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Exhibit 10.42 AMENDED EMPLOYMENT AGREEMENT               This Agreement is made effective this 1st day of October, 2000 (the “Effective Date”), by and between E*TRADE GROUP, INC., a Delaware corporation (“Company”), and CHRISTOS M. COTSAKOS, (“Executive”). BACKGROUND               Executive, Chairman of the Board and Chief Executive Officer of Company, began his service with the Company pursuant to an Employment Agreement dated as of March 15, 1996 (the “Prior Agreement”). Effective June 1, 1999 Executive and the Company entered into a new employment agreement (the “Employment Agreement”) the terms of which superseded the Prior Agreement.               The Board of Directors of the Company and the Compensation Committee of the Company recognize the unique and singular contribution that the Executive has made to the Company. Paramount to the Company’s interest is insuring the Executive’s retention and securing that his skills and abilities remain focused on the continued growth and leadership of the Company. The vision and energetic commitment that the Executive has demonstrated during his tenure as Chief Executive Officer has been and continues to be a fundamental and essential asset of the Company. The efforts of the Executive are recognized as profoundly and positively impacting on the long-term value of the shareowners interests in the Company. The Executive has left an indelible mark on the Company’s culture and its values. In addition he has and continues to greatly influence the course of e-commerce and the financial services industry at large.               As part of the Annual review of the Executive performance and compensation arrangement with the Company, the Company wishes to make certain changes and modifications to the Executive’s Employment Agreement. The Committee has made note of management’s ability to exceed the performance expectation for the Company in both positive and negative market conditions, as illustrated by the Company this year breaking the $1 Billion revenue level ($1.4 Billion) and achieving profitability 12 months earlier than expected. Accordingly, in order to achieve the objects set forth above, the parties now wish to amend the Employment Agreement with respect to the continued employment of Executive by the Company, modifying certain terms of the Employment Agreement and adding certain other terms to the Employment Agreement.               Therefore, in consideration of the promises and the mutual covenants and agreements set forth herein, the parties agree to enter into this Amended Employment Agreement as follows: TERMS AND CONDITIONS               In consideration of the premises and the mutual covenants and agreements set forth below, the parties agree as follows:               1.  Termination of Prior Agreement. The Prior Agreement shall terminate and be of no further force and effect as of the date of this Agreement.               2.  Employment. Executive agrees to serve as Chief Executive Officer of Company, and as Chairman of the Company’s Board of Directors, for the term of this Agreement, subject to the terms set forth in this Agreement and the provisions of the Bylaws of Company. During his employment, Executive shall devote his effort and attention, on a full-time basis, to the performance of the duties required of him as an executive of Company. Notwithstanding the foregoing, Executive shall be entitled to serve as director (including service as the Board chairman) on the governing boards of other for-profit or not-for-profit entities and to retain any compensation and benefits resulting from such service, so long as such service does not unduly interfere with his duties under this Agreement.               3.  Compensation. As compensation for his services during the term of this Agreement, Executive shall receive the amounts and benefits set forth in this Section 3 all effective as of the Effective Date unless otherwise specified: --------------------------------------------------------------------------------                      (a)  An annual salary of $690,000 (“Base Salary”) prorated for any partial year of employment. As soon as reasonably practicable after the close of Company’s current fiscal year and the close of each fiscal year thereafter, the Base Salary shall be subject to review by the Compensation Committee of the Company’s Board of Directors for increases in light of the size and performance of Company. The Base Salary, as adjusted in accordance with this subsection (a), shall remain in effect unless and until it is increased in accordance with this subsection (a). Executive’s salary shall be payable semimonthly or in accordance with Company’s regular payroll practices in effect from time to time for officers of his level in Company.                      (b)  Participation in the Company’s management bonus plan, with bonus payments to be determined and paid in accordance with the terms of the plan. The bonus will be determined by multiplying: (x) the percentage established by the Compensation Committee (not to be less than 3 times); and (y) the Executive’s then current base salary.                      (c)(i) Participation in the employee benefit plans maintained by Company and in other benefits provided by Company to senior executives, including retirement and 401(k) plans, deferred compensation, medical and dental, annual vacation, paid holidays, sick leave, and similar benefits, which are subject to change from time to time at the reasonable discretion of Company.                      (c)(ii)  Participation in the Supplemental Executive Retirement Plan specifically including the term “Covered Wages” to be defined as the total of the base salary as of the termination date and the targeted bonus at a minimum of three times base salary (or such higher amount then in effect pursuant to sections 3 (a) & (b)) for the plan year which includes the termination.                      (d)  Participation in any Company sponsored incentive arrangements, including participation as a partner in any venture arrangements originated or sponsored by Company.                      (e)  Reimbursement of membership dues and related ongoing costs of appropriate club and professional organizations; and dues, costs and expenses for appropriate, continuing professional education, financial and legal counseling, planning and administration (including any reasonable legal insurance costs).                      (f)  It is acknowledged that Executive has received option with specific terms and conditions provided therein. Company agrees that there will be no change made in any Stock Option during the term of Executive’s employment hereunder which adversely affects Executive’s rights as established by the foregoing documents, without the prior written consent of Executive. With respect to the stock option grant dated April 22, 1999 and with respect to any subsequent stock options granted to Executive, regardless of any other terms to the contrary, in no event with the expiration date for exercise be less than 10 years from date of grant. In the event of death or disability, all time-based vesting restrictions applicable to all stock options, current and hereinafter granted, and outstanding to Executive at the time of his death or disability shall accelerate as of such time and thereafter not restrict the exercisability of any such options held by Executive or his estate. In the event of an involuntary termination of Executive associated with a Change in Control, as defined in Section 6(f)(iii), all time-based vesting restrictions applicable to all stock options, current and hereinafter granted, and outstanding to Executive at the time the Change in Control shall accelerate as of such time and thereafter not restrict the exercisability of any such options held by Executive.                      (g)  Lease of automobile for company use and reimbursement of reasonable operating expense.                      (h)  Reimbursement of all reasonable business-related expenses, including without limitation first-class air travel or chartered aircraft. At the discretion of Executive, immediate family members are permitted to accompany Executive.                      (i)  Reimbursement of tuition, fees, books, ancillary expenses including the cost of research assistants, travel, hotel and meal expenses relating to completion of Ph.D. program, or other executive projects such as speech writing, publishing and similar endeavors.                      (j)  Reimbursement for the cost of a comprehensive security, executive protection and monitoring system that may be installed in Executive’s vehicles and or aircraft and at Executive’s residences (and the residences and vehicles of immediate family members), including (but not limited to) structural costs and related equipment. Included in this area are reimbursement for the cost of equipment, labor or other costs associated -------------------------------------------------------------------------------- with the installation of technology and communication equipment in Executive’s residences integrated with the equipment and transmission and reception capabilities in Executive’s corporate office.                      (k)  Reimbursement for the use of aircraft owned or controlled by Executive (and/or by his affiliates), all in accordance with the policies to be determined in conjunction with Company.                      (l) Company shall purchase a split-dollar insurance policy on Executive’s life, payable to Executive’s designated beneficiary, in the face amount of $10,000,000. Company shall also establish a bonus arrangement to enable a “roll-out” of the policy on a tax-free basis to Executive at his targeted retirement date, as defined by Executive in writing. In the event of a termination of employment prior to retirement, Executive shall be entitled to receipt of the policy and a bonus in the amount required to cover all applicable income taxes on such transfer, fully grossed up.                      (m) Executive shall be provided, at his discretion, with a loan at the lowest applicable interest rate, to purchase from the company or its subsidiaries any transportation equipment.                      (n)  “Gross-up” payments to cover taxes due in the event any of the benefits described in subsections (e), (g), (h), (i), (j), (k) and (l) above, or in Section 6(c), are taxable to Executive.               4.  In addition to any other compensation paid to Executive pursuant to this agreement or otherwise awarded to Executive by the Compensation Committee of the Company’s Board of Directors, Executive will receive the Special Enterprise Enhancement Payment award provided by this section. The award will be paid within 30 days after the closing of a “qualified event”. For this purpose, a “qualified event” is an event consummated prior to January 3, 2000, and defined in Section 6(f)(iii) entitled “Change in Control” hereinafter provided. The amount of the award will be based on the increase of the Enterprise Value (i.e. of the Company as hereinbefore defined) from August 12, 1999, to the qualified event (based on the respective closing market prices as represented on the established exchange on which the company’s shares are regularly traded. If, however, a greater per share price is stated in any document creating, upon closing, a “qualified event” then that price shall be utilized herein.) The Enterprise Value shall be the market capitalization to be calculated inclusive of all fully diluted shares as represented on the financial statements of the Company on which the company’s independent accountants render an opinion thereon. For this purpose only, the initial value will use the share information as of August 12, 1999 with the appropriate market price as of the same date for the effective date of this measurement. To the extent there has been an increased value as of the “qualified event”, the Executive will receive an award of eighteen thousands of one percent (0.018%) multiplied by such increase.               5.  Term. The term of this Agreement and the termination rights are as follows:                      (a)  This Agreement and Executive’s employment under this Agreement shall be effective as of the Effective Date and shall continue for a term ending on May 31, 2002 (the “Initial Term”). This Agreement and Executive’s employment shall automatically continue for successive one-year periods at the end of the Initial Term, unless either party gives written notice to the other of its intent to terminate this Agreement and Executive’s employment not less than 180 days prior to the commencement of any such one-year renewal period. In the event such notice to terminate is properly given, this Agreement and Executive’s employment shall terminate at the end of the Initial Term or the one-year renewal period during which the notice is given.                      (b)  This Agreement and Executive’s employment may be terminated by either party prior to the end of the Initial Term (or any renewal period) upon 30 days’ prior written notice to the other party, provided that, in the event of such termination, Company shall be obligated to make the payments and provide the benefits described in Section 6 below.               6.  Termination Payments. Upon termination of Executive’s employment, Company shall pay to Executive, within three business days after the end of the 30-day notice period provided in Section 5 above, a payment in cash determined under subsection (a) or (b) of this Section 6 and shall for the period or at the time specified provide the other benefits described in subsections (c) and (e) of this Section 6:                      (a)  The payment shall be equal to five full years of Executive’s “Current Total Annual Compensation” as defined in subsection (f) of this Section 6, if: (i) Executive’s employment is terminated by Company, other than for Cause, within three years after any “Change in Control” of Company as defined in subsection (f) of this Section 6, or at the request of or pursuant to an agreement with a third party who has taken steps reasonably calculated to effect a Change in Control, or otherwise in connection with or in anticipation of a -------------------------------------------------------------------------------- Change in Control; or (ii) Executive elects to terminate employment for Good Reason within three years after any Change in Control of Company. In addition, in the event that Executive’s employment is terminated in the circumstances described in this subsection, the Company shall also forgive any and all loans between Executive and the Company or its subsidiaries that are outstanding at the time of such termination, whether such loans are for the exercise of stock options or any other purpose. The Company shall also pay Executive a “gross-up” payment to cover taxes due from the forgiveness of any such loan.                      (b)  The payment shall be equal to four full years of Executive’s Current Total Annual Compensation if (i) Executive’s employment is terminated by Company, other than for Cause, and such termination is not described in (a) above; or (ii) Executive elects to terminate his employment for “Good Reason,” as defined in subsection (f) of this Section 6, and such termination is not described in (a) above. In addition, in the event that Executive’s employment is terminated in the circumstances described in this subsection, the Company shall also forgive any and all loans between Executive and the Company or its subsidiaries that are outstanding at the time of such termination, whether such loans are for the exercise of stock options or any other purpose. The Company shall also pay Executive a “gross-up” payment to cover taxes due fr om the forgiveness of any such loan.                      (c)  In addition to the amount payable to Executive under subsection (a) or (b) of this Section 6, Executive shall be entitled to the following upon termination for any reason:                             (i)  The health care (including medical and dental) and life insurance coverage benefits provided to Executive and his Spouse at his date of termination, shall be continued at the same level and in the same manner for the rest of their lives. Any additional coverages Executive had at termination, including dependent coverage, will also be continued for such period on the same terms. Any costs Executive was paying for such coverages at the time of termination shall continue to be paid by Executive. If the terms of any benefit plan referred to in this section do not permit continued participation by Executive, then Company will arrange for other coverage providing substantially similar benefits at the same contribution level of Executive.                             (ii)  Reasonable relocation expenses for Executive and his dependents to any location within the continental United States incurred for the purpose of new employment on or within eighteen months of the effective termination date of this Agreement. Such expenses shall include without limitation first-class airfare and other travel for Executive and his family; moving and storage expenses; real estate closing fees and costs upon the sale of his residence and purchase of a new residence; all other expenses reasonably incurred in relocating to a location other than Menlo Park, California or environs; and an amount equal to Ten Percent (10%) of his Current Total Annual Compensation to cover all incidental relocation expenses.                             (iii)  Outplacement and financial and legal counseling services selected by Executive, up to a maximum of $100,000 each (net of tax, if any).                             (iv)  A mutually acceptable office, together with secretarial assistance and customary office facilities and services, located at Company (or in lieu thereof reimbursement for same at another location), for up to 36 months following the effective termination date of this Agreement, for the purpose of facilitating Executive’s search for new employment.                      (d)  The Employee’s employment shall terminate in the event of death. The Company shall pay to the Executive’s surviving spouse or family trust (or estate, if none), the payment provided under this Section 6 and shall continue to pay the Base Salary plus most recent bonus amount for the remaining term of the contract. The Executive’s rights under the benefit plans of the Company shall be determined under the provisions of those plans.                      (e)  The Company may terminate the Employee’s employment for Disability by giving the Employee six months’ advance notice in writing. Disability is defined in subsection (f)(vi) of this Section 6. Upon the effective date of a termination for Disability, the Company will pay to the Executive the payment provided under subsection (b) of this Section 6. In the event of disability, the Executive’s rights under the benefit plans of the Company shall be determined under the provisions of those plans.                      (f)  For purposes of this Agreement, the following definitions shall apply:                             (i)  The “Board” shall mean the Board of Directors of Company. --------------------------------------------------------------------------------                             (ii)  The “Incumbent Board” shall mean the members of the Board as of the date of this Agreement and any person becoming a member of the Board hereafter whose election, or nomination for election by Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Company).                             (iii)  “Change in Control” shall mean:                             (A)  The acquisition (other than from Company) by any person, entity or “group,” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding, for this purpose, any employee benefit plan of Company or its subsidiaries which acquires beneficial ownership of voting securities of Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either the then outstanding shares of Common Stock or the combined voting power of Company’s then outstanding voting securities entitled to vote generally in the election of directors; or                             (B)  The failure for any reason of individuals who constitute the Incumbent Board to continue to constitute at least a majority of the Board; or                             (C)  Approval by the stockholders of Company of a reorganization, merger, consolidation, in each case, with respect to which the shares of Company voting stock outstanding immediately prior to such reorganization, merger or consolidation do not constitute or become exchanged for or converted into more than 40% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, or a liquidation or dissolution of Company or of the sale of all or substantially all of the assets of Company.                             (iv)  “Good Reason” shall mean:                             (A)  The assignment to Executive of any duties inconsistent in any respect with Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2 above, or any other action by Company which results in a diminution of such position, authority, duties or responsibilities, excluding for this purpose any action taken with the consent of Executive and any isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by Company promptly after receipt of notice of such action given by Executive;                             (B)  A reduction in the overall level of Executive’s compensation or benefits as provided in Section 3;                             (C)  Company’s requiring Executive to be based at any office or location other than Company’s executive offices in Menlo Park, California environs, except for travel reasonably required in the performance of Executive’s responsibilities;                             (D)  Any purported termination by Company of Executive’ s employment otherwise than as expressly permitted by this Agreement; or                             (E)  Any failure by Company to comply with and satisfy Section 7 below.                             (F)  The nomination by the Board of a Chairman (or person serving in a similar capacity) of a person other than Executive.               For purposes of this Agreement, any good-faith determination of “Good Reason” made by Executive shall be conclusive.                             (v)  “Current Total Annual Compensation” shall be the total of the following amounts: (A) the greater of (i) Executive’s Base Salary for the greater of the calendar or fiscal year (the “Applicable Year”) in which his employment terminates or (ii) such salary for the Applicable Year prior to the year of such termination; and (B) the greater of (i) any total that became payable to Executive under the Bonus Plan during the Applicable Year prior to the Applicable Year in which his employment terminates and (ii) the maximum total bonus amount to which Executive would be and had been paid for the Applicable Year in which his employment terminates as if all Bonus Plan criteria had been or are met, regardless of when such amounts are -------------------------------------------------------------------------------- actually to be paid or had been paid. Any longer term Bonus Plan payments are to be accelerated and included within the meaning of this definition.                             (vi)  “Disability” shall mean the total and permanent inability of Executive due to illness, accident or other physical or mental incapacity to perform the usual duties of his employment under this Agreement, as determined by a physician selected by Company and acceptable to Executive or Executive’s legal representative (which agreement as to acceptability shall not be unreasonably withheld).                             (vii)  The “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.                             (viii)  “Cause” shall be defined solely as (i) Executive’s defalcation or misappropriation of funds or property of the Company, or the commission of any other illegal act in the course of his employment with Company which, in the reasonable judgment of the Board of Directors, has a material adverse financial effect on the Company or on Executive’s ongoing abilities to carry out his duties under this Agreement; (ii) Executive’s conviction of a felony or of any crime involving moral turpitude, and affirmance of such conviction following the exhaustion of any appeals; (iii) refusal of Executive to substantially perform all of his duties and responsibilities, or Executive’s persistent neglect of duty or chronic unapproved absenteeism (other than for a temporary or perman ent Disability), which remains uncured following thirty days after written notice of such alleged Cause by the Board of Directors; or (iv) any material and substantial breach by Executive of other terms and conditions of this Agreement, which, in the reasonable judgment of the Board of Directors, has a material adverse financial effect on the Company or on Executive’s ongoing abilities to carry out his duties under this Agreement and which remains uncured following thirty days after written notice of such alleged Cause by the Board of Directors.                      (g)  In addition to the amounts payable and/or forgiven under subsection (a), (b) or (c) of this Section 6, Company shall pay Executive a tax equalization payment in accordance with this subsection. The tax equalization payment shall be in an amount which, when added to the other amounts payable to Executive under this Section 6, will place Executive in the same after-tax position as if the excise tax penalty of Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any successor statute of similar import, did not apply to any of the amounts payable under this Section 6 including any amounts paid under this subsection (g). The amount of this tax equalization payment shall be determined by Company’s independent accountants and shall be payable to Executive at the same time as the payment under subsection (a) or (b) of thi s Section 6.               7.  Assignment; Successors. Any assignment of this Agreement shall be in accordance with the following:                      (a)  The rights and benefits of Executive under this Agreement, other than accrued and unpaid amounts due hereunder, are personal to him and shall not be assignable by Executive, except with the prior written consent of Company.                      (b)  Subject to the provisions of subsection (c) of this Section 7, this Agreement shall not be assignable by Company, provided that with the consent of Executive, Company may assign this Agreement to another corporation wholly owned by it either directly or through one or more other corporations, or to any corporate successor of Company or any such corporation.                      (c)  Any business entity succeeding to substantially all of the business of Company, by purchase, merger, consolidation, sale of assets or otherwise, shall be bound by and shall adopt and assume this Agreement, and Company shall require the assumption of this Agreement by such successor as a condition to such purchase, merger, consolidation, sale of assets or other similar transaction.               8.  Notices. Any notice or other communications under this Agreement shall be in writing, signed by the party making the same, and shall be delivered personally or sent by certified or registered mail, postage prepaid, addressed as follows:  If to Executive; Mr. Christos M. Cotsakos c/o E*Trade Group, Inc. 4500 Bohannon Drive Menlo Park, California 94025 --------------------------------------------------------------------------------  If to Company; The Board of Directors c/o E*Trade Group, Inc. 4500 Bohannon Drive Menlo Park, California 94025 or such other address or agent as may hereafter be designated by either party hereto. All such notices shall be deemed given on the date personally delivered or mailed.               9.  Full Settlement and Legal Expenses. 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, counter-claim, recoupment, defense or other claim, right or action which Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The prevailing party shall be entitled to recover all legal fees and expenses which such party may reasonably incur as a result of any legal proceeding relating to the validity, enforceability, or breach of, or liability under, any provision of this Agreement or any guarantee of performance (including as a result of any contest by Executive about the amount of any payment pursuant t o Section 6 of this Agreement), plus in each case interest at the applicable Federal Rate provided for in Section 7872(f)(2) of the Code.               10.  Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of California, except that any arbitration shall be governed by the Federal Arbitration Act.               11.  Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid, but if any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provisions in every other respect and of the remaining provisions of this Agreement shall not be in any way impaired.               12.  Entire Agreement. This Agreement (including all Exhibits) contains the entire agreement of the parties with respect to the subject matter contained in this Agreement. There are no restrictions, promises, covenants, or undertakings between Company and Executive, other than those expressly set forth in this Agreement. This Agreement supersedes all prior agreements and understandings between the parties. This Agreement may not be amended or modified except in writing executed by the parties.               13.  Arbitration. Any controversy or claim arising out of or relating to this Agreement shall be settled by arbitration in accordance with the American Arbitration Association’s National Rules for the Resolution of Employment Disputes, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. Any arbitration shall be held in Santa Clara County, California, unless otherwise agreed in writing by the parties. --------------------------------------------------------------------------------               IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written.      E*TRADE GROUP, INC. [CORPORATE SEAL]      /s/ David Hayden      --------------------------------------------------------------------------------        David Hayden Audit Committee           /s/ William Ford      --------------------------------------------------------------------------------        William Ford Compensation Committee      EXECUTIVE      /s/ Christos M. Cotsakos      --------------------------------------------------------------------------------        Christos M. Cotsakos

FOURTH AMENDMENT TO CNG NONEMPLOYEE DIRECTORS' FEE PLAN   The CNG Nonemployee Directors' Fee Plan, as amended and restated effective October 1, 1996, and as subsequently amended by the First, Second and Third Amendments thereto (the "Plan"), is hereby further amended as follows effective as of November 30, 1999: 1. By deleting the last sentence of subparagraph (a) of paragraph 4 of the Plan and inserting in lieu thereof the following: "By written notice to the Secretary of the Company, a Director may change from time to time his or her election(s) as to the terms and conditions of payment of deferred fees to extend the time for receiving payment and/or change the form of payment, except that (i) no election change shall be effective under the Plan unless it is filed with the Secretary at least one year prior to the date payment would have been made to the Director hereunder if the Director had not made such election change, and (ii) a Director may change the time for receiving payment only once. Unless the Company, in its sole discretion, decides to commence payment in a different manner, a Directors' deferred fees shall be paid in accordance with the Director's last written election(s) as to the terms and conditions of payment, or changes therein, that are in effect under the Plan." 2. By adding a new subparagraph (d) after subparagraph (c) of paragraph 4 of the Plan as follows: "(d) Notwithstanding anything to the contrary herein, the distribution of all or any portion of a Director's deferred fees will be delayed for a period not to exceed seven months or may be subject to prior approval by the Compensation Committee (the "Committee") of the Board of Directors of CTG Resources, Inc. or any successor thereto ("CTG") or by the Board of Directors of CTG to the extent that the Company determines that such delay or approval is necessary or desirable to ensure that any transaction under the Plan will qualify for an exemption from the liability provisions imposed on the Director under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any rules and regulations issued thereunder. In the event of any such delay, the undistributed deferred fees shall continue to be subject to investment adjustment as provided in paragraph 3 until distribution is made." 3. Except as hereinabove modified and amended, the Plan, as amended, shall remain in full force and effect. IN WITNESS WHEREOF, Connecticut Natural Gas Corporation hereby executes this Fourth Amendment this 14th day of December, 1999.   Witness: CONNECTICUT NATURAL GAS CORPORATION   S/ Jean S. McCarthy                                                  

PREFERRED STOCK SURRENDER AGREEMENT         THIS AGREEMENT dated effective November 1, 2000, is by and between PEASE OIL AND GAS COMPANY, a Nevada corporation (“Company”) and the undersigned, each of which is a holder of the Company’s Series B 5% PIK Cumulative Convertible Preferred Stock (each holder is referred to herein as a “Holder” and all the holders are referred together as the “Holders”).         This Agreement is made with reference to the following agreed facts:         A. The names of the Holders and the number of shares of the Company’s Series B 5% PIK Cumulative Convertible Preferred Stock (the “Series B Preferred”) owned by each is set forth on Schedule 1 attached hereto.         B. Pursuant to an "Agreement Not to Sell or Convert Securities," dated effective May 24, 1999 (the "Lock-Up Agreement"), the Company and the Holders agreed, among other things, that no Holder would convert Series B Preferred into Company common stock and that the dividends on the Series B Preferred shall be deferred during the time when the Company sought to complete a merger with Carpatsky Petroleum Inc. ("CPI").         C. Under an “Exchange Agreement and Irrevocable Proxy,” dated on various dates in August 1999, each Holder of Series B Preferred agreed, among other things, to: (i) exchange all outstanding Series B Preferred for common stock of the Company on or before the date of completion of the merger with CPI, (ii) to vote to approve the merger with CPI and related matters, and (iii) that the Lock-Up Agreement was to remain in full force and effect until the later of closing or termination of the merger with CPI, or November 15, 1999. The Company has not paid or accrued dividends on the Series B Preferred since September 1, 1999.         D. The Company and the Holders believe that it is in the best interest of the Company to terminate the Merger Agreement with CPI, subject to the matters set forth in this Agreement.         E. The Company and each of the Holders have agreed that until this Agreement is signed by the parties, the Holders shall be precluded from converting or transferring any of their Series B Preferred.         NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confirmed, the Company and the Holders hereto agree as follows:          1. Exchange Series B Preferred. On or before October 31, 2000 (the “Closing Date”), each Holder shall surrender all certificates representing its Series B Preferred, together with all other dividend rights, conversion rights, voting rights or other rights which may be applicable to the Series B Preferred, to the Company. In exchange for surrender of the Series B Preferred, the Company shall, on the Closing Date, pay to each Holder the sum set forth on Schedule 1 and issue and deliver to each Holder a warrant to purchase that number of shares of the Company’s common stock set forth on Schedule 1 (the “Warrants”) to this Agreement.          2. Company Warrants. Each Warrant issued to a Holder shall be in a form, and shall represent the rights, terms and conditions applicable to the purchase of Company common stock as the form of Warrant attached hereto as Exhibit B and incorporated herein by reference.          3. Termination of Certain Rights. Upon completion of the exchange on the Closing Date, the rights and privileges of the Holders, as described in the Preferred Stock Purchase Agreement dated effective December 31, 1997 and the Certificate of Designation of Series B 5% PIK Cumulative Convertible Preferred Stock, as amended, as filed with the Secretary of State of Nevada December 31, 1997, which designated a total of 145,300 shares of the Company’s Series B Preferred and set forth the rights and privileges applicable thereto (the “Series B Preferred Designation”) shall be terminated. Following the exchange, Holders’ rights as security holders of the Company shall solely as holders of the Warrants, and not as holders of preferred stock of any class.          4. Agreement Not to Sell or Convert Series B Preferred. Each Holder agrees that pending the Closing Date, as described above, the Holder shall not convert or seek to convert the Series B Preferred held by Holder into Company common stock. Further, each Holder agrees that Holder will not sell or transfer, including making any short sale or similar transaction, any shares of the Company’s Series B Preferred or the Company’s common stock, either publicly or privately. If the Closing Date has not occurred by December 15, 2000, then any Holder may, upon 15 days prior written notice delivered to the Company, sell or transfer Series B Preferred stock held by it, or seek to convert Holder’s Series B Preferred in accordance with the conversion rights applicable to Series B Preferred.          5. No Further Dividends on Series B Preferred. Provided that the Closing Date occurs on or before December 15, 2000, then all unpaid dividends on the Series B Preferred shall be waived by all of the Holders and the Company shall have no obligation to pay any Holder any unpaid dividends on the Series B Preferred. If the Closing Date has not occurred by December 15, 2000, then the Company shall be obligated to the Holders only to pay dividends on the Series B Preferred, at the rate described in the Series B Designation, from October 31, 2000 through the earlier of the date on which the Series B Preferred is (i) converted into Company common stock, or (ii) redeemed by the Company. All other unpaid dividends on the Series B Preferred, whether or not accrued or declared, are hereby waived by the Holders.          6. Representations and Warranties and the Company. The Company represents and warrants to the Holders as follows:         6.1 Organization, Qualifications and Corporate Power.           (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Nevada and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification except where the failure to be licensed or qualified would not have a material adverse effect on the financial condition, results of operations, business or properties of the Company and its subsidiaries taken as a whole. The Company has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted, to execute, deliver and perform this Agreement, and to issue, sell and deliver the Warrants.           (b) Except for wholly-owned subsidiaries of the Company, the identify of which has been disclosed to the Purchasers and except for agreements to participate in the acquisition, exploration, drilling and/or development of various oil and gas properties, the Company does not (i) own of record or beneficially, directly or indirectly, (A) any shares of capital stock or securities convertible into capital stock of any other corporation or (B) any participating interest in any partnership, joint venture or other noncorporate business enterprise or (ii) control, directly or indirectly, any other entity. Each of the subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and is duly licensed or qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which the nature of the business transacted by it or the character of the properties owned or leased by it requires such licensing or qualification except where the failure to be licensed or qualified would not have a material adverse effect on the Company and its subsidiaries taken as a whole. Each of the subsidiaries has the corporate power and authority to own and hold its properties and to carry on its business as now conducted and as proposed to be conducted. All of the outstanding shares of capital stock of each of the subsidiaries are owned beneficially and of record by the Company, one of its other subsidiaries, or any combination of the Company and/or one or more of its other subsidiaries, in each case free and clear of any liens, charges, restrictions, claims or encumbrances of any nature whatsoever; and there are no outstanding subscriptions, warrants, options, convertible securities, or other rights (contingent or other) pursuant to which any of the subsidiaries is or may become obligated to issue any shares of its capital stock to any person other than the Company or one of the other subsidiaries.         6.2 Authorization of Agreements, Etc.           (a) The execution and delivery by the Company of this Agreement, the performance by the Company of its obligations hereunder, and the issuance, sale and delivery of the Warrants have been duly authorized by all requisite corporate action and will not violate any provision of applicable law, any order of any court or other agency of government, the Articles of Incorporation of the Company, as amended (the “Charter”), or the Bylaws of the Company, as amended, or any provision of any indenture, agreement or other instrument to which the Company, any of its subsidiaries or any of their respective properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, restriction, claim or encumbrance of any nature whatsoever upon any of the properties or assets of the Company or any of its subsidiaries except for such violations or conflicts which would not have a material adverse effect on the Company and its subsidiaries taken as a whole.           (b) The Warrants have been duly authorized and, when exercised in accordance with the terms of the Warrants, the common stock to be issued upon exercise will be validly issued, fully paid and nonassessable shares of common stock of the Company and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company. The issuance, sale and delivery of the Warrants is not subject to any preemptive right of stockholders of the Company or to any right of first refusal or other right in favor of any person.         6.3 Validity. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, Insolvency, moratorium and similar laws affecting the rights of creditors generally). The obligations of the Company set forth in the Warrants, when the Warrants are executed and delivered in accordance with this Agreement, will constitute the legal, valid and binding obligations of the Company, enforceable in accordance with its respective terms (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the rights of creditors generally).         6.4 SEC Documents. The Company has filed all registration statements, proxy statements, reports and other documents required to be filed by it under the Securities Act of 1933, as amended (“Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (collectively, the “SEC Documents”). Each SEC Document complied as to form when filed in all material respects with the rules and regulations of the SEC and did not on the date of filing contain any untrue statement of a material tact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.         6.5 Authorized Capital Stock. The authorized capital stock of the Company consists of 4,000,000 shares of $0.10 par value common stock, and 2,000,000 shares of $0.01 par value preferred stock, of which 595,000 are undesignated, 145,000 shares have been designated as Series B Preferred and the balance have been retired. The designations, powers, preferences, rights, qualifications, limitations and restrictions in respect of each class and series of authorized capital stock of the Company are as set forth in the Charter, and all such designations, powers, preferences, rights, qualifications, limitations and restrictions are valid, binding and enforceable and in accordance with all applicable laws (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the rights of creditors generally). Except for option plans pursuant to which the Company is authorized to grant stock purchase options to employees, officers, directors and consultants, of which options to purchase 42,514 shares of common stock at exercise prices ranging from $5.00 to $29.70 (average exercise price: $17.04), are currently outstanding, and except for warrants pursuant to which other persons may purchase or otherwise acquire up to 203,532 shares of common stock of the Company at exercise prices ranging from $5.00 to $37.50 (average exercise price: $15.17), as described in the SEC Documents, and except for the intention by the Board of Directors of the Company to authorize the issuance to Patrick J. Duncan, President, at or before the Closing: (a) 150,000 shares of the Company’s common stock, and (b) a Warrant to purchase up to 600,000 shares of the Company’s common stock at an exercise price of $0.50 per share, exercisable only as follows: (i) as to 300,000 shares, if the Company’s reported closing sales price for its common stock is at least $1.50 for 80% of the trading days in a one month period, and (ii) as to 300,000 shares, only if the Company’s reported closing sales price for its common stock is at least $2.00 for 80% of the trading days in a three month period, there is no other subscription, warrant, option, convertible security, or other right (contingent or other) to purchase or otherwise acquire equity securities of the Company authorized or outstanding and there is no commitment by the Company to issue shares, subscriptions, warrants, options, convertible securities, or other such rights or to distribute to holders of any of its equity securities any evidence of indebtedness or asset, except pursuant to this Agreement or other similar agreements with other holders of Series B Preferred and except conversion rights of holders of the Company’s outstanding 10% Convertible Debentures, due April 15, 2001. Except as provided for in the Charter, or as disclosed in the SEC Documents, the Company has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its equity securities or any interest therein, to make any payment in satisfaction of any appraisal rights properly perfected, or to pay any dividend or make any other distribution in respect thereof. To the Company’s knowledge, there are no voting trusts or agreements, stockholders agreements, pledge agreements, buy-sell agreements, rights of first refusal or preemptive rights relating to any securities of the Company or any of its subsidiaries (whether or not the Company or any of its subsidiaries is a party thereto), except for rights of holders of Series B Preferred. All of the outstanding securities of the Company were issued in compliance with all applicable federal and state securities laws.         6.6 Financial Statements. All of the financial statements included in the SEC Documents have been prepared with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of the Company and its subsidiaries, as of the dates of such reports and the consolidated results of their operations and cash flows for the periods upon which the reports are based. Since June 30, 2000, (i) there has been no change in the assets, liabilities or financial condition of the Company and its subsidiaries (on a consolidated basis) from that reflected in the Form 10-QSB for the quarter ending June 30, 2000, except for changes in the ordinary course of business which in the aggregate have not been materially adverse and (ii) none of the business, prospects, financial condition, operations, property or affairs of the Company and its subsidiaries (on a consolidated basis) has been materially adversely affected by any occurrence or development, individually or in the aggregate, whether or not insured against.         6.7 Subsequent Events. Since June 30, 2000, the Company has not (i) issued any stock, bond or other corporate security, (ii) borrowed any amount or incurred or become subject to any liability (absolute, accrued or contingent), except current liabilities incurred and liabilities under contracts entered into in the ordinary course of business, (iii) discharged or satisfied any lien or encumbrance or incurred or paid any obligation or liability (absolute, accrued or contingent) other than current liabilities shown since June 30, 2000 and current liabilities incurred since June 30, 2000, in the ordinary course of business, (iv) declared or made any payment or distribution to stockholders or purchased or redeemed any share of its capital stock or other security, (v) mortgaged, pledged or subjected to lien any of its assets, tangible or intangible, other than liens for current real property taxes not yet due and payable, (vi) sold, assigned or transferred any of its tangible assets except in the ordinary course of business, or canceled any debt or claim, (vii) suffered any loss of property or waived any right of substantial value whether or not in the ordinary course of business, (viii) made any material change in the manner of business or operations of the Company, (ix) entered into any transaction except in the ordinary course of business or as otherwise contemplated hereby, or (x) entered into any commitment (contingent or otherwise) to do any of the foregoing.         6.8 Litigation; Compliance With Law. There is no material (i) action, suit, claim, proceeding or investigation pending or, to the Company’s knowledge, threatened against or affecting the Company, at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) arbitration proceeding relating to the Company pending or (iii) governmental inquiry pending or, to the Company’s knowledge, threatened against or affecting the Company (including without limitation any inquiry as to the qualification of the Company to hold or receive any license or permit). The Company is not in default with respect to any order, writ, injunction or decree known to or served upon the Company of any court or of any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign. The Company has complied with all laws, rules, regulations and orders applicable to its business, operations, properties, assets, products and services, and the Company has all necessary permits, licenses and other authorizations required to conduct its business as conducted and as proposed to be conducted except where the failure to comply or to have a license, permit or other authorization would not have, a material adverse effect on the Company and its subsidiaries taken as a whole.         6.9 Oil and Gas Properties. Each of the Company and its subsidiaries has good and defensible title to all of its respective interests in oil and gas leases, free and clear of any encumbrances, subject only to liens for taxes or charges of mechanics or materialmen not yet due and to encumbrances under gas sales contracts, operating agreements, unitization and pooling agreements and other similar agreements as are customarily found in connection with comparable exploration, drilling and producing operations and to title defects and other encumbrances that are, singularly und in the aggregate, not material in amount and do not interfere with its use or enjoyment of its oil and gas properties. Each of the Company and its subsidiaries has complied in all material respects with its obligations under the terms of the oil and gas leases in which it purports to own an interest, and all of such leases are in full force and effect (except where the failure so to comply or to be in full force and effect will not have a Material adverse effect) upon the Company and its subsidiaries taken as a whole.         6.10 Taxes. The Company has filed all tax returns, federal, state, county and local, required to be filed by it, and the Company has paid all taxes shown to be due by such returns as well as all other taxes, assessments and governmental charges which have become due or payable including, without limitation, all taxes which the Company is obligated to withhold from amounts owing to employees, creditors and third parties. All such taxes with respect to which the Company has become obligated pursuant to elections made by the Company in accordance with generally accepted practice have been paid and adequate reserves have been established for all taxes accrued but not yet payable. The federal income tax returns of the Company have never been audited by the Internal Revenue Service. No deficiency assessment with respect to or proposed adjustment of the Company’s federal, state, county or local taxes is pending or, to the Company’s knowledge, threatened. There is no tax lien, whether imposed by any federal, state, county or local taxing authority, outstanding against the assets, properties or business of the Company.         6.11 Other Agreements. The Company is not a party to or otherwise bound by any written or oral contract or instrument or other restriction which individually or in the aggregate could have a Material adverse effect on the Company and its subsidiaries taken as a whole.         6.12 Government Approvals. Subject to the accuracy of the representations and warranties of the Holders set forth in Section 4, no registration or filing with, or consent or approval of or other action by, any federal, state or other governmental agency or instrumentality is or will be necessary for the valid execution, delivery and performance by the Company of this Agreement, the issuance, sale and delivery of the Warrants or, other than filings pursuant to state securities laws.          7. Representation and Warranties of the Holders. Each Holder severally represents and warrants to the Company that:           (a) it is a corporation, limited partnership or limited liability company or other entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization or a trust duly formed under the laws of the state of its formation.           (b) it has full power and authority and has taken all required action necessary to permit it to execute, deliver and perform this Agreement, which constitute the legal, valid and binding obligations of each such Holder, enforceable against each such Holder in accordance with its terms (subject, as to enforcement of remedies, to the discretion of courts in awarding equitable relief and to applicable bankruptcy, reorganization, insolvency, moratorium and similar laws affecting the rights of creditors generally).           (c) neither the execution or delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in a breach or violation of. or constitute a default under, the governing documents of the Holders, or any agreement, indenture or other instrument to which the Holders are a party or by which any of them are bound or to which any of their properties are subject, nor will the performance by the Holders of their obligations hereunder violate any applicable law or result in the creation or imposition of any lion, charge, claim or encumbrance upon any property or assets of the Holders. No permit, consent, approval, authorization or order of any Governmental Authority or other Person is required in connection with the consummation by the Holders of the transactions contemplated by this Agreement, except such as have been obtained and as otherwise contemplated by this Agreement.           (d) it is an “accredited investor’ within the meaning of Rule 501 under the Securities Act and was not organized for the specific purpose of acquiring the Warrants.           (e) it or its investment adviser has had an opportunity to discuss, ask questions and receive answers concerning the Company’s business, management and financial affairs with the Company’s management sand has been permitted to have access to all information which it has requested in order to evaluate the merits and risks of the purchase of the Warrants.           (f) the Warrants being purchased by it are being acquired for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof.           (g) it understands that (1) the Warrants have not been registered under the Securities Act or the securities laws of any state by reason of their issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and/or Rule 506 promulgated under the Securities Act, (2) the shares of common stock issued upon exercise of the Warrants must be held indefinitely unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration and (3) the certificates representing the Warrants will bear the following legend:   The securities represented by this certificate may not be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act of 1933 (the “Act”), or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the company.          8. Conditions to the Obligations of the Holders and the Company.         8.1 Conditions to the Obligations of the Holders. The obligation of each Holder to surrender its Series B Preferred for Warrants on the Closing Date is subject to the satisfaction, on or before the Closing Date, of the following conditions:           (a) All Proceedings to be Satisfactory. All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby shall be satisfactory in form and substance to the Holders and the Holders shall have received all such counterpart originals or certified or other copies of such documents as they reasonably may request.           (b) Exchange of Series B Preferred. Holders of all outstanding Series B Preferred of the Company shall have agreed to surrender or to exchange all outstanding Series B Preferred at or prior to the Closing Date.         8.2 Conditions to the Obligations of the Company. The obligation of the Company to issue and deliver the Warrants on the Closing Date is subject to the following conditions:           (a) Surrender of Series B Preferred. The holders of all outstanding Series B Preferred (consisting of the Holders and six other holders who will surrender all 99,503 shares of Series B Preferred owned in exchange for a like number of shares of the Company’s Series C Redeemable Preferred Stock) shall have surrendered all Series B Preferred for cancellation or exchange pursuant to this Agreement or other similar agreements on or before the Closing Date.          9. Covenants of the Company. The Company covenants and agrees with each of the Holders that so long as a majority of the Warrants issued by the Company pursuant to the terms of this Agreement are held by the Holders as a group:         9.1 Financial Statements, Reports, Etc. The Company shall furnish to each Holder promptly upon sending, making available or filing the same, all press releases, reports and financial statements that the Company sends or makes available to its stockholders or directors or files with the SEC.         9.2 Reserve for Additional Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of common stock, for the purpose of issuing shares of common stock upon exercise of all of the Warrants, such number of its duly authorized shares of its common stock as shall be sufficient to permit all the Warrants to be exercised. If at any time the number of authorized but unissued shares of common stock shall not be sufficient to comply with the terms of this Agreement or to permit exercise of all of the, Warrants, the Company will forthwith take such corporate action as may be necessary, including holding a special meeting of its stockholders to approve an Amendment to the Company’s Charter, to increase its authorized but unissued shares of common stock to such number of shares as shall be sufficient for such purposes. The Company will obtain any authorization, consent, approval or other action by or make any filing with any court or administrative body that may be required under applicable state corporate and securities laws in connection with the issuance of shares of common stock.         9.3 Keeping of Records and Books of Account. The Company shall keep, and cause each subsidiary to keep, adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.         9.4 Comply With Registration Obligations. The Company shall satisfy its obligations to register the shares underlying the Warrants as set forth in the form of Warrant attached as Exhibit B.         9.5 Only Fixed Price Conversion. While any of the Series C Preferred is outstanding, the Company will not issue any security or create any options, warrants or other rights, which are convertible into any security of the Company at a price which is not fixed at the time of issuance or creation.         9.6 Restructure of Outstanding Debt. The parties acknowledge that the Company intends to seek extensions of the maturity for the Company’s outstanding $2.8 million of Convertible Debentures, due April 15, 2001 from the individual debentureholders. In connection with seeking such extension, the Company shall not reduce the conversion price of the Debentures below $1.50 per share of common stock, materially increase the obligations of the Company under the Debentures, issue other equity of the Company to the debentureholders, or make any other change to the Debentures that would materially and adversely impact the Holders of the outstanding Series C Preferred without, in any case, first obtaining the written consent of the Holders of 80% of the Series C Preferred then outstanding.          10. Miscellaneous.         10.1 Publicity. Without the prior approval of the other parties, no party shall issue, make or distribute any press release, public announcement or other publicity or disclosure (each a “Release”) that refers to the Holders’ investment in or contracts or agreements with the Company, except in each instance, if, upon the advice of counsel, the party believes such Release is required by applicable law or regulations, or by a court or agency having jurisdiction, in which case such party shall use its best efforts to give the other parties written notice thereof, provide the text of such Release and permit the other parties reasonable opportunity to review and comment upon the relevant portions of such Release.         10.2 Expenses. Each party hereto will pay its own expenses in connection with the transactions contemplated hereby.         10.3 Survival of Agreements. All covenants and agreements made herein, or made in the Registration Agreement or any certificate or instrument delivered to the Holders pursuant to or in connection with this Agreement or the Registration Agreement, shall survive the execution and delivery of this Agreement and the Registration Agreement, the issuance, sale and delivery of the Shares, and the issuance and delivery of any of the Additional Shares, and all statements contained in any certificate or other instrument delivered by the Company hereunder or thereunder or in connection herewith or therewith shall be deemed to constitute representations and warranties made by the Company. The Company shall not be liable to the Holders in respect to the representations and warranties made herein unless claims have been initiated against it on or before the date that is twelve (12) months from the date of this Agreement.         10.4 Brokerage. Each party hereto will indemnify and hold harmless the others against and in respect of any claim for brokerage or other commissions relative to this Agreement or to the transactions contemplated hereby, based in any way an agreements, arrangements or understandings made or claimed to have been made by such party with any third party.         10.5 Parties in Interest. All representations, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. Without limiting the generality of the foregoing, all representations, covenants and agreements benefitting the Holders shall inure to the benefit of holders who may purchase any shares in a private transaction from time to time of the shares sold by the Company pursuant to the terms of this Agreement.         10.6 Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered in person or mailed by certified or registered mail, return receipt requested, addressed as follows: The Company:          Pease Oil and Gas Company         751 Horizon Court, Suite 203         P. O. Box 60219         Grand Junction, Colorado 81506-8718         Attention: Patrick J. Duncan, President With a copy to:          Alan W. Peryam, Esq.         Alan W. Peryam, LLC         1120 Lincoln Street, Suite 1000         Denver, Colorado 80203 The Holders:          To the addresses set forth on Schedule 1 hereto or, in any such case, at such other address or addresses as shall have been furnished in writing by such party to the others.         10.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Colorado.         10.8 Entire Agreement. This Agreement, including the Schedules and Exhibits hereto, constitutes the sole and entire agreement of the parties with respect to the subject matter hereof. All Schedules and Exhibits hereto are hereby incorporated herein by reference.         10.9 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.         10.10 Amendments. This Agreement may not be amended or modified, and no provisions hereof may be waived, without the written consent of the Company and the holders of at least two-thirds of the shares of Series B Preferred to be surrendered by Holders pursuant to the terms of this Agreement.         10.11 Severability. If any provision of this Agreement shall be declared void or unenforceable by any judicial or administrative authority, the validity of any other provision and of the entire Agreement shall not be affected thereby.         10.12 Title and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting any term or provision of this Agreement.         10.13 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):           (a) “person” shall mean an individual, corporation, trust, partnership, joint venture, unincorporated organization, government agency or any agency or political subdivision thereof, or other entity.           (b) “subsidiary” shall mean, as to the Company, any corporation of which more than 50% of the outstanding stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by the Company, or by one or more of its subsidiaries, or by the Company and one or more of its subsidiaries.           (c) “Governmental Authority” shall mean (i) the United States of America or any state within the United States of America and (ii) any court or any governmental department, commission, board, bureau, agency or other instrumentality of the United States of America or of any state within the United States of America.         10.14 Grounds for Termination. This Agreement may be terminated at any time prior to Closing:           (a) By mutual agreement of the Company, on one hand, and the Holders, on the other hand; and           (b) By the Company or any Holder if the Closing shall not have occurred on or before December 15, 2000, provided, however, that no party shall be entitled to terminate this Agreement under this Section 10.14(b) if the Closing has failed to occur because such party negligently or willfully failed to perform or observe in any material respect its covenants and agreements hereunder.         10.15 Effect of Termination. In the event that the Closing does not occur as a result of any party hereto exercising its rights to terminate pursuant to Section 10.14, then this Agreement shall be null and void and, except as expressly provided herein, no party shall have any rights or obligations under this Agreement, except that nothing herein shall relieve any party from liability for any willful or negligent failure to perform or observe in any material respect any agreement or covenant contained herein. In the event the termination of this Agreement results from the willful or negligent failure of any party to perform in any material respect any agreement or covenant herein, then the other parties shall be entitled to all remedies available at law or in equity and shall be entitled to recover court costs and reasonable attorneys' fees in addition to any other relief to which such party may be entitled.         IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective on the day and year first above written.                                                                              PEASE OIL AND GAS COMPANY                                                                              a Nevada corporation ATTEST                                                                              By: /s/ Patrick J. Duncan                                                                                          Patrick J. Duncan, President By: /s/ Marilyn L. Adams                                 Marilyn L. Adams, Secretary                                                                              PURCHASERS:                                                                              The entities listed on the attached Schedule 1 SCHEDULE 1 SCHEDULE OF INVESTORS Cash Payment Number of Shares for Number Name and Address of Series B Preferred Exchange of Warrants Signature ---------------- --------------------- -------- ------------ --------- The MADAV IX Foundation 2,000 $66,667 33,333 Attn: Mr. Barry Reis By /s/ Barry Reis 1750 Euclid Avenue Barry Reis, Treasurer Cleveland, OH 44115 Ramat Securities, Ltd. 325 10,833 5,417 Chagrin Plaza East, Suite 200 By /s/ David S. Zlatin 23811 Chagrin Blvd. David S. Zlatin, COO Beachwood, OH 04122 First Union Securities 1,000 33,333 16,667 (Custodian) By /s/ Howard Amster FBO Howard Amster IRA, Howard Amster 10700 Wheat First Drive, WF 1030 Glen Allen, VA 23060-9243 Tamar Securities Inc. 3,000 100,000 50,000 ------ ------- ------- Chagrin Plaza East, Suite 200 By /s/ Tamra F. Gould 23811 Chagrin Blvd. Tamra F. Gould Beachwood, OH 04122 Total 6,325 $210,833 105,417 ===== ======= =======

EX-10 2 r10e-630.htm AVX EX-10 6/30/00 Exhibit 10.10 AVX CORPORATION 1995 STOCK OPTION PLAN AS AMENDED THROUGH JULY 25, 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 under each option 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.  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 or (b) change the class of employees eligible to participate in 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.

Exhibit 10.4 FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT, GUARANTY AND REGISTRATION RIGHTS AGREEMENT            AMENDMENT dated as of October 31, 2000 (this "Amendment") to (a) SECURITIES PURCHASE AGREEMENT, dated as of February 4, 1999, (the "Purchase Agreement") among RECOTON CORPORATION, a New York corporation (the "Company" or "Recoton"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Prudential") and ING (U.S.) CAPITAL LLC ("ING"; ING together with Prudential, individually referred to as a "Purchaser" and collectively as "Purchasers"); (b) GUARANTY, dated as of November 3, 1999 (the "Guaranty"), by each of the GUARANTORS listed therein in favor of the Purchasers; and (c) REGISTRATION RIGHTS AGREEMENT, dated as of February 4, 1999 (the "Registration Rights Agreement"), among the Company, Prudential and ING (U.S.) INVESTMENT CORPORATION. Capitalized terms used herein and not defined herein shall have the respective meanings set forth for such terms in the Purchase Agreement. R E C I T A L S:            WHEREAS, the Company and the Purchasers are party to the Purchase Agreement;            WHEREAS, the Company and certain of its Subsidiaries, the Purchasers, certain other Existing Creditors (as defined in the MRA (as defined below)) and The Chase Manhattan Bank, as collateral agent for the Secured Parties (as defined in the MRA), are parties to that certain Master Restructuring Agreement dated as of September 8, 1999 (as amended, supplemented, restated or otherwise modified from time to time, the "MRA");            WHEREAS, the Company and certain of its Subsidiaries are entering into a Loan Agreement dated as of the Closing Date (as amended, supplemented, restated or otherwise modified from time to time, the "Loan Agreement") with the banks and financial institutions from time to time party thereto, Heller Financial, Inc., as administrative agent and General Electric Capital Corporation, as collateral agent and syndication agent;            WHEREAS, the Company is entering into a Term Loan Agreement dated as of the Closing Date (as amended, supplemented, restated or otherwise modified from time to time, the "Term Agreement") with the banks and financial institutions from time to time party thereto and The Chase Manhattan Bank, as administrative agent;            WHEREAS, it is a condition precedent to each of the Loan Agreement and the Term Agreement that the MRA, the 1997 Note Purchase Agreements, the 1998 Note Purchase Agreements, the Chase Term Loans, the Chase Mortgages and the Related Mortgage Documents, the Existing Credit Agreement and the LIFO Credit Agreement (each as defined in the MRA) and all documents related thereto be terminated and that all obligations in connection therewith shall be terminated and all collateral in which the Secured Parties were granted a security interest in connection therewith shall be released; and            WHEREAS, it is a condition precedent to each of the Loan Agreement and the Term Agreement that the Purchase Agreement be amended, as set forth herein;            WHEREAS, the Company has requested that the Purchasers agree to amend certain provisions of the Purchase Agreement, the Guaranty and the Registration Rights Agreement; and            WHEREAS, subject to the terms and provisions of this Amendment, the Required Holders have agreed to amend certain terms and conditions of the Purchase Agreement, the Guaranty and the Registration Rights Agreement as specifically set forth in this Amendment.            NOW, THEREFORE, it is agreed as follows:            Section 1.   Effect of the MRA. It is understood and agreed that since the MRA has been terminated, for purposes of the Purchase Agreement and the Guaranty, the terms and provisions of the MRA except as otherwise restated herein shall have no force and effect from the Amendment Effective Date (as defined in Section 12 hereof); provided, however, that nothing herein shall affect the re-pricing of the 1999 Original Warrants pursuant to Section 2.4(b) of the MRA or the issuance of the "1999 Replacement Warrants".            Section 2.   Amendment of Section 4. As of the Amendment Effective Date, (a) Sections 4A and 4E of the Purchase Agreement and the second paragraph of Section 4G of the Purchase Agreement are hereby deleted in their entirety and (b) the first sentence of Section 4G of the Purchase Agreement is amended to state that the interest rate applicable from the Amendment Effective Date shall be 16.5%.            Section 3.   Amendment of Section 5. As of the Amendment Effective Date, Section 5 of the Purchase Agreement is hereby amended by deleting it in its entirety and by substituting therefor the covenants set forth in Appendix A hereto. Terms used in Appendix A hereto not otherwise defined therein shall have the meaning assigned to such terms in Appendix D hereto.            Section 4.   Amendment of Section 6. As of the Amendment Effective Date, Section 6 of the Purchase Agreement is hereby amended by deleting it in its entirety and by substituting therefor the covenants set forth in Appendix B hereto. Terms used in Appendix B hereto not otherwise defined therein shall have the meaning assigned to such terms in Appendix D hereto.            Section 5.   Amendment of Section 7A. As of the Amendment Effective Date, Section 7A of the Purchase Agreement hereby is amended by:                 (a)  deleting clauses (i) through (xvi), inclusive, in its entirety and by substituting therefor clauses (i) through (xxv), inclusive, the Events of Default set forth in Appendix C hereto. Terms used in Appendix C hereto not otherwise defined therein shall have the meaning assigned to such terms in Appendix D hereto; and                 (b)  deleting the reference to "clause (viii), clause (ix) or clause (x)" in paragraph (a) and substituting therefor "clause (vii) or clause (viii)".           Section 6.   Amendment of Section 10. As of the Amendment Effective Date, Section 10 of the Purchase Agreement hereby is amended by:                 (a)  deleting the definition of "Bank Credit Agreement" in its entirety and by substituting therefor the following:            "Bank Credit Agreement" shall mean the Loan Agreement dated the Closing Date among the Company, Interact Accessories, Inc., a Delaware corporation, Recoton Audio Corporation, a Delaware corporation, AAMP of Florida, Inc., a Florida corporation, and Recoton Home Audio, Inc., a California corporation, the banks and financial institutions from time to time party thereto, Heller Financial, Inc., a Delaware corporation, as administrative agent and senior agent and General Electric Capital Corporation, a New York corporation, as collateral agent and as syndication agent, as may be amended, supplemented or modified from time to time and any renewal, extension, refunding, restructuring, replacement or refinancing thereof (whether with the original administrative agent and lenders or another administrative agent or agents or one or more lenders and whether provided under the original Bank Credit Agreement or one or more other credit or other agreements or indentures but only to the extent that the aggregate principal amount of Debt incurred thereunder and the undrawn face amount of all letters of credit issues thereunder plus commitments to lend under the German Facility (as defined in Annex A hereto) plus the principal amount of loans outstanding under the Bank Financing Agreement do not exceed in the aggregate $275,000,000 at any one time outstanding)."                 (b)  deleting the definition of "Bank Financing Agreements" in its entirety and by substituting therefor the following:            "Bank Financing Agreement" shall mean the Credit Agreement dated the Closing Date among the Company, the banks and financial institutions from time to time party thereto and The Chase Manhattan Bank, as administrative agent, as may be amended, supplemented or modified from time to time and any renewal, extension, refunding, restructuring, replacement or refinancing thereof (whether with the original administrative agent and lenders or another administrative agent or agents or one or more lenders and whether provided under the original Bank Financing Agreement or one or more other credit or other agreements or indentures but only to the extent that the aggregate principal amount of Debt incurred thereunder and the undrawn face amount of all letters of credit issues thereunder do not exceed in the aggregate $15,000,000 at any one time outstanding)."                 (c) deleting the definition of "GAAP" in its entirety and by substituting therefor the following:            "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination."                 (d)  deleting Section 10B in its entirety and by substituting therefor the following:            "Accounting Terms.  For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to such terms in conformity with GAAP. Financial statements and other information furnished to Purchasers hereunder shall be prepared in accordance with GAAP (as in effect at the time of such preparation) on a consistent basis. In the event any "Accounting Changes" (as defined below) shall occur and such changes affect financial covenants, standards or terms in this Agreement, then Company agrees to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of Company shall be the same after such Accounting Changes as if such Accounting Changes had not been made, and until such time as such an amendment shall have been executed and delivered by Company and Purchasers, (A) all financial covenants, standards and terms in this Agreement shall be calculated and/or construed as if such Accounting Changes had not been made, and (B) Company shall prepare footnotes to the financial statements required to be delivered hereunder that show the differences between the financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes). "Accounting Changes" means: (a) changes in accounting principles required by GAAP and implemented by Company and (b) changes in accounting principles recommended by Company' Accountants."           Section 7.   Amendment of Section 11. As of the Amendment Effective Date, Section 11C of the Purchase Agreement is hereby amended by inserting after the last sentence therein the following:           "Notwithstanding the foregoing or anything to the contrary contained herein, until the Senior Debt has been indefeasibly paid in full in cash in accordance with the terms of the Bank Credit Agreement and the Bank Financing Agreement and all lending commitments under the Bank Credit Agreement and the Bank Financing Agreement have terminated, Purchasers shall not, without the prior written consent of the Administrative Agent under each of the Bank Credit Agreement and the Bank Financing Agreement Agent, agree to any amendment, waiver, modification or supplement to this Agreement or any Guaranty hereunder the effect of which is to (a) increase the maximum aggregate principal amount of the Notes or the rate of interest on the Notes, (b) change the dates upon which payments of principal or interest on the Notes are due, (c) change or add any event of default or any covenant hereunder, (d) alter the subordination provisions in Section 12 hereof, or (g) change or amend any other term herein if such change or amendment would result in a Default under either the Bank Credit Agreement or the Bank Financing Agreement."         Section 8.  Amendment of Section 12.  As of the Amendment Effective Date, Section 12 of the Purchase Agreement is hereby amended by:                 (a)  deleting the definition of "Majority Senior Debt Holders" in its entirety and by substituting therefor the following:           ""Majority Senior Debt Holders" shall mean the (i) Required Lenders (as defined in the Bank Credit Agreement) or (ii) at such time when the Bank Credit Agreement is terminated and all Senior Debt thereunder is indefeasibly paid in full in cash and all commitments to lend thereunder have been terminated, Required Lenders (as defined in the Bank Financing Agreement)."                 (b)  deleting clause (i) of the definition of "Senior Debt" in its entirety; and                 (c) deleting from clause (iii) of the definition of "Senior Debt" the phrase "cash collateralization of letters of credit" and inserting after the phrase "including Post-petition Interest" the phrase "whether or not allowed".           Section 9.   Certain Waivers and Amendments.  Notwithstanding anything to the contrary set forth herein or in the Purchase Agreement:                 (a)  any amendment, supplement, modification, consent or waiver in respect of the observance or performance of the covenants (or any defined term referred to therein) set forth Sections 5, 6 and 7 of the Senior Loan Agreement (as defined in Appendix D hereto) shall be binding on each of the parties hereto and shall be deemed an amendment, supplement, modification, consent or waiver of the corresponding provision of or to Section 5 or 6, as applicable, of the Purchase Agreement, as amended hereby, if such amendment supplement, modification, consent or waiver is executed and delivered in accordance with the terms of Section 9.4 of the Senior Loan Agreement;                 (b)  any waiver of the occurrence of a Default or Event of Default under the Senior Loan Agreement shall be deemed a waiver of the corresponding Default or Event of Default, as the case may be, as set forth in Section 7A of the Purchase Agreement, as amended hereby, and shall be binding on each of the parties hereto and shall be deemed an amendment, supplement, modification, consent or waiver of or to the Purchase Agreement, as amended hereby, if such amendment, supplement, modification, consent or waiver executed and delivered in accordance with the terms of Section 9.4 of the Senior Loan Agreement, provided that no such waiver shall be effective to waive an Event of Default in pursuant to Section 7A(i) of the Purchase Agreement, as amended hereby, without the written consent of the holders of each of the Notes;                 (c)  the Company agrees to give Purchasers notice of any amendment, supplement, modification, consent, waiver or Event of Default under the Senior Loan Agreement as contemplated by Section 8(a) and (b) above; and                 (d)  upon the occurrence of a Permitted Refinancing (as defined in the Subordination Agreement (as defined in Appendix D hereto)) the covenants and Events of Default set forth in the Purchase Agreement, as amended hereby, shall be modified in a manner consistent with any covenants and events of default contained in any agreement providing for such refinancing.           Section 10.   Amendment of Guaranty; Release of Guarantors.                 (a)  As of the Amendment Effective Date, Section 3.1 of the Guaranty is hereby amended by:                      (i)  deleting the proviso to the introductory paragraph in its entirety; and                      (ii)  deleting the definition of "Bank Credit Agreement" in its entirety.                 (b)  As of the Amendment Effective Date, Section 5.15 of the Guaranty is amended by replacing the references to "paragraph 6G or Paragraph 6H" with "paragraph 6C or paragraph 6F" and by inserting after the last sentence therein the following:           "Without any action required of any Noteholder, any Guarantor shall be automatically released from its obligations under this Guaranty if such Guarantor is released from its obligations under the Guaranties (as defined in the Bank Credit Agreement)."                 (c)  As of the Amendment Effective Date, Section 5.16 of the Guaranty is hereby amended by deleting Section 5.16 in its entirety and substituting therefor the following:           "The obligations of any Guarantor under this Guaranty shall be subordinate and junior in right and time of payment to such Guarantor's obligations under the Bank Credit Agreement and the Bank Financing Agreement and any guaranties delivered in connection therewith and the provisions of Section 12 of the Purchase Agreement are incorporated herein by reference as if fully set forth herein, mutatis mutandis, provided that any notice to be provided to any Guarantor in connection with the subordination provided for herein shall be sufficient if such notice is provided to Recoton Corporation in accordance with the terms of the Purchase Agreement, as applicable."                 (d) As of the Amendment Effective Date, guarantees issued in favor of the Purchasers by companies which are not guarantors of the obligations under the Loan Agreement or the Term Agreement are hereby automatically terminated and released.           Section 11.   Amendment of Registration Rights Agreement. The definition of "Warrants" in the Registration Rights Agreement is amended to read as follows: "the Company's Warrants as defined in and issued under the Purchase Agreement and any Additional Warrants (as defined in the Purchase Agreement, including, without limitation, the 1999 Replacement Warrants and the Amendment Warrants, as referenced in an October 31, 2000 Amendment to the Purchase Agreement) to the extent issued as provided in the Purchase Agreement."           Section 12.   Representations and Warranties. Company hereby represents and warrants to the Purchasers that after giving effect to this Amendment:                 (a)  no Default or Event of Default has occurred and is continuing on and as of the Closing Date under the Purchase Agreement; and                 (b)  the representations and warranties of the Company contained in the Purchase Agreement are true and correct on and as of the date hereof as if made on and as of the date hereof, except to the extent such representations and warranties expressly relate to a different date.           Section 13.   Effectiveness.  This Amendment shall become effective as of the date hereof (the "Amendment Effective Date") upon satisfaction of each of the following conditions:                 (a)  the Purchasers shall have executed and delivered a counterpart of this Amendment and received a duly executed counterpart of this Amendment as well as a fully executed copy of the Loan Agreement and the Term Agreement from the Company (which aforesaid executions and deliveries may be effected by delivery and receipt by facsimile transmission);                 (b)  the "Closing Date" shall have occurred under each of the Loan Agreement and the Term Agreement;                 (c)  the Company shall have paid (or made other arrangements satisfactory to the Purchasers to pay) all of the Purchasers' out-of-pocket expenses (including, without limitation, the reasonable fees and disbursements of legal counsel) in connection with this Amendment;                 (d)  the Company shall have delivered to the Purchasers warrants substantially in the form of Exhibit A (the "Amendment Warrants") of which warrants to purchase 11,429 shares shall have been issued to Prudential and warrants to purchase 8,571 shares shall have been issued to ING, such Amendment Warrants having an exercise price equal to the average Market Price (as defined in the 1999 Replacement Warrants issued to the Purchases pursuant to the MRA) for the ten Business Days immediately preceding the date of the issuance thereof and an expiration date on the fifth anniversary of the date of grant; and                 (e)  the Company shall have paid a non-refundable closing fee to each of Prudential in the amount of $500,000 and ING in the amount of $375,000.           Section 14.   Status of Purchase Agreement.                 (a)  This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly amended hereby, the terms, provisions and conditions of the Purchase Agreement, the Guaranty and the Registration Rights Agreement shall continue in full force and effect and are hereby ratified and confirmed in all respects; and                 (b)  No amendment of any terms or provisions of the Purchase Agreement, the Guaranty or the Registration Rights Agreement made hereunder shall relieve the Company from complying with any other term or provision of the Purchase Agreement, the Guaranty and the Registration Rights Agreement.           Section 15. Miscellaneous.                 (a)  No Waiver, Cumulative Remedies.  No failure or delay or course of dealing on the part of the Purchasers in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights, powers and remedies herein expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Purchasers would otherwise have. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Purchasers to any other or further action in any circumstances without notice or demand.                 (b)  Expenses.  Company agrees to pay and reimburse the Purchasers for all of their reasonable costs and expenses (including, without limitation, the reasonable fees and disbursements of legal counsel) in connection with this Amendment.                 (c)  Headings Descriptive.  The headings of the several Sections and subsections of this Amendment are inserted for convenience only and shall not in any way affect the meaning or construction of any provision.                 (d)  Severability.  In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.                 (e)  Counterparts.  This Amendment may be executed and delivered in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with each of the Company and the Purchasers.           Section 16.   Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. [Remainder of page intentionally left blank]           IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first written above.                                COMPANY: RECOTON CORPORATION By:        /s/ Arnold Kezsbom                                             Name:  Arnold Kezsbom Title:    Senior Vice President - Finance                               GUARANTORS: INTERACT ACCESSORIES, INC. RECOTON AUDIO CORPORATION AAMP OF FLORIDA, INC. RECOTON HOME AUDIO, INC. CHRISTIE DESIGN CORPORATION RECOTON INTERNATIONAL HOLDINGS, INC. RECOTON EUROPEAN HOLDINGS, INC. RECOTON JAPAN, INC. RECOTON CANADA LTD RECONE, INC. By:        /s/ Arnold Kezsbom                                               Name:  Arnold Kezsbom Title:    Vice President                               PURCHASERS: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By:  /s/ Gwendolyn S. Foster                                             Name:  Gwendolyn S. Foster Title:     Vice President ING (U.S.) CAPITAL LLC By:  /s/ William B. Redmond                                                Name:  William B. Redmond Title:    Vice President AGREED (for purposes of Section 10): ING (U.S.) INVESTMENTS CORPORATION By:  /s/ William B. Redmond                                         Name:   William B. Redmond Title:    Vice President Appendix A to the Amendment to the Securities Purchase Agreement 5.  AFFIRMATIVE COVENANTS           Company covenants and agrees that it shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5.           5A.   Financial Statements and Other Reports.  Recoton will deliver to Purchasers the financial statements and other reports contained in the Reporting Rider attached as Schedule 5A hereto (capitalized terms used therein not otherwise defined shall have the meanings ascribed thereto herein). In addition to the foregoing, the Company covenants that it will, upon the request of the holder of any Note, provide such holder, and any qualified institutional buyer designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of Rule 144A under the Securities Act in connection with the resale of the Notes, except at such times as the Company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act. For the purpose of this paragraph, the term "qualified institutional buyer" shall have the meaning specified in Rule 144A under the Securities Act.           5B.   Maintenance of Properties.  Each Loan Party will and will cause each of its Subsidiaries to maintain or cause to be maintained in good repair, working order and condition all material properties used in the business of each Loan Party and its Subsidiaries and will make or cause to be made all appropriate repairs, renewals and replacements thereof.           5C.   Compliance with Laws.  Each Loan Party will, and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority as now in effect and which may be imposed in the future in all jurisdictions in which such Loan Party or any of its Subsidiaries is now doing business or may hereafter be doing business, other than those laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.           5D.   Use of Proceeds and Margin Security.  Company shall use the proceeds of all Senior Loans for ordinary working capital and general corporate purposes (and as described in the recitals to the Senior Loan Agreement) consistent with all applicable laws, statutes, rules and regulations. No portion of the proceeds of any Senior Loan shall be used by the Company or any of its Subsidiaries for the purpose of purchasing or carrying margin stock within the meaning of Regulation U, or in any manner that might cause the borrowing or the application of such proceeds to violate Regulation T or Regulation X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Exchange Act.           5E.   Year 2000.  Company and each of its Subsidiaries has assessed the microchip and computer-based systems and the software used in its business and has determined that such systems and software are "Year 2000 Compliant". Company has not experienced any disruption in its business or any material expense as a result of its systems and software, and those of its principal vendors, suppliers, and customers, failing to be Year 2000 Compliant, and the Company is not aware of any circumstances that would be reasonably likely to result in a material adverse change in the business or financial condition of the Company or any of its Subsidiaries as a result of the failure of Company or any of its Subsidiaries to have become Year 2000 Compliant prior to January 1, 2000. For purposes of this paragraph, "Year 2000 Compliant" means that all software, embedded microchips and other processing capabilities utilized by, and material to the business operations or financial condition of, the Company and its Subsidiaries are able to interpret, store, transmit, receive and manipulate data on and involving all calendar dates correctly and without causing any abnormal ending scenarios in relation to dates in and after the Year 2000.           5F.   Environmental Matters.  (i) Each Loan Party shall comply with all Environmental Laws and shall promptly take any and all necessary Cleanup action in connection with the Release or threatened Release of any Hazardous Materials on, under or affecting any real estate in order to comply with all applicable Environmental Laws and governmental authorizations, unless the failure to so comply could not reasonably be expected to have a Material Adverse Effect. In the event a Loan Party undertakes any Cleanup action with respect to the Release or threatened Release of any Hazardous Materials on or affecting any real estate, such Loan Party shall conduct and complete such Cleanup action in material compliance with all applicable Environmental Laws, and in accordance with the policies, orders and directives of all federal, state and local governmental authorities except when, and only to the extent that, such Loan Party’s liability for such presence, handling, storage, use, disposal, transportation or Release or threatened Release of any Hazardous Materials is being contested in good faith by such Loan Party.                 (ii)  Each Loan Party shall promptly advise the Purchasers in writing and in reasonable detail of (a) any Release or threatened Release of any Hazardous Materials required to be reported to any federal, state, local or foreign governmental or regulatory agency under any applicable Environmental Laws, (b) any and all material written communications with respect to any pending or threatened Environmental Claims or Releases of Hazardous Materials, in each such case which, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect; (c) any Cleanup performed by a Loan Party or any other Person in response to (x) any Hazardous Materials on, under or about any Real Estate, the existence of which has a reasonable possibility of resulting in an environmental liability having a Material Adverse Effect, or (y) any environmental liabilities that could have a Material Adverse Effect, and (iv) a Loan Party's discovery of any occurrence or condition on any property that could cause any Real Estate presently owned or operated by the Loan Party or its Subsidiaries or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws.                 (iii)  Each Loan Party shall promptly notify the Purchasers of (a) any proposed acquisition of stock, assets, or property by such Loan Party that could reasonably be expected to expose such Loan Party and (b) any proposed action to be taken by such Loan Party to commence manufacturing, industrial or other similar operations that could reasonably be expected to subject such Loan Party to additional Environmental Laws or governmental authorizations, that are materially different from the Environmental Laws applicable to the operations of such Loan Party.                 (iv)  Each Loan Party shall, at its own expense, provide copies of such documents or information as the Purchasers may reasonably request in relation to any matters disclosed pursuant to this subsection.           5G.  Financial Covenants.  Company covenants and agrees that it shall comply with and shall cause each of its Subsidiaries to comply with all covenants contained in the Financial Covenant Rider attached hereto as Schedule 5G (capitalized terms used therein not otherwise defined therein shall have the meanings ascribed thereto herein).           5H.  Notices.   Company shall promptly give notice to the Purchasers of:                 (i)  the occurrence of any Default or Event of Default of which it is aware under this Agreement, the Senior Loan Agreement or the Term Loan Agreement;                 (ii)  any development or event of which it is aware which has had or could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this subsection shall be accompanied by a statement of Company’s chief executive officer, chief operating officer or chief financial officer setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto.         5I.  Parity with Senior Lender.  No Person shall deliver a guarantee to the Senior Agent on behalf of the Senior Lenders to secure payment and performance of the Obligations (as defined in the Senior Loan Agreement) that is not also granted to the Purchasers (as subordinated creditors) to secure payment and performance of the Notes and the other obligations hereunder; provided that any guarantee to the Purchasers shall be subordinated on terms substantially similar to those in guarantees issued in favor of the Purchasers on the date hereof.           5J.  Inspection of Property; Books and Records; Discussions.  Company shall 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 dealing and transactions in relation to its business and activities; and permit representatives of any Purchaser 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 Company and its Subsidiaries with officers of the Company and its Subsidiaries and with its independent certified public accountants so long as representatives of the Company are given the opportunity to be present.           5K.  Use of Proceeds.  Company shall use the proceeds of the Senior Loans for ordinary working capital and general corporate purposes (and as described in the recitals to the Senior Loan Agreement) consistent with all applicable laws, statutes, rules and regulations. Appendix B to the Amendment to the Securities Purchase Agreement 6.  NEGATIVE COVENANTS           Company covenants and agrees that it shall not and will not permit any of its Subsidiaries to:           6A.   Indebtedness and Liabilities.  Directly or indirectly create, incur, assume, guaranty, or otherwise become or remain directly or indirectly liable, on a fixed or contingent basis, with respect to any Indebtedness except:                 (i)  Indebtedness under this Agreement and the Notes;                 (ii)   Indebtedness (excluding Capital Leases) not to exceed $1,500,000 in the aggregate at any time outstanding;                 (iii)  Indebtedness under Capital Leases (excluding Capital Leases in connection with the New Information System) in existence as of the Closing Date plus an additional $1,000,000 outstanding at any time in the aggregate; provided, however, that amounts of such Indebtedness reduced shall be allowed to be incurred again;                 (iv)  Indebtedness in connection with the New Information System not to exceed $15,000,000 outstanding at any time in the aggregate;                 (v)  (a)  Indebtedness of any Loan Party to any other Loan Party; (b) Indebtedness of any Foreign Subsidiary to any Loan Party to the extent permitted under subsection 6D(vi); (c) Indebtedness of any Foreign Subsidiary to any other Foreign Subsidiary; (d) Indebtedness of any Loan Party to any Foreign Subsidiary; provided, however, that (1) any inter company Indebtedness of any Loan Party permitted under this subsection 6A(v) shall be subordinated in right of payment to the Obligations under and as defined in the Senior Loan Agreement on terms satisfactory to the Senior Lenders and evidenced by intercompany notes in form and substance satisfactory to the Purchasers, (2) all such intercompany notes shall be endorsed in blank or accompanied by note powers endorsed in blank and pledged and delivered to the Senior Agent, for the benefit of the Agents, Senior Lenders, the Term Loan Administrative Agent and the Term Loan Lenders, (3) at the time any inter company Indebtedness is incurred by any Loan Party pursuant to this subsection 6A(v), and after giving effect thereto, the Loan Parties shall be Solvent; and (4) no Default or Event of Default exists or would occur and be continuing after giving effect to any proposed inter company Indebtedness pursuant to this subsection 6A(v):                 (vi)  Indebtedness of Recoton in an amount not to exceed $5,518,399 plus accrued interest evidenced by a promissory note payable to the United States of America or an agency thereof delivered in settlement of obligations of Recoton arising out of the customs investigation discussed in Recoton's Form 8-K for an event which occurred on July 27, 1999;                 (vii) Indebtedness under the Senior Loan Agreement and the Term Loan Agreement;                 (viii)  Indebtedness under the German Facility; provided, that the terms of the Indebtedness permitted under this subsection 6A(viii) can not be amended, increased, replaced or terminated without the prior written consent of the Purchasers;                 (ix)  Indebtedness existing on the Closing Date and identified on Schedule 7.1 to the Senior Loan Agreement;                 (x)  Indebtedness of the type described in subsection 2.3(C) of the Senior Loan Agreement with respect to the issuance of debt securities of Recoton in a public offering or a private placement and which (1) the Net Securities Proceeds are used to pay down the Senior Debt or the "Obligations" (as such term is defined in the Term Loan Agreement) as set forth in subsection 2.5 of the Term Loan Agreement or as otherwise required pursuant to this Agreement, (2) shall be subordinate to the Senior Loans; (3) the terms and conditions shall be satisfactory to the Purchasers and (4) the documentation shall be satisfactory to the Purchasers;                 (xi)  Indebtedness incurred by STD and its Subsidiaries to the extent supported by Lender Letters of Credit (as defined in the Senior Loan Agreement) and which amount as of the Closing Date is $12,400,000;                 (xii)  Indebtedness with respect to the obligations of Recoton Italy and Recoton UK referred to in subsection 6B(v) and (vi);                 (xiii)  Indebtedness of Recoton Italy with respect to letters of credit that are cash collateralized; and                 (xiv)  Senior Debt and any Permitted Refinancing (as defined in the Subordination Agreement). Company will not, and will not permit any of its Subsidiaries to, incur any Liabilities except for Indebtedness permitted herein and trade and other payables and expenses arising in the ordinary course of business that are paid in accordance with their prior existing practices.           6B.  Guaranties.  Guaranty, endorse, or otherwise in any way become or be responsible for any obligations of any other Person, whether directly or indirectly by agreement to purchase the indebtedness of any other Person or through the purchase of goods, supplies or services, or maintenance of working capital or other balance sheet covenants or conditions, or by way of stock purchase, capital contribution, advance or loan or issuance of a letter of credit for the purpose of paying or discharging any indebtedness or obligation of such other Person or otherwise except for: endorsements of instruments or items of payment for collection in the ordinary course of business;                 (i)  guaranties in existence on the Closing Date and listed on Schedule 7.2 to the Senior Loan Agreement;                 (ii)  guaranties pursuant to this Agreement, the Senior Loan Documents or the Term Loan Documents;                 (iii)  guaranties of the Indebtedness permitted under subsections 6A(ii), (iii) and (iv);                 (iv)  guaranties made in the ordinary course of business by a Loan Party with respect to Recoton Italy's obligations not to exceed in the aggregate $2,000,000 for all of the Loan Parties;                 (v)  guaranties made in the ordinary course of business by a Loan Party with respect to Recoton UK's obligations not to exceed in the aggregate $2,000,000 for all of the Loan Parties;                 (vi)  guaranties made in the ordinary course of business by (a) a Loan Party with respect to obligations of another Loan Party and (b) a Foreign Subsidiary with respect to obligations of a Loan Party or any other Foreign Subsidiary, which obligations in each case are not otherwise prohibited by this Agreement; and                 (vii)  guaranties made by Recoton of the obligations incurred by Recoton Germany under the German Facility.           6C.  Transfers, Liens and Related Matters.                 (i)  Transfers. Sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to any assets of such Person, except that the Company and its Subsidiaries may (a) sell or otherwise dispose of Inventory in the ordinary course of business; (b) sell, transfer or discount without recourse, in the ordinary course of business, accounts receivables arising in the ordinary course of business in connection with the compromise or collection thereof or in connection with the receipt of proceeds under credit insurance; provided, that such proceeds are applied to prepay the Senior Debt in accordance with its terms or as otherwise provided in Section 2.5 of the Term Loan Agreement; (c) sell or otherwise dispose of worn out, obsolete or surplus equipment and fixtures, so long as the Net Proceeds are applied to the prepayment of the Senior Debt in accordance with its terms or as otherwise provided in Section 2.5 of the Term Loan Agreement; (d) subject to the provisions of the Senior Loan Documents, transfer, sell or assign any assets to another Loan Party (including in connection with the dissolution, liquidation or winding up of any Subsidiary set forth on Schedule 7.6 to the Senior Loan Agreement); (e) make other Asset Dispositions if all of the following conditions are met: (1) the market value of assets sold or otherwise disposed of in one or a series of related transactions does not exceed $250,000 and the aggregate market value of assets sold or otherwise disposed of in any Fiscal Year does not exceed $1,000,000; (2) the consideration received is at least equal to the fair market value of such assets; (3) the sole consideration received is cash; provided, that trade-ins for which the cash value of such trade-in is applied against the purchase price of new equipment so purchased shall be deemed to be cash; (4) the Net Proceeds of such Asset Disposition are applied to the prepayment of Senior Debt in accordance with its terms or as otherwise provided in Section 2.5 of the Term Loan Agreement; (5) after giving effect to the sale or other disposition of the assets included within the Asset Disposition and the repayments required above with the proceeds thereof, the Company is in compliance on a pro forma basis with the covenants set forth in the Schedule 5G recomputed for the most recently ended month for which information is available and showing it will be in compliance as of the date thereof and in the future, and is in compliance with all other terms and conditions contained in this Agreement; and (6) no Default or Event of Default shall then exist or result from such sale or other disposition; and (f) consummate the InterAct International IPO. Notwithstanding anything to the contrary contained herein (x) Recoton shall be permitted to sell its stock (provided that the proceeds thereof shall be applied to the Senior Debt in accordance with its terms); and grant options in accordance with its existing stock option plans and warrants in its reasonable business judgment, (y) InterAct International shall be permitted to sell its stock in accordance with subsection 2.4(B)(6) of the Senior Loan Agreement; and options on the stock of InterAct International may be granted, and stock may be issued upon exercise of such options, to employees and directors of InterAct International as described in Schedule 11.1(C) of the Senior Loan Agreement, and (z) any Subsidiary can sell stock to its parent to the extent permitted by Section 6D(iii), (vii), (viii) and (xiii).                 (ii)  Liens.  Except for Permitted Encumbrances, directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any assets of such Person or any proceeds, income or profits therefrom.                 (iii)  No Negative Pledges.  Enter into or assume any agreement (other than this Agreement, the Term Loan Documents or the Senior Loan Documents) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired.                 (iv)  No Restrictions on Subsidiary Distributions to the Company. Except as provided herein, the Senior Loan Agreement or the Term Loan Agreement, directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to: (1) pay dividends or make any other distribution on any of such Subsidiary's capital stock or other equity interest owned by the Company or any Subsidiary of the Company; (2) pay any indebtedness owed to the Company or any other Subsidiary; (3) make loans or advances to the Company or any other Subsidiary; or (4) transfer any of its property or assets to the Company or any other Subsidiary.           6D.  Investments and Loans.   Make or permit to exist any Investments in any other Person, except:                 (i)  the Company may make and maintain Investments in Cash Equivalents consistent with the cash management system and subject to securities account control agreements in form and substance satisfactory to the Senior Agent;                 (ii)  Foreign Subsidiaries may make and maintain Investments in Cash Equivalents;                 (iii)  (a)  the Company and its Subsidiaries continue loans made to employees and former employees as set forth in Schedule 7.4(c) to the Senior Loan Agreement which loans, after the Closing Date, may not be increased or reborrowed; (b) InterAct International may make loans to employees of InterAct International for the purpose of exercising options to purchase capital stock in InterAct International as described in Schedule 11.1(C) to the Senior Loan Agreement; and (iii) Company and its Subsidiaries may make and maintain additional loans and advances to employees in an aggregate outstanding amount not in excess of $2,000,000 at any time;                 (iv)  the Company and its Subsidiaries may make and maintain extensions of trade credit in the ordinary course of business;                 (v)  the Company and its Subsidiaries may make and maintain Investments existing as of the Closing Date in their respective Subsidiaries as set forth in Schedule 7.4(e) to the Senior Loan Agreement;                 (vi)  after the Closing Date, Loan Parties may make and replenish Investments in:                      (a) Recoton UK up to $2,000,000 in the aggregate (including guaranties);                      (b) Recoton Italy up to $2,000,000 in the aggregate (including guaranties); and                      (c)  Recoton Germany up to $7,000,000 in the aggregate (including guaranties);                 (vii)  each Loan Party may make and maintain additional equity Investments in its Subsidiaries which are Loan Parties;                 (viii)  the Company and its Subsidiaries may make additional equity Investments in existing and new Subsidiaries in connection with the STD Restructuring to the extent permitted under subsection 6K;                 (ix)  Foreign Subsidiaries may make and maintain additional equity Investments in their respective Subsidiaries;                 (x)  the Company and its Subsidiaries may make inter company loans to the extent permitted pursuant to subsection 6A(v);                 (xi)  the Company and its Subsidiaries may make loans and advances to suppliers for the purchase and preparation of Inventory in the ordinary course of business not to exceed $2,000,000 at any one time outstanding; provided that no such loan or advance shall be outstanding for more than 180 days;                 (xii)  InterAct International may make loans to employees of InterAct International for the purpose of exercising options to purchase capital stock in InterAct International as described in Schedule 11.1(C) to the Senior Loan Agreement; and                 (xiii)  debt held by any Loan Party or any of its Subsidiaries in a Subsidiary may be converted to equity of that Subsidiary.           6E.   Restricted Junior Payments.  (i) Directly or indirectly declare, order, pay, make or set apart any sum for any Restricted Junior Payment, except that: (a) Subsidiaries of the Company may make Restricted Junior Payments with respect to their common stock or other equity interest which Restricted Junior Payment shall be applied to pay the Senior Debt in accordance with its terms and, after payment in full thereof, the Term Loans, and after payment thereof, the Notes and (b) so long as no Default or Event of Default is occurring or continuing and after giving effect to such payment no Default or Event of Default results, (x) Recoton may repurchase capital stock issued to its employees, directors or consultants and the employees, directors or consultants of its Subsidiaries, in an aggregate amount not to exceed $3,000,000 in cash during the term of this Agreement. Notwithstanding anything to the contrary contained herein, Recoton may repurchase shares of its capital stock which are surrendered by optionees which consideration for repurchase shall be made solely with the issuance of shares of additional stock issued upon the exercise of options granted under Recoton’s stock option plans.                 (ii)  Directly or indirectly pay or prepay any account payables to STD provided, however, so long as no Default or Event of Default has then occurred or is continuing or would be caused thereby, the account payables to STD may be paid on a monthly basis, provided that all the following conditions have been met:            (a)  the payment to STD is within normal and customary terms and shall be payment for invoices that have remained unpaid for at least 90 days from the date of issuance;            (b)  the amount to be paid shall not be in excess of $25,000,000 per month; and            (c)  the amounts to be repaid shall be for account payables with respect to the purchase of Inventory from STD.           6F.  Restriction on Fundamental Changes.  (i)  Enter into any transaction of merger, amalgamation or consolidation (other than a merger, amalgamation or consolidation among Loan Parties); (ii) other than the Subsidiaries set forth in Schedule 7.6 to the Senior Loan Agreement, liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); (iii) convey, sell, lease, sublease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its business or assets, or the capital stock or other equity interest of any of its Subsidiaries, whether now owned or hereafter acquired other than pursuant to the establishment of Subsidiaries as described in Schedule 7.11 to the Senior Loan Agreement or the liquidation, winding up or dissolution of the Subsidiaries set forth on Schedule 7.6 to the Senior Loan Agreement (provided that, in connection with the transfer of assets or creation of Subsidiaries in connection with the transactions described on Schedule 7.11 to the Senior Loan Agreement, Purchasers shall have received (a) such amendments and counterparts to any guaranties under the Notes as may be requested by Purchasers to bind newly created Subsidiaries or existing Subsidiaries to the terms of such guaranties and the other applicable documents in connection herewith, and (b) copies of organizational documents, resolutions and incumbency certificates of any Persons executing any of the foregoing amendments or counterparts, and such other documents and instruments in connection therewith as may be reasonably requested by Purchasers; all of the foregoing in form and substance reasonably satisfactory to Purchaser); or (iv) acquire by purchase or otherwise all or any substantial part of the business or assets of, or stock or other beneficial ownership of, any Person; provided, however, that any Subsidiary may be merged, amalgamated or consolidated with or into the Company (provided that the Company shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiaries of the Company that are Guarantors (provided that the wholly owned Subsidiary or Subsidiaries that are Guarantors shall be the continuing or surviving corporations). It is understood and agreed that the InterAct International IPO shall be permitted if the following conditions are met:            (a)  the Net Securities Proceeds of the InterAct International IPO shall be applied in payment of the Senior Debt pursuant to, and to the extent required by and in accordance with the Senior Loan Agreement;            (b)  the Company shall deliver a certificate showing pro forma compliance with the financial covenants and Minimum Excess Availability (as defined in the Senior Loan Agreement on the Closing Date) after giving effect to the InterAct International IPO; and            (c)  upon the payment in full in cash of the Senior Debt in accordance with subsection 2.4(B)(6) of the Senior Loan Agreement, InterAct International will no longer be a Loan Party.           6G.   Changes Relating to Subordinated Debt.  Change or amend the terms of any Subordinated Debt (including guaranties thereof) if the effect of such amendment is an attempt to: (i) increase the interest rate on such Indebtedness; (ii) change the dates upon which payments of principal or interest are due on such Indebtedness; (iii) change any event of default or add any covenant with respect to such Indebtedness; (iv) change the payment or amendment and modification provisions of such Indebtedness; (v) change the subordination provisions thereof; or (vi) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Indebtedness in a manner adverse to the Company, any of its Subsidiaries or the Purchasers.           6H.   Transactions with Affiliates.  Directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale or exchange of property or the rendering of any service) with any Affiliate or with any officer, director or employee of any Loan Party, except for transactions in the ordinary course of the Company’s business and upon fair and reasonable terms and except for the transactions set forth in subsection 6D(iii) on terms which are no less favorable to the Company than it would obtain in a comparable arm’s length transaction with an unaffiliated Person.           6I.   Conduct of Business. From and after the Closing Date, engage in any business other than businesses of the type engaged in by the Company or its Subsidiaries on the Closing Date or those in or directly related to the consumer electronics industry.           6J.   Tax Consolidations.  File or consent to the filing of any consolidated income tax return with any Person other than any of its Subsidiaries, or any Guarantor, provided that in the event the Company files a consolidated return with any such Person, the Company’s contribution with respect to taxes as a result of the filing of such consolidated return shall not be greater, nor the receipt of tax benefits less, than they would have been had the Company not filed a consolidated return with such Person.           6K.   Subsidiaries.  Other than the Subsidiaries set forth on Schedule 6K, establish, create or acquire any new Subsidiaries.           6L.   Fiscal Year; Tax Designation.  Change its Fiscal Year; or elect to be designated as an entity other than a C corporation as defined in the IRC.           6M.   Sale-Leasebacks.  Engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets.           6N.   Inactive Subsidiaries.  With respect to each of the Inactive Subsidiaries (as defined in the Senior Loan Agreement as of the Closing Date), conduct any business, acquire any assets or otherwise become liable for any obligation except for nominal amounts as may be required to liquidate, wind-up or dissolve such Inactive Subsidiaries.           6O.   Parity with Senior Lender.  Neither the Company nor its Subsidiaries shall grant any security interest in property or deliver a guarantee to any Purchaser, the Term Loan Administrative Agent, on behalf of the Term Loan Lenders, or to any Term Loan Lender to secure payment and performance of the Notes and the obligations thereunder or to Obligations (as defined in the Term Loan Agreement) that is not also granted to the Senior Agent on behalf of the Senior Lenders to secure payment and performance of the Obligations (as defined in the defined in the Senior Loan Agreement). Appendix C to the Amendment to the Securities Purchase Agreement                 (i)  Payment.  Failure to make payment of (x) the principal with respect to any Note within five (5) days after such amount becomes due in accordance with this Agreement, or (y) interest with respect to any Note or any other obligation pursuant to this Agreement, any Note or any Subsidiary Guaranty within fifteen (15) days after such amount becomes due in accordance with this Agreement, such Note or such Subsidiary Guaranty; or                 (ii)  Default in Other Agreements.  (1) Failure of the Company or any of its Subsidiaries to pay when due any principal or interest on any Indebtedness (other than as set forth in subsection 7A(i) hereof) or (2) breach or default of the Company or any of its Subsidiaries with respect to any Indebtedness (other than as set forth elsewhere in this subsection 7A), if such failure to pay, breach or default entitles the holder or trustee to cause such Indebtedness having an aggregate principal amount in excess of $1,000,000 to become or be declared due prior to its stated maturity in each case regardless of whether such default is waived or such right is exercised by such holder or trustee; or                 (iii)  Breach of Certain Provisions. Failure of the Company to perform or comply with any term or condition contained in paragraphs (A), (B), (C) and (K) of Schedule 5A or subsections 5B, 5C or 5G or contained in Section 6 or Schedule 5G; or                 (iv)  Breach of Warranty.  Any representation, warranty, certification or other statement made by any Loan Party herein or in any statement or certificate at any time given by such Person in writing pursuant or in connection herewith is false in any material respect on the date made; or                 (v)  Other Defaults.  Any Loan Party defaults in the performance of or compliance with any term contained in this Agreement, any Note or any Subsidiary Guaranty and such default is not remedied or waived within 15 days after receipt by such Loan Party of notice from any Purchaser of such default (other than occurrences described in other provisions of this subsection 7A, for which a different grace or cure period is specified, or, if no grace or cure period is specified, constitute immediate Events of Default); or                 (vi)  Change in Control.  (1) Any Person (other than Robert L. Borchardt and/or any trust established by him) or "group" within the meaning of Section 13(d) or 14(d) of the Exchange Act (other than a group controlled by Robert L. Borchardt or any trust established by him) (a) shall have acquired beneficial ownership of 20% or more of any outstanding class of capital stock having ordinary voting power in the election of directors of Recoton or (b) shall obtain the power (whether or not exercised) to elect a majority of Recoton's directors, (2) the Board of directors of Recoton shall not consist of a majority of Continuing Directors ("Continuing Directors" means the directors of Recoton as of the Closing Date and each other director, if such director's nomination for election to the Board of Directors of Recoton is recommended by a majority of then Continuing Directors), (3) Recoton ceases to own, directly or indirectly, 100% of the other Borrowers (as such term is defined in the Term Loan Agreement), Recone or Recoton Canada other than with respect to options to acquire InterAct International stock and (4) Robert L. Borchardt or any trust established by him shall cease to beneficially own and control 4% of the outstanding capital stock of Recoton.                 (vii)  Involuntary Bankruptcy; Appointment of Receiver, etc.  (1) A court enters a decree or order for relief with respect to any Loan Party or any of its Subsidiaries in an involuntary case under any applicable bankruptcy, reorganization, insolvency, receivership or other similar law now or hereafter in effect, which decree or order is not stayed or other similar relief is not granted under any applicable federal, provincial or state law; or (2) the continuance of any of the following events for 60 days unless dismissed, bonded or discharged: (a) an involuntary case, petition or proceeding is commenced against any Loan Party or any of its Subsidiaries, under any applicable bankruptcy, reorganization, insolvency or other similar law now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or equity); or (b) a receiver, receiver-manager, administrator, manager, liquidator, sequestrator, trustee, custodian or other fiduciary having similar powers over any Loan Party or any of its Subsidiaries, or over all or a substantial part of their respective property, is appointed; or                 (viii)  Voluntary Bankruptcy; Appointment of Receiver, etc.  (1) Any Loan Party or any of its Subsidiaries commences a voluntary petition, proceeding or case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or equity), or consents to the entry of an order for relief in an involuntary case or to the conversion of an involuntary case to a voluntary case under any such law or consents to the appointment of or taking possession by a receiver, receiver-manager, administrator, manager, trustee or other custodian for all or a substantial part of its property; or (2) any Loan Party or any of its Subsidiaries makes any assignment for the benefit of creditors; or (3) the board of directors of any Loan Party or any of its Subsidiaries adopts any resolution or otherwise authorizes action to approve any of the actions referred to in this subsection 7A(viii); or (4) any Loan Party or any of its Subsidiaries is unable, or admits in writing its inability to pay its debts as they mature, or commits any other act of bankruptcy; or                 (ix)  Liens.  Any lien, levy or assessment is filed or recorded with respect to or otherwise imposed upon all or any assets of any Loan Party or any of its Subsidiaries by the United States or any foreign government or any department or instrumentality thereof or by any federal, state, provincial, county, municipality or other governmental agency (other than Permitted Encumbrances) and such lien, levy or assessment is not stayed, vacated, paid or discharged within 10 days; or                 (x)  Judgment and Attachments.  Any money judgment, writ or warrant of attachment, or similar process involving (1) an amount in any individual case in excess of $2,000,000 or (2) an amount in the aggregate at any time in excess of $2,000,000 (in either case not adequately covered by insurance as to which the insurance company has acknowledged coverage) is entered or filed against any Loan Party or any of its Subsidiaries or any of their respective assets and remains undischarged, unvacated, unbonded or unstayed for a period of 30 days, but in any event not later than 5 days prior to the date of any proposed sale thereunder; or                 (xi)  Dissolution.  Any order, judgment or decree is entered against any Loan Party or any of its Subsidiaries decreeing the dissolution or winding up or split up of such Loan Party or that Subsidiary and such order remains undischarged or unstayed for a period in excess of 20 days, but in any event not later than 5 days prior to the date of any proposed dissolution or winding up or split up; or                 (xii)  Solvency.  The Loan Parties cease to be Solvent or admit in writing their present or prospective inability to pay their debts as they become due; or                 (xiii)  Injunction.  Any Loan Party or any of its Subsidiaries is enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency (including, but not limited to, those of any foreign country) from conducting all or any material part of the business of the Company's and its Subsidiaries, on a consolidated basis, and such order continues for 30 days or more; or                 (xiv)  Invalidity of this Agreement, Etc.  This Agreement, any Note or any Subsidiary Guaranty for any reason, other than a partial or full release in accordance with the terms thereof, ceases to be in full force and effect or is declared to be null and void, or any Loan Party denies that it has any further liability thereunder, or gives notice to such effect; or                 (xv)  [Intentionally Omitted]; or                 (xvi)  Strike, Etc.  Any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than ten consecutive days beyond the coverage period of any applicable business interruption insurance, the cessation or substantial curtailment of revenue producing activities at any facility of any Loan Party or any of its Subsidiaries if any such event or circumstance could reasonably be expected to have a Material Adverse Effect; or.                 (xvii)  Licenses and Permits.  The loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by the Company or any of its Subsidiaries, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect; or.                 (xviii)  [Intentionally Omitted]; or                 (xix)  Currency Controls.  There are controls on payments imposed by a Governmental Authority which interfere with the payment of obligations hereunder, any Note or any Subsidiary Guaranty;                 (xx)  Environmental Matters.  Except as to any of the following for which such Loan Party has provided timely notice and has been granted a reasonable period to cure (but only for the duration of such cure period): (i) Any Environmental Claim shall have been asserted against a Loan Party which could reasonably be expected to have a Material Adverse Effect, (ii) any Release or threatened Release of any Hazardous Materials on, under or affecting any real estate shall have occurred, and such event could reasonably form the basis of an Environmental Claim against a Loan Party which, if determined adversely, could reasonably be expected to have a Material Adverse Effect, or (iii) a Loan Party shall have failed to obtain any governmental authorization necessary under any Environmental Law for the management, use, control, ownership or operation of its business or any of the real estate or any such governmental authorization shall be revoked, terminated, modified, or otherwise cease to be in full force and effect, in each case, if the existence of such condition could reasonably be expected to have a Material Adverse Effect; or                 (xxi)  Employee Benefit Plans.  There occurs one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of any Loan Party or any of its ERISA Affiliates in excess of $500,000 during the term of this Agreement; or there exists, an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities) which exceeds $500,000; or                 (xxii)  Resignation of Borrowers' Accountants.  The Company's Accountants shall resign because of impropriety or irregularity in the conduct of the Loan Parties or their Subsidiaries. Appendix D to the Amendment to the Securities Purchase Agreement           "Agents":   the "Agents" as defined in the Senior Loan Agreement on the Closing Date and their successors and assigns.           "Affiliate":   any Person (other than the Purchasers): (a) directly or indirectly controlling, controlled by, or under common control with, any Loan Party, (b) directly or indirectly owning or holding 10% or more of any equity interest in the Company; (c) 10% or more of whose stock or other equity interest having ordinary voting power for the election of directors or the power to direct or cause the direction of management, is directly or indirectly owned or held by the Company; or (d) which has a senior officer who is also a senior officer of the Company. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with") means the possession directly or indirectly of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or other equity interest, or by contract or otherwise.           "Asset Disposition":   the disposition, whether by sale, lease, transfer, loss, damage, destruction, condemnation or otherwise, of any or all of the assets of the Company or any of its Subsidiaries other than sales of Inventory in the ordinary course of business.           "Capital Expenditures":  all expenditures (including deposits) for, or contracts for expenditures (excluding contracts for expenditures under or with respect to Capital Leases, but including cash down payments for assets acquired under Capital Leases) with respect to the purchase or acquisition of any fixed assets or improvements recorded as an asset in conformity with GAAP.           "Capital Lease":  any lease of any property (whether real, personal or mixed) that, in conformity with GAAP, should be accounted for as a capital lease.           "Cleanup":   all actions required to: (a) cleanup, remove, treat or remediate Hazardous Materials in the indoor or outdoor environment; (b) prevent the Release of Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (c) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (d) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Hazardous Materials in the indoor or outdoor environment.           "Closing Date":  October 31, 2000.           "Commission"   means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this Agreement such Commission is not existing and performing the duties now assigned to it under the Exchange Act, the body performing such duties at such time.           "Company Accountants":  means the independent certified public accountants selected by Company and its Subsidiaries as its auditors and reasonably acceptable to Purchasers and Senior Agent, which selection shall not be modified during the term of this Agreement without Purchasers’ and Senior Agent’s prior written consent. It is understood and agreed that the "Big Five" independent certified public accountants shall be deemed acceptable and therefore no such written consent shall be necessary.           "Consolidated Intangibles":  as of any date of determination, all assets of the Company and its Subsidiaries, determined on a consolidated basis at such date, that are generally classified as intangibles, including without limitation, goodwill, trademarks, patents and copyrights.           "Consolidated Net Worth":  as of any date of determination, all amounts which would be included under shareholders equity on a balance sheet of the Company and its Subsidiaries determined on a consolidated basis at such date in accordance with GAAP.           "Consolidated Tangible Net Worth":  as of any date of determination, the excess, if any, of Consolidated Net Worth less Consolidated Intangibles as at such date subtracting the net write-up or adding back the net write-down since June 30, 2000 in the book value of assets resulting from the revaluations arising out of foreign currency valuations in accordance with GAAP.           "EBITDA": for any period, without duplication, the total of the following for Company and its Subsidiaries on a consolidated basis, each calculated for such period: (1) net income determined in accordance with GAAP; plus, to the extent included in the calculation of net income, (2) the sum of (a) income and franchise taxes paid or accrued; (b) interest expenses, net of interest income, paid or accrued; (c) amortization and depreciation; (d) other non-cash charges (excluding accruals for cash expenses made in the ordinary course of business) and (e) the yield maintenance fee resulting from the repayment of indebtedness on the Closing Date; less, to the extent included in the calculation of net income, (3) the sum of (a) the income of any Person (other than majority-owned Subsidiaries of the Company) in which the Company or a majority-owned Subsidiary of the Company has an ownership interest except to the extent such income is received by the Company or such majority-owned Subsidiary in a cash distribution during such period; (b) gains or losses from sales or other dispositions of assets (other than Inventory in the normal course of business); and (c) extraordinary or non-recurring gains, but not net of extraordinary or non-recurring "cash" losses.             "Employee Benefit Plan":  any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party or any ERISA Affiliate or (b) has at any time within the preceding 6 years been maintained for the employees of any Loan Party or any current or former ERISA Affiliate.           "Environmental Claim":  any claim, action, cause of action, investigation or notice (written or oral) by any Person alleging potential liability (including, without limitation, potential liability for investigatory costs, Cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, or Release of any Hazardous Materials at any location, whether or not owned, leased or operated by the Company or any of its Subsidiaries, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.           "Environmental Law":  all federal, state, provincial, local and foreign laws and regulations relating to pollution or protection of human health or the environment, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, disposal, transport or handling of Hazardous Materials, laws and regulations with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Materials and laws relating to the management or use of natural resources.           "ERISA":  the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.           "ERISA Affiliate":  as applied to any Loan Party, any Person who is a member of a group which is under common control with any Loan Party, who together with any Loan Party is treated as a single employer within the meaning of Section 414(b) and (c) of the Code. Any former ERISA Affiliate of a Loan Party shall continue to be considered an ERISA Affiliate within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Loan Party and with respect to liabilities arising after such period for which such Loan Party could be liable under the Code or ERISA.           "ERISA Event":  (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the Pension Benefit Guaranty Corporation has been waived by regulation); (ii) the withdrawal by any Loan Party or any of its ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (iii) the institution by the Pension Benefit Guaranty Corporation of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (iv) the imposition of liability on any Loan Party or any of its ERISA Affiliates pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; or (v) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against any Loan Party or any of its ERISA Affiliates in connection with any Employee Benefit Plan.           "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission thereunder.           "Fiscal Year":  each twelve month period ending on the last day of December in each year.           "Fiscal Year-To-Date":  all completed fiscal quarters within each Fiscal Year of any determination date.           "Fixed Charge Coverage":  for any period, EBITDA less Capital Expenditures (excluding expenditures with respect to the New Information System) divided by Fixed Charges.           "Fixed Charges": for any period, and each calculated for such period (without duplication), (a) Interest Expense of Company and its Subsidiaries; plus (b) scheduled payments of principal with respect to all Senior Loans of Company and its Subsidiaries; plus (c) income and franchise taxes paid in cash by Recoton and its Subsidiaries on a consolidated basis.           "Foreign Subsidiary":  any Subsidiary (other than Recoton Canada) that is not incorporated or organized in the United States of America, any state thereof or in the District of Columbia.           "German Facility":  means the DM 50,000,000 financing arrangement between Recoton Germany and its Subsidiaries and Heller Bank A.G or, if such facility is not renewed during the term of this Agreement, a replacement facility on terms and pursuant to documentation substantially consistent with those in existence on the date hereof and otherwise reasonably satisfactory to the Agents and the Requisite Lenders (as defined in the Senior Loan Agreement).           "Governmental Authority":  any nation or government, any state, province or any other political subdivision of any of the foregoing and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.           "Hazardous Material":  all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.ss.300.5, or defined as such by, or regulated as such under, any Environmental Law.           "Hedge Agreements":  all interest rate swaps, caps or collar agreements or similar arrangements entered into by the Company or any of its Subsidiaries providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies.           "Indebtedness":   as applied to any Person, means without duplication: (a) all indebtedness for borrowed money; (b) obligations under Capital Leases; (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (d) any obligation owed for all or any part of the deferred purchase price of property or services if the purchase price is due more than six months from the date the obligation is incurred or is evidenced by a note or similar written instrument; (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non recourse to the credit of that Person; (f) obligations in respect of letters of credit; (g) all obligations under Hedge Agreements, including, as of any date of determination, the net amounts, if any, that would be required to be paid by such Person if such Hedge Agreements were terminated on such date and (h) any amounts due to the U.S. Customs Service pursuant to the outstanding note.           "InterAct International":  InterAct International Inc., a Delaware corporation, and its Subsidiaries.           "InterAct International IPO":  an underwritten public offering of common stock made by InterAct International pursuant to a registration statement filed with and declared effective by the Commission in accordance with the Securities Act.           "Interest Expense":  without duplication, for any period, the following on a consolidated basis, for the Company and its Subsidiaries each calculated for such period: interest expenses deducted in the determination of net income (excluding (i) the amortization of fees and costs with respect to the transactions contemplated by this Agreement and the Related Agreements (as defined in the Senior Loan Agreement) which have been capitalized as transaction costs in accordance with the provisions thereof; and (ii) interest paid in kind).           "IRC"   means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder.           "Lien":   means any lien, mortgage, pledge, security interest, charge or encumbrance of any kind, whether voluntary or involuntary, (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest).           "Loan Party":  any Person party to this Agreement, a Note or a Subsidiary Guaranty.           "Material Adverse Effect":  (i) any material adverse effect on the business, financial position, results of operations or prospects of the Company and its Subsidiaries, considered as a whole, (ii) any material impairment of the legality, validity and enforceability of this Agreement, any Note or any Subsidiary Guaranty, or the rights and remedies of the Purchasers, or (iii) any material impairment of the Loan Parties’ ability to perform their obligations under this Agreement, any Note or any Subsidiary Guaranty.           "Multiemployer Plan":  any Employee Benefit Plan that is a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.           "Net Proceeds":  (a) with respect to any Asset Disposition constituting a casualty or condemnation, the insurance or condemnation proceeds received in connection therewith net of any expenses, if any, incurred by Purchasers in the collection or handling thereof and (b) with respect to any other Asset Disposition, the proceeds received in connection therewith net of (i) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Company or any of its Subsidiaries in connection therewith (in each case, paid to non-Affiliates), (ii) transfer taxes, (iii) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (iv) an appropriate reserve for income taxes in accordance with GAAP in connection therewith.           "Net Securities Proceeds":  the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses) from the issuance of Securities of or incurrence of Indebtedness by the Company or its Subsidiaries.           "New Information System":  the enterprise resource planning system consisting of licensed software, purchased or leased hardware, consulting services and related expenses which Recoton and its Subsidiaries are in the process of contracting for and implementing.           "1997 Note Purchase Agreements":  collectively, the separate Note Purchase Agreements, each dated January 6, 1997, between Recoton and each of the purchasers named in Annex 1 thereto as amended, supplemented or modified prior to the closing of the transactions contemplated hereunder.           "1998 Note Purchase Agreement":  the Note Purchase Agreement, dated as of September 1, 1998, between Recoton and the purchaser named in Annex 1 thereto as amended, supplemented or modified prior to the closing of the transactions contemplated hereunder.           "Permitted Encumbrances":  the following types of Liens: (a) Liens (other than Liens relating to Environmental Claims or ERISA) for taxes, assessments or other governmental charges not yet due and payable or which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Company or such Subsidiary has established appropriate reserves as shall be required in conformity with GAAP; (b) statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar liens imposed by law, which are incurred in the ordinary course of business for sums not more than 30 days delinquent and that attach only to Real Estate, inventory and equipment; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) easements, rights-of-way, zoning restrictions, licences and other similar charges or encumbrances affecting the use of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; (e) Liens for purchase money obligations, provided that (i) the Indebtedness secured by any such Lien is permitted under subsection 6A, and (ii) such Lien encumbers only the asset so purchased; (f) Liens in favor of the Senior Agent, on behalf of the Agents, Senior Lenders, the Term Loan Administrative Agent and the Term Loan Lenders; (g) Liens on deposits on other property of the Company or any Subsidiary to secure up to $500,000 of insurance obligations incurred in the ordinary course of business; (h) Liens on the Inventory of the Company or any of its Subsidiaries that is consigned in an aggregate amount not to exceed $500,000 at any one time outstanding; (i) any interest or title of a lessor or sublessor under any real property lease not prohibited by this Agreement; (j) Liens set forth on Schedule 1.1(B) to the Senior Loan Agreement; and (k) Liens arising in respect of judgments in an aggregate amount of less than $2,000,000 at any one time outstanding in circumstances not constituting a Default or an Event of Default.           "Person":   natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.           "Projections":   the Company’s forecasted: (a) balance sheets; (b) profit and loss statements; (c) cash flow statement; and (d) statements of shareholders equity all prepared in accordance with clause L of the Reporting Rider set forth on Schedule 5A, and based upon good faith estimates and assumptions by the Company believed to be reasonable at the time made, together with appropriate supporting details and a statement of underlying assumptions.           "Real Estate":  as such term is defined in subsection 4.5 to the Senior Loan Agreement.           "Recoton":  the Company.           "Recoton Canada":  Recoton Canada Ltd., an Ontario corporation.           "Recoton Germany":  Recoton German Holdings GmbH, a corporation organized under the laws of the Federal Republic of Germany.           "Recoton Italy":  Recoton Italia s.r.l., a corporation incorporated under the laws of Italy.           "Recoton UK":   Recoton (UK) Limited, a corporation incorporated under the laws of England and Wales.           "Regulation T":  Regulation T of the Board as in effect from time to time.           "Regulation U":  Regulation U of the Board as in effect from time to time.           "Regulation X":  Regulation X of the Board as in effect from time to time.           "Release":   any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including, without limitation, the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), or into or out of any property, including the movement of any Hazardous Material through the air, soil, surface water, groundwater or property.           "Restricted Junior Payment":  (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock or other equity interest of the Company or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely with shares of the class of stock on which such dividend is declared or any properly and legally declared dividend which is not paid in cash; (b) any payment or prepayment of principal of, premium, if any, or interest on, or any redemption, conversion, exchange, retirement, defeasance, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Subordinated Debt or any shares of any class of stock of the Company or any of its Subsidiaries now or hereafter outstanding, or the issuance of a notice of an intention to do any of the foregoing; (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of the Company or any of its Subsidiaries now or hereafter outstanding; and (d) any payment by the Company or any of its Subsidiaries of any management, consulting or similar fees to any Affiliate other than a Loan Party, whether pursuant to a management agreement or otherwise in excess of $100,000 as to any Person per Fiscal Year, or in excess of $250,000 in the aggregate in any Fiscal Year (it being understood that fees paid to directors of Recoton for services as directors or on committees of the Board are not considered as management, consulting or similar fees).           "Securities":   stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.           "Securities Act"  means (i) the Securities Act of 1933, as amended, and the rules and regulations promulgated by the Commission thereunder and (ii) the Securities Act (Ontario), as amended, and the rules and regulations promulgated thereunder.           "Senior Agent":  Heller Financial, Inc. and its successors and assigns.           "Senior Lenders":   the financial institutions from time to time party to the Senior Loan Agreement.           "Senior Loan Agreement":  the Loan Agreement dated as of the Closing Date, among Recoton and the other Borrowers (as defined therein), Heller Financial, Inc. and General Electric Capital Corporation as agents and the financial institutions from time to time party thereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms and the terms of the Subordination Agreement.           "Senior Loan Documents":  the "Loan Documents" as defined in the Senior Loan Agreement.           "Senior Loans":   the "Loans" as defined in the Senior Loan Agreement.           "Solvent":   with respect to the Loan Parties on a consolidated basis that they (a) own assets the fair salable value of which are greater than the total amount of their liabilities (including contingent liabilities); (b) have capital that is not unreasonably small in relation to their business as presently conducted or any contemplated or undertaken transaction; and (c) do not intend to incur and do not believe that they will incur debts beyond their ability to pay such debts as they become due.           "STD":  STD Holdings Limited, a corporation organized under the laws of Hong Kong.           "STD Restructuring":  the restructuring of InterAct International and the subsidiaries of STD as set forth in Schedule 11.1(C) to the Senior Loan Agreement.           "Subordinated Debt":  any debt which by its terms is subordinate and junior in right of payment to the Notes.           "Subordination Agreement":  means that certain Subordination and Intercreditor Agreement, dated as of the date hereof, among the Loan Parties, Heller Financial, Inc. in its capacity as administrative agent on behalf of Agents and Senior Lenders, Senior Agent and the Term Loan Lenders (as Subordinated Creditors).           "Subsidiary":   means, with respect to any Person, any corporation, association or other business entity of which more than 50% of the total voting power of shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other subsidiaries of that Person or a combination thereof.           "Term Loan Agreement":  the Term Loan Agreement dated as of the Closing Date, as amended, supplemented, restated or otherwise modified from time to time, among the Company, the banks and financial institutions from time to time party thereto and The Chase Manhattan Bank, as administrative agent.           "Term Loan Administrative Agent":  the "Administrative Agent" as such term is defined in the Term Loan Agreement.           "Term Loan Lenders":  the "Lenders" as such term is defined in the Term Loan Agreement. Schedule 5A to the Amendment to the Securities Purchase Agreement REPORTING RIDER                 (A)  Monthly Financials.  (i) As soon as available and in any event no later than thirty (30) days after the end of each April, May, July, August, October and November, Company will deliver to Purchasers (1) the consolidated and consolidating balance sheet of Company and its Subsidiaries as at the end of such month and the related consolidated and consolidating statements of income for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                      (ii)  As soon as available and in any event no later than sixty (60) days after the end of each January and February, Company will deliver to Purchasers (1) the consolidated and consolidating balance sheet of Company and its Subsidiaries as at the end of such month and the related consolidated and consolidating statements of income for such month and for the period from the beginning of the then current Fiscal Year to the end of such month, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                      (iii)  No later than ten (10) days after the submission of the monthly financial statements required under clauses A (i) and A (ii) above, Company will deliver to Purchasers a statement of cash flow from the beginning of the then current Fiscal Year to the end of such month. Unless otherwise requested by the Purchasers there will not be a required submission of monthly financials for any month that ends on a calendar quarter.                 (B)  Quarterly Financials.  (i) As soon as available and in any event no later than forty-six (46) days (or if the 45th day is not a Business Day, the day immediately succeeding the date on which the SEC filing for such period is due) after the end of each of the first three calendar quarters of a Fiscal Year, Company will deliver to Purchasers (1) the consolidated and consolidating balance sheet of Company and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, stockholders' equity and cash flow for such quarter of a Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such quarter of a Fiscal Year, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                      (ii)  As soon as available and in any event no later than sixty-five (65) days after the end of the fourth calendar quarter of a Fiscal Year, Company will deliver to Purchasers the consolidated and consolidating balance sheet of Company and its Subsidiaries as at the end of such period and the related consolidated and consolidating statements of income, stockholders' equity and cash flow from the beginning of the then current Fiscal Year to the end of such quarter of a Fiscal Year, and (2) a schedule of the consolidated outstanding Indebtedness for borrowed money of Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan.                      (iii)  Together with the delivery of all financial statements pursuant to clause (B)(i), Company shall deliver an officer's certificate executed by the chief executive officer, the chief financial officer or the chief operating officer certifying that Borrowers' Accountants (as such term is defined in the Senior Loan Agreement) have reviewed all such Quarterly Financials.                 (C)  Year-End Financials.  As soon as available and in any event no later than ninety-one (91) days (or if the 90th day is not a Business Day, the day immediately succeeding the date on which the SEC filing for such period is due) after the end of each Fiscal Year, Company will deliver to Purchasers: (1) the consolidated balance sheet of Company and its Subsidiaries as at the end of such year and the related consolidated statements of income, stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of the consolidated outstanding Indebtedness of Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan; and (3) a report with respect to the financial statements from Borrowers' Accountants, which report shall be unqualified as to going concern and scope of audit of Company and its Subsidiaries and shall state that (a) such consolidated financial statements present fairly the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with accounting principles generally accepted in the United States of America and (b) that the examination by Borrowers' Accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; and (4) copies of the consolidating financial statements of Company and its Subsidiaries, including (a) consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Year showing inter company eliminations and (b) related consolidating statements of income of Company and its Subsidiaries showing inter company eliminations.                 (D)  Accountants' Certification and Reports.  Together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to paragraph (C) above, Company will deliver a written statement by Borrowers' Accountants stating whether, in connection with the examination, any condition or event that constitutes a Default or an Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof. Promptly upon receipt thereof, Company will deliver to Purchasers copies of all significant reports submitted to the Company by Borrowers' Accountants in connection with each annual, interim or special audit of the financial statements of the Company made by Borrowers' Accountants, including the comment letter submitted by Borrowers' Accountants to management in connection with their annual audit.                 (E)  Compliance Certificate.  (i) Together with the delivery of each set of financial statements referenced in clauses (B)(i) and (C) above, Company will deliver to Purchasers a Compliance Certificate in substantially the form attached to the Senior Loan Agreement and addressed to each of the purchasers (the "Compliance Certificate"), including copies of the calculations and work-up employed to determine the Company's compliance or noncompliance with the financial covenants set forth in the Financial Covenants Rider. Together with the delivery of each set of financial statements referenced in clauses (A), (B)(i) and (C) above, Company will confirm in the Compliance Certificate that the accounts payables to third parties have been paid for the last ninety (90) days in the ordinary course of business consistent with historical customary payment practices and that the Company is in compliance with all other covenants in the Loan Agreement.                 (F)  [Intentionally Omitted].                 (G)  [Intentionally Omitted].                 (H)  Management Report.  Together with each delivery of financial statements of Company and its Subsidiaries pursuant to paragraphs (B) and (C) above, Company will deliver to Purchasers the corresponding form 10-Q or 10-K, as the case may be, which forms will include management's analysis of the Company's financial performance on both a consolidated basis and by business segment. Management will also provide a report comparing the financial results for the quarter than ended to the corresponding figures from the most recent Projections for the current Fiscal Year delivered to Purchasers pursuant to paragraph (L) below and discuss the reasons for any significant variations. The information above shall be certified by the chief financial officer, chief operating officer or chief executive officer of Company and shall be presented in summary comparison form on a consolidated basis setting forth the differences in actual and projected revenue, gross profit, operating expenses and net income for such period. At the request of the Purchasers, Company will provide a detailed comparison of the foregoing information within thirty (30) days of such request.                 (I)  [Intentionally Omitted].                 (J)  Government Notices.  Promptly after the receipt thereof, Company will deliver to Purchasers copies of all notices, requests, subpoenas, inquiries or other writings received from any governmental agency concerning any Employee Benefit Plan, the violation or alleged violation of any Environmental Laws, the storage, use or disposal of any Hazardous Material, the violation or alleged violation of the Fair Labor Standards Act or the Company's or non-payment of any taxes including any tax audit if the failure to timely comply or respond to any such notices, requests, subpoenas, inquiries or other writings would give such governmental agency the right to seek to impose a lien on or take other action with respect to any of the Company's assets.                 (K)  Events of Default, etc.  Promptly upon an executive officer of Company obtaining knowledge of any of the following events or conditions, Company shall deliver to Purchasers a certificate of Company's chief executive officer, chief operating officer or chief financial officer specifying the nature and period of existence of such condition or event and what action the Company has taken, is taking and proposes to take with respect thereto: (1) any condition or event that constitutes an Event of Default or Default; or (2) any Material Adverse Effect.                 (L)  Debt and Equity Notices.  As soon as practicable, Company will deliver to Purchasers copies of all material written notices given or received by any Loan Party with respect to any Debt or capital stock or equity interest of such Loan Party, and, within two Business Days after any Loan Party obtains knowledge of any matured or unmatured event of default with respect to any Debt, notice of such event of default.                 (M)  Projections.  As soon as available and in any event no later than the end of each Fiscal Year of the Company, Company will deliver to Purchasers Projections for the Company and its Subsidiaries for the forthcoming Fiscal Year. Projections for the forthcoming Fiscal Year shall be on a month by month basis and on a consolidated and consolidating bases. As soon as available and in any event no later than thirty (30) days after the end of each Fiscal Year of the Company, Company will deliver to Purchasers Projections for the remaining Fiscal Years through the maturity of the Loans which Projections shall be on consolidated, annual, and year by year bases.                 (N)  Litigation.  Promptly upon learning thereof, Company will deliver to Purchasers in writing notice of any litigation commenced or threatened against any Loan Party that (i) seeks damages in excess of $2,000,000,(ii) seeks injunctive relief, (iii) is asserted or instituted against any Employee Benefit Plan, its fiduciaries or its assets or against any Loan Party or ERISA Affiliate in connection with any Employee Benefit Plan, (iv) alleges criminal misconduct by any Loan Party, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Claims or (vi) involves any product recall.                 (O)  [Intentionally Omitted].                 (P)  SEC Filings and Press Releases.  Promptly upon their becoming available, Company will deliver to Purchasers copies of: (i) all financial statements, reports, notices and proxy statements made publicly available by any Loan Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Loan Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Loan Party to the public concerning material changes or developments in the business of any such Person.                 (Q)  Other Information.  With reasonable promptness, Company will deliver to Purchasers such other information and data as Purchasers may reasonably request from time to time.                 (R)  [Intentionally Omitted].                 (S)  ERISA Matters.  Promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, Company will deliver to Purchasers a written notice specifying the nature thereof, what action any Loan Party or any of its ERISA Affiliates has taken, is taking or proposes to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the Pension Benefit Guaranty Corporation with respect thereto.                 (T)  Inspection.  Company shall permit Purchasers and any authorized representatives designated by Purchasers to visit and inspect any of the properties of Company and its Subsidiaries, including their financial and accounting records, and, in conjunction with such inspection, to make copies and take extracts therefrom, at such reasonable times during normal business hours and as often as may be reasonably requested. Schedule 5G to the Amendment to the Securities Purchase Agreement FINANCIAL COVENANTS RIDER           A.  Consolidated Tangible Net Worth.  Recoton and its Subsidiaries shall attain a Consolidated Tangible Net Worth in the amounts set forth below at the end of each quarter of a Fiscal Year set forth below: Fiscal Quarter Ending Amount December 31, 2000 $76,500,000 March 31, 2001 $76,750,000 June 30, 2001 $75,000,000 September 30, 2001 $76,500,000 December 31, 2001 $92,500,000 March 31, 2002 $90,000,000 June 30, 2002 $87,500,000 September 30, 2002 $89,000,000 December 31, 2002 $110,250,000 March 31, 2003 $107,750,000 June 30, 2003 $105,250,000           B.  Minimum EBITDA.  Recoton and its Subsidiaries, on a consolidated basis, shall attain a minimum EBITDA in the amounts set forth below for each quarter of a Fiscal Year and for any trailing four quarters period ending on the last day of each month during the periods set forth below: Amount for Amount for Trailing Fiscal Quarter Ending Fiscal Quarter Four Quarters December 31, 2000 $21,000,000 $45,000,000 March 31, 2001 $3,500,000 $41,500,000 June 30, 2001 $6,000,000 $40,500,000 September 30, 2001 $12,250,000 $43,500,000 December 31, 2001 $29,250,000 $51,500,000 March 31, 2002 $4,000,000 $51,750,000 June 30, 2002 $6,750,000 $52,500,000 September 30, 2002 $13,500,000 $53,500,000 December 31, 2002 $32,250,000 $56,500,000 March 31, 2003 $4,000,000 $56,750,000 June 30, 2003 $7,000,000 $57,000,000 Notwithstanding anything to the contrary contained herein, if the actual result for an individual Fiscal Quarter ending March 31, June 30, or September 30 does not meet the required minimum for such Fiscal Quarter but the Fiscal Year-To-Date EBITDA results as of the Fiscal Quarter then ended meets or exceeds the required minimum EBITDA for the Fiscal Year-To-Date including that same period, as outlined above, the Company will remain in compliance with respect to the column headed "Amount For Fiscal Quarter". Under no circumstance, however, shall Recoton and its Subsidiaries, on a consolidated basis, fail to attain a minimum EBITDA of $21,000,000 for Fiscal Quarter ending December 31, 2000, $29,250,000 for Fiscal Quarter ending December 31, 2001 and $32,250,000 for Fiscal Quarter ending December 31, 2002.           C.  Capital Expenditure Limits.  The aggregate amount of all Capital Expenditures (excluding expenditures with respect to the New Information System), Capital Leases with respect to fixed assets of Company and its Subsidiaries (which shall be considered to be expended in full on the date such Capital Leases are entered into) and other contracts with respect to fixed assets initially capitalized on the Company’s or any Subsidiary’s balance sheet prepared in accordance with GAAP (which shall be considered to be expended in full on the date such contract is entered into) (excluding, in each case, expenditures for trade-ins and replacement of assets to the extent funded with casualty insurance proceeds) will not exceed the amount set forth below for each period set forth below. The amounts set forth below not made in any period set forth below may be carried over for one year only to the next period provided, however, any carried-over amount will be deemed used only after all otherwise permitted amounts for that period have been used: Period Amount October 31, 2000 to December 31, 2000 $3,000,000 January 1, 2001 to December 31, 2001 $8,000,000 January 1, 2002 to December 31, 2002 $8,000,000 January 1, 2002 to December 31, 2003 $8,000,000           D.  Fixed Charges Coverage.  Recoton and its Subsidiaries, on a consolidated basis, shall not permit the Fixed Charges Coverage for any period ending on the last day of each quarter during the periods set forth below to be less than the amount set forth below for such periods: Ratio for Trailing Fiscal Quarter Ending Four Quarter Period December 31, 2000 1.0 to 1.0 March 31, 2001 1.0 to 1.0 June 30, 2001 1.0 to 1.0 September 30, 2001 1.0 to 1.0 December 31, 2001 1.1 to 1.0 March 31, 2002 1.1 to 1.0 June 30, 2002 1.1 to 1.0 September 30, 2002 1.0 to 1.0 December 31, 2002 1.0 to 1.0 March 31, 2003 1.0 to 1.0 June 30, 2003 1.0 to 1.0

EXHIBIT 10.(iii)A FY 2001 CORPORATE EMPLOYEE COMPENSATION PLAN (SEPTEMBER 1, 2000 - AUGUST 31, 2001) OBJECTIVE To pay additional cash beyond base salary to eligible employees of Farmland Industries, Inc., who are not tied to any single business or service unit, contingent upon the company's financial performance. Farmland Industries, Inc. ("Corporate") must achieve a threshold or minimum net income before taxes and extraordinary items, or no payout occurs. This plan includes four important exhibits which are an integral part of the plan structure. Please be aware of and consult them. They include the following: Exhibit A - Corporate financial performance criteria and levels Exhibit B - A summary schedule of payout opportunities by earnings level Exhibit C - Additional detail on determination of payout Exhibit D - Descriptions and definitions of accounting terms and methodologies relevant to this plan PLAN STRUCTURE The plan provides the opportunity for a cash payment following the conclusion of each quarter in FY 2001 to eligible employees for the attainment of corporate objectives year to date. The corporate standard measure is net income before taxes and extraordinary items. A further requirement for payout to Farmland Industries, Inc. appointed corporate officers is that cash patronage payments to members must occur; if not, this group will receive no payout under the terms of this plan. The structure and format of the Corporate Employee compensation plan may differ in some respects from unit customized plans. Plan requirements and rules for such items as eligibility for participation, proration of payout, etc., supersede those of any customized plans should conflicts occur (Note: some details in sales incentive plans may vary given the difference in nature between sales and non-sales variable pay plans.) ELIGIBILITY The following types of employees are ineligible for any single quarterly payout under the ----------- Corporate Employee Compensation Plan: o Employees whose terms and conditions of employment are subject to collective bargaining. o Employees hired after September 1, 2000; December 1, 2000; March 1, 2001; or June 1, 2001 (Waived if the employee is a former regular full time employee during FY 2001. Payout is prorated.) o Regular part time employees with less than 125 hours of service during any one quarter in FY 2001. o Temporary employees with less than 250 hours of service during a FY 2001 quarter. o Employees terminated for cause prior to the end of a quarter. o Employees who terminate voluntarily prior to the end of a quarter (Employees who terminate to accept a position with a member cooperative may be eligible for a prorated payout.) o Employees included in variable compensation plans other than the corporate employee compensation plan. Exceptions must be approved by the Chief Executive Officer and by the VP, Human Resources. Certain classes of employees who terminate prior to the end of a quarter will receive payout based on their eligible earnings during the quarter: Death/Disability Retirement Reduction in Force Focus Team member obtaining outside employment Layoff Leave of Absence Involuntary separations, other than for reasons included in the list above, which are not for performance or for cause, may result in prorated payout. --- Employees who voluntarily terminate prior to the end of a quarter for the purpose of assuming a position with a system member cooperative may be eligible to receive a payout. To secure eligibility, the employee must notify Corporate Human Resources, in writing, at the time of separation and ensure that the system member cooperative notifies Farmland's Corporate Human Resources Department, in writing, to verify employment from the point of separation through the conclusion of the plan quarter. Employees on formal disciplinary or performance probation are ineligible for that portion of the fiscal quarter or year. DETERMINATION OF PAYOUT Payout is determined as a percentage of eligible gross wages or salary paid during the fiscal quarter, as shown in Exhibits B and C. Corporate performance measurements are labeled "threshold", "target", and "maximum". Threshold - The minimal performance level required for the plan to pay out. No payout occurs ---------- for achievement below threshold. Target - Identifies the actual performance objective. ------ Maximum - A performance level exceeding target at which the payout as a percentage of ------- eligible gross wages or salary is frozen. No payout occurs beyond these percentages regardless of performance. Payout for performance between threshold and target or target and maximum is prorated. In the event of a merger, change of control, or other major organizational structure change during the course of the plan year, the rate of earnings for the quarter, year to date, would be projected to the end of the quarter in order to derive net income performance estimate. MODIFICATION OF THE PLAN Farmland Management and/or the Board of Directors reserve the right to modify this plan, including changing details, temporarily suspending the plan, or terminating the plan altogether prior to the conclusion of any fiscal year quarter. They reserve the same right relative to any business or service unit variable pay plan. APPROVED: ROBERT HONSE ---------------------------------------- Robert Honse President and CEO EXHIBIT A FY 2001 PERFORMANCE CRITERIA AND GOALS Corporate Net Income before taxes and extraordinary items (full fiscal year): ----------------------------------------------------------------------------- Threshold $44,100700 Target $63,000,000 Maximum $88,200,000 Quarterly Objectives: --------------------- 1st Quarter ----------- Threshold $5,600,000 Target $8,000,000 Maximum $11,200,000 2nd Quarter (year to date) -------------------------- Threshold $5,600,000 Target $8,000,000 Maximum $11,200,000 3rd Quarter (year to date) -------------------------- Threshold $33,600,000 Target $48,000,000 Maximum $67,000,000 4th Quarter (full year) ----------- Threshold $44,100,000 Target $63,000,000 Maximum $88,200,000 EXHIBIT B FY 2001 Payout Calculation Grid ----------------------------------------- ---------------------------------------------- ------------------------------------------ Threshold - Target - Maximum Earnings V Comp Calculation Point* ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 3 - 5 - 8 All Non - Exempt** Any Earnings ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 3 - 5 - 8 Below $36,050 Exempt Actual Earnings ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 3 - 6 - 10 $36,050 - $39,654 $37,855 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 4 - 7 - 12 $39,655 - $43,619 $41,640 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 5 - 8 - 15*** $43,620 - $50,164 $46,895 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 5 - 10 - 18 $50,165 - $57,689 $53,930 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 6 - 12 - 22 $57,690 - $66,344 $62,020 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 7 - 15 - 27 $66,345 - $76,299 $71,325 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 8 - 18 - 33 $76,300 - $87,744 $82,025 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 10 - 22 - 40 $87,745 - $100,909 $94,330 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 12 - 25 - 46 $100,910 - $116,049 $108,480 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 12 - 25 - 46 $116,050 - $133,459 $124,755 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 12 - 25 - 46 $133,460 - $153,479 $143,470 ------------------------------- ------------------------------ ------------------------------------ ------------------------------- ------------------------------ ------------------------------------ 14 - 28 - 52 $153,480 + Actual Earnings (Non - FII Executives) ------------------------------- ------------------------------ ------------------------------------ * I.E., for any exempt employee whose earnings fall within a particular range, the payout is calculated on this middle value. Annual figures are divided by 4 to determine quarterly payouts. ** Includes Truck Drivers *** Employees legitimately considered Production Supervisors will receive at least this percentage payout -------- opportunity level, regardless of actual pay. Calculation point against which percentage is applied is -- based on actual pay. ----------------------------------------------------------------------------------------------------------------------------------- Executives ----------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------- ------------------------------------------------- Threshold - Target - Maximum Earnings V Comp Calculation Point ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- 18 - 36 - 67 Designated FII Executives ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- 22 - 45 - 83 Designated FII Executives ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- Determined by Board President and CEO ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $92,700 - $111,239 $101,970 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $111,240 - $133,489 $122,365 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $133,490 - $160,189 $146,840 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $160,190 - $192,229 $176,210 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $192,230 - $230,674 $211,455 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $230,675 - $276,809 $253,745 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $276,810 - $332,169 $304,490 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $332,170 - $398,604 $365,390 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $398,605 - $478,324 $438,465 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $478,325 - $573,989 $526,160 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $573,990 - $688,789 $631,390 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $688,790 - $826,549 $757,170 ------------------------------------ ---------------------------- ------------------------------------------- ------------------------------------ ---------------------------- ------------------------------------------- $826,550 + Actual Earnings ------------------------------------ ---------------------------- ------------------------------------------- Note: These scales are the same as those used in Fiscal Year 2000. EXHIBIT C DETAIL ON DETERMINATION OF PAYOUT Non-Exempt Employees: Payout is determined as a percentage of eligible gross earnings paid during any quarter of fiscal year 2001. Note: Eligible gross wages may exclude some lump sums. Exempt/Management Employees: Payout is determined as a percentage of the Variable Comp Calculation Point based on eligible gross wages during any quarter of fiscal year 2001. Exhibit B grid lists the percentage opportunities assigned to each Variable Comp Calculation Point.** NOTE: Lump Sum amounts given during the fiscal year will not be included in Eligible gross wages unless they were given in lieu of merit increase. **Variable Comp Calculation Point and designated percentage will be used unless comparison to FY 96 salary range midpoint and grade determined percentage results in a higher payout amount; but once a person has transitioned to the current variable pay computation method, that person cannot return to receiving a payout based on the FY 96 salary range midpoint. Individuals hired, promoted or demoted after 9/1/96 are ineligible for this comparison. Eligible Earnings: Base earnings, merit increase pay, lump sum in lieu of a merit increase, shift differential, bridge differential, and geographic differential. Production supervisors flat rate overtime payments. Non-exempt overtime payments. Non-eligible Earnings: The following is list of the most common items not included as earnings: --- Vacation and personal holiday balance lump sum payments Previous FY variable compensation payment Sales Commission, SPIFFs payment, bonus, etc. Severance pay Relocation reimbursements Exceptions to normal eligibility or ineligibility of earnings must be approved in advance by the Vice President, Human Resources and the Director, Compensation. EXHIBIT D DETERMINATION OF EXTRAORDINARY ITEM ----------------------------------- If Farmland achieves its performance goals, but experiences a loss year due to extraordinary items, the Board of Directors of Farmland Industries, Inc. maintains the discretion to authorize, adjust, or deny payout of any portion of the Variable Compensation Plan not yet paid. This also applies to employees who participate in customized business or service unit plans. Employees on sales incentive plans are not affected by this provision unless specific portions of --- their plans are tied to corporate performance. GUIDELINES FOR "EXTRAORDINARY" DESIGNATION The Chief Financial Officer and the Chief Executive Officer must approve the classification of any item as "extraordinary." Transactions deemed as "extraordinary" and therefore excluded in the determination of Income for variable compensation include: o The punitive portion of litigation results in favor of or against Farmland, excluding redemptive payments on normal business matters where the intent is to substantially restore net income to where it would have been had the incident not occurred. o The loss generated from the impairment of asset value of a major asset, group of assets, or investments. o The loss from any new business activity or business unit added subsequent to the approval of the Business -------------------------------------- Plan, provided that the acquisition was such that it required specific Board of Director approval outside of the business plan. The impact of adjustments resulting from LIFO inventory computations or reserves. o Other items as approved. Specific requests by an operating unit for treatment of an item as "extraordinary" must be approved by the Senior Management representative before review by the Chief Financial Officer and the Chief Executive Officer.

