more of the parties to this Agreement in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument.  A set of the copies of this Agreement signed by all the parties shall be lodged with Borrowers and the Administrative Agent. Severability .  The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. No Third Parties Benefited .  This Agreement is made and entered into for the sole protection and legal benefit of Borrowers, the Lenders and the Administrative Agent, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.  Neither the Administrative Agent nor any Lender shall have any obligation to any Person not a party to this Agreement or other Loan Documents. Time .  Time is of the essence as to each term or provision of this Agreement and each of the other Loan Documents. Governing Law and Jurisdiction a. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT BORROWERS, THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. b. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWERS, THE ADMINISTRATIVE AGENT AND THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE JURISDICTION OF THOSE COURTS.  EACH OF BORROWERS, THE ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. Waiver of Right to Jury Trial .  BORROWERS, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OF, OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.  BORROWERS, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.  WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.  THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. Entire Agreement .  This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among Borrowers, the Lenders and the Administrative Agent, and, except as otherwise stated below, supersedes all prior or contemporaneous Agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof Interpretation .  This Agreement is the result of negotiations between and has been reviewed by counsel to the Administrative Agent, Borrowers and other parties, and is the product of all parties hereto.  Accordingly, this Agreement and the other Loan Documents shall not be construed against the Lenders or the Administrative Agent merely because of the Administrative Agent's or Lenders' involvement in the preparation of such documents and agreements. Intentionally Omitted Fees and Claims .  Fees and claims arising out of BofA's pre-petition and post-petition cash management system shall rank pari passu with the fees and claims due to the Lenders hereunder. Release .  Borrowers shall execute and deliver a Release of Claims in favor of the Lenders, in the form of Schedule 10.22 hereto. Further Assurances .  At any time and from time to time, upon the request of the Administrative Agent, Borrowers shall execute, deliver and acknowledge or cause to be executed, delivered or acknowledged, such further documents and instruments and do such other acts and things as the Administrative Agent may reasonably request in order to fully effect the purposes of the Loan Documents and any other agreements, instruments and documents delivered pursuant to or in connection with the Loans. Non-liability of Lender .  Borrowers acknowledge and agree that: a. Any inspections of any property of Borrowers made by or through the Administrative Agent or the Lenders are for purposes of administration of the Loan Documents only, and Borrowers are not entitled to rely upon the same (whether or not such inspections are at the expense of Borrowers); b. By accepting or approving anything required to be observed, performed, fulfilled or given to the Administrative Agent or the Lenders pursuant to the Loan Documents, neither the Administrative Agent nor the Lenders shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by the Administrative Agent or the Lenders; c. The relationship between Borrowers and the Administrative Agent and the Lenders is, and shall at all times remain, solely that of borrower and lender; neither the Administrative Agent nor any Lender shall under any circumstance be deemed to be in a relationship of confidence or trust or a fiduciary relationship with Borrowers or their Affiliates, or to owe any fiduciary duty to Borrowers or their Affiliates; neither the Administrative Agent nor any Lender undertakes or assumes any responsibility or duty to Borrowers or their Affiliates to select, review, inspect, supervise, pass judgment upon or inform Borrowers or their Affiliates of any matter in connection with their property or the operations of Borrowers or their Affiliates; Borrowers and their Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by the Administrative Agent or any Lender in connection with such matters is solely for the protection of the Administrative Agent and the Lenders and neither Borrowers nor any other Person is entitled to rely thereon; and d. Neither the Administrative Agent nor any Lender shall be responsible or liable to any Person for any loss, damage, liability or claim of any kind relating to injury or death to Persons or damage to property caused by the actions, inaction or negligence of Borrowers and/or their Affiliates and Borrowers hereby indemnify and hold the Administrative Agent and the Lenders harmless from any such loss, damage, liability or claim. Headings .  Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. UNITED ARTISTS THEATRE COMPANY   By Name: Title: Address for Notices:       UNITED ARTISTS THEATRE CIRCUIT, INC.   By Name: Title: Address for Notices:       UNITED ARTISTS REALTY COMPANY   By Name: Title: Address for Notices:       UNITED ARTISTS PROPERTIES I CORP.   By Name: Title: Address for Notices:       UNITED ARTISTS PROPERTIES II CORP.   By Name: Title: Address for Notices:       BANK OF AMERICA, N.A. As Administrative Agent and Collateral Agent   By Name: Title: Address for Notices:       BANK OF AMERICA, N.A. As a Lender   By Name: Title: Address for Notices: 333 So. Beaudry Ave. 9th Floor Dept. 3436 Los Angeles, CA 90017     EXHIBITS EXHIBIT A NOTE EXHIBIT B NOTICE TO DEPOSITARY INSTITUTION EXHIBIT C FORM OF LEGAL OPINION EXHIBIT D CONFIRMATION ORDER EXHIBIT E FORM OF ASSIGNMENT AND ACCEPTANCE EXHIBIT F SECURITY AGREEMENT EXHIBIT G STOCK PLEDGE AGREEMENT EXHIBIT H UAPH II STOCK PLEDGE AGREEMENT EXHIBIT I FORM OF LEASEHOLD DEED OF TRUST EXHIBIT J FORM OF MODIFICATION OF DEED OF TRUST SCHEDULES Schedule A Lenders Schedule B Term Sheet Schedule 1 Credit Lenders Schedule 1.1(a) Annualization Factors Schedule 1.1(b) Lending Offices and Addresses for Notices Schedule 1.2 Mortgaged Property Descriptions Schedule 2.1 Lenders' Credit Commitments Schedule 4.2(b)(ii) Jurisdictions for Good Standing Certificates Schedule 5.5 Litigation Schedule 5.7 ERISA Schedule 5.9 Title to Properties Schedule 5.10 Taxes Schedule 5.12 Environmental Matters Schedule 5.16 Subsidiaries and Equity Investments Schedule 6.12 Collateral and Deposit Account Schedules Schedule 7.1 Permitted Liens Schedule 7.4 Investments Schedule 7.5 Existing Indebtedness Schedule 7.8 Certain Contingent Liabilities Schedule 10.22 Release of Claims
  EXHIBIT 10.33.1   EXECUTION COPY * Confidential Treatment Requested   SECOND AMENDMENT              This amendment (the “Second Amendment”) effective as of May 1st, 2001 (the “Second Amendment Effective Date”), amends the Interactive Services Agreement, dated September 3, 1999, by and between America Online, Inc. (“AOL”) and Medscape, Inc.  (“Medscape” or “ICP”), as amended. WITNESSETH:              WHEREAS, AOL and Medscape executed the Interactive Services Agreement, dated September 3, 1999 (“Agreement”); and              WHEREAS, AOL and Medscape executed an amendment to the Agreement on September 27, 2000 (the “First Amendment”); and              WHEREAS, AOL and Medscape mutually desire to change certain terms and conditions of the Agreement, as amended.              NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1. Exhibit A-1, Carriage Plan, attached to the Agreement is deleted in its entirety and replaced with the attached Revised Exhibit A-1 dated May 1, 2001 (“Revised Exhibit A-1”).  To the extent that any obligations of AOL set forth in Exhibit A-2 are inconsistent with AOL’s obligations pursuant to Revised Exhibit A-1, Exhibit A-2 shall be deemed to be amended to delete such obligations.  Medscape shall continue to provide Content as set forth in Exhibit A-2 and as necessary for AOL to provide the Promotions set forth in Revised Exhibit A-1.     2. Beginning on May 1, 2001, AOL shall deliver [ * ] Impressions from ICP’s presence on the AOL Network (the “Amended Impressions Target”).  AOL shall have no further obligation to deliver Impressions pursuant to the first sentence of Section 1.5 of the Agreement.     3. In Section 2.5, any and all references to “Consumer Versions” shall be deleted and shall be replaced with “ICP Internet Site.”     4. Section 2.5.1.B is deleted in its entirety.     5. In Section 2.5.1.D, “within a subcategory of paragraphs B or C above” is deleted and inserted in its place shall be “on the ICP Internet Site.”  Also in Section 2.5.1.D, the last sentence is deleted in its entirety.     6. Subject to Section 6(d) below, Section 3.4 of the Agreement is amended as follows:       (a) “$33,000,000” shall be deleted in the first sentence and replaced with “$19,333,333.32.”       (b) The following language (added pursuant to the First Amendment) shall be deleted:  “$3,083,340 is due January 2, 2001, $2,750,001 is due on May 1, 2001, $2,750,001 is due on August 1, 2001, $2,750,001 is due on November 1, 2001, $2,750,001 is due on February 1, 2002 and $916,656 is due on May 1, 2002” and replaced with the following:     “$1,000,000 is due on June 20, 2001 for the twelve month period May 1, 2001 to April 30, 2002, and then equal monthly payments of $83,333.33 are due on each of the following dates:  May 1, 2002, June 1, 2002, July 1, 2002 and August 1, 2002.”         (c) AOL acknowledges that Medscape has already made payments of [ * ] towards the Guaranteed Payment amount.     . (d) [ * ]     7. In Section 5.3, the following sentence shall be inserted at the end of the paragraph:     “AOL agrees that it will not place, or require the placement of, any links to a Named Entity’s content on the ICP Internet Site.”       8. Section 7.1 is deleted in its entirety and inserted in its place shall be the following:     “Unless earlier terminated as set forth herein, the initial term of this Agreement shall commence on the Effective Date and expire three (3) years from the Effective Date.  Upon the expiration or earlier termination of this Agreement, and for one (1) year following such expiration or termination, AOL may, at its discretion, continue to promote one or more ‘pointers’ or links from the AOL Network to the ICP Interactive Site located at URL http://www.cbshealthwatch.com, or any successor site designated by ICP, and continue to use ICP’s trade names, trademarks and service marks in connection therewith.”       9. Section 7.6 is deleted in its entirety and inserted in its place shall be the following:     “In the event of a Change of Control of ICP to a Named Entity during the Initial Term, AOL shall have the right to terminate the Agreement by providing fifteen (15) days written notice.”       10. Section 7.7 is deleted in its entirety and inserted in its place shall be the following:     “Either party may terminate this Agreement without cause upon sixty (60) days notice to the other party.  In the event that either party gives such notice of termination between May 1, 2001 and February 28, 2002, AOL will [ * ] between the effective date of such termination and April 30, 2002.”     11. The following Section 10 is inserted:   “ICP agrees to provide the following promotion to AOL:     10.1 [ * ]. Such placements shall comply with the keyword guidelines attached to the Agreement as Exhibit G, as well as any requirements imposed generally by CBS on its advertising partners.  Further, ICP agrees to provide a monthly report detailing all keywords appearing on CBS television advertisements.     10.2 [ * ]         12. The following Section 11 is inserted:     “The parties agree to the following:     11.1 AOL Contact Person:  AOL agrees to assign an individual to answer all reasonable inquiries from ICP clients regarding advertising on the ICP Internet Site, including any concerns the client may have regarding the positioning of ICP content with respect to other AOL health content partners.     11.2 Press Release:  Pursuant to Section 7.9 of the Agreement, prior to distribution of any Press Release, each Party shall obtain the prior written approval of the other Party.     11.3 Hi-Ethics:  Both Parties acknowledge that as of the Second Amendment Effective Date they are members of the Health Internet Ethics group (“Hi-Ethics”).  AOL shall not require ICP to take any action that would violate the Hi-Ethics Principles as currently written.     11.4 AOL agrees that ICP may use promotional tools such as “daughter windows” and “pop-ups” on the ICP Internet Sites consistent with general AOL policies for the applicable AOL Property. ”         13. The following definition shall be added to Exhibit B of the Agreement:       “Netbusiness.  