Exhibit 10(a) Contract No. 117119   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED February 25, 2000 UNDER SUBPART G OF PART 284 OF THE FERC'S REGULATIONS   1. SHIPPER is: THE PEOPLES GAS LIGHT AND COKE COMPANY, a LDC. 2. (a) MDQ totals: 25,000 MMBTU per day. (b) Service option selected (check any or all): [ ] LN [ ] SW [ ]NB 3. TERM: April 1, 2000 through October 31, 2002. 4. Service will be ON BEHALF OF: [X] Shipper or [ ]Other: 5. The ULTIMATE END USERS are customers within any state in the continental U.S.; or (specify state)________________________________________________. 6. [ ] This Agreement supersedes and cancels a _____________ Agreement dated ___________. [X] Service and reservation charges commence the latter of: (a) April 1, 2000, and (b) the date capacity to provide the service hereunder is available on Natural's System. [ ] Other:_____________________________________________ 7. SHIPPER'S ADDRESSES   NATURAL'S ADDRESSES   General Correspondence : PEOPLES GAS LIGHT & COKE COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA 130 E. RANDOLPH DR.   ATTENTION: ACCOUNT SERVICES CHICAGO, IL 60601-6207   ONE ALLEN CENTER, SUITE 1000     500 DALLAS ST., 77002     P. O. BOX 283 77001-0283     HOUSTON, TEXAS         Statements/Invoices/Accounting Related Materials : PEOPLES GAS LIGHT & COKE COMPANY   NATURAL GAS PIPELINE COMPANY OF AMERICA DIANE FILEWICZ, 24TH FLOOR   ATTENTION: ACCOUNT SERVICES 130 E. RANDOLPH DR.   ONE ALLEN CENTER, SUITE 1000 CHICAGO, IL 60601-6207   500 DALLAS ST., 77002     P.O. BOX 283 77001-0283     HOUSTON, TEXAS         Payments :     NATURAL GAS PIPELINE COMPANY OF AMERICA     P.O. BOX 70605     CHICAGO, ILLINOIS 60673-0605           FOR WIRE TRANSFER OR ACH:     DEPOSITORY INSTITUTION: THE CHASE     MANHATTAN BANK, NEW YORK, NY     WIRE ROUTING #: 021000021     ACCOUNT #: 323-206042     8. The above stated Rate Schedule, as revised from time to time, controls this Agreement and is incorporated herein. The attached Exhibits A, B, and C are part of this Agreement. NATURAL AND SHIPPER ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF NATURAL'S FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW IS APPLICABLE, NATURAL AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE STATE OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION AND EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the entire agreement between the parties and no waiver, representation, or agreement shall affect this Agreement unless it is in writing. Shipper shall provide the actual end user purchasers names(s) to Natural if Natural must provide them to the FERC. AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President         Contract No. 117119 EXHIBIT A DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. LOBO/NGPL AGUA DULCE NUECES NUECES TX 901022 04 11,000 INTERCONNECT WITH LOBO           PIPELINE COMPANY IN BLOCK 3,           ANDRES F. DE LA FUENTE GRANTE,           A-111, NUECES COUNTY, TEXAS                       2. LOBO/NGPL NE THMPSNVLLE JIM JIM HOGG TX 901041 04 14,000 HOGG           INTERCONNECT WITH LOBO           PIPELINE COMPANY IN BLOCK 4,           "LAS ANIMAS" HEIRS OF FELIPE DE           LA PENA SURVEY, JIM HOGG           COUNTY, TEXAS             SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. PGLC/NGPL CRAWFORD COOK COOK IL 904360 09 25,000 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY AT TRANSPORTER'S           CRAWFORD METER STATION IN           SEC. 34-T39N-R13E, COOK COUNTY,           ILLINOIS.             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED: February 25, 2000 EFFECTIVE DATE: April 1, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 18   0   F   0 20   18   F   14,000 22   20   F   25,000 26   22   F   25,000 27   26   F   25,000 28   27   F   25,000 31   28   F   25,000

Exhibit 10(g) Contract No. 117183   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 2 DATED April 5, 2000 TO AGREEMENT DATED March 16, 2000 (Agreement)   1. [ ] Exhibit A dated April 5, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated April 5, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [X] Exhibits A and B dated April 5, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [X] Exhibit C dated April 5, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [X] Revise Agreement MDQ: [ ] Increase [X] Decrease In Section 2. of Agreement substitute 20,000 MMBTU for 85,000 MMBTU. [ ] Revise Agreement MAC: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [ ] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [ ] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 2 becomes effective April 16, 2000. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President     EXHIBIT A DATED: April 5, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SULPHUR/NGPL MAUD MILLER MILLER AR 3844 08 20,000 INTERCONNECT WITH NGC           ENERGY ON TRANSPORTER'S           MAUD LATERAL IN SEC. 33-T17S-           R28W, MILLER COUNTY, ARKANSAS               SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: April 5, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. PGLC/NGPL CALUMET #3 COOK COOK IL 3296 09 20,000 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY AT TRANSPORTER'S           CALUMET LINE #3 IN SEC. 6-T37N-           R15E, COOK COUNTY, ILLINOIS             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED April 5, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED April 5, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117183   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 27   0   F   0 28   27   F   20,000 33   36   F   20,000 35   28   B   20,000 36   35   F   20,000

EXHIBIT 10.75 MEMORANDUM OF UNDERSTANDING FOR WAFER SUPPLY Whereas Catalyst Semiconductor, Inc. (CSI) wishes to purchase wafers from Oki Electric Industry Co., Ltd. (Oki), and Oki wishes to supply wafers to CSI, the two parties enter this agreement as of July 6, 2000. Definitions: Wafers: [*]. Understanding For the 12 month period from September 1, 2000 through August 31, 2001, CSI agrees to place orders with Oki and Oki agrees to deliver the wafer quantities as stated below:           [*]:          [*]           [*]:          [*] The price of wafers for the period from September 1, 2000 through August 31, 2001 shall be determined as follows:           [*]:          $[*]           [*]:          $[*] In case there is any deviation from the [*] delivery schedule, [*]. CATALYST SEMICONDUCTOR, INC.       OKI ELECTRIC INDUSTRY, CO. LTD. /s/  Hideyuki Tanigami       /s/  Hisao Baba --------------------------------------------------------------------------------      -------------------------------------------------------------------------------- Name:  Hideyuki Tanigami Title:    Chairman of the Board       Name:  Hisao Baba Title:    Vice President & General Manager Marketing & Sales Dev., SiSC        22 September 2000      September 22, 2000 --------------------------------------------------------------------------------      -------------------------------------------------------------------------------- Date      Date  [*]  Certain information in this exhibit has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.                  

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 SEPARATION AGREEMENT     This Separation Agreement ("Agreement") is made and entered into this 28th day of September 2000, by and between Don L. Sticinski ("you"), a resident of the state of Minnesota, and Alliant Techsystems Inc. ("Alliant"), a Delaware corporation with its principal place of business in Hopkins, Minnesota.     You and Alliant have agreed that your employment will conclude as provided in this Agreement and, in connection with the termination of your employment, Alliant has agreed to provide you with certain payments to which you would not be entitled absent your execution of this Agreement. Further, you and Alliant desire to settle any and all disputes related directly or indirectly to your employment by Alliant and/or your termination from employment, in accordance with the terms and conditions set forth in this Agreement. Therefore, in consideration of the mutual covenants and agreements set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, you and Alliant agree as follows:      1.  Termination of Employment.  Effective September 19, 2000 you voluntarily resign as an Executive Officer of Alliant Techsystems Inc. and as a Director or Officer of Alliant (including any of its subsidiaries and affiliates). Your last day of work will be September 30, 2000 at which time you will commence a paid leave of absence. Effective September 1, 2001 (Termination Date), your leave of absence will cease and you will no longer be an employee of Alliant. Except as otherwise provided in this Agreement, or as set forth in the applicable employee benefit plan, all of your privileges as an Alliant employee will end as of the close of business on the Termination Date.      2.  Payments.       (a) In connection with your termination of employment, Alliant will provide you the following payments and benefits:      (i) Continuation of base salary while on leave.  Alliant will continue to pay to you your monthly base salary as of September 30, 2000 during your leave of absence until your Termination Date. Alliant will make these payment to you only on the condition that you have signed this Agreement and have not exercised your right to rescind it pursuant to paragraph 10 below. Alliant will withhold required deductions, including deductions for applicable state and federal taxes, social security and all other standard deductions. Payments will be considered "Earnings" or "Recognized Compensation" for purposes of any of Alliant's qualified or non-qualified employee benefit plans, and 401k deductions will be taken according to your elections.     (ii) Management Incentive Plan.  You will be eligible to receive your Management Incentive Plan (MIP) payment for Fiscal Year 2001, prorated for your period of active service ending on September 30, 2000. Such payment will be based on the performance criteria already agreed upon between you and Alliant prior to the beginning of such Fiscal Year and actual business unit and corporate performance. This amount will be paid in a single lump sum payment in cash at the same time as all other MIP participants receive payment. This amount will be considered "Earnings" or "Recognized Compensation" for purposes of Alliant's qualified or non-qualified employee benefit plans. You will not be a participant in the Alliant Management Incentive Plan for the fiscal year beginning April 1, 2001 or thereafter.     (iii) Relocation.  You will be entitled to receive relocation services of broker/real estate sales agent expense reimbursement up to 7% of the final sale price of your existing Minnesota home and reasonable and customary closing fees. Should your house not be sold by June 1, 2001, Alliant agrees to purchase your house under applicable terms of the Alliant Purchase Option Program (copy attached). Alliant also will, until September 1, 2001, reimburse you for household moving 20 -------------------------------------------------------------------------------- expenses; such reimbursed moving expenses not to exceed Twenty-Five Thousand Dollars ($25,000).     (iv) Restricted Stock.  Your 1167 shares of restricted stock granted June 1, 2000, per Alliant Techsystems Personnel and Compensation Committee approval, are fully vested as of September 30, 2000.     (v) Performance Shares.  Your performance shares will continue to vest until September 1, 2001, at which time all unvested shares are forfeited.     (vi) Stock Options.  With your continued employment through September 1, 2001, your stock options will become vested at their normal vesting dates until September 1, 2001, at which time all non-vested stock options shall be forfeited.    (vii) CVA.  Any CVA amount accrued for AFY 2001 (prorated) will be paid out at the end of AFY 2001 in a single lump sum.    (viii) Income Security Plan.  Following your resignation as an Executive Officer effective September 19, 2000 and until your Termination Date, you will be eligible for change in control benefits under the Alliant Income Security Plan.     (ix) Leased Car.  You will be entitled to a continuation of your current car lease until September 1, 2001.     (x) Outplacement Services.  You will be entitled to participate in location outplacement services until your Termination Date, and Alliant will pay outplacement fees up to 15% of your yearly base salary, or, within a reasonable time of your Termination Date, pay directly to you the cash difference between the outplacement fees actually paid and 15% of your base salary.     (xi) Executive Perquisites Account.  Your participation in the Executive Perquisites Account plan shall terminate effective close of business on September 30, 2000. However, financial planning services will continue under its current terms through September 1, 2001.    (xii) Accrued but Unused Vacation.  You will be paid your accrued and unused vacation balance on September 30, 2000. No vacation will accrue during the time period from September 30, 2000 through September 1, 2001.    (xiii) Employee Benefit Plans.  Your rights to benefits under all other Alliant employee benefit plans will continue during your leave of absence and will be governed by the terms of such plans.     (b) Except as provided above, you acknowledge that you have received all other compensation and benefits due and owing to you from Alliant and that you have no further claim to any compensation or employee benefits from Alliant. You acknowledge that you are not entitled to the payment in paragraph 2(a)(i) above unless you sign this Agreement and that Alliant has agreed to provide this payment solely as consideration for your signing this Agreement.      3.  Your Death.  Alliant agrees that the compensation described in paragraph 2(a)(i) through 2(a)(xiii) above will be paid to your estate in the event of your death, on the condition that you have signed this Agreement and have not exercised your right to rescind.      4.  Unemployment Compensation.  Alliant agrees not to challenge your entitlement to unemployment compensation benefits as provided by law.      5.  Attorneys' Fees and Expenses.  Alliant agrees that you may submit for reimbursement as financial planning services any attorneys' fees incurred by you in conjunction with a review of this agreement. 21 --------------------------------------------------------------------------------      6.  Confidential Information.  You acknowledge that in the course of your employment with Alliant or any of its predecessor companies, you have had access to confidential information and trade secrets relating to business affairs of Alliant and/or its predecessor or related companies and entities. You agree that you will maintain the confidentiality of Alliant's confidential information and / or trade secrets. You agree that at no time following your execution of this Agreement, will you disclose or otherwise make available to any person, company or other party confidential information or trade secrets. This Agreement shall not limit any obligations you have under any other Alliant confidentiality agreement or applicable federal or state law.      7.  Return of Alliant Property.  You acknowledge that prior to your last day of active employment, or paid leave, whichever is later, you will return all property owned by Alliant which is in your possession, including, but not limited to, any company credit card (or credit card on which Alliant is a guarantor), computer, telephone, pager, fax or printer. Further, you agree to repay to Alliant the amount of any permanent or temporary advances previously made to you by Alliant which remain outstanding and any balance owing on any credit cards of any moneys due and owing Alliant or for which Alliant is a guarantor. During the period of your leave of absence, you will be entitled to the continued use of your leased vehicle.      8.  Release.  You fully release and discharge the companies and individuals listed below from all liability for damages or claims of any kind arising out of any action, inaction, decision, or event occurring through the date of your execution of this Agreement: •Alliant, and its predecessor companies; •All companies owned by, connected with, or affiliated with Alliant; and •Alliant's current and former Directors, Officers, Managers, Employees, Agents, Insurers, Counsel, and Shareholders.     You understand that you are giving up any and all manner of actions or causes of actions, suits, debts, claims, complaints, or demands of any kind whatsoever, whether direct or indirect, fixed or contingent, known or unknown, in law or in equity, that you have or may have for claims arising under or based on, but not limited to, the: •Minnesota Human Rights Act, Minn. Stat. § 363.01, et seq. or any other similar state statute applicable in your state of residence; •Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq., as amended by the Older Workers Benefit Protection Act; •Americans with Disabilities Act, 42 U.S.C. § 12101, et seq.; •Employee Retirement Income and Security Act, 29 U.S.C. § 1001, et seq.; •Fair Labor Standards Act, 29 U.S.C. § 201, et seq.; •Family and Medical Leave Act, 29 U.S.C. § 2601, et seq.; •National Labor Relations Act, 29 U.S.C. § 151, et seq.; •Occupational Safety and Health Act, 29 U.S. C. § 651, et seq.; •Rehabilitation Act, 29 U.S.C. § 701 et seq.; •Title VII, as amended by the Civil Rights Act of 1991, 42 U.S.C. § 2000e, et seq.; •Worker Adjustment and Retaining Notification Act of 1988, 29 U.S.C. § 2101, et seq.; or •Any other federal, state or local law, including any attorneys' fees that could be awarded in connection with these or any other claims. 22 --------------------------------------------------------------------------------     You further understand that this Agreement extends to, but is not limited to, all claims that you have or may have in contract or tort theories. This includes, but is not limited to, the following potential claims: •Wrongful discharge, or wrongful discharge in violation of public policy; •Breach of contract, breach of an express or implied promise, breach of the implied covenant of good faith and fair dealing, or breach of fiduciary duty; •Interference with contractual relations; •Promissory estoppel; •Breach of employee handbooks, manuals or other policies; •Assault or battery; •Intentional or negligent misrepresentation, or fraud; •Retaliation, or intentional or negligent infliction of emotional distress; •Defamation (including all forms of libel, slander, and self-defamation); •Negligent hiring, retention or supervision; and/or •Any other claim otherwise based on any theory, whether developed or undeveloped, arising from or related to your employment or the termination of your employment with Alliant, or any other fact or matter occurring prior to your execution of this Agreement.     You further agree that you will not institute any claim for damages, or any other relief, nor request any other party or entity, to institute any claim for damages on your behalf. You understand that you waive your right to money damages or other legal or equitable relief awarded as a result of any claim filed on your behalf by any other person, entity or governmental agency.     Your Release of claims, as set forth above, is not intended to and does not waive or release your rights to seek post-termination insurance continuation or other post-termination benefits under "COBRA", Minn. Stat. § 61A.092, Minn. Stat. § 62A, "ERISA", or other state or federal laws or regulations relating to insurance continuation rights or other vested benefits, or any other vested rights, if any, which you have pursuant to Alliant's qualified or non-qualified employee benefit plans, 401(k) plans, pension plans, or other retirement plans. Further, you are not waiving any claims which you may have against Alliant to defend and indemnify you for actions which you took, or for your inactions, within the course and scope of your employment for Alliant, subject to the limitations, terms and conditions of Alliant's By Laws, Articles of Incorporation, and/or under Minnesota law.      9.  Consideration Period.  You have been informed that the terms of this Agreement shall be open for consideration by you for a period of at least forty five (45) calendar days after the date set forth above, during which time you may consider whether or not to accept this Agreement and seek legal counsel to advise you of your rights. You agree that changes to this Agreement, whether material or immaterial, will not restart this acceptance period. You further understand that you are not required to take the entire forty five (45) day period to decide whether you wish to execute the Agreement and that you may do so on an accelerated basis without prejudice to your own or Alliant's rights under this Agreement.     10.  Right to Rescind.  You understand that you have the right to rescind this Agreement for any reason by informing Alliant of your intent to rescind this Agreement within fifteen (15) calendar days after you sign it. You understand that this Agreement will not become effective or enforceable unless and until you execute the Agreement and the applicable rescission period has expired. Any such rescission must be in 23 -------------------------------------------------------------------------------- writing and hand-delivered to the person listed below or, if sent by mail, must be received by such person within the applicable time period, sent by certified mail, return receipt requested, and addressed as follows: Sandy Ketchmark, MN11-1025 Alliant Techsystems 600 2nd Street NE Hopkins, MN 55343 In the event that you effectively rescind the Agreement, neither you nor Alliant will have any rights or obligations whatsoever under this Agreement. Any rescission, however, does not affect your termination of employment from Alliant, effective as of the date set forth in paragraph 1.     11.  Effective Date.  This Agreement does not become effective until sixteen (16) calendar days after you sign it and return it to the person named above and then only if it has not been rescinded by you under the procedures of paragraph 10.     12.  No Admission.  This Agreement is not an admission by Alliant that any of its actions or inactions are unjustified, unwarranted, discriminatory, wrongful or in violation of any federal, state or local law and this Agreement shall not be interpreted as such. Alliant disclaims any liability to you or any other person on the part of itself and/or its current or former directors, officers, employees, representatives, and agents. You agree and acknowledge that this Agreement shall not be interpreted to render either party to be a prevailing party for any purpose including, but not limited to, an award of attorney's fees under any statute or otherwise.     13.  Effect of Breach.  In the event that you breach any provision of this Agreement, Alliant will have no further obligations under paragraph 2(a)(i) of this Agreement. You agree that in the event of your breach Alliant will be entitled to repayment of all moneys paid to you under such section together with the attorneys' fees and costs incurred to collect the money and to seek injunctive relief.     14.  No Adequate Remedy.  You agree that it is impossible to measure in money all of the damages which will accrue to Alliant by reason of your breach of any of your obligations under this Agreement. Therefore, if Alliant shall institute any action or proceeding to enforce the provisions hereof, you hereby waive the claim or defense that Alliant has an adequate remedy at law, and you shall not raise in any such action or proceeding the claim or defense that Alliant has an adequate remedy at law.     15.  No Assignment.  This Agreement is personal to you and may not be assigned by you.     16.  Enforceable Contract.  This Agreement shall be governed by the laws of the State of Minnesota. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.     17.  Entire Agreement.  You agree that this Agreement contains the entire agreement between you and Alliant with respect to the subject matter hereof and there are no promises, undertakings or understandings outside of this Agreement, except with respect to your continued requirement to not reveal confidential, secret or top secret information, patent, trademark or similar matters and as specifically set forth herein. This Agreement supersedes all prior or contemporaneous discussions, negotiations and agreements, whether written or oral, except as specifically set forth herein. Your right to payments or employee benefits from Alliant are specified exclusively and completely in this Agreement. Any modification or addition to this Agreement must be in writing, signed by an officer of Alliant and you.     18.  Acknowledgment.  You affirm that you have read this Agreement, and have had adequate time to consider the terms of the Agreement. Further, you have been advised that you should consult with an attorney prior to signing this Agreement. You acknowledge that the provisions of this Agreement 24 -------------------------------------------------------------------------------- are understandable to you and to the extent that you have not understood any section, paragraph, sentence, clause or term, you have taken steps to ensure that it was explained to you. You have entered into this Agreement freely and voluntarily.     IN WITNESS WHEREOF, the parties have executed this Agreement by their signatures below.   Employee— Dated: September 28, 2000       Don L. Sticinski /s/ -------------------------------------------------------------------------------- Your signature ******************************************************************************** HR Administrator—       Dated: September 28, 2000       Alliant Techsystems Inc.   Paul David Miller -------------------------------------------------------------------------------- (Print name)       /s/ PAUL DAVID MILLER    -------------------------------------------------------------------------------- Signature Chairman and CEO -------------------------------------------------------------------------------- Title 25 -------------------------------------------------------------------------------- QUICKLINKS SEPARATION AGREEMENT

  AMENDMENT TO THE COHERENT COMMUNICATIONS SYSTEMS CORPORATION AMENDED AND RESTATED 1982 STOCK OPTION PLAN WHEREAS, Coherent Communications Systems Corporation ("Coherent") has heretofore established the Coherent Communications Systems Corporation Amended and Restated 1982 Stock Option Plan (the "Plan") for the benefit of employees of Coherent Communications Systems Corporation and its subsidiaries; WHEREAS, Coherent was acquired by Tellabs, Inc. ("Tellabs") in a merger on August 3, 1998, and Coherent subsequently merged into Tellabs Operations, Inc. (the "Corporation"); WHEREAS, the Board of Directors of Tellabs deems it desirable to make certain amendments to the Plan relating to the vesting of options and/or the post-employment exercise period in the event of the death, disability, or retirement of an option holder, or a change in control of Tellabs; WHEREAS, the Board of Directors has considered the recommendations; and WHEREAS, the Board of Directors of the Corporation has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows: Under Section 2 of the Plan, the following definition of "Change in Control" shall be added: (f) "Change in Control" means the first to occur of: (1) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, Tellabs, Inc. ("Tellabs") or any subsidiary of Tellabs, or any employee benefit plan of Tellabs or any subsidiary of Tellabs, or any person or entity organized, appointed or established by Tellabs for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of Tellabs, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of Tellabs representing 20% or more of the combined voting power of Tellabs's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by Tellabs; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (2) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of Tellabs and any new director (except for a director designated by a person who has entered into an agreement with Tellabs to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by Tellabs' stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (3) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Tellabs (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 of outstanding voting securities of Tellabs immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns Tellabs or all or substantially all of Tellabs' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of Tellabs; (ii) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of Tellabs or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company 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 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 (4) Approval by the stockholders of Tellabs of a complete liquidation or dissolution of Tellabs.   Under Section 2 of the Plan, the following definition of "Disability" shall be added: (i) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. Section 10 shall be amended in its entirety to read as follows: 10. TERMINATION OF EMPLOYMENT. Except as set forth in Section 10A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Stock Option Agreement, the following rules shall apply upon termination of the Optionee's employment with the Corporation and all Subsidiaries: (a) Except as set forth in subsections (b), (c), (d) and (e) below, in the event of termination (voluntary or involuntary) for any reason of the holder's employment by the Corporation, any unexercised Option shall be exercisable by the Optionee at any time within 30 days after the date of such termination but only to the extent such Option was exercisable on the date of such termination. In no event shall such unexercised Option be exercisable after the expiration of its term. (b) In the event of termination of employment due to the death the Optionee, each Option held by the Optionee shall become exercisable in full and may be exercised at any time prior to the expiration date of the Option or within one year after the date of the Optionee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Optionee, each Option held by the Optionee may, to the extent exercisable at the time of termination of employment, be exercised at any time prior to the expiration date of the Option or within three years after the date of the Optionee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Optionee on or after attaining age 55, all or a portion of each Option held by the Optionee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Optionee's attained age and one point for each year of continuous service with the Corporation or its Subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Corporation or a Subsidiary of the Corporation, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested option shall vest At least 80 but less than 90 points           75% of each unvested option shall vest At least 90 points                                   100% of each unvested option shall vest and all Options held by the Optionee to the extent then exercisable may be exercised at any time prior to the expiration date of the Option or within three years after the date of the Optionee's retirement, whichever period is shorter. (e) Notwithstanding anything in this Plan to the contrary, any ISO which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a NQSO. The Plan shall hereby be amended by adding a new Section 10A to read: 10A. CHANGE IN CONTROL. (a) Upon the occurrence of a Change in Control, any and all Options granted hereunder shall become immediately exercisable and remain exercisable until such Options expire or terminate under the provisions of this Plan. (b) Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to Change in Control. IN WITNESS WHEREOF, the foregoing amendments to the Coherent Communications Systems Corporation Amended and Restated 1982 Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000.   TELLABS OPERATIONS, INC.   By:/s Brian J. Jackman Name:Brian J. Jackman Its: President

Exhibit 10.1  MapInfo Corporation 1993 Director Stock Option Plan        1.     Purpose             The purpose of this 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation (the "Company") is to encourage ownership in the Company by outside directors of the Company whose continued services are considered essential to the Company's future progress and to provide them with a further incentive to remain as directors of the Company.      2.     Administration             The Board of Directors shall supervise and administer the Plan. Grants of stock options under the Plan and the amount and nature of the awards to be granted shall be automatic in accordance with Section 5. However, all questions of interpretation of the Plan or of any options issued under it shall be determined by the Board of Directors and such determination shall be final and binding upon all persons having an interest in the Plan.      3.     Participation in the Plan             Directors of the Company who are not employees of the Company or any subsidiary of the Company shall be eligible to participate in the Plan.      4.     Stock Subject to the Plan             (a)     The maximum number of shares which may be issued under the Plan shall be 165,0001 shares of the Company's Common Stock, par value $.002 per share ("Common Stock"), subject to adjustment as provided in Section 9 of the Plan.             (b)     If any outstanding option under the Plan for any reason expires or is terminated without having been exercised in full, the shares allocable to the unexercised portion of such option shall again become available for grant pursuant to the Plan.             (c)     All options granted under the Plan shall be non-statutory options not entitled to special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended to date and as it may be amended from time to time (the "Code").   1   Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00.        5.     Terms, Conditions and Form of Options             Each option granted under the Plan shall be evidenced by a written agreement in such form as the Board of Directors shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions:             (a)     Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for such number of shares of Common Stock equal to $20,000 divided by the option exercise price per share for each such option (the "Annual Option").             (b)     Option Exercise Price. The option exercise price per share for each option granted under the Plan shall equal (i) the last reported sales price per share of the Company's Common Stock on the NASDAQ National Market System (or, if the Company is traded on a nationally recognized securities exchange on the date of grant, the reported closing sales price per share of the Company's Common Stock by such exchange) on the date of grant (or if no such price is reported on such date such price as reported on the nearest preceding day) or (ii) if the Common Stock is not traded on NASDAQ or an exchange, the fair market value per share on the date of grant as most recently determined by the Board of Directors.             (c)     Options Non-Transferable. Each option granted under the Plan by its terms shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and shall be exercised during the lifetime of the optionee only by him. No option or interest therein may be transferred, assigned, pledged or hypothecated by the optionee during his lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.             (d)     Exercise Period. Each Annual Option shall become exercisable at the end of nine years and nine months after the date of grant, provided that such option shall become exercisable one year after the date of grant if the director has attended during such year at least 75% of the aggregate of the number of meetings of the Board of Directors and the number of meetings held by all committees on which he then served. In the event an optionee ceases to serve as a director, each such option may be exercised by the optionee (or, in the event of his death, by his administrator, executor or heirs), at any time within 12 months after the optionee ceases to serve as a director, to the extent such option was exercisable at the time of such cessation of service. Notwithstanding the foregoing, no option shall be exercisable after the expiration of ten years from the date of grant.             (e)     Exercise Procedure. Options may be exercised only by written notice to the Company at its principal office accompanied by (i) payment in cash of the full consideration for the shares as to which they are exercised or (ii) an irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price or delivery of irrevocable instructions to a broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price.      6.     Assignments             The rights and benefits of participants under the Plan may not be assigned, whether voluntarily or by operation of law, except as provided in Section 5(d).      7.     Effective Date             The Plan shall become effective immediately upon its adoption by the Board of Directors, but all grants of options shall be conditional upon the approval of the Plan by the stockholders of the Company within 12 months after adoption of the Plan by the Board of Directors.      8.     Limitation of Rights             (a)     No Right to Continue as a Director. Neither the Plan, nor the granting of an option nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a director for any period of time.             (b)     No Stockholders' Rights for Options. An optionee shall have no rights as a stockholder with respect to the shares covered by his options until the date of the issuance to him of a stock certificate therefor, and no adjustment will be made for dividends or other rights (except as provided in Section 9) for which the record date is prior to the date such certificate is issued.      9.     Changes in Common Stock             (a)     If the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other securities, through merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to such shares of Common Stock, or other securities, an appropriate and proportionate adjustment will be made in (i) the maximum number and kind of shares reserved for issuance under the Plan, (ii) the number and kind of shares or other securities subject to then outstanding options under the Plan and (iii) the price for each share subject to any then outstanding options under the Plan, without changing the aggregate purchase price as to which such options remain exercisable. No fractional shares will be issued under the Plan on account of any such adjustments.             (b)     In the event that the Company is merged or consolidated into or with another corporation (in which consolidation or merger the stockholders of the Company receive distributions of cash or securities of another issuer as a result thereof), or in the event that all or substantially all of the assets of the Company are acquired by any other person or entity, or in the event of a reorganization or liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company, shall, as to outstanding options, either (i) provide that such options shall be assumed, or equivalent options shall be substituted, by the acquiring or successor corporation (or an affiliate thereof), or (ii) upon written notice to the optionees, provide that all unexercised options will terminate immediately prior to the consummation of such merger, consolidation, acquisition, reorganization or liquidations unless exercised by the optionee within a specified number of days following the date of such notice.      10.     Amendment of the Plan             The Board of Directors may suspend or discontinue the Plan or review or amend it in any respect whatsoever; provided, however, that without approval of the stockholders of the Company no revision or amendment shall change the number of shares subject to the Plan (except as provided in Section 9), change the designation of the class of directors eligible to receive options, or materially increase the benefits accruing to participants under the Plan. The Plan may not be amended more than once in any six-month period.      11.     Governing Law             The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of New York.     Adopted by the Board of Directors on November 23, 1993 Approved by the stockholders on December 8, 1993   AMENDMENT NO. 1 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        The first sentence of Subsection 5(a) of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety to provide as follows:      "(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for such number of shares of Common Stock equal to $40,000 divided by the option exercise price per share for each stock option (the "Annual Option")." Adopted by the Board of Directors on December 9, 1994 Approved by the stockholders on January 20, 1995     AMENDMENT NO. 2 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        The first sentence of Subsection 5(a) of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:      "(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for 4,5002 shares of Common Stock (the "Annual Option")." Adopted by the Board of Directors on December 19, 1995 Approved by the Stockholders on February 2, 1996     2   Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00.     AMENDMENT NO. 3 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        Subsection 4(a) of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:      "(a)     The maximum number of shares which may be issued under the Plan shall be 75,0003 shares of the Company's Common Stock, par value $.002 per share ("Common Stock"), subject to adjustment as provided in Section 9 of the Plan."      The first sentence of Subsection 5(a) of the Plan is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:      "(a) Option Grants. On the date of each annual meeting of stockholders of the Company, the Company shall grant to each eligible director an option for 7,5004 shares of Common Stock (the "Annual Option")."   Adopted by the Board of Directors on November 12, 1996 Approved by the Stockholders on March 20, 1997     3   Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00. 4   Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00.   AMENDMENT NO. 4 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        Section 5(c) of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety to provide as follows:      "(c) Options Non-Transferable. Except as otherwise provided in the option agreement evidencing the option grant, each option granted under the Plan shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and shall be exercised during the lifetime of the optionee only by him."      Section 10 of the Plan is hereby amended and restated in its entirety to read as follows:      "10. Amendment of the Plan. The Board of Directors may at any time, and from time, modify, terminate or amend the Plan in any respect, except that if at any time the approval of the stockholders of the Company is required as to such modification or amendment under any applicable tax or regulatory requirement, the Board of Directors may not effect such modification or amendment without such approval."   Adopted by the Board of Directors on December 9, 1996       AMENDMENT NO. 5 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        Section 11 of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety to provide as follows:      11.     Governing Law             The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware." Adopted by the Board of Directors on February 11, 1998     AMENDMENT NO. 6 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        Subsection 4(a) of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:      "(a)     The maximum number of shares which may be issued under the Plan shall be 120,0005 shares of the Company's Common Stock, par value $.002 per share ("Common Stock"), subject to adjustment as provided in Section 9 of the Plan."     Adopted by the Board of Directors on November 14, 1998 Approved by the Stockholders on February 24, 1999       5   Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00.   AMENDMENT NO. 7 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        Subsection 4(a) of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety, subject to stockholder approval, to provide as follows:      "(a)     The maximum number of shares which may be issued under the Plan shall be 165,0006 shares of the Company's Common Stock, par value $.002 per share ("Common Stock"), subject to adjustment as provided in Section 9 of the Plan."     Adopted by the Board of Directors on November 23, 1999 Approved by the Stockholders on March 7, 2000     Number revised to reflect 3 for 2 stock split in the form of a stock dividend effective 1/10/00.   AMENDMENT NO. 8 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION        In order to adjust the number of shares covered by the Annual Option under the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation (the "Company") to reflect the three-for-two stock split in the form of a stock dividend effected by the Company in January 2000, the reference in the first sentence of Section 5(a) of the Plan to "5,000" shares is hereby amended to "7,500 shares," and the following clause is hereby added to the end of Section 5(a) of the Plan: ", subject to adjustment as provided in Section 9 of the Plan."        The following clause is hereby added to the end of the first sentence of Section 9(a) of the Plan: "and (iv) the number and kind of shares or other securities issuable pursuant to Section 5(a) of the Plan."     Adopted by the Board of Directors on February 25, 2000   Approved by the Stockholders on March 7, 2000     AMENDMENT NO. 9 TO THE 1993 DIRECTOR STOCK OPTION PLAN OF MAPINFO CORPORATION          Section 2 of the 1993 Director Stock Option Plan (the "Plan") of MapInfo Corporation is hereby amended and restated in its entirety to read as follows:        "2.  Administration: The Board of Directors shall supervise and administer the Plan. All questions of interpretation of the Plan or any options issued under it shall be determined by the Board of Directors and such determination shall be final and binding upon all persons having an interest in the Plan."        Section 5(f) is hereby added to the, Plan, which shall read in its entirety as follows:        "(f)  Other Grants. The Board of Directors may grant options under the Plan to eligible directors on such other terms and conditions as the Board may determine, which terms and conditions need not comply with clauses (a) - (f) of this Section 5." Adopted by the Board of Directors On May 9, 2000

STOCK PURCHASE AGREEMENT               THIS AGREEMENT ("Agreement") has been made and entered into effective the _____ day of September, 2001, by and between Summit Machinery Company, an Oklahoma corporation ("Seller"), and SBL Corporation, an Oklahoma corporation ("Buyer"), with reference to the following:             WHEREAS: Seller owns 1000 shares of common stock of Northwest Energy Enterprises, Inc. ("NEE"), which shares together represent all of the issued and outstanding stock of NEE.             WHEREAS: Buyer desires to acquire all of the issued and outstanding shares of NEE (the "Shares"), and the Seller desires to sell the Shares to Buyer upon and subject to the terms and conditions set forth in this Agreement.             NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:             1. Sale of the Shares                     1.1 Sale and Delivery of the Shares. Subject to the terms and conditions herein set forth, at the Closing (hereafter defined) Seller shall sell, assign, transfer and deliver to Buyer the Shares, and Buyer agrees to purchase, receive, and accept delivery of and to pay Seller for the Shares.                     1.2 Purchase Price and Payment. The purchase price for the Shares is $350,000.00 ("Purchase Price"). The Purchase Price shall be paid by the Buyer to Seller at the Closing in immediately available U.S. funds.             2. The Closing. The purchase and sale of the Shares (the "Closing") shall be held at 16 South Pennsylvania, Oklahoma City, Oklahoma 73107, on or about October 15, 2001, or such other time and place as shall be determined by Seller.             3. Representations and Warranties of Seller. The Seller represents and warrants to Buyer, as follows:                     3.1 The Shares. The Seller owns and has full and valid rights and title to the Shares, free and clear of all liens, security interests, claims and encumbrances, and the Seller has good right and authority to sell the same. The Shares have been validly authorized and issued, fully paid and nonassessable and are not subject to any outstanding rights, options, warrants or claims issued or executed by the Seller.                     3.2 Authority for Agreement. The Seller has full and requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Seller, enforceable against the Seller in accordance with its terms.                     3.3 Corporate Status. NEE is an Oklahoma corporation duly organized and existing and in good standing under the laws of the State of Oklahoma.                     3.4 Capitalization. NEE's authorized capitalization consists of 10,000 shares of common stock, par value of $1.00 each.                     3.5 Subsidiaries. NEE has no subsidiaries.             4. Representations and Warranties of Buyer. Buyer represents and warrants to Seller as follows:                     4.1 Organization. Buyer is an Oklahoma corporation duly organized, validly existing and in good standing under the laws of the Oklahoma and has corporate power to enter into and to carry out the terms and provisions of this Agreement.                     4.2 Agreement Authorized. The execution, delivery and performance of this Agreement by Buyer has been authorized by all requisite corporation action on the part of Buyer and will not conflict with or result in any breach in the terms, conditions or provisions of Buyer's corporate charter, by-laws or any other instrument to which Buyer is a party.                     4.3 Securities Law Restrictions. Buyer shall, within the meaning of the Securities Act of 1933, acquire the Shares for investment and not with a view to the sale or distribution thereof.                     4.4 Knowledgeable Buyer. Prior to the Closing, Buyer managed the business of NEE. Buyer confirms and acknowledges that it has performed unrestricted due diligence into the assets and liabilities of NEE. Buyer is fully aware of the nature and extent of all liabilities and assets in NEE and is not relying on any representations or warranties, express or implied, of Seller except as may be expressly provided in this Agreement.             5. Additional Agreements of Parties.                     5.1 Transfer of Shares. On the Closing, Seller will cooperate with Buyer in arranging to have available immediately after the Closing the transfer books of NEE and to cause such action to be taken by the officers and directors of NEE as may be required in order that all of the Shares delivered hereunder may forthwith be transferred of record to Buyer and in order that Buyer may cause such changes to be effected in the Board of Directors and officers of NEE as Buyer may desire.                     5.2 Conduct of Business. Buyer shall promptly perform and undertake all liabilities that are part of NEE. Buyer hereby indemnifies Seller from and against any claim associated with the liabilities that are a part of NEE and any assets of NEE.             6. Conditions Precedent to Obligations of Buyer. The obligations of Buyer hereunder at the Closing shall be subject at its option, to the condition that all representations and warranties and other statements of Seller herein are true and correct and the condition that Seller perform all of its obligations hereunder to be performed at or prior to the Closing, and the following conditions:                     6.1 Delivery of Stock. Certificates evidencing the Shares, duly executed for transfer to Buyer, and duly transferred to Buyer on the books of NEE.                     6.2 Officers and Board of Directors. The Officers and members of the Board of Directors of NEE shall resign their office and/or directorships effective as of the Closing.                     6.3 Consents. All consents from third parties required to consummate the transactions provided for in this Agreement shall have been obtained.                     6.4 No Change. There shall have been no material adverse change in the condition or obligations of NEE (financial or otherwise).             7. Conditions Precedent to Obligations of Seller. The obligations of Seller at the Closing shall be subject, at its option, to the conditions that:                     7.1 Representations and Warranties. All representations and warranties and other statements of Buyer herein are at and as of the Closing true and correct.                     7.2 Performance of Obligations. Buyer shall have performed all of its obligations hereunder to be performed at or prior to the Closing.             8. Expenses. Except as otherwise herein provided, each party hereto will bear and pay its own expenses of negotiating and consummating the transactions contemplated hereby.             9. Notices.                     9.1 All notices, requests or other communications called hereunder or contemplated hereby, shall be in writing, shall be deemed to have been given if personally delivered in return for a receipt, or if mailed, by registered or certified mail, return receipt requested, or by overnight courier service, to the parties at the addresses set forth below. The date of delivery shall be the date of giving notice or if any notice, given or made by mail in the manner prescribed above shall be deemed to have been given five (5) days after the date of mailing. Any party may change the address to which notices are given, by giving notice in the manner herein provided: Notices to Seller shall be addressed as follows:                                                         Summit Machinery Company                                                         16 South Pennsylvania Avenue                                                         Oklahoma City, OK 73107                                                         Attn: President Notices to Buyer shall be addressed as follows:                                                         SBL Corporation                                                         16 South Pennsylvania Avenue                                                        Oklahoma City, OK 73107                                                         Attn: President             10. Miscellaneous.                     10.1 Whole Agreement - No Oral Modification. This Agreement embodies all representations, warranties and agreements of the parties hereto, and may not be altered or modified except by an instrument in writing signed by the parties.                     10.2 Benefit of Agreement. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.                     10.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma applicable contracts made and performed entirely therein.                     10.4 Counterparts. This Agreement may be executed in any number of counterparts, which taken together shall constitute one and the same instrument, and each of which shall be considered an original for all purposes.                     10.5 Section Headings. The section headings contained in this Agreement are for convenience and reference only and shall not in any way affect the meaning or interpretation of this Agreement.                     10.6 Severability. All agreements and covenants contained herein are severable, and in the event any of them should be held to be invalid by a court of competent jurisdiction, this Agreement shall be interpreted and enforced as if such invalid agreements or covenants were not contained herein.             IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written.                                                                                                           "SELLER"                                                                                                          SUMMIT MACHINERY COMPANY                                                                                                         By:                                                                                                         "BUYER"                                                                                                          SBL CORPORATION                                                                                                          By:                                                                                                             Jack E. Golsen, President  

  Exhibit 10(m) EXTENSION AND RENEWAL OF EMPLOYMENT AGREEMENT      THIS AGREEMENT, as of this September 1, 2001 by and between DMI FURNITURE, INC., a Delaware corporation (“DMI” or the “Corporation”) and JOSEPH G. HILL (“Employee”).      WHEREAS, Employee and DMI have entered into an Employment Agreement dated as of September 1, 1986, which has been amended from time to time and extended and renewed for additional terms through September 1, 2001;      WHEREAS, the Employment Agreement, as amended, extended and renewed to date, is intended to complement the terms of the Amendment to Employment Agreement and Officer Severance Agreement dated as of May 19, 1988 between the Employee and DMI (the “Officer Severance Agreement”), which provides for the payment of certain benefits to Employee in certain circumstances following a “change in control” of DMI (as defined in the Officer Severance Agreement).      WHEREAS, Employee and DMI desire to amend, renew and extend the Employment Agreement between them for an additional term expiring on September 1, 2003; and      NOW, THEREFORE, intending to be legally bound hereby and in consideration of the mutual undertakings hereinafter set forth, DMI and Employee agree as follows, effective September 1, 2001;      1.     Employment. DMI or its successors hereby employs Employee and Employee hereby accepts employment as Executive Vice President, Operations of DMI for a period commencing September 1, 2001 and ending September 1, 2003.      2.     Duties of Employee. Employee further agrees as follows:             (a)  To perform well and faithfully all such duties as are assigned to him by the Board of Directors or the Chief Executive Officer of DMI; and             (b)  To devote the time and attention to the performance of all matters necessary and appropriate to the discharge of the duties so assigned to him in the operation of DMI, it being the intention of this provision to require that Employee serve as a “full-time” employee of DMI, to devote his best efforts to the performance of the duties of him; and             (c)  Not to invest or otherwise be involved in any business or other activity that competes with the business of DMI other than nominal investments as a passive investor in publicly traded companies.      3.     Compensation. As compensation for his services pursuant to this Agreement, Employee shall be paid as follows:             (a) Salary. A minimum salary of $200,000 per year payable at the rate of $8,333.33 semi-monthly during the period between September 1, 2001 and August 31, 2002. A minimum salary of $225,000 per year payable at the rate of $9,375 semi-montly during the period between September 1, 2002 and August 31, 2003.             (b) Cash Bonus, fiscal years 2002 and 2003. For the Corporation’s fiscal year 2002 and 2003, Employee shall receive an incentive bonus, the amount of which is the sum of the subsections (i) through (iii):       (i) Net income. Net income shall mean the net income as reported to the Securities and Exchange Commission on form 10K excluding (a) any gains or losses resulting from the sale, conversion or other disposition of capital assets; (b) accruals made in accordance with general accepted accounting. E-1 --------------------------------------------------------------------------------         (ii) principles to recognize the costs associated with the permanent closure of an operation and the carrying costs prior to the sale of the assets of that (iii) operation; (c) gain or loss resulting from non-operational litigation; and (d) charges or credits resulting from the adoption of a change in accounting principle.           Net Income   Bonus --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- <$900,000     -0-   $.9-$1.3M   $ 20,000   $1.3-$1.7M   $ 30,000   $1.7-$2.2M   $ 40,000   $2.2-$2.6M   $ 50,000   $2.6-$3.0M   $ 60,000   $3.0-$3.6M   $ 72,000   $3.6-$4.0M   $ 84,000                      (ii)  Return on Assets. Return on Assets (ROA) is net income (as defined in (i)) divided by total assets as of the beginning of the fiscal year.             Return on Assets   Bonus --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   <2%   -0-     2%-3%   $ 7,000     3%-4%   $ 10,500     4%-5%   $ 14,000     5%-6%   $ 17,500     6%-7%   $ 21,000     7%-8%   $ 24,500     >8% $ 28,000        (iii)  Sales Growth.             Revenue Growth   Bonus --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- <0%     -0-     0%-5%   $ 6,500     5%-10%   $ 9,300     10%-12.5%   $ 12,100     12.5%-15%   $ 15,800     15%-17.5%   $ 18,600     17.5%-20%   $ 23,300     >20%   $ 28,000               (c)  Bonus Payments. Any bonus under this paragraph 3 shall be paid within one hundred thirty days of the end of the fiscal year.      4.     Fringe Benefits. DMI will provide Employee with fringe benefits as follows:             (a)  DMI will maintain, without contribution by Employee, life insurance with E-2 --------------------------------------------------------------------------------                (b)  benefits payable as designated by Employee in a face amount equal to three times Employee’s annual base salary rate hereunder provided however the face amount of life insurance benefits is not to exceed $750,000.              (c)  DMI will maintain health insurance at least as comprehensive as provided for other key and executive employees.              (d)  DMI will maintain, without contribution by Employee, travel accident insurance with benefits payable as designated by Employee in a face amount equal to $250,000 death benefits for accidental death in the course of travel.              (e)  DMI will provide Employee with an automobile comparable to those furnished to other key executives, or its cash equivalent of $675 per month, for Employee’s business related use.              (f)  Employee shall receive reimbursement for expenses incurred by him in connection with Medical Care for Employees, his spouse and his dependents, provided, however, that the amount paid by DMI to Employee pursuant to this subsection in any fiscal year during the term of this Agreement shall not exceed $2,000. For the purpose of this subsection the term “Medical Care” means amounts paid for the diagnosis, care, medication, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body (including amounts paid for accident or health insurance), or for transportation primarily for and essential to Medical Care. Payments hereunder may be made from time to time as requested by Employee with or without requiring proof of the medical expenses in questions, in the discretion of the Board of Directors, and it is not necessary that such medical expenses have already been paid by Employee, his spouse, or his aforesaid dependents, but merely that, if not yet paid, there exists an obligation to pay them. Premiums paid by DMI under any group accident or health insurance policy that may be maintained by DMI covering or for the benefit of some or all of its employees, and payments made by insurers pursuant to said policy, shall not to any extent be regarded as payments made pursuant to this subsection.              (f)  Employee shall receive annual reimbursement for expenses incurred by him in connection with personal or tax financial planning, not to exceed $2,000 per year.              (g)  Employee shall be entitled to participate in any benefit plan of a type not specifically covered by this Agreement and established by DMI for key employees during the term of Employee’s employment hereunder on a basis consistent with his age, position, responsibilities, and level of compensation.              (h)  Employee shall be reimbursed for his reasonable out-of-pocket travel and business expenses, including but not limited to, membership in private clubs for business purposes. All such club memberships will be approved by a majority of outside members of the Board of Directors.   5.   Vacation. Employee shall be entitled to a four-week vacation with pay in each 12-month period ending August 31. A maximum of one week of annual paid vacation shall be cumulative and will not be deemed waived if not taken during the applicable 12-month period. Employee’s paid vacation shall be pro-rated based on the number of months he has remained employed by DMI during any fiscal year during which this Agreement expires or is terminated. E-3 --------------------------------------------------------------------------------        6.     Other Board of Directors Action. Nothing in this Agreement shall be deemed to prevent the Board of Directors of DMI from taking any action it may deem, in its sole discretion, to be desirable to make the terms and conditions of this Employment Agreement more beneficial to Employee, or to add further benefits to his employment with DMI, provided that Employee agrees to such changes and additions.      7.     Termination. This Agreement shall terminate and, except to the extent previously accrued or as otherwise provided in the Officer Severance Agreement, all rights and obligations of DMI and Employee under this Agreement shall be void, upon the earliest to occur of any of the following:              (a)  Expiration of the period of employment set forth in paragraph 1, providing that the Corporation has served the Employee with Notice, not less than 90 days prior to the expiration of the term of this agreement, of the Corporation’s decision to not renew the agreement. If the Corporation does not serve the Employee with this Notice of non-renewal, then this agreement automatically renews and extends for a period of an additional one year period through the end of the following fiscal year of the Corporation. In the event the Corporation gives notice of non-renewal, and the Corporation fails to negotiate other employment arrangements with Employee, Employee will receive a severance payment in the amount of $115,000 on October 1, 2003, providing Employee delivers a release of liability in substantially the same form as attached here as “Exhibit A”.              (b)  Death of Employee;              (c)  Mental or physical illness or disability of Employee that shall incapacitate him, for a period of 90 successive days or for an aggregate period of 120 days during any 12 calendar months, from fully performing the duties assigned to him hereunder and in the good faith determination of the Board of Directors and upon written notice to Employee.              (d)  If Employee (i) is found guilty of having committed against DMI any criminal act, including criminal fraud, or (ii) is found guilty of having committed any criminal act involving moral turpitude, or (iii) the willful and continued failure by the Employee to substantially perform the Employee’s duties with DMI after a written demand for substantial performance is delivered to the Employee by the Board, which demand specifically identifies the manner in which the Board believes that the Employee has not substantially performed his duties; or (iv) the willful engaging by the Employee in gross misconduct materially and demonstrably injurious to the Corporation. For the purposes of this definition, no act, or failure to act on the Employee’s part shall be considered “willful” unless done or omitted to be done by the Employee other than in good faith and without reasonable belief that the Employee’s action or omission was in the best interests of DMI. The Employee shall not be deemed to have been terminated for Cause (as defined in the Officer Severance Agreement) unless and until DMI has delivered a Notice of Termination, as provided therein.              (e)  Voluntary cessation by Employee of his duties and responsibilities under this agreement.              If DMI terminates Employee’s employment other than for Cause (as defined in the Officer Severance Agreement), and a change in control (as defined in the Officer Severance Agreement) occurs within 9 months thereafter, then Employee shall be entitled to all benefits E-4 --------------------------------------------------------------------------------   provided under the Officer Severance Agreement.      Otherwise, if Employee’s employment hereunder is terminated for any other reason than those specified in subparagraphs (a) through (e) of this paragraph 7, then DMI shall remain liable to Employee and shall pay Employee in full settlement of DMI’s obligations hereunder: (i) the full amount of the balance of his base salary as provided in subparagraph 3(a) above, to the expiration date of this Agreement or to such expiration date as may have been extended by action of the Board of Directors pursuant to subparagraph 7(a), in a lump sum; plus (ii) an amount equal to the cash bonus and the stock bonus that would have been payable to Employee pursuant to subparagraph 3(b) above had Employee remained employed until the end of DMI’s fiscal year, multiplied by a fraction, the numerator of which is the number of complete calendar months during which Employee was employed during the fiscal year and the denominator of which is 12. The payments based upon the cash bonus and the stock bonus shall be paid within 130 days of the delivery to DMI of the financial statements upon which they shall be based.      8.     Coordination with Officer Severance Agreement. For the purposes of the Officer Severance Agreement, this Agreement shall constitute a renewal and extension of the Employment Agreement dated as of September 1, 1986 between Employee and DMI. If any provision of this Agreement may be viewed as conflicting with a provision of the Officer Severance Agreement, and the provision at issue does not specifically state that it is intended to supersede the Officer Severance Agreement, the Officer Severance Agreement shall control.      9.     Non-competition. If this Agreement is terminated for any reason specified in subparagraphs (a) through (e) of Paragraph 7, Employee shall refrain, for a period of one year after the termination of this Agreement, from carrying on a business that competes with a business conducted by DMI within the geographic areas described as follows:       The 50 states of the United States of America and Puerto Rico, except for the states of Washington, Oregon, Idaho, Colorado, Wyoming, North Dakota and South Dakota. For the purposes of this paragraph, a business shall be deemed carried on by Employee if carried on by a proprietorship, partnership, association, or corporation, or other business entity with which Employee is connected, except that Employee shall not be deemed to be connected with a business competitive to that conducted by DMI to the extent that Employee is merely a passive investor therein or not engaged in the business operations thereof as an officer, director, employee, agent, consultant, sales representative, or other provider of personal services in a capacity that would enable him to use his knowledge or DMI’s trade secrets, customer lists, sources of supply or unique business methods to compete against DMI. It is agreed that in the event of a breach or a threatened breach of the foregoing, no adequate remedy exists at law to protect DMI’s interests and that DMI shall be entitled to appropriate injunctive relief. Should the foregoing covenant be adjudged to any extent invalid by any court of competent jurisdiction, such covenant shall be deemed modified to the extent necessary to make it enforceable.      10.     Place of Employment. DMI agrees that the principal location at which Employee is to render his services hereunder will continue to be Louisville, Kentucky. E-5 --------------------------------------------------------------------------------        11.     Notices. Any notice to DMI or Employee hereunder may be given by delivering it to, or by depositing it in the United States mail, postage pre-paid and by certified mail, addressed to the parties at the following addresses:   DMI: Mr. Donald D. Dreher DMI Furniture, Inc. One Oxmoor Place 101 Bullitt Lane Louisville, KY 40222 with a required copy to:   Chairman, Compensation/Stock Option Committee DMI Furniture, Inc. One Oxmoor Place 101 Bullitt Lane Louisville, KY 40222   Employee: Mr. Joseph G. Hill 5506 Apache Road Louisville, KY 40207      12.     Entire Agreement. This Agreement and the Officer Severance Agreement (a) contain the complete and entire understanding and agreement of DMI and Employee respecting the subject matter hereof; (b) supersede and cancel all understandings or agreements, oral or written, respecting the employment of Employee in connection with the business of DMI; and (c) may not be modified except by an instrument in writing executed by DMI and Employee.      13.     Waiver of Breach. The waiver by either party, of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of either party.      14.     Assignment. Employee may not assign his rights or obligations under this agreement. The rights and obligations of DMI shall inure to the benefit of and shall be binding upon the successors and assigns of DMI.      15.     Captions. All captions and headings used herein are for convenient reference only and do not form part of this Agreement. E-6 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, DMI and Employee have caused this Agreement to be duly executed and delivered on the day and year first above written, but effective September 1, 1999.           DMI FURNITURE, INC.     ATTEST:______________________   By_______________________________________________________________________       Donald D. Dreher Chairman of the Board, President, and Chief Executive Officer           _____________________________________________     Joseph G. Hill E-7