The targeted, special purpose, business-to-business area, owned and controlled by AOL and marketed under the “Netscape NetbusinessSM” brand, specifically excluding (a) Netscape Netcenter, the AOL Service and the CompuServe Service, (b) AOL.com, Netscape.com and CompuServe.com, (c) any international versions of such site, (d) “ICQ,” “NetscapeSearch,” “Netscape Instant Messenger,” “Netscape NetMail,” “Netscape Hometown,” “My News,” “Digital City, “ or any similar independent product or service offered by or through such site or any other AOL Interactive Site, (e) any programming or Content area offered by or through such site over which AOL does not exercise complete operational control (including, without limitation, Content areas controlled by other parties and member-created Content areas), (f) any programming or Content area offered by or through such site which was operated, maintained or controlled by the former America Online Studios division (e.g., Electra), (g) any yellow pages, white pages, classifieds or other search, directory or review services or Content offered by or through such site or any other AOL Interactive Site, (h) any property, feature, product or service which AOL or its Affiliates may acquire subsequent to the Second Amendment Effective Date and (j) any other version of an AOL Interactive Site which is materially different from AOL’s primary Internet-based targeted, special purpose, business-to-business area marketed under the “Netscape NetbusinessSM” brand, by virtue of its branding, distribution, functionality, Content or services, including, without limitation, any co-branded versions or any version distributed through any broadband distribution platform or through any platform or device other than a desktop personal computer.”       14. Release.  Provided that, on or before [ * ], ICP meets its obligation to pay AOL [ * ] pursuant to Section 6(b) of this Second Amendment, AOL and ICP each releases and forever discharges the other and all of its stockholders, employees, agents, successors, assigns, legal representatives, affiliates, directors and officers from and against any and all actions, claims, suits, demands or other obligations or liabilities of any nature whatsoever, whether known or unknown, which the releasing Party or its stockholders, employees, agents, successors, assigns, legal representatives, affiliates, directors or officers have had, now have or may in the future have arising out of or in connection with the performance or failure to perform under the Agreement prior to the Second Amendment Effective Date, including without limitation ICP’s failure to meet its payment obligations under Section 3.4 of the Agreement.  This Release shall not operate to relieve either Party of its obligations under the Agreement or this Second Amendment after the Second Amendment Effective Date.     15. The provisions of the Agreement not specifically amended herein shall remain in full force and effect as they appear in the Agreement.     16. Each Party represents and warrants that the individual signing this Second Amendment on its behalf is authorized to do so, and that such individual’s signature binds it to this Second Amendment.   In WITNESS WHEREOF, the Parties have executed this Second Amendment as of the date first above written. AMERICA ONLINE, INC.     --------------------------------------------------------------------------------   Print Name:   -------------------------------------------------------------------------------- Title:   -------------------------------------------------------------------------------- Date:   --------------------------------------------------------------------------------     MEDSCAPE, INC.     -------------------------------------------------------------------------------- Print Name:   -------------------------------------------------------------------------------- Title:   -------------------------------------------------------------------------------- Date:   --------------------------------------------------------------------------------     Revised Exhibit A-1 May 1, 2001 Integration Detail Brand   Channel/Area Screen   Placement / Promotion Type   Frequency of Placement / Promotion   Year 1   Year 2                         AOL Service             [ * ]   [ * ]     Health Today in Health   1 text link   Permanent             Health Men's Health   1 text link   Permanent             Health Seniors' Health   1 text link   Permanent             Health Children's Health   1 text link   Permanent             Health Health & Beauty   1 text link   Permanent             Health Sexual Health & Relationships   1 text link   Permanent             Health Alternative Medicine   1 text link   Permanent             Parenting/ Pregnancy Pregnancy:  Health   2 text links   Permanent             Health Specials; 1 text link in each of 8 specials; each special runs for 6 months           Health Fitness & Sports Medicine   1 text link   Permanent             Health Conditions & Treatment (main/overall index screen)   AT button   Permanent                                                       AOL.com             [ * ]   [ * ]     Health Diet & Nutrition   Feature Module/Logo   Daily             Health Health News   Part of Feed   Daily             Health Index, Fitness & Sports Medicine, Alternative Medicine, Diet & Nutrition, Doctors, Insurance, HMOs and More, Women's Health, Men's Health, Children's Health, Seniors Health   Essentials Link: Medical Dictionary/Logo   Permanent                                     Health Index, Fitness & Sports Medicine, Alternative Medicine, Diet & Nutrition, Doctors, Insurance, HMOs and More, Women's Health, Men's Health, Children's Health, Seniors Health   Essentials Link: Medical Tests   Permanent                                     Health Index, Fitness & Sports Medicine, Alternative Medicine, Diet & Nutrition, Doctors, Insurance, HMOs and More, Women's Health, Men's Health, Children's Health, Seniors Health   Essentials Link: Self-care Guide   Permanent                                     Health Women's, Men's, Children's, Seniors   Static breakout of advanced information   Permanent               Netscape             [ * ]   [ * ]     Health Index Page Disease Centers (text + widget)   Scrolling list box of conditions; branded   Permanent             Health Index Page Health Factoid (text w/ link)   Interesting Health fact with link to co-branded site for more information.   Permanent             Health Index Page Feature: What Your Doctor is Reading ("In Clinical Terms"; text + links)   Articles link to co-branded pages   Permanent             Health Index Page Disease Centers (link)   Disease Centers link lives w/in Nscp Navigation – Departments.                 Health Department pages (where appropriate) Ask a Doctor (link Placement depends on functionality)   Link will live w/in Nscp Navigation – under a “Health Tools / Resources” section. Links to co-branded pages.   Permanent                                 CompuServe             [ * ]   [ * ]     Health Channel Top Read what your doctor is reading   CBSHW branded   Permanent             Health Channel Top News story; teaser and link to second page.   CBSHW branded story   1x per week             Ailments & Conditions Top Story: teaser and link to second page   CBSHW branded story   1x per week             Ailments & Conditions page and each Specialty Center Links to Databases   Links to Medical Test Handbook, First Aid and Self Care Guide   Permanent             Ailments & Conditions page and each Specialty Center Read what your doctor is reading   Branded right nav bar text link.   Permanent             Ailments & Conditions sub-departments Text links for more information   Branded; In right or left nav bar.   Permanent             AIDS/HIV Specialty Center News Story; teaser and link to second page   CBSHW branded story.   Bi-weekly             Heart Disease Specialty Center. News Story; teaser and link to second page   CBSHW branded story.   Bi-weekly             Pain Management Specialty Center. News Story; teaser and link to second page   CBSHW branded story.   Bi-weekly             Multiple Sclerosis Specialty Center. News Story; teaser and link to second page   CBSHW branded story.   Bi-weekly             Cancer Specialty Center. News Story; teaser and link to second page   CBSHW branded story.   Bi-weekly             Disabilities Specialty Center. News Story; teaser and link to second page   CBSHW branded story.   Bi-weekly                                 Digital City             [ * ]   [ * ]     Condition pages “Advanced Information”   Text Link with branding   Permanent             Facilities & Services/Pharmacies Medication Information   Branded badge and search widget   Permanent           [ * ]   [ * ]  
QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.23 PURCHASE AGREEMENT     This PURCHASE AGREEMENT (this "Agreement"), dated as of December 19, 2001, is entered into by and between SeeBeyond Technology Corporation, a Delaware corporation, (the "Company"), and Acqua Wellington Opportunity I Limited, a company organized under the laws of the Commonwealth of the Bahamas (the "Purchaser"), for the purchase and sale of shares of the common stock, par value $.0001 per share (the "Common Stock"), of the Company by the Purchaser, in the manner, and upon the terms, provisions and conditions set forth in this Agreement.     WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Purchaser and Purchaser shall purchase shares of Common Stock; and     WHEREAS, such purchase and sale will be made in reliance upon the provisions of Section 4(2) and Rule 506 of Regulation D ("Regulation D") of the United States Securities Act of 1933, as amended, and regulations promulgated thereunder (the "Securities Act"), or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the purchases of Common Stock to be made hereunder.     NOW, THEREFORE, in consideration of the representations, warranties and agreements contained herein and other good and valuable consideration, the receipt and legal adequacy of which is hereby acknowledged by the parties, the Company and the Purchaser hereby agree as follows:     1. Purchase Price.     (a) Upon the following terms and subject to the conditions contained herein, the Purchaser hereby agrees to purchase 1,400,000 shares of the Company's Common Stock (the "Shares") at a per share price of $5.8268 ("Per Share Purchase Price") and for an aggregate purchase price of $8,157,564 (the "Purchase Price").     (b) The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of Common Stock, to effect the issuance of the Shares.     (c) In consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees to issue and sell to the Purchaser and the Purchaser agrees to purchase the Shares. The closing under this Agreement (the "Closing") shall take place at the offices of Jenkens & Gilchrist Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174 on the date hereof (eastern time) upon the satisfaction of each of the conditions set forth in Sections 4 and 5 hereof (the "Closing Date").     2. Representations, Warranties and Covenants of the Purchaser.  The Purchaser represents and warrants to the Company, and covenants for the benefit of the Company, as follows:     (a) The Purchaser is a company duly organized, validly existing and in good standing under the laws of the Commonwealth of the Bahamas.     (b) This Agreement has been duly authorized, validly executed and delivered by the Purchaser and is a valid and binding agreement and obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, subject to limitations on enforcement by general principles of equity and by bankruptcy or other laws affecting the enforcement of creditors' rights generally, and the Purchaser has full power and authority to execute and deliver this Agreement and the other agreements and documents contemplated hereby and to perform its obligations hereunder and thereunder. --------------------------------------------------------------------------------     (c) The Purchaser has received and carefully reviewed copies of the Public Documents (as hereinafter defined). The Purchaser understands that no Federal, state, local or foreign governmental body or regulatory authority has made any finding or determination relating to the fairness of an investment in any of the Shares and that no Federal, state, local or foreign governmental body or regulatory authority has recommended or endorsed, or will recommend or endorse, any investment in any of the Shares. The Purchaser, in making the decision to purchase the Shares, has relied upon independent investigation made by it and has not relied on any information or representations made by third parties.     (d) The Purchaser understands that the Shares are being offered and sold to it in reliance on specific provisions of Federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein for purposes of qualifying for exemptions from registration under the Securities Act, and applicable state securities laws.     (e) The Purchaser is an "accredited investor" as defined under Rule 501 of Regulation D promulgated under the Securities Act.     (f)  The Purchaser is and will be acquiring the Shares for such Purchaser's own account, and not with a view to any resale or distribution of the Shares in whole or in part, in violation of the Securities Act or any applicable securities laws, and the Purchaser has no present intention of selling, or otherwise distributing the Shares in whole or in part.     (g) The offer and sale of the Shares is intended to be exempt from registration under the Securities Act, by virtue of Section 4(2) and Rule 506 of Regulation D promulgated under the Securities Act. The Purchaser understands that the Shares purchased hereunder have not been, and may never be, registered under the Securities Act and that none of the Shares can be sold or transferred unless they are first registered under the Securities Act and such state and other securities laws as may be applicable or in the opinion of counsel for the Company an exemption from registration under the Securities Act is available (and then the Shares may be sold or transferred only in compliance with such exemption and all applicable state and other securities laws).     (h) The Purchaser (i) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Company; (ii) recognizes that such Purchaser's investment in the Company involves a high degree of risk; and (iii) has not been organized solely for the purpose of acquiring the Shares.     (i)  The Purchaser is capable of evaluating the risks and merits of an investment in the Shares by virtue of its experience as an investor and its knowledge, experience, and sophistication in financial and business matters and such Purchaser is capable of bearing the entire loss of its investment in the Shares.     (j)  The Purchaser is neither a registered broker-dealer nor an affiliate of a registered broker-dealer.     (k) The Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares which have been requested by the Purchaser. The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company. The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares. Purchaser understands that it (and not the Company) shall be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement. The Purchaser has not obtained any material non-public information from the Company. –2– --------------------------------------------------------------------------------     (l)  The Purchaser is not in possession of any material non-public information regarding the Company. Purchaser acknowledges that the Company has not provided Purchaser with any material information related to the Company other than such as has been publicly disclosed and such that is set forth in the Commission Documents. Purchaser agrees that it will not bring any claim against the Company to the extent such claim (including, without limitation, any claim based on Section 10(b) of the Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder) is based on the Company's failure to disclose material information to the Purchaser, unless such information is such that, pursuant to the rules and regulations of the Commission, should have been disclosed in a Commission Document at the time of filing of such Commission Document.     (m) The Purchaser shall comply with all applicable federal securities laws, rules and regulations in connection with the sale of the Shares purchased by the Purchase hereunder.     3. Representations, Warranties and Covenants of the Company.  The Company represents and warrants to the Purchaser (except as set forth in the Commission Documents as defined below), and covenants for the benefit of the Purchaser, as follows:     (a) The Company has been duly incorporated and is validly existing and in good standing under the laws of the state of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure to register or qualify would not have a Material Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" shall mean any effect on the business, results of operations, prospects, assets or financial condition of the Company that is material and adverse to the Company and its subsidiaries and affiliates, taken as a whole and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement in any material respect; provided, however, that "Material Adverse Effect" shall not include operating losses of the Company in the amounts set forth in the Commission Documents.     (b) The Company has furnished the Purchaser with copies of the Company's Annual Report on Form 10-K for fiscal year ended December 31, 2001 (the "Form 10-K") filed with the Securities and Exchange Commission (the "Commission") and its Form 10-Q for the quarterly period ended September 30, 2001 (the "Form 10-Q"; collectively with the Form 10-K, the "Public Documents"). The Public Documents at the time of their filing did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. As used herein, "Commission Documents" means all reports, schedules, forms, statements and other documents filed by the Company with the Commission after March 31, 2001 pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act.     (c) The Shares have been duly authorized by all necessary corporate action and, when paid for by the Purchaser and issued in accordance with the terms hereof, the Shares shall be validly issued, fully paid and non-assessable.     (d) Each of this Agreement and the Registration Rights Agreement attached hereto as Exhibit A (the "Registration Rights Agreement") has been duly authorized, validly executed and delivered on behalf of the Company and is a valid and binding agreement and obligation of the Company enforceable against the Company in accordance with its terms, subject to limitations on enforcement by general principles of equity and by bankruptcy or other laws affecting the enforcement of creditors' rights generally, and the Company has full power and authority to –3– -------------------------------------------------------------------------------- execute and deliver this Agreement and the other agreements and documents contemplated hereby and to perform its obligations hereunder and thereunder.     (e) Except as disclosed in Schedule 3(e) attached hereto, the execution and delivery of this Agreement and the Registration Rights Agreement, the issuance of any of the Shares and the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement by the Company, will not (other than as have been waived) (i) conflict with or result in a breach of or a default under any of the terms or provisions of, (A) the Company's certificate of incorporation or by-laws, or (B) of any material provision of any indenture, mortgage, deed of trust or other material agreement or instrument to which the Company is a party or by which it or any of its material properties or assets is bound, (ii) result in a violation of any material provision of any law, statute, rule, regulation, or any existing applicable decree, judgment or order by any court, Federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company, or any of its material properties or assets or (iii) result in the creation or imposition of any material lien, charge or encumbrance upon any material property or assets of the Company or any of its subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of their property or any of them is subject except in the case of clauses (i)(B) or (iii) for any such conflicts, breaches, or defaults or any liens, charges, or encumbrances which would not have a Material Adverse Effect.     (f)  The sale and issuance of the Shares in accordance with the terms of and in reliance on the accuracy of the Purchaser's representations and warranties set forth in this Agreement will be exempt from the registration requirements of the Securities Act.     (g) No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement or the offer, sale or issuance of the Shares or the consummation of any other transaction contemplated by this Agreement (other than any filings which may be required to be made by the Company with the Commission, or the Nasdaq National Market or pursuant to any state or "blue sky" securities laws subsequent to the Closing, and, any registration statement which may be filed pursuant to this Agreement).     (h) There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company which questions the validity of this Agreement or the Registration Rights Agreement or the transactions contemplated thereby or any action taken or to be taken pursuant thereto. Except as disclosed in the Commission Documents and except for material non-public information, there is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company or any subsidiary, or any of their respective properties or assets which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.     (i)  Subsequent to the dates as of which information is given in the Public Documents, Commission Documents, this Agreement or the Registration Rights Agreement and except as contemplated herein and except for material non-public information, the Company has not incurred any material liabilities or material obligations, direct or contingent, or entered into any material transactions not in the ordinary course of business.     (j)  Except as may be affected by material non-public information, the Company has sufficient title and ownership of all trademarks, service marks, trade names, copyrights, patents, trade secrets and other proprietary rights ("Intellectual Property") necessary for its business as now conducted and as proposed to be conducted as described in the Public Documents or the Commission Documents except for any of the foregoing, the absence of which would not reasonably be likely to result in a Material Adverse Effect and, to its knowledge without any conflict with or infringement –4– -------------------------------------------------------------------------------- of the rights of others. Except as set forth in the Public Documents or the Commission Documents, and except for material non-public information, there are no material outstanding options, licenses or agreements of any kind relating to the Intellectual Property (other than such agreements as may be entered into in the ordinary course of business), nor is the Company bound by or party to any material options, licenses or agreements of any kind with respect to the Intellectual Property of any other person or entity.     (k) The Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares hereunder. Neither the Company nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Shares, or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has taken or will take any action so as to bring the issuance and sale of any of the Shares under the registration provisions of the Securities Act and any other applicable federal and state securities laws. Neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any of the Shares.     (l)  Except for material non-public information, to the Company's knowledge, neither this Agreement nor the Schedules hereto nor the Registration Rights Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.     (m) The authorized capital stock of the Company and the shares thereof issued and outstanding as of November 13, 2001 are set forth on Schedule 3(m) attached hereto. All of the outstanding shares of the Company's Common Stock have been duly and validly authorized, and are fully paid and non-assessable. Except as set forth in this Agreement, the Public Documents, the Commission Documents or on Schedule 3(m)attached hereto, as of November 13, 2001, no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company. Furthermore, except as set forth in this Agreement, in the Public Documents, the Commission Documents or on Schedule 3(m) as of the date hereof, there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. Except as disclosed in the Commission Documents or the Public Documents and except for customary transfer restrictions contained in agreements entered into by the Company in order to sell restricted securities, as of the date hereof, the Company is not a party to any agreement granting registration rights to any person with respect to any of its equity or debt securities. The Company is not a party to, and its executive officers have no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied with all applicable federal and state securities laws, or no stockholder has a right of rescission or damages with respect thereto which is reasonably likely to have a Material Adverse Effect. The Company has furnished or made available to the Purchaser true and correct copies of the Company's Certificate of Incorporation as in effect on the date hereof (the "Certificate"), and the Company's Bylaws as in effect on the date hereof (the "Bylaws").     (n) Prior to the effectiveness of the Registration Statement (as defined in the Registration Rights Agreement), the Company will use its commercially reasonable efforts to list the Shares for trading on the Nasdaq National Market or any relevant market or system, if applicable, and will –5– -------------------------------------------------------------------------------- comply in all material respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Nasdaq National Market or any relevant market or system.     (o) Except for the disclosure of this Agreement and the Registration Rights Agreement, the Company may not issue a press release or otherwise make a public statement or announcement with respect to the transaction contemplated hereby prior to the Closing Date. In the event that the Company is required by law or regulations to issue a press release or otherwise make a public statement or announcement with respect to this Agreement after the Closing Date, the Company shall consult with the Purchaser on the form and substance of such press release or other disclosure.     (p) The Company may enter into an agreement with a third party before the filing date or effectiveness of the registration statement covering the Shares, the principal purpose of which is to secure equity financing (an "Other Financing") and for clarification purposes, excluding the following: (i) the issuance or sale of securities pursuant to options to officers, directors, employees, and employee stock purchase plan or consultants; and (ii) the issuance of securities to financial institutions or lessors in connection with bona fide, arm's length credit arrangements, leases or similar transactions. If the Other Financing occurs before the filing date of the registration statement at a price per share less than the Purchase Price the Company will issue a number of additional shares to the Purchaser based on the following equation: (i) the aggregate Purchase Price paid pursuant to this Agreement, (ii) divided by the price per share paid by the investor in the Other Financing, (iii) minus the number of Shares issued pursuant to this Agreement. If the Company enters into an Other Financing before the effectiveness of the registration statement at a price per share less than the Purchase Price, the Company will issue additional shares to the Purchaser based on standard "weighted average" anti-dilution formula (the "Anti-Dilution shares") as set forth on Schedule 3(p) hereof. If issued, the Anti-Dilution Shares shall, at the Purchaser's reasonable request, if appropriate, be registered in a separate registration statement.     4. Conditions Precedent to the Obligation of the Company to Sell the Shares:  The obligation hereunder of the Company to issue and sell the Shares to the Purchaser is subject to the satisfaction or waiver, at or before the Closing Date, of each of the 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 Purchaser shall have executed and delivered this Agreement and the Registration Rights Agreement.     (b) The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by such Purchaser at or prior to the Closing Date.     (c) The representations and warranties of the Purchaser 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 are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.     (d) At the Closing Date, upon receipt of the certificates evidencing the Shares, the Purchaser shall have delivered to the Company immediately available funds as payment in full of the Purchase Price for the Shares.     (e) No statute, 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 at or prior to the Closing Date. –6– --------------------------------------------------------------------------------     (f)  As of the Closing Date, no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting the Company, or any of its properties, which questions the validity of the Agreement, the Registration Rights Agreement or the transactions contemplated thereby or any action taken or to be take pursuant thereto.     5. Conditions Precedent to the Obligation of the Purchaser to purchase the Shares:  The obligation hereunder of the Purchaser to acquire and pay for the Shares is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below. These conditions are for the Purchaser's sole benefit and may be waived by the Purchaser at any time in its sole discretion.     (a) The Company shall have executed and delivered this Agreement and the Registration Rights Agreement.     (b) The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.     (c) Each of 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 Closing Date as though made at that time (except for representations and warranties that speak as of a particular date), which shall be true and correct in all material respects as of such date.     (d) No statute, 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 at or prior to the Closing Date.     (e) As of the Closing Date, no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting the Company, or any of its properties, which questions the validity of the Agreement, the Registration Rights Agreement or the transactions contemplated thereby or any action taken or to be take pursuant thereto. As of the Closing Date, no action, suit, claim or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting the Company, or any of its properties, which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.     (f)  The Company shall have delivered certificates evidencing the Shares to the Purchaser at or before the Closing Date.     (g) The Company shall have delivered on the Closing Date to the Purchaser a secretary's certificate, dated as of the Closing Date, as to (i) the resolutions of the board of directors of the Company authorizing the transactions contemplated by this Agreement, (ii) the Certificate, (iii) the Bylaws, each as in effect at the Closing, and (iv) the authority and incumbency of the officers of the Company executing this Agreement and the Registration Rights Agreement.     (h) The Purchaser shall have received a legal opinion in substantially the form annexed hereto as Exhibit B as of the Closing Date.     6. Legends.  Unless otherwise provided below, each certificate representing the Shares shall be stamped or otherwise imprinted with a legend substantially in the following form (the "Legend"): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE –7– -------------------------------------------------------------------------------- SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR SEEBEYOND TECHNOLOGY CORPORATION (THE "COMPANY") SHALL HAVE RECEIVED AN OPINION FROM COUNSEL TO THE COMPANY, IN FORM, SCOPE AND SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED."     7. Fees and Expenses.  Each of the Company and the Purchaser shall pay its respective fees and expenses related to the transactions contemplated by this Agreement and the Registration Rights Agreement; except that the Company shall pay on the Closing Date, all reasonable fees and expenses, exclusive of reasonable disbursements and out-of-pocket expenses, incurred by the Purchaser of up to $25,000 in connection with the preparation, negotiation, execution and delivery of this Agreement and the Registration Rights Agreement. Neither the Company nor the Purchaser has employed, or is subject to the valid claim of, any broker, finder, investment banker, consultant, financial advisor or other intermediary (collectively "Broker") in connection with the transactions contemplated by this Agreement who might be entitled to a fee or commission in connection with this Agreement or the transactions contemplated hereby. Each party agrees to and shall indemnify the other against any claim for a fee or commission made by any Broker against the other in connection with this Agreement or the transactions contemplated hereby.     