    Exhibit 10.60       LEASE AGREEMENT       Between   THE ST. JOE COMPANY, a Florida corporation, LANDLORD   and   NEXTEL WIP LEASE CORPORATION, a Delaware corporation, TENANT   ***Confidential treatment requested   TABLE OF CONTENTS     SECTION 1:  TERM SUBSECTION     Property and Premises 1.1 Common Areas 1.2 Initial Term 1.3 Extension Term(s) 1.4 Term of this Lease 1.5     SECTION 2:  CONSTRUCTION; DELIVERY OF PREMISES       Construction 2.1 Delivery of Premises 2.2     SECTION 3:  RENT AND OTHER CHARGES       Base Rent 3.1 Late Charges 3.2 Additional Rent 3.3 Common Area Maintenance Charges, Operating Expenses 3.4 Utilities and Service 3.5     SECTION 4:  USE OF PROPERTY       Permitted Uses 4.1 Compliance with Laws 4.2 Hazardous Material 4.3 Signs and Auctions 4.4 Landlord’s Access 4.5 Quiet Possession 4.6 Covenants and Restrictions 4.7 Parking 4.8     SECTION 5:  TENANT ALTERATIONS.       SECTION 6:  INSURANCE AND INDEMNITY.       Tenant’s Insurance 6.1 Landlord’s Insurance 6.2 Release and Waiver of Subrogation Rights 6.3 Indemnification of the Parties 6.4       SECTION 7:  DAMAGE, DESTRUCTION AND CONDEMNATION       Destruction or Damages to Premises 7.1 Condemnation 7.2     SECTION 8:  MAINTENANCE AND REPAIRS       Landlord’s Obligations 8.1 Tenant’s Obligations 8.2 Condition Upon Termination 8.3     SECTION 9:  DEFAULT AND REMEDIES       Default by Tenant 9.1 Remedies 9.2 Costs 9.3 Waiver 9.4 Default by Landlord 9.5     SECTION 10:  PROTECTION OF LENDERS       Subordination and Attornment 10.1 Estoppel Certificates and Subordination and Non-Disturbance Agreement 10.2 Tenant’s Financial Condition 10.3     SECTION 11:  TELECOMMUNICATIONS       SECTION 12.  MISCELLANEOUS PROVISIONS       Landlord’s Liability; Certain Duties 12.1 Interpretation 12.2 Incorporation of Prior Agreements; Modifications 12.3 Notices 12.4 Radon Gas Notice 12.5 Waivers 12.6 No Recordation 12.7 Force Majeure 12.8 Execution of Lease 12.9 Authority 12.10 Florida Law 12.11 Counterpart 12.12 Holding Over 12.13 Time of Essence 12.14 Approval of Plans and Specifications 12.15 Relationship 12.16 Broker’s Fee 12.17                 Waiver of Trial by Jury 12.18 Riders and Exhibits Incorporated 12.19 Tenant Assignment 12.20 Landlord Assignment 12.21         EXHIBITS       EXHIBIT "A-1" – Site Plan   EXHIBIT “A-2” – Legal Description   EXHIBIT “B” – Commencement Agreement   EXHIBIT “C” – Construction Addendum   EXHIBIT “D” – Rules and Regulations     ***Confidential treatment requested LEASE AGREEMENT                THIS LEASE AGREEMENT ("Lease") is made as of May ___, 2001 by and between THE ST. JOE COMPANY, a Florida corporation, an address of which is 1650 Prudential Drive, Suite 400, Jacksonville, Florida 32207 ("Landlord") and NEXTEL WIP LEASE CORPORATION, a Delaware corporation, an address of which is 4500 Carillon Point, Kirkland, Washington 98033 ("Tenant"). W I T N E S S E T H : 1.          TERM 1.1        PROPERTY AND PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the following described property: Approximately 30,000 square feet of rentable area (the "Premises") constituting a portion of the Building (as defined herein) to be constructed on certain real property located in Panama City Beach, Bay County, Florida.  The Building and the location of the Premises are as shown on the Site Plan attached hereto as Exhibit A-1.  The Building will contain approximately 67,414 square feet of rentable area and will be included in a multiple building, business and industrial park known as Beckrich Office Park situated on that certain real property located in Panama City Beach, Bay County, Florida and more particularly described on Exhibit A-2 (the "Property").   The actual rentable area of the Premises, the Additional Premises ( as defined below) and the Building (and Tenant's Share, as defined herein) will be determined upon Substantial Completion of the same, as defined in the Construction Addendum.  The rentable area of the Premises, the Additional Premises and the Building will be computed whenever required pursuant to this Lease in accordance with the American National Standard Method of Measuring Floor Area in Office Buildings of the Building Owners and Managers Association International (ANSI Z65.1 - 1996).  For purposes of this Lease, "Building" will mean the Base Building and the Leasehold Improvements, as such terms are defined in the Construction Addendum. Effective as of that date which is 365 days from and after the Term Commencement Date (as defined in the Construction Addendum) (the "Effective Date"), Landlord hereby leases to Tenant and Tenant hereby leases from Landlord approximately *** additional square feet of rentable area (the "Additional Premises"), constituting the remaining rentable space in the Building.  Notwithstanding the definition of "Effective Date" set forth above, Tenant may deliver a written notice to Landlord to set the Effective Date earlier than 365 days from and after the Term Commencement Date.  If Tenant delivers to Landlord such written notice, the Effective Date shall thereafter be deemed to be the date of such notice; provided, however, in no event shall such notice be dated earlier than the date of Substantial Completion of the Additional Premises or later than 365 days from and after the Term Commencement Date.  Upon the Effective Date, (i) the Additional Premises will be included in the Premises for purposes of this Lease, (ii) Tenant will pay Base Rent (at the then existing rate as specified in Section 3.1.1; provided, however, in the event the Effective Date occurs during the first 12 months after the Term Commencement Date, Tenant will pay Base Rent specified for lease months 1-12 in Section 3.1.1 plus an amount equivalent to *** multiplied by *** square feet until lease month *** when the rates set forth in Section 3.1.1 will control), and (iii) the lease of the Additional Premises will be on the same covenants, agreements, terms provisions and conditions as provided herein for the Premises. 1.2        COMMON AREAS. Tenant and its employees and customers will have the non-exclusive right during the Term (as defined below) to use the parking areas, streets, driveways, aisles, sidewalks, curbs, delivery passages, loading areas, lighting facilities, and all other areas situated on or in the Property which are designated by Landlord, from time to time, for use by all tenants of the Building or the Property (collectively, the “Common Areas”), in common with Landlord, other tenants of the Building and the Property and other persons designated by Landlord, subject to the Rules and Regulations promulgated by Landlord from time to time. 1.3        INITIAL TERM. The initial term of this Lease (the "Initial Term") will commence on the Term Commencement Date (as defined in the Construction Addendum) and end on the last day of the calendar month which is *** months after the Term Commencement Date (the “Expiration Date”), unless renewed, terminated or extended on the terms and conditions set forth herein.  Each of the parties hereto agrees, upon demand of the other, to execute a Commencement Agreement substantially in accordance with Exhibit B attached hereto setting forth the Term Commencement Date, the Expiration Date, the rentable area of the Premises, and Tenant's Share. 1.4        EXTENSION TERM(S). Tenant, at its option, will be entitled to the privilege of *** successive extensions of the Term, each extension to be for a period of *** years (each, an "Extension Term").  Each Extension Term will be on the same covenants, agreements, terms, provisions and conditions as are contained herein for the Initial Term, except the Base Rent payable during any Extension Term will be as provided in Section 3.1.2 and except for such provisions as are, by their terms, inapplicable to an Extension Term. Tenant may extend the Term provided that it is not in material or monetary default under this Lease by giving to Landlord a notice in writing at least 180 days before the expiration of the previously established Term, and thereupon the Term will be extended without the execution of any other document; provided, however, that, at any time after an Extension Term has become effective, Landlord and Tenant, upon request of either, will execute an agreement supplementary hereto setting out the date to which such Extension Term will extend and the Base Rent payable during such Extension Term. 1.5        TERM OF THIS LEASE. For purposes of this Lease, "Term" will mean the Initial Term and any Extension Term which may become effective pursuant to Section 1.4.  In no event will the Term, including the Initial Term and all Extension Terms, exceed *** years. 2.          CONSTRUCTION; DELIVERY OF PREMISES. 2.1        CONSTRUCTION. Landlord will promptly commence, at its sole expense (except as otherwise provided in this Lease or the Construction Addendum), and will pursue with due diligence and continuously until completion, the construction of the Building in accordance with the provisions of the Construction Addendum attached hereto as Exhibit C. 2.2        DELIVERY OF PREMISES. The Leasehold Improvements (as defined in the Construction Addendum) will be completed, and possession of the Premises (including the Additional Premises) will be delivered to Tenant, in accordance with the provisions of the Construction Addendum. 3.          RENT AND OTHER CHARGES. 3.1        BASE RENT. 3.1.1     Base Rent; Initial Term.  Tenant hereby covenants and agrees to pay Base Rent for the Premises in advance in equal monthly installments on the first day of each month in lawful United States currency, together with any and all rental, sales or use taxes levied by any governmental body having authority upon the use or occupancy of the Premises and any rent or other charges payable hereunder in accordance with the following schedule: Lease Monthsin Initial Term Annual Base Rent   Monthly BaseRent   Monthly Sales Tax*   Monthly Rent**   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   -------------------------------------------------------------------------------- *Calculated at the current Bay County, Florida sales tax rate of 7%. **Does not include Tenant’s Share of Operating Expenses. 3.1.2     Base Rent; Extension Term(s). Tenant hereby covenants and agrees to pay Base Rent during any Extension Term in advance in equal monthly installments on the first day of each month in lawful United States currency, together with any and all rental, sales or use taxes levied by any governmental body having authority upon the use or occupancy of the Premises and any rent or other charges payable hereunder in accordance with the following schedule: Lease Months in First Extension Term Annual Base Rent   Monthly Base Rent   Monthly Sales Tax   Monthly Rent**   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   -------------------------------------------------------------------------------- *Calculated at the current Bay County, Florida sales tax rate of 7%. **Does not include Tenant’s Share of Operating Expenses. Lease Months in Second Extension Term Annual Base Rent   Monthly Base Rent   Monthly Sales Tax   Monthly Rent**   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   *** ***   ***   ***   ***   -------------------------------------------------------------------------------- *Calculated at the current Bay County, Florida sales tax rate of 7%. **Does not include Tenant’s Share of Operating Expenses. 3.1.3     Payment of Base Rent. Base Rent will be due and payable beginning on the Term Commencement Date and continuing on the first day of each and every month thereafter throughout the Term and will be paid without demand, set-off or deduction, except as provided for herein or by the laws of the State of Florida, to Landlord at its address above or such other address as Landlord directs in writing from time to time with 45 days advance notice. Provided however, that if the Term Commencement Date should be a date other than the first day of a calendar month, the monthly Base Rent set forth above will be prorated to the end of that calendar month. 3.1.4     Triple Net Lease.  This Lease is what is commonly called a "triple net lease," it being understood that Landlord will receive the Base Rent free and clear of any and all impositions, taxes, liens, charges or expenses of any nature whatsoever in connection with the ownership and operation of the Premises, except as expressly provided in this Lease. 3.2        LATE CHARGES. If any Base Rent or other payment due under this Lease is not received by Landlord within 10 days of the due date of such payment, Tenant will pay, in addition to such payment a late charge equal to ***.  If any payment due from Tenant shall remain overdue for more than 10 days, interest will accrue daily on the past due amount from the date such amount was due until paid or judgment is entered at a rate equivalent to the lesser of 18% per annum and the highest rate permitted by law.  Interest on the past due amount will be in addition to and not in lieu of the late charge set forth above or any other remedy available to Landlord. 3.3        ADDITIONAL RENT. All charges payable by Tenant under the terms of this Lease other than Base Rent are called "Additional Rent." Unless this Lease provides otherwise, all Additional Rent will be paid by Tenant to Landlord with the next monthly installment of Base Rent and will include all applicable sales or use taxes.  Base Rent and Additional Rent are collectively referred to herein as "Rent." 3.4        COMMON AREA MAINTENANCE CHARGES, OPERATING EXPENSES. In addition to the Base Rent payable under this Section 3, Tenant agrees to pay as Additional Rent its proportionate share of the "Operating Expenses" (as defined herein) for the Building and for the Property to the extent that any item of Operating Expenses is directly applicable to the Property but is not attributable to any particular building in the Property or any tenant(s) therein.  The proportionate share to be paid by Tenant (the "Share") will be a fraction, the numerator of which will be the rentable square footage of the Premises and the denominator of which will be the rentable square footage of the Building, all as determined as measured by Landlord in accordance with Section 1.1.  Tenant’s Share at the inception of the Lease is ***.  The Share is subject to change from time to time as and if the rentable square footage of the Premises or the Building changes including, without limitation, when the Additional Premises is included in the Premises.  Tenant will pay to Landlord on a monthly basis an amount equal to one-twelfth (1/12) of Tenant's Share of annual Operating Expenses, together with applicable sales and use taxes.  Said amount will be payable without demand, set-off or deduction at the same time and in the same manner as Base Rent.  Upon the establishment of the Term Commencement Date, Landlord will notify Tenant of the estimated amount of Operating Expenses (including the estimated monthly payment) due from Tenant for the balance of 2002.  Within 90 days after the end of each calendar year, Landlord will send to Tenant a statement of Operating Expenses for the prior year describing in reasonable detail all Operating Expenses incurred in the operation of the Building and, to the extent applicable, the Property, along with the amount of the Share (the "Operating Expense Statement").  Tenant will be given a credit against its Share of future Operating Expenses payable to the extent of any overpayment of Operating Expenses that have been paid up to the time of the Operating Expense Statement unless the Operating Expense Statement is rendered at the end of the Term, in which case any overpayment made by Tenant will be reimbursed by Landlord to Tenant at the time Tenant delivers the Premises to Landlord..  If Tenant has underpaid its Share of Operating Expenses, then Tenant will pay the balance due to Landlord as Additional Rent within 30 days of the date of the Operating Expense Statement unless the Operating Expense Statement is rendered at the end of the Term, in which case any overage due Landlord will be paid at the time Tenant delivers the Premises to Landlord.  Concurrently with the Operating Expense Statement, Landlord will provide an estimate of the Operating Expenses for the current calendar year and a statement of the estimated monthly Operating Expenses payable by Tenant.  Landlord’s failure to provide an Operating Expense Statement will not prejudice Landlord’s right to collect a shortfall or Tenant’s right to receive a credit for over payments. "Operating Expenses" will mean any expenses incurred whether by Landlord or by others on behalf of Landlord, directly arising out of Landlord’s maintenance, operation, repair, replacement (if such replacement is generally regarded in the industry as increasing operating efficiency or is required under any Applicable Laws (as defined in Section 4.2) that were not applicable to the Property or the Building as of the Term Commencement Date) and administration of the Property, the Building and the Common Areas, including, without limitation:  (i) all real estate, personal property and other ad valorem taxes, and any other levies, charges, local improvement rates, and assessments whatsoever assessed or charged against the Property, the Building and the Common Areas, the equipment and improvements therein contained, including any amounts assessed or charged in substitution for or in lieu of any such taxes, excluding only income or capital gains taxes imposed upon Landlord, and including all costs associated with the appeal of any assessment on taxes; (ii) insurance which Landlord is obligated or permitted to obtain under this Lease and any deductible amount applicable to any claim made by Landlord under such insurance; (iii) reasonable security expenses; (iv) reasonable landscaping and pest control expenses; (v) a reasonable management fee; (vi) electricity, water, sewer, gas, window washing, janitorial services, trash and debris and other maintenance and utility charges; (vii) reasonable wages and benefits payable to employees of Landlord to compensate such employees for their performance of duties that are directly connected with the operation and maintenance of the Property, the Building or the Common Areas; (viii) dues and assessments under any applicable deed restrictions or declarations of covenants and restrictions; and (ix) except as expressly limited by any of the items referred to below, such other reasonable costs and expenses actually incurred by Landlord in the maintenance, repair and operation of the Building, but only to the extent that such other costs and expense are customarily incurred as an operating expense in accordance with good property management practices.  Such other reasonable costs will include a pro rata share, equitably allocated to the Building, of any costs and expenses similar to those set forth above which are incurred by Landlord, by a property owners association, or by another entity for maintenance, operation, and repair of any Common Areas or facilities serving the Property. Operating Expenses will not include any of the following:   (i) principal and interest payments on loans secured by mortgages or trust deeds on the Premises and any financing or refinancing costs;   (ii) cost of capital improvements, except that Operating Expenses includes the cost during the Term, as reasonably amortized over the useful life of the capital improvement by Landlord with interest at the then current rates for construction financing on the unamortized amount, of any capital improvements made during the Term which (a) can reasonably be expected to reduce the Operating Expenses, or (b) are made in order to comply with any Applicable Laws hereafter promulgated by any governmental authority or board of fire underwriters;   (iii) depreciation;   (iv) cost of any repairs, restoration or other work necessitated by fire, windstorm or other insured casualty to the extent that insurance proceeds have been received by Landlord;   (v) cost of off-site personnel (except as otherwise provided for above);   (vi) expenses in the nature of costs, fines or penalties resulting directly from any act or omission of Landlord;   (vii) any costs included in Operating Expenses representing an amount paid to an entity or person related to Landlord to the extent such amount is in excess of the amount which would have been paid in the absence of such relationship;   (viii) professional fees incurred in connection with the preparation of financial statements, tax returns and other documents and information for Landlord or its mortgagees;   (ix) any repairs or alterations made by Landlord to comply with Applicable Laws existing as of the execution hereof; and   (x) leasing commissions, advertising costs and other expenses incurred solely to locate new tenants for the Building.   If the nature of Tenant’s business within the Premises is such that additional costs are incurred by Landlord for insurance, cleaning, utilities, sanitation, trash removal, pest control, disposal services or other Operating Expenses, Tenant agrees to pay to Landlord on demand as Additional Rent the amount of such additional costs which are exclusively and directly related to Tenant’s business or Tenant's use or occupancy of the Premises. If any tax expense, insurance expense, or other Operating Expense is not assessed separately or charged specifically to the Building, but is charged against the Property as a whole, Landlord will reasonably determine the portion of such Operating Expenses chargeable to Tenant. 3.5        UTILITIES AND SERVICE. 3.5.1     Utility Service.  Landlord will provide or cause to be provided the mains, conduits and other facilities necessary to supply water, gas, electricity, telephone service and sewage service to the Premises.  Tenant will however, be responsible, at its expense, to make provisions for connecting or hooking up to such utilities directly with the appropriate utility company furnishing same.  Landlord will not cause, without Tenant’s prior written consent, which consent will not be unreasonably withheld, the provider of these utilities to change. 3.5.2     Tenant Responsible for Charges.  Tenant will promptly pay all charges and deposits for electricity, water, gas, telephone service and sewage service and other utilities furnished to the Premises.  Landlord will not be liable for any interruption  in utility services except to the extent that such interruption is caused by the negligence of Landlord, its agents, contractors, or employees. 4.          USE OF PROPERTY. 4.1        PERMITTED USES. Tenant may use the Premises only for commercial office purposes, including, without limitation, for the operation of a call center and a phone programming and distribution center (collectively, the "Permitted Use").  Tenant will observe all reasonable rules and regulations established by Landlord from time to time for the Building.  The rules and regulations in effect as of the date hereof are attached to and made a part of this Lease as Exhibit D (the "Rules and Regulations").  Landlord will have the right at all times to change and amend the rules and regulations in any reasonable manner as it may deem advisable for the safety, care and operation or use of the Premises or the Property. 4.2        COMPLIANCE WITH LAWS. 4.2.1     Landlord’s Compliance.  During the Term, Landlord will be responsible for making any modifications to the Building and the Property and their appurtenances, excluding the Premises, but including the Common Areas, elevators and entrances serving the Property and the Building, required pursuant to any federal, state or local laws,  ordinances, building codes, and rules and regulations of governmental entities having jurisdiction over the Property, including but not limited to the Board of Fire Underwriters and the Americans with Disabilities Act and all regulations and orders promulgated pursuant thereto (collectively, “Applicable Laws”).  Any modifications to the Property and/or the Building made by Landlord pursuant to the provisions of this Section 4.2.1will initially be at Landlord’s expense; however, such expense may be included in Landlord’s Operating Expenses of the Building as set forth above. 4.2.2     Tenant’s Compliance.  Tenant will comply with all Applicable Laws relating to its use or occupancy of the Premises, and will promptly comply with all governmental orders and directives for the correction, prevention, and abatement of nuisances in, upon, or connected with the Premises, all at Tenant’s sole expense.  Tenant warrants that all Tenant Alterations (as defined in Section 5 below) of the Premises made by Tenant or Tenant’s employees, agents or contractorsor any other work performed by or on behalf of Tenant in and to the Premises, either prior to Tenant’s occupancy of the Premises or at any time during the Term, will comply with all Applicable Laws.  Landlord represents that the Leasehold Improvements constructed by or under the direction of Landlord will comply with all Applicable Laws in effect on or before the Term Commencement Date.  Tenant will procure at its own expense all permits and licenses required for the transaction of its business in the Premises.  In addition, Tenant warrants that its use of the Premises will be in strict compliance with all Applicable Laws.  During the Term, Tenant will, at its sole cost and expense, make any modifications to the Premises that may be required pursuant to any Applicable Laws relating to Tenant’s use or occupancy of the Premises and enacted after the Term Commencement Date. 4.3        HAZARDOUS MATERIAL. Throughout the Term, Tenant will not  use, generate, release, discharge, store, dispose, or transport  any Hazardous Materials (as defined herein) on, under, in, above, to, or from the Premises except that Hazardous Materials may be used in the Premises as necessary for the customary maintenance of the Premises provided that same are used, stored and disposed of in strict compliance with Applicable Laws.  For purposes of this provision, the term “Hazardous Materials” will mean and refer to any wastes, materials, or other substances of any kind or character that are or become regulated as hazardous or toxic waste or substances, or which require special handling or treatment, under any Applicable Laws. If Tenant’s activities at the Premises or Tenant’s use of the Premises (a) results in a release of Hazardous Materials that is not in compliance with Applicable Laws or permits issued thereunder; (b) gives rise to any claim or requires a response under common law or Applicable Laws or permits issued thereunder; (c) causes a significant public health effect; or (d) creates a nuisance; then Tenant will, at its sole cost and expense:  (i) immediately provide verbal notice thereof to Landlord as well as written notice to Landlord in the manner required by this Lease, which written notice will identify the Hazardous Materials involved and the emergency procedures taken or to be taken; and (ii) promptly take all action in response to such situation required by Applicable Laws, provided that Tenant will first obtain Landlord’s approval of the non-emergency remediation plan to be undertaken. Landlord represents, warrants and agrees (1) that, to Landlord's knowledge, neither Landlord nor any third party has used, generated, stored or disposed of, or permitted the use, generation, storage or disposal of, any Hazardous Substances on, under, about or within the Land (as defined in the Construction Addendum) in violation of any Applicable Laws, and (2) that Landlord will not, and will not permit any third party to use, generate, store or dispose of any Hazardous Materials on, under, about or within the Premises or the Building in violation of any Applicable Laws.  Landlord and Tenant each indemnify and agree to defend and hold harmless the other and the other's officers, directors, partners, affiliates, agents and employees against any and all losses, liabilities, claims and/or costs (including reasonable attorneys’ fees and costs) arising from any breach of any representation, warranty or agreement contained in this Section 4.3. All warranties and representations of Landlord made herein are made to "Landlord's knowledge" as of the Term Commencement Date.  "Landlord's knowledge" will be deemed to mean only the actual knowledge of xxx, xxx, xxx, xxx, xxx, xxx of Landlord who have given substantive attention to the development of Beckrich  Office Park, whom Landlord represents are responsible for such matters and are in a position to have knowledge thereof, as evidenced by his/their receipt of actual notice, without imputation or attribution of knowledge of any other parties and without any obligation to investigate or independently verify any of the matters contained herein.  The definition of "Landlord's knowledge" set forth above is not intended to limit Landlord's obligation to comply with Applicable Laws relating to Hazardous Materials as set forth herein. 4.4        SIGNS AND AUCTIONS. Tenant will not place any signs on the Premises, the Building or the Property except with the prior written consent of Landlord, including consent as to location and design, which consent will not be unreasonably withheld.  Any and all such approved signs will be installed and maintained by Tenant, at its sole cost and expense, and will be in compliance with the Rules and Regulations and all Applicable Laws.  Tenant will be responsible to Landlord for the installation, use, or maintenance of said signs and any damage caused thereby.  Tenant agrees to remove said signs prior to termination of the Lease and upon such removal to repair all damage incident to such removal. 4.5        LANDLORD'S ACCESS. With the exception of the Computer Room (which Computer Room is situated as shown in the Building Plans) for which notice will always be required, Landlord will be entitled at all reasonable times and upon reasonable notice (but no notice is required in an Emergency except as otherwise set forth herein) to enter the Premises to examine them and to make such repairs, alterations, or improvements thereto as Landlord is required by this Lease to make or which Landlord considers necessary or desirable.  Tenant will not unduly obstruct any pipes, conduits, or mechanical or other electrical equipment so as to prevent reasonable access thereto.  Landlord will exercise its rights under this Section 4.5, to the extent possible in the circumstances, in such manner so as to reduce, if practical, interference with Tenant’s use and enjoyment of the Premises.  Landlord and its agents have the right to enter the Premises at all reasonable times and upon reasonable notice to show them to prospective purchasers, lenders, or anyone having a prospective interest in the Building, and, during the last six months of the Term, to show them to prospective tenants. Landlord may place customary “For Sale” or “For Lease” signs on the Property and, during the last six months of the Term, on the Premises and/or the Building, as Landlord deems necessary.  Notwithstanding the foregoing to the contrary and with the exception of the designated Computer Room, Landlord will have the right at all times, and without notice, to enter the Premises in the event of an Emergency affecting the Premises.  For purposes hereof, "Emergency" means fire, release of hazardous substances, explosion, severe weather, hazardous situations necessitating the extraction of personnel, any condition which Landlord reasonably believes poses an eminent threat of bodily injury, death, environmental or property damage, or other similar incidents. 4.6        QUIET POSSESSION. If Tenant pays the Rent and all other charges and fully performs all of its obligations under this Lease, Tenant will be entitled to peaceful and quiet enjoyment of the Premises for the full Term without interruption or interference by Landlord or any person claiming through Landlord, subject, however, to the Permitted Exceptions (as defined in the Construction Addendum). 4.7        COVENANTS AND RESTRICTIONS. Tenant hereby acknowledges and agrees that the Building, and Tenant’s occupancy thereof, may be subject to certain declarations and agreements (collectively, the “Declaration”), which Declaration, if in existence, has been recorded among the Public Records of Bay County, Florida. 4.8        PARKING. From and after the Term Commencement Date, Tenant will have a non-exclusive license, at no additional charge to Tenant, to use 270 parking spaces associated with the Building.  Within 12 months from and after the Term Commencement Date, Landlord will grant Tenant a non-exclusive license, at no additional charge to Tenant, to use an additional 194 parking spaces associated with the Building.  All such parking spaces will be located as shown in the Building Plans (as defined in the Construction Addendum).  Landlord reserves the right from time to time to assign or re-assign the location of such parking spaces in any manner that Landlord in Landlord’s reasonable discretion deems beneficial to the operation of the Building.  Tenant agrees that it will employ its best efforts to prevent the use by Tenant’s employees and visitors of parking spaces allocated exclusively to other tenants.  All motor vehicles (including all contents thereof) will be parked in such spaces at the sole risk of Tenant, its employees, agents, invitees and licensees, it being expressly agreed and understood that Landlord has no duty to insure any of said motor vehicles (including the contents thereof), and that Landlord is not responsible for the protection and security of such vehicles, or the contents thereof. 5.          TENANT ALTERATIONS. Tenant will not make or allow to be made any alterations in or to the Premises ("Tenant Alterations") without first obtaining the written consent of Landlord, which consent will not be unreasonably withheld.  Landlord may require Tenant to provide demolition and/or lien and completion bonds in form and amount satisfactory to Landlord.  All Tenant Alterations will be accomplished in a good and workmanlike manner at Tenant’s sole expense, in conformity with all Applicable Laws, by a licensed and bonded contractor approved in advance by Landlord, such approval of contractor not to be unreasonably withheld or delayed.  All contractors performing Tenant Alterations in the Premises will carry workers’ compensation insurance, commercial general liability insurance, automobile insurance and excess liability insurance in amounts reasonably acceptable to Landlord and will deliver a certificate of insurance evidencing such coverages to Landlord prior to commencing work in the Premises.  Upon completion of any such Tenant Alterations, Tenant will provide Landlord with “as built” plans, copies of all construction contracts, and proof of payment for all labor and materials.  Any Tenant Alterations to the Premises made by or installed by either party hereto will remain upon and be surrendered with the Premises and become the property of Landlord upon the expiration or earlier termination of this Lease without credit to Tenant; provided, however, Landlord, at its option, may require Tenant to remove and/or repair any Tenant Alterations to restore the Premises to the condition existing at the time Tenant took possession, with all costs of removal, repair, restoration, or alterations to be borne by Tenant.  Prior to the completion of any Tenant Alterations, Landlord and Tenant agree to execute a written statement as to whether or not Tenant will be required to remove any such Tenant Alterations upon the expiration or earlier termination of the Lease.  This clause will not apply to moveable equipment, furniture or moveable trade fixtures owned by Tenant, which may be removed by Tenant at the end of the Term if Tenant is not then in default and if such equipment and furniture are not then subject to any other rights, liens or interests of Landlord.  Tenant will have no authority or power, express or implied, to create or cause any construction lien or mechanics’ or materialmen’s lien or claim of any kind against the Premises, the Property or any portion thereof.  Tenant will promptly cause any such liens or claims to be released by payment, bonding or otherwise within 30 days after request by Landlord, and will indemnify Landlord against losses arising out of any such claim including, without limitation, legal fees and court costs.  EXCEPT TO THE EXTENT THAT LANDLORD IS RESPONSIBLE FOR THE PAYMENT TO CONTRACTORS PURSUANT TO THE TERMS OF THIS LEASE OR THE CONSTRUCTION ADDENDUM, NOTICE IS HEREBY GIVEN THAT LANDLORD WILL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIAL FURNISHED OR TO BE FURNISHED TO TENANT, OR TO ANYONE HOLDING THE PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS’ OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS WILL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN THE PREMISES.  TENANT WILL DISCLOSE THE FOREGOING PROVISIONS TO ANY CONTRACTOR ENGAGED BY TENANT PROVIDING LABOR, SERVICES OR MATERIAL TO THE PREMISES. 6.          INSURANCE AND INDEMNITY. 6.1        TENANT’S INSURANCE. Tenant will throughout the Term (and any other period when Tenant is in possession of the Premises) carry and maintain, at its sole cost and expense, the following types of insurance, which will provide coverage on an occurrence basis, with respect to the Premises, in the amounts specified with deductible amounts reasonably satisfactory to Landlord and in the form hereinafter provided for: (a)         Commercial General Liability Insurance.  Commercial general liability insurance covering claims arising from bodily injury and property damage with minimum limits of $1,000,000 per occurrence and $2,000,000 general aggregate and insuring against legal liability of the insured with respect to the Premises or arising out of the maintenance, use or occupancy thereof.  The liability policy also will cover, but not be limited to, the contractual liabilities of Tenant arising from this Lease. (b)        Comprehensive Automobile Liability Insurance.   Comprehensive automobile liability insurance with a limit of not less than $1,000,000 per occurrence for bodily injury, $500,000 per person and $100,000 property damage or a combined single limit of $1,000,000 for both owned and non-owned vehicles. (c)         Excess Liability Insurance.  Tenant will also carry and maintain umbrella liability insurance with a limit of not less that $5,000,000 per occurrence. (d)        Property Insurance.  Extended or broad form coverage property insurance including plate glass coverage on a replacement cost basis, with coverage equal to the full replacement value of all personal property, decorations, trade fixtures, furnishings, equipment, Tenant Alterations, leasehold improvements and betterments made by Tenant, and all other contents located or placed in the Premises.  Tenant’s policy will also include business interruption/extra expense coverage in sufficient amounts. (e)         Workers’ Compensation and Employers’ Liability Insurance.  Workers’ Compensation Insurance covering all employees of Tenant, as required by the laws of the State of Florida and Employer's Liability coverage subject to a limit of no less than $100,000 each employee, $100,000 each accident, and $1,000,000 policy limit. (f)         Policy Form.  All policies referred to above will:  (i) be taken out with insurers licensed to do business in Florida having an A.M. Best’s rating of A-, Class 9, or otherwise approved in advance by Landlord; (ii) name Landlord and its property manager as additional insureds; (iii) be non-contributing with, and apply only as primary and not as excess to any other insurance available to Landlord or any mortgagee of Landlord; and  (iv) contain an obligation of the insurers to notify Landlord by certified mail not less than 15 days prior to any material change, cancellation, or termination of any such policy.  Certificates of insurance on Landlord’s standard form or, if required by a mortgagee, copies of such insurance policies certified by an authorized officer of Tenant’s insurer as being complete and current, will be delivered to Landlord promptly upon request.  If (a) Tenant fails to take out or to keep in force any insurance referred to in this Section 6.1, or should any such insurance not be approved by either Landlord or any mortgagee, and (b) Tenant does not commence and continue to diligently cure such default within 48 hours after written notice by Landlord to Tenant specifying the nature of such default, then Landlord has the right, without assuming any obligation in connection therewith, to procure such insurance at the sole cost of Tenant, and all outlays by Landlord will be paid by Tenant to Landlord as Additional Rent without prejudice to any other rights or remedies of Landlord under this Lease.  Tenant will not keep or use in the Premises any article which may be prohibited by any fire or casualty insurance policy in force from time to time covering the Premises or the Building. 6.2        LANDLORD’S INSURANCE. During the Term, Landlord will carry and maintain the following types of insurance with respect to the Building and the Property in such amounts or percentages of replacement value as Landlord or its insurance advisor deems reasonable in relation to the age, location, type of construction and physical conditions of the Building and the Property and the availability of such insurance at reasonable rates:  (i) broad form or extended coverage insurance on the Building (excluding any property with respect to which Tenant and other tenants are obliged to insure pursuant to Section 6.1 or similar sections of their respective leases); (ii) public liability and property damage insurance with respect to Landlord’s operations in the Building; and (iii) such other forms of insurance as Landlord or its mortgagee reasonably considers advisable.  Such insurance will be in such reasonable amounts and with such reasonable deductibles as would be carried by a prudent owner of a similar building, having regard to size, age, and location.  Landlord will have the right to self insure any or all of its liabilities with respect to the Building or the Property. 6.3        RELEASE AND WAIVER OF SUBROGATION RIGHTS. The parties hereto, for themselves and anyone claiming through or under them, hereby release and waive any and all rights of recovery, claims, actions or causes of action, against each other, their respective agents, directors, officers and employees, for any loss or damage that may occur to the Premises or the Building, and to all property, whether real, personal or mixed, located in the Premises or the Building, by reason of any cause against which the releasing party is actually insured or, regardless of the releasing party’s actual insurance coverage, against which the releasing party is required to be insured pursuant to the provisions of Sections 6.1 or 6.2.  This mutual release and waiver will apply regardless of the cause or origin of the loss or damage, including negligence of the parties hereto, their respective agents and employees.  Each party agrees to provide the other with reasonable evidence of its insurance carrier’s consent to such waiver of subrogation upon request.  This Section 6.3 supersedes any provision to the contrary which may be contained in this Lease. 6.4        INDEMNIFICATION OF THE PARTIES. Tenant indemnifies and agrees to defend and hold harmless Landlord from and against any and all liability for any loss, injury or damage, including, without limitation, consequential damage including, without limitation, all costs, expenses, court costs and reasonable attorneys’ fees, imposed on Landlord by any person whomsoever that occurs (i) in the Premises, except for any such loss, injury or damage that is caused by or results from the gross negligence or willful misconduct of Landlord, its employees, agents, other tenants or contractors; (ii) in the Building or anywhere on the Property except for any such loss, injury or damage that is caused by or results from the negligence or willful misconduct of Landlord, its employees, agents, other tenants or contractors; or (iii) in the Building or anywhere on the Property which is caused by or results from the negligent act or omission of Tenant, its employees, agents or contractors.  The commercial liability insurance that Tenant is required to carry pursuant to Section 6.1(a) of this Lease will include coverage of the foregoing contractual indemnity.  Landlord indemnifies and agrees to defend and hold harmless Tenant from and against any and all liability for any loss, injury or damage, including, without limitation, all costs, expenses, court costs and reasonable attorneys’ fees, imposed on Tenant by any person whomsoever that occurs in the Building or anywhere on the Property and that is caused by or results from the gross negligence or willful misconduct of Landlord or its employees, agents or contractors.  The provisions of this Section 6.4 will survive the expiration or earlier termination of this Lease. 7.          DAMAGE, DESTRUCTION AND CONDEMNATION. 7.1        DESTRUCTION OR DAMAGE TO PREMISES. If the Premises are at any time damaged or destroyed in whole or in part by fire, casualty or other causes, Landlord will have 30 days from such damage or destruction to reasonably determine and inform Tenant whether Landlord will restore the Premises to substantially the condition which existed immediately prior to the occurrence of the casualty.  If Landlord elects to rebuild, Landlord will use diligent, good faith efforts to complete such repairs to the extent of insurance proceeds within 120 days from the end of the 30 day period and, if reasonably practical and if not contrary to any agreements to which Landlord is bound (including any agreements with Landlord's insurance carriers, but not including any agreements with other tenants of Landlord), Landlord will diligently attempt to cause such repairs to be a priority if other of Landlord's properties require repairs contemporaneously with the repairs to the Premises.  If such repairs have not been completed within that 120 day period, and Tenant desires to terminate the Lease as a result thereof, then Tenant must notify Landlord prior to Landlord’s completion of the repairs of Tenant’s intention to terminate this Lease.  Landlord will then have 30 days after Landlord’s receipt of written notice of Tenant’s election to terminate to complete such repairs (as evidenced by a certificate of completion from Landlord's architect).  If Landlord does complete such repairs prior to the expiration of such 30 day cure period, Tenant will have no such right to terminate this Lease.  Tenant will, upon substantial completion by Landlord, promptly and diligently, and at its sole cost and expense, repair and restore any Tenant Alterations or other improvements to the Premises made by Tenant to the condition which existed immediately prior to the occurrence of the casualty to the extent of insurance proceeds.  For purposes of this Section 7.1, "substantial completion" will be deemed to have occurred when Landlord's repair and restoration of the Building has reached a stage of completion that allows full and reasonable use of the Premises for the Permitted Use, with only minor, non-structural "punch list" type items, if any, remaining to be completed. If, in the mutual opinion of Landlord and Tenant, the Premises cannot be restored within 150 days of such damage or destruction (the "Probable Restoration Period"), then either Landlord or Tenant may terminate this Lease as of a date specified in a written notice to the other, which date will not be less than 30 nor more than 60 days after the date such written notice is given.  If Landlord and Tenant disagree as to the Probable Restoration Period, then such period will be determined by a qualified independent general contractor reasonably acceptable to both parties, and, upon receipt of notice of the Probable Restoration Period, as determined by such general contractor, Landlord and Tenant will have 10 days within which to exercise their option to terminate this Lease, if applicable.  Until the restoration of the Premises is complete, there will be an abatement or reduction of Base Rent in the same proportion that the square footage of rentable area in the Premises so damaged or destroyed and under restoration bears to the total square footage of rentable area in the Premises, unless the damaging event was caused by the negligence or willful misconduct of Tenant, its employees, officers, agents, licensees, invitees, visitors, customers, concessionaires, assignees, subtenants, contractors or subcontractors, in which event there will be no such abatement or reduction. Notwithstanding the foregoing or the following, either Landlord or Tenant may, at their option, terminate this Lease by notifying the other party in writing of such termination within 30 days of the date of damage if such damage to the Premises is in excess of 50% of the value of the Premises, as determined by a qualified independent general contractor reasonably acceptable to both parties. Notwithstanding the foregoing provisions of this Section 7.1, if damage to or destruction of the Premises in excess of 50% of the value of the Premises occurs within the last year of the Term, as the same may be extended as provided herein, the obligation of Landlord to restore the Premises will not arise unless (i) Landlord, at its sole option, elects to restore such work; (ii) Landlord, at its sole option, elects to provide Tenant with the opportunity of extending the Term for an additional period so as to expire 5 years from the date of the completion by Landlord of the repairs and restoration of the Premises; and (iii) Tenant gives written notice to Landlord within 30 days after Landlord’s request that Tenant agrees to such extension.  Such extension will be on the terms and conditions provided herein, if an option to extend this Lease remains to be exercised by Tenant hereunder, or under the terms prescribed in Landlord’s notice, if no such further extension period is provided for herein.  Upon receipt of such notice from Tenant, Landlord agrees to repair and restore the Premises within a reasonable time.  If Tenant fails to timely extend the Term as provided herein, Landlord at its option will have the right to terminate this Lease as of the date of the damaging event, or to restore the Premises and the Lease will continue for the remainder of the then unexpired Term, or until the Lease is otherwise terminated as provided herein. 7.2        CONDEMNATION. 7.2.1     TOTAL OR PARTIAL TAKING. If the whole of the Premises (provided that if 25% or more of the Premises are taken, Tenant may deem that the whole of the Premises are taken), or such portion thereof as will make the Premises unusable, in Tenant's commercially reasonable judgment, for the purposes leased hereunder, shall be taken by any public authority under the power of eminent domain or sold to public authority under threat or in lieu of such taking, the Term will cease as of the day possession or title is taken by such public authority, whichever is earlier (“Taking Date”), whereupon the Rent and all other charges will be paid up to the Taking Date with a proportionate refund by Landlord of any Rent and all other charges paid for a period subsequent to the Taking Date.  If less than the whole of the Premises, or less than such portion thereof as will make the Premises unusable as of the Taking Date, is taken, Base Rent and other charges payable to Landlord will be reduced in proportion to the amount of the Premises taken.  If this Lease is not terminated, Landlord will repair any damage to the Premises caused by the taking to the extent necessary to make the Premises reasonably tenantable within the limitations of the available compensation awarded for the taking (exclusive of any amount awarded for land).  Notwithstanding the foregoing to the contrary, if the whole of the Premises are taken, Landlord will have the right, at its option, to relocate Tenant into other space within the Building or the Property comparable to the Premises (the "New Premises") and, in such event, the Term will not cease as provided above.  Upon such relocation, the New Premises will be deemed the Premises and the prior space originally demised (the "Old Premises") will in all respects be released  from the effect of this Lease.  If Landlord elects to relocate Tenant as above described, (i) the New Premises will contain approximately the same as, or greater rental area than the Old Premises, (ii) Landlord will improve the New Premises, at Landlord's cost (other than the cost of stock, trade fixtures, furniture, and other personal property belonging to Tenant which shall be the responsibility of Tenant), to at least the standards of the Old Premises, (iii)  Base Rent, Tenant's Share of Operating Expenses, and all other charges hereunder will be adjusted for variation in the square footage of the rental area of the New Premises, and (iv) all other terms of this Lease will apply to the New Premises, except as otherwise provided herein. 7.2.2     AWARD. All compensation awarded or paid upon a total or partial taking of the Premises or the Building including the value of the leasehold estate created hereby will belong to and be the property of Landlord without any participation by Tenant; Tenant will have no claim to any such award based on Tenant’s leasehold interest.  However, nothing contained herein will be construed to preclude Tenant, at its cost, from independently prosecuting any claim directly against the condemning authority in such condemnation proceeding for damage to, or cost of removal of, stock, trade fixtures, furniture, and other personal property belonging to Tenant; provided, however, that no such claim will diminish or otherwise adversely affect Landlord’s award or the award of any mortgagee. 8.          MAINTENANCE AND REPAIRS. 8.1        LANDLORD'S OBLIGATIONS. Provided Tenant is not in default under this Lease, Landlord will furnish the following services (the "Services") at its expense (however, such expenses may be included in Operating Expenses): (i)          Repairs and maintenance, for maintaining in good order at all times the exterior walls, windows, doors, and roof of the Building, the heating, ventilating and air conditioning systems, electrical and plumbing systems of the Building, and the walks, paving and landscaping surrounding the Building.   Tenant will be responsible for damage, other than normal wear and tear, to the Premises that is caused by Tenant's usage and occupancy of the Premises. (ii)         Grounds care, including the sweeping of walks and parking areas and the maintenance of landscaping in an attractive manner. (iii)        Fire and extended coverage insurance to protect Landlord's interest in the Building. (iv)       General management, including supervision, inspections and management functions. 8.1.1     Services will be provided for the Building during the hours of 8:00 A.M. to 6:00 P.M. on Mondays through Fridays, and from 8:00 A.M. to 1:00 P.M. on Saturday, except for legal holidays observed by Tenant.  Tenant will advise Landlord of its local holiday schedule and any changes thereto from time to time. 8.1.2     If Tenant uses Services for a period in excess of that provided for herein, then Landlord reserves the right to charge Tenant, as Additional Rent, a reasonable sum as reimbursement for the direct cost of such added Services. 8.1.3     Landlord will not be liable for any damages directly or indirectly resulting from the installation, use, malfunction, or interruption of use of any equipment in connection with the furnishing of Services referred to herein, and particularly any interruption in Services by any cause beyond the immediate control of Landlord; but Landlord will exercise due care in furnishing adequate and uninterrupted Services.  Without limitation on the foregoing, under no circumstances will Landlord incur liability for damages caused directly or indirectly by any malfunction of a computer system or systems within the Building resulting from or arising out of the failure or malfunction of any electrical, air-conditioning or other system serving the Building. 8.2        TENANT'S OBLIGATIONS. 8.2.1     Except as specifically provided to the contrary in Section 8.1 above, Tenant will, at Tenant's sole cost and expense, maintain in good order, condition and repair the Premises and the fixtures and appurtenances therein, and will suffer no active or permissive waste or injury thereof, and Tenant's responsibilities in conjunction therewith will include, but not be limited to, the cleaning of window coverings, the shampooing of the carpeting located in the Premises, as well as the regular painting and decorating of the Premises so as to maintain the Premises in a first class condition. If any portion of the Premises or any system or equipment in the Premises which Tenant is obligated to repair cannot be fully repaired, Tenant will promptly replace the same.  To the extent that the useful life of such replacement (as determined in accordance with the General Depreciation System of accounting, or such similar system or method as the parties may reasonably agree upon) extends beyond the Term, Tenant will, promptly after its purchase of the replacement, submit to Landlord satisfactory payment and depreciation evidence with respect to the replacement and, within 30 days after receipt of the same, Landlord will reimburse Tenant for the prorated cost of said replacement from the end of the Term to the end of the useful life of such replacement.  Tenant will, at Tenant's expense, but under the direction of Landlord and performed by Landlord's employees, or with Landlord's express written consent, by persons requested by Tenant and authorized in writing by Landlord, promptly repair any injury or damage to Premises or Building caused by misuse or neglect thereof by Tenant, or by persons permitted on the Premises by Tenant, or by Tenant moving in or out of the Premises. 8.2.2     Tenant agrees that all personal property brought into the Premises by Tenant, its employees, licensees and invitees will be at the sole risk of Tenant; and Landlord will not be liable for theft thereof or of money deposited therein or for any damages thereto, such theft or damage being the sole responsibility of Tenant. 8.2.3     Tenant will obtain Landlord's consent, such consent not to be unreasonably withheld, as to the location or relocation within the Premises of any heavy objects or furnishings such as file cabinets, vending machines, etc., so as not to cause damage to the Building. 8.3        CONDITION UPON TERMINATION. Upon the termination of the Lease, Tenant will surrender the Premises to Landlord, broom clean and in the same condition as received except for ordinary wear and tear which Tenant was not otherwise obligated to remedy under any provision of this Lease. However, Tenant will not be obligated to repair any damage which Landlord is required to repair under Section 8.1.  All property of Tenant remaining on the Premises after expiration of the Term will be deemed conclusively abandoned and may be removed by Landlord, and Tenant will reimburse Landlord for the reasonable cost of removing the same, subject however, to Landlord’s right to require Tenant to remove any Tenant Alterations made to Premises by Tenant pursuant to Section 5.  Tenant will repair, at Tenant's expense, any damage to the Premises or the Building caused by the removal of any of Tenant’s personal property, including but not limited to furniture, machinery and equipment.  In no event, however, will Tenant remove any of the following materials or equipment without Landlord's prior written consent: any power wiring or power panels; lighting or lighting fixtures; millwork and cabinetry; wall coverings; drapes, blinds or other window coverings; carpets or other floor coverings; heaters, air conditioners, or any other heating or air conditioning equipment; fencing or security gates; plumbing fixtures, water fountains; or other similar building operating equipment and decorations. 9.          DEFAULT AND REMEDIES: 9.1        DEFAULT BY TENANT.  The following will be events of default by Tenant under this Lease: (a)         Failure to pay when due any installment of Rent or any other payment required  pursuant to this Lease; (b)        The filing of a petition for bankruptcy or insolvency under any applicable federal or state bankruptcy or insolvency law, which is not dismissed within 60 days after the date of filing thereof; an adjudication of bankruptcy or insolvency or an admission that it cannot meet its financial obligations as they become due, or the appointment or a receiver or trustee for all or substantially all of the assets of Tenant, which receiver is not discharged within 60 days after the appointment thereof; (c)         A transfer by Tenant in fraud of creditors or an assignment by Tenant for the benefit of creditors; (d)        Any act which results in a lien being filed against the Premises or the Property and such lien not being removed within 30 days after written notice thereof to Tenant; (e)         The liquidation, termination or dissolution of Tenant; and (f)         Failure to cure any non-monetary provision of this Lease within 20 days after written notice thereof to Tenant, provided, however, that in the event such failure to perform cannot reasonably be cured within such 20 day period, Landlord will not exercise any right or remedy hereunder if Tenant begins to cure the default within the 20 day period and continues actively and diligently in good faith to completely cure said default. 9.2        REMEDIES.   In the event of any default hereunder by Tenant, then without prejudice to any other rights which it has pursuant to this Lease or at law or in equity, Landlord will have the following rights and remedies, which are cumulative and not alternative: (a)         Landlord may terminate this Lease by notice to Tenant and retake possession of the Premises for Landlord’s account.  Tenant will then quit and surrender the Premises to Landlord.  Tenant’s liability under all of the provisions of this Lease will continue notwithstanding any expiration and surrender, or any re-entry, repossession, or disposition hereunder, including to the extent legally permissible, payment of all Rent and other charges until the date this Lease would have expired had such termination not occurred. If Landlord so elects, Rent will be accelerated and Tenant will pay Landlord damages in the amount of any and all sums which would have been due for the remainder of the Term.  In the event of such acceleration, Landlord will use commercially reasonable efforts to relet the Premises and, if the Premises is relet, will reimburse to Tenant, on a quarterly basis, the accelerated Rent paid by Tenant to Landlord hereunder to the extent Landlord receives equivalent sums from its new tenant. (b)        Landlord may enter the Premises as agent of Tenant to take possession of any property of Tenant on the Premises, to store such property at the expense and risk of Tenant or to sell or otherwise dispose of such property in such manner as Landlord may see fit without notice to Tenant.  Re-entry and removal may be effected by summary dispossess proceedings, by any suitable action or proceeding, or otherwise.  Landlord will not be liable in any way in connection with its actions pursuant to this section, to the extent that its actions are in accordance with law. (c)         Landlord may relet all or any part of the Premises for all or any part of the unexpired portion of the Term or for any longer period, and may accept any Rent then attainable; grant any concessions of Rent, and agree, at Tenant’s expense, to paint or make any special repairs, alterations, and decorations for any new Tenant as it may deem advisable in its sole and absolute discretion.  Landlord covenants to use such commercially reasonable efforts to relet the Premises as are imposed by law. (d)        Landlord may remedy or attempt to remedy any default of Tenant under this Lease for the account of Tenant and to enter upon the Premises for such purposes.  No notice of Landlord’s intention to perform such covenants need be given Tenant unless expressly required by this Lease.  Except to the extent of any loss or damage caused by the gross negligence or willful misconduct of Landlord, its employees, agents or contractors, Landlord will not be liable to Tenant for any loss or damage caused by acts of Landlord in remedying or attempting to remedy such default and Tenant will pay to Landlord all expenses incurred by Landlord in connection with remedying or attempting to remedy such default.  Any expenses incurred by Landlord will accrue interest from the date of payment by Landlord until repaid by Tenant at the highest rate permitted by law.              9.3        COSTS. In the event it is necessary for either party to this Lease to retain an attorney to enforce any covenant, condition, or provision hereof, it is agreed that the prevailing party shall be entitled to recover, in addition to any damages proven, its reasonable attorneys' fees.  In addition, upon any default by Tenant, Tenant will also be liable to Landlord for the expenses to which Landlord may be put in re-entering the Premises, reletting the Premises and putting the Premises into the condition necessary for such reletting (including attorneys’ fees and disbursements, marshall’s fees, and brokerage fees, in so doing), and any other expenses reasonably incurred by Landlord. 9.4        WAIVER. No delay or omission by Landlord in exercising a right or remedy will exhaust or impair the same or constitute a waiver of, or acquiescence to, a default. 9.5        DEFAULT BY LANDLORD. In the event of any default by Landlord, Tenant’s exclusive remedy will be an action for damages; provided, however, prior to any such action Tenant will give Landlord written notice specifying such default with particularity, and Landlord will have a period of 20 days following the date of such notice in which to commence the appropriate cure of such default.  Unless and until Landlord fails to commence and diligently pursue the appropriate cure of such default after such notice or complete same within a reasonable period of time, Tenant will not have any remedy or cause of action by reason thereof.  Notwithstanding any provision of this Lease, Landlord will not at any time have any personal liability under this Lease, and Tenant’s sole remedy with respect thereto will be a suit for damages and not a termination of the Lease.  As a material inducement to Landlord to enter into this Lease with Tenant, Tenant hereby acknowledges and agrees that Landlord's liability for any breach or default by Landlord of any term or provision of this Lease is limited to the greater of the following (the "Liability Cap"):  (i) Landlord's equity or interest then owned by Landlord in the Building, or (ii) a cumulative maximum of $2,500,000.00.  Notwithstanding the foregoing, in the event that any breach or default by Landlord of any term or provision of this Lease results from Landlord's gross negligence or willful misconduct, the Liability Cap set forth above shall be increased to a cumulative maximum of $5,000,000.00.  In no event will any deficiency judgment be sought or obtained against Landlord in the event Tenant's damages exceed the Liability Cap, and Tenant hereby expressly waives any claims for damages in excess of the Liability Cap. 10.        PROTECTION OF LENDERS. 10.1      SUBORDINATION AND ATTORNMENT.   This Lease will be subject and subordinated at all times to the terms of each and every ground or underlying lease which now exist or may hereafter be executed affecting the Premises, and to the liens of each and every mortgage and deed of trust in any amount or amounts whatsoever now or hereafter existing encumbering the Premises, the Building or the Property, and to all modifications, renewals and replacements thereto without the necessity of having further instruments executed by Tenant to effect such subordination.  Subject to the specific provisions of a subordination and non-disturbance agreement, so long as no default or event which with the passing of time or giving of notice would constitute a default, exists under this Lease, the peaceable possession of Tenant in and to the Premises for the Term will not be disturbed in the event of the foreclosure of any such mortgage or deed of trust or in the event of a termination of any ground or underlying leases affecting the Premises.  If Landlord’s interest in the Building and or the Property is acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure sale or transfer in lieu thereof, Tenant will attorn to the transferee of or successor to Landlord’s interest in the Premises, the Building or the Property and recognize such transferee or successor as Landlord under this Lease. 10.2      ESTOPPEL CERTIFICATES AND SUBORDINATION AND NON-DISTURBANCE AGREEMENT.  Within 15 days of receipt of a written request of Landlord, any lender or prospective lender of the Building or Property, or at the request of any purchaser or prospective purchaser of the Building or the Property, Tenant will deliver an estoppel certificate, attaching a true and complete copy of this Lease, including all amendments relative thereto, and certifying with particularity, among other things, (i) a description of any renewal or expansion options, if any; (ii) the amount of Rent currently and actually paid by Tenant under this Lease; (iii) that the Lease is in full force and effect as modified; (iv) that Tenant is in possession of the Premises; (v) stating whether either Landlord or Tenant is in default under the Lease and, if so, summarizing such default(s); and (vi) stating whether Tenant or Landlord has any offsets or claims against the other party and, if so, specifying with particularity the nature and amount of such offset or claim.  Landlord will likewise deliver a similar estoppel certificate within 15 days of the request of Tenant, any lender or prospective lender of Tenant, or assignee approved by Landlord. 10.3      TENANT'S FINANCIAL CONDITION.   Within 10 days after written request from Landlord, Tenant will deliver to Landlord such financial statements as are reasonably required by Landlord to verify the net worth of Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant will deliver to any lender designated by Landlord any financial statements required by such lender to facilitate the financing or refinancing of the Building or the Property. Tenant represents and warrants to Landlord that each such financial statement is a true and accurate statement as of the date of such statement. All financial statements will be confidential and will be used only for the purposes set forth herein.  If there is a material adverse change in Tenant’s financial condition, Tenant will give immediate notice of such material adverse change to Landlord.  If Tenant fails to give such immediate notice to Landlord, such failure will be deemed an event of default under this Lease.   11. TELECOMMUNICATIONS. Tenant acknowledges and agrees that all telephone and telecommunications services desired by Tenant will be ordered and utilized at the sole expense of Tenant.  All installations of telecommunications equipment and wires will be accomplished pursuant to plans and specifications approved in advance in writing by Landlord.  Unless Landlord otherwise requests or consents in writing, all of Tenant’s telecommunications equipment will be and remain solely in the Premises and the telephone closet(s) on the floor(s) on which the Premises is located, in accordance with rules and regulations adopted by Landlord from time to time.  Landlord will have no responsibility for the maintenance of Tenant’s telecommunications equipment, including wire, or for any wiring or other infrastructure to which Tenant’s telecommunications equipment may be connected.  Tenant agrees that, to the extent any such service is interrupted, curtailed or discontinued from any cause whatsoever, whether or not such loss or damage results from any fault, default, negligence, act or omission of Landlord or its agents, servants, employees, or any other person for whom Landlord is in law responsible, Landlord will have no obligation or liability with respect thereto and it will be the sole obligation of Tenant at its expense to obtain substitute service. Landlord will have the right, upon reasonable prior notice to Tenant, to interrupt or turn off telecommunications facilities in the event of an Emergency or as necessary in connection with the operation of the Building or installation of telecommunications equipment for other tenants of the Building. Tenant will not utilize any wireless communications equipment (other than usual and customary cellular telephones), including antennae and satellite receiver dishes, within the Premises or the Building, without Landlord’s prior written consent.  Such consent may be conditioned in such a manner so as to protect Landlord’s financial interests and the interests of the Building, and the other tenants therein, in a manner similar to the arrangements described in the immediately preceding paragraphs. In the event that telecommunications equipment, wiring and facilities installed by or at the request of Tenant within the Premises, or elsewhere within the Building causes interference to equipment used by another party, Tenant will assume all liability related to such interference, Tenant will use reasonable efforts, and will cooperate with Landlord and other parties, to promptly eliminate such interference.  In the event that Tenant is unable to do so, Tenant will substitute alternative equipment which remedies the situation.  If such interference persists, Tenant will discontinue the use of such equipment, and, at Landlord’s discretion, remove such equipment according to the foregoing specifications. 12.        MISCELLANEOUS PROVISIONS. 12.1      LANDLORD'S LIABILITY; CERTAIN DUTIES.   As used in the Lease, the term "Landlord" means only the current owner or owners of the fee title to the Premises, the Building or the Property or the leasehold estate under a ground lease of the Premises, the Building or the Property at the time in question. Each landlord is obligated to perform the obligations of Landlord under this Lease only during the time such landlord owns such interest or title. Any landlord who transfers its title or interest is relieved of all liability with respect to the obligations of Landlord under this Lease to be performed on or after the date of transfer, provided that such transfer is not for the primary purpose of avoiding such obligations. However, each landlord will deliver to its transferee all funds previously paid by Tenant if such funds have not yet been applied under the terms of this Lease. 12.2      INTERPRETATION. The captions of the Articles or Sections of this Lease are to assist the parties in reading this Lease and are not a part of the terms or provisions of this Lease. Whenever required by the context of this Lease, the singular will include the plural and the plural will include the singular. The masculine, feminine and neuter genders will each include the other. In any provision relating to the conduct, acts or omissions of Tenant the term "Tenant" will include Tenant's agents, employees, contractors, invitees, successors or others using the Premises, the Building or the Property with Tenant's expressed or implied permission.  This Lease will not be construed more or less favorably with respect to either party as a consequence of the Lease or various provisions hereof having been drafted by one of the parties hereto. 12.3      INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Lease is the only agreement between the parties pertaining to the lease of the Premises, the Building or the Property and no other agreements either oral or otherwise are effective unless embodied herein.  All amendments to this Lease will be in writing and signed by all parties. Any other attempted amendment will be void. 12.4      NOTICES. Any notices which may be permitted or required hereunder will be in writing and will be deemed to have been duly given as of the date and time the same are personally delivered, transmitted electronically (i.e., telecopier device) or within three days after depositing with the United States Postal Service, postage prepaid by registered or certified mail, return receipt requested, or within one day after depositing with Federal Express or other overnight delivery service from which a receipt may be obtained, and addressed as follows: To Landlord at the following address: St. Joe Commercial 415 Beckrich Road, Suite 350 Panama City Beach, Florida  32407 Telephone:  *** Telecopy:  *** Attn:  *** Copies to: The St. Joe Company 1650 Prudential Drive, Suite 400 Jacksonville, Florida 32207 Attn:  *** Telephone:  *** Telecopy:  ***                            and The St. Joe Company 1650 Prudential Drive, Suite 400 Jacksonville, Florida 32207 Attn:  *** Telephone: *** Telecopy: *** To Tenant at the following address: Nextel WIP Lease Corporation 4500 Carillon Point Kirkland, WA  98033 Attn: General Counsel Telephone: (425) 576-3600 Telecopy: (425) 576-3650                            And Nextel Partners Attn: Facilities Manager. 10901 Bren Road East Minnetonka, Minnesota 55343 or at such other address as either party hereto will from time to time designate to the other party by notice in writing as herein provided. 12.5      RADON GAS NOTICE. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit.  Landlord does not conduct radon testing with respect to the Building and disclaims any and all representations and warranties as to the absence of radon gas or radon gas producing conditions with respect to the Building. 12.6      WAIVERS. All waivers must be in writing and signed by the waiving party.  Landlord's failure to enforce any provision of this Lease or its acceptance of Rent will not be a waiver and will not prevent Landlord from enforcing that provision or any other provision of this Lease in the future. No statement on a payment check from Tenant or in a letter accompanying a payment check will be binding on Landlord.  Landlord may, with or without notice to Tenant, negotiate such check without being bound to the conditions of such statement. 12.7      NO RECORDATION. Tenant will not record this Lease or any memorandum of lease without prior written consent from Landlord. 12.8      FORCE MAJEURE. If either party cannot perform any of its obligations (except the payment of Rent, or other sums of money) due to events beyond that party's control, the time provided for performing such obligations will be extended by a period of time equal to the duration of such events. Events beyond control include, but are not limited to, Excusable Delays (as defined in the Construction Addendum), acts of the other party, acts of God, war, civil commotion, labor disputes, strikes, fire, flood or other casualty, shortages of labor or material, government regulation or restriction and weather conditions. 12.9      EXECUTION OF LEASE. Submission or preparation of this Lease by Landlord will not constitute an offer by Landlord or option for the Premises, and this Lease will constitute an offer, acceptance or contract only as expressly specified by the terms of this Section 12.9.  In the event that Tenant executes this Lease first, such action will constitute an offer to Landlord, which may be accepted by Landlord by executing this Lease, and once this Lease is so executed by Landlord, such offer may not be revoked by Tenant and this Lease will become a binding contract.  In the event that Landlord executes this Lease first, such action will constitute an offer to Tenant, which may be accepted by Tenant only by delivery to Landlord of a fully executed copy of this Lease, together with a fully executed copy of any and all guaranty agreements and addendums provided that in the event that any party other than Landlord makes any material or minor alteration of any nature whatsoever to any of said documents, then such action will merely constitute a counteroffer, which Landlord, may, at Landlord's election, accept or reject.  Notwithstanding that the Term Commencement Date may occur and the Term may commence after the date of execution of this Lease, upon delivery and acceptance of this Lease in accordance with the terms of this Lease, this Lease will be fully effective, and in full force and effect and valid and binding against the parties in accordance with, but on and subject to, the terms and conditions of this Lease. 12.10    AUTHORITY. As a material inducement to Landlord to enter into this Lease, Tenant, intending that Landlord rely thereon, represents and warrants the following to Landlord: (i)          This Lease constitutes a valid and binding obligation of Tenant, enforceable against Tenant in accordance with the terms of this Lease; (ii)         Tenant is duly organized, validly existing and in good standing under the laws of the state of Tenant's organization and has full power and authority to transact business in the State of Florida; and (iii)        The execution and delivery of this Lease by the individual or individuals executing this Lease on behalf of Tenant, and the performance by Tenant of Tenant's obligations under this Lease, have been duly authorized and approved by all necessary corporate or partnership action, as the case may be, and the execution, delivery and performance of this Lease by Tenant is not in conflict with Tenant's organizational documents or other charters, agreements, rules or regulations governing Tenant's business as any of the foregoing may have been supplemented or amended in any manner. 12.11    FLORIDA LAW. This Lease will be governed by the laws of the State of Florida. 12.12    COUNTERPART. This Lease may be executed in multiple counterparts, each counterpart of which will be deemed an original and any of which will be deemed to be complete in and of itself and may be introduced into evidence or used for any purpose without the production of the other counterpart or counterparts. 12.13    HOLDING OVER. In addition to and not limiting any other rights or remedies which Landlord may have on account of Tenant holding over without written consent of Landlord, Tenant will pay to Landlord rent in the amount of 125% of the Base Rent, as well as any and all direct and consequential damages incurred by Landlord on account of such unapproved holding over including claims by tenants entitled to future possession. 12.14    TIME IS OF THE ESSENCE. TIME IS OF THE ESSENCE OF THIS LEASE AND ALL PROVISIONS CONTAINED HEREIN. 12.15    APPROVAL OF PLANS AND SPECIFICATIONS. Neither review nor approval by or on behalf of Landlord of any Tenant's plans nor any plans and specifications for any Tenant Alterations or any other work performed by or on behalf of Tenant in and to the Premises, will constitute a representation or warranty by Landlord, any of Landlord's beneficiaries, the managing agent of the Building or the Property or any of their respective agents, partners or employees that such plans and specifications either (i) are complete or suitable for their intended purpose, or (ii) comply with Applicable Laws, it being expressly agreed by Tenant that neither Landlord, nor any of Landlord's beneficiaries, nor the managing agent of the Building or the Property nor any of their respective agents, partners or employees assume any responsibility or liability whatsoever to Tenant or to any other person or entity for such completeness, suitability or compliance. 12.16    RELATIONSHIP. Landlord and Tenant disclaim any intention to create a joint venture, partnership or agency relationship. 12.17    BROKER'S FEE. Tenant covenants, represents and warrants that Tenant had no dealings or negotiations with any broker or agent in connection with the consummation of this Lease.  Advantis Real Estate Services Company (“Advantis”) is the sole broker with whom Landlord has dealt in this transaction and Landlord agrees to pay any commissions due Advantis.  Tenant acknowledges that Advantis represents solely Landlord with respect to this transaction.  Tenant and Landlord covenant and agree to hold harmless and indemnify each other from and against any and all costs, expenses (including reasonable attorneys’ fees before trial, at trial, on appeal and in bankruptcy) or liability for any compensation, commissions, or charges claimed by any broker or agent claiming to have been engaged by or to have had dealings with the indemnifying party with respect to this Lease or the negotiation thereof other than Advantis. 12.18    WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE. 12.19    RIDERS AND EXHIBITS. All Riders, Addenda, Schedules and Exhibits attached hereto will be deemed to be a part hereof and are hereby incorporated herein. 12.20    TENANT ASSIGNMENT.  Tenant will not assign this Lease, in whole or in part, or sublease the Premises, in whole or in part, without the prior written consent of Landlord, which consent will not be unreasonably withheld, subject to Landlord’s right of recapture set forth below, and in no event will Tenant be released from any obligation or liability under this Lease following any such assignment or sublease; provided, however, that Tenant will have the right, without Landlord's consent, to assign this Lease or sublet all or any part of the Premises to an Affiliate of Tenant.  For purposes of this Section 12.20, the term "Affiliate" means an entity which (either directly or indirectly, through one or more intermediaries) controls, is in common control with or is controlled by Tenant.  For purposes of this definition, the term "control" means (a) legal or beneficial ownership of more than fifty percent (50%) of the voting interests of an entity, or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person or entity, whether through the ownership of voting securities, by contract or otherwise.  No sublessee of the Premises or any portion thereof, may further assign or sublease its interest in the Premises or any portion thereof.  Other than an assignment to an Affiliate of Tenant as previously defined, Tenant will pay Landlord an assignment fee in an amount of $500, together with all legal fees and expenses incurred by Landlord in connection with the review by Landlord of Tenant’s requested assignment or sublease pursuant to this Section 12.20, together with any legal fees and disbursements incurred in the preparation and/or review of any documentation (collectively, the "Assignment Costs").  Such sums will be paid by Tenant as Additional Rent within 30 days of invoice for payment thereof.  If the rent due and payable by any assignee or sublessee under any permitted assignment or sublease together with any other consideration received by Tenant exceeds the Rent payable under this Lease for such space, Tenant will pay to Landlord all such excess rent and other excess consideration within 10 days following receipt thereof by Tenant; provided however, Tenant may deduct from such excess rent and other excess consideration the Assignment Costs and any other commercially reasonably costs incurred by Tenant in connection with establishing such assignment/subletting (e.g., a reasonable brokerage commission) provided that Tenant provides Landlord with satisfactory payment evidence of such costs. Within 15 days after Landlord’s receipt of Tenant’s request for Landlord’s consent to a proposed assignment or sublease, excluding any assignment or sublease to an Affiliate of Tenant, Landlord will have the right to require Tenant to reconvey to Landlord that portion of the Premises which Tenant is seeking to assign or sublet.  Tenant will reconvey that portion of the Premises in consideration of Landlord’s release of Tenant from all future Rent and other obligations, which would not otherwise survive termination of the Lease, with respect to the portion of the Premises so reconveyed.  Any such reconveyance will be evidenced by an agreement reasonably acceptable to Landlord and Tenant in form and substance. 12.21    LANDLORD ASSIGNMENT.  Landlord will have the right to sell, transfer or assign, in whole or in part, its rights and obligations under this Lease and in the Property.  Any such sale, transfer or assignment will operate to release Landlord from any and all liability under this Lease arising after the date of such sale, assignment or transfer.     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]     IN WITNESS WHEREOF, Tenant and Landlord have caused this Lease to be duly executed as of the date first above written by their respective duly authorized officers, agents or attorneys in fact as the case may be.   SIGNED, SEALED AND DELIVERED IN THE PRESENCE OF: "Tenant"   NEXTEL WIP LEASE CORPORATION, a Delaware corporation         --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Print Name: --------------------------------------------------------------------------------   Print Name: --------------------------------------------------------------------------------   Its: -------------------------------------------------------------------------------- President   Date: -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     Print Name: --------------------------------------------------------------------------------   (Corporate Seal)       "Landlord"       THE ST. JOE COMPANY, a Florida corporation         --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Print Name: --------------------------------------------------------------------------------   Print Name: --------------------------------------------------------------------------------   Its: -------------------------------------------------------------------------------- President   Date: -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     Print Name: --------------------------------------------------------------------------------   (Corporate Seal)       EXHIBIT A-1 SITE PLAN   EXHIBIT A-2 LEGAL DESCRIPTION   EXHIBIT B LEASE COMMENCEMENT DATE AGREEMENT                THIS AGREEMENT is made and entered into as of ____________________, 200__, by and between THE ST. JOE COMPANY, a Florida corporation ("Landlord") and ______________________________, a ________________________ ("Tenant"). WITNESSETH              WHEREAS, Landlord and Tenant entered into a lease dated __________________, 2001 (“Lease”) setting forth the terms of occupancy by Tenant for Suites _____ and _____ at ____________________ located at _______________; and WHEREAS, Landlord and Tenant desire to confirm certain dates and other information relating to the Lease as hereafter set forth.              NOW THEREFORE, in consideration of the premises and the covenants hereafter set forth, it is agreed,              1.          The foregoing recitals are true and correct and are incorporated herein by reference.  Capitalized terms used herein but not defined herein will have the meaning given to them in the Lease.              2.          The Term Commencement Date of the Lease is ____________________, 200__ and the Expiration Date of the Lease is _______________________, 200_, unless sooner terminated or extended pursuant to the Lease.              3.          The Premises contain ____ square feet of rentable area.              4.          Tenant’s Share is ______%.              IN WITNESS WHEREOF, Landlord and Tenant have executed this document as of the first date set forth in the first paragraph above.   "Landlord" "Tenant"     THE ST. JOE COMPANY, a Florida corporation   , a   --------------------------------------------------------------------------------         --------------------------------------------------------------------------------         By:     By:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Name:     Name:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Its:   President   Its:   President   --------------------------------------------------------------------------------       --------------------------------------------------------------------------------   Date:     Date:     --------------------------------------------------------------------------------     --------------------------------------------------------------------------------           EXHIBIT C CONSTRUCTION ADDENDUM ATTACHED TO AND MADE A PART OF THE LEASE DATED _________________, 2001 BETWEEN THE ST. JOE COMPANY, AS LANDLORD, AND NEXTEL WIP LEASE CORPORATION, AS TENANT ARTICLE I CERTAIN DEFINITIONS              For the purposes of this Exhibit (herein called the “Addendum”), unless the context otherwise requires, the following terms will have the respective meanings assigned to them in this Article I or the section or article referred to below:              1.1        "Additional Premises" will have the meaning ascribed to the same in Section 1.1 of the Lease.              1.2        “Allowance Amount” will have the meaning set forth in Section 5.2.              1.3        “Base Building Architect” will mean Rolland, DelValle & Bradley, Inc., or such other firm which may hereafter be designated by Landlord and approved in writing by Tenant, in Tenant's reasonable discretion.              1.4        “Base Building Plans” will mean the final, detailed working plans, specifications, drawings, and construction documents for the Base Building to be prepared and sealed by the Base Building Architect and approved in writing by Landlord, and (only to the extent necessary to obtain all requisite building and other permits) the City of Panama City Beach, Florida, as such Base Building Plans may be modified in accordance with this Addendum.              1.5        “Base Building” will be that certain one-story building to contain approximately 67,414 square feet of rentable area, together with the Base Building Systems, grading, drainage, site work and related improvements to be built on the Land in accordance with the Base Building Plans, all Legal Requirements, and the provisions of this Addendum.              1.6         “Base Building Systems” will mean with respect to the Base Building:   (a) the HVAC unit on the roof, the plumbing system, and the restrooms; (b) the electrical, telephone, telecommunication conduit, water, storm sewer and sanitary sewer utility systems and connections; (c) the sprinkler and fire protection systems; (d) the lighting systems in the restrooms; (e)  the ceiling system in the restrooms; (f) the paving and other improvements for pedestrian and vehicular access and vehicular parking, together with all equipment, machinery, shafts, flues, piping, wiring, panels and instrumentation and other appurtenances relating to any or all of the foregoing, all as more specifically set forth in the Base Building Plans.              1.7        "Building" will mean the Base Building and the Leasehold Improvements relating to the Premises (but not the Leasehold Improvements relating to the Additional Premises).              1.8        “Building Plans” will mean the Base Building Plans and the Leasehold Improvement Plans.              1.9        “Building Work” will mean all construction work, services performed, or materials provided to the Property in connection with the construction of the Base Building.              1.10      “Business Day” will mean any day other than a Saturday, Sunday, or legal holiday observed by Tenant.  Tenant will advise Landlord of its local holiday schedule and any changes thereto from time to time.              1.11      “Construction Contract” will mean any construction contract and/or construction management agreement to be entered into by Landlord, as owner, for the construction and/or management of construction of all or any part of the Building and the other improvements called for in the Building Plans.              1.12      "Construction Schedule" will mean the design and construction schedule attached to this Addendum as Schedule 3 and made a part hereof.              1.13      “Early Occupancy Date” will mean the date 30 days prior to the date of Substantial Completion as such date of Substantial Completion is projected by Landlord in good faith.  On the Early Occupancy Date, the construction of the Building and the Leasehold Improvements relating to the Additional Premises will be completed to a degree which will allow the installation of Tenant's Lines (as defined in Section 4.5 hereof) without any undue delay or material adverse cost to Tenant; provided, however, that the Work in the Building and the Additional Premises may continue as of such date and such completion will not be deemed Substantial Completion (as defined in Section 1.33 hereof).  Prior to the installation of Tenant's Lines, Landlord, Tenant and their respective representatives, will walk through the Building and the Additional Premises to determine the condition of space within the Building and the Additional Premises as of such date.  Tenant will be responsible for all costs of repair of damage to the Building and the Additional Premises caused by Tenant, its employees, agents or contractors during the period between the Early Occupancy Date and the Term Commencement Date or the Effective Date (as defined in Section 1.1 of the Lease), as the case may be.              1.14      “Excusable Delay” will mean any delay in Substantial Completion of the Building or the Leasehold Improvements relating to the Additional Premises due to strikes, lockouts, or other labor or industrial disturbance (other than on the part of employees of Landlord), civil disturbance, future order of any government, court or regulatory body claiming jurisdiction, act of the public enemy, war, riot, sabotage, blockade, embargo, failure or inability to secure or delay in securing materials, supplies, or labor through ordinary sources by reason of shortages or priority or regulation or order of any government or regulatory body, lightning, earthquake, fire, storm, hurricane, tornado, flood, washout, explosion, unusually inclement weather, or any cause whatsoever beyond the reasonable control of Landlord, whether or not similar to any of the other causes hereinabove stated; provided, however, that for purposes of this definition, Landlord's or any other person's lack of funds will not be deemed to be a cause beyond the control of Landlord, and an Excusable Delay will be deemed to exist only so long as Landlord has timely identified the occurrence and nature of the delay in accordance with the provisions of Section 4.3 and exercises reasonable due diligence to remove or overcome it.              1.15      “General Contractor” will mean the general contractor or construction manager selected by Landlord for the construction of the Base Building and the Leasehold Improvements.              1.16      “Governmental Authority” will mean any and all courts, boards, agencies, commissions, offices, or authorities of any nature whatsoever of any governmental unit (federal, state, county, district, municipal, city, or otherwise) whether now or hereafter in existence, which have jurisdiction over the Building and the Additional Premises.              1.17      “Land” will mean that tract of real property situated in Bay  County, Florida, and being more particularly depicted  on Exhibit A-1 attached to the Lease.              1.18      “Leasehold Contract” will mean the Construction Contract awarded for the construction of the Leasehold Improvements.              1.19      “Leasehold Improvement Architect” will mean firm which may hereafter be designated by Landlord and approved in writing by Tenant, in Tenant's reasonable discretion.              1.20      “Leasehold Improvement Cost” will mean the maximum cost of construction of the Leasehold Improvements as established pursuant to Section 2.4.              1.21      “Leasehold Improvement Plans” will mean the final, detailed working plans, specifications, drawings, and construction documents for the Leasehold Improvements to be prepared and sealed by the Leasehold Improvement Architect and approved in writing by Landlord, Tenant, and (only to the extent necessary to obtain all requisite building and other permits) the appropriate Governmental Authority, as such Leasehold Improvement Plans may be modified in accordance with this Addendum.              1.22      “Leasehold Improvements” will mean all leasehold improvements to be constructed and/or installed in the Premises and the Additional Premises, including all partitions, doors and hardware, wall coverings, painting, lighting systems, supplemental HVAC and electrical systems, ceiling systems, floor coverings, millwork and other tenant finish improvements (but specifically excluding the Base Building Systems and other improvements which are defined as part of the Base Building), all as more specifically set forth in the Leasehold Improvement Plans.   Leasehold Improvements will not include furniture, furnishings, office equipment, signs, artwork, trade fixtures, or special systems installed by Tenant that are in the nature of movable or removable fixtures or equipment.  Additionally, Leasehold Improvements will not include Tenant's Lines, any items installed at Tenant's request by General Contractor, or any other contractor, pursuant to a separate contract with Tenant, and not otherwise required to be installed in accordance with the Building Plans.              1.23      “Leasehold Improvements Work” will mean all construction work, services performed, or materials provided to the Property in connection with the construction of the Leasehold Improvements.              1.24      “Legal Requirements” will mean (a) any and all judicial decisions, orders, injunctions, writs, statutes, rulings, rules, regulations, permits, certificates, or ordinances of any Governmental Authority in any way applicable to Landlord, Tenant, the Property or the Project including, but not limited to, any of the aforesaid dealing with the design, construction, ownership, use, leasing, maintenance, service, operation, sale, exchange, or condition of real property, or zoning or environmental matters in effect as of the date of final approval of the Building Plans by the appropriate Governmental Authority,  (b) any and all loan documents, construction contracts, leases, declaration of covenants, conditions or restrictions, or other agreements (written or oral) and any and all insurance requirements, documents, or instruments relating to Landlord, Tenant, the Property or the Project to which Landlord, Tenant or the Property may be bound or encumbered, and (c) any and all covenants, restrictions, and easements for the Property or the Project as may be recorded by Landlord in its sole discretion.              1.25      "Premises" will have the meaning ascribed to the same in Section 1.1 of the Lease and, for purposes of this Addendum, will specifically exclude the Additional Premises.              1.26      “Permitted Exceptions” will mean only (a) those Title Exceptions as are listed in attached Schedule 1, (b) those easements (temporary and permanent) which are reasonably and customarily necessary to service or benefit the development, use, operation and ownership of the Building or the Additional Premises and that do not adversely affect the use or occupancy of the Building, the Additional Premises and Building Facilities by Tenant, and (c) such other Title Exceptions as may hereafter be approved in writing by Tenant.              1.27      “Project” will mean the approximately 10.0 acre tract of real property, of which the Land, as defined in Section 1.16 above is a part, on which Landlord is developing a mixed use multiple building business and industrial park known as Beckrich Office Park, including the common drives, walkways, drainage facilities, and other improvements as generally depicted on the Master Development Plan for Beckrich Office Park, attached to and made a part of the Review Plans and Specifications attached to this Addendum as Schedule 2, all as such Beckrich Office Park business and industrial park may be developed, constructed or modified from time to time by Landlord in its sole discretion.              1.28      “Projected Completion Date” will mean January 1, 2002 with respect to the completion of the Building, and March 31, 2002 with respect to the completion of the Leasehold Improvements for the Additional Premises.              1.29      “Property” will mean the Building, the Additional Premises and the Land and all appurtenances thereto.              1.30      “Punch List Items” will mean those items of construction, decoration, and mechanical adjustment relating to the Building or the Leasehold Improvements relating to the Additional Premises, as the case may be, which, individually or in the aggregate, are minor in character and do not materially interfere with Tenant's use or enjoyment of the Building or the Leasehold Improvements relating to the Additional Premises, as the case may be, and the appurtenances thereto and for which it may be reasonably anticipated that the completion will occur within 30 days after Substantial Completion, subject to extension for Excusable Delay. The Base Building Architect (as to the Base Building) and the Leasehold Improvement Architect (as to the Leasehold Improvements) will each prepare a schedule of Punch List Items upon Substantial Completion of each relevant portion of the Building or the Leasehold Improvements relating to the Additional Premises (i.e., a schedule of Punch List Items upon Substantial Completion of Building and a separate schedule of Punch List Items upon Substantial Completion of Leasehold Improvements of the Building), each such schedule to be reviewed and approved in writing by Landlord, Tenant, General Contractor and, as appropriate, the Base Building Architect and the Leasehold Improvement Architect.              1.31      “Review Plans and Specifications” will mean the preliminary plans, drawings, and specifications for the Base Building (including the Base Building Systems) approved by Landlord and Tenant and more particularly described in Schedule 2 attached to this Addendum and made a part hereof.              1.32      “Substantial Completion” or “Substantially Complete” will mean the completion by Landlord of the construction of the Building or the Leasehold Improvements for the Additional Premises, as the case may be, or relevant portion thereof, all as more specifically set forth in the Building Plans, including, but not limited to, the construction and installation of the Base Building Systems, in accordance with the Building Plans, all applicable Legal Requirements and this Addendum, in a good and workmanlike manner, and in accordance with good construction and engineering practices, free from known material defects (structural, mechanical, or otherwise) in design, workmanship, and materials, with new materials (unless otherwise specified in the Building Plans), and with the only additional construction to be effected being Punch List Items.  Without limiting the foregoing, “Substantial Completion” will not be deemed to have occurred until all of the following conditions have been satisfied (or waived in writing by Tenant):  (a) receipt of a Certificate of Substantial Completion by the Base Building Architect (as to the Base Building) and the Leasehold Improvement Architect (as to the Leasehold Improvements) on AIA Form G704 (or a substantially similar form) relating to the construction of the Building, or the Leasehold Improvements relating to the Additional Premises, or relevant portion thereof, as the case may be; (b) substantially all exterior work will have been performed (except as to Punch List Items) and all outside hoists have been removed from the Building; (c) the City, county or other Governmental Authority has conducted all inspections, and issued all certificates and approvals, necessary for legal occupancy of the Building or the Additional Premises or relevant portion thereof by Tenant, as the case may be (unless the failure to obtain any necessary certificate or approval is caused   by Tenant’s failure to complete the installation of Tenant's Lines); (d) Tenant, its employees, agents and invitees have ready access to, and parking adjacent to, the Building; and (e) all necessary utilities and plumbing are available in capacities not less than as set forth in the Building Plans. At Landlord's request, Tenant will execute and deliver to Landlord a written acknowledgment that Substantial Completion has occurred.  Acceptance of possession, use or occupancy of the Premises or the Additional Premises by Tenant will not be deemed to constitute a waiver of Landlord's duties, obligations or warranties expressly set forth in this Addendum or the Lease.              1.33      “Tenant Delay” will mean any delay in Substantial Completion of the Building (or relevant portion thereof) or the Leasehold Improvements for the Additional Premises, as the case may be, which is due directly or indirectly to any act or omission of Tenant, its employees, agents, contractors, or subcontractors, including, without limitation, any changes to the Building Plans or in the Work made by or at the request of Tenant pursuant to Section 3.2, and any failure of Tenant or Tenant's Consultant to review and comment on, within the time frames set forth in this Addendum, any plans, drawings, specifications or other construction documents required by this Addendum to be submitted to Tenant or Tenant's Consultant by Landlord.  No Tenant Delay will be deemed to have occurred under this Addendum unless Landlord has identified the occurrence and nature of the delay in accordance with the provisions of Section 4.3.  There will be excluded from the number of days of Tenant Delays any days of delay which are caused by any act or omission of Landlord, its employees, agents, contractors or subcontractors (including, but not limited to, the Base Building Architect) and any Excusable Delays.  Landlord will have no obligation to attempt to mitigate, through expediting the prosecution of any Work or changing the scope of the Work or otherwise, the actual or presumed effects of a Tenant Delay on Landlord’s ability to achieve Substantial Completion; provided, however, that at Tenant’s request and with a written agreement by Tenant to pay any additional costs incurred by Landlord resulting therefrom, Landlord will use all reasonable efforts to accelerate the performance of the Work to mitigate the effects of any Tenant Delay.              1.34      “Tenant's Consultant” will mean such individual or firm (if any) as is so designated by Tenant from time to time.              1.35      “Tenant's Building Changes” will have the meaning set forth in Section 3.2.              1.36      “Tenant's Cost” will have the meaning set forth in Section 5.2.              1.37      “Tenant's Delay Damages” will have the meaning set forth in Section 6.1.              1.38      "Tenant's Lines" will have the meaning set forth in Section 4.5.              1.39      Term Commencement Date” will mean the date of Substantial Completion of the Building as accelerated one day for each day of Tenant Delay.              1.40      “Title Exception” will mean any lien, mortgage, security interest, encumbrance, pledge, assignment, claim, charge, lease (surface, space, mineral, or otherwise), condition, restriction, option, conditional sale contract, right of first refusal, restrictive covenant, exception, easement (temporary or permanent), right-of-way, encroachment, overlap, or other outstanding claim, interest, estate, or equity of any nature whatsoever affecting or pertaining to the Property or any portion thereof.              1.41      “Work” will mean the Building Work and the Leasehold Improvements Work.              Additional defined terms may appear in other provisions of this Addendum and, if so, will have the respective meanings assigned to them. Capitalized terms not specifically defined in this Addendum will have the same meanings as ascribed thereto in the Lease.  The definition of a term or phrase in the singular will include and allow for a reference to such term or phrase in the plural or vice versa. ARTICLE II BUILDING PLANS AND CONSTRUCTION CONTRACTS              2.1        Preparation of Building Plans.              (a)         Base Building Plans.  Landlord will cause the Base Building Architect to prepare (and, as appropriate, revise) site plans, concept plans, foundation and shell building construction documents and other plans, drawings, specifications and construction documents for the Base Building.  All such plans, drawings, specifications and other construction documents will be consistent in all material respects with the scope, design or general quality of the Base Building as reflected in the Review Plans and Specifications.  On or before May 24, 2001, all such plans, drawings, specifications and construction documents will be submitted to Tenant and Tenant’s Consultant (if any), not for Tenant’s approval, but only to allow Tenant to confirm that the same are consistent in all material respects with the scope, design or general quality of the Base Building as reflected in the Review Plans and Specifications, and Tenant may, by appropriate marking, provide specific indications of any non-compliance with the Review Plans and Specifications or any requested revisions (in which event the relevant plans, drawing, specifications or other construction documents will be revised by the Base Building Architect and resubmitted to Tenant on or before 10 Business Days after Landlord's receipt of Tenant's specific indications of any non-compliance or requested revisions, and the process repeated, until finally completed in full; provided, however, in no event will this process extend beyond June 30, 2001).  In no event will Tenant's requested revisions require or result in a material change in the scope, design or general quality of the Base Building as reflected in the Review Plans and Specifications, including, without limitation, any change in the rentable or useable floor area of the Base Building. Tenant will provide specific indications of any non-compliance with the Review Plans and Specifications or requested revisions to any items submitted pursuant to this subparagraph (a) no later than 5 Business Days after receipt by Tenant and Tenant’s Consultant (if any). The failure of Tenant to notify Landlord of any non-compliance or requested revisions within 5 Business Days after Tenant's receipt of such items will be deemed to be a lack of objection thereof by Tenant.              (b)        Leasehold Improvement Plans. Landlord will cause the Leasehold Improvement Architect to prepare (and, as appropriate, revise) plans, drawings specifications and construction documents for the Leasehold Improvements.  In no event will any such plans, drawings, specifications and other construction documents require or result in a change in the scope, design or general quality of the Base Building as reflected in the Review Plans and Specifications and/or the Base Building Plans.  On or before August 1, 2001, all such plans, drawings, specifications and construction documents will be submitted to Tenant and Tenant will, by appropriate marking, either approve the same or provide specific indications of rejections and requested revisions (in which event the relevant plans, drawings, specifications or other construction documents will be revised by the Leasehold Improvement Architect and resubmitted to Tenant on or before 10 Business Days after Landlord's receipt of Tenant's specific indications of rejections or requested revisions, and the process repeated, until finally approved in full; provided, however, in no event will this process extend beyond August 26, 2001).  Notwithstanding the generality of the foregoing, in no event will Tenant have any right to reject or request any revision to any plans, drawings, specifications or other construction documents for the Leasehold Improvements if the same would (i) require or result in a change in the scope, design or general quality of the Base Building as reflected in the Review Plans and Specifications and/or the Building Plans, (ii) have an adverse impact on the Base Building Systems, (iii) have an adverse impact on the exterior appearance of the Building or the Additional Premises, or (iv) have an adverse impact on the appearance or functionality of any common areas located on a floor where the Tenant does not lease the entire floor. Tenant will approve or provide specific indications of rejections and requested revisions to any items submitted (or resubmitted) pursuant to this subparagraph (b) no later than 5 Business Days after receipt by Tenant. The failure of Tenant to notify Landlord of approval or disapproval of the items submitted to Tenant under this subsection (b) within 5 Business Days after Tenant's receipt of such items will be deemed to be an approval thereof by Tenant, and to the extent appropriate, incorporated in the Work.              (c)         Final Plans and Specifications.  Upon final approval by Landlord andTenant of the plans, drawings, specifications, and construction documents for the Building and the Leasehold Improvements for the Additional Premises, whether actual or deemed as set forth in this Section 2.1, two sets thereof will be initialed by, and delivered to, Landlord and Tenant to reflect their applicability to the Lease and same will become a part of the Building Plans.              (d)        Cooperation.  Notwithstanding anything contained in this Section 2.1 to the contrary, it is the intent of Landlord and Tenant to proceed as quickly as reasonably possible to resolve any issues regarding the consistency of the proposed Building Plans with the Review Plans and Specifications and finalize the Building Plans, and Landlord and Tenant agree to fully cooperate with each other in an effort to accelerate the completion and finalization of the Building Plans.              2.2        Effect of Approval.  To the extent that Tenant’s approval or consent is required or contemplated hereunder, approval by Tenant (whether actual or deemed) will (a) be non-technical approval of design, materials, and equipment, (b) not be deemed to mean approval of structural capacity of the Base Building or the Base Building Systems, size of ducts and piping, adequacy of electrical wiring, system/equipment capacities and, without limitation, other technical matters, (c) not relieve Landlord of responsibility for proper and adequate design of the Base Building or construction of the Building or the Leasehold Improvements relating to the Additional Premises, and (d) not be deemed approval by Tenant of any extension of the period in which Landlord is to Substantially Complete construction of the Building or the Leasehold Improvements relating to the Additional Premises, as provided in the Lease.  Provided however, Tenant will promptly notify Landlord of any defects or problems in the Building Plans and the construction of the Building or the Leasehold Improvements for the Additional Premises to the extent that Tenant has actual knowledge thereof.  In addition, where Tenant contemplates installation of Leasehold Improvements, trade fixtures, or equipment which are not specifically identified in the Review Plans and Specifications, and which require structural, electrical or mechanical capacity in excess of such capacity as shown in the Review Plans and Specifications, Tenant will be obligated to advise Landlord of such requirements and request appropriate modification to the Base Building Plans as otherwise provided for in this Addendum.  Landlord will ensure that the structure and detail of the utilities and the mechanical, electrical and other Base Building Systems meet all applicable Legal Requirements and the Building Plans and that all of the Work satisfies all Legal Requirements.  Landlord will obtain from General Contractor, and Landlord will use its reasonable efforts to obtain from the Base Building Architect, the Leasehold Improvement Architect, and any electrical, mechanical or structural engineer providing services for the design or construction of the Building and the Leasehold Improvements relating to the Additional Premises, warranties and guarantees, in a form acceptable to Landlord, in Landlord's reasonable discretion, as to the sufficiency and adequacy of the construction of the Base Building, the Base Building Systems and the Leasehold Improvements.  Landlord will obtain from the Base Building Architect and the Leasehold Improvement Architect, certificates, in a form acceptable to Landlord, in Landlord's reasonable discretion, as to the sufficiency and adequacy of the design of the Base Building, the Base Building Systems and the Leasehold Improvements.              2.3        Construction Contract for Base Building.  Landlord may solicit bids for or enter into on a negotiated basis Construction Contracts for the construction of the Base Building, as determined by Landlord.              2.4        Construction Contract for Leasehold Improvements.  Landlord will solicit a bid from General Contractor) for the construction of the Leasehold Improvements, and any changes thereto, for each of the following components of the Leasehold Improvements:  HVAC; electrical; drywall; and plumbing/mechanical.  Promptly after receipt of the bid, Landlord and Tenant will establish the Leasehold Improvement Cost.  The Leasehold Improvement Cost will only include “general conditions” cost items as the same will be addressed in the Construction Contract for the Base Building for the period of time which occurs after Substantial Completion of the Building, or the Leasehold Improvements relating to the Additional Premises, as the case may be, or which require special general conditions related specifically to the nature of the Leasehold Improvement Work.  Landlord will have the right in Landlord's sole discretion to elect as to whether the Leasehold Contract will be awarded on a guaranteed maximum cost basis or on a lump sum basis.  In the event the established Leasehold Improvement Cost exceeds the Allowance Amount, Tenant, at its option, will have the right to have the Leasehold Improvements redesigned, in a manner reasonably acceptable to Landlord, so as to lower the Leasehold Improvement Cost, and have the project renegotiated, with General Contractor to re-establish the Leasehold Improvement Cost; provided, however, that if any such redesign causes changes in materials or other Construction Schedule impacts or is the cause of a delay in obtaining a building permit beyond the applicable deadline date set forth in the Construction Schedule, then such delay will constitute a Tenant Delay. Notwithstanding the foregoing, Landlord and Tenant acknowledge that, by mutual agreement of Landlord and Tenant, negotiated contracts may be let as to certain aspects of the development and construction of the Leasehold Improvements and, accordingly, the Leasehold Improvement Cost may be established as a negotiated amount.  To the extent practical and possible, Landlord will give to Tenant and Tenant's Consultant (if any) 5 days' prior notice of any pre-bid conferences with General Contractor and will permit Tenant and Tenant's Consultant (if any) to attend such meetings for purposes of clarifying the scope of work and the levels of craftsmanship which will be acceptable for the Leasehold Improvements. ARTICLE III CHANGES IN BUILDING PLANS AND COST OF CHANGES              3.1        Changes to the Building Plans by Landlord.  Landlord will not make, or permit to be made, any material changes or any other changes which would materially and adversely affect Tenant's use or enjoyment of the Premises or the Additional Premises in the Building Plans or approve or acquiesce in any material deviations from the Building Plans without the prior written consent of Tenant, except as may be required to comply with Legal Requirements or to correct construction defects or hazardous conditions.  From time to time, Landlord may request, by submitting an analysis of the additional cost or savings and change, if any, in the Substantial Completion date, that Tenant approve any such changes in the Building Plans, or to the work already installed prior to Substantial Completion.  If Tenant should fail to approve in writing such change requested by Landlord within 10 Business Days following receipt thereof, the same will be disapproved in all respects by Tenant, and Landlord will not be authorized to make such requested change.  Landlord will be solely liable and obligated to pay all costs, expenses and changes relating to or resulting from any changes to the Building Plans requested by Landlord. No change in the Building Plans requested by Landlord (whether or not approved by Tenant) will be the basis of any Tenant Delay.              3.2        Changes to the Building Plans by Tenant.  From time to time after Tenant has reviewed the Base Building Plans and approved the Leasehold Improvement Plans, Tenant may request Landlord to make changes in the Building Plans or to the Work already installed prior to Substantial Completion.  Any changes to the Building Plans so requested by Tenant (herein referred to as “Tenant's Building Changes”) will be subject to Landlord's prior written approval, which will not be unreasonably withheld; provided, however, that such approval may be withheld in Landlord’s sole discretion if such proposed change requires or results in a change in the scope, design, general quality or rentable area of the Base Building or a delay in the Substantial Completion of the Building or the Leasehold Improvements relating to the Additional Premises, as the case may be.  Landlord will, within 20 Business Days following receipt of Tenant's proposed changes, deliver to Tenant (a) a statement of the estimated change, if any, in the cost of construction of the Building or the Leasehold Improvements for the Additional Premises, as the case may be (the “Building Cost”) in connection with such Tenant's Building Changes as above provided, and (b) an estimate of the period of time, if any, that such Tenant's Building Changes will delay the Substantial Completion of the Building or the Leasehold Improvements for the Additional Premises, as the case may be.  In the case of Tenant's Building Changes requested prior to the awarding of a Construction Contract for the subject work, Landlord's statement of estimated change in the Building Cost will be based on a good faith estimate of such costs by Landlord and, in the case of Tenant's Building Changes requested after the awarding of a Construction Contract for the subject work, the statement of estimated change in Building Cost will be based on the proposed change order to the Construction Contract to be issued and approved by Landlord for such Tenant's Building Changes.  If Tenant fails to approve in writing Landlord's submission within 10 Business Days following receipt thereof, the same will be deemed disapproved in all respects by Tenant, and Landlord will not be authorized to make the change.  If Tenant approves in writing the statement of cost and the delay in Substantial Completion as submitted by Landlord, Landlord will promptly cause the Building Plans to be modified to provide for such change and will submit such modified Building Plans to Tenant.              3.3        Accounting for Changes.  During the construction of the Work, Landlord will cause to be submitted to Tenant and Tenant's Consultant monthly progress reports prepared by General Contractor, and approved by the Base Building Architect and the Leasehold Improvement Architect as to the Building Work and the Leasehold Improvements Work, respectively, specifying any change in the estimated date of Substantial Completion, and showing the progress of the Work, and, as to those items for which the cost is the responsibility of Tenant, the amount of estimated costs and/or savings attributable to any approved changes or delay of any kind including Tenant Delay.  Landlord will submit to Tenant such accounts, records, invoices, and evidences of payment as Tenant may reasonably request to evidence the costs or savings as to those items for which the cost is the responsibility of Tenant or for which the savings will benefit Tenant.  Within 30 days after Substantial Completion, an analysis will be completed to determine the sum total of additional charges due to Landlord (after crediting savings and, to the extent applicable, the Allowance Amount) by reason solely of Tenant's Building Changes or Tenant Delay.  If an amount is due to Landlord after crediting savings and, to the extent applicable, the Allowance Amount, and after submission to and approval by Tenant of such accounts, records, invoices, and evidence of payments as Tenant may reasonably request, such amount (plus interest accrued thereon at an agreed rate of the then “prime rate” as published in The Wall Street Journal  plus 2% interest per annum from the date of Landlord's payment), to the extent not added to the Base Rent as provided in Section 5.2 of this Addendum, will be paid in cash by Tenant to Landlord within 30 days after the analysis and determination have been completed.  Tenant will be obligated to pay the fees (including, but not limited to, the fees of the Base Building Architect, the Leasehold Improvement Architect, and other professionals engaged and utilized by the Landlord), expenses, and charges of Landlord and all contractors, subcontractors, suppliers, materialmen, and laborers to the extent, but only to the extent, that such fees, expenses, and charges are directly or indirectly incurred as a result of Tenant's Building Changes or Tenant Delay and, to the extent the same relate to the Leasehold Improvements, only to the extent the same cause the Leasehold Improvement Cost to exceed the Allowance Amount. ARTICLE IV CONSTRUCTION OF THE BUILDING              4.1        Performance.  Landlord will cause to be furnished, installed, and performed completely all of the Work for the construction and completion of the Building and  the Leasehold Improvements for the Additional Premises as shown on and in accordance with the Building Plans, as modified by approved changes as provided in Article III.  Landlord will be fully responsible for all matters that must be accomplished to complete the Work in accordance with the provisions of this Addendum including, without limitation, filing plans and other required documentation with the proper Governmental Authority, securing all necessary permits, supervising all details of the Work, and promptly removing or otherwise handling to Tenant's reasonable satisfaction all mechanics', materialmen's and like liens from the public record by payment or surety bond. Landlord will cause all construction on or in the Building and the Leasehold Improvements for the Additional Premises to be performed in accordance with all applicable Legal Requirements in a good and workmanlike manner and in accordance with good construction and engineering practices, free from material defects (structural, mechanical, or otherwise) in design, workmanship, and materials, and with new materials (unless otherwise specified in the Building Plans), all as more specifically set forth in the Building Plans, excluding any items installed at Tenant's request by General Contractor, or any other contractor, pursuant to a separate contract with Tenant, and not otherwise required to be installed in accordance with the Building Plans.              4.2        Non-Liability of Tenant.  Subject to the terms and conditions of Sections 4.4 and 4.5, Tenant will not be liable for any injury, loss, or damage to any person (including, but not limited to, death) or property on or about the Property during construction, unless caused by Tenant, its employees, agents,  contractors  or invitees, and Landlord will indemnify and save Tenant harmless against and from any such liability, and any costs or charges (including, without limitation, reasonable attorneys' fees and court costs) which Tenant may incur on account of such injury, loss, or damage.              4.3        Information; Monthly Report.  During the period prior to the Term Commencement Date (and, with respect to the Additional Premises, prior to the Effective Date), Landlord will provide all reasonable cooperation to keep Tenant informed as to material aspects pertaining to the design, construction, use, maintenance, operation, service, or insurance of the Building and the Additional Premises.  Accordingly, upon written request, Landlord will furnish Tenant's Designated Representative (as defined below) with copies of all progress reports, correspondence, or other  information as may be material and pertinent to the Property, other than internal communications or confidential matters between Landlord and its attorneys or accountants and materials and information relating to the cost of the Building and the Leasehold Improvements relating to the Additional Premises (except to the extent the same relate to cost items which are the responsibility of Tenant). Tenant's Designated Representative and Tenant’s Consultant (if any) will have the right to attend scheduled meetings material to the interest of Tenant as may be held with respect to the Property between Landlord, General Contractor, the Base Building Architect, the Leasehold Improvement Architect, and any other outside person or firm (other than Landlord's attorneys or accountants) furnishing materials, services, or labor to or with respect to the Property. Landlord agrees to make a good faith effort to provide Tenant with reasonable prior notice of any scheduled meetings material to the interest of Tenant, but will not be obligated to attempt to schedule any such meetings to accommodate Tenant’s availability or convenience.  Furthermore, Tenant’s failure to timely attend any such scheduled meetings will not constitute a basis for any claim by Tenant that Landlord has violated the foregoing provisions.  Prior to the Term Commencement Date (and, with respect to the Additional Premises, prior to the Effective Date), Landlord and its construction team will meet no less frequently than once each month to discuss and analyze the progress of construction and Landlord will prepare and deliver to Tenant a written report (which may be in the form of the minutes of the meeting) (a “Construction Meeting Report”) summarizing the material items discussed at such meeting and the effect of such items, if any, on the Construction Schedule.  Each Construction Meeting Report will specifically identify any event or condition which would constitute an Excusable Delay or a Tenant Delay (and any incurred cost directly or indirectly resulting from a Tenant Delay) which has occurred since issuance of the immediately prior Construction Meeting Report.              4.4        General Access.  Landlord will afford Tenant, its employees, and its representatives regular access during normal business hours to the Land and the Building and the Additional Premises, all materials thereon and therein, and all Work being performed thereon and therein; provided, however, that in exercising such right of access, Tenant and its employees and representatives will comply with all Legal Requirements (including, but not limited to, OSHA safety regulations and standards) and will coordinate such access with General Contractor. Tenant will be required to provide at least 24 hours prior notice to General Contractor for the purpose of coordinating Tenant’s entry onto the Property with Work then in progress.  Tenant acknowledges that its ability to gain entry to the Property occasionally may be limited or restricted due to the particular stage of Work then in progress and Tenant will at all times be accompanied by a representative of Landlord except during periods in which Tenant, its employees and representatives are engaged in the installation of Tenant's equipment and other property as provided in Section 4.5. Tenant indemnifies and agrees to hold harmless Landlord, General Contractor from and against any and all claims arising from, or claimed to arise from, any negligence, act or failure to act, of Tenant, its employees, representatives, and invitees while on the Land or the Project, or in the Building  or the Additional Premises prior to the Term Commencement Date (and prior to the Effective Date with respect to the Additional Premises), or for any other reason whatsoever arising out of Tenant's access to or being on the Land or in the Building or the Additional Premises prior to the Term Commencement Date or the Effective Date, as the case may be. Tenant’s indemnification obligation pursuant to the provisions of this Section 4.4 will survive and continue in full force and effect after the Term Commencement Date and the expiration or termination of the Lease (regardless of how same may occur).              4.5        Installation of Tenant's Lines; Early Occupancy.  At such time as the Building or the Additional Premises, as the case may be, shall be in a state suitable for the commencement of the installation of Tenant's Lines (as defined below) (as reasonably determined by Landlord in good faith), which in any event will be no later than the Early Occupancy Date, Tenant and its employees, agents, contractors, and subcontractors may enter upon the Property for the purpose of installing and arranging Tenant's electrical and telecommunications cabling (Tenant's Lines”).  In exercising such right of access, Tenant and its employees, agents, contractors and subcontractors will comply with all reasonable standards and regulations established by Landlord and will coordinate their efforts with General Contractor to insure timely completion of all Work in the Building and the Additional Premises, and maintenance of the Property in a safe condition.  During performance of any such work, Tenant's employees, agents, contractors and subcontractors will also coordinate with Landlord the delivery, storage, movement and installation of Tenant's Lines.  Any work performed by Tenant's employees, agents, contractors or subcontractors will be conducted in such manner so as to maintain harmonious labor relations and not to interfere with or delay General Contractor or Landlord's construction of the Building, the Leasehold Improvements relating to the Additional Premises or any other improvements to the Property.  Landlord will provide Tenant's employees, agents, contractors and subcontractors with reasonable access to the Building, the Premises and the Additional Premises for the purpose of making inspections and taking measurements in advance of the period for the installation of Tenant's Lines; provided that the construction of the Building and the Leasehold Improvements relating to the Additional Premises will have reached a point in Landlord's reasonable judgment such that Landlord will not be unreasonably delayed or hampered in the completion thereof by permitting such early access.  In connection with the access permitted under this Section 4.5, Tenant covenants (i) to cease immediately upon request by Landlord any activity or work during any period which, in Landlord's reasonable judgment, will unreasonably interfere with or delay Landlord's prosecution or completion of the Building, the Additional Premises or any other improvements to the Property, or in the Landlord’s or General Contractor’s reasonable judgement will create any unsafe condition at the Property (ii) that such access will be at the sole risk of Tenant and will be deemed to be a license, (iii) that prior to exercising such right, Tenant will deliver to Landlord the certificates of insurance evidencing such insurance as is required by Landlord, in Landlord's reasonable discretion, including public liability, property damage and worker's compensation to protect Landlord, General Contractor and Tenant during the period of Tenant's access, and (iv) that Tenant indemnifies and agrees to hold harmless Landlord and General Contractor from and against any and all claims arising from, or claimed to arise from, or out of the performance of any work by or on behalf of Tenant on or in the Property other than by Landlord or Landlord's contractors, agents, employees or representatives, or which may arise by reason of any matter collateral thereto, and from and against any and all claims arising from, or claimed to arise from, any negligence, act or failure to act, of Tenant, its contractors, subcontractors, decorators, servants, agents  employees or invitees, or for any other reason whatsoever arising out of Tenant's access to the Property or being in the Premises, or the Additional Premises or in connection with the work to be performed by or for Tenant by anyone other than Landlord or Landlord's contractors, agents, employees or representatives. Tenant’s indemnification obligation pursuant to the provisions of this Section 4.5 will survive and continue in full force and effect after the Term Commencement Date and the expiration or termination of the Lease (regardless of how same may occur). Tenant or Tenant's contractors will carry comprehensive general insurance, which will include coverage of the foregoing contractual liability. Tenant will not permit any mechanic's or materialmen's lien to be placed upon the Property caused by or resulting from any work performed, materials furnished or obligation incurred in connection with the installation of Tenant's Lines and, in the case of the filing of any such lien Tenant will promptly pay same or bond around such claims to the satisfaction of Landlord, in Landlord's reasonable discretion.              4.6        No Assumption of Responsibility.  Except as otherwise expressly provided herein, neither the exercise nor the failure to exercise by Tenant or its representatives of any right afforded Tenant under this Addendum (including specifically, but without limitation, the exercise or the failure to exercise of a right to review, comment upon, approve, or disapprove documents, plans, specifications, drawings, or other matters, or the performance by Landlord) or the failure by Tenant to insist upon the performance by Landlord of any obligation imposed upon Landlord under this Addendum, will (a) impose upon Tenant, or be deemed to be an assumption by Tenant, of any obligation or liability with respect to the construction, operating, or insurance of the Building, the Leasehold Improvements relating to the Additional Premises, or the design of the Base Building, or (b) constitute or be deemed to constitute acquiescence by Tenant to any act or failure to act on the part of Landlord which is in conflict with any provision of this Addendum.              4.7        Designated Representatives.  Landlord and Tenant each hereby appoint a representative (each a “Designated Representative”), and in the event that a Designated Representative is unavailable for any reason whatsoever, an alternative representative (each an “Alternative Representative”), to make timely binding decisions on design, development and construction matters (but not other matters) relating to the Building and the Leasehold Improvements.  The Designated Representatives are: Landlord xxx  Tenant xxx      The Alternative Representatives are: Landlord xxx  Tenant xxx  At any time and from time to time hereafter, Landlord and Tenant will each have the right to appoint a successor or substitute Designated Representative and/or Alternative Representative to act on behalf of such party, each such appointment to be effected by delivering 10 days' prior written notice to the other party hereto in accordance with the terms and provisions of Section 12.4 of the Lease. Any action which may be taken by a Designated Representative may also be taken by an Alternative Representative and any party may rely thereon as if such action had been taken by the Designated Representative and such party will have no duty to inquire why the Designated Representative was unavailable to act. ARTICLE V COST OBLIGATIONS              5.1        Landlord's Cost.  Except as otherwise specifically provided in Article III or in Section 5.2, Landlord will be liable and obligated to pay for all costs of preparation of the Base Building Plans, the Leasehold Improvement Plans, and all costs of developing and constructing the Base Building, including, but not limited to, all labor and materials.  In addition, to the extent provided in Section 5.2 and except as otherwise specifically provided in Article III, Landlord will be obligated to fund the cost of developing and constructing the Leasehold Improvements, and for all costs of developing and constructing the Leasehold Improvements in excess of the established Leasehold Improvement Cost (unless such increase is a direct result of Tenant Delay or Tenant's Changes to the Leasehold Improvement Plans or the Leasehold Improvements Work as provided in Article III).              5.2        Tenant's Cost.  Tenant will be liable for and obligated to pay the cost of any increase in Landlord’s costs of developing and constructing the Base Building resulting directly from Tenant Delay.  Tenant also will be liable for and obligated to pay the cost of constructing and completing the Leasehold Improvements, including, without limitation, labor and materials (“Tenant’s Cost”); provided, however, that, Tenant’s Cost will in no event exceed the Leasehold Improvement Cost (unless such increase is a direct result of Tenant Delay or Tenant’s changes to the Leasehold Improvement Plans or the Leasehold Improvements Work as provided in Article III); and provided further that Tenant will be entitled to receive, and Landlord will be obligated to pay, an amount equal to *** times the number of square feet of rentable area contained in the Premises and the Additional Premises (the “Allowance Amount”). In the event Tenant’s Cost is less than the Allowance Amount, Tenant will have the right to apply the difference as an offset against the first rents due under the Lease.  In the event that Tenant’s Cost exceeds the Allowance Amount and/or charges are to be paid by Tenant as a result of Tenant’s Building Changes as provided in Article III, then up to an aggregate amount equal to the product of *** multiplied by the number of square feet of rentable area contained in the Premises and the Additional Premises (“Excess Improvements Amortization Limit”), Tenant will pay the excess amount to Landlord either (i) in a lump sum payment due within the times established in Section 3.3 of this Addendum, or (ii) in equal amortized monthly installments over 120 months at an annual interest rate of 12%, with such monthly installments being added to the Base Rent due and payable over the Term, as Tenant will elect. Any Tenant’s Cost in excess the  Allowance Amount  plus the Excess Improvements Amortization Limit,  i.e. in excess of an aggregate cost of *** times the number of square feet of rentable area contained in the Premises and the Additional Premises, will be paid by Tenant to Landlord in a lump sum payment due within the times established in 3.3 of this Addendum.  Landlord will use its reasonable and good faith efforts to obtain and credit against the cost of completion and construction of the Leasehold Improvements all discounts, commissions, and rebates offered by any contractor or subcontractor.  In accordance with the other terms and provisions of this Addendum, Landlord will provide to Tenant and Tenant's Consultant during normal business hours full and complete access to all books, records, and accounts to verify the amount of costs for the construction and completion of the Leasehold Improvements. ARTICLE VI SCHEDULE FOR CONSTRUCTION              6.1        Time to Complete.  Time is of the essence to this Addendum.  Landlord will cause the construction of the Building and the Leasehold Improvements relating to the Additional Premises in accordance with the Building Plans, all applicable Legal Requirements, and the provisions of this Addendum with reasonable diligence, which requires Landlord to Substantially Complete (a) the Building and the Leasehold Improvements relating to the Additional Premises on or before the Projected Completion Date, as extended by Excusable Delays and/or Tenant Delays, in which case the Projected Completion Date, if adversely affected by Excusable Delay and/or Tenant Delay, will be extended by one day for each day of such Excusable Delay and/or Tenant Delay. If the Building or the Leasehold Improvements for the Additional Premises, as the case may be, will not be Substantially Complete on or before the date 30 days after the  Projected Completion Date, as extended by Tenant Delay and/or Excusable Delay, (the “Late Date”), Landlord will then be liable to Tenant for damages (“Tenant's Delay Damages”) as provided below. Tenant’s Delay Damages will not exceed the lesser of actual cost incurred by Tenant or the product of $2,000.00 multiplied by the number of days in the late period. Tenant's actual damages for late Substantial Completion of the Building or the Leasehold Improvements for the Additional Premises are difficult and impractical to ascertain, and the Tenant's Delay Damages are intended to be reasonable estimates for the amounts of damages that Tenant will suffer by reason of Landlord's delay in completing the Building or the Leasehold Improvements for the Additional Premises.  Tenant will provide Landlord, from time to time, and in any event not later than 10 days after the Term Commencement Date (and, with respect to the Additional Premises, not later than 10 days after the Effective Date), with a written statement specifying the nature and amount of Tenant’s Delay Damage claimed by Tenant.  Landlord will first credit the amount of unpaid Tenant's Delay Damages, if any, against the amount of the charges, if any, owed by Tenant for Tenant Building Changes or Tenant Delay or Tenant’s Cost, and the balance remaining, if any, will, within 30 days of receipt of Tenant’s statement, be paid in cash by Landlord to Tenant; provided, however, that if Landlord contests Tenant’s claim for Tenant’s Delay Damages, then Tenant’s ability to claim such offset (and Tenant’s corresponding obligation to pay the charges which would be subject to offset) will be postponed until a final adjudication is reached with respect to such claim.  If any Tenant’s Delay Damages are not paid to Tenant when due, Tenant will have the right to apply such due amount as an offset against the rent due under the Lease.  Except in those circumstances under which Tenant will be entitled to terminate the Lease as provided in Section 6.2 of this Addendum, the payment to Tenant by Landlord of Tenant's Delay Damages will constitute Tenant's sole remedy for Landlord's failure to timely Substantially Complete the Building or the Leasehold Improvements relating to the Additional Premises. Tenant’s Delay Damages relate solely to the late Substantial Completion of the Building and the Leasehold Improvements relating to the Additional Premises and are not intended to limit or define Tenant’s damages or other rights and remedies for any default by Landlord in the performance of its other obligations under this Addendum or the Lease.              6.2        Outside Date for Date of Substantial Completion.  Notwithstanding anything to the contrary herein contained, if Substantial Completion of the Building has not occurred by a date 60 days after the Projected Completion Date for the Building, as extended by both Tenant Delay and Excusable Delay (the “Outside Date”), Tenant may terminate the Lease by giving written notice of such election to Landlord, on or before the date 30 days following the Outside Date in which event  the parties will have no further obligations and liabilities under this Lease except for such obligations and liabilities which specifically survive the termination of the Lease and except, further, that Landlord will be liable for, and within 30 days after the date of Tenant's notice of election to terminate will pay to Tenant, all unpaid Tenant’s Delay Damages relating to the Building which have accrued through the Outside Date. The payment by Landlord to Tenant of Tenant's Delay Damages relating to the Building will constitute Tenant's sole remedy for Landlord's failure to timely Substantially Complete the Building and the termination of the Lease. ARTICLE VII LEASE              7.1        Term Commencement Date. The Term of the Lease will commence upon the Term Commencement Date.  On the Term Commencement Date, Landlord agrees that: (a) Landlord will deliver possession of the Premises, free of all leases, tenancies, occupants, construction lien claims not discharged or transferred to security within 10  days of the filing thereof, and material defects in material and workmanship; (b) the Building will be in compliance with all Legal Requirements other than as may be applied due solely to a special use by Tenant; (c) the Property will not be subject to any Title Exceptions except Permitted Exceptions; and (d) Landlord will satisfy all those obligations imposed upon Landlord by the provisions of the Lease which are required to be complied with prior to the commencement of the Term of the Lease. ARTICLE VIII GENERAL COVENANTS OF LANDLORD              8.1        Insurance.  Landlord will obtain and maintain or will require General Contractor to obtain and maintain, from the date hereof until the Term Commencement Date (and, with respect to the Additional Premises, until the Effective Date), at no cost to Tenant, builder's risk insurance, automobile liability insurance and comprehensive general liability insurance against liability for bodily injury and death and property damage, in reasonable and customary amounts and forms.  Landlord will also provide or cause to be provided and kept in force workers' compensation coverage with statutory benefits covering employees of General Contractor and with such endorsements as may be reasonably requested by Tenant.  Landlord will deliver to Tenant, promptly as same are issued, true and complete copies or certificates of all policies of insurance, together with all subsequent endorsements thereto, as are required to be obtained and maintained by Landlord pursuant to the terms hereof. Any insurance required by the terms of this Section 8.1 to be carried by Landlord may be under a blanket policy (or policies) covering other properties of Landlord and/or its affiliates; provided, however that Landlord will procure and deliver to Tenant a statement from the insurer or general agent of the insurer setting forth the coverage maintained and the amounts thereof allocated to the risks intended to be insured hereunder. Schedule 1 (Schedule of Permitted Encumbrances)   Schedule 2 (Review Plans and Specifications)   Schedule 3 (Construction Schedule)   EXHIBIT D RULES AND REGULATIONS Capitalized terms not specifically defined in this Exhibit will have the same meanings as ascribed thereto in the Lease. 1. Tenant will not install or operate any machinery or apparatus other than usual small business machines without specific written approval of Landlord.  No article deemed hazardous because of flammability and no explosive or other articles of an intrinsically hazardous nature will be brought into the Building. 2. No additional locks or similar devices will be placed upon doors of the Premises and no locks will be changed except with written consent of Landlord. Such consent of Landlord will not be unreasonably withheld.  Upon termination of the Lease, Tenant will surrender to Landlord all keys to the Premises. 3. Tenant will be permitted to move furniture and office furnishings into or out of the Building at its own risk.  Any damage caused to the Premises or Building will be repaired at the expense of Tenant. 4. Provided Landlord is required to furnish janitorial services, no person will be employed by Tenant to do janitorial work in the Premises, and no persons other than the janitors for the Building will clean the Premises, unless Landlord will first give its written consent.  Any person employed by Tenant with Landlord's consent to do janitorial work will, while in the Premises and Building, be subject to and under the control and direction of Landlord, but will not be considered the agent or servant of Landlord. 5. Window coverings other than building standard, either inside or outside the windows, may not be installed without Landlord's prior written consent and must be furnished, installed and maintained at the expense of Tenant and at Tenant's risk, and must be of such shape, color, material, quality and design as may be prescribed by Landlord. 6. If Tenant desires additional telecommunications connections, or the installation of any other electrical wiring, Landlord will, upon receiving a written request from Tenant and at Tenant's expense, direct the electricians as to where and how the wires are to be introduced and run, and without such direction no boring, cutting or installation of wires will be permitted.  Tenant will not install or erect any satellite dish, antennae, aerial wires or any other equipment inside or outside the Premises and Building without in every instance obtaining prior written approval from Landlord.   7. The sidewalks, entrances, passages, courts, corridors, vestibules, halls, stairways and elevators (if any) in or about the Premises and Building will not be obstructed or used for storage or for any purpose other than ingress and egress by Tenant. 8. Tenant will not create or maintain a nuisance in the Premises nor make or permit any noise or odor or use or operate any electrical or electronic devices that emit loud sounds, air waves, or odors, that are objectionable to other tenants of this Building or any adjoining building or premises; nor will the Premises be used for lodging or sleeping or for any immoral or illegal purpose that will violate any law, damage the Premises, or injure the reputation of the Building or the Property. 9. Tenant and its occupants will observe and obey all parking and traffic regulations from time to time imposed by Landlord on the Premises, the Building or the Property. Landlord in all cases reserves the right to designate "no parking" zones, traffic right-of-ways and general parking area procedures.  Failure of Tenant to comply with parking regulations will constitute an event of default under the Lease.  Landlord may institute such measures for proper parking as are necessitated by conditions existing at a particular time;  including but not limited to towing, impounding and/or tagging of improperly parked vehicles, and instituting a control system to insure only properly authorized vehicles are parking in assigned areas. 10. Landlord reserves the right at all times to exclude newsboys, loiterers, vendors, solicitors and peddlers from the Building and the Property as deemed necessary and to require registration, satisfactory identification and credentials from all persons seeking access to any part of the Building or the Property.  Landlord will exercise its best judgement in executing such control but will not be held liable for granting or refusing such access. 11. Any sign, letter, picture, notice, advertisement or the like installed within the Premises, which is visible from outside the Premises, will be installed in such manner and be of such character and style as Landlord will approve in writing.  No sign, lettering, picture, notice, advertisement or the like will be placed on any outside window or in a position to be visible from outside the Building without prior written approval of Landlord. 12. Tenant will not use the name of the Building or the Property for any purpose other than that of the business address of Tenant, and will not use any picture or likeness of the Building or the Property in any circulars, notices, advertisements or correspondence without Landlord's prior written consent. 13. No animals, pets, bicycles or skateboards or other vehicles will be brought or permitted to be in the Premises or the Building. 14. Tenant will not make any room-to-room canvass to solicit business from other Tenants of the Building or the Property.   15. Tenant will not waste electricity, water or air conditioning, and will cooperate fully with Landlord to assure the most effective and efficient operation of the Building.  Tenant will not adjust any common controls other than room thermostats installed for specific use.  Tenant will not tie, wedge, or otherwise fasten open any water faucet or outlet.  Tenant will keep all common corridor doors closed. 16. Tenant assumes full responsibility for protecting the Premises from theft, robbery, pilferage and other crimes.  Except during Tenant's normal business hours, Tenant will not prop open any common doors to the Building, and will be liable for any loss caused by negligence thereto. 17. Tenant will not overload any floor and will not install any heavy objects, safes, business machines, files or other equipment without having received Landlord's prior written consent as to size, maximum weight, routing and location thereof.  Safes, furniture, equipment, machines and other large or bulky articles will be brought through the Building and into and out of the Premises at such times and in such manner as Landlord will direct and at Tenant's sole risk and responsibility. 18. Tenant, its employees, agents, guests and invitees will not in any manner deface or damage the Building and will be responsible for any repairs required. 19. Tenant will not use more electrical current from individual or collective circuits than is designated by the amperage rating of said circuits at the circuit breaker panels for Tenant's suite.  Should Tenant exceed the safe capacity as designed and as stated on the circuit breakers for said circuits then Tenant will bear the entire expense of modifications to adjust or increase the amperage for Tenant's safe and proper electrical consumption.  Landlord's consent to such modifications to the electrical system will not relieve Tenant from the obligation not to use more electricity than such safe capacity. 20. Tenant, its employees, invitees and guests will not smoke in the Premises, the Building or any Common Areas.  Smoking is allowed in designated smoking areas only. 21. Tenant will be responsible for any damage including stoppage caused by failure to use the apparatus as instructed or for the purpose constructed done to any Common Area including but not limited to restrooms, elevators, stairways, hallways, lobbies, sidewalks, parking lots, landscape areas caused by Tenant, its licensees, guests, agents, contractors or invitees negligence or misuse. 22. Landlord reserves the right to establish rules and regulations which will govern the access, activity, conduct and set specific rules and regulations with respect to contractors, subcontractors, agents or consultants which perform activities in the Building, the Premises and or the Property. 23. Landlord reserves the right to make such further reasonable rules and regulations as in its judgment may from time to time be necessary for the safety, care and cleanliness of the Premises and the preservation of good order therein. Any additional rules and regulations promulgated by Landlord will be binding upon the parties hereto with the same force and effect as if they had been inserted herein at the time of execution hereof. Tenant will be responsible for the observance of all of the foregoing rules and regulations by Tenant's employees, agents, clients, customers, invitees and guests.  Landlord will not be responsible for any violation of the foregoing rules and regulations by other Tenants of the Building and will have no obligation to enforce the same against other tenants. 24. Tenant will not conduct or permit any auctions or sales at the Premises or the Property.  

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.22 RETENTION AGREEMENT     This Retention Agreement (the "Agreement") is made and entered into effective as of December          , 2000, by and between                              (the "Director") and NetRatings, Inc., a Delaware corporation (the "Company"). R E C I T A L     In order to provide the Director with enhanced financial security and sufficient encouragement to remain with the Company, the Board of Directors of the Company (the "Board") believes that it is imperative to provide the Director with certain benefits upon the involuntary termination of the Director's services as a board member of the Company provided that such termination was not for cause. A G R E E M E N T     In consideration of the mutual covenants herein contained and the continued service of the Director to the Company, the parties agree as follows:     1.  Benefits upon removal from Board.       (a)  Acceleration of Vesting.  Subject to Sections 1(b), and 1(d) below and as consideration for the covenants made herein by Director including Director's covenants in Section 3 herein, if the Director's service to the Company as a member of the Board terminates as a result of an Involuntary Termination (as defined in Section 2(c)) or through the failure of the Company's shareholders to re-elect such Director to the Board, then (i) the unvested portion of any stock option(s) held by the Director as of the date of this Agreement that were granted by the Company shall immediately accelerate and become fully vested, and such options shall remain exercisable for the period prescribed in the Director's stock option agreements and (ii) the Company's right of repurchase as to any shares sold to Director prior to the date of this Agreement pursuant to a restricted stock purchase agreement or similar agreement shall immediately lapse as to all shares issued pursuant to such agreement.     (b)  280G Compliance.  In the event the Director becomes entitled to the benefits provided under this Agreement and/or any other payments or benefits with a Change of Control (as defined in Section 2(c)) of the Company (collectively, the "Payments"), and such Payments would result in a "parachute payment" as described in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the amount of such Payments shall be either:      (i) the full amount of the Payments, or     (ii) a reduced amount which would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code (the "Excise Tax"), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Director, on an after-tax basis, of the greatest amount of benefit. Unless the Company or the Director otherwise agree in writing, any determination required under this Section shall be made in writing by independent public accountants appointed by the Company and reasonably acceptable to the Director (the "Accountants"), whose determination shall be conclusive and binding upon the Director and the Company for all purposes. The Company shall bear all costs the Accountants may reasonably incur. 1 --------------------------------------------------------------------------------     (c)  Voluntary Resignation; Termination For Cause.  If the Director voluntarily resigns from the Board (and such resignation is not an Involuntary Termination defined in Section 2(c)), or if the Board terminates the Director's services as a Director for Cause, then the Director shall not be entitled to receive any benefits set forth in this Agreement.     (d)  Release of Claims.  The Director shall not be entitled to any of the benefits described in this Section 1 unless and until the Director, in consideration for such benefits, executes a release of claims in a form satisfactory to the Company; provided, however, that such release shall not apply to any right of the Director to be indemnified by the Company.     2.  Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:     (a)  Cause.  "Cause" shall mean: (i) any act of personal dishonesty taken by the Director in connection with his responsibilities as a director which is intended to result in substantial personal enrichment of the Director; (ii) the Director's conviction of a felony which the Board reasonably believes has had or will have a material detrimental effect on the Company's reputation or business; (iii) a willful act by the Director which constitutes misconduct and is injurious to the Company; and (iv) continued willful violations by the Director of the Director's obligations to the Company after there has been delivered to the Director a written demand for performance from the Company which describes the basis for the Company's belief that the Director has not substantially performed his duties.     (b)  Change of Control.  "Change of Control" shall mean the occurrence of any of the following events: (i) the acquisition by any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of the "beneficial ownership" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iii) the sale or disposition of all or substantially all of the assets of the Company; or (iv) the approval by the stockholders of the Company of a plan of complete liquidation of the Company.     (c)  Involuntary Termination.  "Involuntary Termination" shall mean (i) without the Director's express written consent, the removal of the Director from the Board or the failure of the Company's shareholders to re-elect such Director to the Board other than for Cause; (ii) in the case of the Chairman of the Board, the removal of such Director from such position other than for Cause; (iii) the death or Disability (as defined in Section 2(d) below) of the Director; or (iv) any breach by the Company of any material provision of this Agreement. Disability.  "Disability" shall mean the inability of the Director to perform his duties as a member of the Board as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to the Director (or the Director's legal representative). 2 --------------------------------------------------------------------------------     3.  Other Activities.       (a) In order to protect the Company's valuable proprietary information, Director agrees that during Director's term of service to the Company and for a period of one (1) year following the termination of such services with the Company for any reason, Director shall not, as a compensated or uncompensated officer, director, consultant, advisor, partner, joint venturer, investor, independent contractor, employee or otherwise, provide any labor, services, advice or assistance to any of the following entities, which are direct competitors of the Company: Jupiter-Media Metrix, NetValue, Comscore Networks, PC Data, Forrester Research, Gartner Group, IDC; or to any other companies which the Board may determine from time to time are direct competitors of the Company. Director acknowledges and agrees that the restrictions contained in the preceding sentence are reasonable and necessary, as there is a significant risk that Director's provision of labor, services, advice or assistance to any of those competitors could result in the inevitable disclosure of the Company's proprietary information. Director further acknowledge and agree that the restrictions contained in this paragraph will not preclude Director from engaging in any trade, business or profession that Director is qualified to engage in. Notwithstanding the foregoing, Director is permitted to own, individually, as a passive investor up to a one percent (1%) interest in any publicly traded entity.     (b) Upon the termination of Director's services to the Company as a member of its Board, Director shall not, for a period of twelve (12) months knowingly solicit for the purposes of employment or to hire, without prior written consent of the Company, any employee of the Company, either directly or indirectly through an associated company, employee search or placement firm or any other third party.     4.  Successors.       (a)  Company's Successors.  Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and assets shall assume the Company's obligations under this Agreement.     (b)  Director's Successors.  Without the written consent of the Company, the Director shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity. Notwithstanding the foregoing, the terms of this Agreement and all rights of the Director hereunder shall inure to the benefit of, and be enforceable by, the Director's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.     5.  Notices.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Director, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.     6.  Miscellaneous Provisions.       (a)  Waiver.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the party hereto adversely affected thereby. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.     (b)  Whole Agreement.  This Agreement, any stock option agreements representing options, and any other restricted stock purchase agreement or similar agreement represent the entire 3 -------------------------------------------------------------------------------- agreement and understanding between the parties as to the subject matter herein and supersede all prior or contemporaneous agreements, whether written or oral, including the Change of Control Agreement entered into between the Company and Director dated                             . Nothing in this Agreement, however, is intended to affect the rights of the Director, or the covered dependents of the Director, under any applicable law with respect to health insurance continuation coverage.     (c)  Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware.     (d)  Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.     (e)  Arbitration.  The Company and the Director agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement shall be settled by arbitration to be held in Santa Clara County, California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's award in any court having jurisdiction.     (f)  No Assignment of Benefits.  The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this Section 6(f) shall be void.     (g)  Employment Taxes.  Payments made pursuant to this Agreement may be subject to withholding of applicable income and employment taxes.     (h)  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY:   NETRATINGS, INC.     By:             --------------------------------------------------------------------------------     Title:             -------------------------------------------------------------------------------- EMPLOYEE:   [DIRECTOR NAME]               -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- QuickLinks RETENTION AGREEMENT R E C I T A L A G R E E M E N T

PMA CAPITAL CORPORATION EXECUTIVE MANAGEMENT PENSION PLAN MARCH 2001 -------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE         ARTICLE I - DEFINITIONS 1 1.1 Actuarial Equivalent1 1.2 Administrator1 1.3 Affiliated Employer1 1.4 Board of Directors2 1.5 Cause2 1.6 Change of Control2 1.7 Code2 1.8 Effective Date2 1.9 Eligible Executive2 1.10 Good Reason3 1.11 Participant3 1.12 Participating Company3 1.13 Past Service Credit3 1.14 Past Service Retirement Benefit3 1.15 Pension Plan3 1.16 Plan.4 1.17 Plan Sponsor4 1.18 Plan Year4 1.19 PMA SERP4 1.20 Section 401(a)(17) Limitation4 1.21 Section 415 Limitation4 1.22 Spouse4 1.23 Termination of Employment4   ARTICLE II - PAST SERVICE RETIREMENT BENEFITS4 2.1 Past Service Credit4 2.2 Past Service Retirement Benefit4 2.3 Reemployment5   ARTICLE III - VESTING OF PAST SERVICE RETIREMENT BENEFITS5 3.1 Full Vesting5 3.2 Forfeitures5   ARTICLE IV - FORM OF PAYMENT OF PAST SERVICE RETIREMENT BENEFITS5 4.1 Payment of Past Service Retirement Benefit5 4.2 Form of Payment5 4.3 Change of Control During Employment5 4.4 Change of Control During Retirement6 4.5 Failure to Assume Plan upon Change of Control6 4.6.  Actuarial Equivalent6   ARTICLE V - DEATH BENEFIT6 5.1 Death Benefit6 5.2 Simultaneous Death6   ARTICLE VI - ADMINISTRATION OF THE PLAN6 6.1 Administrator6 -i- --------------------------------------------------------------------------------         6.2 Committee Action7 6.3 Powers of Administrator7 6.4 Decisions of Administrator8 6.5 Administrative Expenses8 6.6 Eligibility to Participate8 6.7 Insurance and Indemnification for Liability8 6.8 Agent for Service of Legal Process8 6.9 Delegation of Responsibility8 6.10 Claims Procedure8   ARTICLE VII - MISCELLANEOUS10 7.1 Funding10 7.2 Amendment or Termination10 7.3 Status of Employment10 7.4 Payments to Minors and Incompetents10 7.5 Inalienability of Benefits10 7.6 Governing Law11 7.7 Severability11 7.8 Required Information to Administrator11 7.9 Income and Payroll Tax Withholding11 7.10 Application of Plan11 7.11 No Effect on Other Benefits11 7.12 Inurement12 7.13 Notice12 7.14 Captions12 7.15 Acceleration of Payments12 7.16 Reporting and Disclosure Requirements12 7.17 Gender and Number12   ARTICLE VIII - ADOPTION BY AFFILIATED EMPLOYERS12 8.1 Adoption of Plan12 8.2 Withdrawal from Plan13 8.3 Application of Withdrawal Provisions13 8.4 Plan Sponsor Appointed Agent of Participating Companies13   APPENDIX A - LIST OF PARTICIPATING COMPANIES14   PLAN EXHIBIT A - PLAN ADOPTION AGREEMENT15   PLAN ADOPTION AGREEMENT - PENNSYLVANIA MANUFACTURERS'             ASSOCIATION INSURANCE COMPANY16   PLAN ADOPTION AGREEMENT - PMA CAPITAL INSURANCE COMPANY             (FORMERLY PMA REINSURANCE CORPORATION)17   PLAN ADOPTION AGREEMENT - CALIBER ONE INDEMNITY COMPANY18   PLAN ADOPTION AGREEMENT - CALIBER ONE MANAGEMENT COMPANY, INC.19   PLAN ADOPTION AGREEMENT - PMA MANAGEMENT CORP.20   PLAN ADOPTION AGREEMENT - PMA RE MANAGEMENT COMPANY21 -ii- -------------------------------------------------------------------------------- PMA CAPITAL CORPORATION EXECUTIVE MANAGEMENT PENSION PLAN         WHEREAS, some executives hired in mid-career by the PMA Capital Corporation (formerly known as the Pennsylvania Manufacturers Corporation) (the “Plan Sponsor”) are not able to be credited with the maximum number of years of Benefit Service allowable under the PMA Capital Corporation Pension Plan (formerly known as The PMC Pension Plan (the “Pension Plan”)), due to the age of the executive when hired (“Short Service Reduction”); and         WHEREAS, Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended (the “Code”) place limitations (the “Sections 401(a)(17) and 415 Limitations”) on the retirement benefits which can be paid to participants in the Pension Plan; and         WHEREAS, the Plan Sponsor established the PMA Capital Corporation Supplemental Executive Retirement Plan (formerly known as The PMC Supplemental Executive Retirement Plan) (the “PMA SERP”), effective January 1, 1993, to provide supplemental executive retirement benefits for the purposes of offsetting the Short Service Reduction and the Sections 401(a)(17) and 415 Limitations to a select group of management and highly compensated employees within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and         WHEREAS, the Plan Sponsor has decided to provide to a select group of management and highly compensated employees within the meaning of Section 201(2) of ERISA the Short Service Reduction benefits previously provided under the PMA SERP in a separate plan to be known as the PMA Capital Corporation Executive Management Pension Plan (the “Plan”), as set forth herein, and has restated the PMA SERP to, among other things, reflect the removal from the PMA SERP of those provisions set forth herein;         NOW THEREFORE, the Plan Sponsor does hereby adopt the Plan as of January 1, 1999, as hereinafter set forth. ARTICLE I —DEFINITIONS         The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:         1.1 Actuarial Equivalent. An amount or benefit of equivalent present value to the amount or benefit which otherwise would have been provided to, or on account of, a Participant determined on the basis of the actuarial assumptions then in effect under the Pension Plan.         1.2 Administrator. 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.         1.3 Affiliated Employer. 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 -1- --------------------------------------------------------------------------------        (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.         1.4 Board of Directors. 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.         1.5 Cause. Termination by a Participating Company of employment with the Participating Company for “Cause” shall mean termination upon the willful engaging by the Participant in misconduct which is materially injurious to the Participating Company or any Affiliated Employer. No act, or failure to act, on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that such action or omission was in the best interest of the Participating Company or its Affiliated Employers. Notwithstanding the foregoing, a Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Participant a copy of a written determination by the Administrator (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Administrator), finding that in the good faith opinion of the Administrator the Participant was guilty of misconduct as set forth above in this Section and specifying the particulars thereof in detail. If the Administrator consists of more than one individual, the Administrator’s determination shall be made by written resolution duly adopted by the affirmative vote of a majority of the entire membership of the Administrator at a meeting of the Administrator called and held for the purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Administrator), finding that in the good faith opinion of the Administrator the Participant was guilty of misconduct as set forth above in this Section and specifying the particulars thereof in detail.         1.6 Change of Control. 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 occur 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.         1.7 Code. 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.         1.8 Effective Date. January 1, 1999.         1.9 Eligible Executive. Any executive of a Participating Company who is hired as a Vice President or as a more senior officer on or after January 1, 1990. -2- --------------------------------------------------------------------------------         1.10 Good Reason. For purposes of this Plan, “Good Reason” shall mean any of the following events which occurs, following a Change of Control, without the Participant’s express written consent:        (a) The assignment to the Participant of any duties materially inconsistent with the Participant’s status, position, duties, and responsibilities with the Participating Company immediately prior to such Change of Control or a substantial alteration in the nature or status of the Participant’s responsibilities from those in effect immediately prior to such Change of Control;        (b) A reduction by the Participating Company in the Participant’s annual base salary as in effect on the Effective Date or thereafter, as the same may be increased from time to time, except for across-the-board salary reductions similarly affecting all executives of the Participating Company and of any organization in control of the Participating Company;        (c) The Participating Company’s requiring the Participant to be based anywhere other than the Participant’s office prior to the Change of Control except for required travel on the Participating Company’s business to an extent substantially consistent with the Participant’s prior travel obligations;        (d) The failure by the Participating Company to continue in effect any compensation plan of the Participating Company in which the Participant participates, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan in connection with such Change of Control, or the failure by the Participating Company to continue the Participant’s participation therein;        (e) The failure by the Participating Company to continue to provide the Participant with benefits substantially similar to those provided under the Plan Sponsor’s 401(k) Plan or any of the pension, life insurance, medical, health and accident, or disability plans of the Participating Company in which the Participant was participating at the time of such Change of Control, or the taking of any action by the Participating Company which would directly or indirectly materially reduce any of such benefits or deprive the Participant of any material fringe benefit enjoyed by the Participant at the time of such Change of Control, or the failure by the Participating Company or its subsidiaries to provide the number of paid vacation days to which the Participant was entitled on the basis of years of service with the Participating Company in accordance with the normal vacation policy of the Participating Company as in effect at the time of such Change of Control;        (f) Any purported termination of a Participant’s employment which is not effected pursuant to a written notice setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment; and for purposes of this Plan, no such purported termination shall be effective.         1.11 Participant. An Eligible Executive or former Eligible Executive who accrues, or who has accrued, benefits under this Plan on and after January 1, 1999.         1.12 Participating Company. 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 VIII. Each Participating Company is listed on Appendix A.         1.13 Past Service Credit. A Participant’s past service credit under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, both as determined in accordance with Section 2.1 hereof.         1.14 Past Service Retirement Benefit. A Participant’s past service retirement benefit under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, both as determined in accordance with Section 2.2 hereof.         1.15 Pension Plan. The PMA Capital Corporation Pension Plan (formerly known as The PMC Pension Plan) as in effect on the Effective Date and as such plan may be further amended and/or restated from time to time and -3- -------------------------------------------------------------------------------- each successor or replacement tax-qualified pension plan. In addition, the Pension Plan shall also include such other retirement plans of the Plan Sponsor, or of such other affiliates, subsidiaries or divisions of the Plan Sponsor as the Administrator may expressly include from time to time.         1.16 Plan. The PMA Capital Corporation Executive Management Pension Plan as set forth herein and as it may be amended and/or restated from time to time.         1.17 Plan Sponsor. PMA Capital Corporation, a Pennsylvania corporation.         1.18 Plan Year. Each calendar year beginning on January 1 and ending on the following December 31.         1.19 PMA SERP. The PMA Capital Corporation Supplemental Executive Retirement Plan, as in effect before January 1, 1999.         1.20 Section 401(a)(17) Limitation. The limitation on compensation taken into account under the Pension Plan pursuant to Section 401(a)(17) of the Code.         1.21 Section 415 Limitation. The limitation on benefits payable from the Pension Plan imposed by Section 415 of the Code.         1.22 Spouse. A person who is married to a Participant and who is recognized as the Participant’s Spouse for purposes of the Pension Plan.         1.23 Termination of Employment. A termination of the employer — employee relationship under circumstances which give rise to a “Separation from Service” under the Pension Plan. ARTICLE II —PAST SERVICE RETIREMENT BENEFITS         2.1 Past Service Credit. A Participant’s Past Service Credit under the Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, shall be determined as follows. A Participant who is or was an Eligible Executive shall be credited with one additional year of Benefit Service (as such term is defined in Article I of the Pension Plan) under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, for each year of Benefit Service credited under the Pension Plan until the sum of the Participant’s years of Benefit Service credited under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999 (i.e., the Participant’s Past Service Credit under the Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999) and the Participant’s years of Benefit Service credited under the Pension Plan equal twenty-five (25) years of Benefit Service. If the sum of a Participant’s Past Service Credit under the Plan on and after January 1, 1999, the PMA SERP before January 1, 1999, and such Participant’s years of Benefit Service under the Pension Plan is greater than twenty-five (25), such Participant’s Past Service Credit under the Plan and under the PMA SERP shall be reduced first so that said sum does not exceed twenty-five (25). Any such reduction shall be made first under the PMA SERP and then under the Plan. (All references in this Plan to Articles, Sections or specific paragraphs of the Pension Plan shall include any successor Article, Section or paragraph or any amendment thereto.)         2.2 Past Service Retirement Benefit. Subject to Sections 2.3 and 7.2 hereof, a Participant’s Past Service Retirement Benefit, if any, shall be an amount equal to the amount that would be payable under the benefit formula actually used in determining such Participant’s benefit under Article V of the Pension Plan at the time such benefit becomes payable but using only the Participant’s Past Service Credit determined under Section 2.1 as his/her Years of Benefit Service (as defined in Article I of the Pension Plan) under the Pension Plan and the following additional assumptions:        (a) The Participant shall be deemed to receive Compensation (as such term is defined in Article I of the Pension Plan) during each year of past service equal to such Participant’s annual rate of pay as in effect on -4- --------------------------------------------------------------------------------   the Participant’s Employment Commencement Date (as such term is defined in Article I of the Pension Plan) without taking into account the Section 401(a)(17) Limitation or any salary reduction contributions by such Participant to the PMA Capital Corporation 401(k) Excess Plan or to the PMA Capital Corporation Executive Deferred Compensation Plan; and        (b) The Section 415 Limitation contained in Article XI of the Pension Plan shall not be taken into account.         2.3 Reemployment. If a Participant whose employment with a Participating Company was terminated at a time when such Participant had a Past Service Retirement Benefit and whose benefit had commenced to be paid under this Plan or under the PMA SERP becomes reemployed by the Participating Company, payment of such Past Service Retirement Benefit shall be suspended until such individual again ceases to be employed by the Participating Company. Thereupon, payment of such Past Service Retirement Benefit shall recommence, but only if such Participant is still entitled, after taking into account the additional Benefit Service earned by such Participant during his or her period of reemployment, under the terms of Sections 2.1 and 2.2 to a Past Service Retirement Benefit under the Plan or PMA SERP. ARTICLE III —VESTING OF PAST SERVICE RETIREMENT BENEFITS         3.1 Full Vesting. Except as otherwise provided in this Section 3.1 and in Section 7.2 hereof, a Participant shall have a fully (100%) vested and nonforfeitable interest in his/her Past Service Retirement Benefit, if any, once he/she has satisfied the age and service requirements for early or normal retirement under the Pension Plan, as amended effective June 1, 1999, whichever occurs first. Notwithstanding the foregoing, a Participant shall forfeit his/her vested interest, if any, in his/her Past Service Retirement Benefit if his/her employment is terminated for Cause.         3.2 Forfeitures. Any amount forfeited hereunder by a Participant pursuant to Section 3.1 shall constitute a reduction of the Participating Company’s liability under the Plan and/or PMA SERP and shall not be allocated to the remaining Participants. ARTICLE IV —FORM OF PAYMENT OF PAST SERVICE RETIREMENT BENEFITS         4.1 Payment of Past Service Retirement Benefit. Except as otherwise provided in Sections 4.3 and 7.2 hereof, a Participant’s vested Past Service Retirement Benefit, if any, shall commence to be paid at the time retirement income payments commence being made to the Participant under the Pension Plan. If a Participant elects early retirement under the Pension Plan, then the Participant’s Past Service Retirement Benefit shall commence at the same time as payments from the Pension Plan and shall be reduced by the same early retirement reduction factors, if any, applicable to his/her retirement income from the Pension Plan, as amended effective June 1, 1999.         4.2 Form of Payment. The normal form of payment of a Participant’s Past Service Retirement Benefit shall be the same as that provided under the Pension Plan. Subject to Section 4.5 hereof, a Participant’s Past Service Retirement Benefit shall be paid, however, in the same form which the Participant has elected, or is deemed to have elected, pursuant to the Pension Plan. The Participant’s election under the Pension Plan (with the valid consent of his/her Spouse where required under the Pension Plan) shall also be applicable to the payment of his/her Past Service Retirement Benefit. Notwithstanding the foregoing, any Participant who elects a Social Security level income option to augment his/her benefit under the Pension Plan on account of his/her retirement before he/she is eligible for retirement benefits under the Federal Social Security system (as such optional form is described in Section 7.2 of the Pension Plan) shall receive his/her Past Service Retirement Benefit in the form of a single life annuity, as reduced, if necessary, in the manner set forth in Section 4.1 hereof. The Administrator shall have the sole and absolute discretion and authority to approve or reject a Participant’s request for a different method of payment than specified herein.         4.3 Change of Control During Employment. Upon a Change of Control, or within two years thereafter, regardless of whether or not the Plan has been terminated during such period, if the Participating Company (or any successor corporation) shall terminate the Participant’s employment for other than Cause, or if the Participant shall -5- -------------------------------------------------------------------------------- terminate employment for Good Reason or retirement, death, or total disability (as defined in the Pension Plan), then the Participant shall become eligible for, and entitled to receive, the Participant’s Past Service Retirement Benefit. The Participant’s Past Service Retirement Benefit under this provision shall be paid out in a lump sum upon such termination of employment. Such benefit shall be paid by the Participating Company (or any successor corporation) to the Participant in a lump sum, in cash, within ninety days following the date of termination. Such amount will be calculated as the Actuarial Equivalent of the Participant’s Past Service Retirement Benefit using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for determining lump sum distributions. Any Participant who remains employed by the Participating Company (or any successor corporation) for two or more years after a Change of Control shall receive the Past Service Retirement Benefit in accordance with Sections 4.1 and 4.2 hereof.         4.4 Change of Control During Retirement. In the event of a Change of Control of the Plan Sponsor, any Participant who has previously retired from the Participating Company and is receiving payment of the Participant’s Past Service Retirement Benefit shall receive, within ninety days following such Change of Control, a single payment in cash which is the Actuarial Equivalent of the Participant’s remaining benefit under this Plan using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for determining lump sum distributions.         4.5 Failure to Assume Plan upon Change of Control. In the event the Plan is not assumed by a successor upon a Change of Control of the Plan Sponsor, then all Participants shall become eligible for, and entitled to receive, their Past Service Retirement Benefit. Such Past Service Retirement Benefit shall be paid out in a lump sum upon such failure to assume the Plan. Such benefit shall be paid by the Participating Company (or any successor corporation) to the Participant in a lump sum, in cash, within ninety days following the date of the failure to assume the Plan. Such amount will be calculated as the Actuarial Equivalent of the Participant’s Past Service Retirement Benefit.         4.6. Actuarial Equivalent. A Past Service Retirement Benefit which is payable in any form other than the normal form under the Pension Plan, i.e., a straight life annuity over the lifetime of the Participant, or which commences at any time prior to the Participant’s Normal Retirement Date, shall be the Actuarial Equivalent of the Past Service Retirement Benefit payable hereunder using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for making a comparable determination.. ARTICLE V —DEATH BENEFIT         5.1 Death Benefit. Except as otherwise provided herein, a death benefit shall be payable to the surviving Spouse of a Participant who dies before commencement of his/her Past Service Retirement Benefit, if the Spouse is entitled to a qualified pre-retirement survivor annuity under Article VI of the Pension Plan. The amount of the death benefit hereunder shall be based on the amount of the Participant’s Past Service Retirement Benefit determined using the date of death as the date of retirement or separation from service and, for purposes of converting the Past Service Retirement Benefit to a spousal survivor death benefit, using the rules contained in Article VI of the Pension Plan. The death benefit shall be administered and distributed in accordance with the provisions of Article VI of the Pension Plan. In the event of a Change of Control of the Plan Sponsor, any surviving Spouse who is receiving payment of a death benefit pursuant to this Section 5.1 shall receive a single lump sum cash payment which is the Actuarial Equivalent of the surviving Spouse’s remaining death benefit. Such benefit shall be paid by the Participating Company (or any successor corporation) to the surviving Spouse within ninety days following the date of the Change of Control.         5.2 Simultaneous Death. In the event of the simultaneous death of a Participant eligible for a death benefit under this Article V and his/her Spouse so that it is not possible to determine which one was the survivor, it shall be presumed for purposes of this Article V that the Spouse predeceased the Participant. ARTICLE VI —ADMINISTRATION OF THE PLAN         6.1 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 -6- -------------------------------------------------------------------------------- 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.         6.2 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 Committee shall be final and conclusive as to the parties thereto and as to all Participants or beneficiaries claiming any right under the Plan.         6.3 Powers of 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, but not by way of limitation, the following powers:        (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, actuaries, administrators, 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 tables, valuations, certificates, opinions, and reports furnished by the persons described in paragraph (a) or (b) above. Any determination of Actuarially Equivalent benefits by the actuary selected by the Administrator shall be conclusive and binding on the Participating Company, the Administrator and all Participants.        (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. -7- --------------------------------------------------------------------------------        (i) To determine all considerations affecting the eligibility of any Employee to become a Participant or remain a Participant in the Plan;        (j) To determine the status and rights of Participants and their Spouses, beneficiaries or estates;         6.4 Decisions of Administrator. All decisions of the Administrator, and any action taken by it in respect of the Plan and within the powers granted to it under the Plan, shall be conclusive and binding on all persons, subject to the claims and appeal procedure described in Section 6.10 hereof.         6.5 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 advisors, and for such other professional, technical and clerical assistance as may be required, shall be paid by the Participating Company.         6.6 Eligibility to Participate. No member of the Administrator who is also an Eligible Officer 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.         6.7 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 or 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 6.7(a) above, or if such insurance is provided but any of the members of the Administrator or other employees referred to in Section 6.7(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.         6.8 Agent for Service of Legal Process. The Administrator shall be the designated agent for the service of legal process with respect to any matter concerning the Plan.         6.9 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 6.9.         6.10 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”. -8- --------------------------------------------------------------------------------        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 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 6.10.        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 6.10(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. -9- --------------------------------------------------------------------------------        (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 VII —MISCELLANEOUS         7.1 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 Participating Company and/or the Administrator and a Participant. Benefits payable under this Plan shall be paid directly from the general assets of each Participating Company. The Participating Company shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan. The Participating Company’s obligation hereunder will be an unfunded and unsecured promise to make payments in the future. A Participant and his/her Spouse shall not have any property interest, claim or legal or equitable right in or to any specific assets of the Participating Company other than the unsecured right to receive payments from the Participating Company as provided herein. To the extent any person acquires a right hereunder, such right(s) will be no greater than those of a general, unsecured creditor of the Participating Company.         7.2 Amendment or Termination.        (a) The Board of Directors reserves the right to alter, amend or terminate the Plan, or any part thereof, through the adoption of a written resolution; provided, however, that no such action by the Board of Directors shall reduce a Participant’s Past Service Retirement Benefit accrued as of the time thereof and no such amendment 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) If the Plan is terminated, a determination shall be made of each Participant’s Past Service Retirement Benefit as of the Plan termination date. The amount of a Participant’s benefit or benefits shall be payable to the Participant at the time it would have been payable under Article IV hereof if the Plan had not been terminated. If a Participant dies after termination of the Plan, but prior to his/her Termination of Employment, his/her surviving Spouse shall receive a distribution of his/her death benefit, determined in accordance with Article V hereof, but based on the Participant’s Past Service Retirement Benefit as of the Plan termination date.         7.3 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.         7.4 Payments to Minors and Incompetents. If a Participant or surviving Spouse 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.         7.5 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 Participating Company shall not in -10- --------------------------------------------------------------------------------   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 7.5(a), if a Participant is indebted to the Participating Company at any time when payments are to be made by the Participating Company to the Participant under the provisions of the Plan, the Participating Company shall have the right to reduce the amount of payment to be made to the Participant (or the Participant’s surviving Spouse) to the extent of such indebtedness. Any election by the Participating Company not to reduce such payment shall not constitute a waiver of its claim for such indebtedness.         7.6 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.         7.7 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.         7.8 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 Spouse 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.         7.9 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 or other Participating Company shall withhold from such deferred compensation payments any taxes required to be withheld for federal, state or local tax purposes.         7.10 Application of Plan. The Plan, as set forth herein, shall apply to any Participant terminating employment on or after the Effective Date.         7.11 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 a Participating Company or any supplemental arrangement which constitutes a part of the Participating Company’s regular compensation structure. -11- --------------------------------------------------------------------------------         7.12 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 Spouse, beneficiaries, successors, heirs, executors and administrators.         7.13 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.         7.14 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.         7.15 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 Spouse 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 the Spouse (as applicable), upon the request of the Participant or Spouse, the Administrator shall immediately make distribution to the Participant or Spouse of the amount so taxable.         7.16 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 DOL Reg. ss. 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.         7.17 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 VIII —ADOPTION BY AFFILIATED EMPLOYERS         8.1 Adoption of Plan. The following rules shall apply with respect to the adoption of the Plan: -12- --------------------------------------------------------------------------------        (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;        (2) The board of directors of the Affiliated Employer adopts this Plan by an appropriate written resolution which identifies the Eligible Executives;        (3) The Affiliated Employer executes a Plan Adoption Agreement in the form attached hereto as Plan Exhibit A, applicable to the Eligible Executives of such Affiliated Employer. The Affiliated Employer may elect in such Adoption Agreement to have special provisions apply with respect to the Eligible Executives of the Affiliated Employer which differ from the provisions of the Plan applicable to other Eligible Executives; 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 Executives.         8.2 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.         8.3 Application of Withdrawal Provisions. The withdrawal provisions contained in Section 8.2 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.         8.4 Plan Sponsor Appointed Agent of Participating Companies. As a condition precedent to the adoption of the Plan, each participating Affiliated Employer appoints 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 7th day of March, 2001. ATTEST: PMA CAPITAL CORPORATION       [SEAL]       /s/ Robert L. Pratter -------------------------------------------------------------------------------- By: /s/ Francis W. McDonnell -------------------------------------------------------------------------------- Robert L. Pratter, Secretary         Francis W. McDonnell, Senior Vice President,         Treasurer & Chief Financial Officer -13- -------------------------------------------------------------------------------- APPENDIX A —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 -14- -------------------------------------------------------------------------------- PLAN EXHIBIT A —PLAN ADOPTION AGREEMENT [Insert Name of Adopting Affiliated Employer] PMA CAPITAL CORPORATION EXECUTIVE MANAGEMENT PENSION 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 __________, 20___ hereby adopts the PMA CAPITAL CORPORATION EXECUTIVE MANAGEMENT PENSION 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 -15- --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.145 REGISTRATION RIGHTS AGREEMENT     REGISTRATION RIGHTS AGREEMENT, dated as of July 18, 2001 (as amended, modified or supplemented from time to time, this "Agreement"), among MICRON TECHNOLOGY, INC., a Delaware corporation (together with its successors, the "Company"), and LEHMAN BROTHERS INC. on behalf of itself as initial purchaser (the "Initial Purchaser") of the Warrants to purchase common shares, par value $0.10, of the Company, to be issued pursuant to the provisions of a Warrant Agreement dated as of July 18, 2001, between the Company and Wells Fargo Bank Minnesota, N.A., as Warrant Agent (the "Warrant Agent") and all other Holders (as defined below).     1.  Certain Definitions.       For purposes of this Agreement, the following terms shall have the following respective meanings:     (a) "Business Day" means a day of the week other than a Saturday, a Sunday or a day which shall be in New York, New York, or Boise, Idaho, or in the city in which the principal office of the Warrant Agent is located a legal holiday or a day on which banking institutions are authorized or required by law.     (b) "Closing Date" means the date on which the Warrants are initially issued.     (c) "Commission" means the Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose.     (d) "Damages Event" has the meaning assigned thereto in Section 2(c).     (e) "Deferral Notice" has the meaning assigned thereto in Section 3(f).     (f)  "Deferral Period" has the meaning assigned thereto in Section 3(f).     (g) "Effective Time" means the time and date as of which the Commission declares the Shelf Registration effective or as of which the Shelf Registration otherwise becomes effective.     (h) "Effectiveness Period" has the meaning assigned thereto in Section 2(a).     (i)  "Exchange Act" means the Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time.     (j)  "Holder" means the Initial Purchaser, for so long as it owns any Registrable Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of such Registrable Securities.     (k) "Issue Price" means $17.20.     (l)  "Liquidated Damages" has the meaning assigned thereto in Section 2(c).     (m) "Material Event" has the meaning assigned thereto in Section 3(a)(vi).     (n) "NASD" means the National Association of Securities Dealers.     (o) "Notice and Questionnaire" means a written notice delivered to the Company containing substantially the information called for by the Selling Security Holder Notice and Questionnaire of the Company, attached as Annex A to the Offering Memorandum, dated July 12, 2001, relating to the offer and sale of the Warrants.     (p) "Notice Holder" means, on any date, any Holder that has delivered a Notice and Questionnaire to the Company on or prior to such date.     (q) "Person" means a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency. --------------------------------------------------------------------------------     (r) "Prospectus" means the prospectus included in any Shelf Registration, as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or deemed explicitly to be incorporated by reference in such Prospectus.     (s) "Purchase Agreement" means the Purchase Agreement dated July 12, 2001, between the Company and the Initial Purchaser.     (t)  "Registrable Securities" means the Shares; provided, however, that such Shares shall cease to be Registrable Securities (i) when in the circumstances contemplated by Section 2(a), a registration statement registering such Shares under the Securities Act has been declared or becomes effective and such Shares have been sold or otherwise transferred by a Holder thereof pursuant to such effective registration statement; (ii) when such Shares are sold pursuant to Rule 144 under circumstances in which any legend borne by such Shares relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed or such Shares are eligible to be sold pursuant to paragraph (k) of Rule 144; or (iii) when such Shares shall cease to be outstanding.     (u) "Registration Expenses" has the meaning assigned thereto in Section 5.     (v) "Resale Period" means any period during the Effectiveness Period (i) beginning, (x) for the purposes of Section 2(c)(iii) hereof, on the earlier of (1) the Resale Period Commencement Date and (2) the second Trading Day after the day the Company is first obliged to file with the Commission an annual report on Form 10-K or a quarterly report on Form 10-Q for the immediately preceding fiscal year or fiscal quarter, as the case may be, and (y) for all other purposes, on the Resale Period Commencement Date, and (ii) ending on the earlier of (x) the day which follows the Resale Period Commencement Date by a number of days which is the sum of (A) 30 and (B) the number of days during the Resale Period during which either the Shelf Registration or the Prospectus or both are not available for resales by Notice Holders and (y) the first day, after the next Resale Period Commencement Date, on which the Shelf Registration and the Prospectus are available for resales by Notice Holders.     (w) "Resale Period Commencement Date" means the second Trading Day after the day the Company first files with the Commission an annual report on Form 10-K or a quarterly report on Form 10-Q for the immediately preceding fiscal year or fiscal quarter, as the case may be.     (x) "Rule 144," "Rule 405" and "Rule 415" means, in each case, such rule promulgated under the Securities Act, or any successor thereto, as amended from time to time.     (y) "Securities" means, collectively, the Warrants and the Shares.     (z) "Securities Act" means the Securities Act of 1933, or any successor thereto as amended from time to time.     (aa) "Shares" means the shares of common stock of the Company, par value $0.10 per share, for which the Warrants are exercisable or that have been issued upon any exercise of the Warrants.     (bb) "Shelf Registration" has the meaning assigned thereto in Section 2(a).     (cc) "Trading Day" means a day on which the New York Stock Exchange (or such other principal securities exchange or automated quotation system upon which the Registrable Securities may then be listed for public trading) shall be open for business.     (dd) "Warrant Agreement" means the Warrant Agreement dated as of July 18, 2001, between the Company and Wells Fargo Bank Minnesota, N.A., as Warrant Agent.     (ee) "Warrants" means the Warrants to purchase common shares, par value $0.10, of the Company to be issued under the Warrant Agreement and sold by the Company to the Initial Purchaser.     Unless the context otherwise requires, any reference herein to a "section" or "clause" refers to a section or clause, as the case may be, of this Agreement, and the words "herein," "hereof" and 2 -------------------------------------------------------------------------------- "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section or other subdivision. Unless the context otherwise requires, any reference to a statute, rule or regulation refers to the same (including any successor statute, rule or regulation thereto) as it may be amended from time to time.     2.  Registration Under the Securities Act.       (a) The Company agrees to file under the Securities Act within 90 days after the Closing Date a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the Holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (the "Shelf Registration"). The Company agrees to use its reasonable efforts to cause the Shelf Registration to be, to become or to be declared, effective by the Commission within 180 days after the Closing Date and to keep such Shelf Registration continuously effective for a period (the "Effectiveness Period") ending on the earlier of (i) the second anniversary of the Closing Date or (ii) such time as there are no longer any Registrable Securities outstanding. The Company further agrees to promptly supplement or to make amendments to the Shelf Registration, as and when required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration or by the Securities Act or rules and regulations thereunder for shelf registration, and the Company agrees to furnish to the Holders of the Registrable Securities copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission.     (b) Each Holder of Registrable Securities agrees that if such Holder wishes to sell or transfer Registrable Securities pursuant to a Shelf Registration and related Prospectus, it will do so only in accordance with this Section 2(b) and Section 3(f). Each Holder of Securities wishing to sell or transfer Registrable Securities pursuant to a Shelf Registration and a related Prospectus agrees to deliver a Notice and Questionnaire to the Company at least five (5) Business Days prior to any intended sale or transfer of Registrable Securities under the Shelf Registration. From and after the date the Shelf Registration is declared effective, during any Resale Period (exclusive of any days which are within a Deferral Period), the Company shall, as promptly as is practicable after the date a Notice and Questionnaire is delivered, and in any event within five (5) Business Days after such date, (i) if required by applicable law, file with the Commission a post-effective amendment to the Shelf Registration or prepare and, if required by applicable law, file a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that the Holder delivering such Notice and Questionnaire is named as a selling security Holder in the Shelf Registration and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with applicable law and, if the Company shall file a post-effective amendment to the Shelf Registration, use its reasonable efforts to cause such post-effective amendment to be declared effective under the Securities Act as promptly as is practicable; (ii) provide such Holder copies of any documents filed pursuant to clause (i) of this sentence; and (iii) notify such Holder as promptly as practicable after the effectiveness under the Securities Act of any post-effective amendment filed pursuant to clause (i) of this sentence; provided that if such Notice and Questionnaire is delivered during a Deferral Period, the Company shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above upon expiration of the Deferral Period in accordance with Section 3(f). Notwithstanding anything contained herein to the contrary, (i) the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling securityholder in any Registration Statement or related Prospectus; and the Company shall not be obligated to file more than one (1) post-effective amendment or supplement for the purpose of naming Holders as selling securityholders who were not named in the initial Shelf Registration at the time of effectiveness in any five (5) day period following the effectiveness of the initial Shelf Registration. Any Holder which subsequently provides a Notice and Questionnaire required by this Section 2(b) pursuant to the provisions of this Section 2(b) (whether or not such Holder has supplied the Notice and Questionnaire 3 -------------------------------------------------------------------------------- at the time the initial Shelf Registration was declared effective) shall be named as a selling securityholder in the Shelf Registration and related Prospectus in accordance with the requirements of this Section 2(b).     (c) If any of the following events (each, a "Damages Event") shall occur, then liquidated damages (the "Liquidated Damages") shall become payable in respect of the Registrable Securities as follows:      (i) if the Shelf Registration has not been filed with the Commission within 90 days following the Closing Date, then commencing on the 91st day after the Closing Date, Liquidated Damages shall accrue at a rate of 0.25% per annum of the Issue Price for the first 90 days following such 91st day, 0.50% per annum of the Issue Price for the next 90 days and 0.75% per annum of the Issue Price thereafter; or     (ii) if the Shelf Registration has been filed with the Commission and has not been declared effective by the Commission within 180 days following the Closing Date, then commencing on the 181st day after the Closing Date, Liquidated Damages shall accrue at a rate of 0.25% per annum of the Issue Price for the first 90 days following such 181st day, 0.50% per annum of the Issue Price for the for the next 90 days and 0.75% per annum of the Issue Price thereafter, provided, however, that no Liquidated Damages shall be payable pursuant to this clause 2(c)(ii) during any period during which Liquidated Damages are payable pursuant to clause 2(c)(i); or     (iii) if the aggregate duration of Deferral Periods in any Resale Period exceeds thirty (30) days, then commencing on the 31st day of such aggregated Deferral Periods, Liquidated Damages shall accrue at a rate of 0.25% per annum of the Issue Price for the first 90 days following such 30th day, 0.50% per annum of the Issue Price for the next 90 days and 0.75% per annum of the Issue Price thereafter, provided, however, that no Liquidated Damages shall be payable pursuant to this clause 2(c)(iii) during any period during which Liquidated Damages are payable pursuant to clause 2(c)(i) or 2(c)(ii); provided further, that Liquidated Damages under this clause 2(c)(iii) shall be paid only to Notice Holders; provided, further, that upon (1) the filing of the Shelf Registration (in the case of clause (i) above), (2) the effectiveness of the Shelf Registration (in the case of clause (ii) above), (3) the earlier of (i) the time sales have been permitted under the Shelf Registration for an aggregate of thirty (30) days in any Resale Period and (ii) the time sales are permitted under the Shelf Registration in connection with a subsequent Resale Period (in the case of clause (iii) above) or (4) the termination of transfer restrictions on the Registrable Securities as a result of the application of Rule 144(k), Liquidated Damages on the Registrable Securities as a result of such clause shall cease to accrue.     (d) Any reference herein to a registration statement shall be deemed to include any document incorporated therein by reference as of the applicable Effective Time and any reference herein to any post-effective amendment to a registration statement shall be deemed to include any document incorporated therein by reference as of a time after such Effective Time.     (e) Notwithstanding any other provision of this Agreement, no Holder of Securities which Holder is, in the case of Liquidated Damages payable pursuant to Section 2(c)(iii) hereof, not a Notice Holder and does not comply with the provisions of Section 3(c), if applicable, shall be entitled to receive Liquidated Damages unless and until such Holder complies with the provisions of such section, if applicable.     (f)  Notwithstanding any other provision of this Agreement, no Liquidated Damages shall accrue as to any Registrable Security from and after the earlier of the date such security is no longer a Registrable Security and the expiration of the Effectiveness Period. All of the Company's obligations set forth in this Section 2 that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all obligations with respect to such security have been satisfied in full. 4 --------------------------------------------------------------------------------     (g) The Company shall pay any Liquidated Damages on January 18 and July 18 of each year (each, a "Liquidated Damages Payment Date") with respect to the Liquidated Damages, if any, accruing during the six-month period ending on such Liquidated Damages Payment Date. The Company shall pay any such Liquidated Damages to the Person who is the Holder of the Securities at the close of business on December 18 or June 18, as the case may be, next preceding the Liquidated Damages Payment Date. The Company shall pay such Liquidated Damages in money of the United States of America that at the time of payment is legal tender for the payment of public and private debts. The Company shall pay any such Liquidated Damages to the Warrant Agent on behalf of the Holders entitled thereto, and the Warrant Agent shall pay such Liquidated Damages to the Holders entitled thereto.     (h) The parties hereto agree that the Notice Holders of Registrable Securities will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if a Damages Event were to occur. The parties hereto further agree that the Liquidated Damages provided for in this Section 2 constitute a reasonable estimate of the damages that may be incurred by Notice Holders of Registrable Securities by reason of the failure of the Shelf Registration Statement to be filed or declared effective or available for effecting resales of Registrable Securities in accordance with the provisions hereof. Therefore, the parties hereto agree that the sole damages payable for a violation of the terms of this Agreement with respect to which Liquidated Damages are expressly provided for (including any non-compliance with a covenant that results, directly or indirectly, in a Damages Event) shall be such Liquidated Damages.     3.  Registration Procedures.       The following provisions shall apply to registration statements filed pursuant to Section 2:     (a) In connection with the Company's obligations with respect to the Shelf Registration, the Company shall:      (i) prepare and file with the Commission a registration statement with respect to the Shelf Registration on any form which may be utilized by the Company and which shall permit the disposition of the Registrable Securities in accordance with the intended method or methods thereof, as specified in writing by the Holders of the Registrable Securities, and use its reasonable efforts to cause such registration statement to become effective in accordance with Section 2(a) above;     (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the Prospectus included therein as may be necessary to effect and to maintain the effectiveness of such registration statement for the period specified in Section 2(a) and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such registration statement, and furnish to the Holders of the Registrable Securities copies of any such supplement or amendment simultaneously with or promptly following its being filed with the Commission;     (iii) comply, as to all matters within the Company's control, with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities covered by such registration statement in accordance with the intended methods of disposition by the Holders thereof provided for in such registration statement;     (iv) during any Resale Period (exclusive of any Deferral Period), provide to any of (A) the Holders of the Registrable Securities to be included in such registration statement and (B) not more than one counsel for all the Holders of such Registrable Securities that so request of the Company in writing, the opportunity to review and comment upon such registration statement, each Prospectus included therein or filed with the Commission and each amendment or supplement thereto, provided that the foregoing shall not apply to any reports or other filings by the Company with the Commission pursuant to its obligations under the Securities Act or the 5 -------------------------------------------------------------------------------- Exchange Act even though such reports or filings may be incorporated by reference in the Registration Statement;     (v) during any Resale Period (exclusive of any Deferral Period), promptly notify the Holders of Registrable Securities named in the Shelf Registration or a supplement thereto, and confirm such notice in writing, (A) when such registration statement or the Prospectus included therein or any Prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such registration statement or any post-effective amendment, when the same has become effective, (B) of the issuance by the Commission of any stop order suspending the effectiveness of such registration statement or the initiation or written threat of any proceedings for that purpose, (C) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or written threat of any proceeding for such purpose, (D) during any Resale Period (exclusive of any Deferral Period) of the occurrence of (but not the nature of or details concerning) any event or the existence of any fact (a "Material Event") as a result of which any Shelf Registration shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by the Company shall be required pursuant to this clause (D) in the event that the Company either promptly files a Prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Shelf Registration, which, in either case, contains the requisite information with respect to such Material Event that results in such Shelf Registration's no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading), (E) of the determination by the Company that a post-effective amendment to a Shelf Registration will be filed with the Commission, which notice may, at the discretion of the Company (or as required pursuant to Section 3(f)), state that it constitutes a Deferral Notice, in which event the provisions of Section 3(f) shall apply or (F) at any time when a Prospectus is required to be delivered under the Securities Act, that such registration statement, Prospectus, Prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder;     (vi) use its reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement or any post-effective amendment thereto at the earliest practicable date;    (vii) subject to the limits set forth in Section 2(b) hereof, during any Resale Period (exclusive of any Deferral Period), if requested by any Holder of Registrable Securities which is also a Notice Holder, promptly incorporate into a Prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission relating to the terms of the sale of such Registrable Securities, including information with respect to the number of Registrable Securities being sold by such Holder, the name and description of such Holder, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect thereof and with respect to any other terms of the offering of the Registrable Securities to be sold by such Holder; and make all required filings of such Prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment;    (viii) during any Resale Period (exclusive of any Deferral Period), if requested in writing, furnish to each Holder of Registrable Securities an executed copy (or, in the case of a Holder of Registrable Securities, a conformed copy) of such registration statement, each such amendment or 6 -------------------------------------------------------------------------------- supplement thereto (in each case including all exhibits thereto) and such number of copies of such registration statement (excluding exhibits thereto) and of the Prospectus included in such registration statement (including each preliminary Prospectus and any summary Prospectus); and the Company hereby consents (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus (including any such preliminary or summary Prospectus) and any amendment or supplement thereto by each such Holder in the form most recently provided to such person by the Company in connection with the offering and sale of the Registrable Securities covered by the Prospectus (including any such preliminary or summary Prospectus) or any supplement or amendment thereto; and     (ix) during any Resale Period (exclusive of any Deferral Period), use its reasonable efforts to (A) register or qualify, to the extent required by law, the Registrable Securities to be included in such registration statement under such securities laws or blue sky laws of such United States jurisdictions as any Holder of such Registrable Securities shall reasonably request, and (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Shelf Registration is required to remain effective under Section 2(a) and for so long as may be necessary to enable any such Holder to complete its distribution of Securities pursuant to such registration statement but in any event not later than the date through which the Company is required to keep the Shelf Registration effective pursuant to Section 2(a); provided, however, that the Company shall not be required for any such purpose to (1) qualify to do business as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(a)(x), (2) consent to general service of process or otherwise subject itself to service of process in any such jurisdiction or otherwise subject itself to taxation in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders.     In case any of the foregoing obligations depends on information provided or to be provided by a party other than the Company, such obligation shall be subject to the provision of such information by such party; provided that the Company shall use its reasonable efforts to obtain the necessary information from any party responsible for providing such information.     (b) In the event that the Company would be required, pursuant to Section 3(a)(vi)(D), to notify the selling Holders of Registrable Securities named in the Shelf Registration or a supplement thereto of the existence of the circumstances described therein, the Company shall, unless a Deferral Period is in effect, prepare and furnish to each such Holder a reasonable number of copies of a Prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such Prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder. Each Holder of Registrable Securities agrees that upon receipt of any notice from the Company, pursuant to Section 3(a)(vi)(D), such Holder shall forthwith discontinue (and cause any placement or sales agent or underwriters acting on their behalf to discontinue) the disposition of Registrable Securities pursuant to the registration statement applicable to such Registrable Securities until such Holder (i) shall have received copies of such amended or supplemented Prospectus and, if so directed by the Company, such Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Registrable Securities at the time of receipt of such notice or (ii) shall have received notice from the Company that the disposition of Registrable Securities pursuant to the Shelf Registration may continue.     (c) The Company may require each Holder of Registrable Securities as to which any registration pursuant to Section 2(a) is being effected to furnish to the Company such information regarding such Holder and such Holder's intended method of distribution of such Registrable Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required in order to comply with the Securities Act. Each such Holder agrees to notify 7 -------------------------------------------------------------------------------- the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Holder to the Company or of the occurrence of any event in either case as a result of which any Prospectus relating to such registration contains or would contain an untrue statement of a material fact regarding such Holder or such Holder's intended method of disposition of such Registrable Securities or omits to state any material fact regarding such Holder or such Holder's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such Prospectus shall not contain, with respect to such Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.     (d) Until the expiration of two years after the Closing Date, the Company shall not, and shall not enter into any transaction that is designed to or which could reasonably be expected to cause its "affiliates" (as defined in Rule 144) to, resell any of the Securities that have been reacquired by any of them except pursuant to an effective registration statement under the Securities Act.     (e) Upon the occurrence of a Material Event, during any Resale Period the Company shall as promptly as practicable prepare and file a post-effective amendment to the Shelf Registration or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Shelf Registration and Prospectus so that such Shelf Registration does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to a Shelf Registration, use its reasonable efforts to cause it to be declared effective as promptly as is reasonably practicable; provided that the Company shall not be required to comply with the foregoing obligations during any Deferral Period or any period during which Liquidated Damages are accruing; and provided further that the Company shall be required to comply with the foregoing obligations as promptly as practicable after the end of any Deferral Period during which it has not complied with such obligations unless Liquidated Damages are accruing.     (f)  Upon the occurrence or existence of any pending corporate development or any other event or circumstance that, in the reasonable judgment of the Company, makes it appropriate to suspend the availability of the Shelf Registration and the related Prospectus, the Company shall give two Trading Days' notice (without notice of the nature or details of such events) to the Notice Holders that the availability of the Shelf Registration and the Prospectus is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Shelf Registration until such Notice Holder is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. Each Holder agrees to keep the receipt of a Deferral Notice and the contents thereof confidential unless such Holder is required to disclose such receipt or such contents pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter. The period during which the availability of the Shelf Registration or the Prospectus for effecting resales of Registrable Securities is suspended is herein referred to as a "Deferral Period."     4.  Holder's Obligations.       (a) Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Shelf Registration or to receive or use a Prospectus relating thereto, unless such Holder has furnished the Company with a Notice and Questionnaire as required pursuant to Section 2(b) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. 8 --------------------------------------------------------------------------------     (b) Each Notice Holder agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Notice Holder not misleading and any other information regarding such Notice Holder and the distribution of such Registrable Securities as may be required to be disclosed in the Shelf Registration or the Prospectus under applicable law or pursuant to Commission comments.     (c) Each Holder agrees to sell Securities pursuant to the Shelf Registration in accordance with this Agreement, including, without limitation, that each Holder agrees not to sell any Registrable Securities pursuant to the Shelf Registration outside any Resale Period or during any Deferral Period.     (d) Each Holder agrees not to sell any Registrable Securities without delivering, or causing to be delivered, a Prospectus to the purchaser thereof.     (e) Each Holder agrees to notify the Company, following termination of any Resale Period and within 5 Business Days of the Company's request for such information, of the amount of Registrable Securities sold pursuant to the Shelf Registration, and, in the absence of a response, the Company may assume that all of the Holder's Registrable Securities were so sold.     5.  Registration Expenses.       The Company agrees to bear and to pay or to cause to be paid promptly, upon request being made therefor, all expenses incident to the Company's performance of or compliance with this Agreement, including (a) all Commission and registration and filing fees and expenses of the New York Stock Exchange, (b) all fees and expenses in connection with the qualification of the Registrable Securities for offering and sale under the State securities and blue sky laws referred to in Section 3(a)(x) hereof, (c) all expenses relating to the preparation, and reproduction of each registration statement required to be filed hereunder, each Prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the certificates representing the Registrable Securities and all other documents relating hereto, (d) reasonable fees and expenses of the Warrant Agent under the Warrant Agreement, and of any escrow agent or custodian, and of the registrar and transfer agent for the Registrable Securities, (e) internal expenses (including all salaries and expenses of the Company's officers and employees performing legal or accounting duties), and (f) reasonable fees, disbursements and expenses of one counsel for the Holders of Registrable Securities retained in connection with the Shelf Registration, as selected by the Company (unless reasonably objected to by Holders of at least a majority in aggregate of the Registrable Securities being registered), and fees, expenses and disbursements of any other persons, including special experts, retained by the Company in connection with such registration (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any Holder of Registrable Securities, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a documented request therefor. Notwithstanding the foregoing, the Holders of the Registrable Securities being registered shall pay all agency fees and commissions and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such Holders (severally or jointly), other than the counsel and experts specifically referred to above.     6.  Representations and Warranties.       The Company represents and warrants to, and agrees with, the Initial Purchaser and each of the Holders from time to time of Registrable Securities that:     (a) Each registration statement covering Registrable Securities and each Prospectus (including any preliminary or summary Prospectus) contained therein or furnished pursuant to Section 3(b) hereof and any further amendments or supplements to any such registration statement or Prospectus, when it becomes effective or is filed with the Commission, as the case may be, and, in the case of an 9 -------------------------------------------------------------------------------- underwritten offering of Registrable Securities, at the time of the closing under the underwriting agreement relating thereto, will conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at all times subsequent to the Effective Time when a Prospectus would be required to be delivered under the Securities Act, other than from (i) such time as a notice has been given to Holders of Registrable Securities pursuant to Section 3(a)(vi)(D) hereof until (ii) such time as the Company furnishes an amended or supplemented Prospectus pursuant to Section 3(b) hereof or such time as the Company provides notice that offers and sales pursuant to the Shelf Registration may continue, each such registration statement, and each Prospectus (including any summary Prospectus) contained therein or furnished pursuant to Section 3(a) hereof, as then amended or supplemented, will conform in all material respects to the applicable requirements of the Securities Act and the rules and regulations of the Commission thereunder; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of a Holder of Registrable Securities expressly for use therein.     (b) Any documents incorporated by reference in any Prospectus referred to in Section 6(a) hereof, when they become or became effective or are or were filed with the Commission, as the case may be, will conform or conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such documents will contain or contained an untrue statement of a material fact or will omit or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a Holder of Registrable Securities expressly for use therein.     (c) The compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or, except to the extent that any such contravention would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, any indenture or instrument relating to indebtedness for money borrowed or any material agreement to which the Company is a party or any order, rule, regulation or decree of any court or governmental agency or authority located in the United States having jurisdiction over the Company or any property of the Company; and, to the knowledge of the Company, no consent, authorization or order of, or filing or registration with, any court or governmental agency or authority is required for the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Securities Act contemplated hereby and such consents, approvals, authorizations, registrations or qualifications as may be required under State securities or blue sky laws.     (d) This Agreement has been duly authorized, executed and delivered by the Company.     7.  Indemnification.       (a) Indemnification by the Company. In connection with the Shelf Registration, the Company shall, and it hereby agrees to, indemnify and to hold harmless each of the Holders of Registrable Securities included in such Shelf Registration, and each person who is named in such Shelf Registration or a supplement thereto as an underwriter in any offering or sale of such Registrable Securities and each person who controls any such person (each, a "Participant") against any losses, claims, damages or liabilities, joint or several, to which such Participant may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration 10 -------------------------------------------------------------------------------- statement under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary Prospectus contained therein or furnished by the Company to any such Participant, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading and the Company shall, and it hereby agrees to, reimburse each such Participant for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary Prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by any Participant expressly for use therein; provided, further, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense (1) arising from an offer or sale of Registrable Securities occurring during a Deferral Period, if Notice Holders received a Deferral Notice, or (2) the Participant fails to deliver at or prior to the written confirmation of sale, the most recent Prospectus, as amended or supplemented, and such Prospectus, as amended or supplemented, would have corrected such untrue statement or alleged untrue statement of a material fact. This indemnity agreement will be in addition to any liability which the Company may otherwise have.     (b) Indemnification by Participants. Each Participant, severally and not jointly, agrees to indemnify and hold harmless the Company, each of the Company's directors, officers and employees and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act (each, a "Company Party"), against any losses, claims, damages or liabilities, joint or several, to which such Company Party may become subject under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary Prospectus contained therein or furnished by the Company to such Participant, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and each Participant shall, and it hereby agrees to, reimburse each Company Party for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided, that, each Participant agrees to provide such indemnification only with reference to written information furnished to the Company by or on behalf of such Participant specifically for use in any registration statement, or any preliminary or final or summary Prospectus contained therein or any amendment or supplement thereto. This indemnity agreement will be acknowledged by each Participant that is not an Initial Purchaser in such Participant's Notice and will be in addition to any liability which any such person may otherwise have.     (c) Notice. Promptly after receipt by an indemnified party under Section 7(a) or (b) of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under Section 7(a) or (b). In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided that, if the defendants in any such action include both the indemnified party and the indemnifying party and representation of both parties 11 -------------------------------------------------------------------------------- by the same counsel would be inappropriate due to actual or potential conflicting interests between them, the indemnified party or parties shall have the right to select separate counsel to 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 Section 7(a) or (b) for any legal or other expenses subsequently incurred by such indemnified party (other than reasonable costs of investigation) in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the immediately preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate national counsel, approved by the indemnifying party, representing the indemnified parties who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; and except that, if clause (i) or (iii) is applicable, such liability shall be only in respect of the counsel referred to in such clause (i) or (iii).     No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. No indemnified party shall, without the prior written consent of the indemnifying party, effect any settlement of any pending or threatened action for which the indemnifying party could have liability under this Agreement.     (d) Contribution. Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 7(a) or Section 7(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7(d) were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 7(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7(d), no Participant shall be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such Participant from the sale of any Registrable Securities exceeds the amount of any damages which such Participant has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public 12 -------------------------------------------------------------------------------- exceeds the amount of any damages which such underwriter 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 Participants' obligations in this Section 7(d) to contribute shall be several in proportion to the number of Registrable Securities registered or underwritten, as the case may be, by them and not joint.     (e) The obligations of the Company under this Section 7 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each officer, director and partner of each Participant and each person, if any, who controls any Participant within the meaning of the Securities Act or the Exchange Act; and the obligations of the Participants contemplated by this Section 7 shall be in addition to any liability which the respective Participants may otherwise have and shall extend, upon the same terms and conditions, to each officer, employee and director of the Company (including any person who, with his consent, is named in any registration statement as about to become a director of the Company), and to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act.     8.  Rule 144.       The Company covenants to the Holders of Registrable Securities that the Company shall use its reasonable efforts to file in a timely manner the reports it is required to file under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any Holder of Registrable Securities in connection with that Holder's sale pursuant to Rule 144, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements.     9.  Miscellaneous.       (a) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, when received if sent via facsimile or telex or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: if to the Company, to it at 8000 S. Federal Way, Boise, Idaho 83716-9632, Attention: Chief Financial Officer (fax: (208) 363-2900); if to an Initial Purchaser, to it at Three World Financial Center, New York, New York 10285, Attention: Syndicate Department (fax: (212) 528-8822); and if to a Holder, to the address of such Holder set forth in the security register, a Notice and Questionnaire or other records of the Company or to such other address as the Company or any such Holder 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) Parties in Interest. All the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the respective successors and assigns of the parties hereto. In the event that any transferee of any Holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a party hereto for all purposes and such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by and to perform, all of the 13 -------------------------------------------------------------------------------- applicable terms and provisions of this Agreement and such transferee shall promptly furnish to the Company a Notice and Questionnaire.     (c) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any Holder of Registrable Securities, any director, officer or partner of such Holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities pursuant to the Purchase Agreement and the transfer and registration of Registrable Securities by such Holder.     (d) GOVERNING LAW. THIS REGISTRATION RIGHTS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.     (e) Headings. The descriptive headings of the several sections and 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.     (f)  Entire Agreement; Amendments. This Agreement and the other writings referred to herein (including the Warrant Agreement) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. 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 by a written instrument duly executed by the Company and the Holders of at least a majority of the Shares constituting Registrable Securities at the time outstanding (with Holders of Warrants deemed to be the Holders, for the purposes of this section, of the number of outstanding Shares for which such Warrants are or would be exercisable as of the date on which such consent is requested). Each Holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 9(f), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such Holder.     (g) Inspection. For so long as this Agreement shall be in effect, this Agreement and a complete list of the names and addresses of all the Holders of Registrable Securities shall be made available for inspection and copying on any Business Day by any Holder of Registrable Securities for proper purposes only (which shall include any purpose related to the rights of the Holders of Registrable Securities under the Securities, the Warrant Agreement and this Agreement) at the offices of the Company at the address thereof set forth in Section 9(a) above, or at the office of the Warrant Agent under the Warrant Agreement.     (h) Counterparts. This Agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 14 --------------------------------------------------------------------------------     Agreed to and accepted as of the date referred to above.     Very truly yours,     MICRON TECHNOLOGY, INC.     By:      -------------------------------------------------------------------------------- Name: Title: LEHMAN BROTHERS INC.     By:      -------------------------------------------------------------------------------- Name: Title:     15 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.145 REGISTRATION RIGHTS AGREEMENT

EXHIBIT 10.9 MIPS TECHNOLOGIES, INC. EMPLOYEE STOCK PURCHASE PLAN adopted by the Board of Directors on May 22, 1998 and approved by the Stockholder on May 22, 1998 (as amended August 27, 1998) (as amended May 18, 1999 and approved by the Stockholders on October 28, 1999) (as amended January 26, 2000) -------------------------------------------------------------------------------- MIPS TECHNOLOGIES, INC. EMPLOYEE STOCK PURCHASE PLAN adopted by Board of Directors on May 22, 1998 and approved by Stockholder on May 22, 1998 (as amended August 27, 1998) (as amended May 18, 1999 and approved by the Stockholders on October 28, 1999) (as amended January 26, 2000)     The following constitutes the provisions of the MIPS Technologies, Inc. Employee Stock Purchase Plan.     1.  PURPOSE. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through payroll deductions. It is believed that employee participation in ownership of the Company on this basis will be to the mutual benefit of the employees and the Company. It is the intention of the Company that the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.     2.  DEFINITIONS.     "Board" means the Board of Directors of the Company.     "Code" means the Internal Revenue Code of 1986, as amended.     "Common Stock" means the Common Stock, $0.001 par value, of the Company.     "Company" means MIPS Technologies, Inc.     "Committee" means the committee appointed by and serving at the pleasure of the Board to administer the Plan pursuant to Section 14.     "Compensation" means base pay, plus any amounts attributable to overtime, shift premium, incentive compensation, deferred compensation, bonuses and commissions (exclusive of "spot bonuses" and any other such item specifically directed to Employees), designated by the Board, but shall exclude severance pay, pay in lieu of vacations, back pay awards, disability benefits, or any other compensation excluded in the discretion of the Board.     Compensation shall be determined before giving effect to any salary reduction agreement pursuant to a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code, or to pursuant to a deferred election under a nonqualified deferred compensation plan.     "Continuous Status as an Employee" shall mean the absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of a leave of absence agreed to in writing by the Company, provided that such leave is for a period of not more than 90 days or re-employment upon the expiration of such leave is guaranteed by contract or statute.     "Designated Subsidiaries" means the Subsidiaries which have been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan.     "Employee" means any person, including an officer, who is customarily employed for at least twenty (20) hours per week and more than five (5) months in a calendar year by the Company or one of its Designated Subsidiaries.     "Exercise Date" means the last business day of each Exercise Period in an Offering Period. 1 --------------------------------------------------------------------------------     "Exercise Period" means a six-month period commencing on an Offering Date or on the first business day after any Exercise Date in an Offering Period.     "Offering Date" means the first day of each Offering Period of the Plan.     "Offering Period" means a period of twenty-four (24) months consisting of four six-month Exercise Periods during which options granted pursuant to the Plan may be exercised.     "Plan" means the MIPS Technologies, Inc. Employee Stock Purchase Plan.     "Subsidiary" means any corporation, domestic or foreign, in which the Company owns, directly or indirectly, 50% or more of the voting shares.     3.  ELIGIBILITY.     (a) Any person who is an Employee, as defined in Section 2, on the Offering Date of a given Offering Period shall be eligible to participate in such Offering Period under the Plan, subject to the requirements of Section 5(a) and the limitations imposed by Section 423(b) of the Code.     (b) Notwithstanding any provisions of the Plan to the contrary, no Employee shall be granted an option under the Plan if (i) immediately after the grant, such Employee (or any other person whose stock ownership would be attributed to such Employee pursuant to Section 424(d) of the Code) would own shares and/or hold outstanding options to purchase shares possessing five percent (5%) or more of the total combined voting power or value of all classes of shares of the Company or of any subsidiary of the Company, or (ii) the rate of withholding under such option would permit the employee's rights to purchase shares under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its subsidiaries to accrue (i.e., become exercisable) at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair market value of such shares (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time.     (c) Upon reemployment of a former Employee, such former Employee will again be eligible to participate in the Plan, subject to the requirements of Section 5(a) and the limitations imposed by Section 423(b) of the Code.     4.  OFFERING PERIODS. The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on or about each May 1 or November 1, provided, however, that the Offering Date of the initial Offering Period shall be June 10, 1998. If the Company cannot make an offer under the Plan on or about any May 1 or November 1 because of restrictions imposed by law, the Company may make an offer as soon as practical after the expiration of such restrictions. The Board or the Committee shall have the power to change the duration of Offering Periods with respect to future offerings without stockholder approval, if such change is announced at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected.     5.  PARTICIPATION.     (a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions on the form provided by the Company and filing it with the Company's payroll office prior to the Offering Date of the first Offering Period with respect to which it is to be effective, unless a later time for filing the subscription agreement is set by the Board or Committee for all eligible Employees with respect to such Offering Period. Once enrolled, the Employee remains enrolled in each subsequent Offering Period of the Plan at the designated payroll deduction unless the Employee withdraws by providing the Company with a written Notice of Withdrawal or files a new subscription agreement prior to the applicable Offering Date changing the Employee's designated payroll deduction. An eligible Employee may participate in only one Offering Period at a time. 2 --------------------------------------------------------------------------------     (b) Payroll deductions for a participant shall commence with the first payroll period following the Offering Date, or the first payroll following the date of valid filing of the subscription agreement, whichever is later, and shall end when terminated by the participant as provided in Section 10.     6.  PAYROLL DEDUCTIONS.     (a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each payday during all subsequent Offering Periods at a rate not exceeding ten percent (10%), or such other rate as may be determined from time to time by the Board, of the Compensation which he or she would otherwise receive on such payday without regard to deferral elections. Notwithstanding the foregoing, for the initial Offering Period commencing on June 10, 1998, payroll deductions will not commence until the first payday following the date that the registration statement for the initial public offering of the Common Stock becomes or is declared effective by the Securities and Exchange Commission under the Securities Act of 1933 (the "IPO Effective Date"). The amount of initial payroll deductions in the period from June 10, 1998 to the IPO Effective Date will, upon authorization by the participant, be deducted in two substantially equal payments during the first two payroll periods immediately following the IPO Effective Date and, thereafter, payroll deductions will be made at the rate authorized by the participant in his or her initial subscription agreement.     (b) All payroll deductions authorized by a participant shall be credited to his or her account under the Plan. A participant may not make any additional payments into such account.     (c) A participant may discontinue his or her participation in the Plan as provided in Section 10, or may change the rate of his or her payroll deductions during an Offering Period by completing and filing with the Company a new authorization for payroll deduction, provided that the Board may, in its discretion, impose reasonable and uniform restrictions on participants' ability to change the rate of payroll deductions. The change in rate shall be effective no later than fifteen (15) days following the Company's receipt of the new authorization. A participant may decrease or increase the amount of his or her payroll deductions as of the beginning of an Offering Period by completing and filing with the Company, prior to the beginning of such Offering Period, a new payroll deduction authorization.     (d) Notwithstanding the foregoing, to the extent necessary, but only to such extent, to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's payroll deductions may be automatically decreased to 0% at such time during any Exercise Period which is scheduled to end in the current calendar year that the aggregate of all payroll deductions accumulated with respect to the applicable Offering Period and any other Offering Period ending within the same calendar year equals $25,000. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the next succeeding Exercise Period, unless terminated by the participant as provided in Section 10.     7.  GRANT OF OPTION.     (a) On each Offering Date, each participant shall be granted an option to purchase on each Exercise Date (at the per share option price) a number of full shares of Common Stock arrived at by dividing such participant's total payroll deductions to be accumulated prior to such Exercise Date and retained in the participant's account as of the Exercise Date by the lower of (i) eighty-five percent (85%) of the fair market value of a share of Common Stock at the Offering Date, or (ii) eighty-five percent (85%) of the fair market value of a share of Common Stock at the Exercise Date; provided, however, that the maximum number of shares a participant may purchase during each Offering Period shall be determined by (i) dividing $50,000 by the fair market value of a share of Common Stock on the Offering Date for Offering Periods under the Plan commencing 3 -------------------------------------------------------------------------------- prior to May 18, 1999, or (ii) dividing $100,000 by the fair market value of a share of Common Stock on the Offering Date for all Offering Periods beginning on or after May 18, 1999; and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. The fair market value of a share of Common Stock shall be determined as provided in Section 7(b) herein.     (b) The option price per share of such shares shall be the lower of: (i) eighty-five percent (85%) of the fair market value of a share of Common Stock at the Offering Date; or (ii) eighty-five percent (85%) of the fair market value of a share of Common Stock at the Exercise Date. The fair market value of a share of Common Stock on said dates shall be determined by the Board, based upon such factors as the Board determines relevant; provided, however, that if there is a public market for the Common Stock, the fair market value of a share of Common Stock on a given date shall be the closing price for the Common Stock as of such date; or, in the event that the Common Stock is listed on a national securities exchange, the fair market value of a share of Common Stock shall be an amount equal to the closing sales price of a share of Common Stock on the exchange as of such date.     8.  EXERCISE OF OPTION.     (a) Unless a participant withdraws from the Offering Period as provided in Section 10, his or her option for the purchase of shares will be exercised automatically at each Exercise Date, and the maximum number of full shares subject to option will be purchased at the applicable option price with the accumulated payroll deductions in his or her account. The shares purchased upon exercise of an option hereunder shall be deemed to be transferred to the participant on the Exercise Date.     (b) During his or her lifetime, a participant's option to purchase shares hereunder is exercisable only by the participant.     (c) The Board may require, as a condition precedent to any purchase under the Plan, appropriate arrangements with the participant for the withholding of any applicable Federal, state, local or foreign withholding or other taxes.     9.  DELIVERY. As promptly as practicable after the Exercise Date of each Offering Period, the Company shall arrange for the shares purchased upon exercise of his or her option to be electronically credited to the participant's designated brokerage account at one of the securities brokerage firms participating in the Company's direct deposit program from time to time. Any cash remaining to the credit of a participant's account under the Plan after a purchase by him or her of shares at the Exercise Date of each Offering Period which merely represents a fractional share shall be credited to the participant's account for the next subsequent Offering Period; any additional cash shall be returned to said participant.     10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.     (a) A participant may withdraw all, but not less than all, the payroll deductions credited to his or her account under the Plan at any time prior to an Exercise Date by giving written notice to the Company on a form provided for such purpose. If the participant withdraws from the Offering Period, all of the participant's payroll deductions credited to his or her account will be paid to the participant as soon as practicable after receipt of the notice of withdrawal and his or her option for the current Offering Period will be automatically canceled, and no further payroll deductions for the purchase of shares will be made during such Offering Period or subsequent Offering Periods, except pursuant to a new subscription agreement filed in accordance with Section 6 hereof. 4 --------------------------------------------------------------------------------     (b) Upon termination of the participant's Continuous Status as an Employee prior to an Exercise Date of an Offering Period for any reason, including retirement or death, the payroll deductions accumulated in his or her account will be returned to him or her as soon as practicable after such termination or, in the case of death, to the person or persons entitled thereto under Section 14, and his or her option will be automatically canceled.     (c) In the event an Employee fails to remain in Continuous Status as an Employee of the Company for at least twenty (20) hours per week during an Offering Period in which the employee is a participant, he or she will be deemed to have elected to withdraw from the Plan, and the payroll deductions credited to his or her account will be returned to the participant and the option canceled.     (d) A participant's withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in a succeeding Offering Period by executing and delivering to the Company a new payroll deduction form or in any similar plan which may hereafter be adopted by the Company.     11. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. In the event that the fair market value of the Common Stock is lower on the first day of an Exercise Period (the "Subsequent Exercise Period") than it was on the first Offering Date for that Offering Period (the "Initial Offering Period"), all participants in the Plan on the first day of the Subsequent Exercise Period shall be deemed to have withdrawn from the Initial Offering Period on the first day of the Subsequent Exercise Period and to have enrolled as participants in a new Offering Period which begins on or about that day. A participant may elect to remain in the Initial Offering Period by filing a written statement declaring such election with the Company prior to the time of the automatic change to the new Offering Period.     12. INTEREST. No interest shall accrue on the payroll deductions of a participant in the Plan.     13. STOCK.     (a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19, the maximum number of shares of Common Stock which shall be reserved for sale under the Plan shall be 600,000 shares, plus an annual increase to be added on July 1 of each year beginning July 1, 1999 equal to the lesser of: (i)0.5% of the total number of shares of Common Stock outstanding on a fully diluted basis as of the immediately preceding June 30; (ii)600,000 shares; or (iii)an amount determined by the Board. If the total number of shares which would otherwise be subject to options granted pursuant to Section 7(a) hereof on the Offering Date of an Offering Period exceeds the number of shares then available under the Plan (after deduction of all shares for which options have been exercised or are then outstanding), the Company shall make a pro rata allocation of the shares remaining available for option grant in as uniform and equitable a manner as is practicable. In such event, the Company shall give written notice of such reduction of the number of shares subject to the option to each participant affected thereby and shall return any excess funds accumulated in each participant's account as soon as practicable after the affected Exercise Date of such Offering Period. Common Stock to be sold to participants in the Plan may be, at the election of the Company, either treasury shares or shares authorized but unissued.     (b) A participant will have no interest or voting rights in shares covered by his or her option until such option has been exercised. 5 --------------------------------------------------------------------------------     (c) Shares to be delivered to a participant under the Plan will be credited electronically to a brokerage account in the name of the participant at one of the brokerage firms participating from time to time in the Company's direct deposit program.     14. ADMINISTRATION. The Plan shall be administered by the Board or the Committee. The Board or the Committee shall have the authority to (i) make all factual determinations in the administration or interpretation of the Plan, (ii) establish administrative regulations to further the purpose of the Plan, and (iii) take any other action desirable or necessary to interpret, construe or implement properly the provisions of the Plan. The administration, interpretation or application of the Plan by the Board or the Committee shall be final, conclusive and binding upon all participants. Members of the Board or the Committee who are eligible Employees are permitted to participate in the Plan, provided that:     (a) Members of the Board who participate in the Plan may not vote on any matter affecting the administration of the Plan or the grant of any option pursuant to the Plan.     (b) If a Committee is established to administer the Plan, no member of the Board who participates in the Plan may be a member of the Committee.     15. DESIGNATION OF BENEFICIARY.     (a) A participant may file a written designation of a beneficiary who is to receive shares and/or cash, if any, from the participant's account under the Plan in the event of such participant's death at a time when cash or shares are held for his or her account.     (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant in the absence of a valid designation of a beneficiary who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant; or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may reasonably designate.     16. RIGHTS NOT TRANSFERABLE. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 10.     17. USE OF FUNDS. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.     18. REPORTS. Individual accounts will be maintained for each participant in the Plan. Statements of account will be given to participating Employees as soon as practicable following each Exercise Date. Such statements will set forth the amounts of payroll deductions, the per share purchase price, the number of shares purchased and the remaining cash balance, if any.     19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but have not yet been placed under option (collectively, the "Reserves"), as well as the price per share of Common Stock covered by each option under the Plan which has not yet been exercised, shall be proportionately adjusted for any increase or 6 -------------------------------------------------------------------------------- decrease in the number of issued shares of Common Stock resulting from a stock split, stock dividend, combination or reclassification of the Common Stock or any other increase or decrease in the number of 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 issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to option.     In the event of the proposed dissolution or liquidation of the Company, the Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. 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, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation, In the event that the successor corporation refuses to assume or substitute for the option, the Board may, in its discretion, shorten any Exercise Periods then in progress by setting a new Exercise Date (the "New Exercise Date") and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company's proposed sale or merger. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.     The Board may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, and in the event of the Company being consolidated with or merged into any other corporation.     20. AMENDMENT OR TERMINATION. The Board may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19 and this Section 20, no such termination will affect options previously granted. Except as provided in Section 19 and this Section 20, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. In addition, to the extent necessary, but only to such extent, to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law or regulation), the Company shall obtain stockholder approval of an amendment in such a manner and to such a degree as so required.     Without stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan. 7 --------------------------------------------------------------------------------     In the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:     (1) altering the purchase price for any Offering Period including an Offering Period underway at the time of the change in purchase price;     (2) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; and     (3) allocating shares.     Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants.     21. NOTICES. All notices or other communications by a participant to the Company in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. Notices given electronically by the Company will be deemed to be written notices under the Plan.     22. STOCKHOLDER APPROVAL. The Plan was adopted by the Board on May 22, 1998 and approved by the shareholders of the Company on May 22, 1998 in accordance with the requirements of Section 423(b)(2) of the Code.     23. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.     As a condition to the exercise of an option, if required by applicable securities laws, the Company may require the participant for whose account the option is being exercised to represent and warrant at the time of 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 any of the aforementioned applicable provisions of law.     24. NO RIGHT TO EMPLOYMENT. Nothing shall confer upon any employee of the Company any right to continued employment with the Company any right to continued employment with the Company or interfere in any way with the right of the Company to terminate the employment of any of its employees at any time, with or without cause.     25. TERM OF PLAN. The Plan shall remain in effect until May 22, 2008, unless terminated earlier in accordance with Section 20.     26. GOVERNING LAW. All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws. 8 -------------------------------------------------------------------------------- MIPS Technologies Inc.   EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT -------------------------------------------------------------------------------- EMPLOYEE LAST NAME   FIRST NAME   MI   SOCIAL SECURITY #   EMPLOYEE #               -------------------------------------------------------------------------------- DAYTIME TELEPHONE NUMBER   OFFICE LOCATION               -------------------------------------------------------------------------------- / / ORIGINAL APPLICATION   / / CHANGE 1.I hereby elect to participate in each Offering Period of the MIPS Technologies Inc. Employee Stock Purchase Plan (the "Plan") beginning subsequent to the date set forth below and subscribe to purchase shares of Common Stock of MIPS Technologies Inc. (the "Company") in accordance with this Agreement and the Plan. 2.I hereby authorize payroll deductions from each paycheck during each Offering Period in the amount of (1% to 10%, whole percentages only)            % of my compensation (including base pay and, to the extent applicable, any amounts attributable to overtime, shift premium, incentive compensation, bonuses and commissions) in accordance with the Plan. 3.I understand that said payroll deductions shall be accumulated for the purchase of shares in accordance with the Plan, and that shares will be purchased for me automatically at the end of each six-month Exercise Period unless I withdraw from the Plan by giving written notice to the Company. I authorize the Company to carry over to the next Exercise Period or Offering Period any Cash insufficient to purchase a share of Common Stock. 4.I have received a copy of the Company's most recent prospectus which describes the Plan and a copy of the complete "MIPS Technologies Inc. Employee Stock Purchase Plan." I understand that my participation in the Plan is in all respects subject to the terms of the Plan. 5.I hereby agree to be bound by the terms of the Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan. 6.In the event of my death, I hereby designate the following to be my beneficiary(ies) to receive all payments and shares due me under the Plan. !Same Beneficiaries as designated on prior Subscription Agreement !Original designation or change as set forth below: -------------------------------------------------------------------------------- Beneficiary(ies) Full Name(s)   Relationship   % Of Proceeds --------------------------------------------------------------------------------           --------------------------------------------------------------------------------           --------------------------------------------------------------------------------           -------------------------------------------------------------------------------- 7.I agree that the shares I purchase through the MIPS Technologies Inc. Employee Stock Purchase Plan (ESPP) will be electronically transferred to a brokerage firm for credit to an account set up under my name. Broker selection and additional information may be found on the Company's internal website or obtained from the Benefits Department. -------------------------------------------------------------------------------- Employee Signature   -------------------------------------------------------------------------------- Date -------------------------------------------------------------------------------- Human Resources Signature   -------------------------------------------------------------------------------- Date PLEASE RETURN FORM TO Trish Leeper / HR 1 --------------------------------------------------------------------------------

EX-10.157 6 loanagre.htm CONSTRUCTION LOAN AGREEMENT Exhibit 10.157 CONSTRUCTION LOAN AGREEMENT This CONSTRUCTION LOAN AGREEMENT ("Agreement") is made and entered into as of June 21, 2001 by and between AXYS 468 LITTLEFIELD LLC, a California limited liability company ("Borrower"), and CUPERTINO NATIONAL BANK, a California banking corporation ("Lender"). RECITALS A. Borrower, as successor in interest to Guarantor (as defined below), owns the leasehold estate created by that certain Ground Lease (as defined below) of the real property ("Land") described in the attached Exhibit A, incorporated by this reference. B. Borrower proposes to construct on the Land the Improvements (as defined below) in accordance with the Plans and Specifications (as defined below). C. Borrower wishes to borrow from Lender up to the sum of Eleven Million and 00/100 Dollars ($11,000,000.00) (the "Loan") to be used by Borrower for construction of the Improvements, subject to the terms of this Agreement. D. The Loan is to be evidenced by the Term Note Secured by Construction Leasehold Deed of Trust (the "Note") in the original principal amount of Eleven Million and 00/100 Dollars ($11,000,000.00) dated the date hereof made by Borrower payable to the order of Lender, repayment of which is to be secured by the Construction Leasehold Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated the date hereof covering the Land and the Improvements (the "Deed of Trust") executed by Borrower in favor of GREATER BAY BANCORP, a Delaware corporation ("Trustee"), in trust for the benefit of Lender, and any further security that Lender now or from time to time may require. E. Repayment of the Loan and completion of the Improvements are to be guaranteed by Guarantor pursuant to the Guaranty Agreement dated as of the date hereof executed by Guarantor in favor of Lender (the "Guaranty"). AGREEMENT NOW, THEREFORE , for good and valuable consideration the receipt and adequacy of which are acknowledged, the parties agree as follows: DEFINED TERMS Definitions . All capitalized terms not defined herein shall have the meanings set forth in the Deed of Trust. As used in this Agreement, the following terms shall have the following meanings: "Agreement" means this Construction Loan Agreement, and all exhibits and addendums attached hereto as all of the foregoing may be amended, supplemented, or modified from time to time. "Business Day" means any day excluding Saturday, Sunday, and any day which is a legal holiday under the laws of the State of California, or is a day on which banking institutions located in the State of California are closed. "Cash Collateral Account Agreement" means the Cash Collateral Account Agreement dated the date hereof by and between Borrower and Lender. "Change" has the meaning set forth in Section 3.2. "Commitment Date" means the date Lender issued its commitment to fund the loan. "Completion Date" means the earlier to occur of: (a) Loan Maturity Date; or (b) the last day of the month in which Completion of the Improvements occurs. "Completion of the Improvements" means that, in Lender's sole judgment: (a) the Improvements will have been constructed in a good and workmanlike manner in accordance with: (i) the Plans and Specifications, (ii) construction progress schedule; and (iii) the current Direct and Indirect Cost Breakdowns as furnished to Lender by Borrower, approved in writing by Lender, without substantial deviation, unless approved by Lender; (b) all notices of completion with respect to the Improvements will have been filed, all statutory lien periods will have expired, and all endorsements, including but not limited to endorsement nos. 100, 101.2, 102.5, and 116 to Lender's title policy shall have been delivered to Lender; (c) all costs of constructing the Improvements will have been paid, including, without limitation, interest on the Note prior to the Completion Date; (d) all materials and fixtures usually furnished and installed at this stage of construction shall have been fully furnished and installed; and (e) all of the conditions specified in Section 4.9 will have been satisfied. "Default Rate" means a rate of interest three percentage points (3%) over the interest rate as stated in the Note. "Direct Cost Breakdown" means the direct cost breakdown as set forth in the Disbursement Schedule. "Disbursement Schedule" has the meaning set forth in Section 4.1 "Environmental Indemnity" means the Environmental Indemnity dated the date hereof executed by Borrower in favor of Lender. "Extended Maturity Date" has the meaning set forth in Section 2.3. "Event of Default" has the meaning set forth in Section 6.1. "Financial Statements" means the financial statements of Borrower and any other Persons as may be required by Lender from time to time, including operating statements, balance sheets, and any other financial reports and information that Lender may require. "Fixtures" means all fixtures located on or within the Improvements or now or later installed in or used in connection with any of the Improvements, including, but not limited to, all partitions, screens, awnings, motors, engines, boilers, furnaces, pipes, plumbing, elevators, cleaning and sprinkler systems, fire extinguishing apparatus and equipment, water tanks, heating, ventilating, air conditioning and air cooling equipment, built-in refrigerators, and gas and electric machinery, appurtenances, and equipment, whether permanently affixed to the Land or the Improvements. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America, applied on a consistent basis over the time period in question as to classification of items and amounts. "General Contractor" means O'Neill Construction or any other general contractor designated by Borrower as general contractor and approved by Lender. "Governmental Authority" means (a) the United States of America; (b) the State of California; (c) the County of San Mateo, California; or (d) the City of South San Francisco, California, or other political subdivision, agency, department, commission, board, bureau, or instrumentality of any of them. "Governmental Requirement" means any law, ordinance, order, rule, regulation, or requirement of a Governmental Authority. "Ground Lease" means that certain Ground Lease dated October 30, 1998 by and between Lessor and Borrower, as successor in interest to Guarantor, as amended from time to time. "Guarantor" means AXYS Pharmaceuticals, Inc., a Delaware corporation. "Impositions" means all real estate and personal property taxes and other taxes and assessments, water and sewer rates and charges, and all other governmental charges and any interest or costs or penalties with respect to them, ground rent and charges for any easement or agreement maintained for the benefit of the Property, general and special, ordinary and extraordinary, foreseen or unforeseen, of any kind that at any time may be assessed, levied, imposed, or become a lien on the Property or the rent or income received from the Property, or any use or occupancy of the Property; and any charges, expenses, payments, or assessments of any nature that are or may become a lien on the Property or the rent or income received from it. "Improvements" means all buildings, improvements, Fixtures and appurtenances on the Land, and all improvements, additions, and replacements, and other buildings and improvements, at any time later constructed or placed on the Land. "Indirect Cost Breakdown" means the indirect cost breakdown as set forth in the Disbursement Schedule. "Inspector" has the meaning set forth in Section 3.5. "Lessor" means Littlefield Associates, a California general partnership. "Letter of Credit" has the meaning set forth in Section 2.4.1. "Loan Documents" means the Note, this Agreement, the Security Documents, and all other documents executed by Borrower or Guarantor (including guaranties) evidencing, securing, or relating to the Loan, except the Environmental Indemnity. "Loan Extension Notice" has the meaning set forth in Section 2.3. "Loan Fee" has the meaning set forth in Section 8.21.1. "Loan Maturity Date" means the Maturity Date as defined in the Note. "Loan Proceeds" means funds disbursed by Lender pursuant to this Agreement to finance the construction of the Improvements. "Materials" has the meaning set forth in Section 4.5. "Person" means any natural person, corporation, firm, partnership, association, trust, government, governmental agency, or any other entity, whether acting in an individual, fiduciary, or other capacity. "Plans and Specifications" means the final set of architectural, structural, mechanical, electrical, grading, sewer, water, street, and utility plans and specifications for the Improvements, including all supplements, amendments, and modifications. "Potential Default" means an event that would constitute an Event of Default but for any requirement of notice to be given or period of grace or time to elapse. "Project Architect" has the meaning set forth in Section 3.10. "Property" means Borrower's ground leasehold interest in the Land, the Improvements, and the Fixtures, together with: (a) all rights, privileges, tenements, hereditaments, rights-of-way, easements, and appurtenances of the Land or the Improvements now or later belonging to the Property and all right, title, and interest of Borrower in any streets, ways, alleys, strips, or gores of land adjoining the Land; and (b) all of Borrower's right, title, and interest in the Land, the Improvements, and the Fixtures, including any award for any change of grade of streets affecting the Land, the Improvements, or the Fixtures. "Security Documents" means the Deed of Trust and Cash Collateral Account Agreement, together with all other documents or instruments entered into between Borrower and Lender or by Borrower in favor of, or for the benefit of, Lender that recite that they are to secure the Loan. "Take Out Lender" means a lender, that pays in full the outstanding principal, plus all accrued and unpaid interest, plus all costs and fees due and payable under the Note. "Title Company" means First American Title Company. "Title Policy" means the ALTA Loan Policy issued by Title Company. "Work" means the construction of the Improvements. Accounting Terms . Unless otherwise indicated in this Agreement or any other Loan Document, all accounting terms used in this Agreement or any other Loan Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP changes during the term of this Agreement such that any covenants contained herein would then be calculated in a different manner or with different components, Borrower and Lender agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower's financial condition to substantially the same criteria as were effective prior to such change in GAAP; provided, however, that, until Borrower and Lender so amend this Agreement, all such covenants shall be calculated in accordance with GAAP as in effect immediately prior to such change. Headings . Headings in this Agreement and each of the other Loan Documents are for convenience of reference only and are not part of the substance hereof or thereof. Plural Terms . All terms defined in this Agreement or any other Loan Document in the singular form shall have comparable meanings when used in the plural form and vice versa. Other Interpretive Provisions . References in this Agreement to "Recitals," "Sections," "Exhibits" and "Schedules" are to recitals, sections, exhibits and schedules herein and hereto unless otherwise indicated. References in this Agreement and each of the other Loan Documents to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any other Loan Document shall refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. The words "include" and "including" and words of similar import when used in this Agreement or any other Loan Document shall not be construed to be limiting or exclusive. LOAN AND LETTER OF CREDIT Loan . Lender agrees to lend to Borrower, and Borrower agrees to borrow from Lender, up to Eleven Million and 00/100 Dollars ($11,000,000.00), to finance the construction of the Improvements and for other purposes specified in the Loan Documents, subject to the terms, conditions, representations, warranties, and covenants in this Agreement. Disbursements . Lender agrees to disburse the Loan Proceeds in the manner and subject to the limitations in this Agreement. Interest will accrue on disbursed Loan Proceeds at the applicable rate specified in the Note with respect to each disbursement from the date on which the disbursement is made until repaid. All Loan Proceeds will be evidenced by the Note and will be secured by the Deed of Trust and other applicable Security Documents. Extension of the Loan Maturity Date. Subject to the terms and conditions of the Cash Collateral Security Agreement, Lender agrees to extend the Loan Maturity Date set forth in the Note, subject to Lender receiving from Borrower, at least thirty (30) days before the Loan Maturity Date, written notice requesting an extension (the "Loan Extension Notice") for an additional term up to three (3) months (the "Extended Maturity Date") subject, however, to satisfaction of all of the following conditions no later than the Loan Maturity Date: All covenants and obligations of Borrower and Guarantor under the Loan Documents and the Environmental Indemnity shall have been performed and all representations and warranties contained herein shall be true and correct as of the Loan Maturity Date. No Event of Default shall have occurred. Lender shall have determined, in Lender's sole discretion, that no conditions exist that might materially adversely affect: (a) the ability of Borrower or Guarantor to perform any of its obligations under the Loan Documents and Environmental Indemnity; (b) the business or financial condition of Borrower or Guarantor; (c) the business or financial condition, operations, or value of the Improvements or the Property; or (d) the priority of Lender's lien in the Improvements and the Property. Borrower shall have executed and delivered to Lender a replacement note or such other documentation as Lender may require, in form and content satisfactory to Lender, specifying the Extended Maturity Date. Borrower shall have delivered to Lender such other documents and assurances as Lender shall require, including, without limitation if requested by Lender, an endorsement to Lender's title insurance policy, at Borrower's expense, assuring Lender that the extension will not affect the priority of Lender's lien in the Improvements and the Property. Borrower shall have paid to Lender concurrently with the delivery of the Loan Extension Notice a fee in the amount of Twenty Seven Thousand Five Hundred and 00/100 Dollars ($27,500.00). Standby Letter of Credit . Issuance. Subject to, and upon the terms and conditions contained herein, at the request of Borrower, Lender shall issue an irrevocable standby letter of credit (the "Letter of Credit") for the account of Borrower and for the benefit of Take Out Lender, containing terms and conditions acceptable to Lender. Each draft paid by Lender under the Letter of Credit shall be repaid by Borrower in accordance with the terms of the Letter of Credit. Cash Collateral . Borrower's reimbursement obligation under the Letter of Credit shall be cash secured as set forth in the Cash Collateral Account Agreement. Amount of Letter of Credit. Except in Lender's discretion, the amount of the Letter of Credit shall not at any time exceed Two Million and 00/100 Dollars ($2,000,000.00). Notwithstanding the foregoing, if the balance of the Deposit Account (as defined in the Cash Collateral Agreement) is less than Two Million and 00/100 Dollars ($2,000,000.00), then the amount of the Letter of Credit shall be equal to the balance of the Deposit Account as of the date of issuance of the Letter of Credit. Letter of Credit Agreement . The Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit Agreement and related documents, if any, required by Lender in connection with the issuance thereof (each, a " Letter of Credit Agreement "). Subleases . Upon request of Lender, for purposes of facilitating a take out loan, Borrower shall enter into a sublease for the Property with Guarantor or its successor in interest, and on such terms that are reasonably acceptable to Lender. CONSTRUCTION AND COMPLETION OF IMPROVEMENTS Construction . Borrower will diligently proceed with construction of the Improvements in accordance with the Plans and Specifications as approved by Lender. Completion of the Improvements will occur on or before the Loan Maturity Date. Extra Work; Changes in Plans and Specifications. Subject to Section 4.3, all requests for changes in the Plans and Specifications or construction contract (individually, a "Change", and collectively, "Changes"), other than minor changes involving no extra cost, must be in writing, signed by Borrower and the Project Architect, and delivered to Lender for its approval, which approval shall not be unreasonably withheld. Borrower shall obtain any required permits or authorizations from any Governmental Authority having jurisdiction prior to approving or requesting any Change. Contractors and Contracts. On demand by Lender, Borrower will furnish to Lender from time to time correct lists of all contractors and subcontractors employed in connection with the Work. Each list will show the name, address, and telephone number of each contractor or subcontractor, a general statement of the nature of the work to be done, the labor and materials to be supplied, the names of material suppliers, if known, and the approximate dollar value of the labor, work, and materials with respect to each. Lender may contact directly each contractor, subcontractor, and material supplier to verify the facts disclosed by the list or for any other purpose. All contracts let by Borrower or its contractors relating to the Work will require them to disclose to Lender information sufficient to make that verification. All estimated direct costs of the Work will be covered by firm contracts or orders with contractors, subcontractors, or material suppliers acceptable to Lender. All those contracts and orders will be subject to the approval of Lender, and no contract or order may be amended or altered without the prior written approval of Lender. Purchase or Lease of Materials . No materials, equipment, furniture, fixtures, or any other part of the Improvements will be purchased or leased for or installed on the Property under any security agreement, lease, or other arrangement in which the seller or lessor reserves or purports to reserve any rights in them or any right to remove or repossess any of these items or to consider them personal property after their incorporation in the Work, unless specifically authorized by Lender in advance in writing. Inspection. Lender, through its officers, agents, contractors, or employees, will have the right at any time, with notice to Borrower and without notice to Borrower upon an Event of Default, to enter on the Property and inspect the Improvements and the Work; and to examine the books, records, accounting data, plans, shop drawings, specifications, and other documents of Borrower pertaining to the Work and to make extracts or copies. All these documents will be made available to Lender, its officers, agents, contractors, and employees promptly on written demand. Lender may cause periodic inspections to be made by an inspector or inspectors ("Inspector") consulting with Lender in connection with the Work. Borrower agrees to cooperate fully (and to cause the General Contractor to cooperate fully) with the Inspector and to permit all appropriate access to the Property and to all relevant books and records. The cost of that service will be borne by Borrower and will be paid within thirty (30) days of receipt of any invoice or paid from available Loan Proceeds. Protection Against Lien Claims. Borrower agrees to pay and discharge promptly and fully all claims for labor done and materials and services furnished in connection with the Work, diligently to file or produce the filing of a valid Notice of Completion on completion of the Work, diligently to file or procure the filing of a Notice of Cessation in the event of a cessation of labor on the Work for a continuous period of (30) days or more, and to take all other reasonable steps to forestall the assertion of claims of lien against the Property or any part of it. Borrower will require the general contractor to obtain a lien waiver with respect to each payment by or to the general contractor and each of the various subcontractors and material suppliers (and the major subcontractors and submaterial suppliers under them), and Lender, at any time, at its option, may require that: (a) Borrower make any payments for which disbursements are made under this Agreement by joint check made payable to the general contractor and subcontractor or sub-subcontractor for whose account the payment is to be made, as joint payees; or (b) all contractors, material suppliers, and laborers employed in connection with the Work will be paid directly by disbursement on a form or order approved by Lender and countersigned by Borrower. Nothing here will require Borrower to pay any claims for labor, materials, or services that Borrower in good faith disputes and that Borrower, at its own expense, is currently and diligently contesting, provided that Borrower will, in that case and in each other case where a claim of lien has been filed, within ten (10) days after the filing of any claim of lien: (i) record in the office of the Recorder of the County where the Property is located a surety bond sufficient to release the claim of lien; (ii) make a deposit of cash in the amount of one hundred and fifty percent (150%) of the claim of lien with Lender; (iii) deliver to Lender a specific title insurance policy endorsement under which the Title Company insures Lender that the claim of lien is not valid; or (iv) deliver to Lender any other assurance as may be acceptable to Lender. Performance and Payment Bonds. Borrower will procure and deliver to Lender, and will require General Contractor and all subcontractors to procure and deliver to Lender, dual obligee performance and labor and material payment bonds in form, substance, and amount satisfactory to Lender that Lender may require by notice to Borrower. Borrower will deliver to Lender an original of each bond for Lender's approval. Security Instruments . From time to time Borrower will execute and deliver to Lender a security instrument naming Lender as secured party covering all contracts entered into in connection with the Work and all other property of any kind owned by Borrower and used, or to be used, in the use and enjoyment of the Property and concerning which Lender may have any doubt as to its being subject to the lien of the Security Documents. Surveys. Upon request by Lender, and at Borrower's expense, Borrower will furnish to Lender, immediately on completion of the foundation work and immediately on completion of the Improvements, respectively, a survey of the Property by a registered surveyor approved by Lender, in form and substance satisfactory to Lender, bearing the surveyor's certificate addressed to Lender and Title Company that: (a) confirms the legal description and area of the Property; (b) shows the location of all improvements, roads, fences, easements, zoning setback lines, height restrictions, or other space limitations; (c) shows utility lines to point of connection with the public system; (d) shows adjoining public and private streets and the distance to and names of nearest intersecting streets; (e) shows all encroachments on the Property; (f) certifies that the Plans and Specifications provide that the foundations and the Improvements, respectively, will be, and to the extent constructed are, located entirely within the setback lines and the property lines, and will not, and to the extent constructed do not, encroach on any other property, easement, or public or private right-of- way, or breach or violate any covenant, condition, or restriction of record, or any building or zoning ordinance; and (g) shows any other details that Lender may reasonably request. The final survey will also enumerate and locate all parking spaces. Project Architect. An architect approved in writing by Lender ("Project Architect") will be retained by Borrower, at Borrower's expense, to furnish periodic reports on the progress of the Work, including an estimate of the time and cost required to complete the Work according to the Plans and Specifications. LOAN DISBURSEMENT PROCEDURES Application for Advances. Borrower shall apply for advances from the Loan according to the disbursement schedule attached hereto as Exhibit B (the "Disbursement Schedule"). Each application shall be stated on a standard AIA payment request form or other form approved by Lender, executed by Borrower, and supported by such evidence as Lender shall reasonably require. Borrower shall apply only for the disbursement with respect to Work actually done by the General Contractor and for materials and equipment actually incorporated into the Property. Each application for an advance shall be deemed a certification by Borrower that as of the date of such application, all representations and warranties contained in this Agreement are true and correct, and that Borrower is in compliance with all of the provisions of this Agreement. Construction Account . As set forth in the Disbursement Schedule, and subject to Section 4.2, for accounting purposes only, Lender may, at Lender's sole discretion, deposit advances requested under Section 4.1 of this Agreement to deposit account no. 4107012 maintained with Lender. Payments. At the sole option of Lender, advances may be paid in the joint names of Borrower and the General Contractor, subcontractor(s) or supplier(s) in payment of sums due under the construction contract. At Lender's sole option, Lender may directly pay the General Contractor and any subcontractors or other parties the sums due under the construction contract. Borrower appoints Lender as its attorney in fact to make such payments. This power shall be deemed to be coupled with an interest, shall be irrevocable, and shall survive an Event of Default under this Agreement. Projected Cost Overruns. If at any time Lender determines (in Lender's sole judgment) that the amount of the undisbursed Loan proceeds is not sufficient to pay all of the costs to complete the construction of the Improvements and to satisfy the interest obligations, then Lender may require Borrower to deposit with Lender any additional funds that Lender determines are necessary to pay such costs and satisfy the interest obligations. Borrower shall deposit such funds within ten (10) days of Lender's request. Funds deposited with Lender pursuant to this Section 4.3 shall be disbursed prior to any Loan Proceeds in the same manner as disbursement of the Loan proceeds. Inspections . Lender may make on-site inspections and review of construction to verify percentage of completion and certify disbursement requests. Loan Proceeds will not be advanced more frequently than once a month as construction progresses. Advances for Materials. Lender will not be required to make any advances for building materials or furnishings (collectively "Materials") that are located off the Property or are stored on the Property but not affixed to or incorporated in the Improvements unless Borrower will have submitted to Lender evidence satisfactory to Lender that: (a) all sums then due under the purchase contract for the Materials have been paid or that Borrower will cause the payment to be made promptly on the making of the Advance and will apply the Advance for that purpose; (b) the Materials are in storage or have been shipped in compliance with Section 4.5; (c) Borrower has purchased and there is in full force insurance coverage on the Materials complying with Section 4.5; and (d) Borrower has acquired (or on payment of the amounts to be disbursed in the Advance will acquire) title to the Materials, and Lender's security interest in the Materials created under this Agreement and under the Loan Documents has been (or simultaneously will be) perfected as required by applicable law. Lien on Materials . Borrower grants Lender, to the extent not granted in any other provisions of the Loan Documents, a security interest in all Materials for which any Advance is made at any time by Lender pursuant to Section 4.5, together with all additions and accessions and all replacements and proceeds. The security interest will secure the repayment of the Indebtedness and the payment and performance of all of the obligations of Borrower under the Loan Documents, and Lender will have all of the rights and remedies provided for in the Security Agreement, as well as all other rights and remedies provided by any applicable law. Borrower agrees, at Borrower's cost and expense, to: (a) execute from time to time any financing statements and other writings that Lender may reasonably require to perfect and maintain the priority of the security interest, and to file the statements in the manner provided by applicable law; (b) keep the materials stored at all times at the site of the Improvements, in a bonded warehouse, or other facility satisfactory to Lender, or at the premises of the manufacturer or fabricator (in which case the materials will be appropriately marked and identified to the purchase contract and physically segregated in an area with access to a public street), until the materials are incorporated into the Improvements, provided that if the materials are stored with the manufacturer or fabricator, Lender must receive evidence satisfactory to Lender of the creditworthiness of the manufacturer or fabricator, or Borrower will procure and deliver to Lender any dual obligee performance and labor and material payment bond, in form, substance, and amount satisfactory to Lender, that Lender may require; (c) keep the materials insured at all times against any risks that Lender may require pursuant to the terms of the Deed of Trust; (d) use the materials only for construction or furnishing of the Improvements, and not make any transfer of them or permit any lien to attach to them that could impair the ability of Borrower to use the materials for that purpose; (e) take all actions necessary to maintain, preserve, and protect the materials and keep them in good condition and repair, and comply with all laws, regulations, and ordinances relating to the ownership, storage, or use of the materials; and (f) ensure that Lender may enter on any property on which the materials may be stored to inspect them at any reasonable time. If Borrower fails to perform any of its obligations under this Section 4.5, Lender may take any actions and expend any sums that may be necessary in Lender's judgment to protect and preserve Lender's security interest, and all expenditures so incurred (including but not limited to reasonable attorney fees and disbursements) will be repayable by Borrower promptly on demand, will bear interest until paid at the Default Rate, and will be secured by the Security Documents and by the security interest granted above. Conditions Precedent to Each Loan Disbursement. The obligation of Lender to make any disbursements pursuant to the terms of this Agreement will be subject to the following conditions precedent: No Event of Default or Potential Default will have occurred and be continuing. No determination will have been made by Lender that the amount of undisbursed Loan Proceeds is less than the amount required to pay all expenses in connection with the Completion of the Improvements, including, but not limited to, any extra Work, unless Borrower will have deposited with Lender an amount at least equal to the amount of the deficiency as determined by Lender in accordance with Section 4.3. Borrower will have furnished to Lender evidence satisfactory to Lender of payment of bills and releases of lien rights covering Work done or Materials furnished in connection with the Work showing the expenditure of an amount equal to the total advance at the time disbursed, including the then requested payment. Borrower will have furnished to Lender at Borrower's expense: evidence satisfactory to Lender that the Title Company is prepared to issue to Lender a title insurance endorsement to the Title Policy, the payment for which will constitute a cost advance to Borrower, showing no intervening liens or encumbrances on the Property and insuring the full amount of the disbursement, and a satisfactory report under the California Uniform Commercial Code showing no liens or interests other than those of Lender, if requested by Lender. The Project Architect and the Inspector each will have certified in writing to Lender in a form satisfactory to Lender at the time of each disbursement request that the Improvements are being constructed in accordance with the Plans and Specifications. In the judgment of Lender, all work done will have been completed with sound, new materials and fixtures, in a good and proper manner, and all materials, fixtures, and furnishings installed on or acquired for the Property will be owned by Borrower free of any liens, encumbrance, or other interests of any kind other than Lender's lien or security interest. All approvals, permits, certifications, consents, and licenses of governmental authorities or other parties having jurisdiction over the Property or the Work or contractual rights to approve or observe construction of the Improvements, that are necessary at the stage of construction when the disbursement is to be made to enable Completion of Improvements on or before the Completion Date, will have been received and will be in full force. The representations and warranties in the Loan Documents will be correct as of the date of the requested disbursement as though made on that date. All commitment, loan, and other fees then due and payable to Lender, including the fees provided for in Section 8.21, will have been paid in full to Lender, and all documents, records, statements, certificates, reports, and other materials and information described in Exhibit C will have been received and approved in writing by Lender. As to each portion of the Improvements affected, directly or indirectly, by any work for which a disbursement is requested, a valid building permit will be in full force. Borrower will have delivered to Lender all funds, documents, instruments, policies, evidence of satisfaction of conditions, and other materials requested by Lender under the terms of this Agreement or any of the other Loan Documents. On the completion of foundations for the Improvements, the Title Company will have issued its foundation endorsement insuring Lender that each foundation is constructed wholly within the boundaries of the Property and any applicable setback lines and does not encroach on any easement, rights- of-way, or setback lines or violate any covenants, conditions, or restrictions of record. Discretionary Advance . Regardless of the failure of any condition precedent to Lender's obligation to make advances, Lender may make any advances if Lender, in its sole discretion, determines it to be advisable. The making of any disbursement, either before or after the satisfaction of all conditions precedent with respect to Lender's obligation to make the disbursement, will not be deemed to constitute an approval or acceptance by Lender of the Work completed or a waiver of the condition with respect to a subsequent disbursement. Construction Loan Transfer of Funds . Upon request by Borrower and submission of a Construction Loan Transfer of Funds in the form attached to the Disbursement Schedule, Lender may, in Lender's sole discretion, reallocate undisbursed funds within the budget subject to the terms contained in Section 4.3. Final Disbursement. The Upon Completion of the Improvements, the final advance will be disbursed when the following conditions have been satisfied: (a) The Project Architect and the Inspector will have certified to Lender in a manner satisfactory to Lender that the Improvements have been completed in accordance with the Plans and Specifications with sound, new materials and in a good and workmanlike manner and that the Improvements comply with all governmental requirements and are structurally sound; (b) The provisions of Section 3.9 will have been fully complied with; (c) Title policy endorsements in form and amount satisfactory to Lender (including an endorsement insuring lien-free completion of the Improvements) will have been furnished to Lender; (d) The conditions of Section 4.6 will have been satisfied; (e) Final lien waivers will have been obtained from the General Contractor, each of the various subcontractors and material suppliers, and substantially all of the subcontractors and submaterial suppliers under the subcontractors and material suppliers at any level, or Borrower will have furnished evidence satisfactory to Lender that the General Contractor and subcontractors and material suppliers and sub-subcontractors and submaterial suppliers have been paid in full as evidenced by unconditional lien waivers or will be paid in full as evidenced by conditional lien waivers upon final payment; (f) Borrower will have furnished evidence, in form and substance satisfactory to Lender, that: (i) Borrower has obtained final certificates of occupancy for all of the Improvements; (ii) all other permits and approvals necessary for the construction, equipping, management, operation, use, or ownership of the Improvements will have been obtained, subject only to those conditions approved by Lender, and (iii) the completed Improvements comply with all applicable zoning regulations, subdivision map acts, building code provisions, and similar governmental laws and regulations, and have adequate ingress and egress from public streets, that evidence to be in the form of a certificate executed by Borrower in favor of Lender; (g) Borrower will have furnished evidence in form and substance satisfactory to Lender that all utilities necessary for the full use and operation of the Improvements are available and have been connected to the Improvements; and (h) Borrower will have filed a notice of completion of the Improvements and the statutory period for filing of mechanics' and materialmen's liens shall have passed. Notwithstanding any other provision of this Agreement to the contrary, Lender may retain up to ten percent (10%) of the hard costs to be paid as the final payment to the General Contractor upon satisfaction of the conditions set forth above. Use of Proceeds . All Loan Proceeds will be disbursed as provided in this Agreement and used only for payment of the costs of construction of the Improvements in accordance with the Plans for other purposes specified in the Loan Documents. Operating Account . Borrower covenants and agrees that at all times when any part of the Loan will be outstanding, Borrower will deposit all gross revenues of whatever kind received in connection with the operation of the Improvements in an account to be opened and maintained with Lender. Borrower grants to Lender, to the extent not granted in any other Loan Documents, a security interest in that deposit account and Borrower agrees to execute any documents and perform any acts that Lender may deem necessary to evidence or perfect the security interest. Payment of Operating Expenses . Borrower covenants and agrees that it will: (a) pay promptly when due all debts, management fees, and other obligations incurred in the operation of the Property, including, without limitation, the payment of all sums due and payable to persons providing labor, service, or supplies to the Property; (b) at all times purchase any operating supplies and inventories that are reasonably necessary for the operation of a biotechnology research and development office facility; (c) pay interest on the Loan to Lender as the interest accrues; and (d) at all times, purchase any other services and any other items that are reasonably necessary for or customary in the management or operation of biotechnology research and development office facility (these expenses referred to collectively as " Operating Expenses "). BORROWER'S REPRESENTATIONS AND WARRANTIES As a material inducement to Lender to enter into this Agreement and to make the Loan to Borrower, Borrower and each signatory who signs on its behalf unconditionally represents and warrants to Lender as follows: Incorporation, Good Standing, and Due Qualification . Borrower is a limited liability company duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization; has the company power and authority to own its assets and to transact the business in which it is now engaged or proposed to be engaged in; and is duly qualified as a foreign limited liability company and in good standing under the laws of each other jurisdiction in which such qualification is required. Corporate Power and Authority . The execution, delivery, and performance by Borrower of the Loan Documents to which it is a party has been duly authorized by all necessary company action and does not and will not (a) require any consent or approval of the members of such company; (b) contravene Borrower's articles of organization or operating agreement; (c) violate any provision of any law, rule, regulation (including, without limitation, Regulations U and X of the Board of Governors of the federal Reserve System), order, writ, judgment, injunction, decree, determination, or award presently in effect having applicability to such company; (d) result in a breach of or constitute a default under indenture or loan or credit agreement or any other agreement, lease, or instrument to which Borrower is a party or by which it or its properties may be bound or affected; (e) result in, or require, the creation or imposition of any Lien, upon or with respect to any of the properties now owned or hereafter acquired by Borrower; and (f) cause Borrower to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination, or award or any such indenture, agreement, lease, or instrument. Legally Enforceable Agreement . This Agreement is, and each of the other Loan Documents when delivered under this Agreement will be legal, valid, and binding obligations of the Borrower in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency, and other similar laws affecting creditors' rights generally. Ownership and Liens . Borrower has title to, or valid leasehold interests in, all of its properties and assets, real and personal, including the properties and assets and leasehold interest reflected in the Financial Statements delivered to Lender (other than any properties or assets disposed of in the ordinary course of business), and none of the properties and assets owned by Borrower and none of its leasehold interests is subject to any lien, except for such lien granted to Lender. Other Agreements . Neither Borrower nor Guarantor is a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument or subject to any charter or corporate restriction which could have a material adverse effect on the business, properties, assets, operations, or conditions, financial or otherwise, of Borrower, or the ability of Borrower to carry out its obligations under the Loan Documents to which it is a party. Neither the Borrower nor Guarantor is in default in any respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party. Litigation. Except as set forth in Schedule 5.6, if any, there are no actions or proceedings pending by or against Borrower before any court or administrative agency in which an adverse decision could have a material adverse effect on Borrower. Borrower does not have knowledge of any such pending or threatened actions or proceedings. No Material Adverse Change in Financial Statements . All consolidated Financial Statements related to Borrower and Guarantor that have been delivered to Lender fairly present in all material respects Borrower's consolidated financial condition as of the date thereof and Borrower's consolidated results of operations for the period then ended. There has not been a material adverse change in the financial condition of Borrower since the date of the most recent of such financial statements submitted to Lender. There are no Contingent Obligations or liabilities of Borrower or Guarantor, fixed or contingent, which are material but are not reflected in the foregoing financial statements or in the notes thereto, other than liabilities arising in the ordinary course of business since the date of such financial statements. Upon request of Lender, Borrower shall provide Lender updated financial statements of Borrower and Guarantor. Operation of Business . Borrower possesses all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, to conduct their respective businesses substantially as now conducted and as presently proposed to be conducted and Borrower is not in violation of any valid rights of others with respect to any of the foregoing. Regulatory Compliance . Borrower has met the minimum funding requirements of ERISA with respect to any employee benefit plan subject to ERISA. No event has occurred resulting from Borrower's, failure to comply with ERISA that is reasonably likely to result in Borrower incurring any liability that could have a Material Adverse Effect. Borrower is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T and U of the Board of Governors of the Federal Reserve System). Borrower has complied with all the provisions of the Federal Fair Labor Standards Act, and has not violated any statutes, laws, ordinances or rules applicable to it, violation of which could have a Material Adverse Effect. Environmental Condition . Except as disclosed in the environmental reports delivered to Lender or in writing and acknowledged in writing by Lender, none of Borrower's properties or assets have ever been used by such parties or, to the best of such parties knowledge, by previous owners or operators, in the disposal of, or to produce, store, handle, treat, release, or transport, any hazardous waste or hazardous substance other than in accordance with applicable law; to the best of such parties knowledge, none of their properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a hazardous waste or hazardous substance disposal site, or a candidate for closure pursuant to any environmental protection statute; no lien arising under any environmental protection statute has attached to any revenues or to any real or personal property owned by such parties; and such parties have not received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal, state or other governmental agency concerning any action or omission by such parties resulting in the releasing, or otherwise disposing of hazardous waste or hazardous substances into the environment. Taxes . Borrower has filed or caused to be filed all tax returns required to be filed, and has paid, or has made adequate provision for the payment of, all taxes reflected therein. Government Consents . Borrower has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary for the continued operation of Borrower's respective business as currently conducted. Full Disclosure . No information, exhibit, or report furnished by Borrower or Guarantor to Lender in connection with the negotiation of this Agreement contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statement contained therein not materially misleading. No Default . There is no default on the part of Borrower under this Agreement, the Note, the Deed of Trust or any of the other Loan Documents, and no event has occurred and is continuing which with notice or the passage of time or both would constitute an Event of Default thereunder. Title to Property . Borrower is, or on recordation of the Deed of Trust in the official records of San Mateo County, California will be, the sole legal and beneficial owner of the Property, which is free of all claims, liens, and encumbrances other than those shown in the Title Policy. Plans and Specifications . The Plans and Specifications are satisfactory to Borrower and the General Contractor and have been approved by the Take Out Lender. There are no structural defects in the Improvements as shown in the Plans and Specifications, and to the best of Borrower's knowledge, no violation of any Governmental Requirement exists. Permits . Borrower has, or prior to the commencement of construction of the Improvements will have: (a) received all requisite building permits and approvals from all applicable Governmental Authorities; (b) filed or recorded all subdivision maps, plats, and other required instruments; and (c) to the best of Borrower's knowledge, complied with all other related Governmental Requirements. Utilities . All utility services, including without limitation gas, electric, water, storm and sanitary sewer, and telephone facilities, necessary for the construction of the Improvements and the operation for their intended purposes: (a) are available at or within the boundaries of the Property; or (b) all necessary steps have been taken by Borrower and all applicable Governmental Authorities and utility companies to assure the complete construction, installation, and availability of them on completion of the Improvements. Roads . All roads necessary for the full use of the Improvements for their intended purposes: (a) have been completed; or (b) the necessary rights-of-way have been acquired by or dedicated to public use and accepted by appropriate Governmental Authorities, and all necessary steps have been taken by Borrower and such Governmental Authorities to assure the complete construction, installation, and availability of them on completion of the Improvements. Compliance . To the best of Borrower's knowledge, the construction, use, and occupancy of the Property and Improvements comply in full with, or if built according to the Plans and Specifications, will comply in full with, all Governmental Requirements. Neither the zoning nor any other right to construct or use the Improvements is to any extent dependent on or related to any real property other than the Property. All approvals, licenses, permits, certifications, filings, and other actions normally accepted as proof of compliance with all Governmental Requirements by prudent lending institutions that make investments secured by real property in the general area of the Property, to the extent available as of the date of this Agreement, have been given or taken, and to the extent that the approvals, licenses, permits, certifications, filings, and other actions are not available as of the date of this Agreement, either: (a) the Governmental Authority charged with giving or taking them is under a legal duty to do so; or (b) Borrower is entitled to have them given or taken as the ministerial act of that Governmental Authority. Adequacy of Loan . The aggregate amount of all Loan Proceeds, and any funds held by Borrower, are sufficient to pay all costs of construction of the Improvements in accordance with the Plans and Specifications. Other Financing . Borrower has not received other financing for either the acquisition of the Property or the construction of the Improvements, except as has been specifically disclosed to and approved by Lender in writing. Nature of Representations and Warranties . Borrower certifies to Lender that all representations and warranties made in this Agreement and all other Loan Documents are true and correct in all material respects and do not contain any untrue statement of a material fact or omit any material fact necessary to make the representations and warranties not misleading. All representations and warranties will remain true and correct in all material respects and will survive so long as any of Borrower's obligations have not been satisfied or the Loan or any part of it remains outstanding, and for any applicable statute of limitations period. Each request by Borrower for a disbursement will constitute an affirmation that all representations and warranties remain true and correct as of the date of that request. Each representation and warranty made in this Agreement, in any other Loan Documents, and in any other document delivered to Lender by Borrower, will be deemed to have been relied on by Lender, regardless of any investigation, inspection, or inquiry made by Lender or any related disbursement made by Lender. The representations and warranties that are made to the best knowledge of Borrower have been made after diligent inquiry calculated to ascertain the truth and accuracy of the subject matter of each representation and warranty. DEFAULT Events of Default. At the option of Lender, each of the following events will constitute a default (each an "Event of Default"): Default under the Deed of Trust . The occurrence of a default or event of default under any Loan Document or the Environmental Indemnity. Governmental Requirements . Borrower's failure to comply with any Governmental Requirements within thirty (30) days after Borrower receives notice on non-compliance. Expiration of Permits . Borrower's neglect, failure, or refusal to keep in full force any permit, license, consent, or approval with necessary for the construction, occupancy, or use of the Improvements. Construction . Any material deviation from the Plans and Specifications in the construction of the Improvements, or the appearance or use of defective workmanship or materials in the construction of the Improvements, if Borrower fails to remedy them or to diligently proceed to remedy them to Lender's satisfaction within ten (10) days after Lender's written demand to do so. Construction Schedule . Borrower's failure to complete the construction of the Improvements by the Completion Date. Liens or Stop Notices . The filing of any lien against the Property or Improvements or the service on Lender of any bonded stop notice related to the Loan, if the claim of lien or bonded stop notice continues for thirty (30) days without discharge, satisfaction, or the making of provision for payment (including bonding) to the satisfaction of Lender as provided for in Section 3.6. Attachment . The attachment, levy, execution, or other judicial seizure of any portion of the Property or Improvements, or any substantial portion of the other assets of Borrower, that is not released, expunged, bonded, discharged, or dismissed within thirty (30) days after the attachment, levy, execution, or seizure. REMEDIES Option to Act . On the occurrence of any Event of Default, in addition to its other rights in this Agreement or in any of the other Loan Documents, at law, or in equity, Lender may, without prior demand, exercise any one or more of the following rights and remedies: Termination of Disbursements . Terminate its obligation to make disbursements. Acceleration . Declare the Note and all other sums owing to Lender with respect to the other Loan Documents immediately due. Continuation of Disbursements . Make any disbursements after the happening of any one or more of the Events of Default, without waiving its right to demand payment of the Note and all other sums owing to Lender with respect to the other Loan Documents or any other rights or remedies and without liability to make any other or further disbursements, regardless of Lender's previous exercise of any rights and remedies. Legal and Equitable Remedies . Proceed as authorized at law or in equity with respect to the Event of Default, and in connection with that, remain entitled to exercise all other rights and remedies described in this Agreement or the Deed of Trust. Disbursement by Lender . Make any payment from undisbursed Loan Proceeds or other funds of Lender. Repayment of Funds Advanced . If Lender spends its funds in exercising or enforcing any of its rights or remedies under any of the Loan Documents, the amount of funds spent will be payable to Lender on demand, together with interest at the Default Rate from the date the funds were spent until repaid. These amounts will be deemed secured by the Deed of Trust. Rights Cumulative, No Waiver . All of Lender's rights and remedies provided in this Agreement or in any of the other Loan Documents are cumulative and may be exercised by Lender at any time. Lender's exercise of any right or remedy will not constitute a cure of any Event of Default unless all sums then due to Lender under the Loan Documents are repaid and Borrower has cured all other Events of Default. No waiver will be implied from Lender's failure to take, or delay in taking, any action concerning any Event of Default or from any previous waiver of any similar or unrelated Event of Default. Any waiver under any of the Loan Documents must be in writing and will be limited to its specific terms. Disclaimer . Whether Lender elects to employ any of the remedies available to it in connection with an Event of Default, Lender will not be liable for: the construction of or failure to construct, complete, or protect the Improvements; the payment of any expense incurred in connection with the exercise of any remedy available to Lender or the construction or completion of the Improvements, or the performance or nonperformance of any other obligation of Borrower. Grant of Power . Borrower irrevocably appoints Lender as its attorney-in-fact, with full power and authority, including the power of substitution, exercisable on the occurrence of an Event of Default, to act for Borrower in its name, place, and stead as provided in this Agreement: Possession and Completion . To take possession of the Property and Improvements, remove all employees, contractors, and agents of Borrower, to complete or attempt to complete the work of construction, and to market, sell, or lease the Property and Improvements. Plans . To make any additions, changes, and corrections in the Plans as may be necessary or desirable, in Lender's sole discretion, or as it deems proper to complete the Improvements. Employment of Others . To employ any contractors, subcontractors, suppliers, architects, inspectors, consultants, property managers, and other agents that Lender, in its sole discretion, deems proper for the completion of the Improvements, for the protection or clearance of title to the Property or Fixtures, or for the protection of Lender's interests. Security Guards . To employ security guards to protect the Property and Improvements from injury or damage. Compromise Claims . To pay, settle, or compromise all bills and claims then existing or later arising against Borrower that Lender, in its sole discretion, deems proper for the completion of the Improvements, for the protection or clearance of title to the Property, or for the protection of Lender's interests. Legal Proceedings . To prosecute and defend all actions and proceedings in connection with the Property or Improvements. Other Acts . To execute, acknowledge, and deliver all other instruments and documents in the name of Borrower that are necessary or desirable, to exercise Borrower's rights under all contracts concerning the Property or Improvements, and to do all other acts with respect to the Property or Improvements that Borrower might do on its own behalf, in each case as Lender in its reasonable discretion deems proper. MISCELLANEOUS Successors and Assigns . The terms of this Agreement will be binding on and inure to the benefit of successors and assigns of the parties. However, Borrower will not assign this Agreement or any interest it may have in the monies due or, except as otherwise provided, convey or encumber the Property or Fixtures now or later on the Property without the prior written consent of Lender. However, if there is an assignment, conveyance, or encumbrance, Lender may nevertheless at its option continue to make disbursements under this Agreement to Borrower or to those who succeed to Borrower's title, and all sums so disbursed will be deemed to be disbursements under this Agreement and not modifications, and will be secured by the Security Documents. Lender may at any time assign the Loan Documents to any affiliate of Lender or to a national bank or other lender having experience with construction lending, and on transfer of the Loan Documents, the assignee will assume the obligations of Lender, and Lender will have no further obligation of any nature. In that case, the provisions of this Agreement will continue to apply to the Loan, and the assignee will be substituted in the place and stead of Lender, with all rights, obligations, and remedies of Lender, including, without limitation, the right to further assign the Loan Documents. In addition, Lender may at any time assign a participation in the Loan to any other party, provided that Lender continues to be primarily obligated under this Agreement. Expenses . Borrower shall pay on demand all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Lender in the enforcement or attempted enforcement of any of the obligations of Borrower hereunder or in preserving any of Lender's rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting the Loan Documents or any bankruptcy or similar proceeding involving Borrower or any Guarantor. As used herein, the term "reasonable attorneys' fees and expenses" shall include, without limitation, allocable costs and expenses of Lender's in-house legal counsel and staff. Time of Essence . Time is of the essence for the performance of all obligations set forth in this Agreement. Severability of Provisions . In the event any one or more of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable in any respect, then such provision shall be ineffective only to the extent of such prohibition or invalidity, and the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. Amendments . Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated, nor may any consent to the departure from the terms hereof be given, orally (even if supported by new consideration), but only by an instrument in writing signed by all parties to this Agreement. Any waiver or consent so given shall be effective only in the specific instance and for the specific purpose for which given. Entire Agreement . This Agreement, together with the Loan Documents and Environmental Indemnity embodies the entire agreement and understanding among and between the parties hereto, and supersedes all prior or contemporaneous agreements and understandings between said parties, verbal or written, express or implied, relating to the subject matter hereof. No promises of any kind have been made by Lender or any third party to induce Borrower to execute this Agreement. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, shall be used to supplement or modify any terms of this Agreement. Waiver . No failure to exercise and no delay in exercising any right, power, or remedy hereunder shall impair any right, power, or remedy which Lender may have, nor shall any such delay be construed to be a waiver of any of such rights, powers, or remedies, or any acquiescence in any breach or default hereunder; nor shall any waiver by Lender of any breach or default by Borrower hereunder be deemed a waiver of any default or breach subsequently occurring. All rights and remedies granted to Lender hereunder shall remain in full force and effect notwithstanding any single or partial exercise of, or any discontinuance of action begun to enforce, any such right or remedy. The rights and remedies specified herein are cumulative and not exclusive of each other or of any rights or remedies which Lender would otherwise have. Any waiver, permit, consent or approval by Lender of any breach or default hereunder must be in writing and shall be effective only to the extent set forth in such writing and only as to that specific instance. Interpretation . This Agreement and all agreements relating to the subject matter hereof are the product of negotiation and preparation by and among each party and its respective attorneys, and shall be construed accordingly. The parties waive the provisions of California Civil Code 1654. Counterparts . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by telefacsimile shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by telefacsimile to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party; provided; however, that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement. No Third Parties Benefited . This Agreement is made and entered into for the sole protection and benefit of the parties and their permitted successors and assigns, and no other Person. Notices . All notices required to be given will be served in the manner provided in the Deed of Trust. Authority to File Notices . Borrower irrevocably appoints Lender as its agent (the agency being coupled with an interest) to file for record any notices of completion, cessation of labor, or any other notice that Lender deems necessary or desirable to protect its interests under this Agreement or under the Loan Documents. Actions . Lender will have the right to commence, appear in, or defend any action or proceeding purporting to affect the rights, duties, or liabilities of the parties hereunder, or the disbursement of any funds under this Agreement. In connection with that, Lender may incur and pay costs and expenses, including, without limitation, reasonable attorney fees, Borrower agrees to pay to Lender on demand all these expenses. This Section does not apply to actions or proceedings between the parties. Signs . Borrower agrees that on the request of Lender, Borrower will erect and place on or in the vicinity of the Property a sign indicating that Lender has provided construction financing for the Improvements. The sign will remain the property of Lender and will be required to be removed only after construction has been completed. Lender may also arrange for publicity of the Loan in its sole discretion. Prepayment . Borrower may prepay the Loan only on and subject to the terms and conditions in the Note. Under no circumstances will Borrower receive repayment of any fees previously paid to Lender. Borrower's Responsibilities. To prevent and avoid construction defects, Borrower will inspect, review, supervise, and assure the high quality, adequacy, and suitability of: (a) the Plans and Specifications and all changes and amendments; (b) architects, contractors, subcontractors, and material suppliers employed or used in the Work, and the workmanship of and the materials used by all of them; and (c) the progress and course of construction and its conformance with the Plans and Specifications and any amendments, alterations, and changes that may be approved by Lender. Nonliability for Negligence, Loss, or Damage . Borrower acknowledges, understands, and agrees as follows: (a) The relationship between Borrower and Lender is, and will at all times remain, solely that of borrower and lender, and Lender neither undertakes nor assumes any responsibility for or duty to Borrower to select, review, inspect, supervise, pass judgment on, or inform Borrower of the quality, adequacy, or suitability of any of those matters referred to in Section 8.16; (b) Lender owes no duty of care to protect Borrower against negligent, faulty, inadequate, or defective building or construction; (c) Lender will not be responsible or liable to Borrower for any loss or damage of any kind to person or property whether suffered by Borrower or any other Person or group of Persons or for negligent, faulty, inadequate, or defective building or construction, and Borrower will hold Lender harmless from any liability, loss, or damage for these things. Applicable Law . The Agreement shall be governed by and construed in accordance with the laws of the State of California. Survival of Warranties and Covenants . The warranties, representations, conditions, covenants, and agreements in this Agreement and in the other Loan Documents will survive the making of the Loan and the execution and delivery of the Note and will continue in full force until the Indebtedness has been paid in full. Nothing in this Section 8.19 is intended to limit any other provision of the Loan Documents that by their stated terms survive the repayment of the Indebtedness or the termination of any Loan Document. Recording and Filing . Borrower, at its expense, will cause the Security Documents and all supplements to be recorded and filed and rerecorded and refiled in any manner and in any places as Lender will reasonably request, and will pay all recording, filing, rerecording, and refiling taxes, fees, and other charges. Loan Expenses. Borrower agrees to pay to Lender on or before the date of this Agreement an amount equal to One Hundred Ten Thousand and 00/100 Dollars ($110,000.00), which will be fully earned as of the Commitment Date ("Loan Fee"). In making the first disbursement, Lender may, at its option, deduct from the proceeds of that disbursement a sum equal to the aggregate of the following, to the extent Lender has knowledge of it and demand has been made on Lender at the time of the deposit: all expenses specifically incurred in connection with the Loan or the preparation, execution, and delivery of the Loan Documents, including, but not limited to, fees and disbursements of Lender's outside counsel and of Lender's consultants, brokers charges, commitment fees, other fees or commissions, recording costs and expenses, transfer and other taxes (if any), surveys, appraisal fees, title and hazard insurance premiums, recording, notary, and escrow charges, and all other similar, usual, or customary loan closing charges and expenses; all costs and expenses incurred in the review and approval of the matters set forth in Exhibit C (if attached); and any other budgeted expenses that have been approved by Lender in writing; and Lender will, for the benefit of Borrower, pay those amounts over to the respective parties on whose behalf the demands will have been received by Lender. Borrower will pay directly any expenses in connection with the Loan not so paid by Lender, including, without limitation, any of the expenses specified above, and will hold Lender free from any cost, liability, or obligation of any nature in connection with it, including reasonable attorney fees incurred by Lender. Borrower further agrees to pay on demand all out-of- pocket costs and expenses incurred by Lender including, without limitation, the fees and disbursements of Lender's outside counsel, in connection with: the administration of the Loan, including, without limitation, all approvals or consents given or contemplated to be given under the Loan Documents, all amendments to the Loan Documents entered into by Lender or requested by any Loan Party, and all title insurance policies and endorsements required by Lender; and the enforcement of any rights or remedies under the Loan Documents, whether any action or proceeding is commenced, or the protection of the security, or interests of Lender under the Loan Documents. Any costs and expenses, together with interest at the interest rate set forth in the Note, will form a part of the indebtedness and will be secured by the Security Documents. No Representations by Lender . By accepting or approving anything required to be observed, performed, or fulfilled, or to be given to Lender pursuant to this Agreement or pursuant to the Loan Documents, including, but not limited to, any officer's certificate, balance sheet, statement of income and expense, or other Financial Statement, survey, appraisal, or insurance policy, Lender will not be deemed to have warranted or represented the sufficiency, legality, effectiveness, or legal effect of it or of any particular term, provision, or condition of it, and any acceptance or approval will not be or constitute any warranty or representation by Lender. JURY TRIAL WAIVER . BORROWER WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING: (A) BROUGHT BY BORROWER, LENDER, OR ANY OTHER PERSON RELATING TO: (I) THE LOAN OR ANY UNDERSTANDINGS OR PRIOR DEALINGS BETWEEN THE PARTIES; OR (II) THE LOAN DOCUMENTS; OR (B) TO WHICH LENDER IS A PARTY. BORROWER AGREES THAT THIS LOAN AGREEMENT CONSTITUTES A WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY PURSUANT TO THE PROVISIONS OF THE CODE OF CIVIL PROCEDURE 631 AND BORROWER DOES CONSTITUTE AND APPOINT LENDER ITS TRUE AND LAWFUL ATTORNEY-IN-FACT (THE APPOINTMENT BEING COUPLED WITH AN INTEREST) AND BORROWER DOES AUTHORIZE AND EMPOWER LENDER, IN THE NAME, PLACE, AND STEAD OF BORROWER, TO FILE THIS LOAN AGREEMENT WITH THE CLERK OR JUDGE OF ANY COURT OF COMPETENT JURISDICTION AS A STATUTORY WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY . Indemnity . Borrower agrees to defend, indemnify, and hold Lender harmless from all losses, damages, liabilities, claims, actions, judgments, costs, and reasonable attorney fees that Lender may reasonably incur as a direct or indirect consequence of: (a) the making of the Loan; (b) Borrower's failure to perform any obligations as and when required by this Agreement or any of the other Loan Documents; (c) the failure at any time of any of Borrower's representations or warranties to be true and correct; or (d) any act or omission by Borrower, any contractor, subcontractor, engineer, architect, or other Person with respect to the Property, the Improvements, or any portion of them. Borrower will pay immediately on Lender's demand any amounts owing under this indemnity, together with interest at the lesser of the Default Rate or the maximum rate permitted by law from the date Lender makes a payment or incurs a loss. Borrower's duty to indemnify Lender will survive the release and cancellation of the Note and the reconveyance or partial reconveyance of the Deed of Trust. Further Assurances . At Lender's request and at Borrower's expense, Borrower will execute, acknowledge, and deliver all other instruments and perform all other acts necessary, desirable, or proper to carry out the purposes of the Loan Documents or to perfect and preserve any liens created by the Loan Documents. Disclosure of Information . If Lender elects to sell participations in the Loan, Lender may forward to each participant and prospective participant all documents and information related to the Loan in Lender's possession, including without limitation all Financial Statements, whether furnished by Borrower or otherwise. [signature page follows] IN WITNESS WHEREOF , the parties hereto have agreed to the terms of this Construction Loan Agreement as of the date above. AXYS 468 LITTLEFIELD LLC a California limited liability company By: Axys Pharmaceuticals, Inc. a Delaware corporation Its: Manager     By: /s/ Douglas Altschuler Its: Vice President and General Counsel CUPERTINO NATIONAL BANK   By: /s/ Al Diaz Its: Vice President   EXHIBIT A LEGAL DESCRIPTION The land situated in the State of California, County of San Mateo, City of South San Francisco and described as follows: Parcel 1, as shown on that certain Parcel map entitled "PARCEL MAP DIVISION OF HASKINS FERRANDO PROPERTY", filed in the office of the County Recorder of San Mateo County, State of California, on March 5, 1969 in Book 7 of Parcel Maps at page(s) 24. A.P. No.: 015-063-220 JPN 015 006 063 22 A   EXHIBIT B DISBURSEMENT SCHEDULE [To be attached] EXHIBIT C CONDITIONS LIST All of the following documents, certificates, records, statements, reports, and other materials and information, each in form and substance satisfactory to Lender, and duly executed by the parties thereto: (1) Evidence that all of the leasehold interest in the Land is in Borrower. (2) This Agreement. (3) The Note. (4) The Deed of Trust. (5) The Assignment by Guarantor to Borrower of Guarantor's interest in the Ground Lease. (6) The Sublease by and between Borrower and Guarantor. (7) The Consent of Lessor to the Deed of Trust. (8) The Guaranty. (9) A 1992 ALTA Leasehold Loan Policy of title insurance in an amount equal to Eleven Million and 00/100 Dollars ($11,000,000.00), including any endorsements and other commitments as Lender may reasonably require from the Title Company, showing the Deed of Trust to be a valid lien on the Leasehold Estate, excepting only the items that will have been approved by Lender. (10) Assignment of Architectural Contract. (11) Assignment of Construction Contract. (12) General Contractor's Consent to Assignment of Construction Contract. (13) Architect's Consent to Assignment of Architectural Contract. (14) UCC-1 Financing Statements covering all of the property described in the Deed of Trust and the Assignment of Agreements. (15) Documentation evidencing approval of and authorizing execution by Borrower of all documents (including guaranties) evidencing, securing, or relating to the obligations of Borrower under the Loan Agreement. (16) Documentation evidencing approval of and authorizing execution by Guarantor of all documents (including guaranties) evidencing, securing, or relating to the obligations of Borrower under the Loan Agreement. (17) An appraisal of the Property by an MAI appraiser. (18) A final set of architectural, structural, mechanical, electrical, grading, sewer, water, street, and utility plans and specifications for the Improvements, including all supplements, amendments, and modifications, signed and affixed with the architect's registration stamp or seal; affixed with a certification that the documents are accurate copies of plans and specifications for improvements as filed and approved by the city in which the Development is located or any other appropriate governmental authority; and approved by Borrower, the Guarantors, and any other party having approval rights relating to the Improvements ("Property Plans"). (19) A detailed budget of costs to improve the Land. (21) Favorable environmental impact report, where necessary and required by any local, state, or federal authority, or a negative declaration, together with evidence of compliance of the Property with the applicable general plan covering the Land. (22) Evidence that: (a) all public utilities necessary for the operation of the Property (sewer, water, electricity, and gas) will be available for use at the perimeter of the site and will be of adequate size to service the proposed Improvements; (b) all necessary building, storm and sanitary sewer, water, and utility permits and licenses have been issued, without variance, or that any variance in any permits or licenses have been fully disclosed and approved by Lender; and (c) the Property and the contemplated use of it comply with all applicable zoning ordinances. (23) An engineer's report relating to the structural soundness of the Improvements by an engineer satisfactory to Lender. (24) A general contract for the construction of the Improvements with the General Contractor, which contract will provide for a maximum fixed price for all work to be performed, together with current Financial Statements of the general contractor and copies of all major subcontracts (or any other subcontracts specified by Lender) then in effect for the construction of any part of the Improvements. (25) A soils report covering the Land by a soils engineer satisfactory to Lender. (26) Letters from the architect, engineer, or soil engineer, as appropriate, certifying that: (a) copies of the soil boring test data, soil compaction test report, and soil drainage report have been received, and the information has been used in the design of the Improvements; (b) the Property Plans meet safety standards of the Occupational Safety and Health Act of 1970, as they may apply; and (c) on completion of the Improvements in accordance with the Property Plans, the Property will, to the best of the architect's and engineer's knowledge, information, and belief, comply with all applicable local, state, and federal governmental statutes, laws, ordinances, codes, and regulations and have proper ingress and egress from and to appropriate public streets adequate for the intended use of the Property. (27) A final cost breakdown and a construction progress schedule and cash flow projection for the construction of the Improvements. (28) Copies of all inspection and test records and reports made by or for the architect. (29) Insurance policies covering the Property and construction of the Improvements insuring Borrower and Lender against loss or damage by those risks that Lender will require. (30) Copies of all permits and approvals necessary or received from all governmental authorities. (31) Copies of the contracts between Borrower and the Property Architect and consulting engineer. (32) Evidence that the Land is zoned in a manner that will permit the contemplated uses of the Property. (33) A detailed description of all requirements imposed by any governmental authority as conditions to its approval of the Property, together with a statement from Borrower describing its proposed satisfaction. (34) An environmental property report concerning the potential presence of Hazardous Materials on, under, or about the Property. (35) All other documents, agreements, instruments, certificates, or opinions as may be reasonably requested by Lender.

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.19 Amendments to Amended and Restated 1998 Stock Option Plan     The Health Net, Inc. Amended and Restated 1998 Stock Option Plan (the "1998 Plan"), was amended on December 18, 2000 to delete subsection 6.8(b) of the 1998 Plan in its entirety and to replace it with the following new subsection 6.8(b): "(b)Definition of Change in Control.  A "Change in Control" shall mean:     (i)  Consummated Transaction.  Consummation of (a) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Common Stock are converted into cash, securities or other property, other than a Merger, or (b) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (c) the liquidation or dissolution of the Company;     (ii) Control Purchase.  The purchase by any person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity (other than the Company or any employee benefit plan sponsored by an Employer) of any Common Stock of the Company (or securities convertible into the Company's Common Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, without the prior consent of the Board and, after such purchase, such person shall be the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the then outstanding securities of the Company ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Section (d) of such Rule 13d-3 in the case of rights to acquire the Company's securities);     (iii) Board Change.  A change in the composition of the Board during any period of two consecutive years, such that individuals who at the beginning of such period constitute the entire Board shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; or     (iv) Other Transactions.  The occurrence of such other transactions involving a significant issuance of voting stock or change in the composition of the Board that the Board determines to be a Change in Control for purposes of the Plan.     The Agreement evidencing Options or Restricted Stock granted under the Plan may contain such provisions limiting the acceleration of the exercisability of options and the acceleration of the vesting of Restricted Stock as provided in this Section as the Committee deems appropriate to ensure that the penalty provisions of Section 4999 of the Code, or any successor thereto in effect at the time of such acceleration, will not apply to any stock, cash or other property received by the holder from the Company."     The 1998 Plan was also amended on October 13, 2000 to increase the number of shares of Common Stock available under the 1998 Plan from 5,000,000 shares up to 8,256,243 shares. 1 -------------------------------------------------------------------------------- QuickLinks Amendments to Amended and Restated 1998 Stock Option Plan

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.04 BLUE SHIELD CONTROLLED AFFILIATE LICENSE AGREEMENT (Includes revisions adopted by Member Plans through their November 16, 2000, meeting)     This Agreement by and among Blue Cross and Blue Shield Association ("BCBSA") and Blue Cross and Blue Shield of Georgia, Inc. ("Controlled Affiliate"), a Controlled Affiliate of the Blue Cross Plan(s), known as WellPoint Health Networks Inc. ("Plan"), which is also a Party signatory hereto.     WHEREAS, BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD Design service marks;     WHEREAS, Plan and Controlled Affiliate desire that the latter be entitled to use the BLUE SHIELD and BLUE SHIELD Design service marks (collectively the "Licensed Marks") as service marks and be entitled to use the term BLUE SHIELD in a trade name ("Licensed Name");     NOW THEREFORE, in consideration of the foregoing and the mutual agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:     1.  GRANT OF LICENSE     Subject to the terms and conditions of this Agreement, BCBSA hereby grants to Controlled Affiliate the right to use the Licensed Marks and Name in connection with, and only in connection with: (i) health care plans and related services, as defined in BCBSA's License Agreement with Plan, and administering the non-health portion of workers' compensation insurance, and (ii) underwriting the indemnity portion of workers' compensation insurance, provided that Controlled Affiliate's total premium revenue comprises less than 15 percent of the sponsoring Plan's net subscription revenue.     This grant of rights is non-exclusive and is limited to the Service Area served by the Plan. Controlled Affiliate may use the Licensed Marks and Name in its legal name on the following conditions: (i) the legal name must be approved in advance, in writing, by BCBSA; (ii) Controlled Affiliate shall not do business outside the Service Area under any name or mark; and (iii) Controlled Affiliate shall not use the Licensed Marks and Name, or any derivative thereof, as part of any name or symbol used to identify itself in any securities market. Controlled Affiliate may use the Licensed Marks and Name in its Trade Name only with the prior, written, consent of BCBSA.     2.  QUALITY CONTROL     A.  Controlled Affiliate agrees to use the Licensed Marks and Name only in connection with the licensed services and further agrees to be bound by the conditions regarding quality control shown in attached Exhibit A as they may be amended by BCBSA from time-to-time. Amended as of November 16, 2000 --------------------------------------------------------------------------------     B.  Controlled Affiliate agrees to comply with all applicable federal, state and local laws.     C.  Controlled Affiliate agrees that it will provide on an annual basis (or more often if reasonably required by Plan or by BCBSA) a report or reports to Plan and BCBSA demonstrating Controlled Affiliate's compliance with the requirements of this Agreement including but not limited to the quality control provisions of this paragraph and the attached Exhibit A.     D.  Controlled Affiliate agrees that Plan and/or BCBSA may, from time-to-time, upon reasonable notice, review and inspect the manner and method of Controlled Affiliate's rendering of service and use of the Licensed Marks and Name.     E.  As used herein, a Controlled Affiliate is defined as an entity organized and operated in such a manner, that it meets the following requirements: (1)  A Plan or Plans authorized to use the Licensed Marks in the Service Area of the Controlled Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled Affiliate's License Agreement(s), (the "Controlling Plan(s)"), must have the legal authority directly or indirectly through wholly-owned subsidiaries to select members of the Controlled Affiliate's governing body having not less than 50% voting control thereof and to:     (a) prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not concur;     (b) exercise control over the policy and operations of the Controlled Affiliate at least equal to that exercised by persons or entities (jointly or individually) other than the Controlling Plan(s); and Notwithstanding anything to the contrary in (a) through (b) hereof, the Controlled Affiliate's establishing or governing documents must also require written approval by the Controlling Plan(s) before the Controlled Affiliate can: (i)change its legal and/or trade names; (ii)change the geographic area in which it operates; (iii)change any of the type(s) of businesses in which it engages; (iv)create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising in the ordinary course of business; (v)sell any assets, except for sales in the ordinary course of business or sales of equipment no longer useful or being replaced; (vi)make any loans or advances except in the ordinary course of business; (vii)enter into any arrangement or agreement with any party directly or indirectly affiliated with any of the owners or persons or entities with the authority to select or appoint members or board members of the Controlled Affiliate, other than the Plan or Plans (excluding owners of stock holdings of under 5% in a publicly traded Controlled Affiliate); (viii)conduct any business other than under the Licensed Marks and Name; (ix)take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name. In addition, a Plan or Plans directly or indirectly through wholly owned subsidiaries shall own at least 50% of any for-profit Controlled Affiliate. Or 2 -------------------------------------------------------------------------------- (2)  A Plan or Plans authorized to use the Licensed Marks in the Service Area of the Controlled Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled Affiliate's License Agreement(s), (the "Controlling Plan(s)"), have the legal authority directly or indirectly through wholly-owned subsidiaries to select members of the Controlled Affiliate's governing body having more than 50% voting control thereof and to: (a)prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not concur; (b)exercise control over the policy and operations of the Controlled Affiliate. In addition, a Plan or Plans directly or indirectly through wholly-owned subsidiaries shall own at least 50% of any for-profit Controlled Affiliate.     3.  SERVICE MARK USE     A.  Controlled Affiliate recognizes the importance of a comprehensive national network of independent BCBSA licensees which are committed to strengthening the Licensed Marks and Name. The Controlled Affiliate further recognizes that its actions within its Service Area may affect the value of the Licensed Marks and Name nationwide.     B.  Controlled Affiliate shall at all times make proper service mark use of the Licensed Marks and Name, including but not limited to use of such symbols or words as BCBSA shall specify to protect the Licensed Marks and Name and shall comply with such rules (generally applicable to Controlled Affiliates licensed to use the Licensed Marks and Name) relative to service mark use, as are issued from time-to-time by BCBSA. Controlled Affiliate recognizes and agrees that all use of the Licensed Marks and Name by Controlled Affiliate shall inure to the benefit of BCBSA.     C.  Controlled Affiliate may not directly or indirectly use the Licensed Marks and Name in a manner that transfers or is intended to transfer in the Service Area the goodwill associated therewith to another mark or name, nor may Controlled Affiliate engage in activity that may dilute or tarnish the unique value of the Licensed Marks and Name.     D.  If Controlled Affiliate meets the standards of 2E(1) but not 2E(2) above and any of Controlled Affiliate's advertising or promotional material is reasonably determined by BCBSA and/or the Plan to be in contravention of rules and regulations governing the use of the Licensed Marks and Name, Controlled Affiliate shall for ninety (90) days thereafter obtain prior approval from BCBSA of advertising and promotional efforts using the Licensed Marks and Name, approval or disapproval thereof to be forthcoming within five (5) business days of receipt of same by BCBSA or its designee. In all advertising and promotional efforts, Controlled Affiliate shall observe the Service Area limitations applicable to Plan.     E.  Controlled Affiliate shall use its best efforts in the Service Area to promote and build the value of the Licensed Marks and Name.     4.  SUBLICENSING AND ASSIGNMENT     Controlled Affiliate shall not, directly or indirectly, sublicense, transfer, hypothecate, sell, encumber or mortgage, by operation of law or otherwise, the rights granted hereunder and any such act shall be voidable at the sole option of Plan or BCBSA. This Agreement and all rights and duties hereunder are personal to Controlled Affiliate.     5.  INFRINGEMENT     Controlled Affiliate shall promptly notify Plan and Plan shall promptly notify BCBSA of any suspected acts of infringement, unfair competition or passing off that may occur in relation to the Licensed Marks and Name. Controlled Affiliate shall not be entitled to require Plan or BCBSA to take 3 -------------------------------------------------------------------------------- any actions or institute any proceedings to prevent infringement, unfair competition or passing off by third parties. Controlled Affiliate agrees to render to Plan and BCBSA, without charge, all reasonable assistance in connection with any matter pertaining to the protection of the Licensed Marks and Name by BCBSA.     6.  LIABILITY INDEMNIFICATION     Controlled Affiliate and Plan hereby agree to save, defend, indemnify and hold BCBSA harmless from and against all claims, damages, liabilities and costs of every kind, nature and description (except those arising solely as a result of BCBSA's negligence) that may arise as a result of or related to Controlled Affiliate's rendering of services under the Licensed Marks and Name.     7.  LICENSE TERM     A.  Except as otherwise provided herein, the license granted by this Agreement shall remain in effect for a period of one (1) year and shall be automatically extended for additional one (1) year periods unless terminated pursuant to the provisions herein.     B.  This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entity in the event that Plan ceases to be authorized to use the Licensed Marks and Name.     C.  Notwithstanding any other provision of this Agreement, this license to use the Licensed Marks and Name may be forthwith terminated by the Plan or the affirmative vote of the majority of the Board of Directors of BCBSA present and voting at a special meeting expressly called by BCBSA for the purpose on ten (10) days written notice to the Plan advising of the specific matters at issue and granting the Plan an opportunity to be heard and to present its response to Member Plans for: (1) failure to comply with any applicable minimum capital or liquidity requirement under the quality control standards of this Agreement; or (2) failure to comply with the "Organization and Governance" quality control standard of this Agreement; or (3) impending financial insolvency; or (4) for a Smaller Controlled Affiliate (as defined in Exhibit A), failure to comply with any of the applicable requirements of Standards 2, 3, 4, 5 or 7 of attached Exhibit A; or (5) the pendency of any action instituted against the Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business or seeking the declaration or establishment of a trust for any of its property or business, unless this Controlled Affiliate License Agreement has been earlier terminated under paragraph 7(e); or (6) failure by a Controlled Affiliate that meets the standards of 2E(1) but not 2E(2) above to obtain BCBSA's written consent to a change in the identity of any owner, in the extent of ownership, or in the identity of any person or entity with the authority to select or appoint members or board members, provided that as to publicly traded Controlled Affiliates this provision shall apply only if the change affects a person or entity that owns at least 5% of the Controlled Affiliate's stock before or after the change; or (7) such other reason as is determined in good faith immediately and irreparably to threaten the integrity and reputation of BCBSA, the Plans, any other licensee including Controlled Affiliate and/or the Licensed Marks and Name.     D.  Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E) herein, should Controlled Affiliate fail to comply with the provisions of this Agreement and not cure such failure within thirty (30) days of receiving written notice thereof (or commence a cure within such thirty day period and continue diligent efforts to complete the cure if such curing cannot reasonably be completed within such thirty day period) BCBSA or the Plan shall have the right to issue a notice that the Controlled Affiliate is in a state of noncompliance. If a state of noncompliance as aforesaid is undisputed by the Controlled Affiliate or is found to exist by a mandatory dispute resolution panel and is uncured as provided above, BCBSA shall have the right to seek judicial enforcement of the Agreement or to issue a notice of termination thereof. Notwithstanding any other provisions of this Agreement, any disputes 4 -------------------------------------------------------------------------------- as to the termination of this License pursuant to Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to mediation and mandatory dispute resolution. All other disputes between BCBSA, the Plan and/or Controlled Affiliate shall be submitted promptly to mediation and mandatory dispute resolution. The mandatory dispute resolution panel shall have authority to issue orders for specific performance and assess monetary penalties. Except, however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license to use the Licensed Marks and Name may not be finally terminated for any reason without the affirmative vote of a majority of the present and voting members of the Board of Directors of BCBSA.     E.  This Agreement and all of Controlled Affiliate's rights hereunder shall immediately terminate without any further action by any party or entity in the event that:     (1) Controlled Affiliate shall no longer comply with item 2(E) above;     (2) Appropriate dues, royalties and other payments for Controlled Affiliate pursuant to paragraph 9 hereof, which are the royalties for this License Agreement, are more than sixty (60) days in arrears to BCBSA; or     (3) Any of the following events occur: (i) a voluntary petition shall be filed by Controlled Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor relief, or (ii) an involuntary petition or proceeding shall be filed against Controlled Affiliate seeking bankruptcy, reorganization, arrangement with creditors or other relief under the bankruptcy laws of the United States or any other law governing insolvency or debtor relief and such petition or proceeding is consented to or acquiesced in by Controlled Affiliate or is not dismissed within sixty (60) days of the date upon which the petition or other document commencing the proceeding is served upon the Controlled Affiliate, or (iii) an order for relief is entered against Controlled Affiliate in any case under the bankruptcy laws of the United States, or Controlled Affiliate is adjudged bankrupt or insolvent as those terms are defined in the Uniform Commercial Code as enacted in the State of Illinois by any court of competent jurisdiction, or (iv) Controlled Affiliate makes a general assignment of its assets for the benefit of creditors, or (v) the Department of Insurance or other regulatory agency assumes control of Controlled Affiliate or delinquency proceedings (voluntary or involuntary) are instituted, or (vi) an action is brought by Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business, or (vii) an action is instituted by any governmental entity or officer against Controlled Affiliate seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business and such action is consented to or acquiesced in by Controlled Affiliate or is not dismissed within one hundred thirty (130) days of the date upon which the pleading or other document commencing the action is served upon the Controlled Affiliate, provided that if the action is stayed or its prosecution is enjoined, the one hundred thirty (130) day period is tolled for the duration of the stay or injunction, and provided further, that the Association's Board of Directors may toll or extend the 130 day period at any time prior to its expiration, or (viii) a trustee, interim trustee, receiver or other custodian for any of Controlled Affiliate's property or business is appointed or the Controlled Affiliate is ordered dissolved or liquidated. Notwithstanding any other provision of this Agreement, a declaration or a request for declaration of the existence of a trust over any of the Controlled Affiliate's property or business shall not in itself be deemed to constitute or seek appointment of a trustee, interim trustee, receiver or other custodian for purposes of subparagraphs 7(e)(3)(vii) and (viii) of this Agreement.     F.  Upon termination of this Agreement for cause or otherwise, Controlled Affiliate agrees that it shall immediately discontinue all use of the Licensed Marks and Name, including any use in its trade name. 5 --------------------------------------------------------------------------------     G.  Upon termination of this Agreement, Controlled Affiliate shall immediately notify all of its customers that it is no longer a licensee of BCBSA and, if directed by the Association's Board of Directors, shall provide instruction on how the customer can contact BCBSA or a designated licensee to obtain further information on securing coverage. The notification required by this paragraph shall be in writing and in a form approved by BCBSA. The BCBSA shall have the right to audit the terminated entity's books and records to verify compliance with this paragraph.     H.  In the event this Agreement terminates pursuant to 7(b) hereof, or in the event the Controlled Affiliate is a Larger Controlled Affiliate (as defined in Exhibit A), upon termination of this Agreement, the provisions of Paragraph 7.G. shall not apply and the following provisions shall apply:     (1) The Controlled Affiliate shall send a notice through the U.S. mails, with first class postage affixed, to all individual and group customers, providers, brokers and agents of products or services sold, marketed, underwritten or administered by the Controlled Affiliate under the Licensed Marks and Name. The form and content of the notice shall be specified by BCBSA and shall, at a minimum, notify the recipient of the termination of the license, the consequences thereof, and instructions for obtaining alternate products or services licensed by BCBSA. This notice shall be mailed within 15 days after termination.     (2) The Controlled Affiliate shall deliver to BCBSA within five days of a request by BCBSA a listing of national accounts in which the Controlled Affiliate is involved (in a control, participating or servicing capacity), identifying the national account and the Controlled Affiliate's role therein.     (3) Unless the cause of termination is an event respecting BCBSA stated in paragraph 15(a) or (b) of the Plan's license agreement with BCBSA to use the Licensed Marks and Name, the Controlled Affiliate, the Plan, and any other Licensed Controlled Affiliates of the Plan shall be jointly liable for payment to BCBSA of an amount equal to $25 multiplied by the number of Licensed Enrollees of the Controlled Affiliate; provided that if any other Plan is permitted by BCBSA to use marks or names licensed by BCBSA in the Service Area established by this Agreement, the payment shall be multiplied by a fraction, the numerator of which is the number of Licensed Enrollees of the Controlled Affiliate, the Plan, and any other Licensed Controlled Affiliates and the denominator of which is the total number of Licensed Enrollees in the Service Area. Licensed Enrollee means each and every person and covered dependent who is enrolled as an individual or member of a group receiving products or services sold, marketed or administered under marks or names licensed by BCBSA as determined at the earlier of (i) the end of the last fiscal year of the terminated entity which ended prior to termination or (ii) the fiscal year which ended before any transactions causing the termination began. Notwithstanding the foregoing, the amount payable pursuant to this subparagraph H. (3) shall be due only to the extent that, in BCBSA's opinion, it does not cause the net worth of the Controlled Affiliate, the Plan or any other Licensed Controlled Affiliates of the Plan to fall below 100% of the capital benchmark formula, or its equivalent under any successor formula, as set forth in the applicable financial responsibility standards established by BCBSA (provided such equivalent is approved for purposes of this sub paragraph by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans); measured as of the date of termination, and adjusted for the value of any transactions not made in the ordinary course of business. This payment shall not be due in connection with transactions exclusively by or among Plans or their affiliates, including reorganizations, combinations or mergers, where the BCBSA Board of Directors determines that the license termination does not result in a material diminution in the number of Licensed Enrollees or the extent of their coverage. 6 --------------------------------------------------------------------------------     (4) BCBSA shall have the right to audit the books and records of the Controlled Affiliate, the Plan, and any other Licensed Controlled Affiliates of the Plan to verify compliance with this paragraph 7.H.     (5) As to a breach of 7.H.(1), (2), (3) or (4), the parties agree that the obligations are immediately enforceable in a court of competent jurisdiction. As to a breach of 7.H.(1), (2) or (4) by the Controlled Affiliate, the parties agree there is no adequate remedy at law and BCBSA is entitled to obtain specific performance.     I.  In the event the Controlled Affiliate is a Smaller Controlled Affiliate (as defined in Exhibit A), the Controlled Affiliate agrees to be jointly liable for the amount described in H.3. hereof upon termination of the BCBSA license agreement of any Larger Controlled Affiliate of the Plan.     J.  BCBSA shall be entitled to enjoin the Controlled Affiliate or any related party in a court of competent jurisdiction from entry into any transaction which would result in a termination of this Agreement unless the Plan's license from BCBSA to use the Licensed Marks and Names has been terminated pursuant to 10(d) of the Plan's license agreement upon the required 6 month written notice.     K.  BCBSA acknowledges that it is not the owner of assets of the Controlled Affiliate.     L.  In the event that the Plan has more than 50 percent voting control of the Controlled Affiliate under Paragraph 2(E)(2) above and is a Larger Controlled Affiliate (as defined in Exhibit A), then the vote called for in Paragraphs 7(C) and 7(D) above shall require the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans.     8.  DISPUTE RESOLUTION     The parties agree that any disputes between them or between or among either of them and one or more Plans or Controlled Affiliates of Plans that use in any manner the Blue Shield and Blue Shield Marks and Name are subject to the Mediation and Mandatory Dispute Resolution process attached to and made a part of Plan's License from BCBSA to use the Licensed Marks and Name as Exhibits 5, 5A and 5B as amended from time-to-time, which documents are incorporated herein by reference as though fully set forth herein.     9.  LICENSE FEE     Controlled Affiliate will pay to BCBSA a fee for this License determined pursuant to the formula(s) set forth in Exhibit B.     10.  JOINT VENTURE     Nothing contained in the Agreement shall be construed as creating a joint venture, partnership, agency or employment relationship between Plan and Controlled Affiliate or between either and BCBSA. Amended as of March 11, 1999 7 --------------------------------------------------------------------------------     11.  NOTICES AND CORRESPONDENCE     Notices regarding the subject matter of this Agreement or breach or termination thereof shall be in writing and shall be addressed in duplicate to the last known address of each other party, marked respectively to the attention of its President and, if any, its General Counsel.     12.  COMPLETE AGREEMENT     This Agreement contains the complete understandings of the parties in relation to the subject matter hereof. This Agreement may only be amended by the affirmative vote of three-fourths of the Plans and three-fourths of the total then current weighted vote of all the Plans as officially recorded by the BCBSA Corporate Secretary.     13.  SEVERABILITY     If any term of this Agreement is held to be unlawful by a court of competent jurisdiction, such findings shall in no way affect the remaining obligations of the parties hereunder and the court may substitute a lawful term or condition for any unlawful term or condition so long as the effect of such substitution is to provide the parties with the benefits of this Agreement.     14.  NONWAIVER     No waiver by BCBSA of any breach or default in performance on the part of Controlled Affiliate or any other licensee of any of the terms, covenants or conditions of this Agreement shall constitute a waiver of any subsequent breach or default in performance of said terms, covenants or conditions.     14A.  VOTING     For all provisions of this Agreement referring to voting, the term "Plans" shall mean all entities licensed under the Blue Cross License Agreement and/or the Blue Shield License Agreement, and in all votes of the Plans under this Agreement the Plans shall vote together. For weighted votes of the Plans, the Plan shall have a number of votes equal to the number of weighted votes (if any) that it holds as a Blue Cross Plan plus the number of weighted votes (if any) that it holds as a Blue Shield Plan. For all other votes of the Plans, the Plan shall have one vote. For all questions requiring an affirmative three-fourths weighted vote of the Plans, the requirement shall be deemed satisfied with a lesser weighted vote unless six (6) or more Plans fail to cast weighted votes in favor of the question. Amended as of June 16, 2000 8 -------------------------------------------------------------------------------- THIS PAGE IS INTENTIONALLY BLANK. 9 --------------------------------------------------------------------------------     15.  GOVERNING LAW     This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Illinois.     16.  HEADINGS     The headings inserted in this agreement are for convenience only and shall have no bearing on the interpretation hereof.     IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed and effective as of the date of last signature written below. Blue Cross and Blue Shield of Georgia, Inc.:     By:   /s/ HUGH J. STEDMAN    -------------------------------------------------------------------------------- Hugh J. Stedman     Date:   3-15-01 --------------------------------------------------------------------------------     WellPoint Health Networks Inc.:     By:   /s/ LEONARD D. SCHAEFFER    -------------------------------------------------------------------------------- Leonard D. Schaeffer     Date:   3-15-01 --------------------------------------------------------------------------------     BLUE CROSS AND BLUE SHIELD ASSOCIATION     By:   /s/ ROGER G. WILSON    -------------------------------------------------------------------------------- Roger G. Wilson     Date:   3-15-01 --------------------------------------------------------------------------------     10 -------------------------------------------------------------------------------- EXHIBIT A CONTROLLED AFFILIATE LICENSE STANDARDS     November 2000 PREAMBLE     The standards for licensing Controlled Affiliates are established by BCBSA and are subject to change from time-to-time upon the affirmative vote of three-fourths (3/4) of the Plans and three-fourths (3/4) of the total weighted vote. Each licensed Plan is required to use a standard Controlled Affiliate license form provided by BCBSA and to cooperate fully in assuring that the licensed Controlled Affiliate maintains compliance with the license standards.     The Controlled Affiliate License provides a flexible vehicle to accommodate the potential range of health and workers' compensation related products and services Plan Controlled Affiliates provide. The Controlled Affiliate License collapses former health Controlled Affiliate licenses (HCC, HMO, PPO, TPA, and IDS) into a single license using the following business-based criteria to provide a framework for license standards: •Percent of Controlled Affiliate controlled by parent: Greater than 50 percent or 50 percent? •Risk assumption: yes or no? •Medical care delivery: yes or no? •Size of the Controlled Affiliate: If the Controlled Affiliate has health or workers' compensation administration business, does such business constitute 15 percent or more of the parent's and other licensed health subsidiaries' contract enrollment? 11 -------------------------------------------------------------------------------- EXHIBIT A (continued)     For purposes of definition: •A "smaller Controlled Affiliate:" (1) comprises less than fifteen percent (15%) of Plan's and its licensed Controlled Affiliates' total contract enrollment (as reported on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating an entity seeking licensure as licensed);* or (2) underwrites the indemnity portion of workers' compensation insurance and has total premium revenue less than 15 percent of the sponsoring Plan's net subscription revenue. •A "larger Controlled Affiliate" comprises fifteen percent (15%) or more of Plan's and its licensed Controlled Affiliates' total contract enrollment (as reported on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding coverage, and treating an entity seeking licensure as licensed.)*     Changes in Controlled Affiliate status:     If any Controlled Affiliate's status changes regarding: its Plan ownership level, its risk acceptance or direct delivery of medical care, the Controlled Affiliate shall notify BCBSA within thirty (30) days of such occurrence in writing and come into compliance with the applicable standards within six (6) months.     If a smaller Controlled Affiliate's health and workers' compensation administration business reaches or surpasses fifteen percent (15%) of the total contract enrollment of the Plan and licensed Controlled Affiliates, the Controlled Affiliate shall: 12 -------------------------------------------------------------------------------- EXHIBIT A (continued) 1.Within thirty (30) days, notify BCBSA of this fact in writing, including evidence that the Controlled Affiliate meets the minimum liquidity and capital (BCBSA "Managed Care Organizations Risk-Based Capital (MCO-RBC)" as defined by the NAIC and state-established minimum reserve) requirements of the larger Controlled Affiliate Financial Responsibility standard; and 2.Within six (6) months after reaching or surpassing the fifteen percent (15%) threshold, demonstrate compliance with all license requirements for a larger Controlled Affiliate.     If a Controlled Affiliate that underwrites the indemnity portion of workers' compensation insurance receives a change in rating or proposed change in rating, the Controlled Affiliate shall notify BCBSA within 30 days of notification by the external rating agency. -------------------------------------------------------------------------------- *For purposes of this calculation,     The numerator equals:     Applicant Controlled Affiliate's contract enrollment, as defined in BCBSA's Quarterly Enrollment Report (excluding rider and freestanding coverage).     The denominator equals:     Numerator PLUS Plan and all other licensed Controlled Affiliates' contract enrollment, as reported in BCBSA's Quarterly Enrollment Report (excluding rider and freestanding coverage).     November 16, 2000 13 -------------------------------------------------------------------------------- EXHIBIT A (continued) STANDARDS FOR LICENSED CONTROLLED AFFILIATES     As described in Preamble section of Exhibit A to the Affiliate License Agreement, each controlled affiliate seeking licensure must answer four questions. Depending on the controlled affiliate's answers, certain standards apply: 1. What percent of the controlled affiliate is controlled by the parent Plan? -------------------------------------------------------------------------------- More than 50%   50%   100% and Primary Business is Government Non-Risk LOGO [g68784.jpg]   LOGO [g68784.jpg]   LOGO [g68784.jpg] Standard 1A, 4   Standard 1B, 4   Standard 4*,10A -------------------------------------------------------------------------------- * Applicable only if using the names and marks. IN ADDITION, 2. Is risk being assumed? -------------------------------------------------------------------------------- Yes   No --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- LOGO [g88136.jpg]   LOGO [g68784.jpg]   LOGO [g81688.jpg]   LOGO [g88136.jpg]   LOGO [g68784.jpg]   LOGO [g81688.jpg] Controlled Affiliate underwrites any indemnity portion of workers' compensation insurance   Controlled Affiliate comprises less than 15% of total contract enrollment of Plan and its licensed affiliates, and does not underwrite the indemnity portion of workers' compensation insurance   Controlled Affiliate comprises greater than or equal to 15% of total contract enrollment of Plan and its licensed affiliates, and does not underwrite the indemnity portion of workers' compensation insurance   Controlled Affiliate comprises less than 15% of total contract enrollment of Plan and its licensed affiliates   Controlled Affiliate comprises greater than or equal to 15% of total contract enrollment of Plan and its licensed affiliates   Controlled Affiliate's Primary Business is 15% of total contract Government Non-Risk LOGO [g68784.jpg]   LOGO [g68784.jpg]   LOGO [g68784.jpg]   LOGO [g68784.jpg]   LOGO [g68784.jpg]   LOGO [g68784.jpg] Standards 7A-7E   Standard 2 (Guidelines 1.1,1.2)   Standard 6H   Standard 2 (Guidelines 1.1,1.3)   Standard 6H   Standard 10B -------------------------------------------------------------------------------- IN ADDITION, 3. Is medical care being directly provided? -------------------------------------------------------------------------------- Yes   No LOGO [g68784.jpg]   LOGO [g68784.jpg] Standard 3A   Standard 3B -------------------------------------------------------------------------------- IN ADDITION, -------------------------------------------------------------------------------- 4. If the controlled affiliate has health or workers' compensation administration business, does such business comprise 15% or more of the total contract enrollment of Plan and its licensed controlled affiliates? -------------------------------------------------------------------------------- Yes   No --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- LOGO [g68784.jpg]   LOGO [g88136.jpg]   LOGO [g68784.jpg]   LOGO [g81688.jpg] Standards 6A-6I   Controlled Affiliate is a former primary licensee   Controlled Affiliate is not a former primary licensee   Controlled Affiliate's Primary Business is Government Non-Risk             LOGO [g68784.jpg]   LOGO [g68784.jpg]   LOGO [g68784.jpg]             Standards 5,8,9   Standards 5,8   Standards 8, 10(C) 14 -------------------------------------------------------------------------------- EXHIBIT A (continued) Standard 1—Organization and Governance     1A.) The Standard for more than 50% Plan control is: A Controlled Affiliate shall be organized and operated in such a manner that a licensed Plan or Plans authorized to use the Licensed Marks in the Service Area of the Controlled Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled Affiliate's License Agreement(s), (the "Controlling Plan(s)"), have the legal authority, directly or indirectly through wholly-owned subsidiaries: 1) to select members of the Controlled Affiliate's governing body having more than 50% voting control thereof; and 2) to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not concur; and 3) to exercise control over the policy and operations of the Controlled Affiliate. In addition, a Plan or Plans directly or indirectly through wholly-owned subsidiaries shall own more than 50% of any for-profit Controlled Affiliate. 1B.) The Standard for 50% Plan control is: A Controlled Affiliate shall be organized and operated in such a manner that a licensed Plan or Plans authorized to use the Licensed Marks in the Service Area of the Controlled Affiliate pursuant to separate License Agreement(s) with BCBSA, other than such Controlled Affiliate's License Agreement(s), (the "Controlling Plan(s)"), have the legal authority, directly or indirectly through wholly-owned subsidiaries: 1)to select members of the Controlled Affiliate's governing body having not less than 50% voting control thereof; and 2)to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with which the Controlling Plan(s) do(es) not concur; and 3)to exercise control over the policy and operations of the Controlled Affiliate at least equal to that exercised by persons or entities (jointly or individually) other than the Controlling Plan(s). 15 --------------------------------------------------------------------------------     Notwithstanding anything to the contrary in 1) through 3) hereof, the Controlled Affiliate's establishing or governing documents must also require written approval by the Controlling Plan(s) before the Controlled Affiliate can: •change the geographic area in which it operates •change its legal and/or trade names •change any of the types of businesses in which it engages •create, or become liable for by way of guarantee, any indebtedness, other than indebtedness arising in the ordinary course of business •sell any assets, except for sales in the ordinary course of business or sales of equipment no longer useful or being replaced •make any loans or advances except in the ordinary course of business •enter into any arrangement or agreement with any party directly or indirectly affiliated with any of the owners or persons or entities with the authority to select or appoint members or board members of the Controlled Affiliate, other than the Plan or Plans (excluding owners of stock holdings of under 5% in a publicly traded Controlled Affiliate) •conduct any business other than under the Licensed Marks and Name •take any action that any Controlling Plan or BCBSA reasonably believes will adversely affect the Licensed Marks and Name.     In addition, a Plan or Plans directly or indirectly through wholly-owned subsidiaries shall own at least 50% of any for-profit Controlled Affiliate. 16 -------------------------------------------------------------------------------- EXHIBIT A (continued) Standard 2—Financial Responsibility     A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to its customers. If a risk-assuming Controlled Affiliate ceases operations for any reason, Blue Cross and/or Blue Cross Plan coverage will be offered to all Controlled Affiliate subscribers without exclusions, limitations or conditions based on health status. If a nonrisk-assuming Controlled Affiliate ceases operations for any reason, sponsoring Plan(s) will provide for services to its (their) customers. Standard 3—State Licensure/Certification     3A.) The Standard for a Controlled Affiliate that employs, owns or contracts on a substantially exclusive basis for medical services is:     A Controlled Affiliate shall maintain unimpaired licensure or certification for its medical care providers to operate under applicable state laws.     3B.) The Standard for a Controlled Affiliate that does not employ, own or contract on a substantially exclusive basis for medical services is:     A Controlled Affiliate shall maintain unimpaired licensure or certification to operate under applicable state laws. Standard 4—Certain Disclosures     A Controlled Affiliate shall make adequate disclosure in contracting with third parties and in disseminating public statements of 1) the structure of the Blue Cross and Blue Shield System; and 2) the independent nature of every licensee; and 3) the Controlled Affiliate's financial condition. Standard 5—Reports and Records for Certain Smaller Controlled Affiliates     For a smaller Controlled Affiliate that does not underwrite the indemnity portion of workers' compensation insurance, the Standard is: 17 -------------------------------------------------------------------------------- EXHIBIT A (continued)     A Controlled Affiliate and/or its licensed Plan(s) shall furnish, on a timely and accurate basis, reports and records relating to these Standards and the License Agreements between BCBSA and Controlled Affiliate.     Standard 6—Other Standards for Larger Controlled Affiliates     Standards 6(A)—(I) that follow apply to larger Controlled Affiliates.     Standard 6(A): Board of Directors     A Controlled Affiliate Governing Board shall act in the interest of its Corporation in providing cost-effective health care services to its customers. A Controlled Affiliate shall maintain a governing Board, which shall control the Controlled Affiliate, composed of a majority of persons other than providers of health care services, who shall be known as public members. A public member shall not be an employee of or have a financial interest in a health care provider, nor be a member of a profession which provides health care services.     Standard 6(B): Responsiveness to Customers     A Controlled Affiliate shall be operated in a manner responsive to customer needs and requirements.     Standard 6(C): Participation in National Programs     A Controlled Affiliate shall effectively and efficiently participate in each national program as from time to time may be adopted by the Member Plans for the purposes of providing portability of membership between the licensees and ease of claims processing for customers receiving benefits outside of the Controlled Affiliate's Service Area.     Such programs are applicable to licensees, and include: 1.Transfer Program; 2.BlueCard Program; 18 -------------------------------------------------------------------------------- EXHIBIT A (continued) 3.Inter-Plan Teleprocessing System (ITS); and 4.Electronic Claims Routing Process.     Standard 6(D): Financial Performance Requirements     In addition to requirements under the national programs listed in     Standard 6C: Participation in National Programs, a Controlled Affiliate shall take such action as required to ensure its financial performance in programs and contracts of an inter-licensee nature or where BCBSA is a party.     Standard 6(E): Cooperation with Plan Performance Response Process     A Controlled Affiliate shall cooperate with BCBSA's Board of Directors and its Plan Performance and Financial Standards Committee in the administration of the Plan Performance Response Process and in addressing Controlled Affiliate performance problems identified thereunder.     Standard 6(F): Independent Financial Rating     A Controlled Affiliate shall obtain a rating of its financial strength from an independent rating agency approved by BCBSA's Board of Directors for such purpose.     Standard 6(G): Best Efforts     During each year, a Controlled Affiliate shall use its best efforts in the designated Service Area to promote and build the value of the Blue Cross Mark.     Standard 6(H): Financial Responsibility     A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to its customers. Amended March 10, 2000 19 -------------------------------------------------------------------------------- EXHIBIT A (continued) Standard 6(I): Reports and Records A Controlled Affiliate shall furnish to BCBSA on a timely and accurate basis reports and records relating to compliance with these Standards and the License Agreements between BCBSA and Controlled Affiliate. Such reports and records are the following: A)BCBSA Controlled Affiliate Licensure Information Request; and B)Biennial trade name and service mark usage material, including disclosure material; and C)Changes in the ownership and governance of the Controlled Affiliate, including changes in its charter, articles of incorporation, or bylaws, changes in a Controlled Affiliate's Board composition, or changes in the identity of the Controlled Affiliate's Principal Officers, and changes in risk acceptance, contract growth, or direct delivery of medical care; and D)Quarterly Financial Report, Semi-annual "Managed Care Organizations Risk-Based Capital (MCO-RBC) Report" as defined by the NAIC, Annual Certified Audit Report, Insurance Department Examination Report, Annual Statement filed with State Insurance Department (with all attachments); and E)Quarterly Enrollment Report, Semi-Annual Benefit Cost Management Report. Amended November 16, 2000 20 -------------------------------------------------------------------------------- EXHIBIT A (continued) Standard 6(J): Control by Unlicensed Entities Prohibited No Controlled Affiliate shall cause or permit an entity other than a Plan or a Licensed Controlled Affiliate thereof to obtain control of the Controlled Affiliate or to acquire a substantial portion of its assets related to licensable services. Standard 7—Other Standards for Risk-Assuming Workers' Compensation Controlled Affiliates Standards 7(A)—(E) that follow apply to Controlled Affiliates that underwrite the indemnity portion of workers' compensation insurance. Standard 7 (A): Financial Responsibility A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to its customers. Standard 7(B): Reports and Records A Controlled Affiliate shall furnish, on a timely and accurate basis, reports and records relating to compliance with these Standards and the License Agreements between BCBSA and the Controlled Affiliate. Such reports and records are the following: A.BCBSA Controlled Affiliate Licensure Information Request; and B.Biennial trade name and service mark usage materials, including disclosure materials; and C.Annual Certified Audit Report, Annual Statement as filed with the State Insurance Department (with all attachments), Annual NAIC's Risk-Based Capital Worksheets for Property and Casualty Insurers; and Amended June 16, 2000 21 -------------------------------------------------------------------------------- EXHIBIT A (continued) Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for Property and Casualty Insurers, Insurance Department Examination Report; and D.Notification of all changes and proposed changes to independent ratings within 30 days of receipt and submission of a copy of all rating reports; and E.Changes in the ownership and governance of the Controlled Affiliate including changes in its charter, articles of incorporation, or bylaws, changes in a Controlled Affiliate's Board composition, Plan control, state license status, operating area, the Controlled Affiliate's Principal Officers or direct delivery of medical care. Standard 7(C): Loss Prevention A Controlled Affiliate shall apply loss prevention protocol to both new and existing business. Standard 7(D): Claims Administration A Controlled Affiliate shall maintain an effective claims administration process that includes all the necessary functions to assure prompt and proper resolution of medical and indemnity claims. Standard 7(E): Disability and Provider Management A Controlled Affiliate shall arrange for the provision of appropriate and necessary medical and rehabilitative services to facilitate early intervention by medical professionals and timely and appropriate return to work. Amended November 16, 2000 22 -------------------------------------------------------------------------------- EXHIBIT A (continued) Standard 8—Cooperation with Controlled Affiliate License Performance Response Process Protocol A Controlled Affiliate and its Sponsoring Plan(s) shall cooperate with BCBSA's Board of Directors and its Plan Performance and Financial Standards Committee in the administration of the Controlled Affiliate License Performance Response Process Protocol (ALPRPP) and in addressing Controlled Affiliate compliance problems identified thereunder. Standard 9—Participation in National Programs by Smaller Controlled Affiliates A smaller Controlled Affiliate for which this standard applies pursuant to the Preamble section of Exhibit A of the Controlled Affiliate License Agreement shall effectively and efficiently participate in certain national programs from time to time as may be adopted by Member Plans for the purposes of providing ease of claims processing for customers receiving benefits outside of the Controlled Affiliate's service area and be subject to certain relevant financial and reporting requirements. A.National program requirements include: •BlueCard Program; •Inter-Plan Teleprocessing System (ITS); •Transfer Program; and •Electronic Claims Routing Process. B.Financial Requirements include: •Standard 6(D): Financial Performance Requirements and Standard 6(H): Financial Responsibility; or •A financial guarantee covering the Controlled Affiliate's BlueCard Program obligations in a form, and from a guarantor, acceptable to BCBSA. C.Reporting requirements include: •The Quarterly Capital Benchmark Worksheet. Amended March 10, 2000 23 -------------------------------------------------------------------------------- Standard 10—Other Standards for Controlled Affiliates Whose Primary Business is Government Non-Risk Standards 10(A)—(C) that follow apply to Controlled Affiliates whose primary business is government non-risk. Standard 10(A)—Organization and Governance A Controlled Affiliate shall be organized and operated in such a manner that it is 1) wholly owned by a licensed Plan or Plans and 2) the sponsoring licensed Plan or Plans have the legal ability to prevent any change in the articles of incorporation, bylaws or other establishing or governing documents of the Controlled Affiliate with which it does not concur. 24 -------------------------------------------------------------------------------- EXHIBIT A (continued) Standard 10(B)—Financial Responsibility A Controlled Affiliate shall be operated in a manner that provides reasonable financial assurance that it can fulfill all of its contractual obligations to its customers. Standard 10(C):—Reports and Records A Controlled Affiliate shall furnish, on a timely and accurate basis, reports and records relating to compliance with these Standards and the License Agreements between BCBSA and the Controlled Affiliate. Such reports and records are the following: A.BCBSA Affiliate Licensure Information Request; and B.Biennial trade name and service mark usage materials, including disclosure material; and C.Annual Certified Audit Report, Annual Statement (if required) as filed with the State Insurance Department (with all attachments), Annual NAIC Risk-Based Capital Worksheets (if required) as filed with the State Insurance Department (with all attachments), and Insurance Department Examination Report (if applicable)*; and D.Changes in the ownership and governance of the Controlled Affiliate, including changes in its charter, articles of incorporation, or bylaws, changes in the Controlled Affiliate's Board composition, Plan control, state license status, operating area, the Controlled Affiliate's Principal Officers or direct delivery of medical care. 25 -------------------------------------------------------------------------------- EXHIBIT B ROYALTY FORMULA FOR SECTION 9 OF THE CONTROLLED AFFILIATE LICENSE AGREEMENT Controlled Affiliate will pay BCBSA a fee for this license in accordance with the following formula: FOR RISK AND GOVERNMENT NON-RISK PRODUCTS: For Controlled Affiliates not underwriting the indemnity portion of workers' compensation insurance: An amount equal to its pro rata share of each sponsoring Plan's dues payable to BCBSA computed with the addition of the Controlled Affiliate's subscription revenue and contracts arising from products using the marks. The payment by each sponsoring Plan of its dues to BCBSA, including that portion described in this paragraph, will satisfy the requirement of this paragraph, and no separate payment will be necessary. For Controlled Affiliates underwriting the indemnity portion of workers' compensation insurance: An amount equal to 0.35 percent of the gross revenue per annum of Controlled Affiliate arising from products using the marks; plus, an annual fee of $5,000 per license for a Controlled Affiliate subject to Standard 7. For Controlled Affiliates whose primary business is government non-risk: An amount equal to its pro-rata share of each sponsoring Plan's dues payable to BCBSA computed with the addition of the Controlled Affiliate's government non-risk beneficiaries. -------------------------------------------------------------------------------- EXHIBIT B (continued) FOR NONRISK PRODUCTS: An amount equal to 0.24 percent of the gross revenue per annum of Controlled Affiliate arising from products using the marks; plus: 1)An annual fee of $5,000 per license for a Controlled Affiliate subject to Standard 6 D. 2)An annual fee of $2,000 per license for all other Controlled Affiliates. The foregoing shall be reduced by one-half where both a BLUE CROSS® and BLUE SHIELD® License are issued to the same Controlled Affiliate. In the event that any license period is greater or less than one (1) year, any amounts due shall be prorated. Royalties under this formula will be calculated, billed and paid in arrears. -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.04 BLUE SHIELD CONTROLLED AFFILIATE LICENSE AGREEMENT (Includes revisions adopted by Member Plans through their November 16, 2000, meeting) THIS PAGE IS INTENTIONALLY BLANK. STANDARDS FOR LICENSED CONTROLLED AFFILIATES