8. Indemnification.     (a) The Company hereby agrees to indemnify and hold harmless the Purchaser and its officers, directors, shareholders, employees, agents and attorneys against any and all losses, claims, damages, liabilities and reasonable expenses (collectively "Claims") incurred by each such person in connection with defending or investigating any such Claims, whether or not resulting in any liability to such person, to which any such indemnified party may become subject, insofar as such Claims arise out of or are based upon any breach of any representation or warranty or agreement made by the Company in this Agreement.     (b) The Purchaser hereby agrees to indemnify and hold harmless the Company and its officers, directors, shareholders, employees, agents and attorneys against any and all losses, claims, damages, liabilities and expenses incurred by each such person in connection with defending or investigating any such claims or liabilities, whether or not resulting in any liability to such person, to which any such indemnified party may become subject under the Securities Act, or under any other statute, at common law or otherwise, insofar as such Claims arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact made by the Purchaser, (ii) any omission or alleged omission of a material fact with respect to the Purchaser or (iii) any breach of any representation, warranty or agreement made by the Purchaser in this Agreement.     9. Governing Law; Consent to Jurisdiction.  This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect to the rules governing the conflicts of laws. Each of the parties consents to the exclusive jurisdiction of the Federal courts whose districts encompass any part of the County of New York located in the City of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each party waives its right to a trial by jury. Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law. –8– --------------------------------------------------------------------------------     10. Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, express overnight courier, registered first class mail, or telecopier (provided that any notice sent by telecopier shall be confirmed by other means pursuant to this Section 10), initially to the address set forth below, and thereafter at such other address, notice of which is given in accordance with the provisions of this Section.               (a)   if to the Company:         SeeBeyond Technology Corporation 404 East Huntington Drive Monrovia, CA 91016         Tel. No.: (626) 408-3130 Fax No.: (626) 408-3380 Attention: Chief Financial Officer and General Counsel         with a copy to:         Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304         Tel. No.: (650) 493-9300 Fax No.: (650) 493-6811 Attention: Jeffrey D. Saper     (b)   if to the Purchaser:         Acqua Wellington Opportunity I Limited Shirlaw House 87 Shirley Street P.O. Box SS-19084 Nassau, Bahamas Attention: Michael Taylor Tel. No.: (242) 393-0224 Fax No.: (242) 393-7570         with a copy to:         Jenkens & Gilchrist Parker Chapin LLP The Chrysler Building 405 Lexington Avenue New York, NY 10174 Attention: Christopher S. Auguste         Tel. No.: (212) 704-6000 Fax No.: (212) 704-6288     All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied; or when actually received or refused if sent by other means.     11. Entire Agreement.  This Agreement (together with all schedules hereto) and the Registration Rights Agreement constitute the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous oral or written proposals or –9– -------------------------------------------------------------------------------- agreements relating thereto all of which are merged herein. This Agreement may not be amended or any provision hereof waived in whole or in part, except by a written amendment signed by both of the parties. 12. Counterparts.     This Agreement may be executed by facsimile signature and in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.     13. Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns and shall inure to the benefit of each holder of the Shares and its successors and assigns. The Company may not assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the holders of a majority of the then-outstanding Shares. [end of page] –10– --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Agreement was duly executed on the date first written above.     SEEBEYOND TECHNOLOGY CORPORATION     By:   /s/ BARRY J. PLAGA    -------------------------------------------------------------------------------- Name: Barry J. Plaga Title: Senior Vice President, Chief Financial Officer     ACQUA WELLINGTON OPPORTUNITY I LIMITED     By:   /s/ MICHAEL TAYLOR    -------------------------------------------------------------------------------- Name: Michael Taylor Title: Director –11– -------------------------------------------------------------------------------- Schedule 3(p) Anti-Dilution     If the Company shall issue any additional shares of Common Stock in an Other Financing at a price per share less than the Purchaser's Per Share Purchase Price then in effect (the "Other Financing Shares"), the Company shall issue to the Purchaser the number of additional shares of Common Stock equal to the difference between (a) the Purchase Price divided by the Adjusted Per Share Purchase Price (as defined below) minus (b) the number of shares purchased by the Purchaser. The Adjusted Per Share Purchase Price shall be determined (to the nearest cent) by multiplying the applicable Per Share Purchase Price then in effect by a fraction:     (1) the numerator of which shall be equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to the issuance of such Other Financing Shares plus (B) the number of shares of Common Stock underlying currently issued and outstanding options to purchase shares of Common Stock plus (C) the number of shares of Common Stock which the aggregate consideration for the total number of such Other Financing Shares so issued would purchase at a price per share equal to the applicable Per Share Purchase Price then in effect, and     (2) the denominator of which shall be equal to the number of shares of Common Stock outstanding immediately after the issuance of such Other Financing Shares plus the number of shares of Common Stock underlying currently issued and outstanding options to purchase shares of Common Stock. –12– -------------------------------------------------------------------------------- QuickLinks PURCHASE AGREEMENT Schedule 3(p) Anti-Dilution