Exhibit 10.31 BALL CORPORATION 2000 DEFERRED COMPENSATION COMPANY STOCK PLAN 1. Statement of Purpose The purposes of the 2000 Deferred Compensation Company Stock Plan (the "Plan") are (1) to aid Ball Corporation (the "Company") and its subsidiaries in attracting and retaining key employees by providing a non-qualified deferred compensation vehicle that also increases the interest of such key employees in the Company Stock performance, and (2) to establish an alternative method of compensating those Directors of the Company who do not receive compensation as employees of the Company in a way that increases the interest of such Directors in the Company Stock performance. 2. Definitions 2.1. Beneficiary - "Beneficiary" means the person or persons designated as such in accordance with Section 8. 2.2. Class Year - "Class Year" means the year in respect of which Compensation is deferred under the Plan. 2.3. Company - "Company" means Ball Corporation and any of its fifty percent (50%) or more owned subsidiaries. 2.4. Company Matching Contribution - "Company Matching Contribution" means an additional amount to be credited to a Participant's Deferred Compensation Account, which shall equal twenty percent (20%) of the sum of: (1) Deferral Amounts credited to a Participant's Deferred Compensation Account during a calendar year; and (2) amounts transferred from other deferred compensation plans maintained by the Company and credited to a Participant's Deferred Compensation Account during a calendar year. The maximum Company Matching Contribution credited to a Participant's Deferred Compensation Account in a calendar year shall be $20,000. A Company Matching Contribution shall be added to and treated as a part of the deferred amount or transferred amount to which it relates, and shall be credited to the Participant's Deferred Compensation Account at the same time as the deferred amount or transferred amount is credited to such account. If more than one amount is deferred to or transferred to a Participant's Deferred Compensation Account in a calendar year, the Company Matching Contribution shall be applied to the earliest such amounts credited to such account until the maximum Company Matching Contribution has been credited to the Participant; and, if more than one deferred or transferred amount is credited to a Participant's Deferred Compensation Account on the same day, the Company Matching Contribution shall be allocated among such amounts on a prorata basis. 2.5. Company Stock - "Company Stock" means the common stock of Ball Corporation. 2.6. Compensation - "Compensation" means, with respect to a Participant who is an Eligible Employee, annual incentive compensation for the Class Year or other compensation as designated by the Committee, or with respect to a Participant who is a Director, the cash portion of the annual incentive retainer which is calculated in accordance with the Ball Corporation Economic Value Added Incentive Compensation Plan (or any successor plan). 2.7. Declining Balance Installments - "Declining Balance Installments" means a series of annual payments such that each payment is determined by taking that portion of the Participant's Deferred Compensation Account as of the December 31 Valuation Date immediately preceding the Distribution Date and dividing by the number of years of distributions remaining. 2.8. Deferral Amount - "Deferral Amount" means the amount of Elective Deferred Compensation deferred by the Participant for each Class Year. 2.9. Deferred Compensation Account - "Deferred Compensation Account" means the account for each Class Year maintained by the Company for each Participant pursuant to Section 6. 2.10. Director - "Director" means a Director of the Company who is not an employee of the Company or an affiliate. 2.11. Disability - "Disability" or "Disabled" means that a Participant who is an Eligible Employee is disabled for the purpose of any long-term disability program maintained by the Company. 2.12. Distribution Date - "Distribution Date" means the date on which the Company makes distributions from the Participant's Deferred Compensation Account. 2.13. Dividends - "Dividends" means an amount equal to the number of Units in a Participant's Deferred Compensation Account (as determined pursuant to Section 6.2.) multiplied by the amount of quarterly dividend payable to Company Stock shareholders for each share of Company Stock. The amount of Dividends for a payment date for a quarterly dividend shall be determined based on the number of Units in the Participant's Deferred Compensation Account as of the preceding Valuation Date. 2.14. Effective Date - "Effective Date" means November 1, 2000, the date on which the Plan commences. 2.15. Election Form - "Election Form" means the form or forms attached to this Plan and filed with the Human Resources Committee by the Participant in order to participate in the Plan. The terms and conditions specified in the Election Form(s) are incorporated by reference herein and form a part of the Plan. 2.16. Elective Deferred Compensation - "Elective Deferred Compensation" means the amount elected to be deferred by an Eligible Employee or Director in his Election Form. 2.17. Eligible Employee - "Eligible Employee" means an employee of the Company who has been selected by the Human Resources Committee. 2.18. Human Resources Committee - "Human Resources Committee" (also referred to as the "Committee") means the Human Resources Committee of the Board of Directors of the Company, who will administer the Plan. 2.19. Participant - "Participant" means an Eligible Employee or Director participating in the Plan in accordance with the provisions of Section 4. 2.20. Termination of Employment - "Termination of Employment" means, with respect to a Participant who is an employee of the Company, the termination of said Participant's employment with the Company for any reason other than Disability. 2.21. Termination of Service - "Termination of Service" means, with respect to a Participant who is a Director, the termination of said Director's active service as a member of the Company's Board of Directors. 2.22. Transfer Form - "Transfer Form" means the form or forms attached to this Plan and filed with the Human Resources Committee by the Participant in order to transfer an amount from another Company deferred compensation plan to this Plan pursuant to Section 4.2. The terms and conditions specified in the Transfer Form(s) are incorporated by reference herein and form a part of the Plan. 2.23. Unit - "Unit" means the Units credited to a Participant's Deferred Compensation Account pursuant to Section 6. For valuation and distribution purposes, each unit shall be equivalent to one share of Company Stock. 2.24. Valuation Date - "Valuation Date" means the date on which the number of units in a Participant's Deferred Compensation Account is determined for each month as provided in Section 6. hereof. Unless and until changed by the Committee, or except as otherwise provided herein, the Valuation Date shall be the last day of each month. If a Participant (or Beneficiary) requests a Liquidating Distribution under Section 7.8., then, for the purpose of determining the number of shares of Company Stock to be distributed, the Valuation Date shall be the last day of the month in which the Participant submits the request. If a Participant (or Beneficiary) requests a Hardship Benefit pursuant to Section 7.3., the Valuation Date for the purpose of determining the number of shares of Company Stock to be distributed shall be the last day of the month in which the Committee determines that the Participant (or Beneficiary) is eligible for such a distribution. 3. Administration of the Plan The Human Resources Committee, by appointment of the Board of Directors of the Company, shall be the sole administrator of the Plan. The Committee shall have full power to formulate additional details and regulations for carrying out this Plan. The Committee shall also be empowered to make any and all of the determinations not herein specifically authorized which may be necessary or desirable for the effective administration of the Plan. Any decision or interpretation of any provision of this Plan adopted by the Committee shall be final and conclusive. 4. Participation 4.1. Election to Participate. Participation in the Plan shall be limited to Eligible Employees and Directors who elect to participate in the Plan by filing an Election Form prior to the beginning of the Class Year in which the Participant's Compensation is earned. Notwithstanding the foregoing, an employee or Director who first becomes an Eligible Employee or Director prior to July 1 in any Class Year, may elect to participate in the Plan for such Class Year by filing an Election Form within thirty (30) days after becoming an Eligible Employee or Director. The minimum annual deferral shall be $1,000 and the maximum deferral shall be one hundred percent (100%) of the Participant's Compensation (as defined in Section 2.6.) for the Class Year. 4.2. Transfer from Other Plans. An Eligible Employee or Director who has elected to defer amounts to another deferred compensation plan implemented by Ball Corporation prior to December 31, 1999, may elect to transfer deferred amounts from such other plan to this Plan by filing a Transfer Form between November 1 and December 31 immediately preceding the date the transferred amount is credited pursuant to Section 6.1. in any year after the effective date of the Plan, provided the Eligible Employee is actively employed by the Company or the Director is actively serving as a Director of the Company on the date of the election. The minimum amount that may be transferred for any Class Year is $1,000, and the maximum amount that may be transferred is one hundred percent (100%) of prior deferred amounts. Any such transfer shall be subject to the terms and conditions contained in the Transfer Form (including as to the other plans from which transfers may be made), the terms of which are incorporated by referenced herein and form a part of the Plan. 4.3. Committee Discretion. The Committee may, in its sole discretion, and subject to any conditions it determines to be appropriate, provide for the deferral of other amounts of compensation into the Plan for an Eligible Employee or Director, either on a voluntary or involuntary basis, or allow for transfer of additional amounts to the Plan from other deferred compensation plans maintained by the Company. Unless otherwise specified in writing at the time any such amounts are credited to the Plan: (1) the Eligible Employee or Director shall elect the timing and form of payment for any such amounts; and (2) all other provisions of the Plan shall apply to any such deferred amounts. A separate Deferred Compensation Account shall be established and maintained for any such amount. 5. Vesting of Deferred Compensation Account A Participant's interest in his Deferred Compensation Account, the Company Matching Contribution and Dividends credited thereto shall vest immediately. 6. Accounts and Valuations 6.1. Deferred Compensation Accounts. The Committee shall establish and maintain a separate Deferred Compensation Account for each Participant for each Class Year. Deferral Amounts for 2000 and subsequent Class Years and related Company Matching Contributions shall be deemed credited to the Deferred Compensation Account as of January 1 of the year subsequent to the Class Year for which Compensation was deferred. Any deferred amounts transferred to this Plan pursuant to Section 4.2. and any related Company Matching Contribution shall be deemed credited to the Deferred Compensation Account on January 1 of the year following the year in which the election to transfer is made pursuant to Section 4.2. A separate Deferred Compensation Account shall be established and maintained for amounts transferred to this Plan pursuant to Section 4.2. and any Company Matching Contribution related thereto. 6.2. Account Valuation. The value of each Deferred Compensation Account shall be based upon the value of Company Stock. All Deferral Amounts, amounts transferred from other plans pursuant to Section 4.2., and related Company Matching Contributions shall be credited to a Participant's Deferred Compensation Account in Units, or fractional Units, with each Unit having a value equivalent to one share of Company Stock. With respect to any amount credited to a Participant's Deferred Compensation Account as of January 1 in any year, the number of such credited Units shall be determined by dividing the amount credited to the Participant's account (including any related Company Matching Contributions) by the closing price of one share of Company Stock on the New York Stock Exchange Composite Listing as of the close of business on the last trading day of the immediately preceding year. Dividends shall be reflected in a Participant's Deferred Compensation Account by the crediting of additional Units or fractional Units equal to the value of the Dividends and based upon the closing price of one share of Company Stock as of the close of business on the New York Stock Exchange Composite Listing on the payment date for each quarterly dividend payable to Company Stock shareholders. The value of each Deferred Compensation Account shall be determined by multiplying the number of Units by the value of one share of Company Stock on the New York Stock Exchange Composite Listing on the applicable Valuation Date. In the event the New York Stock Exchange Composite Listing is closed on the payment date on which any dividends are paid on Company Stock, or on any applicable Valuation Date, the Units and their related value shall be determined based upon the closing price of Company Stock on the New York Stock Exchange Composite Listing on the last business day immediately preceding such date. 6.3. Changes in Capitalization. If there is any change in the number or class of shares of Company Stock through the declaration of a stock dividend or other extraordinary dividends, or recapitalization resulting in stock splits, or combinations or exchanges of such shares or in the event of similar corporate transactions, the Units in each Participant's Deferred Compensation Account shall be equitably adjusted to reflect any such change in the number or class of issued shares of Company Stock or to reflect such similar corporate transaction. 6.4. Nature of Account Entries. The establishment and maintenance of a Participant's Deferred Compensation Accounts and the crediting of Units and fractional Units pursuant to this Section 6. shall be merely bookkeeping entries and shall not be construed as giving any person any interest in any specific assets of the Company or of any subsidiary of the Company or any trust created by the Company, including any Company Stock owned by the Company or any such subsidiary or trust. The hypothetical investment of the Participant's Deferred Compensation Accounts in shares of Company Stock shall be for bookkeeping purposes only, and shall not require the purchase of actual Company Stock by the Committee or the Company. Benefits accrued under this Plan shall constitute an unsecured general obligation of the Company. 7. Distribution of Accounts 7.1. Form and Timing of Payments. All benefits payable to a Participant or Beneficiary under the Plan shall be paid in Company Stock, with one share distributed for each Unit credited pursuant to Section 6.2. All fractional shares shall be payable in cash. A Participant's Deferred Compensation Account(s) shall be paid to the Participant following the Participant's Termination of Employment or Termination of Service. Except as otherwise provided by the Plan, payment shall be made in a lump sum or in up to fifteen (15) annual installments, as the Participant elects in his Election Form. 7.2. Normal Benefit a. A Participant's Deferred Compensation Account shall be paid to the Participant as requested in his Election Form, subject to the terms and conditions set forth in the Plan, including the Election Form. If a Participant elects to receive payment of his Deferred Compensation Account in installments, payments shall be made in Declining Balance Installments. Unless the Committee determines otherwise, and subject to the provisions of Section 7.5. as to when payments shall commence, distribution payments, whether lump sum or installment, shall be made on or before the fifteenth (15th) day of February of each year. A Participant may elect different payment schedules for different Deferred Compensation Accounts. b. If a Participant dies before receiving his total Deferred Compensation Account balance, whether or not distributions have earlier commenced, his Beneficiary shall be entitled to the remaining account balance in accordance with the payment elections in the Election Form, except that such payments, if not already commenced, shall commence on or before February 15 next following the date of the Participant's death. 7.3. Hardship Benefit. In the event that the Committee, upon written request of a Participant or Beneficiary of a deceased Participant, determines in its sole discretion, that such person has suffered an unforeseeable financial emergency, the Company shall pay to such person, from the Deferred Compensation Account designated by the Participant or Beneficiary, an amount necessary to meet the emergency, not in excess of the amount of the Deferred Compensation Account credited to the Participant. Any amount determined to be payable pursuant to this Section shall be paid no later than thirty (30) days following the applicable Valuation Date (as determined pursuant to Section 2.24.), and no Dividends shall be credited on the distributed amount under Section 6.2. from the Valuation Date to the Distribution Date. The Deferred Compensation Account of the Participant shall thereafter be reduced to reflect the payment as of the date paid of a Hardship Benefit. 7.4. Request to Committee for Delay in Payment. A Participant shall have no right to modify in any way the schedule for the distribution of amounts from his Deferred Compensation Account which he has specified in his Election Form. However, upon a written request submitted by the Participant to the Committee, the Committee may, in its sole discretion, for each Class Year postpone one time the date on which the payment shall commence, not beyond the year in which he will attain age seventy-one (71); and at the same time increase the number of installments to a number not to exceed fifteen (15). Any such request(s) must be made prior to the Termination of Employment with respect to a Participant who is an employee, and at least ninety (90) days prior to the date a Participant who is a Director terminates service on the Board of Directors. 7.5. Date of Payments. Except as otherwise provided in this Plan, payments under this Plan shall be made on or before the fifteenth (15th) day of February of the calendar year following receipt of notice by the Committee of an event which entitles a Participant (or Beneficiary) to payments under the Plan. Amounts that become payable to the Estate of a Beneficiary pursuant to Section 8. shall be paid within 30 days after the Valuation Date that follows a determination by the Committee that an amount is payable. Except as otherwise determined by the Committee, the payment amount to be paid on a Distribution Date shall be based on and subtracted from the Deferred Compensation Account as of the December 31 immediately preceding the Distribution Date plus any amount credited as of the January 1 immediately preceding the Distribution Date. No Dividends shall be credited under Section 6.2. on the distributed amount from the December 31 immediately preceding the Distribution Date to the Distribution Date. 7.6. Termination of Employment Before Age 55. In the event a Participant who is an employee has a Termination of Employment prior to his attaining age fifty-five (55) (other than by death, for which benefits and/or accounts will be paid in accordance with Section 7.2.b.), then, whether or not distributions have earlier commenced, the Deferred Compensation Account of said Participant will be paid to him in a lump sum on or before the fifteenth (15th) day of February in the year following the year in which the Termination of Employment occurred, unless otherwise determined by the Committee. Upon written request of said Participant made within thirty (30) days following Termination of Employment, the Committee may, in its sole discretion, determine that, in lieu of a lump sum, payments shall be made to said Participant in not more than five (5) Declining Balance Installments, commencing on or before such next fifteenth (15th) day of February following the date of Termination of Employment. 7.7. Taxes: Withholding. To the extent required by law, the Company shall withhold from payments made hereunder any amount required to be withheld by the federal or any state or local government. 7.8. Liquidating Distribution. Notwithstanding any provisions of the Plan or the Participant's Election Form to the contrary, following the receipt of a written request from a Participant (or Beneficiary) for a Liquidating Distribution, the Company shall pay to the Participant (or Beneficiary) the Participant's (or Beneficiary's) Liquidating Distribution Account Balance in a lump sum, reduced by applicable withholding taxes, as required. Any such Liquidating Distribution shall be paid no later than thirty (30) days following the applicable Valuation Date (as determined pursuant to Section 2.24.), and no Dividends shall be credited under Section 6.2. on the distributed amount from the Valuation Date to the Distribution Date. "Liquidating Distribution" shall mean a distribution requested by the Participant (or Beneficiary following the death of the Participant) in writing directed to the Committee and specifically referencing this section. If the Participant requesting the Liquidating Distribution is, at the time of the request, an active employee of the Company or is actively serving as a Director of the Company, "Liquidating Distribution Account Balance" shall mean all of the Deferred Compensation Accounts under the Plan in which the Participant has an undistributed balance, decreased by a forfeiture penalty equal to six percent (6%) of the Units credited to the Participant's Deferred Compensation Account(s) pursuant to Section 6.2. as of the Valuation Date. If the Participant requesting the Liquidating Distribution is, at the time of the request, no longer an active employee of the Company or actively serving as a Director of the Company, or in the case of a request made by a Participant's Beneficiary, "Liquidating Distribution Account Balance" shall mean all of the Deferred Compensation Accounts under the Plan in which the Participant has an undistributed balance, decreased by a forfeiture penalty equal to six percent (6%) of the Units credited to the Participant's Deferred Compensation Account(s) pursuant to Section 6.2. as of the Valuation Date; and, the Liquidating Distribution Account Balance in all of the Deferred Compensation Accounts under any Comparable Plans (as said term is defined in the Comparable Plan, including the 6% forfeiture penalty, if any) in which the Participant has an undistributed balance. "Comparable Plans" shall mean the Ball Corporation 1986 Deferred Compensation Plan, the Ball Corporation 1988 Deferred Compensation Plan, the Ball Corporation 1989 Deferred Compensation Plan, the Ball-InCon Glass Packaging Corp. Deferred Compensation Plan, and any comparable deferred compensation plans or successor plans so designated by the Committee. Notwithstanding any provisions of the Plan or the Participant's Election Form to the contrary, if the Participant requesting the Liquidating Distribution is, at the time of the request, an active employee of the Company or active Director of the Company, then the Participant shall, for a period of one (1) Class Year beginning with the Class Year during which the request for the Liquidating Distribution is made, be ineligible to participate in the Plan or any Comparable Plans with respect to any Compensation not yet deferred. 7.9. Replacement of a Committee Member. In the event that a Director requesting a Hardship Benefit under Section 7.3. or a delay in payment under Section 7.4. is a member of the Human Resources Committee, he shall not participate in the Committee's decision and, for purposes of considering his request only, the Secretary of the Company will replace the Director as a member of the Human Resources Committee. 8. Beneficiary Designation A Participant shall have the right at any time, and from time to time, to designate and/or change or cancel any person, persons, or entity as his Beneficiary or Beneficiaries (both principal and contingent) to whom payment under this Plan shall be paid in the event of his death prior to complete distribution to Participant of the benefits due him under the Plan. Each beneficiary change or cancellation shall become effective only when filed in writing with the Committee during the Participant's lifetime on a form provided by the Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed. Any finalized divorce of a Participant subsequent to the date of filing of a Beneficiary designation form shall revoke such designation. The spouse of a married Participant domiciled in a community property jurisdiction shall be required to join in any designation of Beneficiary or Beneficiaries other than the spouse in order for the Beneficiary designation to be effective. If a Participant fails to designate a Beneficiary as provided above, or, if his beneficiary designation is revoked by divorce, or otherwise, without execution of a new designation, or if all designated Beneficiaries predecease the Participant, then the distribution of such benefits shall be made in a lump sum to the Participant's estate. If any installment distribution has commenced to a Beneficiary and the Beneficiary dies before receiving all installments, any remaining installments shall be paid in a lump sum to the estate of the Beneficiary. 9. Amendment and Termination of Plan 9.1. Amendment. The Board of Directors may at any time amend the Plan in whole or in part, provided, however, that no amendment shall be effective to reduce the value of any Participant's Deferred Compensation Account or to affect the Participant's vested right therein, and, except as provided in 9.2. or 9.3., no amendment shall be effective to decrease the future benefits under the Plan payable to any Participant or Beneficiary with respect to any amount credited to a Participant's Deferred Compensation Account prior to the date of the amendment. Written notice of any amendments shall be given promptly to each Participant; provided, no notice shall be required with respect to amendments that are non-material or administrative in nature. 9.2. Termination of Plan a. Company's Right to Terminate. The Board of Directors may at any time, and in its sole discretion, terminate the Plan. No such termination of the Plan shall reduce the balance in a Participant's Deferred Compensation Account or affect the Participant's vested right therein. b. Payments Upon Termination of Plan. Upon any termination of the Plan under this Section 9.2., Compensation for additional Class Years shall not be deferred under the Plan. With respect to then-existing Deferred Compensation Accounts, the Company will, depending upon the Participant's election at that time: (i) pay to the Participant, in a lump sum, the value of each of his Deferred Compensation Accounts as of the preceding Valuation Date; or (ii) make such other arrangement as the Committee determines appropriate. 9.3. Successors and Mergers, Consolidations or Change in Control. The terms and conditions of this Plan and Election Form shall enure to the benefit of and bind the Company, the Participants, their successors, assignees, and personal representatives. If substantially all of the stock or assets of the Company is acquired by another corporation or entity or if the Company is merged into, or consolidated with, another corporation or entity, then the obligations created hereunder shall be obligations of the acquiror or successor corporation or entity. 10. Miscellaneous 10.1. Unsecured General Creditor. Participants and their beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests, or other claims in any property or assets of the Company, nor shall they be beneficiaries of, or have any rights, claims, or interests in any life insurance policies, disability insurance policies, annuity contracts, or the policies therefrom owned or which may be acquired by the Company ("Policies"). Such Policies or other assets shall not be held under any trust solely for the benefit of Participants, their beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan, except to the extent the corpus, income and expenses are treated as assets, income and expenses of the Company pursuant to Sections 671 through 679 of the Internal Revenue Code of 1986, as amended, and remain subject to the claims of the general creditors of the Company. Any and all of such assets and Policies shall be and remain general, unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be that of an unfunded and unsecured promise to pay money in the future. 10.2. Obligations to the Company. If a Participant becomes entitled to a distribution of benefits under the Plan, and if at such time the Participant has outstanding any debt, obligation, or other liability representing an amount owed to the Company, then the Company may offset such amounts owing it or an affiliate against the amount of benefits otherwise distributable. Such determination shall be made by the Committee. 10.3. Non-Assignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, 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, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. 10.4. Employment or Future Eligibility to Participate Not Guaranteed. Nothing contained in this Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Eligible Employee any right to be retained in the employ of the Company. Designation as an Eligible Employee may be revoked at any time by the Committee with respect to any Compensation not yet deferred. 10.5. Election to Board of Directors Not Guaranteed. Participation in this Plan shall not confer on any Participant who is a Director any right to be nominated for re-election to the Board of Directors, or to be re-elected to the Board of Directors. 10.6. Gender, Singular and Plural. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular. 10.7. Captions. The captions to the articles, sections, and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 10.8. Applicable Law. This Plan shall be governed and construed in accordance with the laws of the State of Indiana. 10.9. Validity. In the event any provision of this Plan is held invalid, void, or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan. 10.10. Notice. Any notice or filing required or permitted to be given to the Committee shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the principal office of the Company, directed to the attention of the Chief Executive Officer of the Company. 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 on the receipt for registration or certification.

  EXHIBIT 10.1   AMENDED AND RESTATED EXCHANGE AGREEMENT      THIS EXCHANGE AGREEMENT, dated as of December 13, 2001 is by and among Bio-Aqua Systems, Inc., a Florida corporation (the “Company”); Max Rutman and Flagship Import Export LLC, a Nevada limited liability company (the “Shareholders”); and New Dragon Asia Food Limited, a company organized under the laws of the British Virgin Islands (“New Dragon”). W I T N E S S E T H:      WHEREAS, New Dragon owns 100% of the shares of the equity interests of four companies organized under the laws of the British Virgin Islands (each a “Subsidiary” and, collectively the “Subsidiaries”) each of which in turn hold an interest in a separate sino-foreign joint venture as described on Schedule I attached hereto, which equity interests constitute all of the issued and outstanding equity interests of the Subsidiaries ( the “Equity Interests”);      WHEREAS, concurrently with the execution of this Agreement the Company desires to acquire from New Dragon, and New Dragon desires to sell to the Company, all of the Equity Interests in exchange (the “Exchange”) for the issuance by the Company of an aggregate of 37,963,263 shares (the “Company Shares”) of the Company’s Class A common stock, par value $.0001 per share (the “Company Common Stock”), on the terms and conditions set forth below;      WHEREAS, the Shareholders will benefit from the transactions contemplated herein,      NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and agreements set forth herein, the parties hereto agree as follows: ARTICLE I EXCHANGE      1.1 Exchange. Subject to the terms and conditions of this Agreement, on the Closing Date (as hereinafter defined):           (a) The Company shall issue and deliver an aggregate of 37,963,263 Company Shares to New Dragon and its designee(s), which Shares shall constitute 93% of the voting power of the Company’s issued and outstanding capital stock on a fully diluted basis after giving effect to the Exchange.           (b) As the consideration, New Dragon shall transfer to the Company the Equity Interests in the Subsidiaries along with appropriate transfer documents in favor of the Company.      1.2 Time and Place of Closing. The closing of the transactions contemplated hereby (the “Closing”) shall take place at the offices of Loeb and Loeb LLP, 10100 Santa Monica Boulevard, Suite 2200, Los Angeles, California 90067 on November 6, 2001 (the “Closing Date”) or at such other place as the Company and New Dragon may agree.   --------------------------------------------------------------------------------   ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS      The Company and the Shareholders jointly and severally represent and warrant to New Dragon that now and/or as of the Closing:      2.1 Due Organization and Qualification; Subsidiaries; Due Authorization.           (a) The Company and each subsidiary of the Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of formation, with full corporate power and authority to own, lease and operate its respective business and properties and to carry on its respective business in the places and in the manner as presently conducted or proposed to be conducted. The Company and each subsidiary of the Company is in good standing as a foreign corporation in each jurisdiction in which the properties owned, leased or operated, or the business conducted, by it requires such qualification except for any such failure, which when taken together with all other failures, is not likely to have a material adverse effect on the business of the Company taken as a whole.           (b) Except as set forth in Schedule 2.1(b) attached hereto, the Company does not own, directly or indirectly, any capital stock, equity or interest in any corporation, firm, partnership, joint venture or other entity.           (c) The Company has all requisite corporate power and authority to execute and deliver this Agreement, and to consummate the transactions contemplated hereby and thereby. The Company has taken all corporate action necessary for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and this Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms, except as may be affected by bankruptcy, insolvency, moratoria or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.      2.2 No Conflicts or Defaults. The execution and delivery of this Agreement by the Company and the consummation of the transactions contemplated hereby do not and shall not (a) contravene the Articles of Incorporation or Bylaws of the Company or (b) with or without the giving of notice or the passage of time (i) violate, conflict with, or result in a breach of, or a default or loss of rights under, any material covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which the Company is a party or by which the Company is bound, or any judgment, order or decree, or any law, rule or regulation to which the Company is subject, (ii) result in the creation of, or give any party the right to create, any lien, charge, encumbrance or any other right or adverse interest (“Liens”) upon any of the assets of the Company, (iii) terminate or give any party the right to terminate, amend, abandon or refuse to perform, any material agreement, arrangement or commitment to which the Company is a party or by which the Company’s assets are bound, or (iv) accelerate or modify, or give any party the right to accelerate or modify, the time within which, or the terms under which, the Company is to 2 --------------------------------------------------------------------------------   perform any duties or obligations or receive any rights or benefits under any material agreement, arrangement or commitment to which it is a party.      2.3 Capitalization. Except as set forth on Schedule 2.3, the authorized capital stock of the Company immediately prior to giving effect to the transactions contemplated hereby consists of 20,000,000 shares of Class A Common Stock par value $.0001 per share, of which 1,048,794 shares are issued and outstanding; 1,700,000 shares of Class B Common Stock par value $.0001 per share, of which 1,700,000 shares are issued and outstanding; and 5,000,000 shares of Preferred Stock, none of which are outstanding. All of the outstanding shares of capital stock are, and the Company Shares when issued in accordance with the terms hereof will be, duly authorized, validly issued, fully paid and non-assessable, and have not been or, with respect to the Company Shares, will not be, issued in violation of any preemptive right of stockholders. The Company Shares are not subject to any preemptive or subscription right, any voting trust agreement or other contract, agreement, arrangement, option, warrant, call, commitment or other right of any character obligating or entitling the Company to issue, sell, redeem or repurchase any of its securities. There are outstanding options to purchase an aggregate of 300,000 shares of Class A Common Stock. The options are exercisable at prices ranging from $1.50 per share to $1.65 per share. In addition, there are 850,000 Common Stock Purchase Warrants outstanding. The Company has not granted registration rights to any person.      2.4 Financial Statements. Schedule 2.4 contains copies of the consolidated balance sheet of the Company at December 31, 2000 and the related statements of operations, stockholders’ equity and cash flows for the fiscal year then ended, including the notes thereto, as audited by Spear, Safer, Harmon & Co., certified public accountants and the unaudited balance sheet of the Company at March 31, 2001, and the related consolidated statements of operations, stockholders’ equity and cash flows for the three month period then ended prepared by the Company’s management (collectively, the “Company Financial Statements”). The Company Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles applied on a basis consistent throughout all periods presented, subject to, in the case of the interim statements, audit adjustments, which are not expected to be material. Such statements present fairly the financial position of the Company as of the dates and for the periods indicated. The books of account and other financial records of the Company have been maintained in accordance with good business practices.      2.5 Further Financial Matters. The Company does not have any liabilities or obligations, whether secured or unsecured, accrued, determined, absolute or contingent, asserted or unasserted or otherwise, which are required to be reflected or reserved in a balance sheet or the notes thereto under generally accepted accounting principles, but which are not reflected in the Company Financial Statements.      2.6 Taxes. The Company and each subsidiary of the Company has filed all United States federal, state, county, local and foreign national, provincial and local returns and reports which were required to be filed on or prior to the date hereof in respect of all income, withholding, franchise, payroll, excise, property, sales, use, value added or other taxes or levies, imposts, duties, license and registration fees, charges, assessments or withholdings of any nature whatsoever (together, “Taxes”), and has paid all Taxes (and any related penalties, fines and interest) which have become due pursuant to such returns or reports or pursuant to any 3 --------------------------------------------------------------------------------   assessment which has become payable, or, to the extent its liability for any Taxes (and any related penalties, fines and interest) has not been fully discharged, the same have been properly reflected as a liability on the books and records of the Company or such subsidiary and adequate reserves therefore have been established. All such returns and reports filed on or prior to the date hereof have been properly prepared and are true, correct (and to the extent such returns reflect judgments made by the Company, as the case may be, such judgments were reasonable under the circumstances) and complete in all material respects. No tax return or tax return liability of the Company or such subsidiary has been audited or, presently under audit. The Company has not given or been requested to give waivers of any statute of limitations relating to the payment of any Taxes (or any related penalties, fines and interest). There are no claims pending or, to the knowledge of the Company, threatened, against the Company or such subsidiary for past due Taxes. All payments for withholding taxes, unemployment insurance and other amounts required to be paid for periods prior to the date hereof to any governmental authority in respect of employment obligations of the Company or such subsidiary, including, without limitation, amounts payable pursuant to the Federal Insurance Contributions Act, have been paid or shall be paid prior to the Closing and have been duly provided for on the books and records of the Company and in the Company Financial Statements.      2.7 Indebtedness; Contracts; No Defaults.           (a) Schedule 2.7 sets forth a true, complete and correct list of all material instruments, agreements, indentures, mortgages, guarantees, notes, commitments, accommodations, letters of credit or other arrangements or understandings, whether written or oral, to which the Company or any subsidiary of the Company is a party (collectively, the “Company Agreements”).           (b) Except as disclosed in Schedule 2.7, neither the Company or any subsidiary of the Company nor, to the Company’s knowledge, any other person or entity is in breach in any material respect of, or in default in any material respect under, any material contract, agreement, arrangement, commitment or plan to which the Company or any subsidiary of the Company is a party, and no event or action has occurred, is pending or is threatened, which, after the giving of notice, passage of time or otherwise, would constitute or result in such a material breach or material default by the Company or any subsidiary of the Company or, to the knowledge of the Company, any other person or entity. Neither the Company nor any subsidiary of the Company has received any notice of default under any contract, agreement, arrangement, commitment or plan to which it is a party, which default has not been cured to the satisfaction of, or duly waived by, the party claiming such default on or before the date hereof.      2.8 Personal Property. The Company has good and marketable title to all of its tangible personal property and assets, including, without limitation, all of the assets reflected in the Company Financial Statements that have not been disposed of in the ordinary course of business and such property is free and clear of all Liens or mortgages.      2.9 Real Property. Schedule 2.9 sets forth a true and complete list of all real property owned by, or leased or subleased by or to, the Company or any subsidiary of the Company. 4 --------------------------------------------------------------------------------        2.10 Compliance with Law. Neither the Company nor any subsidiary of the Company is conducting its business or affairs in violation of any applicable foreign, federal, state or local law, ordinance, rule, regulation, court or administrative order, decree or process, or any requirement of insurance carriers. The Company has not received any notice of violation or claimed violation of any such law, ordinance, rule, regulation, order, decree, process or requirement.      2.11 No Adverse Changes. There have not been (a) any material adverse change in the business, prospects, the financial or other condition, or the respective assets or liabilities of the Company or any subsidiary of the Company as reflected in the Company Financial Statements, (b) any material loss sustained by the Company or any subsidiary of the Company, including, but not limited to any loss on account of theft, fire, flood, explosion, accident or other calamity, whether or not insured, which has materially and adversely interfered, or may materially and adversely interfere, with the operation of the Company’s or such subsidiary’s business, or (c) any event, condition or state of facts, including, without limitation, the enactment, adoption or promulgation of any law, rule or regulation, the occurrence of which materially and adversely does or would affect the results of operations or the business or financial condition of the Company or any subsidiary of the Company. Notwithstanding the foregoing, the Company’s business operations are currently inactive.      2.12 Litigation. Except as set forth on Schedule 2.12, there is no claim, dispute, action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened, against or affecting the business of the Company or any subsidiary of the Company, or challenging the validity or propriety of the transactions contemplated by this Agreement, at law or in equity or admiralty or before any federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality, nor to the knowledge of the Company, has any such claim, dispute, action, suit, proceeding or investigation been pending or threatened, during the 12-month period preceding the date hereof; (b) there is no outstanding judgment, order, writ, ruling, injunction, stipulation or decree of any court, arbitrator or federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality, against or materially affecting the business of the Company or any subsidiary of the Company; and (c) the Company has not received any written or verbal inquiry from any federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality concerning the possible violation of any law, rule or regulation or any matter disclosed in respect of its business.      2.13 Insurance. Except as set forth on Schedule 2.13 attached hereto, the Company does not currently maintain any form of insurance.      2.14 Articles of Incorporation and By-laws; Minute Books. The copies of the Articles of Incorporation and Bylaws (or similar governing documents) of the Company and all amendments to each are true, correct and complete. The minute books of the Company and each subsidiary of the Company contain true and complete records of all meetings and consents in lieu of meetings of their respective Board of Directors (and any committees thereof), or similar governing bodies, since the time of their respective organization.      2.15 Employee Benefit Plans. The Company does not maintain, nor has the Company maintained in the past, any employee benefit plans (“as defined in Section 3(3) of the Employee 5 --------------------------------------------------------------------------------   Retirement Income Security Act of 1974, as amended (“ERISA”)), or any plans, programs, policies, practices, arrangements or contracts (whether group or individual) providing for payments, benefits or reimbursements to employees of the Company, former employees, their beneficiaries and dependents under which such employees, former employees, their beneficiaries and dependents are covered through an employment relationship with the Company, any entity required to be aggregated in a controlled group or affiliated service group with the Company for purposes of ERISA or the Internal Revenue Code of 1986 (the “Code”) (including, without limitation, under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA, at any relevant time (“Benefit Plans”).      2.16 Patents; Trademarks and Intellectual Property Rights. The Company does not own or possesses any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, Internet web site(s) or proprietary rights of any nature.      2.17 Affiliate Transactions. Except as disclosed in Schedule 2.17, neither the Company nor any officer, director or employee of the Company (or any of the relatives or Affiliates of any of the aforementioned Persons) is a party to any agreement, contract, commitment or transaction with the Company or affecting the business of the Company, or has any interest in any property, whether real, personal or mixed, or tangible or intangible, used in or necessary to the Company which will subject the Sellers to any liability or obligation from and after the Closing Date.      2.18 Trading. The Company’s Common Stock is currently listed for trading on the American Stock Exchange (“AMEX”), and the Company has received notice that its Common Stock is subject to being delisted therefrom. The Company is deficient in several listing requirements.      2.19 Compliance. The Company and the Shareholders have complied in all material respects with all applicable foreign, federal and state laws, rules and regulations, including, without limitation, the requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act of 1933, as amended, (the “Securities Act”) and is current in its filings.      2.20 Filings. None of the filings made by the Company under the Securities Act or the Exchange act make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. ARTICLE III REPRESENTATIONS AND WARRANTIES OF NEW DRAGON      New Dragon represents and warrants to the Company that now and/or as of the Closing:      3.1 Due Organization and Qualification; Subsidiaries; Due Authorization.           (a) Each Subsidiary is an entity duly organized, validly existing and in good standing under the laws of the British Virgin Islands, with full power and authority to own, lease 6 --------------------------------------------------------------------------------   and operate its business and properties and to carry on its business in the places and in the manner as presently conducted or proposed to be conducted.           (b) The Subsidiaries do not own, directly or indirectly, any capital stock, equity or interest in any corporation, firm, partnership, joint venture or other entity, except as set forth on Schedule 3.1. Except as set forth on Schedule 3.1, each entity listed on Schedule 3.1 is wholly owned by the applicable Subsidiary. All the outstanding shares of capital stock of each Subsidiary listed on Schedule 3.1 are owned free and clear of all liens. There is no contract, agreement, arrangement, option, warrant, call, commitment or other right of any character obligating or entitling any such Subsidiary to issue, sell, redeem or repurchase any of its securities, and there is no outstanding security of any kind convertible into or exchangeable for securities of any such entity.           (c) New Dragon has requisite power and authority to execute and deliver this Agreement, and to consummate the transactions contemplated hereby and thereby. New Dragon has taken all action necessary for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and this Agreement constitutes the valid and binding obligation of New Dragon, enforceable against New Dragon in accordance with its terms, except as may be affected by bankruptcy, insolvency, moratoria or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.      3.2 No Conflicts or Defaults. The execution and delivery of this Agreement by New Dragon and the consummation of the transactions contemplated hereby do not and shall not (a) contravene the organizational documents of New Dragon or any Subsidiary, or (b) with or without the giving of notice or the passage of time, (i) violate, conflict with, or result in a breach of, or a default or loss of rights under, any material covenant, agreement, mortgage, indenture, lease, instrument, permit or license to which New Dragon or such Subsidiary is a party or by which New Dragon or such Subsidiary or any of their respective assets are bound, or any judgment, order or decree, or any law, rule or regulation to which New Dragon, such Subsidiary or any of their respective assets are subject, (ii) result in the creation of, or give any party the right to create, any Lien upon any of the assets of any Subsidiary, or (iii) terminate or give any party the right to terminate, amend, abandon or refuse to perform, any material agreement, arrangement or commitment to which any Subsidiary is a party or by which any Subsidiary or any of its assets are bound, or (iv) accelerate or modify, or give any party the right to accelerate or modify, the time within which, or the terms under which any Subsidiary is to perform any duties or obligations or receive any rights or benefits under any material agreement, arrangement or commitment to which it is a party.      3.3 Capitalization. Set forth on Schedule 3.3 is a list of all Equity Interests in the Subsidiaries, setting forth the names, addresses and number of shares owned. All of the Equity Interests in such Subsidiaries are, and when transferred in accordance with the terms hereof, will be, duly authorized, validly issued, fully paid and nonassessable, and have not been or will not be transferred in violation of any rights of third parties. The shares are not subject to any preemptive or subscription right, any voting trust agreement or other contract, agreement, arrangement, option, warrant, call, commitment or other right of any character obligating or 7 --------------------------------------------------------------------------------   entitling any Subsidiary to issue, sell, redeem or repurchase any of its securities, and there is no outstanding security of any kind convertible into or exchangeable for shares.      3.4 Financial Statements. Schedule 3.4 contains copies of the draft audited combined balance sheet of New Dragon relating solely to the Subsidiaries as at December 25, 2000, and the related combined Statement of Operations, Stockholders’ Equity and Cash Flows for the period then ended, including the notes thereto, (the “New Dragon Financial Statements”). The New Dragon Financial Statements, together with the notes thereto, have been prepared in accordance with generally accepted accounting principles all subject to audit adjustments, which are not expected to be material. The New Dragon Financial Statements present fairly the consolidated financial position of the Subsidiaries as of the date and for the period indicated. The books of account and other financial records of New Dragon as they pertain to the Subsidiaries have been maintained in accordance with good business practices. On or prior to the Closing, New Dragon will deliver to the Company audited New Dragon Financial Statements which will substantially conform to the draft financial statements.      3.5 Further Financial Matters. Except as set forth on Schedule 3.5, the Subsidiaries have no material liabilities or obligations, whether secured or unsecured, accrued, determined, absolute or contingent, asserted or unasserted or otherwise, which are required to be reflected or reserved in a balance sheet or the notes thereto under generally accepted accounting principles, but which are not reflected in the New Dragon Financial Statements.      3.6 Taxes. Except as indicated on Schedule 3.6, the Subsidiaries have complied with all relevant legal requirements relating to registration or notification for taxation purposes. All tax returns and reports filed on or prior to the date hereof have been properly prepared and are true, correct (and to the extent such returns reflect judgments made by the Subsidiaries, such judgments were reasonable under the circumstances) and complete in all material respects. Except as indicated on Schedule 3.6, no extension for the filing of any such return or report is currently in effect. Except as indicated on Schedule 3.6, no tax return or tax return liability of the Subsidiaries has been audited or, presently under audit. All taxes which have been asserted to be payable as a result of any audits have been paid or have been provided for in the New Dragon Financial Statements. Except as indicated on Schedule 3.6, the Subsidiaries have not given or been requested to give waivers of any statute of limitations relating to the payment of any Taxes (or any related penalties, fines and interest). Except as indicated on Schedule 3.6, all payments for withholding taxes, unemployment insurance and other amounts required to be paid for periods prior to the date hereof to any governmental authority in respect of employment obligations of the Subsidiaries have been paid or shall be paid prior to the Closing and have been duly provided for on the books and records of the Subsidiaries and in the New Dragon Financial Statements.      3.7 Indebtedness; Contracts; No Defaults.           (a) Schedule 3.7 sets forth a true, complete and correct list of all material instruments, agreements, indentures, mortgages, guarantees, notes, commitments, accommodations, letters of credit or other arrangements or understandings, whether written or oral, to which the Subsidiaries are a party (collectively, the “New Dragon Operating Agreements”). An agreement shall not be considered material for the purposes of this 8 --------------------------------------------------------------------------------   Section 3.7(a) if it provides for expenditures or receipts of less than US $100,000 and has been entered into by any Subsidiary in the ordinary course of business. The New Dragon Operating Agreements constitute all of the contracts, agreements, understandings and arrangements required for the operation of the business of the Subsidiaries or which have a material effect thereon. Copies of all such material written New Dragon Operating Agreements have previously been delivered or otherwise made available to the Company and such copies are true, complete and correct as of the date hereof.           (b) Except as disclosed on Schedule 3.7, each Subsidiary, or to New Dragon’s knowledge, any other person or entity, is not in breach in any material respect of, or in default in any material respect under, any material contract, agreement, arrangement, commitment or plan to which any Subsidiary is a party, and no event or action has occurred, is pending or is threatened, which, after the giving of notice, passage of time or otherwise, would constitute or result in such a material breach or material default by such Subsidiary to the knowledge of any other person or entity. No Subsidiary has received any notice of default under any contract, agreement, arrangement, commitment or plan to which it is a party, which default has not been cured to the satisfaction of, or duly waived by, the party claiming such default on or before the date hereof.      3.8 Personal Property. Except as set forth on Schedule 3.8, the Subsidiaries have good and marketable title to all of its tangible personal property and assets, including, without limitation, all of the assets reflected in the New Dragon Financial Statements that have not been disposed of in the ordinary course of business since December 25, 2000, free and clear of all Liens or mortgages, except for any Lien for current taxes not yet due and payable and such restrictions, if any, on the disposition of securities as may be imposed by federal or applicable state securities laws.      3.9 Real Property.           (a) Schedule 3.9 sets forth a true and complete list of all real property owned by, or leased or subleased by or to, the Subsidiaries.           (b) Except as set forth on Schedule 3.9, each lease to which the Subsidiary is a party is valid, binding and in full force and effect with respect to such Subsidiary and, to the knowledge of New Dragon, all other parties thereto; no notice of default or termination under any such lease is outstanding.      3.10 Compliance with Law. Except as set forth on Schedule 3.10, each Subsidiary is conducting its respective business or affairs in material compliance with applicable law, ordinance, rule, regulation, court or administrative order, decree or process, or any requirement of insurance carriers. No Subsidiary has received any notice of violation or claimed violation of any such law, ordinance, rule, regulation, order, decree, process or requirement.      3.11 Permits and Licenses. Except as set forth on Schedule 3.11, each Subsidiary has all certificates of occupancy, rights, permits, certificates, licenses, franchises, approvals and other authorizations as are reasonably necessary to conduct its respective business and to own, lease, use, operate and occupy its assets, at the places and in the manner now conducted and 9 --------------------------------------------------------------------------------   operated, except those the absence of which would not materially adversely affect its respective business. Except as set forth on Schedule 3.11, as of the date hereof, the Subsidiaries have not received any written or oral notice or claim pertaining to the failure to obtain any material permit, certificate, license, approval or other authorization required by any agency or other regulatory body, the failure of which to obtain would materially and adversely affect its business.      3.12 No Adverse Changes. Except as set forth on Schedule 3.12, since December 25, 2000, there has not been (a) any material adverse change in the business, prospects, the financial or other condition, or the respective assets or liabilities of the Subsidiaries as reflected in the New Dragon Financial Statements, (b) any material loss sustained by any Subsidiary, including, but not limited to any loss on account of theft, fire, flood, explosion, accident or other calamity, whether or not insured, which has materially and adversely interfered, or may materially and adversely interfere, with the operation of the Subsidiaries’ business, or (c) to the best knowledge of New Dragon, any event, condition or state of facts, including, without limitation, the enactment, adoption or promulgation of any law, rule or regulation, the occurrence of which materially and adversely does or would affect the results of operations or the business or financial condition of the Subsidiaries.      3.13 Litigation. (a) Except as set forth on Schedule 3.13, there is no claim, dispute, action, suit, proceeding or investigation pending or, to the knowledge of New Dragon threatened, against or affecting the business of any Subsidiary, or challenging the validity or propriety of the transactions contemplated by this Agreement, at law or in equity or admiralty or before any authority, board, agency, commission or instrumentality, nor to the knowledge of New Dragon, has any such claim, dispute, action, suit, proceeding or investigation been pending or threatened, during the 12-month period preceding the date hereof; (b) there is no outstanding judgment, order, writ, ruling, injunction, stipulation or decree of any court, arbitrator or federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality, against or materially affecting the business of any Subsidiary; and (c) no Subsidiary has received any written or verbal inquiry from any federal, state, local, foreign or other governmental authority, board, agency, commission or instrumentality concerning the possible violation of any law, rule or regulation or any matter disclosed in respect of its business.      3.14 Insurance. The Subsidiaries maintain insurance against all risks customarily insured against by companies in its industry. All such policies are in full force and effect, and no Subsidiary has received any notice from any insurance company suspending, revoking, modifying or canceling (or threatening such action) any insurance policy issued to such Subsidiary.      3.15 Articles of Association; Minute Books. The copies of the Articles of Association of the Subsidiaries, and all amendments to each are true, correct and complete. The minute books of the Subsidiaries contain true and complete records of all meetings and consents in lieu of meetings of their Board of Directors (and any committees thereof), or similar governing bodies, since the time of their respective organization. The stock records of the Subsidiaries are true, correct and complete.      3.16 Employee Benefit Plans. Except as set forth on Schedule 3.17, the Subsidiaries do not have in existence any share incentive, share option scheme or profit sharing bonus or 10 --------------------------------------------------------------------------------   other such incentive scheme for any of its directors or employees. Except as set forth in Item 3.17 or required under the applicable laws, there are no arrangements, schemes, customs or practices (whether legally enforceable or not) in operation for the payment of or contributions towards any provident fund, pensions, allowances, lump sums or other like benefits on retirement or on death or during periods of sickness or disablement for the benefit of any director or former director or employee or former employee or for the benefit of the dependents of any such persons nor has any proposal been announced to establish any such agreement or agreements.      3.17 Patents; Trademarks and Intellectual Property Rights. Each Subsidiary owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, internet web site(s) proprietary rights and processes necessary for its business as now conducted without any conflict with or infringement of the rights of others. Except as set forth on Schedule 3.18, there are no outstanding options, licenses or agreements of any kind relating to the foregoing, and no Subsidiary is bound by, or a party to, any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other person or entity.      3.18 Brokers. Except as set forth on Schedule 3.18, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried without the intervention of any Person in such a manner as to give rise to any valid claim by any Person against any Seller for a finder’s fee, brokerage commission or similar payment.      3.19 Purchase for Investment.           (a) New Dragon is acquiring the Company Shares for investment for New Dragon’s own account and not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and New Dragon has no present intention of selling, granting any participation in, or otherwise distributing the same. New Dragon further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Company Shares.           (b) New Dragon understands that the Company Shares are not registered under the Securities Act on the ground that the sale and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to Section 4(2) thereof, and that the Company’s reliance on such exemption is predicated on New Dragon’s representations set forth herein. New Dragon is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D under the Securities Act.      3.20 Investment Experience. New Dragon acknowledges that New Dragon can bear the economic risk of its investment, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Company Shares.      3.21 Information. New Dragon has carefully reviewed such information as New Dragon deemed necessary to evaluate an investment in the Company Shares. To the full 11 --------------------------------------------------------------------------------   satisfaction of New Dragon, it has been furnished all materials that it has requested relating to the Company and the issuance of the Company Shares hereunder, and New Dragon has been afforded the opportunity to ask questions of representatives of the Company to obtain any information necessary to verify the accuracy of any representations or information made or given to New Dragon. Notwithstanding the foregoing, nothing herein shall derogate from or otherwise modify the representations and warranties of the Company set forth in this Agreement, on which each of New Dragon has relied in making an exchange of the Equity Interests of the Company Shares.      3.22 Restricted Securities. New Dragon understands that the Company Shares may not be sold, transferred, or otherwise disposed of without registration under the Act or an exemption there from, and that in the absence of an effective registration statement covering the Company Shares or any available exemption from registration under the Securities Act, the Company Shares must be held indefinitely. New Dragon is aware that the Company Shares may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that Rule are met. Among the conditions for use of Rule 144 may be the availability of current information to the public about the Company. ARTICLE IV INDEMNIFICATION      4.1 Indemnity of the Company and the Shareholders. The Company and the Shareholders agree to jointly and severally defend, indemnify and hold harmless New Dragon from and against, and to reimburse New Dragon with respect to, all liabilities, losses, costs and expenses, including, without limitation, reasonable attorneys’ fees and disbursements, asserted against or incurred by New Dragon by reason of, arising out of, or in connection with any material breach of any representation or warranty contained in this Agreement made by the Company or the Shareholders or in any document or certificate delivered by the Company or the Shareholders pursuant to the provisions of this Agreement or in connection with the transactions contemplated thereby.      4.2 Indemnity of the Company. New Dragon agrees to defend, indemnify and hold harmless the Company from and against, and to reimburse the Company with respect to, all liabilities, losses, costs and expenses, including, without limitation, reasonable attorneys’ fees and disbursements, asserted against or incurred by the Company by reason of, arising out of, or in connection with any material breach of any representation or warranty contained in this Agreement and made by New Dragon or in any document or certificate delivered by New Dragon pursuant to the provisions of this Agreement or in connection with the transactions contemplated thereby.      4.3 Indemnification Procedure. A party (an “Indemnified Party”) seeking indemnification shall give prompt notice to the other party (the “Indemnifying Party”) of any claim for indemnification arising under this Article 4. The Indemnifying Party shall have the right to assume and to control the defense of any such claim with counsel reasonably acceptable to such Indemnified Party, at the Indemnifying Party’s own cost and expense, including the cost and expense of reasonable attorneys’ fees and disbursements in connection with such defense, in 12 --------------------------------------------------------------------------------   which event the Indemnifying Party shall not be obligated to pay the fees and disbursements of separate counsel for such in such action. In the event, however, that such Indemnified Party’s legal counsel shall determine that defenses may be available to such Indemnified Party that are different from or in addition to those available to the Indemnifying Party, in that there could reasonably be expected to be a conflict of interest if such Indemnifying Party and the Indemnified Party have common counsel in any such proceeding, or if the Indemnified Party has not assumed the defense of the action or proceedings, then such Indemnifying Party may employ separate counsel to represent or defend such Indemnified Party, and the Indemnifying Party shall pay the reasonable fees and disbursements of counsel for such Indemnified Party. No settlement of any such claim or payment in connection with any such settlement shall be made without the prior consent of the Indemnifying Party which consent shall not be unreasonably withheld. ARTICLE V DELIVERIES      5.1 Items to be delivered to New Dragon prior to or at Closing by the Company.           (a) articles of incorporation and amendments thereto, bylaws and amendments thereto, certificate of good standing in the Company’s state of incorporation;           (b) all applicable schedules hereto;           (c) all minutes and resolutions of board of director and shareholder meetings in possession of the Company;           (d) shareholder list;           (e) all financial statements and tax returns in possession of the Company;           (f) resolution from the Company’s current directors appointing designees of New Dragon to the Company’s Board of Directors;           (g) letters of resignation from the Company’s current officers and directors to be effective upon Closing and after the appointments described in this section;           (h) instructions for the issuance of certificates representing 38,060,763 Company Shares issued in the denominations as set forth opposite the respective names as designated by New Dragon on or before the Closing, duly authorized, validly issued, fully paid for and non-assessable;           (i) copies of board, and if applicable, shareholder resolutions approving this transaction and authorizing the issuances of the shares hereto;           (j) any other document reasonably requested by New Dragon that it deems necessary for the consummation of this transaction.      5.2 Items to be delivered to the Company prior to or at Closing by New Dragon. 13 --------------------------------------------------------------------------------             (a) articles of association and amendments thereto and amendments thereto with respect to each Subsidiary;           (b) all applicable schedules hereto;           (c) all minutes and resolutions of board of director and shareholder meetings of each Subsidiary in possession of New Dragon;           (d) shareholder list;           (e) all financial statements and tax returns in possession of the Subsidiaries;           (f) resolution from New Dragon’s current directors appointing designees of New Dragon to the Company’s Board of Directors;           (g) copies of board, and if applicable, shareholder resolutions approving this transaction and authorizing the issuances of the shares hereto; and           (h) any other document reasonably requested by the Company that it deems necessary for the consummation of this transaction. ARTICLE VI CONDITIONS PRECEDENT      6.1 Conditions Precedent to Closing. The obligations of the parties under this Agreement shall be and are subject to fulfillment, prior to or at the Closing, of each of the following conditions:           (a) That each of the representations and warranties of the parties contained herein shall be true and correct at the time of the Closing Date as if such representations and warranties were made at such time.           (b) That the parties shall have performed or complied with all agreements, terms and conditions required by this Agreement to be performed or complied with by them prior to or at the time of the Closing.           (c) No material adverse change shall have occurred in the financial, business or trading conditions of the Company and the Subsidiaries, taken as a whole, as the case may be, from the date hereof up to and including the Closing Date.      6.2 Conditions to Obligations New Dragon. The obligations of New Dragon shall be subject to fulfillment prior to or at the Closing of each of the following conditions:           (a) The Shareholders shall have paid all of the costs and expenses of the Company associated with the transactions contemplated by this Agreement; 14 --------------------------------------------------------------------------------             (b) As of the Closing, the Company shall have transferred all of its assets and assigned all of its liabilities whatsoever, contingent or otherwise, to the effect that immediately prior to the Exchange, the Company will have no assets or liabilities. All such transfers and assignments shall be in form and substance reasonably satisfactory to New Dragon and its counsel.           (c) The Company shall have entered into a registration rights agreement with all the Sellers in the form attached as Exhibit 6.2(c) (the “Registration Rights Agreement”).           (d) The Company shall have delivered evidence reasonably satisfactory to New Dragon regarding the approval of the shareholders of the Company for this Agreement, the transfer of the Company’s assets referred to in Section 6.2(b) (the “Transferred Assets”) and the change of the Company’s name as may be designated by New Dragon after the date hereof (the “Name Change”).           (e) The Company and New Dragon shall have received notification from AMEX that the Company’s Common Stock shall be continued to be listed for trading on AMEX which condition has been waived by New Dragon.           (f) The Company and the Shareholders shall have entered into a Pledge Agreement respecting the Company’s and the Shareholders’ obligations pursuant to Section 4.1 hereof, in form and substance reasonably satisfactory to New Dragon.           (g) The Company shall have increased the authorized shares of Class A Common Stock to 100,000,000 (the “Share Increase”).           (h) All of the shareholders holding shares of Class B Common Stock shall have converted such shares to shares of Class A Common Stock on a one-for-one basis so that, immediately prior to the Closing, the Company shall have no more than 2,852,000 (excluding certain shares and options described in 2.3) shares of Common Stock outstanding on a fully diluted basis. ARTICLE VII COVENANTS      7.1 Shareholders Vote. As soon as practicable after the date hereof, the Company shall (a) cause the preparation and filing with the Securities and Exchange Commission a proxy statement with respect to this Agreement, the transfer of the Transferred Assets, the Share Increase and the Name Change and (b) call a special meeting of the Shareholders (the “Special Meeting”) to approve such matters.      7.2 AMEX Application. New Dragon shall provide such information as may be reasonably requested by AMEX relating to the continued listing of the Company’s Common Stock on AMEX. 15 --------------------------------------------------------------------------------        7.3 Shareholders Vote. Each of the Shareholders agrees to vote all shares beneficially owned by such Shareholder at the Special Meeting in favor of the matters referred to in Section 7.1. ARTICLE VIII NO PUBLIC DISCLOSURE      8.1 No Public Disclosure. Without the prior written consent of the others, none of the Company or New Dragon will, and will each cause their respective representatives not to, make any release to the press or other public disclosure with respect to either the fact that discussions or negotiations have taken place concerning the transactions contemplated by this Agreement, the existence or contents of this Agreement or any prior correspondence relating to this transactions contemplated by this Agreement, except for such public disclosure as may be necessary, in the written opinion of outside counsel (reasonably satisfactory to the other parties) for the party proposing to make the disclosure not to be in violation of or default under any applicable law, regulation or governmental order. If either party proposes to make any disclosure based upon such an opinion, that party will deliver a copy of such opinion to the other party, together with the text of the proposed disclosure, as far in advance of its disclosure as is practicable, and will in good faith consult with and consider the suggestions of the other party concerning the nature and scope of the information it proposes to disclose. ARTICLE IX CONFIDENTIAL INFORMATION      9.1 Confidential Information. In connection with the negotiation of this Agreement and the consummation of the transactions contemplated hereby, each party hereto will have access to data and confidential information relating to the other party. Each party hereto shall treat such data and information as confidential, preserve the confidentiality thereof and not duplicate or use such data or information, except in connection with the transactions contemplated hereby, and in the event of the termination of this Agreement for any reason whatsoever, each party hereto shall return to the other all documents, work papers and other material (including all copies thereof) obtained in connection with the transactions contemplated hereby and will use reasonable efforts, including instructing its employees who have had access to such information, to keep confidential and not to use any such data or information; provided, however, that such obligations shall not apply to any data and information (i) which at the time of disclosure, is available publicly, (ii) which, after disclosure, becomes available publicly through no fault of the receiving party, (iii) which the receiving party knew or to which the receiving party had access prior to disclosure by the disclosing party, (iv) which is required by law, regulation or exchange rule, or in connection with legal process, to be disclosed, (v) which is disclosed by a receiving party to its attorneys or accountants, who shall respect the above restrictions, or (vi) which is obtained in connection with any Tax matters and is disclosed in connection with the filing of Tax returns or claims for refund or in conducting an audit or other proceeding. 16 --------------------------------------------------------------------------------   ARTICLE X TERMINATION      10.1 Termination. This Agreement may be terminated at any time before or, at Closing, by:           (a) The mutual agreement of the constituent parties;           (b) Any party if:                (i) Any provision of this Agreement applicable to a party shall be materially untrue or fail to be accomplished;                (ii) Any legal proceeding shall have been instituted or shall be imminently threatening to delay, restrain or prevent the consummation of this Agreement; or                (iii) If by November 9, 2001, the conditions precedents to Closing are not satisfied or waived. ARTICLE XI MISCELLANEOUS      11.1 Survival of Representations, Warranties and Agreements. All representations and warranties and statements made by a party to in this Agreement or in any document or certificate delivered pursuant hereto shall survive the Closing Date for so long as the applicable statute of limitations shall remain open. Each of the parties hereto is executing and carrying out the provisions of this agreement in reliance upon the representations, warranties and covenants and agreements contained in this agreement or at the closing of the transactions herein provided for and not upon any investigation which it might have made or any representations, warranty, agreement, promise or information, written or oral, made by the other party or any other person other than as specifically set forth herein.      11.2 Access to Books and Records. During the course of this transaction through Closing, each party agrees to make available for inspection all corporate books, records and assets, and otherwise afford to each other and their respective representatives, reasonable access to all documentation and other information concerning the business, financial and legal conditions of each other for the purpose of conducting a due diligence investigation thereof. Such due diligence investigation shall be for the purpose of satisfying each party as to the business, financial and legal condition of each other for the purpose of determining the desirability of consummating the proposed transaction. The Parties further agree to keep confidential and not use for their own benefit, except in accordance with this Agreement any information or documentation obtained in connection with any such investigation.      11.3 Further Assurances. If, at any time after the Closing, the parties shall consider or be advised that any further deeds, assignments or assurances in law or that any other things are necessary, desirable or proper to complete the merger in accordance with the terms of this 17 --------------------------------------------------------------------------------   agreement or to vest, perfect or confirm, of record or otherwise, the title to any property or rights of the parties hereto, the Parties agree that their proper officers and directors shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights and otherwise to carry out the purpose of this Agreement, and that the proper officers and directors the parties are fully authorized to take any and all such action.      11.4 Notice. All communications, notices, requests, consents or demands given or required under this Agreement shall be in writing and shall be deemed to have been duly given when delivered to, or received by prepaid registered or certified mail or recognized overnight courier addressed to, or upon receipt of a facsimile sent to, the party for whom intended, as follows, or to such other address or facsimile number as may be furnished by such party by notice in the manner provided herein:   If to the Company:   BioAqua Systems Inc. 350 E. Las Olas Blvd., Suite 1700 Ft. Lauderdale, FL 33301 Attention: President Tel: 954-763-1200 Fax: 954-766-7800   If to the Shareholders:   c/o Robert Heiss 99 University Place, 8th Floor New York, NY 10003   If to New Dragon:   Suite 1304, 13th Floor Wing On Centre Connaught Road Central Hong Kong Tel: 852-2815-9892 Fax: 852-2815-9839 Attention: Willie Lai Email: [email protected]   Or such other as New Dragon may notify to the other parties to the Agreement by not less than five (5) Business Day’s notice.      11.5 Entire Agreement. This Agreement, the Schedules and any instruments and agreements to be executed pursuant to this Agreement, sets forth the entire understanding of the parties hereto with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter and may not be waived or modified, in whole or in part, except by a writing signed by each of the parties hereto. No 18 --------------------------------------------------------------------------------   waiver of any provision of this Agreement in any instance shall be deemed to be a waiver of the same or any other provision in any other instance. Failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of its rights under such provision.      11.6 Successors and Assigns. This Agreement shall be binding upon, enforceable against and inure to the benefit of, the parties hereto and their respective heirs, administrators, executors, personal representatives, successors and assigns, and nothing herein is intended to confer any right, remedy or benefit upon any other person. This Agreement may not be assigned by any party hereto except with the prior written consent of the other parties, which consent shall not be unreasonably withheld.      11.7 Governing Law. This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of California are applicable to agreements made and fully to be performed in such state, without giving effect to conflicts of law principles.      11.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.      11.9 Construction. Headings contained in this Agreement are for convenience only and shall not be used in the interpretation of this Agreement. References herein to Articles, Sections and Exhibits are to the articles, sections and exhibits, respectively, of this Agreement. The Disclosure Schedules are hereby incorporated herein by reference and made a part of this Agreement. As used herein, the singular includes the plural, and the masculine, feminine and neuter gender each includes the others where the context so indicates.      11.10 Severability. If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Agreement shall be interpreted and enforceable as if such provision were severed or limited, but only to the extent necessary to render such provision and this Agreement enforceable.      11.11 Costs and Expenses. Except as set forth in Section 6.2(a), each party hereto shall pay its own costs and expenses hereunder, provided that if the transactions contemplated herein are not completed because (i) of the failure of the Company or the Shareholders to satisfy any condition precedent in favor of the Sellers, then the Company and the Shareholders shall forthwith indemnify and reimburse the Sellers for their costs and expenses, or (ii) of the failure of the Sellers to satisfy any condition precedent in favor of the Company, then the Sellers shall forthwith indemnify and reimburse the Company for its costs and expenses.      11.12 Equitable Relief. The parties hereto agree that money damages would not be a sufficient remedy for any breach or threatened breach of any provision herein and that, in addition to all other remedies which any party may have, each party will be entitled to specific performance and injunctive or other equitable relief as a remedy therefor. 19 --------------------------------------------------------------------------------        IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first set forth above. BIO AQUA SYSTEMS INC.         By:         -------------------------------------------------------------------------------- Max Rutman   NEW DRAGON ASIA FOOD LIMITED         By:         --------------------------------------------------------------------------------   Shareholders:     -------------------------------------------------------------------------------- Max Rutman     FLAGSHIP IMPORT EXPORT LLC         By:         --------------------------------------------------------------------------------   20 --------------------------------------------------------------------------------   EXHIBIT           Name   Shares to be Issued --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- New Dragon Asia Food Limited     34,999,469   Dynasty Gold Limited     1,627,882   Orient Financial Services Limited     1,220,912   David Mayer     100,000   Atlas Pearlman, P.A.     15,000         --------------------------------------------------------------------------------   Total     37,963,263   21

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.29 AMENDMENT TO STOCK PURCHASE AGREEMENT     This Agreement is entered into among Silicon Graphics, Inc., a Delaware corporation ("SGI"), NKK U.S.A. Corporation, a Delaware corporation ("NKK USA"), and its sole shareholder, NKK Corporation, a Japanese corporation ("NKK"). RECITALS     WHEREAS, NKK USA is the sole holder of SGI's Series A Preferred Stock, $0.001 par value, of which 17,500 shares are issued and outstanding; and     WHEREAS, each share of the Series A Preferred Stock is entitled to be converted into common stock or redeemed at certain times pursuant to the procedures set forth in Subsections VI, VII and VIII of Article FOURTEENTH of SGI's Restated Certificate of Incorporation (the "Certificate of Designation");     WHEREAS, the parties desire to provide contractually for a single additional opportunity for NKK USA to elect to convert its shares of Series A Preferred by following the procedures otherwise set forth in the Certificate of Designation; AGREEMENT     NOW THEREFORE, in consideration of these premises and the mutual covenants set forth in this Agreement, SGI, NKK USA and NKK agree as follows:     1.  The parties will treat March 1, 2001 as though it were a "Measurement Date" as defined in Section VI(A) of the Certificate of Designation, and will provide such notices, effect such conversions and redemptions, and otherwise take such actions as would be required thereunder.     2.  All provisions of the Certificate of Designation, and all terms and conditions of the Stock Purchase Agreement dated March 2, 1990 among SGI, NKK and NKK USA, as amended by the Series A Preferred Stock Exchange Agreement among the parties dated as of August 14, 1992, shall remain in full force and effect.     3.  This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns.     4.  This Agreement may be executed in one or more counterparts, each of which will be an original and which together will constitute one instrument.     5.  This Agreement will be governed by the law of the State of Delaware.     IN WITNESS WHEREOF, this Agreement is entered into as of December 1, 2000. SILICON GRAPHICS, INC.   NKK CORPORATION By:   /s/ Jean-Samuel Furter --------------------------------------------------------------------------------   By:   /s/ Nobuyuki Naito -------------------------------------------------------------------------------- Name:   Jean-Samuel Furter   Name:   Nobuyuki Naito Title:   Vice President, Treasurer   Title:   General Manager, Information Processing Systems Department         NKK U.S.A. CORPORATION         By:   /s/ Mineo Shimura --------------------------------------------------------------------------------         Name:   Mineo Shimura         Title:   President -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.29 AMENDMENT TO STOCK PURCHASE AGREEMENT

  EXHIBIT 10.14 EXECUTION COPY AGREEMENT                 This Agreement is between AutoZone, Inc., a Nevada corporation ("AZO") and Timothy D. Vargo ("Vargo") made as of the 23rd day of May, 2001 (the "Effective Date").                 WHEREAS, due to illnesses in Vargo's family, Vargo has notified AZO that he will not be able to continue acting as President and Chief Operating Officer of AZO;                 WHEREAS, AZO desires Vargo to be available to it to continue to assist with its business;                 THEREFORE, Vargo and AZO for and in consideration of the promises, undertakings and benefits set out in this Agreement ("Agreement"), agree as follows:                 1.   EFFECTIVE DATE.  Vargo resigns as an officer and a director of AZO and each of AZO's subsidiaries as of the Effective Date but shall remain an employee of AZO or a subsidiary until May 25, 2004 ("Termination Date").  During the period from the Effective Date until the Termination Date, Vargo shall provide such services to AZO as are requested by the CEO of AZO.                 2.   TERMINATION OF EMPLOYMENT AGREEMENT. The parties agree that the Amended and Restated Employment and Non-Compete Agreement dated August 31, 1999 (the "Prior Agreement") between the parties shall be deemed to be amended and restated by this Agreement, and after the execution of this Agreement, neither party hereto shall have any rights under the Prior Agreement.                 3.   BENEFITS. In consideration for the services to be provided to AZO by Vargo under this Agreement, AZO agrees to confer or have a subsidiary confer, the following benefits in Vargo's favor:    A.          For the period beginning on the Effective Date and ending on August 25, 2001, Vargo shall continue to receive his current salary ($500,000 gross on an annual fiscal basis) to be paid at the same time as AZO's executive officers;   B.       Beginning August 26, 2001, until the Termination Date, Vargo shall receive an annualized gross salary of $102,068.80 to be paid in installments every two weeks at the same time as AZO's executive officers are paid (except for pay for the period ended August 31, 2002, which will be for one week, and then again every two weeks thereafter); C.        For the 2001 fiscal year, Vargo shall receive a bonus calculated in accordance with the AutoZone, Inc., Executive Incentive Compensation Plan, for the period beginning from the beginning of the 2001 fiscal year to the Effective Date, that shall be paid when AZO pays bonuses for fiscal year 2001 to its executive officers, and shall not be eligible for a bonus thereafter; and D. All other benefits received by full-time employees of AZO.                 The stock option agreements between Vargo and AZO shall continue to be governed by the terms and conditions contained in such agreements.  All vacation shall be deemed used at the time of the Termination Date.                 The parties understand that applicable local, state, and federal tax deductions and withholdings will be made from all of the appropriate payments and exercises of stock options.                 4.   NON-COMPETE.  Vargo further agrees that he will not, for the period beginning on the date of execution of this Agreement and ending on the Termination Date, be engaged in or concerned with, directly or indirectly, any business related to or involved in the wholesale or retail sale or distribution of auto parts and accessories, chemicals, or motor oil, operating in the automobile aftermarket in any state or geographical area in which AZO or a subsidiary operates now or shall operate during the term of the non- compete agreement (herein called "Competitor"), as an employee, consultant, beneficial or record owner (other than as an owner of less than 1% of an entity's issued and outstanding securities traded on a securities exchange registered as such with the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934), partner, joint venturer, officer or agent of the Competitor.                 The parties acknowledge and agree that the time, scope, geographic area and other provisions of this Non-Compete section have been specifically negotiated by sophisticated commercial parties and specifically hereby agree that such time, scope, geographic area and other provisions are reasonable under the circumstances.                 Further, Vargo agrees not to hire, for himself or any other entity, encourage anyone or entity to hire, or entice away from AZO any employee of AZO or a subsidiary of AZO, during the term of this non-compete agreement.                 In the event of breach by Vargo of any provision of this Paragraph 6 "NON-COMPETE", Vargo acknowledges that such breach will cause irreparable damage to AZO, the exact amount of which will be difficult or impossible to ascertain, and that remedies at law for any such breach will be inadequate. Accordingly, AZO shall be entitled, in addition to any other rights or remedies existing in its favor, to obtain, without the necessity for any bond or other security, specific performance and/or injunctive relief in order to enforce, or prevent breach of any such provision and AZO shall be entitled to the remedies set forth in the section entitled "Remedies".                 5.   CONFIDENTIALITY.  Unless otherwise required by law, Vargo shall hold in confidence any proprietary or confidential information obtained by him during his employment with AZO, which shall include, but not be limited to, information regarding AZO's present and future business plans, systems, operations and personnel matters.                 6.   COMPLETE AGREEMENT.  This Agreement contains the entire agreement between the parties with respect to the matters covered herein and is intended to integrate and merge all prior understandings, discussions and negotiations.  No other agreements, oral or written, relating to the subject matter contained herein shall be binding upon or enforceable against any of the parties.  This Agreement and the documents executed pursuant to it may be amended only in a writing signed by authorized representatives of the parties.  No provision of this Agreement or any document executed pursuant to it may be waived except in a writing signed by authorized representatives of the parties.  The sections of this Agreement taken as a whole are intended to represent a single agreement.                 This Agreement shall be governed and construed by the laws of the State of Tennessee, without regard to its choice of law rules.  The parties agree that the only proper venue for any dispute under this Agreement shall be Shelby County, Tennessee.                 7. TERMINATION WITH CAUSE.  AZO shall have the right to terminate this Agreement and Vargo's employment with AZO for Cause at any time.  Upon such termination for Cause, Vargo shall have no right to receive any compensation, salary, or bonus and shall immediately cease to receive any benefits (other than those as may be required pursuant to the AutoZone, Inc Associates' Pension Plan or by law) and any stock options shall be governed by the respective stock option agreements in effect between Vargo and AZO at that time.  "Cause" shall mean the willful engagement by Vargo in conduct which is demonstrably or materially injurious to AZO, monetarily or otherwise.  For this purpose, no act or failure to act by Vargo shall be considered "willful" unless done, or omitted to be done, by Vargo not in good faith and without reasonable belief that his action or omission was in the best interest of AZO.                 8.  SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND OBLIGATIONS.  The representations, warranties, and obligations of the parties pursuant to this Agreement shall survive the execution hereof and this Agreement shall continue to be binding upon and enforceable against each of the parties, their successors, heirs, executors, and assigns.  The rights and benefits of Vargo hereunder shall inure to the benefit of his heirs and estate and after Vargo's death, his estate shall have the right to receive the Benefits as are required by law, and to the extent allowed by their terms, shall have the rights set forth in the Stock Option Agreements. Notwithstanding, all payments provided for hereunder shall cease at the death of Vargo.                 9.  REMEDIES.  Vargo acknowledges and agrees that any remedy at law for a breach of any obligation herein may be inadequate and that AZO shall be entitled to any and all equitable relief, including, but not limited to, injunctive relief.  In the event Vargo breaches this Agreement in any way, any unpaid Benefits shall immediately terminate and Vargo shall forfeit any then unexercised option rights.                 In addition, the parties agree to execute on or after the date of the execution of this Agreement any and all reasonable additional documents as requested by the other or its counsel to effectuate the purposes hereof.                 IN WITNESS WHEREOF, the respective parties execute this Agreement. AUTOZONE, INC. By:  /s/ Steve Odland   /s/ Timothy D. Vargo Title: Chairman, President & CEO   Timothy D. Vargo 5-22-2001  Date  By:   /s/ Harry Goldsmith     Title: Senior Vice President, General Counsel & Secretary        

Exhibit 10.32   RETIREMENT AGREEMENT AND RELEASE   THIS RETIREMENT AGREEMENT AND RELEASE (“Agreement”) is made and entered into by and between Joseph R. Collins (“Collins”) and Pentair, Inc. (“Pentair”).   1.             Consideration.  In consideration for the mutual promises and the payments to Collins set forth herein, Collins acknowledges the full, complete, and final settlement of any and all claims, actions, causes of action or costs, including attorneys’ fees, against  Pentair and the members of the controlled group of companies which includes Pentair (collectively, the “Group”).   2.             Separation from Service.  Collins has retired as an employee and officer of Pentair and each other Group member, as listed on Schedule A, effective January 15, 2001 (the “Separation Date”).  Effective April 25, 2001, Collins shall retire as a member of the Board of Directors of Pentair and each other Group member, also as listed on Schedule A.  Effective as of the Separation Date, Collins shall cease to be a committee member or to serve in any capacity with respect to each Pentair benefit plan listed on Schedule B.   3.             Transition Payments.  Beginning January 16, 2001 and ending August 31, 2001, Pentair shall pay to Collins $18,750 on each regularly scheduled payroll date which falls during such period.  These payments shall be made in accordance with the usual payroll practices of Pentair and shall be reduced by all applicable state and federal withholding taxes and any other deductions which have been authorized by Collins or which Pentair may be required by law to make.  Collins understands and agrees that these payments are more than Pentair is required to make under its normal policies and practices, are in lieu of compensation and fees for services through April 25, 2001 as a director of Pentair or any other Group member, and are in excess of the amount that would be otherwise due to him as compensation for such transition services as he has provided or may be asked to provide through August 31, 2001.   4.             Stock and Equity Awards.  Outstanding awards made to Collins under the Pentair Omnibus Stock Incentive Plan (the “Omnibus Plan”) and other equity awards shall be paid as described below.  Collins understands and agrees that the payment of these awards as described herein is discretionary and not required under the normal policies and procedures of Pentair, and that he would not be entitled to these benefits without this Agreement.   a.             Restricted Stock.  All shares of restricted stock awarded to Collins through January 15, 2001 under the Ownership Incentive Plan, together with any shares of restricted stock awarded to Collins under the Omnibus Plan or any other bonus program shall, to the extent not currently vested, be vested as of such date in April, 2001 as the Incentive Compensation Units discussed in paragraph 4(b) are paid.     b.             Incentive Compensation Units (“ICUs”).  All ICUs awarded to Collins as of the Separation Date under the Omnibus Plan shall be deemed to be fully earned as of the Separation Date without regard to the relevant period stated at the time of grant.  The value of said awards shall be calculated and paid to Collins in April, 2001.   c.             Stock Options.  All outstanding stock options granted to Collins under the Omnibus Plan shall remain outstanding and exercisable by him through the earlier of their original maturity date and five (5) years from the Separation Date; provided, however, the date any such option, or part thereof, is first exercisable shall not be accelerated.  To the extent options designated as incentive stock options are exercised within thirty (30) days of the Separation Date, they shall retain their status as such; options exercised after this thirty (30) day period shall be treated as nonqualified options.   In the event Collins shall sell any Pentair common stock acquired pursuant to the exercise of an incentive stock option in a disqualifying disposition, Collins shall immediately notify Pentair of such disqualifying disposition and supply all information with respect to such sale as is reasonably requested by Pentair.  This notification obligation shall apply regardless of whether such options were exercised before or after the Separation Date.   In the event Collins should die before all such options have been exercised or otherwise lapse, the beneficiary designated by Collins shall have six (6) months from the date of Collins’s death to exercise any options then outstanding.  Any options not so exercised shall lapse at the end of said six (6) month period.   d.             Continuing Securities Obligations.  At the direction of Pentair, Henson & Efron, P.A. will inform Collins in writing of its understanding of his continuing obligations under applicable securities laws for purposes of any transactions in Pentair common stock.   5.             Retirement Benefits.  Collins shall receive payment from the tax-qualified and non qualified retirement plans maintained by Pentair as follows:   a.             Pentair Pension Plan.  The accrued benefit payable to Collins under the Pentair Pension Plan shall be determined as of the Separation Date and Collins shall be entitled to receive payment of such vested accrued benefit in accordance with applicable provisions of that plan.   b.             Supplemental Retirement Payment.  As a supplemental retirement benefit, Collins shall be paid $27,087.12 monthly beginning on September 1, 2001, said benefit to be paid in the form of a Life Only option.  Optional forms of payment will be made available including Joint & Survivor options.  This benefit is calculated by applying the provisions of the 1988 Supplemental Executive Retirement Plan (the “SERP”) which the Compensation Committee of the Board has determined, in the exercise of the discretion granted it under said plan, shall be extended to Collins even though he had not attained his Vesting and Accrual Date under the SERP as of the Separation Date.  For purposes of determining this SERP benefit, Collins shall be deemed to have (i) reached his Vesting and Accrual Date, as that term is defined in the SERP, (ii) elected an early retirement benefit calculated as if he had attained age sixty-two (62) as of September 1, 2001, and (iii) for purposes of calculating his final average compensation, received a MIP bonus payable in 2001 of $345,000, which is the average MIP bonus paid to Collins over the prior three (3) years, regardless of the amount which may be paid to Collins under the MIP in 2001.   Collins understands and agrees that, absent the exercise of discretion of the Compensation Committee of the Board and the execution of this Agreement, he would not otherwise be entitled to payment of this supplemental retirement benefit, and that Pentair is not required to pay this benefit to Collins under its normal policies and procedures.   c.             Retirement Savings and Stock Incentive Plan (“RSIP”).  Collins shall be entitled to receive payment of his vested accrued benefit under RSIP in accordance with applicable provisions of that plan.  Collins shall remain a participant in RSIP until such time as he requests and receives payment of his vested accrued benefit.  From and after the Separation Date, Collins shall not be entitled to make contributions to RSIP, but shall be entitled to share in allocations of contributions made by Pentair after such date, including matching or employer discretionary contributions payable on account of service completed, deferrals made or salary paid to Collins through the Separation Date, to the extent required by the provisions of RSIP.  For this purpose, no transition payments made to Collins under paragraph 3 of this Agreement shall be included as covered compensation.   d.             Non-Qualified Deferred Compensation Plan (“Sidekick”).  Collins shall be entitled to receive payment of all amounts payable to him under the terms and conditions of Sidekick in accordance with the payment election made by him at the time he began participation in such plan.  From and after the Separation Date, Collins shall not be entitled to make contributions to Sidekick, but shall be entitled to share in allocations of contributions made by Pentair after such date, including matching or employer discretionary contributions payable on account of service completed, deferrals or salary paid to Collins through the Separation Date, to the extent required by the provisions of said plan.  For this purpose, no transition payments made to Collins under paragraph 3 of this Agreement shall be included as covered compensation.   6.             Insurance Benefits.  Collins shall be eligible to elect to continue participation in various medical, dental, life and disability insurance benefits offered by Pentair as follows:   a.             Medical, Dental and Life Insurance.  Collins may elect to continue participation in such group medical, dental and life insurance programs as are made available to employees of Pentair consistent with his rights to continuation coverage under applicable state and federal law.  Said continuation period shall begin on February 1, 2001 and shall end on the earlier of the date Collins is eligible for such coverage with a subsequent employer or the expiration of eighteen (18) months (i.e., July 31, 2002).  At such time as the continuation period ends, Collins shall be offered such conversion rights as are made available by the then insurer.  During the continuation period, Collins and Pentair shall share the cost of such benefits on the same basis as if Collins remained an active employee of Pentair.  Collins understands and agrees that the sharing of premium payments with Pentair is a benefit to which he would not be entitled without this Agreement.   b.             Supplemental Disability and Supplemental Life Insurance.  Collins shall be covered through the Separation Date under the Pentair short-term disability and the voluntary supplemental long-term disability (the “Pentair Income Protection Plan” or “PIPP”) and supplemental life insurance plans as are made available to Pentair employees.  After the Separation Date, Collins shall be offered the opportunity to retain coverage under PIPP and to retain his supplemental life insurance policies at his sole cost and expense.   c.             Flexible Benefit Plan.  Collins shall be offered the opportunity to continue participation in the Pentair Flexible Benefit Plan consistent with the terms and provisions of said plan.   d.             Retiree Flex Plan.  Collins may elect, on or prior to August 31, 2001, to begin participation in the Retiree Flex Plan consistent with the terms and provisions of said plan.  Said election shall be effective as of the end of the continuation period described in the preceding paragraph (a), unless Collins shall elect to earlier waive his continuation rights and immediately begin to receive benefits under the Retiree Flex Plan in lieu of said continuation coverage.   7.             Other Benefits or Payments.  Collins shall be entitled to receive other payments and benefits as described below.  Collins understands and agrees that without this Agreement, he would not be entitled to such benefits.   a.             Flexible Perquisite Account.  For the period beginning January 15, 2001 and ending August 31, 2001, Pentair shall pay to Collins under its Flexible Perquisite Plan an amount not to exceed $13,334.00, less any vehicle lease payments made by Pentair during 2001.  No such payments shall be made to Collins, however, unless and until he submits proper documentation of expenses eligible for payment under said plan.  Any amounts not paid to Collins pursuant to this paragraph as of August 31, 2001 shall be retained by Pentair.   b.             Business Expenses.  Pentair will reimburse Collins for all reasonable business expenses incurred by him, if any, in the active performance of work on behalf of and expressly requested by Pentair through August 31, 2001, provided Collins submits proper documentation for such expenses.   8.             Confidential Information Acquired During Employment.  Collins agrees that he will continue to treat, as private and privileged, any information, data, figures, projections, estimates, marketing plans, customer lists, lists of contract workers, tax records, personnel records, accounting procedures, formulas, contracts, business partners, alliances, ventures and all other confidential information which Collins acquired or created as an employee of the Group.  Further, Collins agrees that he will not release any such information to any person, firm, corporation or other entity at any time, except as may be required by law, or as specifically agreed to in writing by Pentair prior to any such disclosure.  Collins acknowledges that any violation of this non-disclosure provision shall entitle Pentair to appropriate injunctive relief and to any damages which it may sustain due to the improper disclosure.   9.             Non-Solicitation/Non-Competition Agreement.  Collins acknowledges that during his employment with the Group, he became familiar with trade secrets, know-how, executive personnel, business strategies, product development and other confidential and proprietary information concerning the businesses of the Group.  In consideration for the compensation and benefits paid to Collins under this Agreement, Collins agrees that he shall not at any time, either directly or indirectly, and without the prior written consent of Pentair:   a.             own, manage, control, participate in, consult with or render services of any kind for any concern which engages in a business which is competitive with any business being conducted, or contemplated being conducted, by Pentair or any other Group member as of the Separation Date;   b.             become an employee or agent of any publicly traded corporation or other entity, or any division or subsidiary of such a corporation or entity, where more than five percent (5%) of such organization’s business is in competition with any business being conducted, or contemplated being conducted, by Pentair or any other Group member as of the Separation Date;   c.             participate in any plan or attempt to acquire the business, assets or control of the voting stock of Pentair or any other Group member, or in any manner interfere with the control of Pentair or any other Group member, whether by friendly or unfriendly means;   d.                             induce or attempt to induce any individual to leave the employ of Pentair or any other Group member or hire any such individual who approaches him for employment; or   e.                             engage in or sponsor the solicitation of customers of Pentair or any other Group member to do business with any competitor of Pentair or any other Group member.   In the event Collins breaches or threatens to breach any obligation under this paragraph 9, Pentair may apply to any court of competent jurisdiction for specific performance and/or injunctive relief or other relief to enforce the obligations of Collins under this paragraph 9 or to prevent any violations of said paragraph.  Pentair may also pursue any other remedies available to it on account of a breach or threatened breach of this paragraph 9, including the costs and reasonable attorneys’ fees incurred by it in enforcing its rights under this paragraph 9.  In addition to the other remedies herein provided, Collins and any person claiming benefits hereunder through Collins shall forfeit any right to future payments under paragraphs 3 and 5(b) of this Agreement.   10.           Discharge of Claims.  Collins, on behalf of himself, his agents, representatives, attorneys, assignees, heirs, executors and administrators, hereby releases and forever discharges Pentair and all other Group members, and the past and present employees, agents, insurers, officials, officers, directors, divisions, parents, subsidiaries and successors of any of them from any and all claims and causes of action of any type arising, or which may have arisen, out of or in connection with his employment or termination of employment with Pentair and the other members of the Group, including, but not limited to claims, demands or actions arising under the Federal Fair Labor Standards Act, the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 626, as amended by Public Law 101.433 (1990) (the “Older Workers Benefit Protection Act”), Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., the Americans with Disabilities Act, 29 U.S.C. § 2101, et seq., the Family Medical Leave Act, the Minnesota Human Rights Act, Minn. Stat. § 363.01, et seq., any other federal, state or local statute, ordinance, regulation or order regarding employment, compensation for employment, termination of employment, or discrimination in employment, and the common law of any state.   Collins further understands that this discharge of claims extends to, but is not limited to, all claims which he may have as of the date of this Agreement against Pentair or any other Group member, based upon statutory or common law claims for defamation, libel, slander, assault, battery, negligent or intentional infliction of emotional distress, negligent hiring or retention, breach of contract, promissory estoppel, fraud, wrongful discharge, or any other theory, whether legal or equitable, including all claims for items of compensation and benefits except as prohibited by law.   Collins represents that no claim or cause of action covered by this Agreement has been assigned or otherwise transferred or given to anyone.   11.           Cooperation.  Collins agrees that until August 31, 2001, he will be available by telephone to respond to such reasonable requests for information as Pentair may make.  In addition, Collins further agrees that at the request of Pentair, he will, at any time, cooperate with and assist Pentair (including cooperation and assistance in any matters involving claims or lawsuits against Pentair or any other Group member) where Collins has or may have knowledge of the facts involved.  Collins also agrees that he will, at the reasonable request of Pentair, execute, if necessary, any further documents or instruments necessary or appropriate to evidence his separation from service as an officer or director of Pentair or any Group member, including but not necessarily limited to any forms as may be attached hereto as Schedule C.  Collins further agrees that he will not voluntarily aid, assist, or cooperate with anyone who has claims against Pentair or any other Group member, or with their attorneys or agents in any claims or lawsuits which such person may bring against Pentair or any other Group member.  Nothing in this Agreement prevents Collins from testifying at an administrative hearing, arbitration, deposition, or in court, in response to a lawful and properly served subpoena.   12.           Future Employment.  Collins will not apply for or seek employment or re-employment with Pentair or any other Group member at any time after he signs this Agreement.   13.           Merger.  This Agreement supersedes and replaces all prior oral and written agreements and understandings between Collins and Pentair or any other Group member, including, but not limited to, any Key Executive Employment and Separation Agreement which Collins may have executed.  Collins understands and agrees that all claims which he has or may have against Pentair or any other Group member are fully released and discharged by this Agreement.  Except to the extent otherwise required by law, the only claims which Collins may hereafter assert against Pentair or any other Group member are limited to an alleged breach of this Agreement.   14.           Minnesota Law Applies.  This Agreement will be governed by the substantive laws of the State of Minnesota, without regard to any choice of laws provisions thereof, and it shall be construed and enforced thereunder.  All disputes arising out of or relating to this Agreement shall be subject to the jurisdiction of the state court sitting in the County of Hennepin, State of Minnesota, and both parties hereby irrevocably submit to the jurisdiction of such court.   15.           Invalidity.  If any one or more of the terms of this Agreement are deemed to be invalid or unenforceable by a court of law, the validity, enforceability, and legality of the remaining provisions of this Agreement will not in any way be affected or impaired thereby.   16.           Amendment.  This Agreement may be modified only by a subsequent written agreement signed by the parties hereto.   17.           Collins Understands the Terms of this Agreement.  Collins warrants that (a) other than as stated herein, no promise or inducement has been offered for this Agreement; (b) this Agreement is executed without reliance upon any statement or representation of Pentair or its representatives concerning the nature and extent of any claims or liability therefor, if any; (c) Collins is legally competent to execute this Agreement and accepts full responsibility therefor; (d) Pentair, by this Agreement, has advised Collins to consult with an attorney regarding the purpose and effect of this Agreement; (e) Pentair has allowed Collins at least twenty-one (21) days beginning on ___________, 2001 within which to consider this Agreement, and at the expiration of this period this Agreement shall be automatically withdrawn without further notice to Collins or his attorney; and (f) Collins may choose to sign this Agreement at any time prior to the end of this twenty-one (21) day consideration period.   Collins understands that he may nullify and rescind this Agreement as far as it extends to his release of claims arising under Minn. Stat. § 363.01 et seq., the Minnesota Human Rights Act, and under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 626, as amended by Public Law 101.433 (1990) (the “Older Workers Benefit Protection Act”) at any time within fifteen (15) days from the date of his signature below and, in the event of such election, Collins shall only be entitled to receive $1,000 which the parties acknowledge is consideration for Collins’ release of all claims other than those arising under Minn. Stat. § 363.01 et seq., the Minnesota Human Rights Act, and under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 626, as amended by Public Law 101.433 (1990) (the “Older Workers Benefit Protection Act”).  In the event Collins elects to nullify and rescind portions of his release under this Agreement pursuant to this paragraph, he must indicate his desire to do so in writing and deliver that writing to Deb S. Knutson, Vice President, Human Resources, Pentair, Inc., Waters Edge Plaza, 1500 County Road B2 West, St. Paul, MN 55113-3105, by hand or by certified mail.  Collins further understands that if he exercises his rescission rights hereunder, Pentair will not be bound by the terms of this Agreement (except the obligation to pay Collins $1,000), and Collins will have to disgorge and repay to Pentair in full any monies and benefits received pursuant to this Agreement other than such $1,000 sum.     Dated:    ___________________________ Joseph Collins     Subscribed and sworn to before me this 6th day of August, 2001.     ________________________________ Notary Public     Dated:    __________________________                   PENTAIR, INC.     By _________________________________ Its _________________________________     Subscribed and sworn to before me this ____ day of ________, 2001.     _______________________________ Notary Public   SCHEDULE A   Positions Held by Joseph Collins at Pentair     Company   Title       Pentair, Inc.   Vice Chairman of the Board, Director Pentair, Inc.   Employee     SCHEDULE B   Other Positions Held by Joseph Collins at Pentair and Subsidiaries     Committee/Plan   Title Pentair, Inc. Investment Committee for all Bargaining and non-Bargaining Pension s Plans   Member Pentair, Inc. Retirement Savings and Stock Incentive Plan Committee   Member The Pentair Foundation   President Pentair, Inc. Board Finance / Investment Policy Committee   Member Pentair, Inc. Board Public Policy Committee   Member    

  Exhibit 10.7 Conformed Copy EMPLOYMENT AGREEMENT          This Employment Agreement is made as of the 30th day of October 2001, by and between James H. Smith, III, an individual residing in the State of Colorado (the “Executive”), and Charter Communications, Inc., a Delaware corporation (“Charter”), with reference to the following facts:          Charter wishes to retain Executive to serve as Senior Vice President of Operations – Western Division of Charter from the date hereof and on the terms and conditions set forth herein;          Executive desires to serve as Senior Vice President of Operations – Western Division of Charter from the date hereof and on the terms and conditions set forth herein;          NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto hereby agree as follows: 1.     Interpretation.          1.1     Defined Terms.                   “Affiliate” shall mean with respect to any person or entity any other person or entity who controls, is controlled by or is under common control with such person or entity.                   “Allen” shall mean Paul G. Allen.                   “Board” shall mean the Board of Directors of Charter or a committee thereof.                   “Change of Control” means (a) a sale of more than 49.9% of the outstanding capital stock of Charter in a single or related series of transactions, except where Allen and his Affiliates retain effective voting control of Charter, the merger or consolidation of Charter with or into any other corporation or entity, other than a wholly-owned subsidiary of Charter, except where Allen and his Affiliates have effective voting control of the surviving entity, or any other transaction, or event, a result of which is that Allen holds less than 50.1% of the voting power of the surviving entity, except where Allen and his Affiliates retain effective voting control of Charter, or a sale of all or substantially all of the assets of Charter (other than to an entity majority-owned or controlled by Allen and his Affiliates); where , in any such case (b) Executive’s employment with Charter is terminated or his duties are materially diminished (it being understood that neither Charter’s failure to be a “public” company as such term is commonly understood nor his obligation, if any, to report to a committee of the Board following any merger or similar transaction constitute a material diminution in Executive’s duties under this Agreement). 2.     Employment, Duties and Authority.          Charter hereby agrees to employ the Executive, and the Executive agrees to be employed, as Senior Vice President of Operations — Western Division of Charter. As Senior Vice President of Operations — Western Division of Charter, the Executive shall report directly to the Executive Vice President and Chief Operating Officer of Charter, and, subject 1 --------------------------------------------------------------------------------   Exhibit 10.7 Conformed Copy to the control and supervision of such Executive Vice President and Chief Operating Officer of Charter, shall have such duties and responsibilities as are typically performed by a divisional head of operations and such other executive duties not inconsistent with the foregoing as may be assigned to Executive from time to time. The Executive shall devote substantially all of his business time, attention, energies, best efforts and skills to the diligent performance of his duties hereunder. Notwithstanding the foregoing, it is understood that the Executive may expend a reasonable amount of time for personal. charitable, investment and other activities so long as such activities shall not interfere in any material respect with the performance by the Executive of his duties and responsibilities hereunder. 3.     Term.          The term of this Agreement shall commence on the date hereof and shall terminate on December 31, 2005 (the “Term”). 4.     Compensation and Benefits.          4.1     Cash Compensation.                   a. Base Salary. During the Term of this Agreement, Charter shall pay the Executive an annual base salary at the rate of $300,000 or such higher rate as may from time to time be determined by the Board in its discretion, which shall be payable consistent With Charter’s payroll practices.                   b. Bonus. The Executive shall be eligible to receive an annual target bonus equal to forty percent of Executive’s base salary, the amount of such bonus to be determined and paid in accordance with Charter’s Executive Bonus Policy, consistent with past practices. Executive shall also be eligible to be considered for additional bonuses at the discretion of the Board. With respect to the year ended December 31, 2001, Executive shall be paid a bonus of $120,000 by January 15, 2002.          4.2      Benefit Plans. The Executive shall be entitled to participate in any disability insurance, pension, or other benefit plan of Charter now existing or hereafter adopted for the benefit of employees or executives of Charter generally. To the extent that Charter does not provide life insurance in an amount at least equal to the unpaid amount of Executive’s base salary through the end of the Term, Charter shall continue to pay to Executive’s estate an amount equal to Executive’s base salary, in installments, through the end of the Term.          4.3     Vacation. Charter acknowledges that the Executive currently has three weeks of accrued vacation (which Charter, at its sole discretion, may compensate Executive for in lieu of having Executive utilize such vacation). The Executive shall be entitled to compensated vacation in each fiscal year consistent with Charter’s policy, to be taken at times which do not unreasonably interfere with the performance of the Executive’s duties hereunder. Unused vacation time shall be treated in accordance with Charter’s policy.          4.4     Expenses. The Executive shall be entitled to receive reimbursement for all reasonable out-of pocket expenses incurred by the Executive in the performance of his duties hereunder, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Charter. 2 --------------------------------------------------------------------------------   Exhibit 10.7 Conformed Copy 5.     Restricted Stock.          As a matter of separate inducement and agreement in connection with his employment hereunder and not in lieu of any salary or other compensation, Charter shall issue to the Executive 35,000 Shares of Class A Common Stock of Charter (the “Shares”). The restrictions on the Shares shall lapse and the grant shall otherwise have the terms and conditions set forth in the form of Restricted Stock Agreement previously delivered to the Executive. 6.     Indemnification.          Charter agrees to indemnity and hold harmless to the maximum extent permitted by law the Executive from and against any claims, damages, liabilities, losses, costs or expenses in connection with or arising out of the performance by the Executive of his duties as an officer of Charter or any of its subsidiaries or Affiliates. 7.     Termination. This Agreement may be terminated as follows:          7.1     By the Executive for Good Reason. The Executive may terminate this Agreement for Good Reason (as defined below) upon thirty (30) days’ advance written notice to Charter. “Good Reason” shall exist if, without the Executive’s consent: (A) there is an assignment to the Executive of any duties materially inconsistent with, or which constitutes a material reduction of the Executive’s position, duties, responsibilities, status or authority with Charter (it being understood that Charter’s cessation as a “public” company shall not be a material reduction in the Executive’s position, duties, responsibilities, status or authority) and Charter shall not have rectified same within the later of (a) thirty (30) days of written notice from the Executive (b) or if Charter elects, within thirty (30) days after receipt of such written notice, to require that any alleged claim of Good Reason be submitted to binding arbitration, then ten days (10) days after any determination adverse to Charter to rectify such event (any such arbitration shall be held in St. Louis under the local arbitration rules of JAMS or other entity mutually agreed to and such arbitration decision shall be made no later than sixty (60) days after Charter’s election to require such arbitration); (B) the Executive is required to report, directly or indirectly to persons other than the Executive Vice President and Chief Operating Officer of Charter (except that Executive may be required to report to a Board committee following any merger or similar transaction); (C) removal of the Executive from the position he holds pursuant hereto, except in connection with the termination of the Executive for Cause (as defined below); (D) the Executive’s principal place of business shall be outside the Denver, Colorado area; or (e) a Change of Control.          7.2     By Charter for Cause. Charter may terminate this Agreement for Cause upon thirty (30) days’ advance written notice to the Executive. “Cause” shall mean (i) conviction of a felony offense or of a misdemeanor that involves dishonesty or moral turpitude; (ii) the refusal to comply with the lawful directives of Executive Vice President and Chief Operating Officer, the Chief Executive Officer or the Board of Charter, within ten (10) days after written notice of such directive from the Executive Vice President and Chief Operating Officer, the Chief Executive Officer or the Board of Charter; (iii) conduct on the part of the Executive in the course of his employment which constitutes gross negligence or 3 --------------------------------------------------------------------------------   Exhibit 10.7 Conformed Copy willful misconduct which conduct is not cured within ten (10) days after written notice thereof from the Chief Executive Officer or the Board; (iv) the Executive’s breach of his fiduciary duties to the Company; (v) the Executive’s death or his Disability (as defined in Charter’s 2001 Stock Incentive Plan); or (vi) the Executive’s possession or use of illegal drugs or excessive use of alcohol on Company premises on work time or at a work related function (other than alcohol served generally in connection with such function). Should Executive commit or be alleged to have committed a felony offense or a misdemeanor of the character specified in clause (i), Charter may suspend Executive with pay. If Executive is subsequently convicted with respect to the matters giving rise to the suspension, Executive shall immediately repay all compensation or other amounts paid him hereunder from the date of the suspension and any of the Executive Options or Shares which vested after the date of suspension shall forthwith be cancelled and if theretofore sold by Executive, the cash value thereof paid to Charter.          7.3     Effect of Termination. In the event of the termination of this Agreement by Charter without Cause or by Executive For Good Reason, Charter shall pay to the Executive an amount equal to the aggregate base salary due the Executive during the remainder of the Term and a full prorated bonus for the year in which termination occurs. Upon termination of this Agreement by Charter for Cause or by Executive without Good Reason, then the Executive shall cease to be entitled to receive any compensation or other payments with respect to periods after the date of such termination. 8.     Covenant Not to Compete; Confidentiality.          8.1     Covenant Not to Compete. The Executive recognizes and acknowledges that Charter is placing its confidence and trust in the Executive. The Executive, therefore, covenants and agrees that as to clauses (a), (b), (c) and (e) hereof during the Executive’s employment with Charter and solely as to clause (d) the specific time period provided in such clause, the Executive shall not, either directly or indirectly, without the prior written consent of the Board:                   a. Engage in or carry on any business or in any way become associated with any business which is similar to or is in competition with the Business of Charter. As used in this Section 8, the term “Business of Charter” shall mean the business of owning or operating cable television systems and related businesses.                   b. Solicit the business of any person or entity, on behalf of himself or any other person or entity, which is or has been at any time during the term of this Agreement a customer or supplier of Charter including, but not limited to, former or present customers or suppliers with whom the Executive has had personal contact during, or by reason of, his relationship with Charter.                   c. Be or become an employee, agent. consultant, representative, director or officer of, or be otherwise in any manner associated with, any person, firm, corporation, association or other entity which is engaged in or is carrying on any business which is in competition with the Business of Charter; 4 --------------------------------------------------------------------------------   Exhibit 10.7 Conformed Copy                   d. For a period of twenty-four (24) months after termination of the Executive’s employment for any reason whether by Charter or Executive, solicit directly or indirectly for employment or employ (or directly or indirectly cause any entity in which the Executive has an interest or is employed by to solicit or employ), any person employed by Charter or any of its subsidiaries at the time of such termination; provided however, that if such termination occurs after January 1, 2005, and is by Charter without Cause or by the Executive with Good Reason, then the applicable period shall be twelve (12) months after termination of employment; or                   e. Be or become a shareholder, joint venturer, owner (in whole or in part), or partner, or be or become associated with or have any proprietary or financial interest in or of any firm, corporation, association or other entity which is engaged in or is carrying on any business which is similar to or in competition with the Business of Charter, provided, however, that nothing contained in this Section 8 shall prohibit the Executive from owning less than 2% of the shares of a publicly held corporation engaged in the Business of Charter.                            The Executive hereby recognizes and acknowledges that the existing Business of Charter extends throughout the United States of America and therefore agrees that the covenants not to compete contained in this Section 8 shall be applicable nationally. In the event that a court of competent jurisdiction determines that the scope of the non-compete provisions set forth in this Section 8 are unenforceable in any respect, then these provisions shall be deemed to be modified as necessary so that the scope of the non-compete provisions contained herein are nonetheless as broad as possible and yet enforceable under applicable law in accordance with their terms.          8.2     Confidentiality; Non-Disparagement. The Executive will not divulge, and will not permit or suffer the divulgence of, any confidential knowledge or confidential information with respect to the operations or finances of Charter or any of its Affiliates or with respect to confidential or secret customer lists, processes, machinery, plans, devices or products licensed, manufactured or sold, or services rendered, by Charter or any of its Affiliates other than in the regular course of business of Charter or as required by law; provided, however, that the Executive has no obligation, express or implied, to refrain from using or disclosing to others any such knowledge or information which is or hereafter shall become available to the public otherwise than by disclosure by the Executive in breach of this Agreement. Executive will not directly or indirectly disparage or otherwise make adverse references to Charter or any of its officers, directors, employees or Affiliates at any time during or after his employment with Charter. 9.     Notices.          Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be sufficiently given if delivered in person or transmitted by facsimile or similar means of recorded electronic communication to the relevant party as follows:                   a. in the case of the Executive, to the address set forth under his name on the signature page hereto. 5 --------------------------------------------------------------------------------   Exhibit 10.7 Conformed Copy   Charter Communications, Inc. 12405 Powerscourt Drive St. Louis, MO 63101 Attn: Curtis S. Shaw            Senior Vice President,            General Counsel and Secretary Telephone:   314-543-2308 Facsimile:      314-965-8793 E-mail:  [email protected]   with a copy to:   Irell & Manella LLP 1800 Avenue of the Stars, Suite 900 Los Angeles, CA 90067 Attn: Alvin Segel Telephone:   310 277 1010 Facsimile:      310 203 7199 E-mail: [email protected]          Any such notice or other communication shall be deemed to have been given and received on the day on which it is delivered or telecopied (or, if such day is not a business day or if the notice or other communication is not telecopied during business hours, at the place of receipt, on the next following business day). Any party may change its address for the purposes of this Section by giving notice to the other parties in accordance with the foregoing. 10.     Assignability and Enforceability. This Agreement shall be binding on and enforceable by the parties and their respective successors and permitted assigns. No party may assign any of its rights or benefits under this Agreement to any person without the prior written consent of the other party. 11.     Expenses of this Agreement. Each party shall bear its own costs and expenses (including, without limitation, legal, accounting and other professional fees) incurred in connection with this Agreement or the transactions contemplated hereby. 12.     Consultation. The parties shall consult with each other before issuing any press release or making any other public announcement with respect to this Agreement or the transactions contemplated hereby and, except as required by any applicable law or regulatory or stock exchange requirement, neither of them shall issue any such press release or make any such public announcement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed. 13.     Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of laws thereof. 6 --------------------------------------------------------------------------------   Exhibit 10.7 Conformed Copy 14.     Counterparts. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which taken together shall constitute one and the same instrument. 15.     Currency. Unless otherwise indicated, all dollar amounts in this Agreement are expressed in United States dollars. 16.     Sections and Headings. The division of this Agreement into Sections and the insertion of headings are for reference purposes only and shall not affect the interpretation of this Agreement. 17.     Number and Gender. In this Agreement, words importing the singular number only shall include the plural and vice versa and words importing gender shall include all genders. 18.     Entire Agreement. This agreement and any agreements or documents referred to herein or executed contemporaneously herewith, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether written or oral. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise, relating to the subject matter hereof except as herein provided. 19.     Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such determination shall not impair or affect the validity, legality or enforceability of the remaining provisions hereof, and each provision is hereby declared to be separate, severable and distinct. 20.     Amendments and Waivers. No amendment or waiver of any provision of this Agreement shall be binding on any party unless consented to in writing by such party. No waiver of any provision of this Agreement shall be construed as a waiver of any other provision nor shall any waiver constitute a continuing waiver unless otherwise expressly provided. No provision of this Agreement shall be deemed waived by a course of conduct unless such waiver is in writing signed by all parties and stating specifically that it was intended to modify this Agreement. 21.     Taxes; Withholding. All amounts payable hereunder shall be subject to all applicable withholding requirements under federal, state and local tax law. 22.     Survival. The provisions of Sections 6, 8.1(d), 12 and 13 shall survive the termination of this Agreement. 7 --------------------------------------------------------------------------------   Exhibit 10.7 Conformed Copy          IN WITNESS WHEREOF the parties have executed this Agreement.               CHARTER COMMUNICATIONS, INC.               By:   /s/ Curtis S. Shaw -------------------------------------------------------------------------------- Authorized Signatory                   /s/ James H. Smith, III -------------------------------------------------------------------------------- James H. Smith, III 241 Lead King Drive Castle Rock, Colorado 80104 8

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.2 STATION CASINOS, INC. DEFERRED COMPENSATION PLAN FOR EXECUTIVES (As Amended and Restated) Effective as of September 12, 2001 * * * * *     Section 1. Purpose.  The purpose of the Plan is for the Company to provide certain select executives of the Company with an opportunity to defer receipt of compensation for services rendered to the Company. It is intended that the Plan shall aid the Company in retaining and attracting employees whose abilities, experience and judgment can contribute to the continued progress of the Company. The Plan is a continuation of the Company's Deferred Compensation Plan for Executives originally effective November 30, 1994, as amended as of September 30, 1999 and further amended as of September 12, 2001.     Section 2. Definitions.       (a)  "Account(s)" means the Deferred Compensation Account, the Supplemental Contributions Account and/or the Matching Contributions Account, as the context requires.     (b)  "Bonus" means any special and/or discretionary compensation amounts in excess of Salary, determined by the Company to be payable to a Participant with respect to services rendered.     (c)  "Cause" means, for each Participant, the same as the definition of "cause" contained in each Participant's employment agreement with the Company, as in effect from time to time     (d)  "Change of Control" means, for each participant, the same as the definition of change of control contained in such participant's employment agreement with the Company, as in effect from time to time.     (e)  "Committee" means the Human Resources Committee of the Company's Board of Directors.     (f)  "Company" means Station Casinos, Inc.     (g)  "Continuous Service" means a Participant's uninterrupted service with the Company or any affiliate whether before or after the effective date of original effectiveness of the Plan. Service shall not be deemed interrupted by a leave of absence authorized by the Committee, an absence due to mandatory military service or an absence due to disability while the Participant is receiving benefits under any short-term or long-term disability plan or arrangement maintained or sponsored by the Company.     (h)  "Deferred Compensation" means the sum of Salary and Bonus that are the subject of an elective deferral under Section 5.     (i)  "Deferred Compensation Account" means the bookkeeping account established for a Participant under the Plan and to which Deferred Compensation amounts with respect to such Participant are credited from time to time, as adjusted from time to time as provided in the Plan.     (j)  "Deferred Compensation Election Form" means the form pursuant to which Eligible Executives elect to become Participants in the Plan and defer compensation thereunder, in such form as the Committee determines from time to time in its sole discretion.     (k)  "Disability" means mental or physical disability as determined by the Committee in accordance with standards and procedures similar to those under the Company's broad-based regular long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of a Participant, as determined by the -------------------------------------------------------------------------------- Committee, substantially to perform such Participant's regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six (6) consecutive months.     (l)  "Eligible Executive" means any employee of the Company being paid Salary at a rate in excess of the amount specified in Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, and who is selected for participation by the Committee.     (m)  "Matching Contributions Account" means the bookkeeping account established for a Participant under the Plan and to which the Company's matching contributions under Section 5(b) of the Plan are credited from time to time, as adjusted from time to time under the Plan; provided that a Participant's Matching Contributions Account shall be divided into two portions: (a) the vested portion and (b) the unvested portion, each as indicated in a schedule approved by the Committee and maintained by the Chief Financial Officer of the Company with the Company's books and records (the "Schedule").     (n)  "Participant" means an Eligible Executive who has elected to defer Salary and/or Bonus amounts pursuant to the Plan or on whose behalf the Company has made a supplemental contribution under Section 5(c).     (o)  "Plan" means The Station Casinos, Inc. Deferred Compensation Plan for Executives, as set forth herein and as amended from time to time.     (p)  "Plan Year" means the calendar year.     (q)  "Salary" means the regular base compensation paid by the Company to an employee (without regard to any reduction thereof pursuant to the Plan or any thrift or savings plan maintained by the Company), exclusive of Bonus payments and any other incentive payments made by the Company to such employee.     (r)  "Supplemental Contributions Account" means the bookkeeping account established for the Participant under the Plan and to which the Company's supplemental contributions under Section 5(c) of the Plan are credited from time to time, as adjusted from time to time under the Plan.     (s)  "Unforeseeable Emergency" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary unforeseeable circumstances arising as a result of events beyond the control of the Participant.     Section 3. Eligibility.  Individuals eligible to participate in the Plan shall consist of the Eligible Executives of the Company.     Section 4. Administration.       (a)  The Plan shall be administered by the Committee. The Committee is authorized to construe and interpret the Plan and promulgate, amend and rescind rules and regulations relating to the implementation, administration and maintenance of the Plan. Subject to the terms and conditions of the Plan, the Committee shall make all determinations necessary or advisable for the implementation, administration and maintenance of the Plan including, without limitation, determining the Eligible Employees and correcting any technical defect(s) or technical omission(s), or reconciling any technical inconsistency(ies), in the Plan. The Committee may designate persons other than members of the Committee to carry out the day-to day ministerial administration of the Plan under such conditions and limitations as it may prescribe; provided, however, that the Committee shall not delegate its authority with regard to the determination of Eligible Employees. The Committee's determinations under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated. Any determination, decision or action of the Committee in connection with the construction, interpretation, administration, implementation or maintenance of the Plan shall be final, conclusive and binding upon all Participants and any person(s) claiming under or through any Participants. --------------------------------------------------------------------------------     (b)  The Company will indemnify and hold harmless the Committee and each member thereof against any cost or expense (including without limitation attorney's fees) or liability (including without limitation any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act, except in the case of willful gross misconduct or gross negligence.     Section 5. Participation; Elective Deferrals; Matching Contributions; Supplemental Contributions.     (a)  To elect to participate in the Plan for a particular Plan Year, an Eligible Executive must execute a Deferred Compensation Election Form and file such form with the Committee (or its designee) before the commencement of such Plan Year; provided that the amount of Bonus deferred by the Executive may be determined by amendment to the Deferred Compensation Election Form made during the Plan Year but prior to the determination of the of the amount of such Bonus. To participate in the Plan during the first year in which an individual becomes eligible to participate in the Plan, the new Eligible Executive must make an election to defer Salary compensation for services to be performed subsequent to the election and/or to defer Bonus compensation, in each case, within 30 days after the date the new Eligible Executive becomes eligible. Such election shall:     (i)  contain a statement that the Eligible Executive elects to defer a portion of the Eligible Executive's Salary (up to 50% thereof, in increments of 1%) and/or Bonus (up to 100% thereof, in increments of 1%) for a specified Plan Year that becomes payable to the Eligible Executive after the filing of such;     (ii)  apply only to the Salary otherwise payable to the Eligible Executive during the Plan Year for which such election is made and to any Bonus payment that is attributable to the Eligible Executive's services rendered to the Company during the Plan Year for which such election is made (whether or not actually payable in such Plan Year);     (iii)  be irrevocable with respect to the Plan Year to which it applies; and     (iv)  if the Eligible Executive so desires, specify a date, no earlier than thirteen months after the date such election is made, that the vested accrued balances of his or her Accounts will be paid pursuant to Section 6 below. Absent such election, the vested accrued balances of his or her Accounts will be paid following his or her termination of employment in accordance with Section 6 below. A Participant may change his or her election as to the date on which the vested accrued balances of his or her Accounts will be paid at any time prior to the payment of such amounts; provided, however, that such election to change the distribution date shall only be effective with respect to payments of vested accrued Account balances to be made no earlier than 13 months after the date of such election. If a Participant was to receive payment of the vested accrued balances of his or her Accounts prior to the date which is 13 months after the date of such election, such Participant's vested accrued Account balances shall be paid in accordance with his or her most recent other election made more than 13 months prior to the payment date of his or her vested accrued Account balances. Upon receipt of an Eligible Executive's deferral election, the Company shall establish as an accounting entry an individual Deferred Compensation Account for such Eligible Executive and such Eligible Executive shall become a Participant under the Plan. Thereafter, the Company shall credit the Executive's Deferred Compensation Account with all Deferred Compensation which would otherwise have been payable to the Eligible Executive in the absence of an election under the Plan. The Deferred Compensation Account shall be credited no less frequently than the seventh day of each month in an amount equal to the sum of the Deferred Compensation that would otherwise have been paid by the Company in accordance with the Company's normal payroll practices for the immediately preceding month.     (b)  At the beginning of each month, the Company shall, if on the first day of any such month the Participant is employed by the Company, credit matching contributions to the Participant's Matching Contributions Account in an amount up to 10% of the salary amounts -------------------------------------------------------------------------------- actually deferred under the Plan by the Participant in respect of the preceding month and up to 10% of the Bonus the Executive elected to defer on the then current Deferred Compensation Election Form (as adjusted for amendments) for such Plan Year. The Company match percentage cannot exceed the percentage deferred by the Participant. Such matching contributions shall be credited as provided in Section 5(a).     (c)  From time to time, the Company may, in its sole discretion, credit supplemental contributions to the Participant's Supplemental Contributions Account in such amounts as the Company shall determine in its sole discretion. Such supplemental contributions shall be credited as provided in Section 5(a).     (d)  Each Participant's Account balances and all amounts credited pursuant to Section 5(a), (b) and (c) shall be credited with a hypothetical money market rate of interest determined by the Committee from time to time or, to the extent permitted by the Committee, shall be hypothetically "invested" in such securities listed on any national or foreign stock exchange or traded on the National Association of Securities Dealers Automated Quotations system, or in any mutual fund, as designated from time to time by the Participant and the Committee in accordance with procedures to be established by the Committee. Prior to such hypothetical investment by the Participant, credited amounts shall be hypothetically invested in a money market fund designated by the Committee. In the absence of alternative instructions, current earnings and other distributions on or with respect to such hypothetical investments shall be hypothetically reinvested, if possible, as of the date of payment of any such amounts in the same or similar investment or instruments generating the earnings or other distribution. If such reinvestment is not possible, any such earnings shall be hypothetically invested in a money market fund designated by the Committee. The aggregate value of the Accounts shall, from time to time, increase or decrease in accordance with the experience of the Participant's hypothetical investments, if any. The Accounts shall be valued in the aggregate by the Committee as of the last day of each month, in accordance with Section 7.     Section 6. Payment of Deferred Compensation.  The vested accrued balances in a Participant's Deferred Compensation Account, Matching Contributions Account and Supplemental Account shall be paid to a Participant (or, in the case of any Participant's death prior to payment, the Participant's designated beneficiary(ies)) in cash and/or in such other manner as may be determined by the Committee; provided, however, that if any portion of the vested accrued balance in a Participant's Accounts is to be distributed in a Plan Year in which all or a portion of such distribution would not be deductible by the Company because of Section 162(m) of the Internal Revenue Code of 1986, as amended, the Company may, in its sole discretion, delay the payment of the nondeductible portion of such Participant's Accounts until such time as the Company determines the payment of such amounts will be deductible by the Company.     Section 7. Valuation.  At the end of each Plan Year, the vested and unvested balances in the Deferred Compensation Account, Supplemental Contributions Account and the Matching Contributions Account of each Participant shall be determined by the Company, taking into account any increase therein for such Plan Year as a result of deemed dividends or distributions on any security in which amounts credited to the Accounts are hypothetically invested as provided in Section 5(d). The balance determined, as of the end of each Plan Year, shall be communicated in writing to each Participant as soon as practicable after the end of the Plan Year. In the case of any termination of employment under Section 6(i) above, the vested and unvested balances in the Deferred Compensation Account, Supplemental Contributions Account and the Matching Contributions Account of any affected Participant shall be determined by the Company as of the end of the month in which occurs any such termination of employment, also taking into account any increase therein for such Plan Year to date as a result of deemed dividends or distributions on any security in which amounts credited to the Accounts are hypothetically invested as provided in Section 5(d). In the case of a payment to a Participant under Section 6(ii) above, the vested and unvested balances in the Deferred Compensation Account, Supplemental Contributions Account and the Matching Contributions Account of any affected Participant shall be determined by the Company as of the last day of the calendar month ending at -------------------------------------------------------------------------------- least 15 days prior to the date of such payment, also taking into account any increase therein for such Plan Year to date as a result of any deemed dividends or distributions on any security in which amounts credited to the Accounts are hypothetically invested as provided in Section 5(d).     Notwithstanding any other provision of the Plan, the balances in the bookkeeping Accounts maintained for each Participant in the Plan as of September 12, 2001 shall be as set forth in the Schedule.     Section 8. Distributions in Cases of Hardship.  The Committee may make distributions to a Participant from the vested balances in such Participant's Deferred Compensation Account, Supplemental Contributions Account or Matching Contributions Account upon a showing by such Participant that an Unforeseeable Emergency has occurred. Such distributions shall be limited to the amount shown to be necessary to meet the Unforeseeable Emergency.     Section 9. Vesting.  Notwithstanding anything contained herein to the contrary, a Participant's accrued balance in such Participant's Deferred Compensation Account (and the amounts payable with respect thereto) shall be fully vested at all times. A Participant's accrued balance in such Participant's Matching Contributions Account (and the amounts payable with respect thereto) and in such Participant's Supplemental Contributions Account (and the amounts payable with respect thereto) shall, in each case, be vested as to 20% of the balance in such Account for each year of Continuous Service completed by the Participant and shall be fully vested after the Participant has completed five years of Continuous Service; provided, however, that a Participant's accrued but unvested balance in the pre-September 12, 2001 portion of such Participant's Matching Contributions Account (and the amount payable with respect thereto) shall, in each case, be vested as to 1/36th of the balance in such Account for each month of Continuous Service completed by the Participant after August 31, 2001 and shall be fully vested after the Participant has completed 36 months of Continuous Service after such date. Notwithstanding the immediately preceding sentence, if (a) the Participant dies, (b) the Participant's employment with the Company is terminated due to Disability, (c) the Participant's employment agreement with the Company is terminated by the Company without Cause, or (d) a Change of Control occurs, such Participant's accrued balance in the Matching Contributions Account and Supplemental Contributions Account shall be fully vested as of the date of death, the date of such termination or the date of any such Change of Control, as the case may be.     Section 10. Forfeiture.  Upon any Participant's termination of employment other than due to death or Disability, such Participant's accrued balance in such Participant's unvested Matching Contributions Accounts (and the amounts payable with respect thereto) and in such Participant's unvested Supplemental Contributions Account (and the amounts payable with respect thereto) shall, in each case, be forfeited by such Participant.     Section 11. Amendment; Termination.  The Plan may be amended, modified or terminated at any time by the Committee except that no such amendment, modification or termination shall have a material adverse effect on the accrued balance of any Participant's Deferred Compensation Account, Supplemental Contributions Account and/or Matching Contributions Account as of the effective date of any such amendment, modification or termination (without the consent of the Participant (or, if the Participant is dead, his or her beneficiary(ies))); provided however, that a termination of the Plan followed by a distribution of all vested and unvested account balances shall be deemed to not have a material adverse effect on a Participant's accrued balances.     Section 12. Participant's Rights Unsecured; No Duty to Invest.  The right of a Participant to receive any distribution hereunder shall be an unsecured claim against the general assets of the Company. No Company assets shall in any way be subject to any prior claim by any Participant. The Company shall have no duty whatsoever to set aside or invest any amounts credited to any Deferred Compensation Account, Supplemental Contributions Account or Matching Contributions Account established under the Plan. Nothing in the Plan shall confer upon any employee of the Company any right to continued employment with the Company, nor shall it interfere in any way with the right, if any, of the Company to terminate the employment of any employee at any time for any reason. A Participant shall have no -------------------------------------------------------------------------------- right, title, or interest whatsoever in or to any specific assets of the Company, nor any investments, if any, which the Company may make to aid it in meeting its obligations hereunder. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and any Participant or any other person. The Company may enter into a "rabbi" trust agreement to provide for a source of funds out of which all or any portion of the benefits under the Plan may be satisfied.     Section 13. Restrictions on Alienation.  No amount deferred or credited to any Account under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge. Any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, levy or charge the same shall be void; nor shall any amount be in any manner be subject to any claims for the debts, contracts, liabilities, engagements or torts of the Participant (or the Participant's beneficiary or personal representative) entitled to such benefit. No Participant shall be entitled to borrow at any time any portion of the Participant's Account balances under the Plan.     Section 14. Withholding.  As a condition to the receipt of any benefit pursuant to the terms of this Plan, the Participants, or their beneficiaries or personal representatives, as applicable, shall remit to the Company, in cash, an amount equal to amount of any taxes required to be withheld by the Company pursuant to any Federal, state or local law, rule or regulation with respect to the payment of such benefit. The Participants, their beneficiaries and personal representatives shall bear any and all Federal, foreign, state, local, income, or other taxes imposed on amounts paid under the Plan.     Section 15. Participants Bound by Terms of the Plan.  By electing to become a Participant, each Eligible Executive shall be deemed conclusively to have accepted and consented to all terms of the Plan and all actions or decisions made by the Company with regard to the Plan. Such terms and consent shall also apply to and be binding upon the beneficiaries, personal representatives and other successors in interest of each Participant. Each Participant shall receive a copy of the Plan.     Section 16. Designation of Beneficiary(ies).  Each Participant under the Plan may designate a beneficiary or beneficiaries to receive any payment which under the terms of the Plan becomes payable on, after or as a result of the Participant's death. At any time, and from time to time, any such designation may be changed or cancelled by the Participant without the consent of any such beneficiary. Any such designation, change or cancellation must be on a form provided for that purpose by the Committee and shall not be effective until received by the Committee. If no beneficiary has been designated by a deceased Participant, or if the designated beneficiaries have predeceased the Participant, the beneficiary shall be the Participant's estate. If the Participant designates more than one beneficiary, any payments under the Plan to such beneficiaries shall be made in equal shares unless the Participant has expressly designated otherwise, in which case the payments shall be made in the shares designated by the Participant.     Section 17. Severability of Provisions.  In the event any provision of the Plan would serve to invalidate the Plan, that provision shall be deemed to be null and void, and the Plan shall be construed as if it did not contain the particular provision that would make it invalid. The Plan shall be binding upon and inure to the benefit of (a) the Company and its respective successors and assigns, and (b) each Participant, his or her designees and estate. Nothing in the Plan shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation, or engaging in any other corporate transaction.     Section 18. Governing Law and Interpretation.  The Plan shall be construed and enforced in accordance with, and the rights of the parties hereto shall be governed by, the laws of the State of Nevada. This Plan shall not be interpreted as either an employment or trust agreement.     Section 19. Other Company Benefit and Compensation Programs.  Payments and other benefits received by a Participant under the Plan shall not be deemed a part of a Participant's compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any affiliate of the Company. The existence of the -------------------------------------------------------------------------------- Plan notwithstanding, the Company may adopt such other compensation plans or programs and additional compensation arrangements as it deems necessary to attract, retain and motivate employees. The Committee is authorized to cause to be established a trust agreement or several trust agreements or similar arrangements from which the Committee may make payments of amounts due or to become due to any Participants under the Plan.     Section 20. Effective Date of the Plan.  The Plan as reflected herein shall be effective as of September 12, 2001 upon its adoption by the Company. The Plan originally was effective as of November 30, 1994.     IN WITNESS WHEREOF, the Plan is hereby adopted by the Company on this 12 day of September, 2001.     STATION CASINOS, INC.     By:   /s/ -------------------------------------------------------------------------------- Glenn C. Christenson Executive Vice President, Chief Financial Officer and Chief Administrative Officer -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.2 STATION CASINOS, INC. DEFERRED COMPENSATION PLAN FOR EXECUTIVES

Exhibit 10.1 PW EAGLE, INC. Employment Agreement with N. Michael Stickel              THIS EMPLOYMENT AGREEMENT is executed effective on the 12th day of February, 2001, between N. Michael Stickel (the “Employee”) and PW Eagle, Inc. (the “Eagle”), having its corporate headquarters at 222 South Ninth Street, Suite 2880, Minneapolis, MN  55402. WITNESSETH:              WHEREAS, Eagle desires to engage the services of the Employee as Senior Vice President – Sales and Marketing of Eagle and to assure the continued service of the Employee to Eagle on the terms and conditions set forth below.              NOW, THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties agree as follows: 1.          TERM OF EMPLOYMENT              The term of this Agreement and Employee’s employment under this Agreement shall begin on February 12, 2001, and continue until February 11, 2004.  At the expiration of the initial term of this Agreement, the Agreement shall automatically be renewed for a period of one year with any amendments as agreed to by the parties, provided that either party may terminate this Agreement at the expiration of the initial term by giving written notice to the other party no later than six months prior to the expiration of the initial term of the Agreement. 2.          DUTIES              Employee is engaged to serve as Senior Vice President – Sales and Marketing of Eagle.  He shall perform such duties and functions commensurate with his position and as directed by Eagle.  During the term of this Agreement, Employee shall devote all of the time, skills, attention, and energy necessary for the performance of his duties and shall not be employed by any other entity without the expressed written permission of the Chief Executive Officer of Eagle. 3.          COMPENSATION    a.          Base Salary.              As full compensation for the performance by the Employee of all of his obligations under this Agreement, the Employee shall be entitled to receive no less than an annual base salary of $200,000 payable periodically on the payroll schedule established for Eagle employees.  Base salary shall be reviewed as of December 31 each year commencing with December 31, 2001, and based on the performance of the Employee, the business conditions of Eagle and the competitive market, Eagle shall determine the amount, if any, of any increase in base salary to be granted as of such dates.              b.          Annual Bonus.              Employee shall be entitled to participate in the Company’s Senior Management Performance Bonus Plan.              c.          Stock Options and Restricted Stock.              As of the date hereof, in further consideration of the Employee’s employment hereunder, the Employee acknowledges that:              (i)          the Employee has purchased 15,000 shares of Common Stock of Eagle, a portion of the purchase price for which Eagle loaned to the Employee subject to the terms of a Promissory Note of even date herewith executed in favor of Eagle;              (ii)         Eagle has granted the Employee 25,000 shares of restricted Common Stock of Eagle, subject to the terms of a Restricted Stock Agreement of even date herewith between the Employee and Eagle; and              (iii)        Eagle has granted the Employee an incentive stock option to acquire 85,000 shares of Eagle’s Common Stock at an exercise price equal to the fair market value for such Common Stock as of the date hereof, subject to the terms of a Incentive Stock Option Agreement between the Employee and Eagle. 4.          VACATION AND WELFARE BENEFITS              The Employee shall be entitled to all vacation, health/medical, life insurance, savings, and any other plans which are established for the benefit of Eagle employees.  The Employee shall be entitled to such participation as long as he remains in the employ of Eagle or for any period for which he is entitled to continue participation beyond the term of his employment as may be specified elsewhere in this Agreement.  Eagle reserves the right to establish, modify, or determine the terms and conditions of any such welfare plans at its own discretion. 5.          TERMINATION OF THE EMPLOYEE’S EMPLOYMENT BY EAGLE              a.          During the Life of this Agreement.              If the Employee’s employment is terminated by Eagle prior to the expiration of this Agreement for any reason other than for cause (as hereinafter defined) or under such circumstances as would constitute a breach of this Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued employment under this Agreement or in lieu of any other policy or program maintained by Eagle, an amount equal to his base salary for the balance of the initial term of the Agreement remaining at the time of such termination, provided that such payment shall be for a minimum of twelve months of his base salary at the time of such termination.  Eagle may make any such payment that arises from this Section on a pay schedule established by Eagle for other executives.  During periods of any such continuing payments, welfare benefits provided to the Employee under this Agreement shall continue.              b.          Upon the Expiration of this Agreement.              Should Eagle elect not to renew this Agreement upon its expiration, and such election is not as a result of cause (as hereinafter defined) or breach of this Agreement on the part of the Employee, and if Eagle no longer wishes to employ the Employee in his position, Eagle shall pay the Employee an amount equal to twelve months of his base salary at the time of expiration of this Agreement and such payment shall be made, at the Employee’s option, either in a lump-sum as soon as is practicable following the expiration date of this Agreement or in continuing payments on the pay schedule established by Eagle for executives and welfare benefits as provided to the Employee in this Agreement shall continue for the duration of such payments.              c.          Termination for Cause, Resignation or Retirement.              If the Employee’s employment terminates at any time for cause or his resignation or retirement, the Employee shall forfeit the right to any severance payments hereunder.  For purposes of this subsection, “cause” shall include larceny or theft of property of Eagle or any affiliated company or Eagle; revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone except as expressly authorized by Eagle in the performance or the Employee duties or as required by law; willful dishonesty, gross misconduct, or fraud toward Eagle, or any affiliated company or conviction of a felony involving moral turpitude.              d.          Severance.              (i)             Anything contained herein to the contrary notwithstanding, Eagle’s obligation to the Employee to make severance payments under this Agreement shall cease upon the termination of the Employee’s employment with Eagle for reason of retirement by the Employee, his death, his disability for a period exceeding six (6) months, or under any other circumstances as would constitute a breach of this Agreement by the Employee, including, but not limited to, his resignation from his employment.              (ii)         Any payment of severance payments provided herein may, at Eagle’s discretion, be conditioned upon the execution of a release by the Employee of all claims against Eagle arising out of his employment and the termination thereof. 6.          CONFIDENTIAL INFORMATION AND NON-COMPETITION              a.          The Employee acknowledges the importance of Eagle’s arrangements with its employees, suppliers, and customers and he further acknowledges that the nature of these arrangements and other information concerning the business processes, formulas, programs, methods, techniques, policies, and practices of Eagle are trade secrets and constitute valuable assets of Eagle.  Therefore:              (i)          The Employee shall not disclose or furnish to anyone, either directly or indirectly, either during his employment under this Agreement or at any time after his employment, any such trade secret of Eagle or any other company controlling, controlled by, or under common control with Eagle that comes into his possession during the course of his employment.              (ii)         To the extent that the Employee has knowledge of such trade secrets or any other information concerning Eagle which has not been disclosed to the public by Eagle and is material under applicable securities laws, the Employee acknowledges and agrees that the effect of the applicable securities laws prohibit the Employee from trading in Eagle’s stock unless and until Eagle voluntarily discloses such material information to the general public.              (iii)        Upon termination of the Employee’s employment for any reason, the Employee agrees not to compete in the manner described hereinafter, with the business currently conducted by Eagle in the United States for a period of twelve months following such termination.  The Employee agrees that, during such period, he will not be employed by, work for, advise, consult with, serve, or assist in any way, directly or indirectly, any party whose activities or business are similar to or in competition with the business of Eagle.              (iv)       Upon termination of the Employee’s employment for any reason, the Employee agrees not to solicit, cause or assist to solicit for a period of twelve months following such termination, on behalf of himself or any business or organization with which he becomes directly or indirectly associated by ownership, employment, consultancy or otherwise, regardless of whether or not he receives compensation therefrom, (1) any person employed or compensated in any manner by Eagle, or to work, consult for or otherwise become associated with him or any such business or organization, or (2) any customer who has done business with Eagle at any time within the one (1) year period preceding the date of his termination of employment, to purchase or otherwise acquire a product similar to a product sold by Eagle. The foregoing restrictions on competition by the Employee described in the Sections 6(a)(iii) and (iv) shall also be operative during the term of the Employee’s employment.  They shall also be operative for the benefit of Eagle and of any business owned or controlled by Eagle, or any successor or assign if any of the foregoing, but shall terminate if Eagle and the companies with which it becomes affiliated as of the effective date of this Agreement cease to engage in all of the businesses in which Eagle is engaged as of the time Employee’s employment terminates.              b.          The Employee shall surrender to Eagle immediately upon termination of his employment all books, records, and property belonging to Eagle or relating to the employees, business, suppliers, and customers of Eagle without making or retaining any copies.              c.          The Employee acknowledges that Eagle will suffer irreparable damage and injury and will not have an adequate remedy at law in the event of any breach by him of any provision of this Section 6.  Accordingly, in the event of a breach or of a threatened or attempted breach by the Employee of any of the preceding provisions of this Section 6, in addition to all other remedies to which Eagle is entitled under law, Eagle shall be entitled to a temporary and permanent injunction (without the necessity of showing any actual damage) or a decree of specific performance of the provisions of this Section 6, and no bond or other security shall be required in that connection. 7.          DISCOVERIES The Employee will promptly disclose, in writing, to Eagle each improvement, discovery, idea, and invention relating to the business of Eagle made or conceived by him either alone or in conjunction with others while employed by Eagle or within one (1) year after the termination of such employment if such improvement, discovery, idea, or invention that results from or was suggested by such employment whether or not patentable, whether or not made or conceived (i) at the request of or upon the suggestion of Eagle (ii) during his usual hours of work, (iii) on or about the premises of Eagle and whether or not prior or subsequent to the execution hereof.  He will not disclose any such improvement, discovery, idea, or invention to any person except Eagle.  Each such improvement, discovery, idea, or invention shall be the sole and exclusive property of, and is hereby assigned to, Eagle and at the request of Eagle, Employee will assist and cooperate with Eagle and any person or persons from time to time designated by Eagle to obtain for Eagle the grant of any letters patent in the United States and/or such other country or countries as may be designated by Eagle, covering any applications, statements, assignments, or other documents, furnish such information and data and take all such other action (including without limitation, the giving of testimony) as Eagle may from time to time reasonably request. 8.          MISCELLANEOUS              a.          The Employee shall be entitled to participate in any Deferred Compensation Program established for Eagle executives related to any bonuses or other payments in this Agreement that are eligible for deferred payment under the terms of any such Plan.              b.          The Employee shall be reimbursed for, or have directly paid by Eagle (dependent upon Eagle’s financial policy), travel, entertainment, and other associated expenses deemed reasonably necessary in carrying out the duties of his position.              c.          The Employee represents and warrants to Eagle that upon commencement of employment with Eagle that he will not at any time be bound by any agreement that would be violated by his execution or performance of this Agreement.              d.          The Employee may not assign any of his rights or delegate any of his duties under this Agreement.              e.          Any notice or other communication under this Agreement shall be in writing and shall be considered given when mailed by registered mail, return receipt request, to either party.              f.           This Agreement sets forth the entire understanding of the parties, and completely and fully supersedes and replaces any prior agreement(s) with respect to the subject matter herein, written or oral, to which the Employee was a party.  This Agreement shall be governed by and construed in accordance with the law of the State of Oregon applicable to agreements made in that state and cannot be changed or terminated except by written agreement duly signed by both parties.  If any provision of this Agreement or the application thereof to any party or circumstance is finally held invalid or unenforceable, the remaining provisions of this Agreement and the application of such provisions to the other party or circumstances will not be affected thereby, the provisions of this Agreement being severable in any such instance, and the unlawful provision shall be deemed to be amended to conform to requirements of any applicable law. 9.          Any controversy or claim, including claims for damages arising out of or relating to this Agreement, or any breach thereof, or other matters related to the termination of the Employee’s Employment, shall be settled in arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered in any court having jurisdiction thereof. 10.        This Agreement may be signed in one or more counterparts and all such counterparts, taken together, shall constitute one document.              IN WITNESS WHEREOF, this Employment Agreement has been executed by a duly authorized officer of Eagle on this 12th day of February, 2001. PW EAGLE, INC. (the “Company”) By: /s/ William H. Spell --------------------------------------------------------------------------------              IN WITNESS WHEREOF, this Employment Agreement has been executed by the Employee on the 12th day of February, 2001 and the Employee attests that he is in full agreement with all terms and conditions herein and has exercised his legal right to have this Agreement reviewed by an Attorney if he so chooses. By: /s/ N. Michael Stickel -------------------------------------------------------------------------------- (the “Employee”)  

Exhibit 10.12   PERSONAL AND CONFIDENTIAL May 2, 2001 Mr. Peter T. Paul 550 Riviera Circle Larkspur, CA 94939 Dear Peter:              This letter agreement (“Agreement”) will confirm the terms negotiated and reached between you and GreenPoint Financial Corp. (“GreenPoint”) concerning your separation from GreenPoint, GreenPoint Bank (the “Bank”), GreenPoint Credit, LLC (“Credit”), and each of their respective affiliates (collectively, the “GreenPoint Entities”).  Under this Agreement, you and GreenPoint will be, from time to time, referred to collectively as the “Parties”. This Agreement has been entered into between the Parties after each of the Parties consulted with its respective counsel.              1.          Separation Date.  You hereby give notice that effective May 1, 2001 (the “Separation Date”) you will be resigning from your employment with the GreenPoint Entities, including, without limitation, your positions as Vice Chairman of GreenPoint and the Bank and as President and Chief Executive Officer of Credit.  Further, you hereby give notice that effective on the Separation Date you will be resigning from the Board of Directors and the Management Committee of any of the GreenPoint Entities on which you serve as a member, except that, subject to Paragraph 2(c), at this time you will not be resigning as a member of the Boards of Directors of GreenPoint and the Bank.  Your notice and commitment to resign are firm and irrevocable.              2.          Consideration.  In exchange for your execution of this Agreement (provided you do not revoke your acceptance) and your compliance with all of its terms, you will be provided with the payments, benefits and rights set forth in this Agreement.              (a)         Consulting Services.  Subject to the terms and conditions herein, GreenPoint agrees to retain you as a consultant to Thomas S. Johnson and Bharat B. Bhatt, in their capacity as Chairman and Chief Executive Officer and President and Chief Operating Officer, respectively, of GreenPoint and the Bank for the period commencing on the Separation Date and ending on May 1, 2003 (the “Consulting Period”); provided, however, that either you or GreenPoint can earlier terminate the Consulting Period for any reason in the sole discretion of either you or GreenPoint.  You acknowledge that while serving as a consultant under the terms of this Agreement you shall not possess the power or authority to make binding commitments on behalf of any of the GreenPoint Entities or their respective employees, officers or directors. While you are serving as a consultant under the terms of this Agreement, you agree that you will be available on an as needed basis, as determined in the sole discretion of Mr. Johnson or Mr. Bhatt, to provide advice regarding new and existing projects.  The ability of Mr. Johnson and Mr. Bhatt to request consultation and your obligation to provide consulting services under the terms of this Agreement shall not be assigned or transferred to any other person or entity.              (b)        Consulting Fees.  While serving as a consultant during the Consulting Period, GreenPoint shall pay you a consulting fee of $120,000 per year, payable in 12 equal monthly installments in arrears on the first day of each month, with the first such payment being made on June 1, 2001.  It is agreed that you will submit invoices to GreenPoint for reasonable expenses incurred by you in connection with consulting services you provide under the terms of this Agreement and that GreenPoint will reimburse you for these reasonable expenses in accordance with its policy as in effect from time to time.  While serving as a consultant during the Consulting Period, your services are to be rendered as an independent contractor, and you are solely responsible for the payment of all Federal, state, local and foreign taxes that are required by applicable laws or regulations to be paid with respect to the consulting fees.  GreenPoint shall not make any deductions, withholdings or payments from the consulting fees payable to you under this Agreement.  You agree to indemnify GreenPoint for any tax liability it may incur by virtue of any payments made by GreenPoint to you should you fail to file and pay all appropriate taxes as a self-employed person.  Upon the cessation of your consulting services, whether by you or by GreenPoint for any reason in the sole discretion of either you or GreenPoint, GreenPoint’s obligation to pay you the consulting fees shall cease, provided that GreenPoint shall be obligated to pay you a pro-rata portion of the monthly consulting fee in respect of the month in which your services cease.              (c)         Board Memberships.  While serving as a consultant during the Consulting Period, you shall continue to have the right to serve as a member of the Board of Directors of each of GreenPoint and the Bank.  Upon your cessation of service as a consultant, either upon the expiration of the Consulting Period or as a result of termination of your services by you or by GreenPoint for any reason in the sole discretion of either you or GreenPoint, you shall automatically cease to be a member of such Boards of Directors.  You acknowledge that, other than the consulting fees provided herein, you shall not be entitled to receive any fees for your service to the Boards of Directors of GreenPoint and the Bank, nor shall you be entitled to participate in any benefit or compensation plan or program.  It is agreed that you will submit invoices to GreenPoint for reasonable expenses incurred by you in connection with your membership on these Boards and that GreenPoint will reimburse you for these reasonable expenses in accordance with its policy as in effect from time to time.              (d)        Benefit Plans. You acknowledge that effective as of the Separation Date and thereafter while serving as a consultant you shall not be entitled to participate in any of the employee benefit, compensation or incentive plans of any of the GreenPoint Entities, except as specifically provided herein and, as appropriate, you will be given the opportunity to elect COBRA continuation health insurance coverage under the applicable health insurance plan maintained by Credit and may continue health insurance coverage until the end of the COBRA period at your own expense by paying the monthly insurance premium in full each month.  You acknowledge that the GreenPoint Entities provide valuable pension, welfare, fringe and other compensatory benefits to certain eligible employees.  You agree that even if a court or government agency were to determine that during the Consulting Period you and GreenPoint (or any of the other GreenPoint Entities) had a common law employer-employee relationship, you still will be bound by this Agreement and will not be entitled to receive from any of the GreenPoint Entities or have any of the GreenPoint Entities provide on your behalf any different or additional pay, or any benefits, insurance coverage, tax payments or withholding, or compensation of any kind.  You hereby knowingly and voluntarily waive any right you may have to demand, claim or obtain participation, benefits or payments in or from the pension, welfare and/or fringe benefits plans, policies, programs or other arrangements maintained by any of the GreenPoint Entities for their employees on the ground of the performance of services under this Agreement.              Notwithstanding anything contained herein to the contrary, solely with respect to the option to acquire GreenPoint common stock granted under the (i) Stock Option Agreement between GreenPoint and you dated as of March 30, 1999 pursuant to GreenPoint’s Amended and Restated 1994 Stock Incentive Plan, you will vest in an additional 25,000 option shares on the earlier to occur of (q) March 30, 2002 and (r) your death or Disability or a Change in Control (as those terms are defined in the 1994 Stock Incentive Plan) and (ii) Stock Option Agreement between GreenPoint and you dated as of January 20, 2000 pursuant to GreenPoint’s 1999 Stock Incentive Plan, you will vest in an additional 41,666 option shares on the earlier to occur of (t) January 20, 2002 and (u) your death or Disability or a Change in Control (as those terms are defined in the 1999 Stock Incentive Plan); in each case, without regard to the earlier termination of the Consulting Period by you or GreenPoint for any reason in the sole discretion of either you or GreenPoint.  The option shares that vest as provided in the immediately preceding sentence will remain exercisable for a period of one year from the applicable vesting date, which period, in each case, will not be extended as a result of your death or Disability or a Change in Control (as those terms are defined in the 1994 and 1999 Stock Incentive Plans) prior to the expiration of each respective exercise period.  In addition, while serving as a consultant during the Consulting Period, solely with respect to the 2000 grant, you will vest in an additional 41,668 option shares on the earlier to occur of (w) January 20, 2003 and (x) your death or Disability or a Change in Control (as those terms are defined in the 1999 Stock Incentive Plan); provided, however, that if the applicable vesting date is the date set forth in (w) above, you will not vest in the additional 41,668 option shares if, by January 20, 2003, the Consulting Period has been terminated by you or GreenPoint for any reason in the sole discretion of you or GreenPoint. The option shares, if any, that vest as provided in the immediately preceding sentence will remain exercisable for a period of one year from the applicable vesting date, which period will not be extended as a result of your death or Disability or a Change in Control (as those terms are defined in the 1999 Stock Incentive Plan) prior to the expiration thereof. The option shares that are fully vested on May 1, 2001 (which GreenPoint acknowledges to be 50,000 option shares with respect to the 1999 grant and 41,666 option shares with respect to the 2000 grant) will remain exercisable until April 30, 2002, which period will not be extended as a result of your death or Disability or a Change in Control (as those terms are defined in the 1994 and 1999 Stock Incentive Plans) prior to the expiration thereof. You shall have the right to exercise the vested portion of any such option upon the payment of the exercise price and any applicable withholding taxes until the expiration of the periods set forth herein.  To the extent any vested option shares are unexercised as of the expiration of the applicable vesting period set forth herein, they shall expire and be forfeited immediately. You acknowledge that except as provided herein (y) any rights in respect of any other equity awards granted to you under the Stock Incentive Plans referred to above shall expire and be forfeited as of the Separation Date, including, without limitation, the option to acquire GreenPoint common stock under the Stock Option Agreement between GreenPoint and you dated as of February 9, 2001 pursuant to GreenPoint’s 1999 Stock Incentive Plan and (z) all other terms of the Stock Option Agreements referred to above as well as the 1994 and 1999 Stock Incentive Plans (as they may be amended from time to time) shall remain in effect.              You acknowledge that the determination of whether you are “retired” or otherwise qualify for “retirement” as those terms  (or any derivative terms) are used under the plans, policies, programs, practices, etc. maintained by any of the GreenPoint Entities from time to time will be made solely and exclusively under the terms and conditions of each applicable plan, policy, program, practice, etc., and nothing in this Agreement shall modify or otherwise change the terms or meaning of any such plan, policy, program, practice, etc. with respect to your rights or the rights of any other person, or the obligations of any of the GreenPoint Entities thereunder.              3.          Employment Letter Agreement/Restrictive Covenants.  You acknowledge that pursuant to the employment letter agreement between you and GreenPoint dated as of December 4, 1998 (the “Employment Letter”) (attached hereto and made part hereof as Exhibit I), you will continue to be subject to the restrictive covenants set forth in Exhibit B thereto through the Separation Date and thereafter for the applicable periods set forth therein.  You and the GreenPoint Entities acknowledge and agree that with respect to the restrictive covenants set forth in Exhibit B to the Employment Letter, the “Restricted Period” ends on January 1, 2003.              4.          Termination of Change in Control Agreement.  You acknowledge and agree that effective as of May 1, 2001, the Change in Control Agreement entered into between you and GreenPoint as of March 30, 1999 is terminated, and you further agree that the Paul Releasors (as defined in Paragraph 5 below) have no rights and the GreenPoint Releasees (as defined in Paragraph 5 below) have no obligations thereunder.              5.          Release of Claims by Paul.  You, including for this purpose your representatives, agents, heirs, executors, administrators, successors, assigns, present or former spouse, dependants, children and family members (“Paul Releasors”), hereby release the GreenPoint Entities, including for this purpose their respective members, subsidiaries, affiliated entities, predecessors, successors and assigns, and third party beneficiaries, and all of their respective current and former employees, officers, directors, management committees, fiduciaries and agents (“GreenPoint Releasees”), of and from any and all claims, actions, causes of action, suits, and demands, including attorney’s fees and costs, whatsoever, in law or equity, which against the GreenPoint Releasees the Paul Releasors ever had, now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever in connection with any relationship between the Paul Releasors and the GreenPoint Releasees, known or unknown, including, without limitation, rights under federal, state or local laws prohibiting age or other forms of discrimination, including Title VII of the Civil Rights Act of 1964; Sections 1981 through 1988 of Title 42 of the United States Code; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; the Americans with Disabilities Act; the Family and Medical Leave Act; the National Labor Relations Act; the Immigration Reform Control Act; the Occupational Safety and Health Act; any and all other federal, state or local human rights, retaliation, whistle blower, discrimination, bias, civil rights, wage-hour, benefits, pension or labor laws or any other federal, state or local law, rule, regulation or ordinance, including, without limitation, those state laws that are set forth in Exhibit II to this Agreement, any wrongful discharge, public policy, contract, tort or common law; and any alleged entitlement to costs, fees or expenses, including attorneys’ fees, but excluding any claims under this Agreement and any right to receive vested benefits, if any, under the Stock Incentive Plans referred to in Paragraph 2 above and any tax-qualified retirement plan maintained by GreenPoint in which you are a participant as of the Separation Date, any right to receive COBRA continuation health insurance coverage and any right to claim unemployment insurance benefits. The GreenPoint Releasees and the Paul Releasors acknowledge and agree that the Paul Releasors are not waiving any rights or claims against the GreenPoint Releasees that may arise after the date on which this Agreement becomes effective.              5A.       Release of Claims by GreenPoint.  The GreenPoint Entities, including for this purpose their respective members, subsidiaries, affiliated entities, predecessors, successors and assigns, and third party beneficiaries, and all of their respective current and former employees, officers, directors, management committees, fiduciaries and agents (“GreenPoint Releasors”) hereby release you, including for this purpose your representatives, agents, heirs, executors, administrators, successors, assigns, present or former spouse, dependants, children and family members (“Paul Releasees”), of and from any and all claims, actions, causes of action, suits, and demands, including attorney’s fees and costs, whatsoever, in law or equity, which against the Paul Releasees the GreenPoint Releasors ever had, now have or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever in connection with any relationship between the GreenPoint Releasors and the Paul Releasees, known or unknown, including, without limitation, the use by you or the Headlands Foundation, Headlands Estates or the Headlands Group of the Headlands name or the lighthouse logo previously used by Headlands Mortgage Company, rights under any federal, state or local law, rule, regulation or ordinance, public policy, contract, tort or common law, and any alleged entitlement to costs, fees or expenses, including attorneys’ fees, except that the GreenPoint Releasors expressly do not waive any claim, cause of action, right of indemnity or any other relief they may have or be entitled to against the Paul Releasees under this Agreement, or for breach of fiduciary duty, criminal conduct, fraud, misappropriation, embezzlement or violation of the restrictive covenants described in Paragraph 3 above. The Paul Releasees and the GreenPoint Releasors acknowledge and agree that the GreenPoint Releasors are not waiving any rights or claims against the Paul Releasees that may arise after the date on which this Agreement becomes effective.              6.          Waiver of Unknown Claims.  Except as otherwise excepted under or excluded from Paragraphs 5 and 5A above, this is a full and final release covering all unsuspected, unknown, undisclosed and unanticipated losses, wrongs, injuries, debts, claims or damages to the GreenPoint Entities and you which may have arisen, or may arise from any act or omission prior to the effective date of this Agreement, and which arise out of or are related, directly or indirectly, to the dealings between the GreenPoint Entities and you prior to the effective date of this Agreement.  Therefore, the GreenPoint Entities and you waive any and all rights or benefits which the GreenPoint Entities and you may now have, or in the future may have, under the terms of Section 1542 of the California Civil Code, which provides 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. The GreenPoint Entities and you acknowledge that the GreenPoint Entities and you have read this Agreement, including the waiver of California Civil Code Section 1542, and that the GreenPoint Entities and you have been provided the opportunity to consult with counsel, and did consult with counsel chosen by the GreenPoint Entities and you, about this Agreement and specifically about the waiver of Section 1542, that the GreenPoint Entities and you understand this Agreement and the Section 1542 waiver, and so freely and knowingly enter into this Agreement.  The GreenPoint Entities and you acknowledge that the GreenPoint Entities and you may hereafter discover facts different from or in addition to those the GreenPoint Entities and you know or now believe to be true with respect to the matters released or described in this Agreement and the GreenPoint Entities and you agree that the releases and agreements contained herein shall be and will remain effective in all respects notwithstanding any later discovery of any such different or additional facts.  The GreenPoint Entities and you hereby assume any and all risk of any mistake in connection with the true facts involved in the matters, disputes, or controversies described herein or with regard to any facts, which are now unknown to the GreenPoint Entities and you relating hereto.              7.          No Claims Exist.  Solely with respect to the claims, etc. released by the GreenPoint Releasors in Paragraph 5A above, GreenPoint confirms that by or with respect to the GreenPoint Releasors or for the GreenPoint Releasors or on behalf of the GreenPoint Releasors no claim, charge, complaint or action by the GreenPoint Releasors against the Paul Releasees exists in any forum or form. In the event that any such claim is filed, the GreenPoint Releasors shall not be entitled to any relief or recovery therefrom. Solely with respect to the claims, etc. released by the Paul Releasors in Paragraph 5 above, you confirm that by or with respect to the Paul Releasors or for the Paul Releasors or on behalf the Paul Releasors no claim, charge, complaint or action by the Paul Releasors against the GreenPoint Releasees exists in any forum or form. In the event that any such claim is filed, the Paul Releasors shall not be entitled to any relief or recovery therefrom. You agree that in the event any class or collective action is or was commenced against the GreenPoint Releasees based upon events occurring prior to the effective date of this Agreement, the Paul Releasors immediately shall withdraw and/or opt out of said class or collective action upon learning of the inclusion of the Paul Releasors, otherwise you will be in breach of this Agreement.  You further agree that the Paul Releasors shall not be entitled to any relief or recovery from any such class or collective action should the Paul Releasors be included in any such action knowingly or unknowingly.              8.          Time to Consider and Right of Revocation.  You understand that (a) you have twenty-one (21) days to consider the terms and the meaning of this Agreement, (b) you should seek advice from an attorney to consider the terms and the meaning of this Agreement, (c) you may revoke this Agreement for a period of seven (7) days following your signing of this Agreement, and (d) no modifications, alterations, amendments or any other changes to this Agreement, whether material or immaterial, restart, extend or renew the running of the twenty-one (21) day period in which to consider this Agreement.  You acknowledge that if you execute this Agreement prior to the expiration of the 21-day period or if you choose to forego the advice of an attorney, you do so freely, knowingly and voluntarily and waive any and all future claims that such action or actions would affect the validity of this Agreement.  This Agreement will not be effective or enforceable until the revocation period has expired without any revocation by you.  Any revocation within this period must be submitted in writing and received within the revocation period by GreenPoint Financial Corp., 90 Park Avenue, New York, New York, 10016, Attention: Dr. Mary M. Massimo, Human Resources Division, and must state, “I hereby revoke my acceptance of the letter agreement between GreenPoint Financial Corp. and me” or words to that effect.  If the last day of the revocation period is a Saturday, Sunday, or legal holiday in New York, then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday.              9.          Knowing and Voluntary.  The Parties agree that they have entered into this Agreement after having had the opportunity to consult an attorney, with such consultation as the Parties deemed appropriate and that the Parties have a full understanding of their rights and obligations under this Agreement and of the effect of executing this Agreement.  The Parties further acknowledge that their execution of this Agreement is made voluntarily and with full understanding of its consequences and has not been coerced in any way.  In connection with this matter, the Parties have consulted with and have been represented by counsel, and the Parties acknowledge that they chose their respective counsel and are satisfied in all respects with the advice, services and representation provided by such counsel.  The terms of this Agreement are the product of mutual negotiation and compromise between the Parties.  The meaning, effect and terms of this Agreement have been fully explained to the Parties by their respective counsel.              10.        Non-Admission.  The Parties acknowledge and agree that this Agreement shall not be construed as an admission of any fault, wrongdoing or liability whatsoever on the part of either of the Parties and that each of the Parties expressly denies that it violated any law, public policy, contract, any of the policies, practices or procedures of the GreenPoint Entities or had any liability to each other.              11.        Non-Disclosure.  (i) You:                            (a)         agree that you shall not, except as necessary to satisfy your duties as a shareholder of GreenPoint or as a director of GreenPoint and the Bank, or as required to enforce this Agreement, or as compelled by law (and upon being so compelled will notify GreenPoint immediately), publicize or disclose to any person or entity any term of or the making of this Agreement or the facts or circumstances relating thereto; provided, however, you shall disclose in the appropriate circumstances the restrictive covenants described in Paragraph 3 above.  This covenant of confidentiality includes, but is not limited to, the terms or the making of this Agreement and your receipt of the consideration hereunder.  Other than to discuss the terms hereof with your spouse, attorney or tax advisor (each of whom must first agree not to make any disclosure that you yourself could not make), you will not disclose to anyone any facts, documents or other information in connection with this matter.  Upon receipt of any inquiry regarding this matter by prospective employers or others, you, or any of your representatives, shall state only that your separation from the GreenPoint Entities was mutually agreeable. You shall be liable for any damages caused by your or any other person’s violation of this covenant;                            (b)        confirm that, as of the date of the execution of this Agreement, you have not violated the terms of this covenant of confidentiality; and                            (c)         understand and agree that any violation of this covenant of confidentiality will constitute a material breach of this agreement, which will cause GreenPoint to suffer immediate, substantial and irreparable injury and which will be a sufficient basis for an award of injunctive relief and monetary damages without affecting the remainder of this Agreement and without affecting GreenPoint’s right to seek or obtain other equitable or legal relief or remedies.                                         (ii) GreenPoint agrees that it shall not, except as compelled by law, or as required by the U.S. Securities and Exchange Commission or the New York Stock Exchange, or as necessary to continue to operate its business, as determined in its sole discretion, or as required to enforce this Agreement, publicize or disclose to any person or entity any term of or the making of this Agreement. You understand and acknowledge that GreenPoint shall attach this Agreement as an Exhibit to its Forms 10-Q and/or Forms 10-K filed with the U.S. Securities and Exchange Commission. Upon receipt of any inquiry regarding this matter by prospective employers of you or by others, executive officer representatives of GreenPoint who are authorized to discuss this matter, shall state only that your separation from the GreenPoint Entities was mutually agreeable. GreenPoint confirms that, as of the date of the execution of this Agreement, it has not violated the terms of this covenant of confidentiality.              12.        Cooperation/Non-Disparagement.  You agree not to make any remarks or take any actions that directly or indirectly negatively impact the operations of the GreenPoint Entities. You further agree not to make disparaging or derogatory remarks concerning GreenPoint Entities to any third party.  GreenPoint agrees to use reasonable efforts to ensure that the executive officer representatives of GreenPoint who are authorized to discuss this matter do not make disparaging or derogatory remarks concerning you to any third party.              13.        Return of Property.  You agree to return to GreenPoint by April 30, 2001 any property of the GreenPoint Entities in your possession, including but not limited to computer equipment (hardware, including laptop computers, and software), beepers, cellular telephones, keys, credit cards, expense accounts, and identification and access and control cards; provided, however, that until April 30, 2002 GreenPoint will leave on the phone number previously assigned to you in GreenPoint’s Larkspur, CA office a message in your voice advising of your forwarding phone number and will establish on the e-mail address previously assigned to you by GreenPoint an automatic reply advising of your new phone number, postal address and e-mail address.  You agree to account by April 30, 2001 for all expenses not already accounted for (e.g., credit card bills) and to reimburse GreenPoint by April 30, 2001 for any cash advances or unauthorized expenses.  Except for records properly obtained and maintained by you in your capacity as a shareholder and director, you also agree to return all documents, in whatever form you possess them (e.g., whether in hard-copy or electronically) bearing upon the business of the GreenPoint Entities, including but not limited to research data, production reports, product descriptions, customer lists, phone lists, manuals, reports or other records relating to the business or processes of the GreenPoint Entities and you will not maintain, in any form, any copies of such documents.              14.        Entire Agreement.  This Agreement (including the attachments hereto) constitutes our complete agreement and, except as provided in Paragraph 15 below, may not be changed except by a writing signed by you and GreenPoint.  This Agreement shall be binding upon and inure to the benefit of you, GreenPoint and the successors, assigns, beneficiaries, heirs and legal representatives of you and GreenPoint.              15.        Construction.  This Agreement shall be governed and interpreted by and in accordance with the laws of the State of California without regard to its conflict of laws provision.  In the event any provision of this Agreement shall be deemed unenforceable or void, all remaining provisions of this Agreement shall remain in full force and effect, except as specified below.  In the event that any of the provisions of this Agreement shall be deemed by any court of competent jurisdiction, or any arbitrator in any proceedings in which the GreenPoint Releasees, the Paul Releasors, the Paul Releasees or the GreenPoint Releasors shall be a party, to be unenforceable because of its duration, scope, or area, it shall be deemed to be and shall be amended to conform to the scope, period of time and geographical area which would permit it to be enforced.  The court or arbitrator shall make such other modifications as are necessary to effectuate the intent of the Parties in entering into this Agreement.              16.        No Payment of Legal Fees.  Each of the Parties shall be responsible for its own legal fees or costs incurred, if any, in connection with the negotiation and settlement of this Agreement.              17.        Legal and Administrative Proceedings.  During the Consulting Period, you agree to cooperate, assist, and participate, without charge and with reasonable travel expenses and disbursements, in connection with any legal, administrative or other similar proceeding in which you were involved during your employment with the GreenPoint Entities and their respective predecessors and in any other legal, administrative or other similar proceeding filed against or brought by the GreenPoint Entities, including but not limited to meetings with attorneys for the GreenPoint Entities and appearing at and testifying truthfully at any proceeding where your presence is required.  Specifically, you agree to be available on an as needed basis (as reasonably determined by GreenPoint); provided, however, that (a) GreenPoint will provide advance notice to you each time GreenPoint will need you to be available, and (b) GreenPoint’s need for you to be available will not unreasonably conflict with your employment or personal schedule.              18.        Resolution of Disputes.  Except as may be required to enforce any restrictive covenants set forth herein or in the Employment Letter, including Exhibit B thereto, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled solely by arbitration, in accordance with the rules of the American Arbitration Association (“AAA”), in Marin County, California, or if the AAA does not have an office in Marin County, California, then in San Francisco, California.  In such arbitration, each party shall bear its own legal fees and related costs, except that the parties shall share equally the fee of the arbitrator.  To the extent that any claim is found not to be properly subject to arbitration, such claim shall be either decided by the U. S. District Court or the appropriate state court in and for the District or County, as the case may be, in San Francisco, California, and all such claims shall be adjudicated by a judge sitting without a jury, to ensure rapid adjudication of those claims and proper application of existing law.              19.        Headlands Name/Logo. The GreenPoint Entities agree not to contest or object to the use by the Headlands Foundation, a California non profit public benefit corporation (the "Headlands Foundation") of (i) the term "Headlands" in the name of the Headlands Foundation and (ii) the lighthouse logo previously used by Headlands Mortgage Company; provided, however, that (A) the Headlands Foundation continues to qualify as a 501(c)(3) corporation under the Internal Revenue Code of 1986, as amended, and (B) the Headlands Foundation does not directly or indirectly engage in the business activity of residential finance, including, without limitation, originating or servicing mortgage loans.   [remainder of this page left blank on purpose] If the above correctly reflects your understanding of the agreement negotiated and reached between you and GreenPoint, kindly sign an original of this letter agreement below where indicated and return it to me.  The other original is for your files.   Very truly yours,    /s/ Mary M. Massimo     --------------------------------------------------------------------------------     Mary M. Massimo     Senior Vice President and     Human Resources Director     GreenPoint Financial Corp.     ACCEPTED AND AGREED:   /s/  Peter T. Paul     --------------------------------------------------------------------------------     Peter T. Paul         Date: May 2, 2001     Peter T. Paul Headlands Mortgage Company Dear Mr. Paul:              In connection with the proposed transaction by and among GreenPoint Financial Corp. (“GreenPoint”), Headlands Mortgage Company (“Headlands”) and GFC Acquisition Corp. (“GFC”) (the “Merger”) and subject to the consummation of the Merger, GreenPoint is pleased to extend to you an offer of employment in consideration of the substantial contributions you are expected to make and the value that we know you will bring to GreenPoint.  The terms of the offer are as follows: 1. Term. GreenPoint agrees to employ you, and you agree to enter into the employ of GreenPoint, subject to the terms and conditions of this letter agreement, for the period commencing on the effective date of the Merger and ending on the second anniversary thereof (the “Term”), subject to earlier termination as set forth below.     2. Title; Position. During the Term, you shall serve as a Vice Chairman of GreenPoint, as a member of the Board of Directors of GreenPoint (the “Board”) and as the Chief Executive Officer of Headlands, with responsibilities commensurate with such positions.   During the Term, you agree to devote your full attention, time, skill and energy to the business and affairs of GreenPoint and to use your best efforts to perform such responsibilities in a professional manner.   In the event that your employment with GreenPoint and its affiliates is terminated for any reason, you shall automatically cease to be a member of the Board.     3. Compensation.  Your starting annual base salary will be $300,000.  You will be eligible to participate in a cash incentive compensation program, pursuant to the terms and conditions of the program made available to you by GreenPoint from time to time.     4. Stock Options.   On the effective date of the Merger, you will be granted an option to purchase 75,000 shares of common stock of GreenPoint (the “Option”).  The Option will vest and become exercisable in three equal installments on each of the first, second and third anniversaries of the date of grant.  The Option will be governed by the terms of GreenPoint's Stock Option Plan and a Stock Option Agreement to be entered into between you and GreenPoint.  While employed by GreenPoint, you will be eligible to receive annual option grants as determined by the Compensation Committee of the Board.     5. Other Benefits.  You will be eligible to participate in the benefit plans, programs and arrangements generally made available to you by GreenPoint from time to time on the terms and conditions thereof, including paid vacation, life insurance, health insurance, disability insurance and retirement benefits.  In addition, you shall be entitled to change in control protection for covered transactions or events occurring after the effective date of the Merger, in accordance with GreenPoint's standard change in control agreement for executives in the form attached hereto as Exhibit A.   6. Termination of Employment.  If after the effective date of the Merger and prior to the second anniversary thereof, your employment is terminated by GreenPoint without Cause or you terminate your employment for Good Reason (each a “Qualifying Termination”), you will be paid the following amounts: (a) any earned and unpaid portion of your annual base salary through the date of termination, and (b) base salary for the period (the “Continuation Period”) equal to the longer of (x) twelve months or (y) the number of months from the date of termination until the second anniversary of the effective date of the Merger, as and when such amounts were otherwise payable in accordance with GreenPoint’s normal payroll practice.  In addition, during the Continuation Period (or, if earlier, the date you commence employment with a new employer), you will be entitled to continued health, life and disability insurance benefits on a similar basis as such benefits are generally provided to active employees of GreenPoint from time to time, including cost sharing.  The termination payments and benefits set forth in this Section 6 will not be paid to you to the extent you are also entitled to receive the payments and benefits provided under the change in control agreement described in Section 5 hereto. For purposes of this letter agreement, “Cause” shall mean:   (i) acts or omissions constituting gross negligence, recklessness or willful misconduct by you in respect of your fiduciary obligations or otherwise relating to the business of GreenPoint or any of its affiliates;           (ii) a material breach by you of this letter agreement; or           (iii) your conviction of or entry of a plea of nolo contendere to a charge of fraud, misappropriation or  embezzlement.                            For purposes of this letter agreement, “Good Reason” shall mean:   (i) a reduction in your title and/or compensation (each as provided herein) or the assignment to you of any duties not consistent with those of a senior executive of GreenPoint, except in connection with GreenPoint’s termination of your employment for Cause;         (ii) any material breach of this letter agreement by GreenPoint, including, but not limited to, a reduction by GreenPoint in your annual base salary as set forth herein or a change in the conditions of your employment (e.g., including, without limitation, a failure by GreenPoint to provide you with incentive compensation and benefit plans that provide incentive compensation opportunity or benefits, in each case comparable to those made available under the plans or programs provided to you by GreenPoint on the effective date of the Merger and at the appropriate level for the duties of a similarly situated officer), other than an alteration in the terms of the programs or benefit plans of general applicability; or         (iii) the relocation of your principal office location to a location more than 25 miles from its location as of the effective date of the Merger, except for required business travel consistent with your duties.   Notwithstanding the foregoing, no event, action or omission shall constitute Good Reason if you shall have consented in writing thereto.  You agree to provide GreenPoint with 30 days advance written notice of any termination of your employment for Good Reason and that any such notice of termination for Good Reason will set forth with specificity the basis for and the events claimed to constitute Good Reason.                                         You may terminate your employment with GreenPoint at any time without Good Reason by giving GreenPoint written notice not less than 120 days in advance of the date of termination.  Upon any termination of your employment (other than a Qualifying Termination), this letter agreement shall terminate without further obligation to you other than for the payment of earned and unpaid annual base salary through the date of termination. 7. Restrictive Covenants.  In consideration of the grant of the Option and other good and valuable consideration (as more fully described in Exhibit B hereto), you will be subject to the restrictive covenant agreement set forth in Exhibit B attached hereto.  In addition, you will not disclose the terms of this letter agreement to any third party, except your spouse, if any, and your accountant and attorney, and any prospective employer. The provisions of the restrictive covenants set forth herein and in Exhibit B will remain in full force and effect until the expiration of the period specified therein, notwithstanding the earlier termination of your employment hereunder or of the Term of this letter agreement.     8. Other Agreements.  This letter agreement supersedes and terminates all prior employment, severance or change of control agreements and understandings between you and Headlands or its affiliates.  You agree that your outstanding options to acquire shares of Headlands Common Stock will be treated as provided for in the Agreement and Plan of Merger dated as of December 8, 1998 by and among, GreenPoint, Headlands and GFC.   As I am sure you understand, the effectiveness of this letter agreement and of the offer of employment is contingent upon (a) GreenPoint, Headlands and GFC entering into the Agreement and Plan of Merger and the consummation of the transaction contemplated by that Agreement, and (b) your acceptance of this offer by signing an original of this letter.  If these conditions are satisfied, your employment with GreenPoint will start as of the effective date of the Merger. We look forward to your acceptance of this offer and to a long and mutually rewarding relationship. Sincerely,   /S/  S. A. Ibrahim   --------------------------------------------------------------------------------   S. A. Ibrahim   Executive Vice President     I accept the offer of employment made to me by GreenPoint Financial Corp. dated December 4, 1998. In accepting this offer, I agree that I did not rely on any promises or representations, other than those made in this letter. Signature: /S/  Peter T. Paul     --------------------------------------------------------------------------------     Peter T. Paul         Date: December 6, 1998   EXHIBIT B Restrictive Covenant Agreement              You acknowledge that during the course of your employment with GreenPoint Financial Corp. (“GreenPoint”) you will have complete access to highly confidential information and trade secrets relating to GreenPoint's and GreenPoint's subsidiaries', divisions' or any affiliated or related entities' ("Affiliated Entities") non-conforming mortgage banking business (the “Non-Conforming Mortgage Banking Business”), which is not generally in the public domain.  For purposes of these restrictive covenants, "Non-Conforming Mortgage Banking Business" means the business of originating, purchasing, selling and servicing mortgage loans that are non-conforming with respect to documentation or other underwriting criteria or credit.  Such trade secrets and confidential information include, but are not limited to, production reports, product descriptions, customer lists, phone lists, sales and marketing strategies and plans for future business, business development and methods, procedures and devices, business and customer contacts.  Moreover, you will have complete access to GreenPoint's and/or its Affiliated Entities' expertise in the Non-Conforming Mortgage Banking Business, its strategies and, perhaps most significantly, its highly trained staff.  You specifically acknowledge and agree that the Non-Conforming Mortgage Banking Business is a highly specialized "niche".  You further acknowledge and agree that as a result of your access to the trade secrets and confidential information during the course of your employment at Headlands Mortgage Company (“Headlands”) and its affiliates and GreenPoint you developed skill and expertise in the area of the Non-Conforming Mortgage Banking Business which allows you to provide unique and special services to GreenPoint in the area of the Non-Conforming Mortgage Banking Business.              All of these factors place you in a unique position to advantageously compete with GreenPoint and/or its Affiliated Entities or assist a competitor in competing with GreenPoint and/or its Affiliated Entities in the Non-Conforming Mortgage Banking Business by utilizing such trade secrets or confidential information, including utilizing such information to lure away key GreenPoint employees.  You further agree that such unfair competition would cause irreparable harm to GreenPoint.              Therefore, in consideration of the grant of the Option (as that term is defined in the letter agreement between GreenPoint and you dated December 4, 1998 (the “Letter Agreement”)) and for the consideration being received by you in connection with the transaction (the “Merger”) contemplated by the Agreement and Plan of Merger by and among GreenPoint, Headlands and GFC Acquisition Corp. (the “Merger Agreement”), which transaction is a transaction described in Section 16601 of the California Business and Professions Code and acknowledging that you are a selling shareholder of Headlands for purposes of said Section 16601, you voluntarily, knowingly and willfully agree to the following: 1. For the period commencing on the effective date of the Merger and ending two (2) years after your separation from employment from GreenPoint for any reason (the “Restricted Period”), you will not directly or indirectly solicit, induce, influence, aid or suggest to any employee whose employment directly or indirectly relates or related to GreenPoint's Non-Conforming Mortgage Banking Business and who was employed as of the effective date of the Merger or at any time since by Headlands, GreenPoint or any Affiliated Entity (a "GreenPoint Employee"), to leave GreenPoint's or any Affiliated Entity's employ or to seek employment with you (including any business entity you own, control, manage or operate) or any other employer.  Nor will you provide information about a GreenPoint Employee to any potential employer of you or a GreenPoint Employee or in any way assist, directly or indirectly, a potential employer of you or a GreenPoint Employee to solicit, induce, influence, aid or suggest the employment of a GreenPoint Employee.   2. During your employment with GreenPoint and its Affiliated Entities and at all times thereafter, you specifically agree to hold all trade secrets and confidential information, including without limitation the trade secrets and confidential information referenced above, in the strictest confidence, and that you will not, without GreenPoint's prior written consent, disclose, divulge or reveal to any person or business entity, or use for any purpose other than for the exclusive benefit of GreenPoint or any Affiliated Entity, any such trade secrets and confidential information, except (i) in connection with the implementation or enforcement of the Letter Agreement, or (ii) pursuant to judicial or administrative process (but you will notify GreenPoint immediately if you receive such process).     3. You acknowledge that GreenPoint will engage in the Non-Conforming Mortgage Banking Business throughout the country. You acknowledge that if you were to become an employee of or a consultant to a competing organization, your new duties and the products, services and technology of the competing organization would be so similar or related to those employed by you as an employee of GreenPoint that it would be very difficult for you not to rely on or use the trade secrets and confidential information referenced above.  You further acknowledge that you, and any such entity to which you may be rendering services, cannot avoid using the trade secrets and confidential information, because even in the best good faith, you cannot as a practical matter avoid using the knowledge of the trade secrets and confidential information in your work with such an entity.  Accordingly, during the Restricted Period, you will not, directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of or be connected as a principal, employee, officer, director, independent contractor, representative, stockholder, financial backer, partner, advisor or in any other individual or representative capacity any business which engages in the Non-Conforming Mortgage Banking Business, nor will you canvas and advertise for or otherwise assist or advise any business entity to engage in, start or develop a Non-Conforming Mortgage Banking Business ("engage in the Non-Conforming Mortgage Banking Business"), in any area in which Headlands or its affiliates were authorized to engage in the Non-Conforming Mortgage Banking Business prior to the effective date of the Merger, except as provided hereunder.  Included in this covenant not to engage in the Non-Conforming Mortgage Banking Business, you agree you will not (i) solicit Non-Conforming Mortgage Banking Business or otherwise deal directly or indirectly with any customers, appraisers, vendors, correspondents, brokers, lender associates or affiliated entities, of GreenPoint or its Affiliated Entities at any time with respect to the Non-Conforming Mortgage Banking Business; (ii) directly or indirectly divert or attempt to divert from GreenPoint or its Affiliated Entities any Non-Conforming Mortgage Banking Business; and (iii) directly or indirectly interfere or attempt to interfere with the relationships between GreenPoint or its Affiliated Entities, their customers, appraisers, vendors, brokers or affiliates, employees of customers, appraisers, vendors, correspondents, brokers, lender associates or affiliates with respect to the Non-Conforming Mortgage Banking Business.       4. This Agreement does not prohibit you from working for any financial institutions or other business entities that engage in the Non-Conforming Mortgage Banking Business, provided that you do not engage in the Non-Conforming Mortgage Banking Business (as defined above) of any such entity.     5. Notwithstanding the foregoing, you shall not be prohibited from investing and owning not more than one percent (1%) of the outstanding shares of common stock of any corporation, the shares of which are publicly traded pursuant to the Securities Exchange Act of 1934, and/or passively invest as a limited partner in any non-publicly traded security or be employed by government or quasi governmental agencies such as the Federal National Mortgage Association and the Federal Housing Loan Mortgage Corporation.       6. You acknowledge and agree that:  (i) the purposes of the foregoing covenants, including without limitation the noncompetition covenants, are to protect the goodwill, trade secrets and confidential information of GreenPoint and of Headlands and its affiliates acquired by GreenPoint, and to prevent you from interfering with the Non-Conforming Mortgage Banking Business of GreenPoint as a result of or following termination of your employment with GreenPoint; (ii) that the foregoing covenants, including without limitation the noncompetition covenants, are being given in part in consideration for the consideration being received by you as a result of the transaction contemplated by the Merger Agreement, that such transaction is a transaction described in Section 16601 of the California Business and Professions Code and that you are a selling shareholder of Headlands for purposes of said Section 16601; (iii) because of the nature of the Non-Conforming Mortgage Banking Business and because of the nature of the trade secrets and confidential information to which you have access, it would be impractical and excessively difficult to determine the actual damages of GreenPoint  or its Affiliated Entities in the event you breached any of the covenants of this Restrictive Covenant Agreement; and (iv) remedies at law (such as monetary damages) for any breach of your obligations hereunder would be inadequate. You therefore agree and consent that if you commit any breach of a covenant hereunder or threaten to commit any such breach, GreenPoint shall have the right (in addition to, and not in lieu of, any other right or remedy that may be available to it) to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage.  With respect to any provision of this Restrictive Covenant Agreement finally determined by a court of competent jurisdiction to be unenforceable, you, GreenPoint and its Affiliated Entities hereby agree that such court shall have jurisdiction to reform this Restrictive Covenant Agreement or any provision hereof so that it is enforceable to the maximum extent permitted by law, and the parties agree to abide by such court’s determination.  If any of the covenants of this Restrictive Covenant Agreement are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the right of GreenPoint to enforce any such covenant in any other jurisdiction.        7. You agree that these restrictive covenants shall be governed and interpreted by and in accordance with the laws of the State of California without regard to its conflicts of laws provision.  You agree and understand that the provisions of this Restrictive Covenant Agreement shall remain in full force and effect until the expiration of the period specified herein notwithstanding the earlier termination of your employment or of the Letter Agreement.       8. You agree that the above provisions are reasonable and enforceable and that compliance with all of the above provisions is necessary to protect the business and goodwill of GreenPoint and its Affiliated Entities.     Signature: /S/  Peter T. Paul     --------------------------------------------------------------------------------     Peter T. Paul         Date: December 6, 1998       Alabama Age Discrimination Law, Alabama Code Sec. 25-1-20 et seq. Payment of Wages, Alabama Code Sec. 36-6-1     Alaska Human Rights Law, Alaska Statutes Sec. 18.80.010 et seq. Payment of Wages, Alaska Statutes Sec. 23.05.140(b) and (d)     Arizona Civil Rights Law, Arizona Revised Statutes Sec. 41-1401 et seq. Arizona Equal Pay Law, Arizona Revised Statutes Sec. 23-240 et seq. Payment of Wages, Arizona Statutes Annotated Sec. 23-353 et seq.     Arkansas Civil Rights Act, Arkansas Code Annotated Title 16, Ch. 123, Sec. 101-108 Arkansas Equal Pay Law, Arkansas Code Annotated Title 11, Ch. 4, Sub. Ch. 4, Sec. 11- 4-601 through 11-4-612     The California Fair Employment and Housing Act The California Sexual Orientation Bias Laws The California Confidentiality of Medical Information Law The Unruh Act The California Apprenticeship Program Bias Law The California Military Personnel Bias Law The California Moore-Brown Roberti Family Rights Act The California Parental Leave Law for School Visits The California Comparable Worth Law The California Wage and Hour Laws The California Occupational and Safety and Health Act     Colorado Anti-Discrimination Act of 1957, Co.  St. Section 24-34-302 et seq. Colorado Equal Pay Law, Co. St. Section 8-5-101 et seq. Colorado Civil Rights Commission Regulations on Employment Colorado Civil Rights Commission Age Discrimination Rules Colorado Civil Rights Commission Creed and Religious Discrimination Rules Colorado Civil Rights Commission Handicap Discrimination Rules Colorado Civil Rights Commission National Origin Discrimination Rules Colorado Civil Rights Commission Sex Discrimination Rules Colorado Civil Rights Commission Employment Testing Rules     Connecticut Human Rights and Opportunities Law, 814 Gen. Stat. Conn. 46-a-51 to 46-a-104 Equal Pay Law, Gen. Stat. Conn. Sec. 31-58(e), 31-75 and 31-76 Age Discrimination and Employment Insurance Benefits Law, Gen. Stat. Conn. Sec. 38a-543 Payment of Wages, Gen. Stat. Conn. Sec. 31-72     Delaware Fair Employment Practices Act, 19 Delaware Code Annotated 710-718 Delaware Equal Pay Act, 19 Delaware Code Annotated 1107A Delaware Handicap Discrimination Law, 19 Delaware Code Annotated 720-728 Payment of Wages (no official title), 19 Delaware Code Annotated Sec. 1103, Sec. 1109     The District of Columbia Human Rights Act, D.C.Code §§1-2501 to 1-2557 The District of Columbia Employment Rights of Blind and Physically Disabled Persons (“White Cane Act”), D.C.Code Ann. §6-1701 to 6-1709     The Florida Civil Rights Act of 1992 The Florida Equal Pay Act, §725.07 Florida Statutes The Florida Whistleblower Act §§448.102, et seq., Florida Statutes Florida’s Attorney’s Fees Provision for Successful Litigants in Suits for Unpaid Wages, §448.08, Florida Statutes     Georgia Fair Employment Practices Act, Georgia Code Annotated Sec. 45-19-20 to 45-19-45 Equal Employment for Persons with Disabilities Code, Georgia Code Annotated Sec, 34-6A-1 to 34-6A-6 Georgia Age Discrimination Act, Georgia Code Annotated Sec. 34-1-2-et seq. Equal Pay Law, Georgia Code Annotated Sec. 34-5-1 et seq. Payment of Wages, Georgia Code Annotated Sec. 34-7-2     Hawaii Fair Employment Practices Law, 21 Hawaii Revised Statutes Ch. 378-1 to 378-9 Equal Pay Law, Hawaii Revised Statutes Sec. 387-4 Payment of Wages, Hawaii Revised Statutes Sec. 388-3, et seq.     Idaho Fair Employment Practices Act, I.C. Section 67-5901, et seq. Idaho Equal Pay Law, I.C. Section 44-1701, et seq. Idaho Civil Rights Law, I.C. Section 18-7301, et seq. Idaho Wage Claim Statute, I.C. Section 45-601, et seq.     The Illinois State Wage and Hour Laws The Illinois Equal Pay Laws The Illinois Wage Payment and Collection Act The Illinois Health and Safety Act The Illinois Human Rights Act The Illinois Joint Agency Rules on Sex Discrimination The Illinois Joint Agency Rules on National Origin and Discrimination     Indiana Civil Rights Law, as amended Indiana Equal Pay Act, as amended Indiana Minimum Wage Law of 1965, as amended Indiana Handicap Discrimination Law, as amended Indiana Age Discrimination Act, as amended Indiana Occupational Safety and Health Act of 1974, as amended     Iowa Civil Rights Act of 1965, I.C. Section 216.1 et seq. Iowa Wage Payment Collection Law, I.C. Section 91A.1 et seq.     Kansas Act Against Discrimination, K.S. Ch. 44, Art. 10 Kansas Equal Pay Law, K.S. Section 44-1205, et seq. Kansas Age Discrimination in Employment Act, K.S. Section 44-1111, et seq. Kansas Age Discrimination Guidelines Kansas Laws for Payments of Compensation K.S. Section 44-301, et seq.     Kentucky Civil Rights Act, as amended Kentucky Equal Opportunities Act, as amended Kentucky Equal Pay Law, as amended Kentucky Constitution     The Louisiana Employment Discrimination Law, (La. R.S. Ann. Title 23, Ch. 3-A, §301 et seq.) The Louisiana Age Discrimination Law (La. R.S. Ann. Title 23, Ch. 9, §§311 through 314) The Louisiana Commission on Human Rights Act  (La. R.S. 51:2231 et seq.) The Louisiana Discrimination in Employment Act (La. R.S. 23:301 et seq.) The Louisiana Age Discrimination in Employment Act (La. R.S. 23:311 et seq.) The Louisiana Wage Payment Law (La. R.S. 23:631 et seq.) The Louisiana Code of Civil Procedure, Art. 2592     The Maine Human Rights Act, Me. Rev. Stat. Ann. tit. 5, §4551 et seq. The Maine Equal Pay Law, Me. Rev. Stat. Ann. tit. 26, Ch. 7, §628 The Maine Sexual Harassment Policies Law, Me. Rev. Stat. Ann. tit. 26, §806     The Maryland Fair Employment Practices Act, Md. Code Ann. art. 49B, §1 et seq. The Maryland Handicapped Anti-Discrimination Regulations, Md. Regs, Code tit. 14.03.02.01 et seq. The Maryland Equal Pay Law, Md. Code Ann., Lab. & Empl., Subtitle 3, §§301 to 308     The Massachusetts Fair Employment Practice Act, Mass. Gen. Laws ch. 151B, §§1 to 10 The Equal Pay and Maternity Benefits Law, Mass. Gen. Laws ch. 149, §105A to 105D The Massachusetts Equal Rights Act, Mass. Gen. Laws ch. 93, §102 The Massachusetts Age Discrimination Law, Mass. Gen. Laws ch. 149, §24A to 24I Payment of Wages, Mass. Gen. Laws Ann. ch. 149 §148     The Michigan Elliot-Larsen Civil Rights Act, Mich. Comp. Laws, §§37.2101 through 37.2804 The Michigan Bias Against Handicapped Law, Mich. Comp. Laws Ann., §37.1101 et seq. The Michigan Equal Pay Law, Mich. Comp. Laws Ann., §§408.381, 408.382 and 408.392, 408.393, 408.394, 408.395, 408.397 Violation of Equal Pay Law, Mich. Comp. Laws Ann. §750.556     Minnesota Human Rights Act, Minnesota Statutes, Sections 363.01-363.15. Minnesota Equal Pay Law, Minnesota Statutes, Sections 181.66-181.71 Minnesota Age Discrimination Act, Minnesota Statutes, Section 181.81, et seq.     Missouri Human Rights Law and Related Regulations Missouri Equal Pay Laws     Montana Human Rights Act, Title 49, Chs. 1 through 4 of the Montana Code Annotated Montana Persons with Disabilities Employment Preference Act, Title 39, Ch. 30, Sections 39-30-101 to 39-30-207 of the Montana Code Annotated     The Nebraska Fair Employment Practice Act, Neb. Rev. Stat. §48.1101 et seq. The Act Prohibiting Unjust Discrimination in Employment Because of Age, Neb. Rev. Stat. §§48-1001 to 48-1010     The Nevada Fair Employment Practice Act, Nev. Rev. Stat. §§613.310 to 613.435 The Nevada State Wage and Hour Laws, Nev. Rev. Stat. §608.015 The Nevada Equal Pay Law, Nev. Rev. Stat §608.817     The New Hampshire Equal Pay Law, N.H. Rev. Stat. Ann. Ch. 275, §275.36 to 275.4 The New Hampshire Law Against Discrimination, N.H. Rev. Stat. Ann. §§354-A:1 to 354-A:26     The New Jersey Equal Pay Act, N.J. Stat. Ann. Title 34, Ch. 11, §§34:11-56.1 to 34:11-56.11 The New Jersey Law Against Discrimination, N.J. Stat. Ann.§10:5-12 The New Jersey Civil Rights Division Rules of Practice, Title 13, Ch. 4, §§13.4-1.1 et seq. of the New Jersey Administrative Code Equal Employment Opportunity, Title 4A, Ch. 7, §§1-1 et seq. of the New Jersey Administrative Code     The New York Human Rights Law The New York Minimum Wage Law The Equal Pay Law of New York     The New Mexico Human Rights Act The New Mexico AIDS Testing Law The New Mexico Genetic Information Privacy Act The New Mexico Employee Privacy Act The New Mexico Wage and Hour Laws The New Mexico Occupational Health and Safety Act     The North Carolina Equal Employment Practices Act, N.C. Gen. Stat. §143-422.2 The North Carolina Handicapped Persons Protection Act, N.C. Gen. Stat. §168A-5(a)     The North Dakota Equal Pay Act, N.D. Cent. Code §§34-06.1-01 1034-06.1-09 The North Dakota Human Rights Act, N.D. Cent. Code §14-03.4-03 The North Dakota Age Discrimination Act, N.D. Cent. Code §34-01-17 The North Dakota Anti-Discrimination Law, N.D. Cent. Code §14-02.4-08     The Ohio Fair Employment Practices Law, Ohio Rev. Code Ann. Title 41 §4112.02 et seq. The Ohio Equal Pay Law, Ohio Rev. Ann. Code, §4111.17(A) The Ohio Civil Rights Act, Ohio Rev. Code Ann. §§4112.01-4112.99     The Oklahoma Anti-Discrimination Statutes (25 O.S. 1301 et seq.) The Oklahoma Workers’ Compensation Act (85 O.S. 5 et seq.)     The Oregon Equal Pay Law, Or. Rev. Stat. Title 51, Ch. 652, §652.10 et seq. The Oregon Safe Employment Act, Or. Rev. Stat. §§659.062 The Oregon Fair Employment Practices Act, Or. Rev. Stat. §659.030 Oregon Handicap Bias Law, Or. Rev. Stat. §659.400(1), 659(435)(1)     Pennsylvania Human Relations Act, as amended Pennsylvania Wage Payment and Collection Law, as amended Pennsylvania Minimum Wage Act, as amended Pennsylvania Equal Pay Law, as amended     The Rhode Island Equal Pay Law, R.I. Gen. Laws Title 28, Ch. 6, §§28-6-17 through 28-6-21 The Rhode Island Fair Employment Practices Act, R.I. Gen. Laws §28-5 The Rhode Island Equal Pay and Comparable Worth Commission, R.I. Gen. Laws Title 42, Ch. 124, §1 et seq. The Rhode Island Civil Rights Act, R.I. Gen. Laws Title 42, Ch. 112, §§42-112-1 and 42-112-2     South Carolina Human Affairs Law, S.C. Code Sec. 1-13-20 et seq. (Supp 1998) South Carolina Wage Payment Act, S.C. Code Sec. 41-10-10 et seq., (Supp 1998) South Carolina Workers’ Compensation Law     The South Dakota Human Relations Act, S.D. Codified Laws §20-13-1 to 20-13-56 The South Dakota Equal Pay Law, S.D. Codified Laws §60-12-15 et seq. The South Dakota Local Fair Employment Practices Legislation, S.D. Codified Laws §20-12- 4 to 20-12-9     The Tennessee Anti-Discrimination Act, Tenn. Code Ann. tit. 4, Chap. 21, §101 et seq. The Tennessee Fair Employment Practices Law, Tenn. Code Ann. §4-21-407(b) The Tennessee Equal Pay Act, Tenn Code. Ann. tit. 50, Chap. 2, §§201-206 The Tennessee Handicap Bias Law, Tenn. Code Ann. tit. 8, §8-50-102     The Texas Employment, Discrimination Law, Tex. Lab. Code, tit. 2, Chap. 21 §21.001 et seq The Texas Commission on Human Rights Act, Tex. Lab. Code Ann. §21.101 The Texas Communicable Disease Act, Texas Code Ann. ch. 81, Subchapter F. Disability Discrimination, Tex. Hum. Res. Code 121.001 et seq. The Texas Commission on Human Rights Law, Texas Government Code, Tit. 2, Ch. 461, Subchapter A-C, §461.001 et seq. The Texas Equal Pay Act, Texas Gov’t Code Ann., tit. 5, §659.001 The Texas Public Employment Discrimination Act, Texas Civ. Prac. and Rem., tit. 5, §106.001 et seq. The Texas Human Rights Commission Rules, 40 Tex. Admin. Code, §321.1 et seq.     The Utah Antidiscrimination Act, Utah Code Ann. tit. 34A §101 et seq.     The Vermont Fair Employment Practices Act, Vt. Stat. Ann. tit. 21, §495 et seq. The Vermont Human Rights Commission, Vt. Stat. Ann. tit. 9     The Virginia Human Rights Act, Va. Code tit. 2.1, Ch. 42, §2.1-714 et seq. The Virginia Equal Pay Act, Va. Code §40.1-28.6 The Virginians with Disabilities Act, Va. Code tit. 51.5, §51.5 et seq.     The Washington Law Against Discrimination in Employment, Wash. Rec. Code §49.60.010 et seq. The Washington Equal Pay Law, Wash. Rev. Code §49.12.175 The Washington Sex Discrimination Law, Wash. Rev. Code Ch. 49.12, §200 The Washington Age Discrimination Law, Wash. Rev. Code tit. 49, §49.44.090     Wis. Stat. 110.31, et seq.     The West Virginia Human Rights Act, W.Va. Code Ann. §§5-11-1 through 5-11-20 The West Virginia Equal Pay Law, W.Va. Code Ch. 21, Art. 3, §19     The Wyoming Fair Employment Practices Act, Wyo. Stat. tit. 27, Ch. 9, §101-108 The Wyoming Equal Pay Law, Wyo. Stat. tit. 27, Ch. 4, §301-304    

EXHIBIT 10.4 EMPLOYMENT AGREEMENT                   This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into by and between Washington Gas Light Company (the “Company”) or the “Utility”) and Elizabeth M. Arnold (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 1 -------------------------------------------------------------------------------- this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination of employment.                   (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) Position 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 immediately preceding the Effective Date or any office or location less than 35 miles from such location; and 4 --------------------------------------------------------------------------------                   (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 Sections 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.                   (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. 5 -------------------------------------------------------------------------------- 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.                   (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 6 -------------------------------------------------------------------------------- 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 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. 7 --------------------------------------------------------------------------------                   (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 which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, or           (ii) the willful engaging by the Executive in 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 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.                   (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; 8 --------------------------------------------------------------------------------         (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 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 9 -------------------------------------------------------------------------------- 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 three 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.         (ii) for three 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- 10 -------------------------------------------------------------------------------- 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 three-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 three 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 three 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           (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 11 -------------------------------------------------------------------------------- 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.                   (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 12 -------------------------------------------------------------------------------- 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 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 Executive (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 13 -------------------------------------------------------------------------------- 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 Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be 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 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. 14 --------------------------------------------------------------------------------                   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.                   (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. 15 --------------------------------------------------------------------------------                   (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.                   (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 l(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. 16 --------------------------------------------------------------------------------                   (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 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: Elizabeth M. Arnold   WASHINGTON GAS LIGHT COMPANY   _______________________________________ By: James H. DeGraffenreidt, Jr. Title: Chairman, President and Chief Executive Officer 17

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.30 DATED 27th July, 2001 THE MASTER FELLOWS AND SCHOLARS OF TRINITY COLLEGE CAMBRIDGE(1) ACCELRYS LIMITED(2) ACCELRYS INC(3) TRINITY COLLEGE (CSP) LIMITED(4) -------------------------------------------------------------------------------- AGREEMENT relating to the grant of a lease of Unit 334 Cambridge Science Park Milton Road Cambridge -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- THIS AGREEMENT is made on 29th July, 2001 BETWEEN: (1)THE MASTER FELLOWS AND SCHOLARS OF THE COLLEGE OF THE HOLY AND UNDIVIDED TRINITY WITHIN THE TOWN AND UNIVERSITY OF CAMBRIDGE OF KING HENRY THE EIGHTH'S FOUNDATION ("the Landlord" which expression includes its successors in title) (2)ACCELRYS LIMITED (company registration number 02326316) whose registered office is at the Quorum Barnwell Road Cambridge CB5 8RE ("the Tenant") (3)ACCELRYS INC registered in the state of Delaware and whose principal place of business is at CN 5350 Princeton New Jersey 08543-5350 ("the Guarantor") (4)TRINITY COLLEGE (CSP) LIMITED (company registration number 03393539) whose registered office is at 112 Hills Road Cambridge CB2 1PH ("the Company") Whereas the Premises are held by the Landlord which is an exempt charity NOW IT IS HEREBY AGREED as follows: 1 Interpretation 1.1In this Agreement unless the context otherwise requires: 1.1.1Words importing any gender include every gender 1.1.2Words importing the singular number only shall include the plural number and vice versa 1.1.3Words importing persons include firms companies and corporations and vice versa 1.1.4Any reference to any statute (whether or not specifically named) shall include any statutory modification or re-enactment of it for the time being in and any order instrument plan regulation permission and direction made or issued under it or under any statute replaced by it or deriving validity from it 1.1.5References to clauses schedules and annexures are references to the relevant clause in or schedule or annexure to this Agreement 1.1.6Where any obligation is undertaken by two or more persons jointly those persons shall be jointly and severally liable in respect of that obligation 1.1.7Any obligation on the Tenant not to do or omit to do anything shall be deemed to include an obligation not to allow that thing to be done or omitted to be done by any person under its control 1.1.8The headings to the clauses and schedules shall not affect the interpretation 1.2In this Agreement unless the context otherwise requires the following Expressions shall have the following meanings 1.2.1"Arbitrator" means a barrister of at least ten years standing experienced in dealing with agreements of this nature agreed between the parties or nominated on the application of any party by the President for the time being of the Bar Council or his duly appointed deputy where the difference or dispute relates to the meaning or construction of this Agreement or the rights of the parties hereto inter se and otherwise means an independent chartered surveyor of at least ten years standing with experience of dealing with agreements of this nature agreed upon between the parties or nominated on the application of any party by the President for the time being of the Royal Institution of Chartered Surveyors or his duly appointed deputy 2 -------------------------------------------------------------------------------- 1.2.2"Architect" means the Charter Partnership Limited of 15 Cardington Road Bedford MK42 0BP appointed pursuant to an appointment dated 15th January 2001 made between the Landlord (1) the Architect (2) or such other firm of architects as the Landlord may from time to time appoint in connection with the Landlord's Works 1.2.3"Building Contract" means the contract dated 5th April 2001 entered into by the Landlord with the Contractor for the Landlord's Works 1.2.4"Certificate of Practical Completion" means the Certificate of Practical Completion of the Landlord's Works issued by the Architect under the Building Contract 1.2.5"Consultants" means the NTN Partnership K J Tait Scott White and Hookins appointed by the Architect in connection with the Landlord's Works 1.2.6"Contractor" means Haymills of Haymills House Station Road East Stowmarket Suffolk IP14 1CF or other contractor as the Landlord may appoint with the Tenant's approval such approval not to be unreasonably withheld or delayed in connection with the Landlord's Works 1.2.7"Estimated Practical Completion Date" means 16th November 2001 1.2.8"Force Majeure" means fire storm tempest other exceptionally adverse weather conditions war hostilities rebellion revolution insurrection military or usurped power civil war labour lock-outs strikes local combination of workmen and other industrial disputes riot civil commotion disorder decree of Government non availability of materials or equipment delay by a local authority or statutory undertaker in carrying out work in pursuance of its statutory obligations or failure by such authority to carry out such work unforeseen site conditions loss or damage by any one or more of the risks insured against or any other cause or circumstances provided that each and every such event: (i)adversely affects the performance of the terms and provisions of this Agreement and (ii)cannot reasonably be avoided or provided against by Landlord and/or the Engineering Contractor 1.2.9"Gross Internal Area" means the gross internal area in square feet of the building comprising part of the Landlord's Works as built measured in accordance with the Code of Measuring Practice published by the Royal Institution of Chartered Surveyors and the Incorporated Society of Valuers and Auctioneers (Fourth Edition) but excluding paragraph 2.6 of that Code 1.2.10"Landlord's Works" means the construction on the Premises of a two storey building with plant room in accordance with the Plans and Specifications (or as varied in accordance with the provisions of this Agreement) and which are to be completed by the Landlord in accordance with clause 2 of this Agreement 1.2.11"Lease" means the Lease of the Premises to be granted by the Landlord and accepted by the Tenant (with the Guarantor and the Company joining therein in the manner therein prescribed) which shall be in the form of the attached agreed draft subject to any alterations made pursuant to this Agreement 1.2.12"Necessary Consents" means (i)full planning permission and (ii)all other consents licences permissions and approvals whether of a public or a private nature which shall be necessary for the lawful carrying out and completion of the Landlord's Works which the Landlord shall apply for in accordance with clause 2.2 of this Agreement and seek to obtain with all due expedition 3 -------------------------------------------------------------------------------- 1.2.13"Plans and Specifications" means the plans numbered 34834/100L/101J/102F/103D/105D/115F/116E/117C/119D/120D/122D/ 170D/172D and the specification headed "Landlord's Specification Document Units 334/335 Cambridge Science Park" dated 22 May 2000 Issue 06 annexed to this Agreement which describe the Landlord's Works 1.2.14"Practical Completion Date" means the date referred to in the Certificate of Practical Completion as being the date on which the Landlord's Works achieved practical completion 1.2.15"Premises" has the meaning attributed to it by the Lease 1.2.16"Project Team" means the Architect the Consultants the Contractor and any sub-contractor carrying out design work in connection with the provision of the packages listed in Appendix 1 hereto 1.2.17"Rack Rent Commencement Date" means the date 97 days after the Practical Completion Date 1.2.18"Tenant's New Works" means the installation of cabling and partitioning throughout the Premises 1.2.19"Warranties" means the warranties to be entered into by the members of the Project Team for the benefit of the Tenant in their respective forms of the relevant drafts annexed hereto 1.2.20"Working Day" means any day except Saturday Sunday and bank or other public holidays in England 2 Landlord's Works 2.1The Landlord shall at its own expense in all respects as soon as reasonably practicable following the obtaining of the Necessary Consents diligently carry out and complete the Landlord's Works and shall complete them: 2.1.1in a good and workmanlike manner; 2.1.2using designs prepared with reasonable skill and care; 2.1.3using only suitable good quality materials of their several kinds and the Landlord will not use cause or permit or suffer to be used in or about the Landlord's Works or any part or parts thereof substances generally known to be deleterious 2.1.4in accordance with: (i)all Necessary Consents; (ii)all statutes from time to time in force which affect the Landlord's Works; and (iii)the terms of this Agreement (iv)the Construction (Design and Management) Regulations 1994 4 -------------------------------------------------------------------------------- 3 Programme 3.1The Landlord shall use all reasonable endeavours to procure that the Landlord's Works are completed by the Estimated Practical Completion Date but the Tenant shall be deemed to be adequately compensated for any delay in the Practical Completion Date beyond the Estimated Practical Completion Date by the consequent postponement of the rents and other payments reserved and made payable by the Lease and the Tenant shall have no further rights against the Landlord for any such delay 3.2The Landlord shall notify the Tenant of any change to the Estimated Practical Completion Date within three Working Days of the Architect becoming aware of the same 4 Landlord's Variations 4.1The Landlord may vary or add to the Landlord's Works but where such variation or addition will have a material adverse effect upon the Premises or the Tenant the Landlord shall first obtain the written consent of the Tenant which shall not be unreasonably withheld or delayed where reasonable and proper provisions are made to meet the Tenant's concerns 4.2Notwithstanding clause 4.1 the Landlord may without any consent from the Tenant make variations or additions to the Landlord's Works where such are required in order to comply with any statutes or Necessary Consents PROVIDED THAT the Landlord will use reasonable endeavours subject to the overriding aim to complete the Landlord's Works on or before the Estimated Practical Completion Date and subject to the requirement to comply with such statutes or Necessary Consents in negotiations with the local or other competent authority to ensure that any such variation or addition required by the local or other competent authority shall not materially adversely alter the design layout nature capacity or standard of construction of the Premises as provided for in the Plans and Specifications or materially reduce the area of the Premises or materially affect their use or materially increase the Tenant's liability under the Lease 4.3If any materials specified in the Plans and Specifications cannot be obtained or if their delivery at the appropriate time or at reasonable cost cannot be guaranteed then notwithstanding clauses 4.1 and 4.2 the Landlord may subject to notifying promptly the Tenant of its intention to do so and considering such reasonable concerns it may make known use alternative materials of no less quality or performance 5 Site Visits By and Supply of Information to the Tenant 5.1The Landlord shall permit the Tenant and other persons authorised by it at their own risk and subject to the Tenant making good any damage caused by such parties (which the Tenant covenants to do) at such intervals as may from time to time be reasonable on reporting to the Contractor at reasonable times and subject to complying with the proper and reasonable requirements of the Contractor as to safety or otherwise to enter onto the Premises (accompanied by a representative of the Landlord if the Landlord shall so require) to view the progress and state of the Landlord's Works and the materials used or intended for use therein (but so that the persons so entering shall not interfere with the progress of the Landlord's Works and shall address any comments to the Landlord and not to the Contractor) 5.2Within five working days after any such entry the Tenant may serve on the Architect a notice ("Defects Notice") specifying any respects in which they consider that the Landlord's Works are not being or have not been carried out in accordance with clause 2 5.3The Landlord shall forthwith investigate the matters contained in the Defects Notice and if reasonably satisfied that the defects specified in the Defects Notice are well founded shall use 5 -------------------------------------------------------------------------------- reasonable endeavours (subject to the terms of the Building Contract) at its own expense to remedy or procure the remedying of such matters without undue delay 5.4On or before the Practical Completion Date the Landlord shall provide the Tenant with a complete detailed "as built" specification and related drawings in respect of the Premises and with a complete outline "as built" specification and related drawings in respect of the remainder of the Landlord's Works together with the health and safety file compiled in accordance with the Construction (Design & Management) Regulations 1994 5.5Any inspection representation or approval in connection with the Landlord's Works by or on behalf of the Tenant shall not in any way relieve the Landlord from its obligation under this Agreement 6 Issue of Certificate of Practical Completion 6.1In relation to the issue of the Certificate of Practical Completion the Landlord shall procure that 6.1.1the Architect gives to the Tenant at least five Working Days written notice of their proposal to issue such a certificate and of the date on which it is proposed to carry out the inspection of the Landlord's Works for that purpose 6.1.2the Architect permits the Tenant and persons authorised by it to accompany the Architect in that inspection of the Landlord's Works 6.1.3the Architect permits the Tenant and those authorised by it to discuss with them their proposal to issue the relevant certificate and in particular the date to be specified in it 6.1.4the Architect acts impartially and has due regard to any reasonable representations made by the Tenant or those authorised by it (prior to the proposed date of issue of the certificate) in making a decision as to whether or not to issue the Certificate of Practical Completion and as to the date to be specified therein but not so as to fetter the Architect's discretion in this regard 6.2Where the Architect shall have given at least five Working Days notice under clause 6.1.1 and the anticipated Practical Completion Date is subsequently postponed the Landlord shall procure that the Certificate of Practical Completion is not subsequently issued unless notice has been given to the Tenant such notice to be three Working Days and otherwise in accordance with clause 6.1.1 (which procedure shall be repeated as often as necessary until such certificate is issued) 6.3As soon as reasonably practicable after the issue of the Certificate of Practical Completion the Landlord shall supply a copy to the Tenant 7 Post Completion Works 7.1The Tenant shall allow the Landlord and those authorised by it to have access to the Premises after the Lease is granted for the purpose of complying with any outstanding provisions of this Agreement and shall not interfere with or impede the completion of the Landlord's Works Provided that in so entering the Premises the Landlord and those authorised by it will make good to the reasonable satisfaction of the Tenant all damage caused to the Premises and the Tenant's fixtures fittings and equipment by such entry 6 -------------------------------------------------------------------------------- 8 Defects 8.1If the Tenant shall notify the Landlord in writing within 50 weeks from the Practical Completion Date (as to which time shall be of the essence) of any defects which the Landlord is entitled under the terms of the Building Contract to have made good by the Contractor the Landlord will use all reasonable endeavours (subject to the provisions of the Building Contract) to procure that such defects are made good in accordance with the defects liability provisions in the Building Contract 8.2Clause 8.1 above and clauses 8.3 and 8.4 below shall be a complete statement of the Landlord's obligations in respect of defects in the Works and the Tenant shall have no other rights against the Landlord in respect of such defects whether under this Agreement and/or at law or otherwise 8.3Notwithstanding the foregoing provisions of this clause 8 and without prejudice to them the Landlord shall use all reasonable endeavours to procure that any defects notified to the Landlord by the Tenant at any time during the defects liability period under the Building Contract which materially prevent or diminish the Tenant's full use and enjoyment of the Premises shall be rectified by the Contractor as quickly as practicable and with the minimum practicable disruption to the Tenant's use of the Premises 8.4The Landlord shall procure that the Project Team enter into the Warranties and the Landlord shall deliver the same to the Tenant prior to completion of the Lease PROVIDED THAT this obligation shall not apply in relation to any particular member of the Project Team in respect of the warranty to be given by that member of the Project Team if it has ceased to exist or become insolvent 8.5Without prejudice to any rights that the Tenant may have in relation to a breach of clause 8.4 by the Landlord if the Warranties referred to in clause 8.4 have not been entered into or if the Tenant has been unable (after using all reasonable endeavours) to procure the remedy of any latent and inherent defect under the Warranties then (provided notice of the same shall have been given to the Landlord by the Tenant or its successors in title before the expiration of 12 years form the date hereof) the Landlord will use all reasonable endeavours at the request of the Tenant to preserve and to enforce all rights and remedies which the Landlord may have against the Project Team in respect of latent and inherent defects 8.6For the purpose of this clause the expression "latent and inherent defects" shall mean any defect in the Works present but undiscovered at the date of issue of the Certificate of Practical Completion arising out of or attributable to defects in design defects in workmanship or defects in materials used in the Premises 8.7The Landlord shall procure that the suppliers of the Flat Roof and Raised Floor included within the Landlord's Works shall each issue a performance guarantee to the Landlord in its standard form details of which are annexed hereto ("performance guarantees") on or before the completion of the Lease together with its written consent to the assignment thereof to the Tenant 8.8On completion of the Lease the Landlord shall assign the benefit of each of the performance guarantees to the Tenant and deliver the same to the Tenant and shall serve written notice of each such assignment on the supplier as soon as it is completed 8.9The Tenant shall: 8.9.1complywith each of the terms and conditions of each of the performance guarantees following its assignment and upon request by the Landlord shall produce evidence of such compliance 8.9.2atthe expiration or sooner determination of the Term (as defined in the Lease) re-assign the benefit of each of the performance guarantees to the Landlord and deliver the same to the Landlord and shall serve written notice of each such assignment on the supplier as soon as it is completed 7 -------------------------------------------------------------------------------- 8.10If the Tenant is in breach of its obligations under clause 8.9.2 it shall be lawful for the Landlord to do all things necessary to rectify such breach and the Tenant irrevocably empowers and appoints the Landlord as its attorney for this purpose and shall indemnify the Landlord in respect of any proper costs which it so incurs on demand 8.11In the event of the performance guarantees (or any of them) being issued directly to the Tenant then (to the extent only that they are so issued) clauses 8.7 and 8.8 above shall not apply but clauses 8.9 and 8.10 shall apply 9 General Conditions 9.1This Agreement incorporates the Standard Conditions of Sale (3rd Edition) except insofar as they are varied by or inconsistent with any of the provisions of this Agreement 9.2The Premises are let subject to all rights of way and water rights of common and other rights easements quasi-easements wayleaves liabilities and public rights affecting the Premises whether existing at the date of this Agreement or arising after that date and all matters capable of constituting overriding interests if title were registered 9.3Conditions 1.3 3.4 5.11 5.1.2 5.2.2(g) 5.2.3 and 8 of the Standard Conditions are excluded from this Agreement 9.4The Landlord grants the Lease with full title guarantee save that the covenants set out in Section 1 and Section 3(1) of the Law of Property (Miscellaneous Provisions) Act 1994 do not extend to any charge encumbrance or other right which the Landlord does not know about and the covenant set out in Section 2 of the said Act shall not require the Landlord to meet costs arising from the Tenant's failure to make proper searches or to raise requisitions on title or on the results of its searches in respect of periods prior to the date of this Agreement 9.5The Premises are let subject to any covenants restrictions declarations stipulations and agreements contained or referred to in the Lease annexed hereto or as disclosed by the title deduced (if any) The Tenant will not require title to be deduced or make or raise any objection or requisition in respect of title save as regards any matters disclosed by the results of its Land Charges or Land Registry search against the Landlord and arising in the period between the date of this Agreement and the date of actual completion Conditions 4.1.1 4.3.2 4.5.1 and 5.2.7 of the Standard Conditions are accordingly to that extent excluded from this Agreement 9.6The Landlord shall not be bound to let the Premises to any person or company other than the Tenant and other than by way of one lease 9.7The benefit of this Agreement shall be personal to the Tenant who shall not assign charge share part with or otherwise dispose of this Agreement or any interest hereunder 10 Grant of Lease 10.1The Basic Rent shall be such sum as equals the Gross Internal Area of the Premises multiplied by £21.48 subject to a maximum figure of £900,000 10.2As soon as reasonably practicable prior to the Practical Completion Date the Landlord and the Tenant (or their respective nominated representatives) shall jointly measure the Gross Internal Area and seek to agree it 10.3In the event of any failure to agree any measurement in accordance with the foregoing provisions of this clause such measurement shall be determined by arbitration pursuant to the provisions of clause 15 of this Agreement 8 -------------------------------------------------------------------------------- 10.4The Landlord shall procure that its solicitors prepare the engrossments of the Lease and counterpart and deliver the counterpart to the Tenant or its solicitors at least five Working Days before the Completion Date 10.5The Landlord will grant (at the request of the Guarantor testified by its signature to this Agreement) to the Tenant and the Tenant will itself accept and the Tenant and the Guarantor will in their respective capacities execute and deliver to the Landlord a counterpart of the Lease and the Tenant will pay any Service Rent for which demand is made and all costs and other sums payable on the Practical Completion Date pursuant to this Agreement within ten Working Days after the later of: 10.5.1the Practical Completion Date and 10.5.2delivery of the engrossment of the counterpart Lease to the Tenant or its solicitors ("the Completion Date") 10.6Completion of the Lease shall take place at the offices of the Landlord's solicitors or at such other place as they shall reasonably require 10.7The term of the Lease shall commence on the Practical Completion Date and the service rent and other payments under the Lease (excepting the Basic Rent (as that expression is defined in the Lease)) shall all commence to be payable in respect of the period from (and including) the Practical Completion Date but the Basic Rent shall only become due and payable on and from the Rack Rent Commencement Date 11 Determination 11.1The Landlord may determine this Agreement by written notice to the Tenant if both: 11.1.1the Tenant fails to perform or observe any of its obligations in this Agreement or if any event occurs which had the Lease been granted would have entitled the Landlord to re-enter the Premises and 11.1.2either such failure or event is incapable of remedy or it is capable of remedy and the Landlord has served on the Tenant written notice specifying the failure or event and requiring it to be remedied within a reasonable time (to be specified in the notice) and the Tenant has failed so to do 11.2The Tenant may terminate this Agreement if the Landlord's Works are not completed by 28th February 2002 (whether or not for reasons of force majeure) or within such further period as the parties hereto shall agree 11.3The Landlord may determine this Agreement by written notice if the Landlord's Works are not completed by 31st May 2002 (whether or not for reasons of Force Majeure) or within such further period as the parties hereto shall agree 11.4On termination or rescission of this Agreement this Agreement shall become null and void but without prejudice to the obligation contained in this clause 11.4 and without obligation by any party to refund payments made by any other and without prejudice to any rights or remedies which any party may have in respect of antecedent breach of this Agreement and each party shall forthwith return all documents plans and papers provided to it by any other party and each party shall forthwith cancel any entry it may have made at H M Land Registry or the Land Charges Registry protecting this Agreement 9 -------------------------------------------------------------------------------- 12 No Demise/Early Access 12.1Until the actual grant of the Lease this Agreement shall not operate or be deemed to operate as a demise of the Premises nor shall the Tenant have or be entitled to any estate right or interest in the Premises or any part of them or in any materials in or upon them other than such equitable interest as is created by and such rights as are granted by this Agreement 12.2Notwithstanding the foregoing the Tenant may with the prior consent of the Landlord such consent not to be unreasonably withheld or delayed have access to the Premises to commence the Tenant's New Works subject to compliance with the provisions relating thereto contained in the Lease and the Landlord and the Tenant shall confer consult and co-operate with each other to minimise disruption of the activities of the other during the carrying out of the Landlord's Works and the Tenant's New Works respectively and to create and maintain a workable interface between their respective activities 12.3The Tenant shall not take up occupation of the Premises until the Lease shall have been completed and payments made in accordance with the provisions of this Agreement 13 Alienation 13.1The Tenant shall not assign mortgage charge or in any way deal or part with this Agreement or any interest under it and shall itself be the first occupier of the Premises PROVIDED that the Tenant shall be entitled to charge by way of legal charge their interest hereunder with the previous consent of the Landlord (such consent not to be unreasonably withheld or delayed) subject to the same conditions as would be applicable to a corresponding transaction if the Lease had been granted 14 Declaration of Non-Merger 14.1The Landlord's the Tenant's and the Guarantor's obligations under this Agreement shall continue notwithstanding the grant of the Lease insofar as they remain to be performed and observed 15 Resolution of Disputes 15.1If there shall be any dispute or difference between the parties arising out of this Agreement it may be referred by any party to the Arbitrator for determination and the Arbitrator shall act as an Arbitrator in accordance with the Arbitration Acts 1950-1979 or any statutory re-enactment thereof for the time being in force 16 Notices 16.1Any notice to be served on or communication to be sent to any party to this Agreement shall be deemed to be properly served if served in the manner provided in clause 5.2 of the draft Lease annexed hereto 17 Value Added Tax 17.1Any consideration given for supplies made by the Landlord under this Agreement is exclusive of VAT and the Tenant will on demand discharge any liabilities of the Landlord relating to VAT (or any substituted tax) in respect of any supply of goods or services for VAT purposes made pursuant to or in consequence of this Agreement where it is first presented with a valid VAT invoice in the name of the Tenant 10 -------------------------------------------------------------------------------- 18 Statutory Compliance 18.1The Premises are held by or in trust for a charity by the Landlord and the charity is an exempt charity 18.2The obligations on the part of the Landlord contained in this Agreement are personal to The Master Fellows and Scholars of the College of the Holy and Undivided Trinity within the town and University of Cambridge of King Henry the Eighth's Foundation 19 Legal Costs 19.1Each party shall bear its own legal and other costs in relation to this transaction 20 Late Payment 20.1Any sum due from one party to any other under which this Agreement which is not paid when it is due (or within any period specifically allowed by this Agreement) shall bear Interest (as defined in the draft Lease annexed hereto) for the period from the date when it fell due to the date of payment 21 No Representations 21.1This Agreement incorporates the entire contract between the parties and the Tenant and the Guarantor acknowledge that they have not entered into this Agreement in reliance on any statements or representations made to the Tenant or the Guarantor by or on behalf of the Landlord save those written statements of the Landlord's solicitors made prior to the date of this Agreement to the Tenant's solicitors 22 Insurance 22.1The Landlord shall until the Practical Completion Date keep insured or cause to be kept insured the Landlord's Works and all other fixtures fittings plant machinery apparatus and building materials from time to time in and upon the Premises and any adjoining land in an amount not less than the full reinstatement cost for the time being of the Landlord's Works (including professional fees the cost of debris removal and value added tax where applicable) against loss or damage by such risks as may from time to time be usually covered by a contractor's comprehensive policy and shall procure that all insurance money received shall be laid out in making good any such loss or damage 22.2The Landlord shall maintain public liability insurance in an appropriate sum in respect of the Landlord's Works 22.3From the Practical Completion Date the provisions in the Lease relating to insurance shall apply 23 Guarantee 23.1In consideration of the Landlord entering into this Agreement at the request of the Guarantor the Guarantor covenants with and guarantees to the Landlord that the Tenant will observe and perform its obligations under this Agreement to the intent that (mutatis mutandis) the covenants guarantees and conditions contained or referred to in clause 6 of the draft Lease annexed hereto shall be deemed to be incorporated in this clause but with the substitution of "the Guarantor" for "the Surety" 23.2The Landlord shall use all reasonable endeavours to mitigate any losses claims damages and expenses incurred or suffered by it and in respect of which the Guarantor is liable pursuant to clause 23.1 11 -------------------------------------------------------------------------------- 24 Proper Law 24.1This Agreement will be governed by and construed in accordance with English law and the parties irrevocably submit to the non-exclusive jurisdiction of the English courts 24.2The Surety irrevocably authorises and appoints Accelrys Limited of Unit 334 Cambridge Science Park Milton Road Cambridge (or such other person or body resident in England or Wales as it may from time to time by written notice to the other parties hereto substitute) to accept service of all legal process arising out or connected with this Agreement and service on Accelrys Limited (or such substitute) will be deemed to be service on the Surety 24.3The Surety will on the date of this Agreement and as the pre-condition to completion at its own cost obtain and deliver to the Landlord and the Company a letter from Dechert Rice & Rhoads in the form agreed between the solicitors for the Landlord and the Tenant copies of which have been retained by them 25 Charity 25.1The Landlord hereunder is a charity and that charity is an exempt charity 26 Contracts (Rights of Third Parties) Act 1999 26.1The parties intend that no person who is not a party to this Agreement is to have the benefit of or be capable of enforcing any term of this Agreement as a result of the Contracts (Rights of Third Parties) Act 1999 27 The Company 27.1The Company agrees to join in and complete the Lease in the manner therein appearing This instrument: (a)is executed as a deed and by its execution the parties authorise their solicitors to deliver it for them when it is dated (b)was delivered when it was dated. 12 -------------------------------------------------------------------------------- APPENDIX 1     Design packages 1  Structural Steel Work Connections 2  Curtain Walling Windows and Wall Cladding 3  Lift 4  Staircase and Balastrades 5  Atrium Roofing System 6  Window Sunshades 7  Revolving Door 8  Upper Floor Construction The common seal of THE MASTER   ) FELLOWS AND SCHOLARS OF   ) TRINITY COLLEGE CAMBRIDGE was   ) affixed in the presence of:   )             /s/ Jeremy Fairbrother --------------------------------------------------------------------------------     Senior Bursar                 /s/ Alexander Simm --------------------------------------------------------------------------------     Junior Bursar     13 -------------------------------------------------------------------------------- Signed as a deed by TRINITY COLLEGE   ) (CSP) LIMITED acting either by a director   ) and its secretary or by two directors   )             /s/ Jeremy Fairbrother --------------------------------------------------------------------------------     Director                 /s/ Alexander Simm --------------------------------------------------------------------------------     Director/Secretary     The common seal of ACCELRYS LIMITED   ) was affixed in the presence of:   )             /s/ Joseph A. Mollica --------------------------------------------------------------------------------     Director                 /s/ Bruce C. Myers --------------------------------------------------------------------------------     Secretary     Signed as a deed by ACCELRYS INC   ) acting by its duly authorised signatories   )             /s/ Joseph A. Mollica --------------------------------------------------------------------------------     Duly authorised signatory                 /s/ Bruce C. Myers --------------------------------------------------------------------------------     Duly authorised signatory     14 -------------------------------------------------------------------------------- Exhibit 10.30 DATED                        2001 THE MASTER FELLOWS AND SCHOLARS OF TRINITY COLLEGE CAMBRIDGE(1) ACCELRYS LIMITED(2) ACCELRYS INC(3) TRINITY COLLEGE (CSP) LIMITED(4) -------------------------------------------------------------------------------- LEASE of Unit 334 Phase VI Cambridge Science Park -------------------------------------------------------------------------------- Term:   20 years (plus broken quarter if any)         Initial Rent:   £900,000 per annum         Rent Review Dates:   [Insert 5th, 10th and 15th anniversary of Practical Completion or (if Practical Completion not a quarter day) the quarter day succeeding Practical Completion]         Expiry Date:   [Insert day preceding [    ] anniversary of Practical Completion or (if Practical Completion is not a quarter day) the day preceding the [    ] anniversary of the quarter day succeeding practical completion]         Mills & Reeve Cambridge -------------------------------------------------------------------------------- Contents 1   Definitions and Interpretation   1 2   The demise habendum and reddendum   4 3   Tenant's covenants   5 4   Landlord's covenants   5 5   Company's covenants   5 6   Proviso agreement and declaration   5     6.1   Forfeiture   5     6.2   Notices   6     6.3   Rent abatement   6     6.4   Part II Landlord and Tenant Act 1954   7     6.5   Warranties   7     6.6   Landlord's powers to deal with the Landlord's Neighbouring Premises   7     6.7   Arbitration   7     6.8   Landlord's obligations   7     6.9   Value added tax   7     6.10   Reference to Rights   7     6.11   References to Consents   8     6.12   References to Rights of Entry   8     6.13   Third Party Rights   8 7   Surety's covenant   8 8   Personal Rent Abatement   8 Schedule 1   10     Part 1   10     The property included in this demise   10     Part 2   10 1   Right to services   10 2   Right of way   10 3   Right to support   10 Schedule 2   11     Part 1   11     Exceptions and reservations in favour of the Landlord   11 1   Right to light and air   11 2   Right to enter to cultivate   11 3   Right to restrict access   11 4   Right to services   11     Part 2   11 --------------------------------------------------------------------------------     Existing Encumbrances   11 Schedule 3   12     The rents payable by the Tenant   12     Part 1—Rents payable quarterly   12 1   Definitions   13 2   The rent review   13 3   Memorandum of agreement as to rent   13 4   Where assessment of rent delayed   13 5   Intermediate rent periods   13     Part 2—Rents payable upon demand   14 1   Insurance Rent   14 2   Rent for common parts   14 3   Interest on arrears   14 4   Insurance excess   14     Part 3   14     Provisions and obligations relating to the Service Rent   14 Schedule 4   20     Tenant's covenants   20 1   To pay rent   20 2   To pay outgoings   20 3   To repair and decorate   20 4   Not to make alterations   21 5   To permit entry   22 6   To repair on notice   22 7   To pay Landlord's costs   22 8   As to use and safety   23 9   Not to use for unlawful or illegal purposes or cause nuisance   24 10   Not to reside   24 11   As to user   24 12   To keep open and security   25 13   Displays and advertisements   25 14   To keep clean   25 15   To comply with Legal Obligations and give notice   25 16   To comply with the Planning Acts   26 17   Insurance   26 18   To indemnify   27 19   Dealings with the Premises   28 20   To give notice of assignments, devolutions etc.   30 -------------------------------------------------------------------------------- 21   As to loss or acquisition of easements   30 22   To produce plans/documents   31 23   Not to interfere with reserved rights   31 24   To permit entry for reletting etc.   31 25   To yield up   31 26   New surety   31 27   As to value added tax   31 28   As to maintenance contracts   32 29   Statutory acquisitions   32 30   Fire fighting appliances   32 31   Existing Encumbrances   33 32   Not to obstruct   33 33   To comply with regulations   33 34   To comply with Planning Agreement and planning permissions   33 35   To pay cost of damage   33 36   To permit access to the Company   33 37   Costs   33 Schedule 5   34     Landlord's covenants   34 1   As to quiet enjoyment   34 2   To insure and reinstate   34 3   Duty to Mitigate   34 Schedule 6   35     Surety's covenants and agreements   35 1   Covenants by Surety   35 2   Agreements by Surety   35 Schedule 7   37     Guarantee Agreement   37 1   Definitions and interpretation   37 2   Guarantee   37 3   New lease   38 4   Security taken by Guarantor   39 5   Limitation on Guarantor's liability   39 6   Joint and several Guarantors   39 -------------------------------------------------------------------------------- THIS LEASE is made on            2001 BETWEEN: (1)("Landlord") THE MASTER FELLOWS AND SCHOLARS OF THE COLLEGE OF THE HOLY AND UNDIVIDED TRINITY WITHIN THE TOWN AND UNIVERSITY OF CAMBRIDGE OF KING HENRY THE EIGHTH'S FOUNDATION (2)("Tenant") ACCELRYS LIMITED (company number 02326316) whose registered office is at The Quorum Barnwell Road Cambridge CB5 8RE (3)("Surety") ACCELRYS INC incorporated in the state of Delaware whose principal place of business is CN 5350 Princeton New Jersey 08543-5350 (4)("Company") TRINITY COLLEGE (CSP) LIMITED (company number 03393539) whose registered office is at 112 Hills Road Cambridge CB2 1PH NOW THIS LEASE WITNESSETH as follows: 1   Definitions and Interpretation 1.1In this Lease unless the context otherwise requires: "Authority" means any statutory public local or other authority or any court of law or any government department or agency or other competent body or any of them or any of their duly authorised officers "Basic Rent" means £[NB To be calculated pursuant to the Agreement] per annum (subject to increase as provided in part 1 of schedule 3) "Company" means Trinity College (CSP) Limited or any successor company responsible for the management of the Estate "Connected Person" means any person, firm or company which is connected with the Tenant for the purposes of section 839 Income and Corporation Taxes Act 1988 "Consent" means an approval permission authority licence or other relevant form of approval given by the Landlord in writing "Deeds of Grant" means two Deeds of Grant of Easement each being dated 10th November 2000 the first being made between Aula Limited (1) the Landlord (2) and the Company (3) and the second being made between the Landlord (1) Aula Limited (2) and the Company (3) "Enactments" shall include all present and future Acts of Parliament (including but not limited to the Public Health Acts 1875 to 1961 the Factories Act 1961 the Offices Shops and Railway Premises Act 1963 the Fire Precautions Act 1971 the Defective Premises Act 1972 the Health and Safety at Work etc. Act 1974 the Environmental Protection Act 1990 and the Planning Acts) and all notices directions orders regulations bye-laws rules and conditions under or in pursuance of or deriving effect therefrom and any reference herein to a specific enactment or enactments (whether by reference to its or their short title or otherwise) shall include a reference to any enactment amending or replacing the same and any future legislation of a like nature "Environmental Damage" means any damage to human health or the environment which constitutes a breach of any Legal Obligation or gives rise to a civil claim for damages "Estate" shall mean Cambridge Science Park shown edged red and blue on Plan 2 situate adjoining Milton Road partly in the City of Cambridge and partly in the County of Cambridgeshire together with any such further neighbouring area in respect of which the Landlord or its lessees may from time to time or at any time during the Period of Limitation receive planning permission 1 -------------------------------------------------------------------------------- to develop for uses similar or ancillary to the use of the said area edged red and blue and which the Landlord during the Period of Limitation elects to include in Cambridge Science Park "Existing Encumbrances" means the documents referred to in part 2 of schedule 2 of this Lease "Group Company" has the meaning ascribed to it by s.42 Landlord and Tenant Act 1954 "Hazardous Material" means any substance which is inflammable explosive dangerous or otherwise known or reasonably believed to be harmful to human health or the environment and for that reason subject to statutory controls on production use storage or disposal "Insured Risks" means at any particular time the risks of loss or damage by riot civil commotion (if available on reasonable commercial terms and at reasonable commercial cost) fire storm flood explosion bursting or overflow of water tanks boilers or apparatus impact by road vehicles aircraft and other aerial devices or articles dropped therefrom and the risk of any other kind of loss or damage which the Landlord may from time to time in their absolute discretion deem it desirable to insure against and against which they shall at that particular time have a policy of insurance in effect subject to such exclusions and limitations as the insurers may impose and subject in every case to the availability of insurance cover against the risk and subject to the conditions on which and to the extent that insurance cover against each risk is generally available in relation to property such as the Premises "Interest" shall mean interest at the yearly rate of four per cent above the base rate published from time to time by Barclays Bank PLC or (in the event of base rate or Barclays Bank PLC ceasing to exist) such other equivalent rate of interest as the Landlord may from time to time in writing specify "Landlord" shall include any party for the time being entitled to the reversion immediately expectant upon the end of the Term "Landlord's Neighbouring Premises" means any land or buildings now or hereafter during the Period of Limitation erected adjoining or neighbouring the Premises (whether beside under or over) which belong to the Landlord now or hereafter during the Period of Limitation "Legal Obligation" means any obligation from time to time created by any Enactment or Authority which relates to the Premises or their use "Period of Limitation" means the period of eighty years commencing on the date hereof or such longer period as the law may permit (which period is hereby specified as the perpetuity period applicable to this Lease under the rule against perpetuities) "Phase VI" means that part of the Estate edged blue on Plan 2 "Phase VI Planning Agreement" shall mean an Agreement dated 17th October 2000 made between the Landlord (1) Aula Limited (2) Cambridgeshire County Council (3) made pursuant to Section 106 of the Town and Country Planning Act 1990 "Plan 1" shall mean the plan numbered 1 annexed hereto "Plan 2" shall mean the plan numbered 2 annexed hereto "Planning Acts" means the Town and Country Planning Acts 1948 to 1990 the Planning (Hazardous Substances) Act 1990 the Planning (Listed Buildings and Conservation Areas) Act 1990 the Local Government Planning and Land Act 1980 and all notices directions orders regulations byelaws rules and conditions under or in pursuance of or deriving effect therefrom from time to time and any reference herein to these or any other Act or Acts shall include a reference to any statutory modification or re-enactment thereof for the time being in force and any future legislation of a like nature 2 -------------------------------------------------------------------------------- "Planning Agreement" shall mean: (a)an agreement dated 8th November 1971 made pursuant to section 37 of the Town and Country Planning Act 1962 between the County Council of the Administrative County of Cambridgeshire and Isle of Ely (1) and the Landlord (2) and (b)an agreement dated 19th August 1975 made pursuant to section 52 of the Town and Country Planning Act 1971 between the same parties and in the same order as the section 37 agreement and (c)an agreement dated 2nd February 1982 made pursuant to section 52 of the Town and Country Planning Act 1971 between South Cambridgeshire District Council (1) and the Landlord (2) and (d)an agreement dated 26th June 1984 made pursuant to section 52 of the Town and Country Planning Act 1971 between South Cambridgeshire District Council (1) and the Landlord (2) and (e)an agreement dated 2nd June 1988 made pursuant to section 52 of the Town and Country Planning Act 1971 between South Cambridgeshire District Council (1) and the Landlord (2) (f)an agreement dated 15th February 1999 made pursuant to section 106 of the Town and Country Planning Act 1990 between Cambridgeshire County Council (1) and the Landlord (2) "Premises" means the property hereby demised as described in part 1 of schedule 1 including all Service Channels exclusively serving such property and fixtures and fittings (other than trade or tenant's fixtures and fittings) therein together with all additions alterations and improvements to such property "Rent Commencement Date" means [Insert date 97 days after Practical Completion Date] "Rights" means the rights described in part 2 of schedule 1 of this Lease "Service Channels" means all such flues sewers drains ditches pipes wires watercourses cables channels gutters ducts and other conductors of services and plumbing and ventilating equipment and motors appurtenant thereto as are now existing or which may be constructed or laid during the Term and within the Period of Limitation as herein defined "Service Rent" shall have the meaning ascribed to that expression in part 3 of Schedule 3 "Surety" means a person who has entered into a guarantee of the Tenant's covenants contained in this Lease in the form of the guarantee set out in schedule 6 (whether by separate deed pursuant to the provisions of this Lease or otherwise) and shall include the Surety's successors whether by substitution or otherwise including personal representatives "Surveyor" means the Surveyors Consulting Engineers and Agents for the time being of the Landlord "Tenant" shall include the person in whom the Term is presently vested "Term" means the total period of demise hereby granted and (other than in the case of the references to the term in the definition of "Relevant Date" and in the habendum of this Lease) includes any period of holding over or any extension or continuance of the contractual term by Enactment or otherwise 1.2Words importing the masculine gender only include the feminine gender and vice versa and include any body of persons corporate or unincorporate words importing the singular number only include the plural number and vice versa and the word "person" shall include any body of persons corporate or unincorporate and all covenants by any party hereto shall be deemed to be joint and 3 -------------------------------------------------------------------------------- several covenants where that party is more than one person and any covenant by the Tenant not to do or not to do or omit to do an act or thing shall be deemed to include an obligation not to permit or suffer such act or thing to be done or omitted 1.3(a) References to numbered clauses and schedules are references to the relevant clause or schedule to this Lease and references to numbered paragraphs are references to the numbered paragraphs of that schedule or the part of the schedule in which they appear (b)The clause paragraph and schedule headings do not form part of this lease and are not to be taken into account when construing it 1.4This instrument (a)is executed as a deed and by its execution the parties authorise their solicitors to deliver it for them when it is dated (b)was delivered when it was dated (c)is entered into pursuant to an agreement for lease 1.5This Lease is a new tenancy for the purposes of the Landlord and Tenant (Covenants) Act 1995 2   The demise habendum and reddendum 2.1In consideration of the several rents and covenants on the part of the Tenant herein reserved and contained the Landlord HEREBY DEMISES unto the Tenant ALL THOSE premises more particularly described in schedule 1 TOGETHER WITH (in common with the Landlord their lessees and assigns and all other persons from time to time having the like rights) the Rights EXCEPT AND RESERVING UNTO THE LANDLORD and its successors in title assigns and lessees and all persons from time to time authorised by it the interests rights reservations and exceptions more particularly set out in part 1 of schedule 2 TO HOLD the Premises unto the Tenant SUBJECT to (but with the benefit of) the Existing Encumbrances and to any or all easements and other rights (if any) now subsisting over or which may affect the same from [insert Practical Completion Date] 200[  ] [to [  ]200[  ]] [insert quarter day succeeding the Practical Completion Date if Practical Completion Date is not a quarter day—otherwise delete words in italics] and thereafter for the term of 20 years but determinable nevertheless as hereinafter provided YIELDING AND PAYING THEREFOR unto the Landlord during the Term by way of rent (a)yearly and proportionately for any fraction of a year the Basic Rent (which shall be subject to increase as provided in part 1 of Schedule 3) the first such payment or a proportionate part thereof in respect of the period from the Rent Commencement Date to [insert the next regular quarter day after the Rent Commencement Date] to be made on the Rent Commencement Date and thereafter such rents to be paid by equal quarterly instalments in advance on the four usual quarter days in every year (b)on demand the rents specified in part 2 of schedule 3 (c)the Service Rent (which shall be payable in accordance with clause 3.2 of this Lease at the time and in the manner prescribed in part 3 of Schedule 3) (d)any other sums which may become due from the Tenant to the Landlord under the provisions of this Lease     all such payments to be made without any deduction 4 -------------------------------------------------------------------------------- 3   Tenant's covenants 3.1The Tenant HEREBY COVENANTS with the Landlord to observe and perform all the covenants and provisions on the Tenant's part set out in Schedule 4 3.2The Tenant HEREBY COVENANTS with the Company and as a separate and distinct covenant with the Landlord at all times during the Term: (a)(subject to clause 6.15 below) to pay the Service Rent at the times and in the manner provided in part 3 of schedule 3 and (b)to observe and perform the obligations on its part contained in part 3 of Schedule 3 (c)upon each assignment of this Lease the Tenant shall procure that the Assignee enters into and completes a Deed of Covenant in favour of the Company upon like terms to this clause 3.2 4   Landlord's covenants 4.1The Landlord HEREBY COVENANTS with the Tenant to observe and perform all the covenants and provisions on the Landlord's part set out in Schedule 5 5   Company's covenants 5.1The Company hereby covenants with the Tenant as a separate and distinct covenant with the Landlord at all times during the Term to observe and perform all the covenants and provisions on the Company's part set out in part 3 of Schedule 3 5.2The Company hereby covenants with the Tenant that upon each assignment of this Lease the Company shall enter into and complete a Deed of Covenant in favour of such assignee upon like terms to clause 5.1 above and this clause 5.2 6   Proviso agreement and declaration 6.1Forfeiture     Without prejudice to any other rights of the Landlord if: (a)the whole or part of the rent remains unpaid twenty one days after becoming due (whether demanded or not) or (b)any of the Tenant's covenants in this Lease are not performed or observed or (c)the Tenant or any guarantor or surety of the Tenant's obligations under this Lease (i)proposes or enters into any composition or arrangement with its creditors generally or any class of its creditors or (ii)is the subject of any judgment or order made against it which is not complied with within seven days or is the subject of any execution distress sequestration or other process levied upon or enforced against any part of its undertaking property assets or revenue or (iii)being a company: (A)is the subject of a petition presented or an order made or a resolution passed or analogous proceedings taken for appointing an administrator of or winding up such company (save for the purpose of and followed within four months by an amalgamation or reconstruction which does not involve or arise out of insolvency or give rise to a reduction in capital and which is on terms previously approved by the Landlord) or 5 -------------------------------------------------------------------------------- (B)an encumbrancer takes possession or exercises or attempts to exercise any power of sale or a receiver or administrative receiver is appointed of the whole or any part of the undertaking property assets or revenues of such company or (C)stops payment or agrees to declare a moratorium or becomes or is deemed to be insolvent or unable to pay its debts within the meaning of section 123 Insolvency Act 1986 (iv)being an individual: (A)is the subject of a bankruptcy petition or bankruptcy order or (B)is the subject of an application or order or appointment under section 253 or section 273 or section 286 Insolvency Act 1986 or (C)is unable to pay or has no reasonable prospect of being able to pay his debts within the meaning of sections 267 and 268 Insolvency Act 1986 (d)any event occurs or proceedings are taken with respect to the Tenant or any guarantor of the Tenant's obligations under this Lease in any jurisdiction to which it is subject which has an effect equivalent or similar to any of the events mentioned in clause 6.1(c) then and in any of such cases the Landlord may at any time (and notwithstanding the waiver of any previous right of re-entry) re-enter the Premises whereupon this Lease shall absolutely determine but without prejudice to any right of action of the Landlord in respect of any previous breach by the Tenant of this Lease PROVIDED THAT if any of the events referred to in clause 6.1(c) or 6.1(d) occurs in respect of any guarantor or surety of the Tenant in circumstances where a new surety is provided by the Tenant pursuant to the provisions of paragraph 26 of schedule 4 then any such re-entry shall cease and determine and the parties shall be restored to the position they were in prior to such event PROVIDED FURTHER THAT in such circumstances the Landlord shall not effect peaceable re-entry 6.2Notices     Any notice under this Lease shall be in writing and any notice (a)to the Tenant or the Surety shall be deemed to be sufficiently served if (i)left addressed to the Tenant on the Premises or (ii)sent to the Tenant or the Surety by post at the last known address or (if a Company) registered office of the Tenant or the Surety and (b)to the Landlord shall be deemed to be sufficiently served if (i)sent to the Landlord by post at the last known address or (if a Company) registered office of the Landlord (ii)whilst the reversion immediately expectant on the determination of the Term is vested in the original Landlord (as named herein) addressed to the Landlord's Senior Bursar and delivered to him personally or sent to him by post 6.3Rent abatement If the Premises or the access thereto are destroyed or rendered wholly or partly unfit for use by any of the Insured Risks then (provided the destruction or damage is not caused by the act or default of the Tenant or any person on the Premises with the Tenant's express or implied authority or any predecessor in title of any of them so that the insurance policy effected in respect of the Premises is vitiated or payment of any part of the policy money is withheld) a fair proportion of 6 -------------------------------------------------------------------------------- the Basic Rent according to the extent of the damage sustained and (in the case of the Premises being wholly unfit for use) the Service Rent shall cease to be payable for the shorter of a period of three years or the period during which the Premises or the access thereto remain unfit for use and any dispute with reference to this proviso shall be referred to arbitration in accordance with clause 6.7 below 6.4Part II Landlord and Tenant Act 1954 If this Lease is within Part II of the Landlord and Tenant Act 1954 then subject to the provisions of subsection (2) of section 38 of that Act neither the Tenant nor any assignee or undertenant of the Term or of the Premises shall be entitled on quitting the Premises to any compensation under section 37 of that Act 6.5Warranties The Tenant hereby acknowledges and admits that the Landlord has not given or made any representation or warranty that the use of the Premises herein authorised is or will remain a permitted use under the Planning Acts 6.6Landlord's powers to deal with the Landlord's Neighbouring Premises Notwithstanding anything herein contained the Landlord and all persons authorised by the Landlord shall have power without obtaining any consent from or making any compensation to the Tenant to deal as the Landlord may think fit with the Landlord's Neighbouring Premises and to erect thereon or on any part thereof any building whatsoever and to make any repairs alterations or additions and carry out any demolition or rebuilding whatsoever (whether or not affecting the light or air to the Premises) which the Landlord may think fit or desire to do PROVIDED THAT in the exercise of such power the Landlord will not cause the Premises to be rendered unsuitable for the Tenant's use and business nor at any time materially restrict access thereto 6.7Arbitration (Unless this Lease otherwise provides) if any dispute or difference shall arise between the parties hereto touching these presents or the rights or obligations of the parties hereunder such dispute or difference shall in the event of this Lease expressly so providing and otherwise may by agreement between the parties be referred to a single arbitrator to be agreed upon by the parties hereto or in default of agreement to be nominated by the President or Vice President for the time being of the Royal Institution of Chartered Surveyors on the application of any party in accordance with and subject to the provisions of the Arbitration Act 1996 6.8Landlord's obligations Nothing herein contained shall render the Landlord liable (whether by implication of law or otherwise howsoever) to do any act or thing which the Landlord has not expressly covenanted to carry out provide or do in schedule 5 6.9Value added tax Any consideration on supplies made by the Landlord under this Lease is exclusive of value added tax (or any substituted tax) 6.10Reference to Rights Any reference to any right or easement exercisable by the Landlord should be deemed to include the exercise of such right or easement (to the extent that they pertain to the management of the Estate) the Company or any mortgagee of the Landlord or of the Company 7 -------------------------------------------------------------------------------- 6.11References to Consents In every case where there is an obligation on the part of the Tenant to obtain consent or approval from the Landlord there should be deemed to be included an obligation to obtain consent and approval from any mortgagee of the Landlord and the Landlord should be entitled to withhold the giving of its consent or approval until the consent or approval of any such mortgagee has first been granted PROVIDED THAT there shall be no such obligation if the mortgagee of the Landlord is entitled to withhold consent or approval on terms which are more restrictive to the Tenant than the terms applicable to the Landlord pursuant to this Lease 6.12References to Rights of Entry All rights of entry exercisable by the Landlord or (to the extent that they pertain to the management of the Estate) the Company or any mortgagee or persons authorised by the Landlord or the Company shall extend to and include their respective surveyors servants contractors agents licensees and work people with or without plant appliances and materials 6.13Third Party Rights The parties intend that no person who is not a party to this lease is to have the benefit of or be capable of enforcing any term of this lease as a result of the Contracts (Rights of Third Parties) Act 1999. 6.14Proper law This Lease will be governed by and construed in accordance with English law and the parties irrevocably submit to the non-exclusive jurisdiction of the English Courts. The Surety irrevocably authorises and appoints Accelrys Limited of Unit 334 Cambridge Science Park Milton Road Cambridge (or such other person or body resident in England or Wales as it may from time to time by written notice to the other parties hereto substitute) to accept service of all legal process arising out or connected with this agreement and service on Accelrys Limited (or such substitute) will be deemed to be service on the Surety. 6.15Service Rent Payment by the Tenant to the Company of the Service Rent in accordance with clause 3.2 of this Lease shall be a full and sufficient discharge of any obligation on the part of the Tenant to pay the same to the Landlord to the intent that having made payment to the Company under no circumstance shall the Tenant be liable to make the same payment (or any part of that payment) to the Landlord 7   Surety's covenant 7.1The Surety (in consideration of this demise having been made at the Surety's request) hereby covenants with the Landlord (as principal and not merely as guarantor) that the Surety will observe and perform the covenants agreements and declarations set out in schedule 8 8   Personal Rent Abatement 8.1It is further hereby agreed and declared that for so long only as (a)Accelrys Limited is the Tenant under this Lease and personally remains in actual occupation of whole or not less than 30% of the net internal area of the Premises and (b)Accelrys Inc continues in its capacity as surety under this Lease 8 -------------------------------------------------------------------------------- then the Basic Rent shall be rebated by the yearly amounts specified in column 1 below during the periods specified in column 2 below each of which said periods shall be calculated from [Insert Practical Completion Date] Column 1 --------------------------------------------------------------------------------   Column 2 -------------------------------------------------------------------------------- £1000,000   1st Year of the Term £75,000   2nd Year of the Term £50,000   3rd Year of the Term £25,000   4th Year of the Term such rebates to be applicable by equal quarterly instalments against the payment of the Basic Rent 9 -------------------------------------------------------------------------------- Schedule 1 Part 1 The property included in this demise     ALL THAT piece or parcel of land forming part of Cambridge Science Park and known as Unit 334 as the same is more particularly delineated on Plan 1 and thereon edged red and for the purpose of identification only delineated on Plan 2 and thereon edged green together with the buildings standing thereon or on some part thereof Part 2 1   Right to services 1.1At all times hereafter the right of passage and running of appropriate services through the Service Channels now in under or across the public highway abutting upon the southern boundary of the property described in part 1 of this schedule and to make connection with such Service Channels or any of them for the purpose of exercising the said rights and all such rights of access for the Tenant and the Tenant's lessees and employees as may from time to time be reasonably required for the purpose of laying inspecting cleansing repairing maintaining renewing or adding to such Service Channels or any of them but the enjoyment of the aforesaid rights shall be subject to the Tenant or other the person or persons exercising the same or having the benefit thereof being liable to make good all damage to the Estate or the Landlord's Neighbouring Premises thereby occasioned with reasonable dispatch 2   Right of way 2.1The right of way for all purposes reasonably necessary for the use and enjoyment of the Premises for the purposes herein authorised but not further or otherwise with or without vehicles over the roadways coloured brown on Plan 2 (if and so far as the same are not adopted) subject (for the avoidance of doubt) to the terms of the Phase VI Planning Agreement and to the Deeds of Grant 3   Right to support 3.1The right to support now or hereafter belonging to or enjoyed by the Premises 10 -------------------------------------------------------------------------------- Schedule 2 Part 1 Exceptions and reservations in favour of the Landlord 1   Right to light and air 1.1The Tenant shall not be entitled to any right of access of light or air to the Premises which would restrict or interfere with the user of the Estate or any of the Landlord's Neighbouring Premises for building or otherwise howsoever 2   Right to enter to cultivate 2.1A right of access at all times together with the Company's surveyor the Landlord's and the Company's employees servants workmen and all persons authorised by the Landlord to all such parts of the Premises as shall from time to time be unbuilt upon for the purpose of cultivating planting maintaining and landscaping the same in such manner as shall in the absolute discretion of the Landlord from time to time seem appropriate 3   Right to restrict access 3.1A right to restrict vehicular access between Phase VI and the remainder of the Estate for the purpose of complying with the provisions of the Phase VI Planning Agreement 4   Right to services 4.1At all times hereafter the right of passage and running of appropriate services through the Service Channels forming part of the Premises and to make connection with such Service Channels or any of them for the purpose of exercising the said rights and all such rights of access for the Landlord the Surveyor and the Landlord's lessees and employees and all persons from time to time authorised by the Landlord as may from time to time be reasonably required for the purpose of laying inspecting cleansing repairing maintaining or renewing such Service Channels or any of them but the enjoyment of the aforesaid rights shall be subject to the Landlord or other the person or persons exercising the same or having the benefit thereof giving reasonable prior notice save in emergency and being liable to make good all damage to the Premises thereby occasioned as soon as practicable Part 2 Existing Encumbrances 1The Service Charge Deed dated 10.11.2000 and made between Aula Limited (1) the Master Fellows and Scholars of Trinity College Cambridge (2) the Company (3) 2The Planning Agreements 3Water pipe adjacent to northern boundary 4Fibre optic cables adjacent to the western boundary 5The rights of the water authority in relation to the first public drain 6The rights of Eastern Electricity Board in relation to the substation site in the south west corner of the Premises 7The rights of Eastern Electricity Board in relation to the overhead power cables 11 -------------------------------------------------------------------------------- Schedule 3 The rents payable by the Tenant Part 1—Rents payable quarterly 1   Definitions 1.1In this part of this schedule the following words shall have the following meanings (a)the "Relevant Date" shall mean [insert fifth anniversary of Practical Completion if practical completion occurred on a quarter day. Otherwise insert fifth anniversary of quarter day immediately succeeding Practical Completion] and every fifth anniversary of that date during the Term (b)"the Full Open Market Yearly Rent" shall mean the best yearly rent for which the whole of the Premises excluding for all purposes of this part of schedule 3 the floor area of the plant rooms (but for the avoidance of doubt it shall be assumed that the plant installed therein by the Landlord at the Landlord's expense exists and serves the Premises) might reasonably be expected to let (or if a part or parts of the Premises are underlet then the total of the best yearly rents for which each underlet part and the remainder of the Premises (if any) might reasonably be expected to let separately) in the open market by a willing landlord to a willing tenant (or willing tenants as the case may be) (after the expiry of any rent free period or period of concessionary rent which may then be usual on the grant of a new lease to enable a tenant to carry out fitting out works) on the assumption (if not fact) that (i)the Premises are fully repaired maintained and decorated in accordance with the provisions of this Lease and are vacant and fit for immediate occupation and use (and all Legal Obligations are complied with and all requisite consents and permissions for the use of the Premises have been obtained) and that no work has been carried out thereon which would diminish the rental value of the Premises and that in case the Premises had been damaged or destroyed by any of the Insured Risks they had been fully restored in accordance with the terms hereof and (ii)the lease of the Premises shall be for a term of ten years certain without payment of a fine or premium or any other form of inducement being offered or received and upon the same terms provisions agreements and declarations (other than as to the amount of rent and any rent free period hereunder but including like provisions for the review of rent to those herein contained) and covenants on the part of the Landlord and the Tenant as those herein contained (iii)the willing tenant has received whatever rental concessions or other inducements which may at the time be usual on the grant of a new lease with vacant possession to enable it to carry out fitting out works     there being disregarded (A)any effect on rent of the fact that the Tenant or any undertenant or their respective predecessors in title have been in occupation of the Premises and (B)any goodwill attached to the Premises by reason of trade or business carried on therein by the Tenant or any undertenant or their respective predecessors in title and (C)any effect on rent of any improvement (including any carried out during the period of the agreement for the grant of this Lease) to the Premises (being an improvement effected or completed within a period of twenty one years immediately preceding the Relevant Date on which the rent is being reviewed) carried out by the Tenant or any 12 -------------------------------------------------------------------------------- undertenant or their respective predecessors in title in that capacity with the prior consent in writing of the Landlord (where required pursuant to this Lease) other than an improvement effected at the expense of the Landlord or in pursuance of an obligation to the Landlord whether under this Lease or otherwise AND PROVIDED THAT the Landlord or their predecessors in title have not had or been entitled to vacant possession of the Premises since the improvement was carried out and (D)as far as may be permitted by law all restrictions whatsoever relating to rent contained in any Enactments (whether relating to the method of determination of rent or otherwise) 2   The rent review 2.1At each Relevant Date the rent shall be reviewed in accordance with the provisions of this part of this schedule and from and after each Relevant Date the Tenant shall pay to the Landlord by way of rent in respect of the Premises whichever is the greater of (a)the maximum yearly rent payable hereunder immediately prior to that Relevant Date and (b)the Full Open Market Yearly Rent for the Premises at that Relevant Date such Full Open Market Yearly Rent to be determined (in default of agreement between the Landlord and the Tenant) by arbitration in accordance with clause 6.7 of this Lease on the application of the Landlord or the Tenant made at any time before or after that Relevant Date but so that (for the avoidance of doubt) any delay in the implementation of a review of rent hereunder until after a Relevant Date shall not prejudice the review of rent with effect from that Relevant Date 3   Memorandum of agreement as to rent 3.1As soon as practicable after the agreement or determination of the amount of the Full Open Market Yearly Rent a memorandum recording the same shall be endorsed on or otherwise annexed to the Original and Counterpart of this Lease 4   Where assessment of rent delayed 4.1Should the rent to be agreed or determined in accordance with paragraph 2 (herein in this paragraph 4.1 called "the New Rent") not have been agreed or determined as aforesaid by any Relevant Date then the Tenant shall on and after that day pay rent at the rate equal to the rent payable immediately before that Relevant Date (herein in this paragraph 4.1 called "the Old Rent") and so soon as the New Rent shall have been agreed or determined as aforesaid the Tenant shall forthwith pay to the Landlord by way of additional rent the difference between the New Rent and the Old Rent for each quarter for which the New Rent should have been paid together with interest thereon at a rate four per cent below the rate of Interest from the date upon which the same became payable until the date of payment 5   Intermediate rent periods 5.1If at any Relevant Date the Landlord shall be obliged legally or otherwise to comply with any Enactments dealing with the control of rent and which shall restrict or modify the Landlord's right to review the Old Rent or to receive the New Rent (which expressions are defined in paragraph 4.1) in accordance with the terms hereof then the Landlord shall as often as such enactment is removed relaxed or modified be entitled to give not less than one month's notice in writing (herein called "an Intermediate Rent Review Notice") to the Tenant expiring not earlier than the date of each such removal relaxation or modification to introduce an intermediate review 13 -------------------------------------------------------------------------------- of rent additional to the reviews of rent specified in this part of this schedule and the expiry of the Intermediate Rent Review Notice shall be deemed to be the Relevant Date for the purpose of paragraphs 2 3 and 4 PROVIDED THAT nothing herein contained shall vary or modify any subsequent Relevant Date as defined in paragraph 1.1(a) of this part of this schedule Part 2—Rents payable upon demand 1   Insurance Rent 1.1A sum or sums of money equal to the amount or amounts which the Landlord shall from time to time be liable to pay in or in respect of effecting or maintaining the insurance of the Premises in accordance with the Landlord's covenant contained in paragraph 2 of schedule 5 and all professional fees which the Landlord may from time to time incur in connection with the valuation of the Premises for insurance purposes not more frequently than every three years 2   Rent for common parts 2.1A proper proportion attributable to the Premises of the cost and expense of making repairing maintaining renewing rebuilding cleansing and operating all ways roads pavements Service Channels yards bicycle stores vehicle parks and gardens fences party walls and structures and any installations equipment fittings fixtures easements appurtenances or conveniences which are not the subject matter of the Service Rent but which none the less belong to or are used by the Premises in common with the other buildings on the Estate and the Landlord's Neighbouring Premises and with any other premises adjoining or neighbouring the Premises (or any of them) including architect's and surveyor's fees properly incurred in connection with such works (such proper proportion to be certified by the Surveyor whose certificate shall be final and binding on the Tenant) 3   Interest on arrears 3.1Interest on any monies payable by the Tenant to the Landlord under any covenant or provision of this Lease which remain unpaid for seven days shall be payable by the Tenant such Interest to be calculated from the date when such monies were due until the date when such monies are received by the Landlord PROVIDED THAT the provisions of this paragraph 3.1 shall not prejudice any rights or remedies of the Landlord in respect of any breach of any of the covenants on the part of the Tenant herein contained and PROVIDED FURTHER THAT under no circumstance shall the Landlord be entitled to interest on any sum under this paragraph and be entitled to interest on the same sum under paragraph 6.2 of part 3 of schedule 3 4   Insurance excess 4.1If a claim arising under any policy of insurance effected by the Landlord upon the Premises shall be subject to any insurance excess the Tenant shall reimburse or otherwise indemnify the Landlord against the amount of such excess Part 3 Provisions and obligations relating to the Service Rent 1In this schedule unless the context otherwise requires the following words and expressions shall have the following meanings: 1.1"Common Parts" means all parts of the Estate provided or intended to be provided for the purpose of servicing (inter alia) the occupiers of the Estate and for common use and 14 -------------------------------------------------------------------------------- enjoyment by (inter alia) the occupiers of the Estate excluding (for the avoidance of doubt) areas comprised in a transfer or a demise but including (but without limitation) areas (a)intended to be let or transferred to a utility authority for the better performance of their function of supplying services to (inter alios) the occupiers of the Estate from time to time and (b)intended to be dedicated adopted or vested in an appropriate statutory authority or supply authority (c)comprising landscaped areas and water features (d)comprising any barrier or other system agreed to be provided for the control of the flow of traffic between Phase VI and the remainder of the Estate and any associated traffic counter and any control room for monitoring the same the centre facilities buildings an implement/tractor store and caretakers residential accommodation 1.2"Computing Date" means 30th November in every year or any alternative date nominated at any time by the Service Provider 1.3"Financial Year" means (a)the period from and including the date this Deed to and including the first Computing Date and after that (b)the period between two consecutive Computing Dates (excluding the first but including the second Computing Date in the period) 1.4"Interim Sum" means a provisional amount on account of the Service Rent for the relevant Financial Year calculated by the Managing Agent (acting as an expert) based on the Managing Agent's reasonable estimate of the likely amount of the Service Rent for the Financial Year in question 1.5"Managing Agent" means Bidwells of Trumpington Road Cambridge or such other agents as the Service Provider may appoint and notify in writing to the Tenant 1.6"Phase V1" means that part of the Estate as is shown edged blue on the Plan marked "Plan 2" annexed hereto 1.7"Quarter Days" means 25th March 24th June 29th September and 25th December in each year and "Quarter Day" shall be construed accordingly 1.8"Service Provider" means the Company and (in the event of the Company failing for any reason to provide the Services (and in any event upon and the Landlord wishing to enforce its remedies against the Tenant in respect of any default by the Tenant under its covenants and obligations under this part of this schedule)) the Landlord PROVIDED THAT the Landlord shall notify the Tenant in writing as soon as practicable if the Service Provider shall at any time be the Landlord (in lieu of the Company) and shall subsequently notify the Tenant in writing as soon as practicable if the Service Provider shall subsequently revert to being the Company and so on and so forth 1.9"Service Rent" means such per cent of the Service Costs as is fairly and properly attributable to the Premises from time to time and is fair and reasonable in all the circumstances 1.10"Service Costs" means (a)all proper costs and expenses reasonably incurred by the Service Provider in or incidental to providing the Services and 15 -------------------------------------------------------------------------------- (b)all sums incurred by the Service Provider relating to the items set out in paragraph 8 of this schedule and in both cases includes interest charges and fees incurred in borrowing money to meet such expenditure and any Value Added Tax payable on the payments to the extent that Value Added Tax is not otherwise recoverable by the Service Provider and any costs incurred by a third party for and on behalf of the Service Provider where the Service Provider is liable to reimburse those costs but excludes any expenditure for which any other owner or occupier is wholly responsible PROVIDED THAT the Service Rent will not include any sum in respect of the cost of the initial laying out or construction of any item on the Estate comprised within the Common Parts and the making good of any defects faults or shrinkages in the design workmanship or material or any inherent defects arising out of the initial laying out or construction of any such items 1.11"Services" means the services set out in paragraph 7 of this schedule as reasonably provided by the Service Provider from time to time 2The Company will use all reasonable endeavours to provide the Services subject to obtaining any requisite Consent and all other planning permissions and other consents licences permissions and approvals which may be necessary but so that the Company may vary or withhold any of the Services from time to time if and so far as it is reasonable to do so having regard to prevailing circumstances and the intention of the parties that the Estate shall be managed for the benefit of the occupiers in accordance with the principles of good estate management 3As soon as convenient after each Computing Date and in any event within two months after the Quarter Day succeeding that Computing Date the Service Provider will prepare 3.1an account showing the Service Cost for that Financial Year and containing a fair summary of expenditure and breaking down the actual cost of the Services and afford to the Tenant an opportunity to examine and take copies of such vouchers as have been provided to the Service Provider for items of expenditure taken into account by the Service Provider when preparing the said account and 3.2a budget of the anticipated Service Cost for the forthcoming Financial Year the format of which shall follow as closely as practicable the form of account referred to in paragraph 3.1 above 4The Tenant will pay to the Service Provider the Interim Sum by four equal payments in advance on the Quarter Days the first payment (being a proportionate part in respect of the period from and including the date of this Lease to and including the day before the next Quarter Day) to be paid on the date hereof 5If the Service Rent for any Financial Year exceeds the Interim Sum for that Financial Year the excess shall be added to the Interim Sum payable in the next succeeding year and if the Service Rent for any Financial Year is less than the Interim Sum for that Financial Year the overpayment will be credited to the Tenant against the next quarterly payment of the Interim Sum payable in the next succeeding year 6The Tenant covenants with the Company and as a separate and distinct covenant with the Landlord 6.1to pay the Service Rent and Interim Sum at the times and in the manner required by this Deed to such address in England as the Company or the Landlord (as appropriate) may from time to time require and without deduction or set off whether legal or equitable 16 -------------------------------------------------------------------------------- 6.2if the Interim Sum or any part of it is not paid on the date on which it is due or if any other part of the Service Rent is not paid within fourteen days after becoming due (whether or not demanded except where a demand is required by this Lease) the sum in question shall carry Interest for the period from the date on which it became due until the date of actual payment and that Interest shall be paid to the Company or the Landlord (as appropriate) on demand 7The Services shall include 7.1the maintenance of all areas of landscaping comprised within the Common Parts including (but without limitation) regular grass cutting and reseeding and returfing the grassed areas, pruning all shrubs and trees, replacing any that may die, weeding and watering feeding fertilising mulching and otherwise treating (as appropriate) all landscaped areas and providing and maintaining appropriate furniture and signage thereto 7.2maintaining repairing inspecting cleansing lighting and (as necessary) gritting and salting of the roads and footpaths comprised within such of the Common Parts as are not on Phase V1 which are (a)intended to be dedicated or adopted (but only pending the dedication or adoption thereof) and (b)not intended to be dedicated or adopted but only to the extent that they are used or intended to be used in common by the owners of or occupants of the Estate generally it being (for the avoidance of doubt) the intention of the parties that the occupants of Phase V1 should not contribute towards the roads and footpaths on the remainder of the Estate and vice versa with the exception of the matters referred to in paragraph 7.3 below 7.3maintaining repairing inspecting and cleansing any barrier or other system agreed to be provided for the control of the flow of traffic between any parts of the Estate and any section of unadopted road on either side of such barrier or other system and any associated traffic counter and any control room for monitoring the same 7.4maintaining repairing inspecting and cleansing of the foul sewers and surface water sewers used or intended to be used in common by owners of or occupants on the Estate generally pending the dedication or adoption thereof 7.5the provision of security for the Estate to such extent and to such standard as shall from time to time be deemed appropriate 7.6the collection and removal of litter from the Common Parts and providing and maintaining such regular litter and rubbish collection facilities for the occupants on the Estate as shall from time to time be deemed appropriate 7.7the maintenance repair decoration operation and running of the centre facilities buildings for the communal use by owners of or occupants on the Estate generally the implement/tractor store and caretakers residential accommodation but not the initial fitting out and provision of materials and equipment necessary for the operation of such buildings 7.8the provision of conference facilities within the centre facilities buildings as shall be deemed appropriate from time to time 7.9the provision (whether or not by direct employment) of such numbers and quality of staff (including but not limited to management agents) as shall be reasonably required for the management and running of the Estate the provision by the Service Provider of the Services and/or the fulfilment of the Service Provider's obligations 17 -------------------------------------------------------------------------------- 7.10the preparation of (and certification) of annual accounts in respect of the Service Charge and the preparation (and certification) of annual budgets of anticipated expenditure 7.11the placing and maintaining of insurance of the Common Parts in such amounts and against such risks as shall from time to time be deemed reasonably appropriate including without prejudice to the foregoing the insurance of buildings comprised within the Common Parts against risks normally insured against in the case of buildings of a like nature property owner's liability third party liability and employer's liability 7.12such other services and the provision and operation of such other works plant materials and equipment as in the reasonable opinion of the Service Provider shall be necessary for the purpose of the better enjoyment and use of the Estate by occupiers of premises therein or are otherwise in keeping with the principles of good estate management 8The Service Costs will include the following additional items of expenditure 8.1the proper fees and disbursements (including any Value Added Tax payable) reasonably incurred of: (a)the Service Provider's surveyor the Service Provider's accountant and any other person reasonably employed or retained by the Service Provider in connection with the Estate or its management and running or in considering or fulfilling the Service Provider's obligations or powers under any lease or other disposal of premises within the Estate (including this Lease) to the extent that such costs are not exclusively paid by any tenant or third party and do not fall to be collected under sub-paragraph (b) below (b)the Managing Agent in connection with the: (i)management of the Estate (ii)collection of all payments due to the Service Provider connected with the Services the Service Costs or the Estate (but excluding collection of rents) and (iii)performance of the Services 8.2the reasonable fees of the Service Provider for any of the Services functions or duties referred to in paragraph 8.1 that are undertaken by the Service Provider and not by a third party (such fees not to exceed such percentage of the Service Cost as is generally accepted at the time). For the avoidance of doubt if any fees are charged under this paragraph 8.2 in respect of any such services functions or duties no fees in respect of the same services functions or duties shall be charged under paragraph 8.1 above 8.3the cost of employing such staff as the Service Provider reasonably considers necessary for the performance of the Services and the other functions and duties referred to in this paragraph 8 including all reasonable incidental expenditure in connection with the employment such as (but without prejudice to the generality of the foregoing): (a)insurance pension and welfare contributions (b)provision of uniforms and working clothing (c)provision of vehicles equipment and materials for the proper performance of their duties and a store for housing the same but not the initial provision of such vehicles equipment and materials and store and not any rent for the store 8.4the cost of entering into contracts for carrying out any of the Services and the other functions and duties mentioned in this schedule 18 -------------------------------------------------------------------------------- 8.5all outgoings of any kind reasonably paid by the Service Provider in respect of the Common Parts including (without limitation) rates in relation to the accommodation referred to in paragraph 7.7 above 8.6a notional figure equivalent to the reasonable market rental for the time being of the accommodation referred to in paragraph 7.7 above but less any rent or licence fee received from any tenant or operator of the centre facilities building or from any such caretaker and less any charge levied or other income received for the use of the conference facilities referred to in paragraph 7.8 above 8.7reasonable and proper contributions towards any expenditure equalisation and/or sinking fund reasonably maintained by the Service Provider from time to time to avoid wide fluctuations in the amount of Service Costs payable year on year on account of relatively expensive and necessarily recurring items of expenditure in relation to the Common Parts 8.8the cost of supplying copies of any regulations by the Service Provider relating to the Estate 8.9the cost of taking all steps the Service Provider considers necessary to comply with or contest any obligation created pursuant to any Enactment relating or alleged to relate to the Estate or its use and for which any other person is not directly liable or in complying with the Companies Acts from time to time in force or complying with any obligation relating to or affecting the Common Parts incurred in connection with any proceedings or contemplated proceedings or any dispute relating to the Estate to the extent such costs are not paid by any other party 8.10the cost of abating any nuisance in respect of the Estate so far as not the liability of any individual tenant or other person 9The Tenant shall not use the Common Parts nor shared Service Channels for any purpose other than that for which they are designed or so as to exceed the capacity for which they are designed 10The Tenant shall not obstruct the Common Parts nor use them for any purpose or activity which is illegal immoral noisy noxious or offensive or which may be or become a nuisance to or cause damage to the Service Provider or any other person or body 11The Tenant shall pay to the Service Provider on demand all costs expenses losses or liabilities incurred by the Service Provider as a result of or in connection with any breach by the Tenant of its covenants or obligations contained in this schedule and/or the enforcement or attempted enforcement of those covenants and obligations by the Service Provider 19 -------------------------------------------------------------------------------- Schedule 4 Tenant's covenants 1   To pay rent 1.1Subject in all respects to the provisions of clause 6.15 of this Lease to pay to the Landlord the rents hereby reserved (including but not limited to the rent as reviewed from time to time in accordance with part 1 of schedule 3) at the times and in the manner herein appointed for payment thereof without any deduction set off or (except as provided by clause 6.3 of this Lease) abatement whatsoever and to pay those rents reserved in part 1 of schedule 3 by standing order to the bankers of the Landlord or as it shall direct within the United Kingdom 2   To pay outgoings 2.1To pay and discharge all rates taxes duties assessments charges impositions and outgoings whatsoever (whether parliamentary local public utility or of any other description and whether or not of a recurrent nature) now or at any time during the Term taxed assessed charged imposed upon or payable in respect of the Premises or any part thereof or by the Landlord or Tenant or owner or occupier in respect thereof except any arising from any dealing with the Landlord's reversion other than a deemed dealing arising from some act or default on the part of the Tenant 3   To repair and decorate 3.1Well and substantially to cleanse maintain and repair the Premises and every part thereof (including all additions thereto and all fixtures fittings plant and machinery therein and improvements thereto and the Service Channels forming part of the Premises and exclusively serving the same and falling outside the Premises and exclusively serving the same and the boundary structures (if any) of the Premises) 3.2As and when reasonably required by the Landlord to clean (and repoint where appropriate) all external surfaces of the buildings from time to time comprised in the Premises 3.3Without prejudice to the generality of paragraphs 3.1 and 3.2 to paint (or otherwise decorate) with two coats at least of best paint (or other suitable materials) all such parts of the Premises as have been usually painted (or otherwise decorated) such painting (or other decoration) to be (a)as to the outside in every third year of the Term and with such colours as have been approved by the Surveyor (acting reasonably) and (b)as to the inside in every fifth year of the Term and (c)as to both the outside and the inside in the last year of the Term (however determined) and otherwise as the Landlord may reasonably so require 3.4Not to remove or damage any of the Landlord's fixtures and fittings in the Premises and to replace with similar articles of at least equal quality such fixtures and fittings as may be lost or worn out or become unfit for use PROVIDED THAT all work referred to in this paragraph 3 shall be done in a good and workmanlike manner and to the reasonable satisfaction of the Surveyor AND PROVIDED FURTHER THAT the liability of the Tenant under this paragraph shall not extend to damage caused by any of the Insured Risks unless the insurance shall have been vitiated or insurance monies rendered irrecoverable in whole or in part by any act omission neglect or default of the 20 -------------------------------------------------------------------------------- Tenant any undertenant or their respective employees servants agents independent contractors customers visitors licensees invitees or any other person under the Tenant's or the undertenant's control 3.5The Tenant shall give written notice to the Landlord immediately on becoming aware of: (a)any damage to or destruction of the Premises or (b)any defect or want of repair in the Premises (including without limitation any relevant defect within the meaning of section 4 Defective Premises Act 1972) which the Landlord is liable to repair under this Lease or which the Landlord is or may be liable to repair under common law or by virtue of any Enactment 4   Not to make alterations 4.1Not to make any alteration or addition to the Premises which would reduce or otherwise materially adversely affect the capital value of the Landlord's reversionary interest in the Premises or the rental value thereof (as to which the decision of the Surveyor shall be conclusive) 4.2Without prejudice to the prohibition in paragraph 4.1 not to demolish the existing buildings comprising the Premises or construct new buildings or make any alteration addition or improvement to the Premises whether structural or otherwise except as expressly permitted under paragraph 4.3 4.3The Tenant may carry out alterations additions or improvements to the Premises which do not affect any part of the exterior or structure of the Premises where: (a)the Tenant has submitted to the Landlord detailed plans and specifications showing the works and (b)the Tenant has given to the Landlord such covenants relating to the carrying out of the works as the Landlord may reasonably require (including (but not limited to) reinstatement of the Premises at the expiration or sooner determination of the Term) (c)the Tenant has if reasonably so required by the Landlord provided the Landlord with suitable security which will allow the Landlord to carry out and complete the works if the Tenant fails to do so and (d)the Tenant has obtained Consent to the works (which shall not be unreasonably withheld or delayed) PROVIDED THAT the Tenant shall indemnify the Landlord against any liability for any tax assessed upon the Landlord by reason of any such alteration erection or addition to the Premises carried out by or on behalf of the Tenant the liability or potential liability for which shall have been notified to the Tenant on or before the grant of Consent to the extent that such liability or potential liability arises due to the status of the Landlord 4.4Without prejudice to any other rights of the Landlord immediately upon the Landlord by notice in writing to that effect requiring them so to do to remove all additional buildings erections works alterations or additions whatsoever to the Premises for which Consent has not first been obtained pursuant to the provisions of paragraph 4.3 (herein called "the Unauthorised Works") and make good and restore the Premises to the state and condition thereof before the Unauthorised Works were carried out and if the Tenant shall neglect to do so for four days after such notice then it shall be lawful for the Surveyor the Landlord and the Landlord's servants contractors agents and workmen to enter upon the Premises and to remove the Unauthorised Works and to make good and restore the same to the state and condition existing before the carrying out of the 21 -------------------------------------------------------------------------------- Unauthorised Works and all expenses of so doing shall be repaid to the Landlord by the Tenant within seven days of a written demand in that behalf 4.5The Tenant shall be entitled without any requirement to obtain the Landlord's consent to install erect or remove demountable non-structural partitioning and to carry out any works required to comply with paragraph 15 of this schedule 5   To permit entry 5.1To permit the Landlord the Surveyor and their respective workmen and persons duly authorised by them respectively on reasonable notice (except in emergency) at reasonable hours to enter the Premises for the purposes of (a)viewing the same (b)taking Inventories of the fixtures fittings appliances and equipment to be yielded up at the expiration or sooner determination of the Term (c)inspecting for defects in and recording the condition of the Premises or any other breaches of covenant on the part of the Tenant (d)inspecting cleansing maintaining repairing altering renewing or adding to the Estate or any buildings thereon or the Landlord's Neighbouring Premises or any other premises adjoining the Premises or any Service Channels not comprised within the Premises (e)complying with the Landlord's obligations under this Lease or with any other Legal Obligation of the Landlord or pursuant to any reservation contained in this Lease or any other reasonable purpose connected with the management of the Premises the Estate or the Landlord's Neighbouring Premises or the Landlord's interest therein PROVIDED THAT the Landlord shall cause as little inconvenience as reasonably possible and shall make good all damage to the Premises and the Tenant's fixtures fittings and equipment therein caused by such entry as soon as practicable without the payment of compensation to the Tenant AND PROVIDED FURTHER that a representative of the Tenant shall be entitled to accompany the party or parties so entering 6   To repair on notice 6.1To make good to the reasonable satisfaction of the Surveyor as soon as practicable any defect in the repair or decoration of the Premises for which the Tenant is liable hereunder or any other want of compliance with any of the obligations on the part of the Tenant under this Lease of which the Landlord or the Surveyor has given notice in writing to the Tenant or left notice in writing at the Premises 6.2If the Tenant shall not comply with paragraph 6.1 the Tenant shall permit the Landlord the Surveyor and their respective workmen (without prejudice to any other remedy of the Landlord) to enter the Premises and make good such defect breach or want of compliance as aforesaid without the payment of any compensation to the Tenant and all expenses of so doing (including legal costs and Surveyor's fees) shall be paid by the Tenant to the Landlord on demand and shall be recoverable as rent in arrear 7   To pay Landlord's costs 7.1To pay the Landlord's costs and expenses (including legal costs and Surveyor's and other professional fees) 22 -------------------------------------------------------------------------------- (a)In or in contemplation of any proceedings relating to the Premises under sections 146 and/or 147 of the Law of Property Act 1925 or the preparation and service of notices thereunder (whether or not any right of re-entry or forfeiture has been waived by the Landlord or a notice served under the said section 146 is complied with by the Tenant or the Tenant has been relieved under the provisions of the said Act and notwithstanding that forfeiture is avoided otherwise than by relief granted by the Court) (b)In the preparation and service of any Schedule of Dilapidations at any time during or after the Term (c)In connection with the recovery of arrears of rent due from the Tenant hereunder (including but not limited to bailiffs' commission incurred by the Landlord of and incidental to every distress levied by the Landlord on the Tenant's goods for the recovery of overdue rent or other sums due under this Lease) (d)In connection with approving plans and specifications required hereunder and the supervision and inspection of alterations erections additions and any other works carried out by the Tenant and any undertenant (e)In respect of any application for Consent required by this Lease whether or not such Consent be granted 8   As to use and safety 8.1Not knowingly to cause any Environmental Damage at or to the Premises and to indemnify the Landlord against all liabilities claims or demands in respect of Environmental Damage arising out of the use or occupation of the Premises or the state of repair of the Premises 8.2Unless the Consent (which is not to be unreasonably withheld or delayed in circumstances where the other provisions of this paragraph 8 are complied with) of the Landlord shall first have been obtained not to keep or use or permit or suffer to be kept or used on the Premises any Hazardous Materials or any machinery apparatus or equipment or any other thing which may attack or in any way injure by percolation corrosion vibration excessive weight strain or otherwise the surfaces floors ceilings roofs contents or structure of any building comprised therein or in the Estate or in the Landlord's Neighbouring Premises (or any of them) or the keeping or using whereof may contravene any Enactments 8.3Any request by the Tenant for Consent under paragraph 8.2 above shall be in writing and shall be accompanied by: (a)all information required to demonstrate to the reasonable satisfaction of the Landlord that any such Hazardous Material machinery apparatus or equipment is necessary to the business of the Tenant and will be kept produced or used in such manner as to comply with all Legal Obligations applicable thereto and the requirements of any competent Authority and the insurers of the Premises and to prevent Environmental Damage (b)all relevant information regarding compliance with any relevant Legal Obligations (such information to include without limitation copies of applications for any requisite consents relating to any manufacturing processes waste treatments recycling storage or disposal practices) 8.4The Tenant shall forthwith notify the Landlord in writing of any change in the facts and circumstances assumed or reported in any application for or granting of Consent relating to any such Hazardous Material machinery apparatus or equipment kept produced or used on the Premises 23 -------------------------------------------------------------------------------- 8.5In the event of Consent being given all such Hazardous Material shall be kept in properly designed stores and containers and in accordance with the recommendations of any competent Authority and the insurers of the Premises 8.6At the end of the Term (however it ends) to indemnify the Landlord against any diminution in the value of the Landlord's interest in the Premises due to contamination arising out of the use or occupation of the Premises during the term or the state or repair of the Premises and for such purposes the expression "contamination" means contamination by reason of Hazardous Material 8.7Any dispute as to the existence or effect of any contamination shall be referred to Arbitration 9   Not to use for unlawful or illegal purposes or cause nuisance 9.1Not to (a)use or permit or suffer the Premises or any part thereof to be used for any unlawful illegal or immoral purpose or for the manufacture sale or consumption of intoxicating liquors or for the manufacture sale or consumption of Controlled Drugs as defined by the Misuse of Drugs Act 1971 (otherwise than by a practitioner or pharmacist as defined by that Act) or for the manufacture storage publication or sale of any article or thing which may in the opinion of the Landlord be pornographic offensive or obscene or for betting gaming or lotteries or as a hotel club billiards saloon dance hall funfair or amusement premises or for an auction or for any noisy noxious or offensive trade or business and (b)do or permit or suffer to be done on the Premises or any part thereof anything which may be or become or cause a nuisance damage disturbance injury or danger of or to the Landlord or the owners lessees or occupiers of any premises in the neighbourhood or which in the reasonable opinion of the Landlord might be detrimental to the use or development of the Premises or of the Estate or any Landlord's Neighbouring Premises (or any of them) and to pay to the Landlord all costs charges and expenses which may be incurred by the Landlord in abating any nuisance on or arising from the Premises and executing all works as may be necessary for such purpose (c)use any radio television video or sound system audible outside the Premises or play or suffer to be played any musical instrument audible outside the Premises 10  Not to reside 10.1Not to reside on the Premises and not to create or permit or suffer to be created any residential tenancy or residential occupation of the Premises or any part thereof 11  As to user 11.1Not to use the Premises or any part thereof other than for a purpose appropriate to a Science Park that is to say any one or more of the following uses: (a)scientific research associated with industrial production (b)light industrial production of a kind which is dependent on regular consultation with either or both of the following: (i)the Tenant's own research development and design staff established in the Cambridge Study Area (ii)the scientific staff or facilities of the University or of local scientific institutions 24 -------------------------------------------------------------------------------- (c)ancillary buildings and works appropriate in the sole opinion of the Landlord to the use of the Premises as an integral part of a Science Park 12  To keep open and security 12.1Not to permit the Premises to remain vacant or unattended without proper security 12.2To indemnify the Landlord against any empty property rate or penal rate levied or assessed upon the Landlord by reason of the Premises having been left empty save in the circumstances referred to in clause 6.3 12.3To ensure that the Landlord at all times has written notice of the name and address and telephone number of at least one keyholder of the Premises 13  Displays and advertisements 13.1Not to display or permit to be displayed on any part of the Premises so as to be visible outside the Premises any name writing notice sign placard sticker or advertisement of whatsoever nature other than a notice or sign (not being a "Neon" notice or sign or any notice or sign of a similar nature) displaying the name of the Tenant (and any undertenant or other authorised occupier) and the name of the building comprised within the demise (if any) first approved in writing by the Landlord such approval not to be unreasonably withheld or delayed in case of signs which are compatible with other signs on the Estate and not to place leave or install any merchandise or display outside the Premises and on any breach by the Tenant the Landlord the Surveyor and their respective workmen may without notice and without prejudice to any other remedy of the Landlord remove the cause of the breach of this covenant and shall not be liable to make good any loss or pay compensation for so doing 14  To keep clean 14.1Not to allow any rubbish or refuse of any description to accumulate upon the Premises save in suitably located dustbins provided by the Tenant for that purpose and so often as it shall be necessary or desirable and in any event at least once a week to cause such dustbins to be emptied 14.2Generally to keep the Premises (including but not limited to forecourts roads and paths) clean tidy and properly lighted externally 14.3To clean the outside of all windows in the Premises at least once every other month 14.4Not to bring or keep or suffer to be brought or kept upon the Premises anything which in the reasonable opinion of the Landlord are or may become unclean unsightly or detrimental to the Premises the Estate or the Landlord's Neighbouring Premises and nearby premises (or any of them) 14.5Not to discharge into any Service Channels oil grease solids or other deleterious matter or any substance which might be or become a source of danger or injury to the drainage system of the Premises the Estate or the Landlord's Neighbouring Premises (or any of them) or which may pollute the water of any watercourse so as to render the Landlord liable to action or proceedings by any person or body and generally to keep the Service Channels comprised within the demise and exclusively serving the same or outside the Premises and exclusively serving the same unobstructed 15  To comply with Legal Obligations and give notice 15.1At the Tenant's own expense to comply with all Legal Obligations so far as they relate to or affect the Premises or the owner or occupier thereof 25 -------------------------------------------------------------------------------- 15.2At the Tenant's own expense to do all works and all other things so as to comply with paragraph 15.1 above including (without prejudice to the generality of the foregoing) the obtaining of any fire certificate required for the Premises 15.3Within seven days of receipt of notice thereof to give to the Landlord particulars of any provision or requirement of all Enactments or as prescribed or required by any Authority or proposal therefor relating to the Premises the Estate or the Landlord's Neighbouring Premises (or any of them) or the condition or use thereof respectively and at the request of the Landlord and at the cost of the Landlord (save where the Tenant shall derive benefit therefrom) to make or join with the Landlord in making such objection or representation against any such proposal as the Landlord shall deem expedient 16  To comply with the Planning Acts 16.1At all times during the Term to comply in all respects with the provisions and requirements of the Planning Acts and any regulations or orders made thereunder and all licences consents permissions and conditions (if any) granted or imposed thereunder so far as the same respectively relate to or affect the Premises or any part thereof 16.2In the event of the Landlord giving Consent to any of the matters in respect of which the Landlord's Consent shall be required pursuant to the provisions of any covenant or condition contained in this Lease to apply at the cost of the Tenant to the local and planning authorities for all necessary consents and permissions in connection therewith and to give notice to the Landlord of the granting or refusal (as the case may be) of all such consents and permissions forthwith on the receipt thereof 16.3In the event of the said Planning Authority agreeing to grant such necessary consent or permission only with modifications or subject to conditions to give to the Landlord forthwith full particulars of such modifications or conditions AND if such modifications or such conditions shall in the reasonable opinion of the Landlord be undesirable then the Tenant shall not implement or proceed with the matters works or change of use to which the application relates 16.4If the Tenant shall receive any compensation in respect of the Premises under or by virtue of the Planning Acts forthwith to make such provision as is just and equitable for the Landlord to receive their due benefit from such compensation 16.5Not to apply for or implement any planning permission in respect of the whole or any part of the Premises without the Landlord's prior written consent (such consent not to be unreasonably withheld or delayed) and not in any event to do so if such application or the implementation thereof would or might give rise to any tax charge or other levy payable by the Landlord without providing to the Landlord a full indemnity in relation thereto 16.6Unless the Landlord shall otherwise direct to carry out before the expiration or sooner determination of the Term any works stipulated to be carried out to the Premises by a date subsequent to such expiration or sooner determination as a condition of the grant of any planning permission obtained and implemented by the Tenant during the Term 17  Insurance 17.1Not to do or omit to do (or permit or suffer to be done or omitted to be done) anything whereby: (a)the rate of premium on the policy or policies of insurance on the Premises against the Insured Risks or on any policy or policies on the Estate or upon the Landlord's Neighbouring Premises (or either of them) may be increased or cause the insurers to impose more onerous terms in such policy or policies unless the Tenant shall repay to the Landlord all sums paid by 26 -------------------------------------------------------------------------------- way of increased premiums and any expenses incurred by them in or about any renewal of such policy or policies consequent upon such act or omission (and all such sums shall be deed to the rent herein reserved and be recoverable upon demand as rent) (b)any such policy may become void or voidable and in the event of the Premises or any part thereof being damaged by the Insured Risks and the insurance money under any insurance effected against the same being wholly or partly irrecoverable by reason solely or in part of any part omission neglect or default of the Tenant or any undertenant or their respective employees servants agents independent contractors customers visitors licensees invitees or any other person under the Tenant's or the undertenant's control then and in every such case the Tenant will forthwith pay to the Landlord the whole or (as the case may require) an appropriate proportion of the irrecoverable insurance money 17.2To comply with any requirements or recommendations of the insurers of the Premises 18  To indemnify 18.1To keep the Landlord fully and effectually indemnified from and against all liability in respect of losses damages proceedings claims costs expenses and any other liability whatsoever arising from or in connection with (a)the injury or death of any person (b)damage to or destruction of any property whatsoever (c)the infringement disturbance or destruction of any rights easements or privileges (d)the breach by the Tenant of any of the terms covenants and conditions on the part of the Tenant herein contained arising directly or indirectly out of: (i)the repair condition existence or use of the Premises or of any alteration to the Premises or works carried out or in the course of being carried out to the Premises by the Tenant or any undertenant or anyone under their control (ii)anything now or hereafter attached to or projecting from the Premises by the Tenant or any undertenant or anyone under their control (iii)any act default or negligence of the Tenant or any undertenant or any person or body under the control of the Tenant and to insure against such liability in a reputable Insurance Office 27 -------------------------------------------------------------------------------- 19  Dealings with the Premises 19.1Unless expressly permitted under paragraph 19.10 or by a Consent granted under paragraphs 19.2 19.3 or 19.4 the Tenant shall not assign underlet charge part with or share possession or occupation of all or any part of the Premises nor hold the Premises on trust for any other person 19.2The Landlord shall not unreasonably withhold or delay Consent to a legal charge of the whole of the Premises 19.3The Landlord shall not unreasonably withhold or delay Consent to an assignment of the whole of the Premises but the Landlord and the Tenant agree for the purposes of section 19(1A) Landlord and Tenant Act 1927 that the Landlord may withhold that Consent unless the following conditions are satisfied: (a)the prospective assignee is not a Group Company or a Connected Person unless of no less financial status than the Tenant and (b)in relation to either the prospective assignee or any prospective guarantor or guarantors that party shall in the reasonable opinion of the Landlord be a substantial and respectable body or person whose registered office principal place of business or address is within the United Kingdom (c)in the reasonable opinion of the Landlord the prospective assignee is of sufficient financial standing to enable it to comply with the Tenant's covenants in this Lease (d)the Tenant (and any former Tenant who by virtue of there having been an "excluded assignment" as defined in section 11 of the Landlord and Tenant (Covenants) Act 1995 has not been released from the Tenant's covenants in this Lease) enters into an authorised guarantee agreement within the meaning of the Landlord and Tenant (Covenants) Act 1995 with the Landlord in the form set out in schedule 7 of this Lease PROVIDED THAT if the prospective assignee can produce audited accounts for itself for the immediately preceding financial year and for each of the two financial years preceding that showing in the case of each of those years pre-tax profits of three times the then Basic Rent then the Tenant (and any former tenant as aforesaid) shall not be required to enter into such agreement and (e)if the Landlord reasonably requires a guarantor or guarantors acceptable to the Landlord acting reasonably has guaranteed to the Landlord the due performance of the prospective assignee's obligations in like terms to those set out in schedule 6 of this Lease and (f)any security for the Tenant's obligations under this Lease which the Landlord holds immediately before the assignment is continued or renewed in each case on such terms as the Landlord may reasonably require in respect of the Tenant's liability under the authorised guarantee agreement referred to in paragraph 19.3(d) (but this paragraph shall not apply to any authorised guarantee agreement entered into by a former Tenant or by any guarantor of a former Tenant) and (g)any sum due from the Tenant to the Landlord under this Lease (or any deed of variation licence Consent or other document supplemental to or associated with this Lease) is paid and any other material breach of the Tenant's covenants in this Lease (or any deed of variation licence Consent or other document supplemental to or associated with this lease) is remedied; and (h)the Landlord has received an undertaking from the Tenant's solicitors in such form as the Landlord may reasonably require to pay the Landlord on demand the reasonable legal and surveyor's costs and disbursements (including Value Added Tax) incurred by the Landlord in 28 -------------------------------------------------------------------------------- considering the Tenant's application and preparing negotiating and entering into any relevant documentation whether or not the application is withdrawn or the Consent is granted 19.4The Landlord shall not unreasonably withhold or delay Consent to an underletting of the whole of the Premises or of a part of the Premises where all of the following conditions are satisfied: (a)the prospective undertenant has produced references in a form reasonably acceptable to the Landlord (b)the prospective undertenant has covenanted with the Landlord to observe and perform until it assigns the underlease with Consent as required by the underlease the Tenant's covenants and obligations in this Lease (except the covenant to pay rent and insofar only as such covenants affect the underlet premises) (c)if the Landlord reasonably requires a guarantor or guarantors acceptable to the Landlord has guaranteed the due performance by the undertenant of its above covenant in such terms as the Landlord may reasonably require and (d)no fine or premium is taken for the grant of the underlease and (e)the basic rent payable under the underlease is not less than the best rent reasonably obtainable for the underlease and (f)any rent free period or other financial inducements given to the undertenant are no greater than is usual at the time in all the circumstances and (g)the form of the underlease has been approved in writing by the Landlord (approval not to be unreasonably withheld or delayed where the provisions of it are consistent with the provisions of this Lease and where the basic rent due under it is reviewable at the same times and on the same terms as the Basic Rent) and (h)the provisions of paragraph 19.5 are complied with in the case of underletting of part of the Premises 19.5The additional provisions referred to in paragraph 19.4(h) above are: (a)each such underlease shall demise a part of the Premises which is capable of independent and separate occupation subject to use of usual common parts and services and (b)the total number of such underleases which may subsist at any time during the Term shall not exceed 3 and (c)each such underlease shall contain provisions enabling the Tenant (as lessor) to recover from the undertenant a due proportion of the sums due under this Lease in respect of insurance of the Premises and of the cost to the Tenant of repairing decorating and operating the Premises and (d)any such underlease shall preclude further underletting of all or part of the underlet premises and (e)any such underlease shall be excluded from the operation of sections 24-28 Landlord and Tenant Act 1954 19.6The Tenant shall: (a)enforce against any undertenant the provisions of any underlease and shall not waive them and (b)operate the rent review provisions contained in any underlease so as to ensure that the rent is reviewed at the correct times and in accordance with those provisions 29 -------------------------------------------------------------------------------- (c)not accept a surrender of part only of the underlet premises 19.7The Tenant shall not without Consent (which shall not be unreasonably withheld or delayed): (a)vary the terms of any underlease or (b)accept a surrender of part of the underlet premises or (c)agree any review of the rent under any underlease 19.8The Tenant shall not require or permit any rent reserved by any underlease to be commuted or to be paid more than one quarter in advance or to be reduced 19.9Any Consent granted under this paragraph 19 shall (unless it expressly states otherwise) only be valid if the dealing to which it relates is completed within two months after the date of the Consent 19.10The Tenant may (after giving written notice to the Landlord containing all relevant information) share occupation of the Premises with any Group Company on condition that the sharing shall not create any relationship of landlord and tenant and that on any occupier ceasing to be a Group Company the occupation shall immediately cease to be otherwise documented in accordance with this paragraph 19 20  To give notice of assignments, devolutions etc. 20.1To produce a certified copy of every assignment underlease transfer charge Probate Letters of Administration order instrument or other writing effecting or evidencing any transmission or devolution of any estate or interest in the Premises or any part thereof to the solicitors of the Landlord for registration within one month from the date thereof and to pay to the Landlord's solicitors their reasonable fees for each such registration 20.2Within seven days of an assignment of this Lease to give to the Landlord written notice of the person to whom future rent demands should be sent 20.3Upon being requested so to do by the Landlord from time to time to supply the Landlord with such details of the occupiers of the Premises and the terms upon which they occupy 21  As to loss or acquisition of easements 21.1Not to permit any easement or right comprised in belonging to or used with the Premises or any part thereof from being obstructed or lost 21.2Not to give to any third party any acknowledgement that the Tenant enjoys the access of light to any of the windows or openings in the Premises by the consent of such third party nor to pay to such third party any sum of money nor to enter into any agreement with such third party for the purpose of inducing or binding such third party to abstain from obstructing the access of light to any such windows or openings 21.3To take all such steps as may be necessary to prevent the acquisition of any easement or right against over upon or under the Premises or any part thereof and any encroachment thereon and to give to the Landlord immediate notice of any encroachment or threatened encroachment upon the Premises or any attempt to acquire any easement or right under or over the Premises which shall be within the Tenant's knowledge and to do all such things as may be necessary to prevent any encroachment being made or any new easement being acquired 30 -------------------------------------------------------------------------------- 22  To produce plans/documents 22.1If and whenever reasonably called upon so to do to produce to the Landlord or the Surveyor all such plans documents or other evidence as the Landlord may from time to time reasonably require to satisfy themselves that the Tenant has complied in all respects with the provisions of the Tenant's covenants herein 23  Not to interfere with reserved rights 23.1Not to interrupt or interfere with the exercise of the rights contained or referred to in schedule 2 24  To permit entry for reletting etc. 24.1During the last six months before the expiration or sooner determination of the Term or after the expiration thereof (or at any time during the Term in the event of a sale of the Landlord's interest in the Premises) to permit the Landlord and the Surveyor to enter upon the Premises following reasonable prior notice and to affix upon any suitable part or parts thereof a notice board or boards for reletting or other disposal of the Premises and not to remove or obscure the same and at all reasonable times in the daytime to permit all persons authorised by the Landlord or the Surveyor to enter and inspect the Premises following reasonable prior notice 25  To yield up 25.1At the expiration or sooner determination of the Term peaceably and quietly to surrender and yield up to the Landlord the Premises (together with all keys thereto) with vacant possession so repaired maintained decorated cleansed glazed painted and kept as herein provided and if so required by the Landlord to remove such tenants and trade fixtures as the Landlord may specify the Tenant making good all damage caused by the removal of these to the reasonable satisfaction of the Surveyor 26  New surety 26.1If during the Term any surety (which expression in this paragraph 26 includes any guarantor) for the time being of the Tenant's obligations under this lease (or any of them if there is more than one): (a)(being an individual) dies has a bankruptcy order made against the surety or an interim receiver appointed in respect of the surety's property; or (b)(being a company) enters into liquidation has an administration order made in respect of the surety or has a receiver (administrative or otherwise) appointed of any of the surety's undertaking or assets the Tenant will give the Landlord notice of that fact within fourteen days of occurrence of the event and if required by the Landlord will within twenty eight days of the event procure that some other person acceptable to the Landlord enters into a deed of covenant with the Landlord in the same terms (mutatis mutandis) as the original surety PROVIDED THAT the provisions of this paragraph shall only apply to the tenant (for the time being) in respect of which the Surety in question first entered into its obligations in favour of the Landlord 27  As to value added tax 27.1On demand to discharge any liabilities of the Landlord under this Lease relating to VAT in respect of any supply for VAT purposes of goods or services made pursuant to or in consequence of this Lease 31 -------------------------------------------------------------------------------- 27.2Not by: (a)the Tenant's intended use of the Premises (b)the actual use which the Tenant will make or permit to be made of the Premises or (c)any act or omission of the Tenant to prevent from being standard rated any grant or supply made of or in relation to any part of the Premises whether because of any of the provisions of paragraphs 2, 3 and 3A of Schedule 10 of the VAT Act or of Group 1 of Schedule 9 of the VAT Act or otherwise 27.3That on any breach of any of the preceding covenants in this paragraph 27 (without limitation) the Tenant will indemnify the Landlord against: (a)any: (i)VAT paid or payable by the Landlord which is irrecoverable (ii)VAT which the Landlord is or will become liable to pay and (iii)amount for which the Landlord is or may become liable to pay to H M Customs & Excise under the provisions of Part XIV or Part XV of the Value Added Tax Regulations 1995 which the Landlord would not otherwise have been liable to pay or repay had there been no breach (b)any penalties interest or default surcharge due in addition to such liability to pay or repay and also against any liability to income or corporation tax on any payment made to the Landlord under this paragraph 27.3 27.4The parties intend that the grants and supplies effected by the Landlord under this Lease are standard rated for VAT purposes and the Tenant covenants with the Landlord: (a)to use all reasonable endeavours to secure that the supplies so effected are treated as standard rated for VAT purposes (b)not to challenge the treatment of such supplies as standard rated for VAT purposes 28  As to maintenance contracts 28.1Where there are within the Premises any lifts hoists boilers or air-conditioning or central heating installations to enter into and maintain throughout the Term maintenance and safety contracts with reputable engineers for the maintenance and safety of the same and to produce to the Landlord on demand any such contract and the receipt for the current payments or premiums thereunder 29  Statutory acquisitions 29.1Not to do or omit to do any act matter or thing as a consequence whereof the Landlord's reversion immediately expectant upon the determination of the Term shall become liable to acquisition pursuant to any Enactments 30  Fire fighting appliances 30.1To keep the Premises sufficiently supplied and equipped with such suitable fire fighting and extinguishing appliances as shall from time to time be required by law or by the local or other competent authority and by the Landlord's insurers and such appliances shall be open to inspection and shall be properly maintained and also not to obstruct the access to or means of working such appliances or the means of escape from the Premises in case of fire 32 -------------------------------------------------------------------------------- 31  Existing Encumbrances 31.1To observe and perform all covenants in respect of the Premises arising from the Existing Encumbrances so far as they affect the Premises and are still subsisting 32  Not to obstruct 32.1Not to permit any vehicles to stand on the roadways comprised within the Estate or on any other part of the Estate except on such parts as shall from time to time have been authorised by the Landlord or shall have been designated by the Landlord as a loading bay for the Tenant (but during the period of loading and unloading of vehicles only) and not to park on or obstruct any communal part of the Estate 33  To comply with regulations 33.1To comply with all regulations (other than such which may prejudice or affect the use or occupation of the Premises or access thereto) made from time to time for the management of the Estate and of any land or premises used or to be used in common or jointly with any other person and to procure that the Tenant's employees and all persons under the control of the Tenant shall at all times observe and perform the same 34  To comply with Planning Agreement and planning permissions 34.1To observe and perform: (a)all the covenants on the Landlord's part contained in the Planning Agreement and the Phase VI Planning Agreement and the agreements and provisions of the same respectively to the extent that the same affect the Premises or any part thereof (b)all the conditions of any planning permission affecting the Premises (so far as it relates thereto) and at all times to indemnify the Landlord against any breach or non-observance of the same 35  To pay cost of damage 35.1Without prejudice to any other provisions herein contained to pay to the Landlord on demand the full cost as assessed by the Surveyor of making good any damage to the said roads coloured brown on the Plan and any road fittings including but not limited to lighting and signs or any other part of the Estate whether occasioned by the Tenant any undertenant or their respective employees servants agents independent contractors customers visitors licensees invitees or any other person under the Tenant's or the undertenant's control 36  To permit access to the Company 36.1To permit the Company and all persons authorised by it to enter the Premises following reasonable prior notice (save in emergency) for any purpose connected with the management of the Estate PROVIDED THAT the Company and any person authorised it so entering shall cause as little inconvenience to the Tenant as practicable and shall make good as soon as practicable any damage caused to the Premises and the Tenant's fixtures fittings and equipment 37  Costs 37.1Where the Tenant makes application under the Lease for consent to pay on an indemnity basis all reasonable costs and other expenses properly incurred by the Landlord in relation to that application whether the application is granted refused offered subject to any qualification or withdrawn 33 -------------------------------------------------------------------------------- Schedule 5 Landlord's covenants 1   As to quiet enjoyment 1.1That the Tenant paying the rents hereby reserved at the times and in the manner herein appointed and performing and observing the covenants on the Tenant's part and the conditions agreements and stipulations herein contained may peaceably enjoy the Premises for the Term without any lawful interruption from the Landlord or any person lawfully claiming under or in trust for the Landlord 2   To insure and reinstate 2.1(a) To insure and to keep insured the Premises against loss or damage by the Insured Risks in the name of (inter alia) the Landlord with the interest of the Tenant noted on the policy in an Insurance Office to be approved by the Landlord to the full reinstatement value thereof (including architects' and surveyors' fees) together with three years' loss of rent and to make all payments necessary for that purpose within seven days after the same shall respectively become payable and upon reasonable request (but not more than once in any year) to produce to the Tenant the policy or policies of such insurance and the receipt for every such payment or other satisfactory evidence of such insurance cover for the time being and to notify the Tenant as soon as possible of any material change in the terms or conditions of such insurance (b)As often as the Premises or any part thereof shall be destroyed or damaged then (unless the insurance shall have been vitiated or insurance monies rendered irrecoverable in whole or in part by any act omission neglect or default of the Tenant any undertenant or their respective employees servants agents independent contractors customers visitors licensees invitees or any other person under the Tenant's or the undertenant's control save in circumstances where the Tenant has paid the whole or the appropriate proportion of the irrecoverable insurance money (pursuant to paragraph 17.1 of schedule 4) the Landlord shall forthwith to apply all insurance monies in rebuilding or reinstating the same in a good and workmanlike manner and in accordance with plans elevations sections and specifications approved by and to the reasonable satisfaction of the Surveyor and in accordance with the then existing Enactments and to make up any deficiency out of its own monies 3   Duty to Mitigate 3.1In every circumstance where the Tenant (pursuant to the provisions of this Lease) indemnifies the Landlord against losses claims damages actions and expenses to use all reasonable endeavours to mitigate the same and to notify the Tenant as soon as practicable upon becoming aware of any third party claim or action 34 -------------------------------------------------------------------------------- Schedule 6 Surety's covenants and agreements 1   Covenants by Surety 1.1The Surety HEREBY COVENANTS with and guarantees to the Landlord that (a)at all times during the Term and until this demise is lawfully brought to an end and the Landlord has beneficial occupation of the Premises or until the Tenant assigns this Lease as a whole with Consent as required by this Lease (if earlier) or otherwise if the Tenant remains liable for payment under the Landlord and Tenant Act 1954 to pay the rents hereby reserved and all other sums and payments covenanted and or agreed to be paid by the Tenant at the respective times and in manner herein appointed for payment thereof and will also duly perform and observe and keep the several covenants and provisions on the Tenant's part herein contained and (b)the Surety will pay and make good to the Landlord all losses liabilities costs and expenses sustained by the Landlord through the default of the Tenant in respect of any of the before mentioned matters and (c)that any neglect or forbearance of the Landlord in endeavouring to obtain payment of the said several rents and payments as and when the same become due or their delay to take any steps to enforce performance or observance of the several covenants and provisions herein on the Tenant's part contained and any time which may be given by the Landlord to the Tenant shall not release or in any way lessen or affect the liability of the Surety under the guarantee on the Surety's part herein contained and (d)if the Tenant (being a Company) shall become subject to an administration order or be the subject of a winding up order by the Court or otherwise go into liquidation or if the Tenant (being an individual) shall be adjudged bankrupt and the Liquidator or Administrator or the Trustee of the bankrupt's estate (as the case may be) shall disclaim this Lease and if the Landlord shall within three months after such disclaimer by notice in writing require the Surety to accept a lease of the Premises for a term equal to the residue which if there had been no such disclaimer would have remained of the Term at the same rents and under the like covenants and provisions as are reserved by and contained in the Lease the said new lease and the rights and liabilities thereunder to take effect as from the date of the said disclaimer then and in such case the Surety shall accept such lease accordingly and execute and deliver to the Landlord a counterpart thereof in all respects at the sole cost of the Surety and (e)upon demand to pay to the Landlord Interest on all amounts due under this paragraph 1 from the date the same respectively fell due until the date of payment thereof 2   Agreements by Surety 2.1It is hereby agreed and declared that (a)the Surety covenants as principal debtor and not as guarantor and accordingly (for the avoidance of doubt) (i)it shall not be necessary for the Landlord to resort to or seek to enforce any other guarantee or security (whether from the Tenant or otherwise) before claiming payment hereunder and 35 -------------------------------------------------------------------------------- (ii)until all monies and liabilities due or incurred by the Tenant to the Landlord have been paid or discharged in full notwithstanding payment in whole or in part of the amount by the Surety or any purported release or cancellation hereof the Surety shall not by virtue of any such payment or by any other means or on any other ground (A)claim any set off or counter claim against the Tenant in respect of any liability on the part of the Surety to the Landlord and (B)make or enforce any claim or right against the Tenant or prove in competition with the Landlord or exercise any right as a preferential creditor against the Tenant or against the assets of the Tenant and (b)the Surety's covenants herein contained shall not be affected or modified in any way by the liquidation or dissolution of the Tenant or the appointment of any receiver administrator or manager and (c)the Landlord shall be at liberty at all times without affecting or discharging the Surety's liability hereunder (i)to vary release or modify the rights of the Landlord against the Tenant hereunder without the Surety's consent and (ii)to compound with discharge release or vary the liability of the Tenant or any other guarantor or other person and (iii)to appropriate any payment the Landlord may receive from the Tenant the Surety or any other person towards such monies due under this Lease as the Landlord shall in their absolute discretion think fit (d)the Landlord and the Tenant shall be at liberty to review the rent hereunder from time to time in accordance with the provisions of this Lease without reference to the Surety and the covenants conditions agreements and declarations on the part of the Surety contained in this Lease shall apply to the rent as reviewed from time to time as much as to the rent reserved hereby at the commencement of the Term 36 -------------------------------------------------------------------------------- Schedule 7 Guarantee Agreement     THIS DEED dated            is made BETWEEN: (1)     ("the Guarantor") (2)     ("the Landlord") 1   Definitions and interpretation 1.1In this deed: "Basic Rent", "Consent", "Premises", "Rent", "Rent Day" and "Term" have the same meanings as in the Lease "the Lease" means [this lease] and includes where relevant any deed of variation licence Consent or other document supplemental to or associated with the Lease by which the Tenant is bound whether presently existing or not "Relevant Variation" means a relevant variation as defined in section 18(4) of the Landlord and Tenant (Covenants) Act 1995 "Secured Obligations" means the obligation to pay all sums from time to time due or expressed to be due to the Landlord from the Tenant under the Lease and to perform all other obligations which from time to time are or are expressed to be obligations of the Tenant under the Lease "the Tenant" means [the proposed assignee] 1.2In this deed unless the context otherwise requires: (a)references to the singular include the plural and vice versa any reference to a person includes a reference to a body corporate and words importing any gender include every gender (b)references to numbered clauses are references to the relevant clause in this deed 1.3The clause headings do not form part of this deed and are not to be taken into account when construing it 1.4This instrument: (a)is executed as a deed and by its execution the parties authorise their solicitors to deliver it for them when it is dated (b)was delivered when it was dated 2   Guarantee 2.1This guarantee is given pursuant to a provision in the Lease requiring it to be given and is an authorised guarantee agreement for the purposes of section 16 of the Landlord and Tenant (Covenants) Act 1995 2.2The Guarantor unconditionally and irrevocably covenants with and guarantees to the Landlord that Tenant will until the Tenant assigns the Lease as a whole with Consent pay and discharge the 37 -------------------------------------------------------------------------------- Secured Obligations when they fall due or are expressed to fall due under the Lease for payment and discharge 2.3The Guarantor shall upon being requested to do so by the Landlord enter into any deed of variation licence Consent or other document to which in each case the Tenant is a party and which is in each case supplemental to the Lease for the purpose of acknowledging that the Guarantor's liabilities under this deed extend to it but to the extent that the document effects a Relevant Variation clause 5.3 shall apply 2.4The guarantee and covenant in clause 2.2 shall impose on the Guarantor the same liability as if the Guarantor were the principal debtor in respect of the Tenant's obligations under the Lease and that liability shall continue notwithstanding (and will not be discharged in whole or in part or otherwise affected by): (a)any forbearance by the Landlord to enforce against the Tenant the tenant's covenants in the Lease (b)the giving of time or other concessions or the taking or holding of or varying realising releasing or not enforcing any other security for the liabilities of the Tenant (c)any legal limitation or incapacity relating to the Tenant (d)the invalidity or unenforceability of any of the obligations of the Tenant (e)the Tenant ceasing to exist (f)the giving and subsequent withdrawal of any notice to determine the Lease (g)any increase or reduction in the extent of the Premises or in the rent payable under the Lease or any other variation to the Lease (h)the disclaimer of the Lease (i)any other act or omission of the Landlord or any other circumstances which but for this clause 2.4 would discharge the Guarantor and for the purposes of this clause 2 the Tenant shall be deemed liable to continue to pay and discharge the Secured Obligations notwithstanding any of the above matters and any money expressed to be payable by the Tenant which may not be recoverable for any such reason shall be recoverable by the Landlord from the Guarantor as principal debtor 3   New lease 3.1The Guarantor shall if required by the Landlord in writing within the period beginning on the day of a disclaimer of this lease and expiring three months after the Landlord has been notified in writing by the Guarantor or the Tenant of that disclaimer accept a lease of the Premises for the residue of the contractual term unexpired at and with effect from the date of the disclaimer at the same Basic Rent as reserved by the Lease (reviewable at the same times as the Basic Rent would have been reviewable under the Lease had there been no disclaimer) and subject to the same covenants and provisos and the Tenant on execution of the new lease will pay Rent for the period from the date of the disclaimer to the Rent Day following the date of the lease and the costs of and incidental to the new lease and will execute and deliver to the Landlord a counterpart 3.2If the Landlord requires more than one guarantor to take a new lease those guarantors shall take that new lease as joint tenants 38 -------------------------------------------------------------------------------- 4   Security taken by Guarantor 4.1Until the Secured Obligations have been paid and discharged in full the Guarantor shall not without Consent exercise any rights: (a)of subrogation or indemnity in respect of the Secured Obligations (b)to take the benefit of share in or enforce any security or other guarantee or indemnity for the Secured Obligations (c)to prove in the bankruptcy or liquidation of the Tenant in competition with the Landlord 4.2The Guarantor has not taken any security from the Tenant and will not do so 4.3Any security taken by the Guarantor in breach of clause 4.2 and all money at any time received in respect of it shall be held in trust for the Landlord as security for the liability of the Guarantor under this deed 5   Limitation on Guarantor's liability 5.1Nothing in this agreement shall operate so as to make the Guarantor liable for anything in respect of which the Tenant is released from liability by the provisions of the Landlord and Tenant (Covenants) Act 1995 5.2To the extent that this deed purports to impose on the Guarantor any liability for anything in respect of which the Tenant is released from liability by the provisions of the Landlord and Tenant (Covenants) Act 1995 the relevant provision of this deed shall to that extent only be void but that shall not affect: (a)enforceability of that provision except to that extent (b)the enforceability of any other provision of this deed 5.3The Secured Obligations shall not include obligations arising under a Relevant Variation but the making of a Relevant Variation shall not discharge the Guarantor's liability under this deed 6   Joint and several Guarantors 6.1The liability of the Guarantor under this deed shall be the joint and several liability of all parties who have executed this deed as Guarantor and all other parties who from time to time guarantee the Tenant's obligations to the Landlord and any demand for payment by the Landlord on any one or more of such persons jointly and severally liable shall be deemed to be a demand made on all such persons 6.2Each person who has executed this deed as Guarantor or on whose behalf this deed has been so executed agrees to be bound by this deed notwithstanding that the other person intended to execute or be bound by this deed may not do so or may not be effectually bound and notwithstanding that this deed may be determined or become invalid or unenforceable against any other person whether or not the deficiency is known to the Landlord] 39 -------------------------------------------------------------------------------- [Executed by the Guarantor and the Landlord as a deed]       The common seal of THE MASTER FELLOWS AND SCHOLARS OF TRINITY COLLEGE CAMBRIDGE was affixed in the presence of:   ) ) ) )             -------------------------------------------------------------------------------- Senior Bursar           -------------------------------------------------------------------------------- Junior Bursar                 Signed as a deed by TRINITY COLLEGE (CSP) LIMITED acting by a director and its secretary or two directors   ) )             -------------------------------------------------------------------------------- Director           -------------------------------------------------------------------------------- Director/Secretary                 The common seal of ACCELRYS LIMITED was affixed in thepresence of:   ) ) )             -------------------------------------------------------------------------------- Director           -------------------------------------------------------------------------------- Secretary                 Signed as a deed by ACCELRYS INC acting by a its authorised signatories   )             -------------------------------------------------------------------------------- Duly Authorised Signatory           -------------------------------------------------------------------------------- Duly Authorised Signatory     40 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.30 THE MASTER FELLOWS AND SCHOLARS OF TRINITY COLLEGE CAMBRIDGE(1) ACCELRYS LIMITED(2) ACCELRYS INC(3) TRINITY COLLEGE (CSP) LIMITED(4) AGREEMENT relating to the grant of a lease of Unit 334 Cambridge Science Park Milton Road Cambridge APPENDIX 1 Exhibit 10.30 THE MASTER FELLOWS AND SCHOLARS OF TRINITY COLLEGE CAMBRIDGE(1) ACCELRYS LIMITED(2) ACCELRYS INC(3) TRINITY COLLEGE (CSP) LIMITED(4) LEASE of Unit 334 Phase VI Cambridge Science Park Contents Schedule 1 Schedule 2 Schedule 3 Schedule 4 Schedule 5 Schedule 6 Schedule 7

Exhibit 10.3 IDEXX LABORATORIES, INC.   1998 STOCK INCENTIVE PLAN   (as of May 23, 2001)             1.     Purpose                   The purpose of this 1998 Stock Incentive Plan (the "Plan") of IDEXX Laboratories, Inc., a Delaware corporation (the "Company"), is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company's stockholders. Except where the context otherwise requires, the term "Company" shall include any present or future subsidiary corporations of IDEXX Laboratories, Inc. as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the "Code").           2.     Eligibility                   All of the Company's employees, officers, directors, consultants and advisors (and any individuals who have accepted an offer for employment) are eligible to be granted options or restricted stock awards (each, an "Award") under the Plan. Each person who has been granted an Award under the Plan shall be deemed a "Participant".           3.     Administration, Delegation                   (a)     Administration by Board of Directors. The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board's sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.                   (b)     Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a "Committee"). All references in the Plan to the "Board" shall mean the Board or a Committee of the Board to the extent that the Board's powers or authority under the Plan have been delegated to such Committee. 1           4.     Stock Available for Awards                   (a)     Number of Shares. Subject to adjustment under Section 7, Awards may be made under the Plan for up to 3,500,000 shares of common stock, $.10 par value per share, of the Company (the "Common Stock"). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan, subject, however, in the case of Incentive Stock Options (as hereinafter defined), to any limitation required under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.                   (b)     Per-Participant Limit. Subject to adjustment under Section 7, the maximum number of shares of Common Stock with respect to which an Award may be granted to any Participant under the Plan shall be 500,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code.           5.     Stock Options                   (a)     General. The Board may grant options to purchase Common Stock (each, an "Option") and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock Option".                   (b)     Incentive Stock Options. An Option that the Board intends to be an "incentive stock option" as defined in Section 422 of the Code (an "Incentive Stock Option") shall only be granted to employees of the Company and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) which is intended to be an Incentive Stock Option is not an Incentive Stock Option.                   (c)     Exercise Price. The Board shall establish the exercise price, which shall in no event be less than 100% of the fair market value of the Common Stock as determined (or in a manner approved) by the Board in good faith ("Fair Market Value") at the time of grant, at the time each Option is granted and specify it in the applicable option agreement. 2                   (d)     Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement. No option will be granted for a term in excess of 10 years.                   (e)     Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board, together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised.                   (f)     Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:                           (1)     in cash or by check, payable to the order of the Company;                           (2)     except as the Board may, in its sole discretion, otherwise provide in an option agreement, (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price or (iii) delivery of shares of Common Stock owned by the Participant valued at their Fair Market Value, which Common Stock was owned by the Participant at least six months prior to such delivery;                           (3)     to the extent permitted by the Board, in its sole discretion (i) by delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) by payment of such other lawful consideration as the Board may determine; or                           (4)     any combination of the above permitted forms of payment.           6.     Restricted Stock                   (a)     Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, "Restricted Stock Award").                   (b)     Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant's death (the "Designated Beneficiary"). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. 3                   (c)     Limitation on Number of Shares. Notwithstanding any provision of the Plan, no more than 10% of the total number of shares issuable under the Plan may be issued in the form of Restricted Stock Awards which are granted with an issue price less than the Fair Market Value on the date of grant.           7.     Adjustments for Changes in Common Stock and Certain Other Events                   (a)     Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limits set forth in Section 4(b), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, and (iv) the repurchase price per share subject to each outstanding Restricted Stock Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section 7(a) applies and Section 7(c) also applies to any event, Section 7(c) shall be applicable to such event, and this Section 7(a) shall not be applicable.                   (b)     Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that (i) all then unexercised Options will (x) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (y) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date, and (ii) all Restricted Stock Awards will become free of all restrictions as of a specified time prior to the effective date of such liquidation or dissolution.                   (c)     Acquisition Events 4                           (1)     Definition. An "Acquisition Event" shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which the Common Stock is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of shares of the Company for cash, securities or other property pursuant to a statutory share exchange transaction.                           (2)     Consequences of an Acquisition Event on Options. Upon the occurrence of an Acquisition Event, or the execution by the Company of any agreement with respect to an Acquisition Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), provided that any options substituted for Incentive Stock Options shall satisfy, in the determination of the Board, the requirements of Section 424(a) of the Code. Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time (the "Acceleration Time") prior to the Acquisition Event and will terminate immediately prior to the consummation of such Acquisition Event, except to the extent exercised by the Participants before the consummation of such Acquisition Event; provided, however, that, in the event of an Acquisition Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Acquisition Event (the "Acquisition Price"), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Acquisition Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options.                           (3)     Consequences of an Acquisition Event on Restricted Stock Awards. Upon the occurrence of an Acquisition Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company's successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Acquisition Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.                   (d)     Acceleration of Options. Immediately prior to the consummation of a Change of Control, each then outstanding Option under the Plan shall become immediately exercisable as to twenty-five percent (25%) of the number of shares as to which such Option would otherwise not then be exercisable (rounded down to the nearest whole share), and the number of shares as to which each such Option shall become exercisable on each vesting date set forth in the applicable option agreement shall be reduced by 25%. In addition, all Options held by a Participant that are not terminated pursuant to Section 7(c) above shall immediately become exercisable in full if and when, within 24 months after a Change of Control, such Participant's employment or engagement with the Company (or the acquiring or succeeding entity) is involuntarily terminated by the Company (or such acquiring or succeeding entity) other than for Cause (as defined below). 5                           (1)     Definition of Change of Control. "Change of Control" shall mean:                                    (A)     The acquisition by an 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 (A) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (d)(1), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which satisfies the criteria set forth in clauses (A), (B) and (C) of subsection (d)(1)(C) of this Section 7; or                                    (B)     Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequently 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                                    (C)     Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, immediately following such Business Combination, (A) 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, of the corporation resulting from such Business Combination (which as used in this Section 7(d)(1)(C) shall include, 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, (B) 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, 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 and (C) at least half of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or 6                                    (D)     Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.                           (2)     Definition of Cause. "Cause" shall mean:                                    (A)     the failure of the Participant to perform substantially the Participant's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not cured within 30 days after a written demand for substantial performance is delivered to the Participant by the Participant's manager or the Board which specifically identifies the manner in which such manager or the Board, as applicable, believes that the Participant has not substantially performed the Participant's duties, or                                    (B)     the engaging by the Participant in illegal conduct or gross misconduct which is injurious to the Company.           8.     General Provisions Applicable to Awards                   (a)     Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.                   (b)     Documentation. Each Award shall be evidenced by a written instrument in such form as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.                   (c)     Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.                   (d)     Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant's legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award. 7                   (e)     Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value. The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.                   (f)     Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. In addition, neither the Board nor the Company may amend the terms of any issued and outstanding Awards to reduce the exercise price, other than pursuant to Section 7 of the Plan, without the prior approval of the Company's stockholders.                   (g)     Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.                   (h)     Acceleration. The Board may at any time provide that any Options shall become immediately exercisable in full or in part or that any Restricted Stock Awards shall be free of restrictions in full or in part.           9.     Miscellaneous                   (a)     No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. 8                   (b)     No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date for such stock dividend and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.                   (c)     Effective Date and Term of Plan. The Plan shall become effective on the date on which it is approved by the Company's stockholders. No Awards shall be granted under the Plan after the completion of ten (10) years from the date the Plan was approved by the Board, but Awards previously granted may extend beyond that date.                   (d)     Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that, to the extent required by Section 162(m), no Award granted to a Participant designated as subject to Section 162(m) by the Board after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award (to the extent that such amendment to the Plan was required to grant such Award to a particular Participant), unless and until such amendment shall have been approved by the Company's stockholders as required by Section 162(m) (including the vote required under Seciton 162(m)). In addition, the second sentence of Section 8(f) of the Plan may not be amended by the Board without the prior approval of the Company's stockholders.                   (e)     Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law.   Approved by the Board of Directors February 12, 1998. Adopted by stockholders on May 15, 1998. Amended by the Board of Directors on February 16, 1999. Amendment approved by stockholders on May 19, 1999. Amended by the Board of Directors on February 16, 2000. Amendment approved by stockholders on May 17, 2000. Amendment approved by the Board of Directors on May 23, 2001. 9  

EXHIBIT 10.46 EMPLOYMENT AGREEMENT -------------------- This EMPLOYMENT AGREEMENT is made as of June 27, 2001 between, InfoCast Corporation ("InfoCast"), and William C. Lowe ("Lowe"). WITNESSETH: ----------- Whereas, InfoCast desires to have the services of and Lowe for his expertise in the disciplines of executive management, strategy, technology, operations, and other matters of importance to InfoCast, and Lowe willing to provide their expertise and capabilities in those matters in return for consideration detailed within this Agreement. NOW, THEREFORE, the Company, InfoCast, and Lowe agree as follows: 1. Executive Management. William C. Lowe ("Lowe"), will serve as Chairman of the Board and Chief Executive Officer of InfoCast for the term of this Agreement. In this capacity, Lowe will be required to provide a broad range of services typical for a position of this type, including directing the activities of the senior management of InfoCast, devising and directing the implementation of business strategy, working to establish relationships with strategic partners of all types on a global basis, assisting in fund raising activities, and involvement in all other activities incidental to the position, all subject to the following conditions: (a) In his role as Chairman and Chief Executive Officer of InfoCast, Lowe shall be required to participate in the day-to-day operations of InfoCast. He will reside in Tucson, Arizona. Lowe agrees to spend whatever time is necessary at the headquarters office of InfoCast, or its other operating locations to perform the duties of his position. (b) Lowe also agrees to undertake whatever business travel is necessary for the performance of his duties, subject to InfoCast's obligation to reimburse Lowe for all legitimate business expenses incurred and for which adequate documentation is provided. (c) Notwithstanding his obligations under this Agreement, Lowe shall not be precluded from limited involvement in other business activities unrelated to InfoCast. These activities will be reviewed with and approved by the Executive Committee InfoCast's Board of Directors. (d) InfoCast shall provide Lowe with adequate liability indemnification and insurance, protecting him from liability in his roles as Chairman and Chief Executive Officer of InfoCast. 1 2. Compensation for Services. In return for the services provided by Lowe under this Agreement, InfoCast hereby agrees to the following: (a) InfoCast shall pay a monthly salary to Lowe during the term of this Agreement. Such fee shall be payable on the fifteenth day of each month, commencing July 15, 2001. Each monthly payment shall be for $39,500 in U.S. currency. Appropriate withholding and reporting will be handled by the company. (b) InfoCast shall reimburse to Lowe all expenses incurred in fulfillment of this position, including all reasonable travel expenses, subject to provision of all appropriate receipts and other documentation required by InfoCast in accordance with its existing expense reimbursement policies. (c) InfoCast shall provide to Lowe the services of a Secretary to be located at the offices of InfoCast Corporation in Tucson, Arizona. (d) Upon the establishment by InfoCast of a medical benefits program to be available to all of its U. S. based employees, Lowe shall be offered medical benefits under the program during the term of this Agreement. The cost of providing such benefits shall be borne by InfoCast. (e) Lowe shall be granted options to purchase 1.5M shares of InfoCast common stock; 500K options vested to Lowe on March 5, 2001, an additional 500K options shall vest on January 1, 2002, and the remaining 500K options will be vested to Lowe on January 1, 2003. The options shall allow for exercise at a price of $1.00 per share of common stock, payable by Lowe upon date of exercise. Each set of options shall be exercisable for a period of five years from the date they may be first exercised. InfoCast agrees to enter into a definitive option agreement with Lowe which shall detail all terms and conditions of the option grant and the exercise rights thereunder. Lowe and InfoCast agree to negotiate in good faith to execute such option agreement within 90 days of the date of this Agreement. In the case of a change in control for InfoCast, all stock options will vest immediately. (f) InfoCast agrees to extend credit to Lowe in the form of a $200,000 non-interest bearing loan, the proceeds of which will be utilized to purchase common shares of InfoCast. This loan shall be extended, and the purchase of InfoCast common shares completed by July 27, 2001, and Lowe and InfoCast shall execute such legal documentation, including a promissory note, necessary to complete this transaction. The loan will be for a period of 24 months from the date of its creation, and shall be payable upon the earlier of maturity, or the sale of the InfoCast common shares acquired with the loan proceeds. The terms of the common stock purchases effected via the loan proceeds shall be identical to those offered to other 2 investors in InfoCast on the date of this Agreement (one share of InfoCast stock and one-half of a warrant to purchase one share of InfoCast stock at an exercise price of $0.75, with the total purchase price for each of these "units" being $0.50). (g) The InfoCast Executive Committee of the Board can at its discretion create an incentive program for Lowe conditioned on achievement of pre-arranged goals or in recognition of significant business accomplishment. 3. Term of Agreement. This Agreement shall remain in force through March 15, 2003, unless terminated earlier by either party, which termination may occur only upon the expiration of a period of 30 days after which termination notice has been given by the party wishing to terminate. In the event of termination by Lowe, Lowe will be entitled to keep all options for the purchase of InfoCast common shares which are vested in accordance with the schedule described in Section 2(e) of this Agreement. Upon such voluntary termination by Lowe, the loan extended to Lowe by InfoCast as described in Section 2(f) of this Agreement shall be immediately due and payable. Upon termination of this agreement by InfoCast for any reason other than the gross negligence or willful misconduct of Lowe, InfoCast will be obligated to continue paying the monthly management services fee for a period of six months beyond the date of such termination. Upon such termination by InfoCast, Lowe will be entitled to keep all options to purchase InfoCast common stock which have been vested in accordance with the schedule defined in Section 2(e) of this Agreement. Lowe will not be obligated to repay the loan described in Section 2(f) of this Agreement until its state maturity date. 4. Death or Disability. If Lowe were to die or become permanently disabled, his family would receive the benefit of his acquired shares (without repayment of loan) in section f, and the right to the vested options at the date of such occurrence. 5. Notice. Any notice, request, demand, or instruction required or desired to be given hereunder by either party hereto to the other shall be in writing and shall be delivered personally or sent by registered or certified mail, postage prepaid, as follows: (a) If to InfoCast: Mr. Tom Griffis InfoCast Corporation 1 Richmond Street West Suite 901 Toronto, Ontario M5H 3W4 3 (b) If Lowe: Mr. William C. Lowe 5201 Hacienda del sol Tucson, Arizona 85718 6. Waiver; Validity. The waiver by any of the parties hereto of a breach of any provision of this agreement by either of the other parties shall not be construed as a waiver of any subsequent breach by such other party. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 7. Binding Effect. Except as otherwise expressly provided herein, this Agreement shall inure to the benefit of and be binding upon each party and its respective successors and assigns (including but not limited to any corporation or entity which may acquire all or substantially all of the assets or business of any of the parties or with or into which party may be consolidated or merged); provided that the rights and obligations of any of the parties to this Agreement may not be assigned without the prior written consent of each party. 8. Applicable Law. This Agreement shall be governed by the laws of the State of Arizona, without giving effect to the principles of conflicts of laws thereof. 9. Amendments. This Agreement shall not be subject to change or modification except by the execution of a written amendment by all parties hereto. 10. Counterparts. This Agreement may be executed in any number of counterparts by any of 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 instrument. One or more counterparts of this agreement may be delivered by facsimile, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart. IN WITNESS WHEREOF, this Management Services Agreement has been executed by the parties hereto all as of the date first above written. InfoCast Corporation William C. Lowe By: ------------------------------ -------------------------------- Its: Date: ----------------------------- --------------------------- Date: ---------------------------- 4

Exhibit 10.28   ESI Special Senior Executive Severance Pay Plan   ____________________________________________________________________________________________________________   1.   Purpose   The purpose of this ESI Special Senior Executive Severance Pay Plan ("Plan") is to assist in occupational transition by providing Severance Benefits, as defined herein, for employees covered by this Plan whose employment is terminated under conditions set forth in this Plan within two years after an Acceleration Event, as defined herein.   2.   Covered Employees   Covered employees under this Plan ("Special Severance Executives") are full-time, regular salaried employees of ITT Educational Services, Inc. ("ESI") and of any subsidiary company ("ESI Subsidiary") (collectively or individually as the context requires "Company") who are designated by the Compensation Committee of ESI's Board of Directors to be in either Band A or B at any time within the two-year period immediately preceding an Acceleration Event.   After the occurrence of an Acceleration Event, the terms "ESI", "ESI Subsidiary" and "Company" as used herein shall also include, respectively and as the context requires, any successor company to ESI or any successor company to any ESI Subsidiary and any affiliate of any such successor company.   3.   Definitions   An "Acceleration Event" shall occur if (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "Act") disclosing that any person (within the meaning of Section 13(d) of the Act), other than ESI or a subsidiary of ESI or any employee benefit plan sponsored by ESI or a subsidiary of ESI, is the beneficial owner directly or indirectly of 20 percent or more of the outstanding Common Stock, $0.01 par value, of ESI (the "Stock"); (ii) any person (within the meaning of Section 13(d) of the Act), other than ESI or a subsidiary of ESI, or any employee benefit plan sponsored by ESI or a subsidiary of ESI, shall purchase shares pursuant to a tender offer or exchange offer to acquire any Stock  (or securities convertible into Stock) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of 15 percent or more of the outstanding Stock (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Stock); (iii) the stockholders of ESI shall approve (A) any consolidation or merger of ESI in which ESI is not the continuing or surviving corporation or pursuant to which shares of Stock would be converted into cash, securities or other property, other than a merger of ESI in which holders of Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as they had in the Stock immediately before, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of ESI, or (iv) there shall have been a change in a majority of the members of the Board of Directors of ESI within a 12-month period unless the election or nomination for election by ESI's stockholders of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who were directors at the beginning of such 12-month period. "Cause" shall mean action by the Special Severance Executive involving willful malfeasance or the Special Severance Executive's failure to act involving material nonfeasance that would have a materially adverse effect on the Company. No act or emission on the part of the Special Severance Executive shall be considered "willful," unless it is done or omitted in bad faith or without reasonable belief that the action or omission was in the interests of the Company.   "Good Reason" shall mean: (i) without the Special Severance Executive's express written consent and excluding for this purpose an isolated, minor, insubstantial, insignificant and inadvertent action not taken in bad faith and which is remedied by the Company or its affiliates immediately after receipt of notice thereof given by the Special Severance Executive, (A) a reduction in the Special Severance Executive's annual base salary (whether or not deferred) or annual bonus (as measured by the highest bonus paid or awarded, whether or not deferred, in any of the three calendar years preceding an Acceleration Event, including, among the bonuses taken into account for this purpose, any bonus paid or awarded by reason of an Acceleration Event, without regard to whether such bonus is paid, whether or not deferred, during such three year period or after an Acceleration Event) or any reduction in any other compensation or any employee benefits, (B) the assignment to the Special Severance Executive of any duties inconsistent in any respect with the Special Severance Executive's position (including status, offices, titles and reporting requirements), authority, duties, responsibilities, support or assistance, or (C) any other action by the Company or its affiliates which results in a diminution in such position, authority, duties, responsibilities, support or assistance; (ii) without the Special Severance Executive's express written consent, the Company's requiring the Special Severance Executive's work location to be other than within 15 miles of the location where such Special Severance Executive was principally working immediately prior to the Acceleration Event; or (iii) any failure by the Company to obtain the express written assumption of this Plan from any successor to the Company.   4.   Severance Benefits Upon Termination of Employment   If, within two years after an Acceleration Event, the Company terminates the employment of a Special Severance Executive other than for Cause or if the Special Severance Executive terminates his or her employment for Good Reason, he or she shall receive the severance benefits set forth in Section 5 hereof ("Severance Benefits"). For purposes hereof, a determination by a Special Severance Executive that he or she has "Good Reason" hereunder shall be final and binding on the parties hereto absent a showing of bad faith on the Special Severance Executive's part.   5.   Severance Benefits   (I) Severance Benefits for Special Severance Executives in Band A:         (a)   Severance Pay - The sum of (i) three times the highest annual base salary rate paid (whether or not deferred) to the Special Severance Executive at any time during the three year period immediately preceding the Special Severance Executive's termination of employment, and (ii) three times the highest bonus paid or awarded (whether or not deferred) to the Special Severance Executive in any of the three years preceding an Acceleration Event, including, among the bonuses taken into account for this purpose, any bonus paid or awarded by reason of an Acceleration Event, without regard to whether such bonus is paid (whether or not deferred) during such three year period or after an Acceleration Event.     (b)   Benefits and Perquisites –           (i)   Continued health and life insurance benefits and perquisites (including, without limitation, any Company provided automobile and any tax or financial advisory services) for three years following the Special Severance Executive's termination of employment at the same cost to the Special Severance Executive, and at the same coverage levels, as provided to the Special Severance Executive (and the Special Severance Executive's eligible dependents) immediately prior to his or her termination of employment.           (ii)   Payment of a lump sum amount ("Pension Lump Sum Amount") equal to the difference between (A) the total lump sum value of the Special Severance Executive's pension benefit under the ESI Pension Plan and, as applicable, the ESI Excess Pension Plan of the Company (collectively, "Pension Plans") as of the Special Severance Executive's termination of employment and (B) the total lump sum value of the Special Severance Executive's pension benefit under the Pension Plans after crediting an additional three years of pay and interest credits to the Special Severance Executive’s Cash Balance Account, calculated based on an additional year of age and year of eligibility and benefit service to the Special Severance Executive (for purposes of determining the pay credits and vested interest) and applying the highest annual base salary rate and highest bonus determined above under "Severance Pay" (for purposes of determining the Special Severance Executive’s Compensation) with respect to each of the additional three years of the pay and interest credits so credited.  This provision shall apply to any Special Severance Executive having a pension benefit under any of the Pension Plans as of the date of the Acceleration Event.           (iii)  Crediting of an additional three years of age and three years of eligibility service for purposes of the Company's retiree life insurance benefits. This provision shall apply to any Special Severance Executive covered under such benefits any time during the three year period immediately preceding the Special Severance Executive's termination of employment.           (iv)  Payment of a lump sum amount ("Savings Plan Lump Sum Amount") equal to three times the following amount: the highest annual base salary rate determined above under "Severance Pay" times the highest percentage rate of Company contributions  with respect to the Special Severance Executive under the ESI 401(k) Plan and/or the ESI Excess Savings Plan (collectively, "Savings Plans") (including Matching Company Contributions and Retirement Contributions) at any time during the three year period immediately preceding the Special Severance Executive's termination of employment. This provision shall apply to any Special Severance Executive who is a member of any of the Savings Plans at any time during such three year period.     (c)   Outplacement - Outplacement services by a firm selected by the Special Severance Executive for one year following the Special Severance Executive’s termination of employment.         (d)   Tax Preparation - Tax preparation services by a firm selected by the Special Severance Executive for the Special Severance Executive’s federal, state and local income tax returns for the calendar year(s) in which the Special Severance Executive is paid the Severance Pay, Pension Lump Sum Amount and Savings Plan Lump Sum Amount.       (II) Severance Benefits for Special Severance Executives in Band B:         (a)   Severance Pay - The sum of (i) two times the highest annual base salary rate paid (whether or not deferred) to the Special Severance Executive at any time during the three year period immediately preceding the Special Severance Executive's termination of employment and (ii) two times the highest bonus paid or awarded (whether or not deferred) to the Special Severance Executive in any of the three years preceding an Acceleration Event, including, among the bonuses taken into account for this purpose, any bonus paid or awarded by reason of an Acceleration Event, without regard to whether such bonus is paid (whether or not deferred) during such three year period or after an Acceleration Event.         (b)   Benefits and Perquisites –           (i)   Continued health and life insurance benefits and perquisites (including, without limitation, any Company provided automobile and any tax or financial advisory services) for two years following the Special Severance Executive's termination of employment at the same cost to the Special Severance Executive, and at the same coverage levels, as provided to the Special Severance Executive (and the Special Severance Executive's eligible dependents) immediately prior to his or her termination of employment.           (ii)   Payment of a lump sum amount ("Pension Lump Sum Amount") equal to the difference between (A) the total lump sum value of the Special Severance Executive's pension benefit under the ESI Pension Plan and, as applicable, the ESI Excess Pension Plan of the Company (collectively, "Pension Plans") as of the Special Severance Executive's termination of employment and (B) the total lump sum value of the Special Severance Executive's pension benefit under the Pension Plans after crediting an additional two years of pay and interest credits to the Special Severance Executive's Cash Balance Account, calculated based on an additional year of age and year of eligibility and benefit service to the Special Severance Executive (for purposes of determining the pay credits and vested interest) and applying the highest annual base salary rate and highest bonus determined above under "Severance Pay" (for purposes of determining  the Special Severance Executive's Compensation) with respect to each of the additional two years of the pay and interest credits so credited.  This provision shall apply to any Special Severance Executive having a pension benefit under any of the Pension Plans as of the date of the Acceleration Event.           (iii)  Crediting of an additional two years of age and two years of eligibility service for purposes of the Company's retiree life insurance benefits. This provision shall apply to any Special Severance Executive covered under such benefits any time during the three year period immediately preceding the Special Severance Executive's termination of employment.       (iv)   Payment of a lump sum amount ("Savings Plan Lump Sum Amount") equal to two times the following amount: the highest annual base salary rate determined above under "Severance Pay" times the highest percentage rate of Company contributions with respect to the Special Severance Executive under the ESI 401(k) Plan and/or the ESI Excess Savings Plan (collectively, "Savings Plans") (including Matching Company Contributions and Retirement Contributions) at any time during the three year period immediately preceding the Special Severance Executive's termination of employment. This provision shall applyto any Special Severance Executive who is a member of any of the Savings Plans at any time during such three year period.         (c)   Outplacement - Outplacement services by a firm selected by the Special Severance Executive for one year following the Special Severance Executive’s termination of employment.         (d)   Tax Preparation - Tax preparation services by a firm selected by the Special Severance Executive for the Special Severance Executive's federal, state and local income tax returns for the calendar year(s) in which the Special Severance Executive is paid the Severance Pay, Pension Lump Sum Amount and Savings Plan Lump Sum Amount.       (III)   With respect to the provision of benefits and perquisites during the above described respective three and two year periods, if, for any reason at any time the Company is unable to treat the Special Severance Executive as being eligible for ongoing participation in any Company employee benefit plans or perquisites in existence immediately prior to the termination of employment of the Special Severance Executive, and if, as a result thereof, the Special Severance Executive does not receive a benefit or perquisite or receives a reduced benefit or perquisite, the Company shall provide such benefits or perquisites by (a) direct payment to the Special Severance Executive of the amounts the Special Severance Executive would have received from such benefit plan or perquisite had the Special Severance Executive continued to be eligible or (b) at the Company's option, making available equivalent benefits or perquisites from other sources.   6.   Form of Payment of Severance Pay and Lump Sum Payments   Severance Pay shall be paid in cash, in a non-discounted lump sum within five business days after the date the employment of the Special Severance Executive terminates. The Pension Lump Sum Amount and the Savings Plan Lump Sum Amount shall be paid in cash within 30 calendar days after the date the employment of the Special Severance Executive terminates.   7.   Termination of Employment for Cause   The only basis upon which the Severance Benefits shall not be provided to a Special Severance Executive terminated by the Company within two years after an Acceleration Event is upon a termination of the Special Severance Executive’s employment for Cause, as defined herein. 8.   Administration of Plan   This Plan shall be administered by ESI, who shall have the exclusive right to interpret this Plan, adopt any rules and regulations for carrying out this Plan as may be appropriate and decide any and all matters arising under this Plan, including but not limited to the right to determine appeals. Subject to applicable federal and state law, all interpretations and decisions by ESI shall be final, conclusive and binding on all parties affected thereby.   Notwithstanding the preceding paragraph, following an Acceleration Event, any controversy or claim arising out of or relating to this Plan, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and the entire cost thereof shall be borne by the Company. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Company shall pay all attorney's fees, legal fees, costs of litigation, prejudgment interest, and other expenses which are incurred by the Special Severance Executive as a result of the Company's refusal to provide any of the Severance Benefits to which the Special Severance Executive becomes entitled under this Plan, or as a result of the Company's (or any third party's) contesting the validity, enforceability or interpretation of this Plan, or as a result of any conflict between the Special Severance Executive and the Company pertaining to this Plan. The Company shall pay such fees and expenses from the general assets of the Company.   9.   Termination or Amendment   ESI may terminate or amend this Plan ("Plan Change") at any time; except that, following an Acceleration Event, no Plan Change that would adversely affect any Special Severance Executive may be made without the prior written consent of such Special Severance Executive affected thereby.   10.  Offset   Any Severance Benefits provided to a Special Severance Executive under this Plan shall be offset by reducing (a) any Severance Pay hereunder by any severance pay, salary continuation pay, termination pay or similar pay or allowance and (b) any other Severance Benefits hereunder by corresponding employee benefits, perquisites or outplacement services, which the Special Severance Executive receives or is entitled to receive: (i) under the ESI Senior Executive Severance Pay Plan; (ii) pursuant to any other Company policy, practice, program or arrangement; (iii) pursuant to any Company employment agreement or other agreement between the Special Severance Executive and the Company; or (iv) by virtue of any law, excluding, however, any unemployment compensation or worker's compensation, unless the Special Severance Executive voluntarily expressly waives (which the Special Severance Executive shall have the exclusive right to do) in writing any such respective entitlement. 11.   Excise Tax   In the event that it shall be determined that any payment or distribution by the Company to or for the benefit of the Special Severance Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this paragraph 11, such payments or distributions being referred to herein as "Payments") would give rise to liability of the Special Severance Executive for the excise tax imposed by Section 4999 of the Internal Revenue Code, as amended (the "Code"), or any other or subsequent provision of the Code, or that any interest or penalties are incurred by the Special Severance 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 Special Severance Executive shall be entitled to receive an additional payment (the "Gross-Up Payment") in an amount such that after payment by the Special Severance Executive of all federal, state and local taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect to such taxes) and Excise Tax imposed upon the Gross-Up Payment, the Special Severance Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  For this purpose, the Special Severance Executive shall be deemed to be in the highest marginal rate of federal, state and local taxes. This payment shall be made as soon as possible following the date of the Special Severance Executive's termination of employment, but in no event later than 30 calendar days following such date.   In the event the Gross-Up Payment shall fail to make the Special Severance Executive whole on an after-tax basis, the Gross-Up Payment shall be recalculated ("Recalculated Gross-Up Payment"), using the Special Severance Executive's actual effective tax rate, once it is known for the calendar year in which the Gross-Up Payment is made, and the Company shall reimburse the Special Severance Executive for the full amount of any amount by which the Recalculated Gross-Up Payment exceeds the Gross-Up Payment ("Additional Gross-Up Payment").   The Gross-Up Payment and any Additional Gross-Up Payment shall be paid out of the general assets of the Company.   In the event the Internal Revenue Service subsequently adjusts the excise tax computation herein described, the Company shall reimburse the Special Severance Executive for the full amount necessary to make the Special Severance Executive whole on an after-tax basis (less any amounts received by the Special Severance Executive that the Special Severance Executive would not have received had the computations initially been computed as subsequently adjusted), including the value of any underpaid excise tax, and any related interest and/or penalties due to the Internal Revenue Service.   12.   Miscellaneous   The Special Severance Executive shall not be entitled to any notice of termination or pay in lieu thereof.   In cases where Severance Benefits are provided under this Plan, pay in lieu of any unused current year vacation entitlement will be paid to the Special Severance Executive in a lump sum, in cash within five business days after the date the employment of the Special Severance Executive terminates. Severance Benefits under this Plan are paid entirely by the Company from its general assets.   This Plan is not a contract of employment, does not guarantee the Special Severance Executive employment for any specified period and does not limit the right of the Company to terminate the employment of the Special Severance Executive at any time.   If a Special Severance Executive should die while any amount is still payable to the Special Severance Executive hereunder had the Special Severance Executive continued to live, all such amounts shall be paid in accordance with this Plan to the Special Severance Executive's designated heirs or, in the absence of such designation, to the Special Severance Executive's estate.   The numbered paragraph headings contained in this Plan are included solely for convenience of reference and shall not in any way affect the meaning of any provision of this Plan.   If, for any reason, any one or more of the provisions or part of a provision contained in this Plan shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Plan not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law remain in full force and effect.   13.   Adoption Date   This Plan was adopted by ESI on October 16, 2001 ("Adoption Date") and does not apply to any termination of employment which occurred or which was communicated to the Special Severance Executive prior to the Adoption Date.  

EXECUTION COPY WARRANT REGISTRATION RIGHTS AGREEMENT THIS WARRANT REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of May 10, 2001, by HARBORSIDE HEALTHCARE CORPORATION, a Delaware corporation (the "Company"), for the benefit of the Holders (as defined below). R E C I T A L S This Agreement is entered into in connection with a financial restructuring which contemplates, among other things, (I) the exchange offer (the "Exchange Offer") pursuant to the Offering Memorandum and Consent Solicitation Statement dated April 6, 2001 (as it may be amended from time to time, the "Offer to Exchange") of the Company, whereby the Company has offered to exchange (A) (1) 0.5899118 new 12% Senior Subordinated Discount Notes due 2007 (the "New Notes"), each having a principal amount at maturity equal to $1,000, (2) $88.2353 in cash and (3) 10.90836471 warrants (each a "Series A Warrant" and collectively, the "Series A Warrants"), each Series A Warrant initially entitling the holder thereof to purchase one share of Class A Common Stock (as defined herein) of the Company, for each $1,000 principal amount at maturity of its outstanding 11% Senior Subordinated Discount Notes due 2008 (the "Old Notes") and (B) 10.73247518 Series A Warrants for each $1,000 liquidation preference of outstanding shares of its 13-1/2% Exchangeable Preferred Stock (to be redesignated and reclassified as the "Redeemable Preferred Stock" and referred to herein as the "Old Preferred Stock") and (II) the sale of warrants (each an "Series B Warrant" and collectively, the "Series B Warrants", and together with the Series A Warrants, the "Warrants"), each Series B Warrant initially entitling the holder thereof to purchase one share of Class A Common Stock of the Company, and 13% Convertible Exchangeable Preferred Stock of the Company (the "New Preferred Stock") to Investcorp S.A. and/or one of more of its affiliates or designees ("Investcorp") in exchange for $15,000,000 in cash (subject to reduction on a pro rata basis at the election of Investcorp if less than all Old Notes are tendered and exchanged in the Exchange Offer) as provided for in the Series B Warrant and Convertible Exchangeable Preferred Stock Subscription Agreement dated May 10, 2001 between the Company and certain purchasers named therein. In order to induce the holders of Old Notes and Old Preferred Stock to tender their Old Notes and shares of Old Preferred Stock in the Exchange Offer and to induce Investcorp to purchase Series B Warrants and the New Preferred Stock, the Company has agreed to provide the registration rights relating to the Warrants set forth in this Agreement for the benefit of such holders and any subsequent holder or holders of the Warrants and Warrant Shares (as defined below). A G R E E M E N T The Parties hereby agree as follows: SECTION 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" shall have the meaning ascribed to such term in Rule 144 under the Securities Act. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents (however designated and whether voting or non-voting) of such Person's capital stock, whether outstanding on the Issue Date or issued after the Issue Date, and any and all rights (other than any evidence of indebtedness), warrants or options exchangeable for or convertible into such capital stock. "Charter" means the Restated Certificate of Incorporation, as amended, of the Company on the Issue Date, as such Charter may thereafter from time to time be amended in accordance with applicable law and such Charter. "Class A Common Stock" means the Class A Common Stock of the Company, par value $0.01 per share. "Commission" means the U.S. Securities and Exchange Commission and any successor federal agency having similar powers. "Common Stock" means all shares of Capital Stock of the Company, whether or not denominated as "common stock," which are entitled to share ratably in the ordinary dividends of the Company or share ratably in the proceeds of any liquidation of the Company after the payment of all preferential claims, and shall include, without limitation, the Class A Common Stock, Class B Common Stock, Class C Common Stock, Class D Common Stock and the No-Class Common Stock of the Company authorized on the Issue Date. "Holders," as of any date of determination, means the holders of record of Registrable Securities other than any Persons to whom Registrable Securities have been transferred who are not Permitted Assignees under Section 3(b) hereof. "Issue Date" means May 10, 2001, the date of the consummation of the Exchange Offer. "Person" means an individual, limited or general partnership, joint venture, limited liability company, corporation, trust, unincorporated organization or other entity or a government or any department or agency thereof. 2 "Prospectus" means the Prospectus included in any Registration Statement (including, without limitation, any Prospectus subject to completion and a Prospectus that includes any information previously omitted from a Prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of all or any portion of the Registrable Securities covered by such Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "Registrable Securities," as of any date of determination, means (a) the Warrants, (b) any Warrant Shares issued upon exercise of the Warrants, (c) any shares of Capital Stock of the Company issued upon conversion of any of the foregoing pursuant to the Charter, and (d) any shares of Capital Stock issued on account of any of the foregoing in connection with any stock split or stock dividend or any capital reorganization or restructuring effected after the Issue Date. Notwithstanding the foregoing, any particular Registrable Securities shall cease to be such when (i) such securities have been disposed of in accordance with an effective Registration Statement with respect to the sale of such securities or distributed to the public pursuant to Section 4(1) of the Securities Act or (ii) they shall have ceased to be outstanding; provided that clause (i) shall not apply during the period that a Shelf Registration is required to be effective under the second proviso of Section 2(b)(ii). "Registration Expenses" means all expenses incident to the Company's performance of or compliance with its obligations hereunder including, without limitation, all Commission and any stock exchange registration, listing, filing or NASD fees, all fees and expenses of complying with securities or "blue sky" laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications), all messenger and delivery expenses, all printing expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "comfort" letters required by or incident to such performance and compliance, any fees and disbursements of underwriters customarily paid by issuers or sellers of securities (including reasonable fees and disbursements of counsel for the underwriters) and the reasonable fees and expenses of any special experts retained in connection with the requested registration, and the reasonable fees and disbursements of one counsel for the Sellers (which counsel shall be selected by the holders of a majority in interest of the Registrable Securities included in such registration), but excluding underwriting discounts and commissions and fees and disbursements of any additional counsel employed by any Seller. "Registration Statement" means any Registration Statement of the Company, including but not limited to a shelf Registration Statement, that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statement. 3 "Securities Act" means the Securities Act of 1933, as amended. "Seller" means any Holder whose Registrable Securities are included in any registration pursuant to Section 2(a) or (b) of this Agreement. "Warrant Shares" means the shares of Class A Common Stock and other securities, if any, issuable upon exercise of Warrants from time to time and any shares issuable upon the conversion or exchange of such shares of Class A Common Stock or other securities. Certain other terms are defined elsewhere in this Agreement. SECTION 2. Registration Rights. (a) Piggyback Registration Rights. If the Company proposes to effect a public offering (including an initial public offering) and in connection therewith proposes to file a registration statement (excluding any registration statement on Form S-8 or S-4 or comparable successor forms or a registration statement relating to a dividend reinvestment plan), then the Company shall give written notice of such proposed offering and filing to each Holder, before the anticipated filing date of such registration statement, and such notice shall offer each Holder the opportunity to include in such registration statement the Registrable Securities then owned (or issuable upon exercise of Warrants then owned) by such Holder, as such Holder may request in writing within 15 days after receipt of the Company's notice (which request shall specify the number and kind of Registrable Securities to be included in such registration statement and the intended method of disposition) (a "Piggyback Registration"). (b) Shelf Registration. (i) Commencing 90 days after the occurrence of an initial public offering of common equity securities of the Company (subject to any lock-up agreement under Section 2(e) that may be in effect), Holders who beneficially own at least 25% of the total outstanding Registrable Securities (assuming exercise of all Warrants) (the "Demanding Holders") shall have the right to require the Company to file a Registration Statement which shall provide for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act covering all of the Registrable Securities (a "Shelf Registration"). Upon receiving such demand, the Company shall give written notice of such proposed Shelf Registration to each Holder other than the Demanding Holders, before the anticipated filing date of such Registration Statement, and such notice shall offer each such Holder the opportunity to include in such Registration Statement the Registrable Securities then owned (or issuable upon exercise of Warrants then owned) by such Holder, as such Holder may request in writing within 15 days after receipt of the Company's notice (which request shall specify the number and kind of Registrable Securities to be included in such Registration Statement and the intended method of disposition). The Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Securities for resale by such 4 Sellers in the manner or manners designated by them. The Company shall not be required to effect more than one Shelf Registration. (ii) Effectiveness Period. The Company shall use its reasonable best efforts to keep the Shelf Registration continuously effective under the Securities Act until the earlier of (A) August 1, 2009 and (B) the first date as of which all Registrable Securities have been disposed of by the Holders thereof pursuant to such Shelf Registration or distributed to the public pursuant to Section 4(1) under the Securities Act; provided that such obligation shall expire before such date if the Company delivers to the Holders a written opinion of counsel to the Company addressed to the Holders that all Holders (other than Affiliates of the Company and broker-dealers) of Registrable Securities may offer, sell and dispose of the Registrable Securities without compliance with the registration and prospectus delivery provisions of the Securities Act; and provided, further, that notwithstanding the foregoing, any Affiliate of the Company may, with notice to the Company, require the Company to keep the Shelf Registration continuously effective for resales by such Affiliate for so long as such Affiliate holds Registrable Securities. (iii) Shelf Blackout Period. Notwithstanding the foregoing, the Company, upon advising the Holders, may suspend the use of the Prospectus included in any Shelf Registration in the event that, and for a period of time (the "Shelf Blackout Period") not to exceed an aggregate of 60 days in any 12-month period, if the Board of Directors of the Company determines in good faith that (i) required disclosure of information in any related Registration Statement, Prospectus at such time would have a material adverse effect on the Company's business, operations or prospects or (ii) a material business transaction that has not yet been publicly disclosed would be required to be disclosed in a Registration Statement, Prospectus and such disclosure would jeopardize the success of such transaction; provided, that, upon the termination of such Shelf Blackout Period, the Company promptly shall advise the Holders that such Shelf Blackout Period has been terminated. (c) Registration Procedures. If and whenever the Company is required to effect the registration of any Registrable Securities under the Securities Act as provided in Section 2(a) or (b) hereof, the Company will as expeditiously as practicable: (i) (A) prepare and file with the Commission a Registration Statement on the appropriate form which includes such Registrable Securities, and furnish to each Seller at least 5 business days prior to the filing thereof a copy of such Registration Statement, and not file any such Registration Statement to which any Seller shall have reasonably objected on the grounds that such Registration Statement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder, (B) promptly respond to all comments (including those of the Commission, any underwriter and any Seller) received with respect to such Registration Statement and make and file all necessary amendments thereto, and (C) thereafter use its reasonable best efforts to cause such Registration Statement to become effective at the earliest practicable date; 5 (ii) prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement accurate and effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities and other securities covered by such Registration Statement until the earlier of (A) August 1, 2009 and (B) the first date as of which all Registrable Securities have been disposed of by the Holders thereof pursuant to such Shelf Registration or distributed to the public pursuant to Section 4(1) under the Securities Act; provided that such obligation shall expire before such date if the Company delivers to the Holders a written opinion of counsel to the Company addressed to the Holders that all Holders (other than Affiliates of the Company and broker-dealers) of Registrable Securities may offer, sell and dispose of the Registrable Securities without compliance with the registration and prospectus delivery provisions of the Securities Act; and provided, further, that notwithstanding the foregoing, any Affiliate of the Company may, with notice to the Company, require the Company to keep the Shelf Registration continuously effective for resales by such Affiliate for so long as such Affiliate holds Registrable Securities; and will furnish to each such Seller at least 2 business days prior to the filing thereof a copy of any amendment or supplement to such Registration Statement or Prospectus and shall not file any such amendment or supplement to which any such Seller shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (iii) furnish to each Seller of such Registrable Securities, upon such Seller's request, one signed copy of such Registration Statement and of each such amendment thereof and supplement thereto (in each case including all exhibits), such number of copies of the Prospectus included in such Registration Statement (including each preliminary prospectus and any summary Prospectus), in conformity with the requirements of the Securities Act, such documents, if any, incorporated by reference in such Registration Statement or Prospectus, and such other documents as, in each case, such Seller may reasonably request; (iv) notify each Seller of such Registrable Securities and, if requested, confirm such notice in writing, as soon as practicable after notice thereof is received by the Company, (A) when such Registration Statement or such amendment thereof or supplement thereto has been filed or becomes effective and when the Prospectus or any amendment thereof or supplement thereto has been filed, (B) of any request by the Commission for any amendments or supplements to the Registration Statement or the Prospectus or for additional information, including copies of any such request in writing or of any written transcript thereof if requested by a Seller, (C) of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (D) of any stop order issued, or the receipt of notification by the Company that any such stop order is threatened to be issued, by the Commission, and use its reasonable best efforts to prevent the entry of such stop order or to remove it if entered; 6 (v) use its reasonable best efforts to register or qualify all Registrable Securities covered by such Registration Statement under such other securities or "blue sky" laws of such jurisdictions as each Seller shall reasonably request, to keep such registration or qualification in effect for so long as such Registration Statement remains in effect, and do any and all other acts and things that may be necessary or advisable to enable such Seller to consummate the disposition in such jurisdictions of its Registrable Securities covered by such Registration Statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (v) be obligated to be so qualified, or to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction; (vi) if such Registration Statement relates to an underwritten offering, obtain and furnish to each Seller a signed counterpart, addressed to such Seller, of the legal opinions and accountants' comfort letters which are to be delivered to the underwriters; (vii) promptly notify each Seller whose Registrable Securities are covered by such Registration Statement, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon 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 any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Company shall promptly prepare a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (viii) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and under applicable securities or "blue sky" laws and any rules and regulations thereunder; (ix) promptly make available for inspection by any Seller or underwriter participating in any disposition pursuant to any Registration Statement, and by any attorney, accountant or other agent or representative retained by any Seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Seller, underwriter, attorney, accountant or other agent or representative in connection with such Registration Statement; (x) if the Common Stock of the Company is listed on a national securities exchange or quoted on Nasdaq or is to be so listed or quoted, use its reasonable best efforts to comply with the requirements of such exchange or Nasdaq to include shares of Registrable Securities covered by such Registration Statement for listing on each such securities exchange or for quotation on Nasdaq; and 7 (xi) the Company shall cooperate with the Sellers and any underwriter to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold under any Registration Statement, in such denominations and registered in such names as the managing underwriter or underwriters, if any, or such Sellers may request. The Company may require each Seller of Registrable Securities as to which any registration is being effected to furnish the Company such information regarding such Seller and the distribution of such securities as the Company may from time to time reasonably request in writing and as shall be required by law or by the Commission in connection with such registration. (d) Underwriting Agreement. If requested by the underwriters for any underwritten offering of Registrable Securities on behalf of Sellers pursuant to a registration covered by Section 2(a) or (b) hereof, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to contain representations and warranties, and covenants and agreements of, by the Company and other terms and provisions not inconsistent with this Section 2 as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, indemnities to the effect and to the extent provided in Section 2(g) hereof, and the Company will cooperate with such Sellers to the end that the conditions precedent to the obligations of such Sellers under such underwriting agreement shall not include conditions that are not customary in underwriting agreements with respect to secondary distributions and shall be otherwise satisfactory to such Sellers. The Sellers on whose behalf shares are to be distributed by such underwriters shall be party to any such underwriting agreement and the representations and warranties by, and the covenants and other agreements on the part of, the Company to and for the benefit of such underwriters, shall also be made to and for the benefit of such Sellers. Such Sellers shall not be required by the Company to make any representations or warranties to or agreements with the Company or the underwriters other than reasonable representations, warranties or agreements regarding such Sellers, such Sellers' Registrable Securities and such Sellers' intended method or methods of disposition and any other representation required by law. (e) Lock-Up. If and to the extent requested by the managing underwriter in connection with an public offering of common equity securities of the Company, such Holder shall agree in writing that such Holder will not, without the consent of the managing underwriter and except for Registrable Securities included in the public offering, if any: (x) effect any public sale or distribution of any common equity securities of the Company, or any securities convertible into, or exercisable or exchangeable for, any such common equity securities for the period requested by the managing underwriter, not to exceed in any event 180 days following effectiveness of the Registration Statement relating to the initial public offering, or (y) effect any other transfer of any of the foregoing during such lock-up period unless the transferee agrees in writing to be bound by the terms and conditions of this Section 2(e). 8 (f) Registration Expenses. The Company agrees to pay, in connection with each registration of Registrable Securities covered by Section 2(a) or (b) hereof, all Registration Expenses. All other expenses not paid or payable by the Company which are otherwise not attributable to a particular Seller will be the responsibility of and paid for by all of the Sellers on a pro rata basis. (g) Indemnification and Contribution. (i) The Company agrees, to indemnify and hold harmless each Holder of Registrable Securities included in a Registration Statement covered by Section 2(a) or (b), its directors, officers and other agents and each Person, if any, who controls such Person or its affiliates within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant") against any losses, claims, damages or liabilities to which any Participant or such director, officer, agent or controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages or liabilities (or actions, proceedings or investigations in respect thereof) arise out of or are based upon: (a) any untrue statement or alleged untrue statement made by the Company contained in any application or any other document or any amendment or supplement thereto executed by or on behalf of the Company based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to register or qualify the Registrable Securities under the securities or "blue sky" laws thereof or filed with the Commission or any securities association or securities exchange (each, an "Application"); (b) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus; or (c) the omission or alleged omission to state, in any Registration Statement (or any amendment or supplement thereto) or Prospectus (as amended or supplemented) or any preliminary prospectus or any Application or any other document or any amendment or supplement thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse, as incurred, the Participant and each such director, officer, agent and controlling person for any reasonable legal or other reasonable expenses incurred by the Participant or such director, officer, agent or controlling person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, (i) the Company 9 will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus or Application or any amendment or supplement thereto in reliance upon and in conformity with information relating to any Participant furnished to the Company by such Participant in writing specifically for use therein, and (ii) the Company shall not be liable to any Participant under the indemnity agreement in this subsection 2(a) with respect to the preliminary prospectus to the extent that any such loss, claim, damage, liability or expense of such Participant results from the fact that such Participant sold Registrable Securities to a person as to whom it shall be established that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (or the Prospectus as then amended or supplemented if the Company shall have furnished such Participant with such amendment or supplement thereto on a timely basis), in any case where such delivery is required by applicable law and the loss, claim, damage, liability or expense of such Participant results from an untrue statement or omission of a material fact contained in the preliminary prospectus which was corrected in the Prospectus (or in the Prospectus as then amended or supplemented if the Company shall have furnished such Participant with such amendment or supplement thereto on a timely basis). The indemnity provided for in this Section 2(g)(i) will be in addition to any liability that the Company may otherwise have to the indemnified parties under any applicable underwriting agreement. The Company shall not, without the prior written consent of each affected Participant, effect any settlement or compromise of any pending or threatened action, proceeding or investigation in respect of which such Participant or any of its directors, officers, agents or controlling persons is or could have been a party, or indemnity could have been sought hereunder by such Participant or any of its directors, officers, agents or controlling persons, unless such settlement (A) includes an unconditional written release of such Participant and its affected directors, officers, agents and controlling persons, in form and substance reasonably satisfactory to such Participant, from all liability on claims that are the subject matter of such action or proceeding or investigation and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such Participant or its directors, officers, agents and controlling persons. (ii) Each Participant, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Company or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions, proceedings or investigations in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus, or (ii) the omission or the alleged omission to state therein a material fact necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, 10 that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Participant, furnished to the Company by the Participant, specifically for use therein; and subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any reasonable legal or other reasonable expenses incurred by the Company or any such director, officer or controlling person in connection with investigating or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action in respect thereof. The indemnity provided for in this Section 2(g)(ii) will be in addition to any liability that the Participants may otherwise have to the indemnified parties under any applicable underwriting agreement. Each Participant shall not, without the prior written consent of the Company, effect any settlement or compromise of any pending or threatened action, proceeding or investigation in respect of which the Company or any of its directors, officers, agents or controlling persons is or could have been a party, or indemnity could have been sought hereunder by the Company or any of its directors, officers, agents or controlling persons, unless such settlement (A) includes an unconditional written release of the Company and its affected directors, officers, agents and controlling persons, in form and substance reasonably satisfactory to the Company, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of the Company or its directors, officers, agents or controlling persons. Notwithstanding the foregoing, no Participant shall be liable under this Section 2(g)(ii) in excess of the total net profit received by such Participant in connection with the sale of its Registrable Securities giving rise to its liability hereunder, less the aggregate amount of any damages that such Participant has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact. (iii) Promptly after receipt by an indemnified party under this Section 2(g) of notice of the commencement of any action, proceeding or investigation for which such indemnified party is entitled to indemnification under this Section 2(g), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 2(g), notify the indemnifying party of the commencement thereof in writing; but the omission to so notify the indemnifying party (a) will not relieve it from any liability under paragraph (i) or (ii) above unless and to the extent such failure results in the actual forfeiture by the indemnifying party of substantial rights and defenses and (b) will not, in any event, relieve the indemnifying party from any other obligations to any indemnified party. In case any such action, proceeding or investigation is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the defendants in any such action, proceeding or investigation include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the 11 indemnifying party, or (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after receipt by the indemnifying party of notice of the institution of such action, proceeding or investigation, then, in each such case, the indemnifying party shall not have the right to direct the defense of such action, proceeding or investigation on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action, proceeding or investigation on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, proceeding or investigation, the indemnifying party will not be liable to such indemnified party under this Section 2(g) for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action, proceeding or investigation the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action, proceeding or investigation or separate but substantially similar actions, proceedings or investigations in the same jurisdiction arising out of the same general allegations or circumstances, designated by Participants who sold a majority in interest of the Registrable Securities sold by all such Participants in the case of paragraph (i) of this Section 2(g), or the Company in the case of paragraph (ii) of this Section 2(g), representing the indemnified parties under such paragraph (i) or paragraph (ii), as the case may be, who are parties to such action, proceeding or investigation or actions, proceedings or investigations) or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. All fees and expenses reimbursed pursuant to this paragraph (iii) shall be reimbursed as they are incurred. After such notice from the indemnifying party to such indemnified party and (to the extent permitted hereunder) the assumption of the defense of any action, proceeding or investigation hereunder by such indemnifying party, the indemnifying party will not be liable for any settlement of any claim or action effected without its consent (which consent shall not be unreasonably withheld, conditioned or delayed) or for the costs and expenses thereof. (iv) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 2(g) is unavailable to, or insufficient to hold harmless, an indemnified party in respect of any losses, claims, damages, liabilities or expense (or actions, proceedings or investigations in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (or 12 actions, proceedings or investigations in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages, liabilities or expenses (or actions, proceedings or investigations in respect thereof). The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand, or the Participants on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission, and any other equitable considerations appropriate in the circumstances. The parties agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (iv). Notwithstanding any other provision of this paragraph (iv), no Participant shall be obligated to make contributions hereunder that in the aggregate exceed the total net profit received by such Participant in connection with the sale of its Registrable Securities, less the aggregate amount of any damages that such Participant has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and 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. For purposes of this paragraph (iv), each director, officer and agent of a Participant and each person, if any, who controls a Participant within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Participants, and each director of the Company, each officer of the Company and each person, if any, who controls any Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Company. (h) Selection of Managing Underwriter. With respect to any Registration Statement covered by Section 2(a) or (b) hereof, the Company shall select the managing underwriter or underwriters. (i) Underwriter Cutbacks. Notwithstanding anything in this Agreement to the contrary and in addition to any other limitations on rights to participate in a Piggyback Registration hereunder, if the managing underwriter of any public offering thereunder advises the Company in writing (with a copy to the Holders and the Other Rights Holders) that the total number of common equity which the Company, the Holders, and other Persons whose contractual rights (now existing or hereafter granted) give them the right to be included in such registration (the "Other Rights Holders") intend to include in such offering exceeds the maximum amount of common equity that may be distributed without adversely affecting the price, timing or distribution of the common equity being offered, then the amount of common equity to be included in such Piggyback Registration and offering for the account of the Holders and the Other Rights Holders shall be reduced pro rata so that the aggregate amount of common equity included in such Piggyback Registration and offering for the account of the Holders and the Other Rights Holders, together with the common equity to be sold for the account of the Company, does not exceed the amount that such managing underwriter determines in good faith can be sold in such offering without causing such adverse effect. 13 SECTION 3. Miscellaneous. (a) Notices. Any notices in connection with this Agreement shall be in writing and may be given by (i) personal delivery, (ii) fax, (iii) certified mail, return receipt requested, postage prepaid, or (iv) a nationally recognized overnight courier as follows: (x) if to any Holder, at the address of record for such Holder on the records of the Company (or such other address as such Holder shall furnish the Company in writing to receive notices hereunder); and (y) if to the Company, to Harborside Healthcare Corporation, One Beacon Street, Boston, MA 02108, Attn: William H. Stephan, with a copy to Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York 10166, Attention: Joerg Esdorn. Notices shall be deemed to have been given (A) when actually delivered (including by fax with confirmation of transmission), (B) the next business day if sent by overnight courier (with proof of delivery), and (C) on the fifth day after mailing by certified mail. (b) Priority of Registration Rights. The Company hereby agrees that it will not enter into any agreement which would adversely affect the priority of the Holders' rights to include their Registrable Securities on a pro rata basis in a Piggyback Registration in the event of reduction of the number of its Registrable Securities includable in such Piggyback Registration pursuant to Section 2(i) hereof, and the Company represents that as of the date hereof it is not a party to any such agreement. (c) Assignability. This Agreement may not be assigned by any Holder under any circumstances except in connection with a transfer of Registrable Securities to a Permitted Assignee. As used herein, "Permitted Assignee" means a Person to whom record ownership of Registrable Securities is transferred by a Holder without violation or breach of the Charter or any agreement restricting such transfer provided that the transferring Holder shall give at least 10 days advance notice of such transfer to the Company. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and upon, and to the benefit of, the successors and Permitted Assignees of the Holders. (d) Amendment and Waiver. The rights of the Holders and the obligations the Company hereunder are subject to amendment upon the written consent of the Company and a majority in interest of the Holders. Any noncompliance of any provision of this Agreement by the Company may be waived by written consent by a majority in interest of the Holders. Any such amendment or waiver shall be binding upon all Holders. (e) Governing Law. This Agreement shall be construed both as to validity and performance in accordance with, and this Agreement and all disputes hereunder shall be governed by, the laws of the State of New York without regard to principles of conflict of laws that would require the application of any other law. The Company irrevocably and unconditionally agrees that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this Agreement or for recognition or enforcement of any judgment in any such action, suit or proceeding, may be brought in any federal or state court of competent 14 jurisdiction in the Borough of Manhattan of the City of New York, accepts and submits itself to the nonexclusive jurisdiction of any such court, generally and unconditionally, with respect to any such action, suit or proceeding and waives any defense of forum non conveniens or based upon venue if such action, suit or proceeding is brought in accordance with this provision. (f) Headings; Sections. All headings and captions in this Agreement are for purposes of reference only and shall not be construed to limit or affect the substance of this Agreement. All references to Section in this Agreement refer to Sections of this Agreement, unless the context otherwise expressly provides. (g) Entire Agreement. This Agreement contains, and is intended as, a complete statement of all the terms of the arrangements provided for herein, and supersedes any previous agreements and understandings with respect to such arrangements. (h) Specific Performance. The Company acknowledges and agrees that in the event of any breach of this Agreement by the Company, the Holders would be irreparably harmed and could not be made whole by monetary damages. Accordingly, the Company hereby agrees that in addition to any other remedy to which the Holders may be entitled at law or in equity, the Holders shall be entitled to compel specific performance of this Agreement in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction for such action. (i) Faxed Signature Pages. Faxed signatures shall be valid and binding for all purposes. 15 Agreed to as of the date first written above. HARBORSIDE HEALTHCARE CORPORATION, a Delaware corporation By: Name: Title: 16

TIMBERLAND PURCHASE AND SALE AGREEMENT FOR THE SOUTHWEST WASHINGTON TIMBERLANDS by and among PLUM CREEK TIMBERLANDS, L.P., and PLUM CREEK MARKETING, INC., As Seller and POPE RESOURCES, A Delaware Limited Partnership -------------------------------------------------------------------------------- As Purchaser Dated the 12th day of February, 2001 -------------------------------------------------------------------------------- TIMBERLAND PURCHASE AND SALE AGREEMENT FOR THE SOUTHWEST WASHINGTON TIMBERLANDS     THIS AGREEMENT is made and entered into this 12th day of February, 2001, by and among PLUM CREEK TIMBERLANDS, L.P., a Delaware limited partnership, as successor by merger to Plum Creek Timber Company, L.P., a Delaware limited partnership ("Seller Timberlands") and PLUM CREEK MARKETING, INC., a Delaware corporation ("Seller Marketing" and, together with Seller Timberlands, "Seller"), each of whose address is 999 Third Avenue, Suite 2300, Seattle, Washington 98104, and POPE RESOURCES, A Delaware Limited Partnership whose address is 19245 Tenth Avenue Northeast, Poulsbo, Washington 98370-0239 ("Purchaser").     Purchaser desires to purchase from Seller and Seller desires to sell to Purchaser approximately 44,500 acres of timberland and associated property and assets located in the State of Washington, known as the Southwest Washington Timberlands. In consideration of the mutual covenants set forth in this Agreement, the receipt and sufficiency of which are acknowledged, and subject to all terms of this Agreement, the parties agree as follows: 1.  Purchase and Sale of Assets.     Subject to the contingencies and other terms and conditions contained herein, Seller agrees to sell and Purchaser agrees to purchase the Assets (as defined in Paragraph1.6), as follows:     1.1  Timberlands.  All of Seller's right, title and interest in and to certain real property owned by Seller Timberlands in Clark, Cowlitz, Skamania, Lewis and Pierce Counties, Washington, as further described on Exhibit "A" attached hereto and incorporated herein by this reference, together with all other rights and interests related or appurtenant thereto, including but not limited to all of Seller's right, title, and interest (i) in and to the merchantable and unmerchantable timber, growing, lying, standing or felled, timber interests and timber rights located on or appurtenant to the Timberlands; (ii) in and to any cutting rights under public or private timber deeds; (iii) in and to any mineral, sand, oil, gas, hydrocarbon substances and gravel and other hard rock rights on and under the Timberlands not previously severed by Seller's predecessors in interest; (iv) in and to all fixtures and improvements located on the Timberlands, if any; and (v) in and to any development rights, air rights, water, water rights, ditch and ditch rights appurtenant to the Timberlands (collectively, all property described in this Paragraph 1.1 is herein called the "Timberlands").     1.2  Building.  All of Seller's right, title and interest in and to certain real property owned by Seller Marketing, located in Kelso, Cowlitz County, Washington, as legally described on Exhibit "B" attached hereto and incorporated herein by this reference, together with all other rights and interests related or appurtenant thereto, including but not limited to all of Seller's right, title, and interest (i) in and to the office building and related fixtures and improvements located thereon, and (ii) in and to any development rights, air rights, water, water rights, ditch and ditch rights appurtenant thereto (collectively, all property described in this Paragraph 1.2 is herein called the "Building").     1.3  Contracts.  Subject to the provisions of Paragraph 10.1, all rights of Seller in and to all contracts, agreements, operating contracts, stumpage contracts, leases, permits, approved Forest Practice Applications, licenses, governmental consents and agreements, approvals and clearances, and service, maintenance, utility and operating contracts and warranties, equipment and vehicle leases, agreements for construction of roads or other improvements, rights under any payment, performance, or bonds relating to or associated with the Timberlands or the Building and listed in Schedule 1.3 ("Contracts"). 2 --------------------------------------------------------------------------------     1.4  Access Rights and Easements.  All rights and interests of Seller in and to any access rights, rights-of-way and easements appurtenant to or benefiting the Timberlands or the Building and listed in Schedule 1.4 ("Access Rights and Easements").     1.5  Personal Property.  Any and all personal property, tangible and intangible, including without limitation all furniture, fixtures, equipment, vehicles and tools, used in connection with or located upon or within the Timberlands or the Building, Seller's records and information relating to timber inventories, timber management and operations reports, records relating to title matters, current agreements, roads, current leases, equipment, current permits, current easements and access rights, and environmental conditions, maps, property books, aerial photos, plans, drawings, specifications, renderings, engineering studies, surveys, aerial spraying records, fertilization records, research reports, growth and yield studies, timber cruises, appraisals, soil stability studies, disease/insect reports, endangered species survey results, biological studies, grading or drainage studies, environmental and hazardous waste studies and reports and related data and materials, and electronic data solely concerning the Timberlands or the Building (excluding electronic forms of existing contracts, leases, permits or other operating agreements, copies of which have been provided to Purchaser), including the timber inventory, data base software program and mapping software program that can operate independent of Seller's mainframe and that Seller is permitted to license to Purchaser but excluding proprietary software of a type used by or which may be used by Seller in its other timber, forestry or mill operations, and including all such additional personal property as further identified or described on Schedule 1.5 (collectively, the "Personal Property").     1.6  Assets.  The Timberlands, the Building, Contracts, Access Rights and Easements and Personal Property are sometimes collectively referred to as the "Assets." The Assets shall not include the excluded assets ("Excluded Assets") set forth on Schedule 1.6.     1.7  Possession.  Purchaser shall be entitled to possession of the Assets upon Closing. 2.  Purchase Price and Terms.     2.1  Purchase Price.  The purchase price for the Assets is Fifty-Four Million Two Hundred Fifty-one Thousand Dollars ($54,251,000.00) ("Purchase Price").     2.2  Earnest Money.  Upon full execution hereof, Purchaser shall place into the escrow with the Escrow Agent (defined below) the amount of One Million Dollars ($1,000,000.00), in cash, paid or delivered as earnest money (the "Earnest Money") in part payment of the Purchase Price for the Assets. The Earnest Money shall be invested by Escrow Agent in an interest-bearing account mutually acceptable to the parties, with all interest earned thereon being for the account of Purchaser. The Earnest Money shall be refunded to Purchaser if this Agreement terminates for any reason other than Purchaser's failure to close without legal excuse. The Earnest Money shall constitute Seller's sole and exclusive remedy in the event Purchaser fails to close this transaction without legal excuse.     2.3  Payment of Purchase Price.  At Closing, Purchaser shall pay Seller in cash or by wire transfer, or otherwise immediately available federal funds the entire Purchase Price, of which the Earnest Money receipted herein is a part.     2.4  Purchase Price Allocation.  The parties shall allocate the Purchase Price among the Assets in accordance with Section 1060 of the Internal Revenue Code and shall cooperate with each other and provide such information as may be requested in connection with the preparation of the allocation. The parties shall report the federal, state and local tax consequences of the purchase and sale contemplated hereby (including the filing of IRS Form 8594) in a manner consistent with such allocation. The parties further agree that the Purchase Price shall be allocated $53,772,000.00 to the Timberlands, which is further allocated as follows: $201,107.00 to the Timberlands in Clark County, $3,715,645.00 to the 3 -------------------------------------------------------------------------------- Timberlands in Cowlitz County, $19,230,480.00 to the Timberlands in Lewis County, $96,790.00 to the Timberlands in Pierce County, and $30,527,978.00 to the Timberlands in Skamania County. The parties allocate $450,000.00 of the Purchase Price to the Building, and $29,000.00 of the Purchase Price to the Personal Property and other Assets constituting personal property. 3.  Closing.  Closing ("Closing") shall occur at the offices of Transnation Title Insurance Company, 1200 Sixth Avenue, Seattle, Washington 98101 ("Escrow Agent") on the date ("Closing Date") that is on or before April 4, 2001, if closing by such target date is feasible for the parties, but in no event later than April 13, 2001, unless such date is extended pursuant to Paragraph 14 or otherwise by written agreement of the parties; provided, however, that if the condition to closing described in Paragraph 17.1(i) is met prior to March 15, 2001, the Closing Date shall be the date that is on or before March 23, 2001, if closing by such target date is feasible for the parties, but in no event later than March 30, 2001, unless such date is extended pursuant to Paragraph 14 or otherwise by written agreement of the parties.     4.  Representations and Warranties of Seller.  Seller represents and warrants to Purchaser that except as disclosed in a Schedule or Schedules hereinafter described:     4.1  Organization.  Seller Timberlands is a limited partnership duly organized and validly existing under the laws of the State of Delaware. Seller Marketing is a corporation duly organized and validly existing under the laws of the State of Delaware.     4.2  Good Standing.  Seller Timberlands and Seller Marketing are each qualified to do business in the State of Washington.     4.3  Power and Authority for Transaction.  Seller Timberlands and Seller Marketing each have the power and authority to execute, deliver and perform this Agreement and the transactions contemplated herein in accordance with the terms hereof.     4.4  Authorization.  The execution and delivery by each Seller of this Agreement and the due consummation of the transactions contemplated herein have been duly and validly authorized by all necessary partnership or corporate actions on the part of each Seller and this Agreement constitutes a valid and legally binding agreement of each of Seller Timberlands and Seller Marketing.     4.5  No Violation or Conflicts.  Neither the execution and delivery of this Agreement by Seller nor the consummation by Seller of the transactions contemplated herein (i) constitute a violation of Seller Timberlands' certificate of limited partnership or limited partnership agreement, or the Certificate of Incorporation or Bylaws of Seller Marketing, or (ii) result in the breach of or the imposition of any lien on any Assets pursuant to, or constitute a material default under, any indenture or bank loan or credit agreement or other agreement or instrument to which either Seller is a party or by which it or its property may be bound or affected. Except for consents or approvals which will have been obtained or actions which will have been taken on or prior to the Closing Date, and except for consents, approvals, authorizations or actions described in Paragraphs 14 or 19.5, no consent, approval, authorization or action by any governmental authority, or any person or entity having legal rights against or jurisdiction over Seller, is required in connection with the execution and delivery by Seller of this Agreement or the consummation by Seller of the transactions contemplated herein, except as set forth on Schedule 4.5.     4.6  No Defaults.  To Seller's knowledge, the Contracts and Access Rights and Easements are valid and in full force and effect, and no event has occurred or is claimed to have occurred which may render unenforceable or permit the termination of any of the Contracts or Access Rights and Easements. Except as disclosed on Schedule 4.6, to Seller's knowledge, neither Seller nor, to Seller's knowledge, any other party thereto has breached or violated or is claiming Seller has breached or violated any provision of, or is in default or is claiming Seller is in default in any respect under, the 4 -------------------------------------------------------------------------------- terms or conditions of any Contract or Access Right or Easement. Except as disclosed on Schedule 19.5, the Contracts are assignable to Purchaser without consent.     4.7  Condemnation Proceedings.  Subject to Paragraph 17.1(e), no condemnation proceeding is pending or, to the knowledge of Seller, threatened which affects or could reasonably be expected to affect the Timberlands or the Building.     4.8  Environmental Matters.  To Seller's knowledge, except as set forth on Schedule 4.8, Seller warrants that:     (a) neither the Timberlands nor the Building have at any time been used for or suffered the generation, transportation, management, handling, treatment, storage, manufacture, emission disposal, release or deposit of any hazardous substances or fill or other material containing hazardous substances in material violation of applicable laws;     (b) there are no underground storage tanks on the Timberlands or the Building;     (c) Seller has not received written notification from any third party, including,but not limited to, any governmental agency, alleging that Seller, with respect to the management and operations of the Timberlands and the Building, the Timberlands or the Building are not materially in compliance with, may require remediation under, or be subject to liability under applicable environmental laws; and     (d) there are no hazardous substances in, on or under the Timberlands or the Building or any part thereof that are in violation of applicable environmental laws except for such violations as would not (individually or in the aggregate) be material.     Except as to matters covered by Seller's warranty set forth in this Paragraph 4.8, Purchaser releases Seller from all costs, losses, liabilities, obligations and claims, of any nature whatsoever, known and unknown, that Purchaser may have against Seller or that may arise after the date of Closing based in whole or in part upon (i) Seller's failure to comply with any environmental laws applicable to the Timberlands or the Building; or (ii) the presence, release or disposal of any hazardous substance, solid waste, or any other environmental contamination on, within, or from the Timberlands or the Building before, as of, or after the Closing Date. The above-referenced release does not cover or apply to any statutory or common law claim for contribution or indemnity that may arise to the extent Purchaser suffers any liabilities or obligations from future claims of any governmental agency arising out of (i) or (ii) above, or any claims, costs, losses, liabilities, or obligations arising out of the activities of Seller or its agents, contractors or employees on, in, under or about the Timberlands or the Building after the Closing Date. As used herein, the term "environmental laws" shall mean all applicable federal, state or local laws, rules, regulations, governmental permits or other binding determinations of any governmental authority relating to or addressing the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended ("CERCLA"), and the Resource Conservation and Recovery Act, as amended ("RCRA"), the Toxic Substances Control Act, as amended ("TSCA"), the Clean Water Act, as amended ("CWA"), the Clean Air Act, as amended ("CAA"), and the Oil Pollution Control Act of 1990, as amended ("OPA"). As used herein, the terms "hazardous substance" and "release" (as it relates to the release of hazardous substances as opposed to the release of claims) have the meanings specified in CERCLA and the terms "solid waste" and "disposal" (or "disposed") have the meanings specified in RCRA. If either CERCLA or RCRA is amended to broaden the meaning of any term defined thereby, the broader meaning shall apply to this Paragraph 4.8 after the effective date of the amendment. Moreover, to the extent that Washington law establishes a meaning for "hazardous substance," "release," "solid waste," or "disposal" that is broader than that specified in either CERCLA or RCRA, the broader meaning shall apply. 5 --------------------------------------------------------------------------------     4.9  Suits, Actions or Proceedings.  Except as disclosed in Schedule 4.9, there is (i) no court or administrative decision, permit, moratorium, judgment or order against Seller or its predecessors in interest or specifically involving the Timberlands or the Building which materially and adversely affects the value of the Timberlands or Building or the operations of the Timberlands or the Building as they are currently being operated; (ii) no legal, administrative or other suit, action, proceeding or arbitration, or governmental investigation pending or, to the knowledge of Seller, threatened against Seller or specifically involving the Timberlands or the Building which would reasonably be expected to materially and adversely affect the value of the Timberlands or Building or the operations of the Timberlands or the Building as they are currently being operated; and (iii) no legal, administrative or other suit, action, proceeding or arbitration, or governmental investigation pending or, to the knowledge of Seller, threatened by or involving any Employee (defined below) relating to Seller's employment of any such Employee. Except as set forth in Paragraph 14, there is no suit, action, claim, arbitration or other proceeding pending, or to the knowledge of Seller, threatened before any court or governmental agency, which may result in the restraint or prohibition of the consummation of the transactions contemplated by this Agreement.     4.10  Broker Fees.  Seller has not employed any broker, agent or finder, or incurred any liability for any brokerage fees, agents' commissions or finders' fees, in connection with the transactions contemplated herein.     4.11  Compliance.  Except as disclosed on Schedule 4.11, (i) Seller has not received written notification from any governmental agency alleging that the Timberlands or the Building or the use or condition thereof are not presently in compliance with applicable laws (other than environmental law notices set forth in Schedule 4.8), and (ii) Seller has no knowledge of any such violations relating to the Timberlands or the Building or the use or condition thereof. To Seller's knowledge, Seller maintains the Assets in material compliance with all applicable laws, ordinances, codes, permits, approved Forest Practices Applications, and regulations. Seller has not engaged in any timber harvest operations on the Timberlands since January 1, 2001.     4.12  Schedules.  Seller shall deliver the Schedules referred to in this Agreement to Purchaser not later than February 15, 2001. Purchaser shall have until the earlier of five (5) business days after Purchaser's receipt of any such Schedules or February 23, 2001, to provide notice of Purchaser's disapproval of the Schedules, which approval shall not be unreasonably withheld. In the event Purchaser does not provide Seller with notice of Purchaser's disapproval by February 23, 2001, Purchaser shall be deemed to have accepted the Schedules. Subject to the provisions of Paragraph 10.1, in the event Purchaser does not approve the Schedules as provided in this Paragraph 4.12, Purchaser shall have the right to terminate this Agreement by providing written notice to Seller not later than February 23, 2001, in which event the Earnest Money shall be refunded to Purchaser; provided, however, Purchaser shall not be entitled to terminate this Agreement for items on the Schedules which do not or which are not reasonably expected to have a material adverse effect on the value of the Assets. Notwithstanding the foregoing, if Purchaser disapproves any of Seller's proposed form of transfer instruments (i.e. Schedules 17.5(a)(i), 17.5(a)(ii), 17.5(a)(iii), or 17.5(a)(v)), Purchaser and Seller shall use their commercially reasonable efforts to reach agreement with respect to a resolution of Purchaser's objection within five (5) business days.     4.13  Marketable Title.  Seller has good and marketable title to the Assets and at Closing such Assets will be free and clear of all liens, security interests, charges and encumbrances except, in the case of the Timberlands or the Building, Permitted Exceptions defined in Paragraph 7(c).     4.14  Unrecorded Encumbrances; Ongoing Rights.  There is currently and shall prior to Closing be no timber cutting or harvesting activity on or removal of any timber from the Timberlands. Except as disclosed in Schedule 4.14, neither the Timberlands nor the Building is subject to any material leases, cutting rights, logging, stumpage or other agreements, timber contracts or deeds, licenses, 7 -------------------------------------------------------------------------------- restrictive covenants, Forest Practice Applications, permits, tenancies, easements or reservations except the Contracts and those encumbrances of public record. Seller warrants that it shall not sell, mortgage or otherwise transfer the Assets or any portion thereof or interest therein, or modify, waive any rights under or terminate any Contracts or Access Rights and Easements, breach or violate any terms or conditions in any Contracts or Access Rights and Easements, or enter into any agreements, create any liens, claims, restrictions or encumbrances, or grant any rights or interests in or pertaining to the Assets or release or terminate any existing rights benefiting the Assets without the prior written consent of Purchaser, which shall not be unreasonably withheld.     4.15  No Adverse Claims.  Except as disclosed in the Contracts and pursuant to matters of public record, to Seller's knowledge, neither the Timberlands nor the Building is subject to any rights of persons in possession or persons making use thereof which would reasonably be expected to have a material adverse effect on the value of the Timberlands or the Building, nor has Seller received any notice that that the Timberlands or the Building is subject to any claim of adverse possession or prescriptive easement.     4.16  ESA.  To Seller's knowledge, except as disclosed on Schedule 4.16, there are no (i) endangered or threatened species (as defined or listed under federal law) nor any nesting site(s) of or waterways containing any such species located on the Timberlands, or (ii) areas of the Timberlands within any "owl circles," which would materially and adversely affect the harvesting of the timber on the Timberlands.     4.17  Tribal Rights.  Seller has not received written notice from any aboriginal or Native American tribe (or representative thereof) of any rights or claims of such tribe that relate to the Timberlands.     4.18  Timber Harvest Obligations.  Except as disclosed in Schedule 4.18, (i) all timber harvest excise taxes, costs and liabilities associated with any prior harvesting and removal of timber or other natural resources from the Timberlands have been fully paid, and (ii) all other liabilities and obligations arising out of the use, ownership or possession of the Timberlands (including, without limitation, the removal of timber or other natural resources) prior to Closing will be fully paid and performed by Seller on or before closing.     4.19  Employee Matters.  There is no collective bargaining agreement affecting the Employees (defined below). There are no employment agreements with any Employees except the Special Severance Plan for Southwest Washington Employees disclosed under Schedule 12.1(b). 5.  Representations and Warranties of Purchaser.  Purchaser represents and warrants to Seller that:     5.1  Organization.  Purchaser is a limited partnership duly organized and validly existing under the laws of the State of Delaware, and has the partnership power to enter into this Agreement and to carry out the transactions contemplated herein in accordance with the terms hereof.     5.2.  Authorization; No Violation or Conflicts.  Subject to obtaining the consents and approvals described in Paragraph 17.1(f), the execution and delivery of this Agreement by Purchaser and the due consummation of the transactions contemplated herein have been duly and validly authorized by all necessary partnership action on the part of Purchaser, and this Agreement constitutes a valid and legally binding agreement of Purchaser. Subject to obtaining the consents and approvals described in Paragraph 17.1(f), neither the execution and delivery of this Agreement by Purchaser nor the consummation by Purchaser of the transactions contemplated herein constitute a violation of Purchaser's agreement of limited partnership or other organizational documentation or agreements or result in the breach of, or the imposition of any lien on any assets of Purchaser pursuant to, or constitute a default under, any indenture or bank loan or credit agreement, or other agreement or instrument to which Purchaser is a party or by which it or any of its properties may be bound or 8 -------------------------------------------------------------------------------- affected. Except for the approvals described in Paragraphs 14 and 17 and except for consents, approvals, or authorizations which will have been obtained or actions which will have been taken on or prior to the Closing Date, no consent, approval, authorization or action by any governmental authority or any person or entity having legal rights against or jurisdiction over Purchaser is required in connection with the execution and delivery by Purchaser of this Agreement or for consummation by Purchaser of the transactions contemplated herein, except as may be set forth on Schedule 5.2 hereto.     5.3  Broker Fees.  Purchaser has not employed any broker, agent or finder, or incurred any liability for any brokerage fees, agents' commissions or finders' fees, in connection with the transactions contemplated herein.     5.4  Suits, Actions or Proceedings.  Except as set forth in Paragraph 14, Purchaser has no knowledge of any suit, action, arbitration or other proceeding pending before any court or governmental agency, which may result in the restraint or prohibition of the consummation of the transactions contemplated by this Agreement. 6.  Survival; Cushion Against Claims; Knowledge; Materiality.     6.1  Survival.  The respective representations and warranties of Seller and Purchaser contained herein or in any Schedule, certificate or other instrument delivered by or on behalf of such party pursuant to this Agreement, including the environmental matters set forth in Paragraph 4.8, shall survive the Closing for a period of eighteen (18) months and thereafter shall expire and terminate, and each party shall be forever released from liability to the other based upon such representations and warranties except as to matters for which notice has been given by a party of the inaccuracy or breach of any representation or warranty on or prior to such termination date. The representations and warranties of Seller contained in Paragraph 4.13 and in any deeds or assignment instruments transferring the Assets shall not be subject to the terms of this Paragraph 6.1.     6.2  Cushion Against Claims.  In the event of any claim by Purchaser against Seller under Paragraph 4 of this Agreement (other than with respect to covenants and agreements to be performed by Seller after the Closing and which do not relate to matters occurring prior to the Closing), no amount shall be owing by Seller unless and until the amount of damage, loss or expense incurred by Purchaser exceeds $500,000.00 in the aggregate for all such claims ("Cushion"), and Seller shall be obligated only with respect to such excess; provided that the foregoing limitation shall not apply in the event of a breach of or inaccuracy in the representation and warranty set forth in Paragraph 4.10 or Paragraph 4.13 or of any warranties under any deed transferring the Timberlands or the Building. The aggregate amount paid or payable by the Seller pursuant to claims made under Paragraph 4 (excluding claims made under Paragraph 4.13 or under the warranties under any deed or instrument transferring any of the Assets) of this Agreement shall not exceed $10,000,000.00. The provisions of this Paragraph 6.2 shall not limit in any manner the liability of Seller for any failure to close this transaction in accordance with this Agreement or for failure to perform its covenants and agreements under this Agreement which are to be performed after the Closing and which do not relate to matters occurring prior to the Closing or which arise from any breach of warranty or covenant under any deed or instrument transferring any of the Assets.     6.3  Seller's Knowledge Defined.  "Knowledge" as used in this Agreement with respect to the Seller shall mean actual current knowledge (as opposed to constructive or imputed knowledge) of the fact or matter in question by any officer of the Seller or by David Crooker, General Manager, Cascades Region; Gary Johnson, Cascade Unit Manager; or Blaine Powell, Superintendent Timberlands.     6.4  Materiality Defined.  "Material" or "materiality" or "materially" or "materially and adversely affect" as used in this Agreement with respect to Seller shall mean a claim, encumbrance or occurrence 9 -------------------------------------------------------------------------------- (including without limitation a breach of warranty or violation by Seller) that could lessen the value of the Assets by, or cause damages of, at least $150,000.00. 7.  Condition of Title and Title Insurance.     (a) As of the date of closing, title to the Timberlands and the Building is to be free of all encumbrances or defects except those listed in the preliminary commitment for title insurance deemed to be Permitted Exceptions as described below. Monetary encumbrances and any encumbrances arising after the date of this Agreement not caused by or approved in writing by Purchaser shall not be deemed to be Permitted Exceptions and shall be discharged by Seller and be paid from Seller's funds at closing. The following shall not be deemed encumbrances or defects and shall be deemed to be Permitted Exceptions: rights reserved in federal patents or state deeds, building or use restrictions consistent with current zoning, utility easements, other easements not inconsistent with Purchaser's intended use, and rights previously reserved for minerals, metals and ores of every kind and nature, and all oil, gas and other hydrocarbons, together with previously reserved rights of ingress and egress.     (b) At closing, Seller shall, at Seller's expense, cause the Transnation Title Insurance Company to furnish to Purchaser a standard form ALTA Owner's or Purchaser's Policy of Title Insurance (policy form 1970-B or other available form approved by Purchaser) in the amount of the Purchase Price for the Timberlands and the Building insuring the title to the Timberlands and the Building in Purchaser, subject only to the Permitted Exceptions and any liens or encumbrances suffered or incurred by Purchaser ("Title Policy"). Purchaser shall be entitled to obtain at closing, at Purchaser's cost, such special endorsements to the Title Policy as Purchaser may reasonably request.     (c) Seller has provided a copy of the preliminary commitments for title insurance for the Timberland and the Building, together with copies of the exception documents referenced therein. Purchaser shall have until close of business on February 23, 2001 to notify Seller of any objections Purchaser has to any matters shown or referred to in the title commitment. Any title encumbrances or exceptions that are set forth in the title commitment to which Purchaser does not object during the period specified, except the encumbrances that Seller is required to remove under Paragraph 7(a) above, shall be deemed to be permitted exceptions to the status of Seller's title (the "Permitted Exceptions"). With regard to items to which Purchaser does object within the period specified, Seller shall attempt to cure and remove such items prior to Closing. If Seller is unable or fails to cure or remove such items by March 16, 2001, Seller shall notify Purchaser thereof by March 16, 2001, and Purchaser may either waive its objection and proceed with closing, or terminate this Agreement by written notice to Seller no later than March 20, 2001. If Purchaser fails to give such notice to Seller within the time specified, the objection(s) shall be deemed waived by the Purchaser. If any supplements to any of the title commitments are issued after the date of this Agreement, Purchaser shall have until the later of (i) February 23, 2001, or (ii) five (5) business days after receipt of such supplement, to notify Seller of Purchaser's objection to any such matters shown therein, and if such notice is not given within such period, Purchaser shall be deemed to have accepted such matters, except the encumbrances that Seller is required to remove under Paragraph 7(a) above, as Permitted Exceptions. If Seller is unable or fails to cure or remove such items by the required date for Closing, Seller shall notify Purchaser thereof at least two (2) business days prior to such required date for Closing, and Purchaser may either waive its objection thereto and proceed with closing, or terminate this Agreement by written notice to Seller no later than the required date for Closing. 10 -------------------------------------------------------------------------------- 8.  Condition of Property; Subsequent Acts.     8.1  Limitation on Representations.  Purchaser agrees that neither Seller nor its agents, officers, employees or assigns shall be held to any covenant or representation respecting the condition of the Timberlands or any improvements thereon, or the Building, nor shall Purchaser or Seller or the assigns of either be held to any covenant or agreement for alterations, improvements or repairs unless the covenant, representation or agreement relied on is contained herein or is in writing and attached to and made a part of this Agreement.     8.2  Limitation of Warranties.  Except for the representations and warranties made in this Agreement or contained, expressly or impliedly, in the deeds or instruments transferring any of the Assets, Purchaser specifically acknowledges and agrees that (i) Seller does not make any representations or warranties of any kind whatsoever, either express or implied, with respect to the Timberlands or the Building; and (ii) the Timberlands and the Building are sold to Purchaser in an "AS IS" and "WITH ALL FAULTS" condition as of the Closing Date, including without limitation the stability of soils, suitability for any construction or development, encroachment or boundary questions, drainage, availability of utilities, zoning, quantity, quality, acreage, access and similar matters. Purchaser assumes the risk that adverse physical conditions may not have been revealed by its investigation. The limitations and "AS IS" provisions of this Paragraph 8.2 specifically do not apply to the express exceptions to the release granted to Seller in Paragraph 4.8 hereof.     9.  Liabilities Not Assumed.  Except for obligations under the Contracts and the Access Rights and Easements arising from and after Closing, and as otherwise expressly set forth in this Agreement, Purchaser shall not assume or be responsible for any liabilities of Seller. 10.  Contracts; Access Rights and Easements.     10.1  Contracts.  Not later than February 15, 2001, Seller shall provide to Purchaser Schedule 1.3 and true and correct copies of all Contracts (including all amendments thereto). Purchaser shall have until the earlier of five (5) business days from Purchaser's receipt of such Schedule 1.3 and Contracts or February 23, 2001, to notify Seller of any objections Purchaser may have to the assignment of any Contract or Contracts that are material. If Purchaser does not so notify Seller of its objection, Purchaser shall be deemed to have accepted the Contracts listed on Schedule 1.3. In the event Purchaser notifies Seller of its objection to any such material Contracts pursuant to this Paragraph 10.1, Seller and Purchaser covenant and agree that each shall use their commercially reasonable efforts to reach agreement with respect to a resolution of Purchaser's objections to such Contracts. Subject to the terms of this Paragraph 10.1, at Closing, Seller shall assign, to the extent assignable, and Purchaser shall assume the Contracts pursuant to an executed Assignment and Assumption Agreement in the form of Schedule 17.5(a)(iii) hereto. Subject to the provisions of Paragraph 19.5, Seller will use all reasonable efforts to obtain prior to closing any third party consents necessary for the assignment of the Contracts.     10.2  Access Rights and Easements.  At Closing, Seller shall assign, to the extent assignable, and Purchaser shall assume the Access Rights and Easements pursuant to executed blanket assignments in the form of Schedule 17.5(a)(v) hereto. Seller shall use reasonable efforts to provide copies of the Access Rights and Easements to Purchaser by February 15, 2001. Subject to the provisions of Paragraph 19.5, Seller will use all reasonable efforts to obtain prior to closing any third party consents necessary for the assignment of the Access Rights and Easements. 11.  Personal Property.     At Closing, Seller shall transfer all of Seller's right, title and interest to the Personal Property, free and clear of all liens and encumbrances, pursuant to a bill of sale in the form of Schedule 17(a)(ii) 11 -------------------------------------------------------------------------------- and/or other conveyancing documents (such as, with respect to certificated vehicles, appropriate DMV vehicle transfer of ownership documents) in form acceptable to the parties. 12.  Employees and Benefit Plans. 12.1  Termination and Rehiring of Employees.     (a) Purchaser may elect to extend offers of employment to none, any or all of the employees presently employed in relation to Seller's Southwest Washington operations all of whom are listed on Schedule 12.1(a) (the "Employees"). With respect to such employees who accept any such offers of employment and are hired by Purchaser (the "Transitioning Employees), on and as of the Closing Date, Seller will take all action necessary to terminate Transitioning Employees and shall pay such employees all accrued employment related financial obligations due to them through the close of business on the Closing Date except as otherwise provided in this Paragraph 12. Purchaser may submit employment applications to the Employees any time after mutual execution of this Agreement. Seller and Purchaser may jointly conduct drug testing of the Employees no sooner than five (5) days prior to Closing; provided that such drug testing shall not unreasonably interfere with Seller's business operations. Seller and Purchaser shall each receive the results of any such drug testing. Purchaser may extend written offers of employment to any or all Employees conditioned upon reasonable satisfaction of such drug testing procedure. Purchaser shall not be obligated to hire any Employees whether or not they fail to reasonably satisfy such drug testing procedure. Each such offer of employment by Purchaser to Employees shall (i) be effective subject to and as of the Closing; (ii) be at a salary or hourly wage rate, as applicable, that is at least equal to the salary or hourly wage rate of similarly situated employees of Purchaser; (iii) provide for employee benefits that are equivalent to the employee benefits of similarly situated employees of Purchaser; (iv) be for a position that is substantially similar to such Employee's present position with Seller; and (v) be for a position in the general vicinity of the Timberlands. Any Employees who do not accept such offers of employment or who may accept employment with Seller are referred to herein as the "Nontransitioning Employees."     (b) Effective from and after the first day after Closing, Purchaser shall be solely responsible for any and all liabilities in respect to the Transitioning Employees relating to such Transitioning Employee's employment with Purchaser after the Closing, including, without limitation, any and all such liabilities relating to the claims of any such Transitioning Employees for any severance compensation or benefits. Except as set forth in this Paragraph 12, Seller shall remain solely responsible for any and all liabilities with respect to Employees relating to their employment with Seller prior to Closing, including, without limitation, any and all such liabilities relating to the claims of Employees for benefits. Purchaser agrees that in the event Purchaser terminates any Transitioning Employee without cause within twelve (12) months from Closing, Purchaser shall pay to such Transitioning Employee the amount payable to such Transitioning Employee pursuant to Seller's "Special Severance Plan for Southwest Washington Salaried Employees," a copy of which is attached hereto as Schedule 12.1(b). Provided, that if such a Transitioning Employee is reemployed by Seller within twelve (12) months after Closing, Seller shall reimburse Purchaser for the severance payment. Provided further, that Purchaser does not assume any liability under any other severance plan of Seller, and that except as set forth in this paragraph Purchaser may offer Transitioning Employees whatever severance benefits, if any, it wishes.     (c) With respect to any Employees to whom Purchaser does not make an offer of employment in accordance with the requirements of Paragraph 12.1(a) and who are not offered employment by Seller (the "Terminated Employees"), Purchaser shall be responsible to reimburse Seller for any and all benefits payable to such Terminated Employees, if any, pursuant to Seller's "Special Severance Plan for Southwest Washington Salaried Employees," a copy of which is attached hereto as Schedule 12.1(b). Provided, that if such a Terminated Employee is reemployed 12 -------------------------------------------------------------------------------- by Seller within twelve (12) months after Closing, Seller shall reimburse Purchaser for the severance payment. Provided further, that Purchaser does not assume any liability under any other severance plan of Seller.     (d) Any and all liabilities for accrued but unpaid vacation days for services rendered by any Employee prior to Closing shall be borne by Seller. Each Transitioning Employee will be credited with his or her years of employment service with Seller for purposes of determining the number of vacation days available to him or her as an employee of Purchaser.     (e) From and after the Closing, Seller shall remain solely responsible for any and all liabilities with respect to the Nontransitioning Employees and Terminated Employees for all claims arising (whether such claims are made on or after Closing) on or before the Closing, including but not limited to liabilities arising under the Worker Adjustment and Retraining Notification Act of 1990 or COBRA.     12.2  Employee ERISA and 401 Plans Generally.  Effective as of the first day after the Closing Date, Purchaser shall amend any existing plan established pursuant to the Employee Retirement Income Security Act of 1974 or Section 401 of the Internal Revenue Code, defined contribution plans and "401-k" plans, to provide for (i) the immediate participation of the Transitioning Employees in each such plan on the same basis as Purchaser's similarly situated employees then eligible to participate; and (ii) to the extent permissible under applicable law and within the control of Purchaser, the recognition under each such plan of all service of the Transitioning Employees with Seller completed prior to and as of the Closing Date, for purposes of eligibility to participate and vesting. Purchaser shall accept rollovers to its plans by Transitioning Employees to the same extent as allowed for Purchaser's other employees.     12.3  Welfare Plans.  Subject to approval by applicable insurers, effective from and after the first day after the Closing Date, Purchaser shall cause each Transitioning Employee and his or her eligible dependents to become eligible to participate immediately in each employee welfare benefit plan (as such term is defined in Section 3(1) of the Employee Retirement Income Security Act of 1974) maintained, as of the Closing Date, by Purchaser and each other benefit arrangement maintained by Purchaser for the benefit of similarly situated employees of Purchaser ("Welfare Plans"). Subject to approval by applicable insurers, Purchaser shall cause each Welfare Plan to (i) recognize the 2001 co-payments and deductible expenses of the Transitioning Employees and their eligible dependents incurred under those plans that are health benefit plans; and (ii) waive all pre-existing condition exclusions and limitations of the Transitioning Employees and their eligible dependents. From and after the Closing, Seller shall remain solely responsible for liabilities for claims of the Transitioning Employees and their eligible dependents incurred prior to the Closing Date under those plans that are health, disability, accident or life insurance plans and Purchaser shall be solely responsible for all such liabilities for claims incurred by any Transitioning Employee and his or her eligible dependents after the Closing Date. For the purposes of this Paragraph 12.3, a claim for health benefits shall be deemed to have been incurred when the services that are the subject of such claim are rendered and a claim for disability, accident or life insurance shall be deemed to have been incurred when the last event giving rise to such claim occurs. Purchaser and Seller shall cooperate in ensuring that welfare benefit coverage for Transitioning Employees and their eligible dependents on and prior to the Closing is coordinated with such coverage provided after the Closing.     12.4  Worker's Compensation.  From and after the Closing, (i) Seller shall remain solely responsible for all worker's compensation claims of any Transitioning Employee, Nontransitioning Employee or Terminated Employee that relate to any accident or injury that occurred prior to the Closing, regardless of whether such claim is filed by such employee before or after the Closing and (ii) Purchaser shall assume and become solely responsible for all other worker's compensation claims of any Transitioning Employee. 13 -------------------------------------------------------------------------------- 13.  Access to Information.     Upon full execution hereof, Seller will permit Purchaser to have reasonable access to the Superintendent Timberlands and to the Personal Property, whether located in the Building or in Seller's Seattle office, provided, however, that any such access must be coordinated through Dave Crooker in Seller's Seattle office. Seller shall provide Purchaser with access to all other materials reasonably requested by Purchaser. Purchaser and its employees, agents and consultants shall have the right, at Purchaser's sole cost and expense, to enter onto the Timberlands and the Building prior to Closing to conduct such inspections of the Assets, document reviews, interviews with Seller's employees, and tests as Purchaser deems reasonable; provided, however, that such access must be coordinated through Dave Crooker in Seller's Seattle office. 14.  Hart-Scott-Rodino Filing.     As soon as practicable following execution of this Agreement, but in no event later than two weeks following execution of this Agreement, Purchaser and Seller shall make appropriate filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and shall seek expedited review by the examining agency. Seller and Purchaser shall expeditiously attempt to resolve any issues that may arise in connection therewith, including but not limited to whether any exemption applies to the transaction contemplated by this Agreement under the HSR Act or regulations promulgated thereunder. The Closing Date as provided in Paragraph 3 shall be extended, if necessary, by not more than ten (10) days after all applicable waiting periods or extensions under the HSR Act shall have expired without any indication by the Department of Justice or the Federal Trade Commission that either of them intends to challenge the sale contemplated hereby. If all such waiting periods shall not have expired on or before June 30, 2001, then either party shall be entitled to terminate this Agreement without any further liability to the other. Each party shall pay its requisite filing fee, if any, for the HSR Act filings, and all costs and expenses relating to such party's compliance with the terms of this paragraph. 15.  Confidentiality; Public Announcements; Return of Information.     Subject to the provisions of Paragraph 15.3 below:     15.1  Neither Seller nor Purchaser shall disclose the content or substance of this Agreement to any individual, firm, partnership, corporation, entity, governmental authority, or other party except advisors, agents, lenders and representatives assisting each respective party in connection with this transaction, and except government agencies and other third parties to whom notice must be given or from whom consent must be obtained in order to complete the transactions described herein, until such disclosure is agreed upon in writing and then only to accomplish the consents and approvals required hereunder.     15.2  No press releases or other public statements concerning this Agreement or the transactions contemplated hereby shall be made by either party without the prior written approval of the other, provided such approval shall not be unreasonably withheld or delayed; provided further that the parties shall cooperate in good faith with respect to issuing a joint press release at or prior to Closing. Seller acknowledges that this transaction constitutes a "material transaction" for Purchaser with respect to disclosure requirements and Purchaser's press release will include disclosure of the Purchase Price.     15.3  Each party hereto, its representatives, agents and employees shall hold in strict confidence and shall not use or disclose to any person or organization any information or data concerning this Agreement or the transaction contemplated hereby except to the extent that (i) said information has been published or constitutes a matter of public knowledge or record; (ii) such disclosure is reasonably necessary for communications with and reporting to the Board of Directors or other governing body of either party or reasonably appears to be required by a governmental agency having jurisdiction over the 14 -------------------------------------------------------------------------------- parties; (iii) such information is necessary in connection with any suit brought to enforce the obligations of any party hereunder; or (iv) if based upon the legal opinion of counsel for the disclosing party, that such counsel reasonably believes that disclosure is necessary or desirable to avoid conflict with or violation of any applicable law, rule, or regulation.     15.4  In the event of termination of this Agreement for whatever reason, Purchaser will return all originals and copies of documents, work papers and other material obtained hereunder, whether obtained before or after the execution hereof (subject to retention of true copies for litigation purposes as applicable), and Purchaser agrees that it will not disclose or divulge any such information to any other person without Seller's written consent, and will use its best efforts to keep any information so obtained confidential; provided, however, that (i) Purchaser may disclose this information to its employees, attorneys, accountants and prospective lenders who need to know such information in connection with this transaction and who have been informed of Purchaser's obligation to maintain the information as confidential; and (ii) Purchaser shall not be obligated to treat as confidential any information which was known to it at the time of disclosure or which becomes publicly known or available thereafter or is rightfully received by Purchaser from a third party. 16.  Exchange.     Seller may wish to complete this transaction as part of a Section 1031 tax-deferred exchange. Purchaser agrees to cooperate with Seller in documenting and completing such exchange by agreeing that Seller may transfer Seller's rights and obligations under this Agreement to Seller's Qualified Intermediary, in Seller's sole discretion, provided that such assignment, if made, shall not release Seller from its obligations under this Agreement. Purchaser agrees to accept Seller's Qualified Intermediary as the assigned Seller of the Property described in this Agreement. Purchaser shall incur no additional expense or liability by such cooperation. Purchaser may wish to complete this transaction (or portion thereof) as part of a Section 1031 tax-deferred exchange. Seller agrees to cooperate with Purchaser in documenting and completing such exchange by agreeing that Purchaser may transfer all or any portion of Purchaser's rights and obligations under this Agreement to Purchaser's Qualified Intermediary or Exchange Accommodation Titleholder (as defined in Rev. Proc. 2000-37), in Purchaser's sole discretion, provided that such assignment, if made, shall not release Purchaser from its obligations under this Agreement. Seller agrees to accept Purchaser's Qualified Intermediary or Exchange Accommodation Titleholder as the assigned Purchaser of the Property described in this Agreement. Seller shall incur no additional expense or liability by such cooperation. 17.  Closing.     17.1  Conditions to Purchaser's Obligations.  The obligations of Purchaser to perform this Agreement are subject to the satisfaction, in all material respects on or before the Closing Date or the date indicated for any such contingency listed below (whichever is earlier), of each of the following conditions and any other conditions to Purchaser's obligations hereunder specified elsewhere in this Agreement, unless waived in writing by Purchaser in its sole discretion:     (a) Material Inaccuracies.  Seller's representations and warranties shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date and Seller shall deliver a certificate to that effect at Closing.     (b) Performance of Obligations.  Seller shall have performed all obligations required to be performed by it prior to or on the Closing Date under this Agreement.     (c) Title Insurance Commitment.  At Seller's expense, Purchaser shall have received a binding commitment from Transnation Title Insurance Company for the issuance of the Title Policy, and any special endorsements thereto reasonably required by Purchaser (which special endorsements shall be at Purchaser's expense), subject only to the Permitted Exceptions. 15 --------------------------------------------------------------------------------     (d) Suits, Actions or Proceedings.  No suit, action, arbitration or other proceeding shall be pending before any court or governmental agency, which may result in the restraint or prohibition of the consummation of the transactions contemplated by this Agreement, or which could reasonably be expected to have a material adverse effect on the value of the Assets or the use of the Timberlands as commercial timberlands, and all governmental and regulatory approvals and clearances which are required to consummate such transactions shall have been obtained, including without limitation any required under the HSR Act. None of the Contracts which could have a material adverse affect on the value of the Timberlands or Building shall have been terminated or subject to material amendment or default.     (e) Casualty, Loss or Condemnation.  The Timberlands or the Building shall not have become subject, subsequent to the date of this Agreement and prior to the Closing Date, to physical damage by fire, flood, windstorm, earthquake or other similar occurrence, or to any condemnation proceeding, which causes or may result in a diminution in the value of the Timberlands or the Building, collectively, by at least $5,000,000.00. If Purchaser elects to waive the condition set forth in this Paragraph 17.1(e), or if any material casualty or condemnation loss diminishes the value of the Timberlands or the Building, collectively, by less than $5,000,000.00, the Purchase Price shall be reduced to reflect the diminution in value resulting or expected to result from the casualty or condemnation, in which event Seller shall be entitled to retain any compensation awards, insurance proceeds or other payment or relief resulting from such casualty or condemnation. If the parties cannot agree upon the extent of the diminution in value, the determination shall be made by an independent expert mutually agreed upon by the parties. The foregoing notwithstanding, if the amount of the casualty or condemnation loss diminishes or is expected to diminish the value of the Timberlands or the Building, collectively, by $200,000.00 or less, there shall be no adjustment to the Purchase Price; provided, however, that in such event Purchaser shall be entitled to receipt and assignment of any compensation awards, insurance proceeds or other payment or relief resulting from such casualty or condemnation.     (f)  Board Approval.  The Board of Directors of Purchaser shall have approved Purchaser's execution, delivery and performance of this Agreement by not later than February 23, 2001. In the event Purchaser fails to give notice to Seller of its inability to obtain board approval by February 23, 2001, Purchaser shall be deemed to have waived this condition to closing.     (g) Financing.  Purchaser shall have obtained on or before February 23, 2001, a binding commitment for financing in form and substance and upon such terms as are satisfactory to Purchaser. In the event Purchaser fails to give notice to Seller of its inability to obtain a binding commitment for financing by February 23, 2001, Purchaser shall be deemed to have waived this condition to closing.     (h) Environmental Review.  Purchaser may, at Purchaser's sole cost and expense, conduct an environmental review of the Timberlands and the Building to be completed not later than February 23, 2001. Purchaser's obligations to consummate the transactions described herein are subject to and conditioned upon Purchaser's acceptance of the findings of such environmental review. In the event Purchaser fails to give notice to Seller of Purchaser's nonacceptance of its environmental review by February 23, 2001, Purchaser shall be deemed to have waived this condition to closing.     (i)  Removal of Timberlands from NFHCP.  The Timberlands shall have been removed from the Native Fish Habitat Conservation Plan ("NFHCP") and Purchaser shall have received from a responsible officer of Seller a written certification warranting that the Timberlands are not subject to the terms, restrictions or conditions of the NFHCP or any permits or implementation plan issued with respect thereto. 16 --------------------------------------------------------------------------------     In the event any of the above conditions to Purchaser's obligations hereunder are not satisfied or waived by Closing or the earlier dates indicated above, Purchaser will have the right, exercisable at Purchaser's sole election, to terminate this Agreement, whereupon the Earnest Money will be refunded to Purchaser and no party hereto will have any further rights, duties or obligations hereunder other than those which expressly survive a termination hereof.     17.2.  Conditions to Seller's Obligations.  The obligations of Seller to perform this Agreement are subject to the satisfaction, in all material respects on or before the Closing Date, of each of the following conditions and any other conditions to Seller's obligations hereunder specified elsewhere in this Agreement, unless waived in writing by Seller in its sole discretion:     (a) Material Inaccuracies.  Purchaser's representations and warranties shall be true and correct in all material respects on and as of the Closing Date and Purchaser shall have delivered a certificate to that effect at Closing.     (b) Performance of Obligations.  Purchaser shall have performed all obligations required to be performed by it prior to or on the Closing Date under this Agreement.     (c) Suits, Actions or Proceedings.  No suit, action, arbitration or other proceedings shall be pending before any court or governmental agency which may result in the restraint or prohibition of the consummation of the transactions contemplated by this Agreement, and all governmental and regulatory approvals and clearances which are required to consummate such transactions shall have been received, including without limitation any required under the HSR Act.     In the event any of the above conditions to Seller's obligations hereunder are not satisfied or waived by Closing, Seller will have the right, exercisable at Seller's sole election, to terminate this Agreement, whereupon the Earnest Money will be refunded to Purchaser and no party hereto will have any further rights, duties or obligations hereunder other than those which expressly survive a termination hereof.     17.3  Prorations.  All personal property taxes, real property taxes, forest patrol assessments, rents, water and other utilities constituting liens shall be prorated to the Closing Date. 17.4  Closing Costs.     (a) At Closing Seller shall pay the following costs and expenses associated with the closing of the transactions contemplated hereunder:     (i)  The cost of the standard owner's policy or policies of title insurance;     (ii) One-half of escrow fees;     (iii) All transfer, excise, and recording taxes or fees due on the transfer or conveyance of the Assets, including without limitation real estate excise tax on the conveyance of the Timberlands and the Building, and sales/use tax on the transfer of the Personal Property, if any; and     (iv) Seller's attorneys fees.     (v) Any and all compensating or "roll-back" taxes that may become due or assessable as a result of the removal of the Timberlands or any portion thereof from its present property tax classification or designation as "timberlands" or "forestland" prior to Closing or as a result of the inability of Purchaser to obtain a requested continuance of such classification or designation at Closing based upon any prior act or omission of Seller.     (b) Purchaser shall pay:     (i)  One-half of the escrow fees; 17 --------------------------------------------------------------------------------     (ii) Title insurance premium attributable to extended coverage, if any, or any endorsements;     (iii) Recording fees for deeds; and     (iv) Purchaser's attorneys fees.     (v) Any and all compensating or "roll-back" taxes that may become due or assessable as a result of the removal of the Timberlands or any portion thereof from its present property tax classification or designation as "timberlands" or "forestland" as of or after Closing, unless caused by action or failure to act on the part of Seller.     Except as otherwise provided in this Agreement, each party shall be responsible for the payment of costs incurred by said party in connection with the transaction contemplated by this Agreement. 17.5  Closing. At Closing:     (a) Seller shall deliver to Purchaser the following:     (i)  Special Warranty Deeds for each County in which the Timberlands and Building are located in the form attached as Schedule 17.5(a)(i).     (ii) Bill of Sale for the Personal Property, in substantially the form attached hereto as Schedule 17.5(a)(ii), and other transfer documents in form acceptable to the parties appropriate to transfer the Personal Property, including DMV title transfer documents for any certificated vehicles;     (iii) Assignment and Assumption Agreement for the Contracts, in substantially the form attached hereto as Schedule 17.5(a)(iii);     (iv) Nonforeign Affidavit to the effect that Seller is not a foreign person as that term is used in Section 1445 of the Internal Revenue Code;     (v) An Assignment and Assumption Agreement for the Access Rights and Easements to be recorded in each county in which such Access Rights and Easements are located, in substantially the form attached hereto as Schedule 17.5(a)(v);     (vi) A prepaid binding commitment for a standard coverage Policy of Title Insurance; and     (vii) An Officer's Certificate regarding representations and warranties.     (b) Purchaser shall deliver to Seller the following:     (i)  Executed copies of the Assignment and Assumption Agreements described above;     (ii) An Officer's Certificate regarding representations and warranties; and     (iii) The Purchase Price.     At least five (5) business days prior to Closing, Seller and Purchaser shall complete and sign appropriate Real Estate Excise Tax Affidavits with respect to the conveyance of the Timberlands in which Purchaser covenants that it will request continuance of the present "timberlands" or "forestland" property tax classification of the Timberlands, and Purchaser may then, prior to Closing, submit such Real Estate Excise Tax Affidavits to the respective County Assessors to obtain approval of the continuance request.     At Closing Seller and Purchaser shall sign and deliver into escrow notices to the State Department of Natural Resources ("DNR"), on DNR approved forms, wherein notice is given by Seller to the DNR 18 -------------------------------------------------------------------------------- of the assignment to Purchaser of all approved Forest Practices Applications to be assigned to Purchaser under this Agreement, and Purchaser affirms, as the new landowner, timber owner and operator, that it agrees to be bound by all conditions on such approved Forest Practices Applications. Upon Closing, such notices shall be transmitted to the DNR. 18.  Indemnification.     Seller shall defend and indemnify Purchaser and hold it harmless from any claim, damage, liability, loss, cost, deficiency, judgment or expense (reference to "expense" shall include, without limitation, reasonable attorneys' fees and other costs and expenses incident to any actions, suits, proceedings or investigations or the defense of any claims, whether prior to or at trial or in appellate proceedings) (i) arising out of, resulting from or relating to claims by third parties arising out of any acts or omissions of Seller prior to Closing or any injuries, accidents, occurrences, activities or events occurring on the Timberlands or the Building prior to Closing, and (ii) for obligations or liabilities arising or accruing with respect to the Assets prior to the Date of Closing. Purchaser shall defend and indemnify Seller and hold it harmless from any claim, damage, liability, loss, cost, deficiency, judgment or expense (reference to "expense" shall include, without limitation, reasonable attorneys' fees and other costs and expenses incident to any actions, suits, proceedings or investigations or the defense of any claims, whether prior to or at trial or in appellate proceedings) (i) arising out of, resulting from or relating to claims by third parties arising out of any acts or omissions of Purchaser for activities conducted by Purchaser or its employees, agents or contractors inspecting the Timberlands or the Building prior to Closing or any injuries, accidents, occurrences, activities or events occurring on the Timberlands or the Building after Closing (except to the extent caused by Seller or its agents, contractors or employees), and (ii) for obligations or liabilities arising or accruing with respect to the Assets after the Date of Closing. Purchaser's and Seller's respective defense and indemnity obligations under this Paragraph 18 shall survive Closing. 19.  Closing and Post-Closing Adjustments and Post-Closing Matters.     19.1  Performance Deposits.  The performance deposits, as identified and set forth on Schedule 19.1 ("Deposits"),are or may with the passage of time or otherwise become refundable to the contractor or permittee shown on such Schedule 19.1. At Closing, Purchaser shall receive a credit against the Purchase Price in the amount of such Deposits. If any Deposits are returned at or prior to Closing, Seller shall notify Purchaser and the amount thereof shall reduce the amount of the credit Purchaser is to receive for the Deposits. Purchaser agrees to refund the Deposits as may be appropriate to the contractor or permittee upon termination or completion of the corresponding contract or permit. Purchaser shall defend and indemnify Seller and hold it harmless from any claim, damage, liability, loss, cost, deficiency, judgment or expense (reference to "expense" shall include, without limitation, reasonable attorneys' fees and other costs and expenses incident to any actions, suits, proceedings or investigations or the defense of any claims, whether prior to or at trial or in appellate proceedings) arising out of, resulting from or relating to claims by third parties relating to Purchaser's failure to return the Deposits for which Purchaser has received a credit at Closing, as may be required pursuant to the corresponding contract or permit identified on Schedule 19.1.     19.2  Reforestation Obligations.  Seller anticipates that, barring inclement weather, it will complete any and all statutory reforestation obligations it may have with respect to the Timberlands prior to Closing. In the event Seller is unable to complete such reforestation obligations prior to Closing, Purchaser shall manage such incomplete reforestation contracts on behalf of Seller until such contracts are complete; provided, however, that Seller shall remain responsible for any financial obligations under such contracts, and shall defend, indemnify and hold Purchaser harmless from and against any claim, expense, or loss arising therefrom. The indemnity contained in this Paragraph 19.2 shall survive Closing. 19 -------------------------------------------------------------------------------- 19.3  Cost-Share Balances.     (a) Earned Balances.  Seller shall reasonably determine the net amounts then owing by it to the U.S. Forest Service ("USFS") and other third parties, if any, pursuant to earned outstanding balances under cost-share or other USFS access or transportation programs for road construction and maintenance work previously performed to benefit or provide access to, upon or across the Timberlands ("Cost-Share Balances") as of the Closing Date. Seller shall attempt to settle all accounts with the USFS prior to closing with respect to Cost Share Balances. In any event, Seller shall remain responsible for any amounts then owing to the USFS or other third parties for such Cost-Share Balances, and shall be entitled to collect from the owing party all amounts owing to Seller by the USFS or other third parties with respect to such Cost-Share Balances. Purchaser shall have no rights in or liability for the Cost-Share Balances in effect as of the Closing Date, and Seller shall defend, indemnify and hold Purchaser harmless from any claim, expense or loss related to the Cost-Share Balances, which defense and indemnification obligation shall survive Closing.     (b) Commitments for Future Work.  Pursuant to the terms of Road Rights-of-Way Construction and Use Agreements between Seller and the USFS, listed on Schedule 19.3(b), said agreements being included in the Contracts, there are certain road construction or reconstruction projects committed to but not yet completed and/or accepted. Purchaser shall assume all such commitments arising or accruing for the period from and after Closing and shall be responsible for any payments to the USFS for such work performed by the USFS from and after Closing and Purchaser shall be entitled to receive payments from the USFS for any such work performed by Purchaser.     19.4  Deferred Maintenance.  At Closing, the performance of all deferred road construction and maintenance obligations owing by Seller to the USFS or other third parties with respect to the Timberlands as of Closing, ("Deferred Maintenance") shall become the responsibility of Purchaser to perform. Purchaser shall indemnify Seller and hold it harmless from any claim, damage, liability, loss, cost, deficiency, judgment or expense (reference to "expense" shall include, without limitation, reasonable attorneys' fees and other costs and expenses incident to any fines or penalties imposed by the USFS, actions, suits, proceedings or investigations or the defense of any claims, whether prior to or at trial or in appellate proceedings), arising out of, resulting from or relating to Purchaser's failure to perform the post-closing Deferred Maintenance obligations. Notwithstanding the foregoing, any Deferred Maintenance that is required to be completed prior to Closing, shall be Seller's obligation, and Seller shall defend, indemnify and hold Purchaser harmless from and against any claim, expense, or loss arising therefrom. The indemnity contained in this Paragraph 19.4 shall survive closin1g.     19.5  Third Party Consents.  Notwithstanding anything to the contrary in this Agreement, the Contracts and Access Rights and Easements identified on Schedule 19.5 require the consent or approval of a third party, and if such consent is not obtained prior to Closing, such Contracts and Access Rights and Easements for which required consent has not been obtained shall be assigned to Purchaser at Closing on the following basis, terms and conditions: (1) Seller shall assign such Contracts or Access Rights and Easements subject to and effective only at such time as such consent is obtained; (2) Seller shall continue to use reasonable and diligent efforts, at its cost and expense, to obtain any such consent or approval after the Closing Date; (3) until such time as such consent has been obtained, Seller will cooperate in all reasonable respects with the Purchaser in any lawful and economically feasible arrangement to provide that the Purchaser shall receive the interest of the Seller in the benefits under any such Contracts or Access Rights and Easements (except that any such arrangement shall not require performance by Seller as agent) provided that the Purchaser shall undertake to and shall pay or satisfy the corresponding liabilities for the enjoyment of such benefit to the extent Purchaser would have been responsible therefor if such consent or approval had been obtained; and (4) Purchaser shall have no obligations or liabilities under or with respect to such Contracts or Access Rights and Easements until the earlier of (i) the date such consent is obtained and (ii) the date that 21 -------------------------------------------------------------------------------- Purchaser receives the benefits thereunder, and then only for obligations or liabilities arising thereunder or with respect thereto after such date. If this transaction closes on the foregoing basis, the Assignment and Assumption Agreement pertaining to any such Contract or Access Rights and Easements where such required consent has not been obtained as of Closing, shall contain appropriate provisions consistent with the provisions of this Paragraph 19.5. 20.  Miscellaneous.     20.1  Further Assurances.  If, at any time after the Closing Date, either party shall consider or be advised that any further instruments or assurance or any other things are necessary or desirable to carry out the terms of this Agreement, the other party shall execute and deliver all such instruments and assurances and do all things reasonably necessary and proper to carry out the terms of this Agreement.     20.2  Integration.  This Agreement and the documents delivered pursuant hereto contain the entire agreement among the parties with respect to the subject matter hereof and supersede all prior negotiations. None of the parties shall be bound by nor shall be deemed to have made any representations, warranties or commitments except those required to be made by the terms of this Agreement, or those which are contained herein or in the documents delivered pursuant hereto.     20.3  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original instrument, and all such counterparts together shall constitute one Agreement.     20.4  Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any term or provision of this Agreement is so broad as to be invalid or unenforceable, the provision shall be interpreted to be only so broad as is valid or enforceable. Subject to the foregoing provisions of this Paragraph 20.4, if any term or provision of this Agreement is invalid or unenforceable for any reason, such circumstances shall not have the effect of rendering such term or provision invalid or unenforceable in any other case or circumstance.     20.5  Successor and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.     20.6  Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Washington.     20.7  Assignment.  Except as expressly permitted pursuant to Paragraph 16, neither party may assign its rights hereunder prior to the Closing without the prior written consent of the other, which may be withheld for any reason.     20.8  Captions and Paragraph Headings.  The headings used in this Agreement are for convenience only and shall not affect the construction of any of the terms of this Agreement.     20.9  Notices.  Notices under this Agreement shall be in writing and shall be effective when actually delivered or, if mailed, on the earlier of receipt (or refusal of receipt) or three (3) business days after being deposited, postage prepaid, in the United States' mails as certified mail, return receipt requested, directed to the other party at the address set forth below, or, if sent via facsimile transmission, on the date such facsimile transmission to the facsimile number of the other party set forth below is confirmed by machine-printed confirmation of the sender's facsimile machine. The 22 -------------------------------------------------------------------------------- address or facsimile numbers for notices to a party hereunder may be changed by such party by written notice to the other party. If to Seller:   Plum Creek Timberlands, L.P. 999 Third Avenue, Suite 2300 Seattle, WA 98104 Attention: James A. Kraft, Vice President, General Counsel and Secretary Facsimile: (206) 467-3799 If to Purchaser:   Pope Resources, L.P. 19245 Tenth Avenue Northeast Poulsbo, WA 98370-0239 Attn: Allen E. Symington, Chairman and CEO Facsimile: (360) 697-5932 With a Copy to:   Warren Koons, Esq. Davis Wright Tremaine LLP 10500 N.E. 8th Street, Suite 1800 Bellevue, Washington 98004 Facsimile: (425) 646-6199     20.10  Time is of the Essence.  Time is of the essence of this Agreement.     20.12.  Default.  If either party defaults (that is, fails to perform the acts required of it) in its contractual performance herein, the non-defaulting party, subject to the following paragraph, shall be entitled to exercise all rights and remedies available to it at law or equity, including but not limited to specific performance pursuant to the terms of this Agreement, damages or rescission. If the non-defaulting party seeking damages or rescission is the Purchaser, the Earnest Money, together with any interest thereon, shall be refunded.     Purchaser acknowledges that if Purchaser fails to purchase the Assets so as to constitute a default by Purchaser hereunder, for any reason other than the breach of Seller, Seller shall be entitled to forfeit the Earnest Money as compensation for the detriment resulting from the removal of the Property from the market, and entering into this Agreement rather than selling to other potential purchasers. Therefore, in the event of Purchaser's failure to purchase the Assets so as to constitute Purchaser's default hereunder, Seller shall have, as Seller's sole and exclusive remedy, the right to receive the Earnest Money, together with any interest thereon, which sum shall represent liquidated damages for breach and not a penalty therefor. The parties acknowledge and agree that the Earnest Money is presently a reasonable estimate of Seller's damages, considering all of the circumstances existing on the date of this Agreement, including the relationship of the sum to the range of harm to Seller that reasonably could be anticipated and the expectation that proof of actual damages would be impractical or extremely difficult. Factors taken into consideration by the parties include Seller's loss of opportunity during the pendency of this Agreement to sell the Assets to others on better terms, or at a higher price; Seller's risk of loss of a bargain if the market turns negative; Seller's damages related to its continuing obligations for the payment of taxes and insurance; and Seller's loss of earnings on the amount of the purchase price resulting from a delay in closing. Purchaser hereby waives all rights or benefits of any law, rule or regulation, now or hereafter existing, which would allow Purchaser, following Purchaser's failure to purchase the Assets so as to constitute Purchaser's default, to claim a refund of the Earnest Money, together with any interest thereon, as unearned earnest money, a penalty or for any other purpose. Seller hereby waives all rights, remedies and claims, other than forfeiture of the Earnest Money, that Seller may otherwise have for Purchaser's failure to purchase the Assets so as to constitute a default by Purchaser under this Agreement. 23 --------------------------------------------------------------------------------     20.13  Schedules Incorporated.  The schedules attached to this Agreement are incorporated herein by reference: Schedule --------------------------------------------------------------------------------   Description -------------------------------------------------------------------------------- 1.3   Contracts 1.4   Access Rights and Easements 1.5   Personal Property 1.6   Excluded Assets 4.5   Exceptions to No Violations or Conflicts 4.6   Exceptions to No Defaults 4.8   Environmental Matters 4.9   Listing of Suits, Actions, Proceedings 4.11   Compliance 4.14   Unrecorded Encumbrances 4.16   ESA 4.18   Timber Harvest Operations 5.2   Exception to Authorization, No Violationor Conflicts 12.1(a)   List of Employees 12.1(b)   Special Severance Plan for Kelso, Washington Salaried Employees 17.5(a)(i)   Form of Special Warranty Deed for Washington 17.5(a)(ii)   Bill of Sale 17.5(a)(iii)   Assignment and Assumption Agreement for Contracts, Leases and Permits 17.5(a)(v)   Assignment of Access Rights and Assumption Agreement 19.1   Deposits 19.3(b)   Road Rights-of-Way Construction and Use Agreements 19.5   Third Party Consents     20.14  Costs and Expenses.  Except as otherwise expressly provided in this Agreement, each party to this Agreement shall pay its own costs and expenses (including, without limitation, the fees and expenses of its agents, representatives, counsel and accountants) incurred in connection with the closing of the transactions contemplated under this Agreement.     20.15  Attorneys Fees and Other Costs.  If either party initiates any proceeding in law, equity or arbitration concerning this Agreement or any of its provisions, the party that substantially prevails in such proceeding shall be paid by the party not so prevailing therein all costs and expenses incurred in such proceeding, including reasonable attorneys' fees at the pretrial, trial and appellate levels as determined by the court or courts considering the matter.     20.16  No Third Party Beneficiaries.  This Agreement is made and entered into for the sole protection and legal benefit of the parties and, subject to the restrictions on assignment set forth herein, their respective successors and assigns, and no other person or entity shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement. 24 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this instrument the day and year first above written. PLUM CREEK TIMBERLANDS, L.P. By Plum Creek Timber I, L.L.C., Its General Partner   Attest: By: --------------------------------------------------------------------------------   By: --------------------------------------------------------------------------------   Rick R. Holley, President and Chief Executive Officer     Sheri L. Ward, Assistant Secretary PLUM CREEK MARKETING, INC. By: --------------------------------------------------------------------------------   By: --------------------------------------------------------------------------------   Rick R. Holley, President and Chief Executive Officer     Sheri L. Ward, Assistant Secretary POPE RESOURCES, A Delaware Limited Partnership By: -------------------------------------------------------------------------------- Allen E. Symington Chairman and CEO       25 --------------------------------------------------------------------------------

Page 237 Exhibit 10(i)A(6) PERFORMANCE UNDERTAKING This Performance Undertaking (this "Undertaking"), dated as of May 2, 2001, is executed by National Service Industries, Inc., a Delaware corporation (the "Performance Guarantor") in favor of NSI Funding, Inc., a Delaware corporation (together with its successors and assigns, "Recipient"). RECITALS 1. NSI Enterprises, Inc., a California corporation ("NSI Enterprises"), and National Service Industries, Inc., a Georgia corporation ("NSI Georgia" and, together with NSI Enterprises, the "Originators") are parties to a Receivables Sale Agreement, dated as of May 2, 2001 (as amended, restated or otherwise modified from time to time, the "First-Step Sale Agreement"), pursuant to which NSI Enterprises, subject to the terms and conditions contained therein, plans to sell its right, title and interest in its accounts receivable and certain related assets to NSI Georgia. 2. NSI Georgia and Recipient are parties to a Receivables Sale and Contribution Agreement, dated as of May 2, 2001 (as amended, restated or otherwise modified from time to time, the "Sale and Contribution Agreement" and, together with the First-Step Sale Agreement, the "Sale Agreements"), pursuant to which NSI Georgia, subject to the terms and conditions contained therein, plans to sell or contribute its right, title and interest in certain of its accounts receivable and certain related assets (including NSI Georgia's rights under the First-Step Sale Agreement) to Recipient. 3. Recipient intends to finance its purchases under the Sale and Contribution Agreement in part by borrowing under a Credit and Security Agreement dated as of May 2, 2001 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the "Credit and Security Agreement" and, together with the Sale Agreements, the "Agreements") among Recipient, as Borrower, NSI Georgia, as initial Servicer, Blue Ridge Asset Funding Corporation ("Blue Ridge"), the banks and other financial institutions from time to time party thereto as "Liquidity Banks" (together with Blue Ridge, the "Lenders") and Wachovia Bank, N.A. or any successor agent appointed pursuant to the terms of the Credit and Security Agreement, as agent for the Lenders (in such capacity, the "Agent"). 4. Performance Guarantor owns, directly or indirectly, one hundred percent (100%) of the capital stock of each of the Originators and Recipient, and each of the Originators (and accordingly, Performance Guarantor) is expected to receive substantial direct and indirect benefits from their sales and/or contributions of receivables pursuant to the Sale Agreements (which benefits are hereby acknowledged). 5. As an inducement for Recipient to acquire Originators' accounts receivable pursuant to the Sale Agreements, Performance Guarantor has agreed to guaranty (a) the due and punctual performance by NSI Enterprises of its obligations under the First-Step Sale Agreement, (b) the due and punctual performance by NSI Georgia of its obligations under the Sale and Page 238 Exhibit 10(i)A(6) Contribution Agreement, and (c) the due and punctual performance by NSI Georgia of its servicing duties, and NSI Enterprises of its sub-servicing duties, under the Credit and Security Agreement. 6. Performance Guarantor wishes to guaranty the due and punctual performance by NSI Enterprises and NSI Georgia of the aforesaid obligations as provided herein. AGREEMENT NOW, THEREFORE, Performance Guarantor hereby agrees as follows: Section 1. Definitions. Capitalized terms used herein and not defined herein shall the respective meanings assigned thereto in the Agreements. In addition: "Guaranteed Obligations" means, collectively, (a) all covenants, agreements, terms, conditions and indemnities to be performed and observed by (i) NSI Enterprises as seller under the First-Step Sale Agreement or (ii) NSI Georgia as seller and contributor under the Sale and Contribution Agreement, including, without limitation, in each of the foregoing cases, the due and punctual payment of all sums which are or may become due and owing by either such Originator in its capacity as a seller or seller and contributor under the Sale Agreements, whether for fees, expenses (including actual and reasonable counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason, and (b) all Servicing-Related Obligations. "Servicing Related Obligations" means all covenants, agreements, terms, conditions and indemnities to be performed and observed by (i) NSI Georgia in its capacity as Servicer under the Credit and Security Agreement, and/or (ii) NSI Enterprises in its capacity as a sub-servicing delegate of the Servicer under the Credit and Security Agreement. Section 2. Guaranty of Performance of Guaranteed Obligations. Performance Guarantor hereby guarantees to Recipient, the full and punctual payment and performance by each Originator of its respective Guaranteed Obligations. This Undertaking is an absolute, unconditional and continuing guaranty of the full and punctual performance of all Guaranteed Obligations of each Originator under the Agreements and each other document executed and delivered by either Originator pursuant to the Agreements and is in no way conditioned upon any requirement that Recipient first attempt to collect any amounts owing by either Originator to Recipient, the Agent or Blue Ridge from any other Person or resort to any collateral security, any balance of any deposit account or credit on the books of Recipient, the Agent or Blue Ridge in favor of either Originator or any other Person or other means of obtaining payment. Should either Originator default in the payment or performance of any of its Guaranteed Obligations, Recipient (or its assigns) may cause the immediate performance by Performance Guarantor of the Guaranteed Obligations and cause any payment Guaranteed Obligations to become forthwith due and payable to Recipient (or its assigns), without demand or notice of any nature (other than as expressly provided herein), all of which are hereby expressly waived by Performance Guarantor. Page 239 Exhibit 10(i)A(6) Notwithstanding the foregoing, this Undertaking is not a guarantee of the payment or collection of any of the Receivables or the Loans, and Performance Guarantor shall not be responsible for any Guaranteed Obligations to the extent the failure to perform such Guaranteed Obligations by either Originator results from Receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; provided that nothing herein shall relieve either Originator from performing in full its Guaranteed Obligations under the Agreements or Performance Guarantor of its undertaking hereunder with respect to the full performance of such duties. Section 3. Performance Guarantor's Further Agreements to Pay. Performance Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to Recipient (and its assigns), forthwith upon demand in funds immediately available to Recipient, all reasonable costs and expenses (including court costs and reasonable legal expenses) actually incurred or expended by Recipient in connection with enforcement of the Guaranteed Obligations and/or this Undertaking, together with interest on amounts not paid by Performance Guarantor under this Undertaking within two Business Days after such amounts become due until payment, at a rate of interest (computed for the actual number of days elapsed based on a 360 day year) equal to the Prime Rate plus 2% per annum, such rate of interest changing when and as the Prime Rate changes. Section 4. Waivers by Performance Guarantor. Performance Guarantor waives notice of acceptance of this Undertaking, notice of any action taken or omitted by Recipient (or its assigns) in reliance on this Undertaking, and any requirement that Recipient (or its assigns) be diligent or prompt in making demands under this Undertaking, giving notice of any Termination Event, Amortization Event, other default or omission by either Originator or asserting any other rights of Recipient under this Undertaking. Performance Guarantor warrants that it has adequate means to obtain from each Originator, on a continuing basis, information concerning the financial condition of such Originator, and that it is not relying on Recipient to provide such information, now or in the future. Performance Guarantor also irrevocably waives all defenses (i) that at any time may be available in respect of the Guaranteed Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or hereafter in effect or (ii) that arise under the law of suretyship, including impairment of collateral. Recipient (and its assigns) shall be at liberty, without giving notice to or obtaining the assent of Performance Guarantor and without relieving Performance Guarantor of any liability under this Undertaking, to deal with each Originator and with each other party who now is or after the date hereof becomes liable in any manner for any of the Guaranteed Obligations, in such manner as Recipient in its sole discretion deems fit, and to this end Performance Guarantor agrees that the validity and enforceability of this Undertaking, including without limitation, the provisions of Section 7 hereof, shall not be impaired or affected by any of the following: (a) any extension, modification or renewal of, or indulgence with respect to, or substitutions for, the Guaranteed Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Guaranteed Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any Termination Event, Amortization Event, or default with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any other obligation of any person or entity with respect to the Guaranteed Obligations or any part thereof; (e) the enforceability or validity of the Guaranteed Page 240 Exhibit 10(i)A(6) Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Guaranteed Obligations or any part thereof; (f) the application of payments received from any source to the payment of any payment obligations of either Originator or any part thereof or amounts which are not covered by this Undertaking even though Recipient (or its assigns) might lawfully have elected to apply such payments to any part or all of the payment obligations of such Originator or to amounts which are not covered by this Undertaking; (g) the existence of any claim, setoff or other rights which Performance Guarantor may have at any time against either Originator in connection herewith or any unrelated transaction; (h) any assignment or transfer of the Guaranteed Obligations or any part thereof; or (i) any failure on the part of either Originator to perform or comply with any term of the Agreements or any other document executed in connection therewith or delivered thereunder, all whether or not Performance Guarantor shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (i) of this Section 4. Section 5. Unenforceability of Guaranteed Obligations Against Originators. Notwithstanding (a) any change of ownership of Performance Guarantor or either Originator or the insolvency, bankruptcy or any other change in the legal status of either Originator; (b) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Guaranteed Obligations (unless the same shall be applicable to the Performance Guarantor); (c) the failure of either Originator or Performance Guarantor to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Guaranteed Obligations or this Undertaking, or to take any other action required in connection with the performance of all obligations pursuant to the Guaranteed Obligations or this Undertaking; or (d) if any of the moneys included in the Guaranteed Obligations have become irrecoverable from either Originator for any other reason other than final payment in full of the payment obligations in accordance with their terms or lawful setoff of claims against the Purchasers, this Undertaking shall nevertheless be binding on Performance Guarantor. This Undertaking shall be in addition to any other guaranty or other security for the Guaranteed Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security. In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of either Originator or for any other reason with respect to either Originator, all such amounts then due and owing with respect to the Guaranteed Obligations under the terms of the Agreements, or any other agreement evidencing, securing or otherwise executed in connection with the Guaranteed Obligations, shall be immediately due and payable by Performance Guarantor. Section 6. Representations and Warranties. Performance Guarantor hereby represents and warrants to Recipient and its assigns that (a) Performance Guarantor is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, and (b) this Undertaking has been duly executed and delivered by Performance Guarantor and constitutes its legally valid and binding obligation, enforceable against Performance Guarantor in accordance with its terms, provided that the enforceability hereof is subject to Page 241 Exhibit 10(i)A(6) general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles. Section 7. Subrogation. Notwithstanding anything to the contrary contained herein, until the Guaranteed Obligations are paid in full Performance Guarantor: (a) will not enforce or otherwise exercise any right of subrogation to any of the rights of Recipient, the Agent or Blue Ridge against either Originator, (b) hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, at law or in equity or otherwise) to the claims of Recipient, the Agent and Blue Ridge against either Originator and all contractual, statutory or legal or equitable rights of contribution, reimbursement, indemnification and similar rights and "claims" (as that term is defined in the United States Bankruptcy Code) which Performance Guarantor might now have or hereafter acquire against either Originator that arise from the existence or performance of Performance Guarantor's obligations hereunder, (c) will not claim any setoff, recoupment or counterclaim against either Originator in respect of any liability of Performance Guarantor to such Originator and (d) waives any benefit of and any right to participate in any collateral security which may be held by Beneficiaries, the Agent or Blue Ridge. Section 8. Termination of Performance Undertaking. Performance Guarantor's obligations hereunder shall continue in full force and effect until all Obligations are finally paid and satisfied in full and the Credit and Security Agreement is terminated, provided that this Undertaking shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of either Originator or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not Recipient (or its assigns) is in possession of this Undertaking. No invalidity, irregularity or unenforceability by reason of the federal bankruptcy code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Guaranteed Obligations shall impair, affect, be a defense to or claim against the obligations of Performance Guarantor under this Undertaking. Section 9. Effect of Bankruptcy. This Performance Undertaking shall survive the insolvency of either Originator and the commencement of any case or proceeding by or against either Originator under the federal bankruptcy code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal bankruptcy code with respect to either Originator or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which either Originator is subject shall postpone the obligations of Performance Guarantor under this Undertaking. Section 10. Setoff. Regardless of the other means of obtaining payment of any of the Guaranteed Obligations, Recipient (and its assigns) is hereby authorized at any time and from time to time during the existence of any Amortization Event, without notice to Performance Guarantor (any such notice being expressly waived by Performance Guarantor) and to the fullest extent permitted by law, to set off and apply any deposits and other sums against the obligations of Performance Guarantor under this Undertaking then past due for more than two Business Days. Page 242 Exhibit 10(i)A(6) Section 11. Taxes. All payments to be made by Performance Guarantor hereunder shall be made free and clear of any deduction or withholding (except for taxes excluded under Section 10.1 of the Credit and Security Agreement). If Performance Guarantor is required by law to make any deduction or withholding on account of any Taxes or otherwise from any such payment (except for taxes excluded under Section 10.1 of the Credit and Security Agreement), the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, Recipient receive a net sum equal to the sum which they would have received had no deduction or withholding been made. Section 12. Further Assurances. Performance Guarantor agrees that it will from time to time, at the request of Recipient (or its assigns), provide information relating to the business and affairs of Performance Guarantor as Recipient may reasonably request. Section 13. Successors and Assigns. This Performance Undertaking shall be binding upon Performance Guarantor, its successors and permitted assigns, and shall inure to the benefit of and be enforceable by Recipient and its successors and assigns. Without limiting the generality of the foregoing sentence, Recipient may pledge or assign, and hereby notifies Performance Guarantor that it has pledged and assigned, this Performance Undertaking to the Agent, for the benefit of the Lenders, as security for the Obligations, and Performance Guarantor hereby acknowledges that the Agent may enforce this Performance Undertaking, on behalf of Recipient and the Lenders, with the same force and effect as though the Agent were the Recipient hereunder. Subject to Section 7.1(c)(ii) of the Credit and Security Agreement, Performance Guarantor may not assign or transfer any of its obligations hereunder without the prior written consent of each of Recipient and the Agent. Section 14. Amendments and Waivers. No amendment or waiver of any provision of this Undertaking nor consent to any departure by Performance Guarantor therefrom shall be effective unless the same shall be in writing and signed by Recipient, the Agent and Performance Guarantor. No failure on the part of Recipient to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 15. Notices. All notices and other communications provided for hereunder shall be made in writing and shall be addressed as follows: if to Performance Guarantor, at the address set forth beneath its signature hereto, and if to Recipient, at the addresses set forth beneath its signature to the Credit and Security Agreement, or at such other addresses as each of Performance Guarantor or any Recipient may designate in writing to the other. Each such notice or other communication shall be effective (a) if given by telecopy, upon the receipt thereof, (b) if given by mail, five (5) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (c) if given by any other means, when received at the address specified in this Section 15. Section 16. GOVERNING LAW. THIS UNDERTAKING SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF GEORGIA. Page 243 Exhibit 10(i)A(6) Section 17. CONSENT TO JURISDICTION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW: (A) EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON COUNTY, GEORGIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS UNDERTAKING, THE AGREEMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER AND (B) EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. Section 18. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS UNDERTAKING, THE AGREEMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER Section 19. Bankruptcy Petition. Performance Guarantor hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness owed by Blue Ridge, it will not institute against, or join any other Person in instituting against, Blue Ridge any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Section 20. Miscellaneous. This Undertaking constitutes the entire agreement of Performance Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Undertaking shall be in addition to any other guaranty of or collateral security for any of the Guaranteed Obligations. The provisions of this Undertaking are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of Performance Guarantor hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Performance Guarantor's liability under this Undertaking, then, notwithstanding any other provision of this Undertaking to the contrary, the amount of such liability shall, without any further action by Performance Guarantor or Recipient, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. Any provisions of this Undertaking which are 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 Page 244 Exhibit 10(i)A(6) jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise specified, references herein to "Section" shall mean a reference to sections of this Undertaking. {signature page follows} Page 245 Exhibit 10(i)A(6) IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be executed and delivered as of the date first above written. National Service Industries, Inc., A DELAWARE CORPORATION By: ______________________________ Name: ____________________________ Title: _____________________________ Address for Notices: NSI Center 1420 Peachtree Street, N.E. Atlanta, Georgia 30309 Attention: Treasurer Telecopier: 404-853-1330 Telephone: 404-853-1368

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.11 AGREEMENT     This Agreement (this "Agreement") is entered into as of        , 2001 between Health Net, Inc., a Delaware corporation (the "Company"), on the one hand, and         ("Employee"), on the other hand.     WHEREAS, the Company and Employee are parties to a Severance Payment Agreement dated ____________, _____ (the "Severance Agreement"); and     WHEREAS, the Company has adopted certain amendments to the acceleration/change in control provisions ("Acceleration Provisions") of its 1991 Stock Option Plan (the "1991 Plan"), 1997 Stock Option Plan (the "1997 Plan") and 1998 Stock Option Plan (the "1998 Plan" and collectively with the 1991 Plan and 1997 Plan, the "Plans"); and     WHEREAS, the Company desires that the Employee consent to the governance and application of the amended Acceleration Provisions of the Plans to the outstanding options of the Employee under the Plans; and     WHEREAS, Employee is willing to consent to the governance and application of the amended Acceleration Provisions of the Plans to his/her outstanding options under the Plans in exchange for an amendment of the Severance Agreement to provide for a full tax gross-up of any severance payments for any excise taxes under Section 280G of the Internal Revenue Code (the "Code") applicable to the severance payments, as set forth in this Agreement.     NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows:     1.  Plans. Employee hereby consents, in accordance with Section 14 of the 1991 Plan, Section 6.2 of the 1997 Plan and Section 6.2 of the 1998 Plan, that the Plans, as amended by the amendments to the Acceleration Provisions of the Plans set forth in Appendix A attached hereto, shall govern and apply to all outstanding options of the Employee under the Plans, regardless of the date such options were granted. To the extent the option agreements for the outstanding options of Employee under the Plans state anything to the contrary, the parties agree that such option agreement(s) are hereby amended to be consistent with the foregoing sentence.     2.  Severance Agreement. The parties agree that the Severance Agreement is hereby amended to delete Section 7 of the Severance Agreement in its entirety and to replace it with the following new Section 7:     7.  Tax Consequences.     7.1 Notwithstanding any other provisions of this Agreement, in the event that (i) any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a Change of Control or any person affiliated with the Company or such person) (all such payments and distributions, including the severance payments and benefits provided for in Section 3 hereof (the "Severance Payments"), being hereinafter called "Total Payments") would be subject (in whole or part) to the excise tax imposed under section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee 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") and (ii) there are any excess parachute payments (within the meaning of section 280G(b) of the Code), in the aggregate, in respect of such Total Payments in excess of $50,000, then the Company shall pay to Employee an additional cash payment (the "Tax Gross-Up") so that after receipt of such Tax Gross-Up, the payment of any additional federal, state and local income taxes on such Tax Gross-Up amount and the payment of -------------------------------------------------------------------------------- any Excise Taxes, the Employee shall receive such net amount of Total Payments equal to the amount that he/she would have received if no Excise Tax was due; provided, however that the Employee shall cooperate in good faith with the Company to minimize the amount of the Excise Tax that may become payable by taking any such action or making any such election as may be reasonably requested by the Company in respect of the Total Payments due to the Employee.     7.2 Subject to the provisions of Section 7.3, all determinations required to be made under this Section 7, including whether and when a Tax Gross-Up is required and the amount of such Tax Gross-Up and the assumptions to be utilized in arriving at such determination, shall be made by the public accounting firm that, immediately prior to the Change of Control, was the Company's independent auditor (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the receipt of notice from the Employee that the Employee has received Total Payments, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Tax Gross-Up, as determined pursuant to this Section 7, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, then the Accounting Firm shall furnish to the Employee a written opinion that failure to report the Excise Tax on the Employee'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 Employee. As a result of any uncertainty in the application of section 4999 of the Code at the time of the determination by the Accounting Firm hereunder, it is possible that Tax Gross-Up 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 7.3 and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee.     7.3 The Employee 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 Tax Gross-Up. Such notification shall be given as soon as practicable but no later than 10 business days after the Employee 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 Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which the Employee 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 Employee 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 Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7.3, 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 Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided further, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Tax Gross-Up would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.     7.4 If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 7.3, the Employee becomes entitled to receive, and receives, any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 7.3) 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 Employee of an amount advanced by the Company pursuant to Section 7.3, a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 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 Tax Gross-Up required to be paid.     7.5 At the time that payments are made under this Agreement, the Company shall provide the Employee with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from tax counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement)."     3.  Full Force and Effect. Except as amended hereby, the terms and provisions of the Severance Agreement shall be unchanged and shall remain in full force and effect.     4.  Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.     HEALTH NET, INC.     By:   --------------------------------------------------------------------------------     Name: Title:     -------------------------------------------------------------------------------- Employee: -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.11 AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document [***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. Exhibit 10.62 [Translation] CONTRACT CONTRACT NO.: UTAHZ2001032311     The Buyer:   The Seller: Zhejiang Telecom CO.,     NingBo Branch   UTStarcom (China) Ltd.     11th floor CNT Manhattan Building, No.6 ChaoYang Men Bei Da Jie St. Beijing, 100027 TEL:   TEL01065542030 FAX:   FAX (010) 65542058 This contract is made between the BUYER and the SELLER, whereby the BUYER agrees to buy and the SELLER agrees to sell the under-mentioned commodities and services according to the terms and conditions as stipulated hereafter: 1TOTAL CONTRACT PRICE: [***] 2NAME of COMMODITIES, or SERVICES: [***] network equipment (Quantity, Specifications and Unit price as specified in Appendix) 3.1PLACE OF MANUFACTURING AND MANUFACTOR: Hangzhou    UTStarcom 3.2DATE OF DELIVERY: Partial delivery according to the project schedule 3.3PLACE OF SHIPPING: Hangzhou 4PLACE OF DESTINATION Designed by NingBo telecom Co., Ltd. 5PACKING     5.1  The goods shall be packed in new strong case(s) suitable for long distance transportation and well protected against dampness, moisture, shock, and rust. The Sellers shall be liable for any damage to the goods on account of improper packing.     5.2  Detailed Packing List shall be placed in each case which shall indicate the name of goods, total of cases, installation and maintenance manual. Related technical documents shall be shipped with the goods. 6SHIPPING MARK     On the surface of each package, the package number, measurements, the lifting positions, such cautions as "DO NOT STACK UP SIDE DOWN", "HANDLE WITH CARE", "KEEP AWAY FROM MOISTURE" and the shipping mark. -------------------------------------------------------------------------------- 7DELIVERY     7.1  After the arrival of the goods at the place of destination, the packages shall be opened by the Buyers in the presence of the Seller, shall be checked and signed jointly by the representatives of the Buyer and Seller as the acceptance of the goods. The transport documents shall be the certificates of acceptance.     7.2  The Seller shall bear all expenses and risks involved in the handling of the goods until the moment the goods has been delivered. The title to the goods and the risks of the goods are transferred to the buyer upon delivery.     7.3  In case of missing parts or damage due to the Seller's faulty packing, the Buyer shall make a detailed record on the site, or apply for reinspection by the China Commodity Inspection Bureau, or the representatives of the Buyer and Seller make and sign a protocol, Such protocol may be utilized as proper evidence for replacement of missed or damaged parts. If the Buyer opens the package without presence of the Seller, or fails to make the application in written to for replacement of missed or damaged parts within [***] after the arrival of the goods at the destination, the Buyer shall be deemed to accept the goods. 8INSURANCE     The insurance shall be effected by the Seller for [***] of the Contract Amount. 9PAYMENT TERMS:     All payments by the Buyer to the Seller shall be paid by telegraphic transfer to the RiTanLu Office, ChaoYang Branch, Beijing, I&C Bank of China, account number is [***].     9.1  The payment conditions for equipment are as follows:     9.1.1  Down Payment:     [***] down payment of the total contract price for goods being [***] shall be paid by the Buyer to the Seller within [***] from the date of signing of this contract. If the down payment is delayed, the date of shipment will be delayed accordingly.     9.1.2  [***] of the total contract price for goods being [***] shall be paid by the Buyer within [***] from the date of arrival of goods and completion.     9.1.3  [***] of the total contract price for goods being [***] shall be paid within [***] after the completion of installation, debugging and running.     9.1.4  [***] of the total contract price for goods being [***] shall be paid by the Buyer within [***] from the date of running.     9.2  In the event that a payment required by 10.1 isn't made by the Buyer within the time period specified, the Buyer shall pay to the Seller, in addition to the amount owed, a late payment fee of [***] of the amount owed per [***] or part thereof for each [***] the payment is delayed. The total amount of penalty shall not exceed [***] of the total delayed payment. 10INSTALLATION     10.1  The Buyer takes responsibility of [***].     10.2  The Seller takes responsibility of [***] during the period of installation. 11WARRANTY     11.1  The Seller warrants items supplied hereunder to be free from defects in workmanship and material. The Seller's warranty for Equipment and Material will commence upon delivery of 2 -------------------------------------------------------------------------------- the goods and will continue for a period of [***]. During the Warranty period the Seller will, [***] either repair or replace items not conforming to the above warranty. If the Buyer determines that any items should be returned, the Seller shall bear [***] for items returned to the Seller in the PRC and return of the repaired or replaced items to the installation site.     11.2  The Seller warrants to provide debug for the software.     11.3  The foregoing warranty does not extend to any items which has:     11.3.1  Been damaged by misusing, accident;     11.3.2  Been wired, repaired or altered by anyone other than the Seller or its representative;     11.3.3  Been improperly installed, stored, handled or maintained by anyone other than the Seller or its representative;     11.3.4  Been removed from its original site of installation, or to expendable components such as fuses, light bulbs, motor brushes and the like. 12CLAIMS     Within [***] after the goods delivered, the Buyer shall have right to make a claim to the Seller if the quality, specifications or quantities of the goods is not in conformity with what has been stipulated in the contract. 13FORCE MAJEURE:     The Seller shall not be liable for any loss, damage, delay or failure of performance resulting directly or indirectly from any cause which is beyond its reasonable control including, but not limited to the laws, regulations, acts or failure to act of any governmental authority. 14LATE DELIVERY AND PENALTY:     In case of delayed shipment, except for force majeure, the Seller shall pay to the Buyer for every [***] of delay a penalty amounting to [***] of the total value of the goods whose shipment has been delayed. Any fractional part of a [***] is to be considered as a full [***]. The total amount of penalty shall not, however, exceed [***] of the total value of the goods involved in late shipment and is to be deducted from the amount due at the time of payment. 15ARBITRATION     Both parties shall strictly execute the contract in accordance with the relevant laws and regulations of P.R.C. All disputes in connection with the execution of the contract hereof shall be settled through mutual understanding and friendly negotiation. In case no settlement can be reached through negotiations, either party can apply to the appropriate organization for arbitration or mediation. The arbitration fee shall be borne by the losing party. 16LIMITATION OF LIABILITY     16.1  In the event of any breach of this Contract by Seller, or of any loss or injury to the Buyer arising out of this Contract for which the Seller is liable to the Buyer, the Seller's total cumulative liability for all such breaches, losses, and injuries shall be the [***] of:     a  The [***] value of the injury or loss to the Buyer.     b  The [***] payments made to the Seller.     16.2  The Seller shall not be liable for any consequential or incidental loss or damage resulting from this Contract. 3 -------------------------------------------------------------------------------- 17VALIDITY, TERMINATION OF THE CONTRACT AND MISCELLANEOUS.     17.1  This Contract will come into force after being sealed by both parties and signed by the representatives of both parties.     17.2  This Contract will be terminated after both parties have fulfilled their respective duties and obligations.     17.3  Seller hereby licenses the software contained within the products for use by the Buyer. The Buyer or its representatives shall not decompile, disassemble or reverse the software without the prior written permission of the Seller.     17.4  This Contract may be amended only by an instrument in writing signed and sealed by the duly authorized representative of each party.     17.5  During implementation of this Contract, all notices between the parties shall be by certified mail, telex or facsimile.     17.6  Technical proposal, equipment pricelist shall be part of this contract. 18REMARKS     This Contract is made in five original copies, one copy to be held by the Seller, four copies to the Buyer. The Buyer: Zhejiang telecom Co. NingBo Branch Representative: Date: March 23, 2001 The Seller: UTStarcom (China) Co., Ltd. Representative: Date: March 23, 2001 4 -------------------------------------------------------------------------------- Translation Verification     The foregoing represents a fair and accurate English translation of the original Chinese document. Dated: May 11, 2001     By:   /s/ SHAO-NING J. CHOU    --------------------------------------------------------------------------------     Name:   Shao-Ning J. Chou     Title:   Executive Vice President and Chief Operating Officer, China Operations 5 -------------------------------------------------------------------------------- LOGO [g122786.jpg] Technical Proposal for PASTM Xiao Ling Tong wireless network -------------------------------------------------------------------------------- Ningbo Telecommunication Branch Co. PASTM Xiao Ling Tong Wireless Connection Network Technical Proposal UTStarcom (China) Co. Ltd. -------------------------------------------------------------------------------- Contents CHAPTER 1  OVERVIEW   3     1.1   Purpose   3     1.2   Background   3     1.3   Features and advantages of PASTM   3     1.4   Definition   6 CHAPTER 2  NETWORKING PRINCIPLE   7     2.1   Coverage priority   7     2.2   Averaged calling volume in busy hours   7     2.3   Assumption of calling loss   7     2.4   Coverage method   8     2.5   Frequency planning   8 CHAPTER 3  NETWORKING SOLUTION FOR PASTM SYSTEM OF NINGBO TELECOMMUNICATION BRANCH CO.   9     3.1   City Introduction   9     3.2   Division of coverage   9     3.3   Introduction of division   9     3.4   Network structure as shown in the following graph:   12     3.5   Analyses of network capacity   12     3.6   Statistics of transmission links   13     3.7   Determination of ATC and [***] port number   15     3.8   System redundancy   15     3.9   Roaming analysis   15     3.10   Network management system   16         3.10.1  Constitution of network management   16         3.10.2  Design of network management network   17 2 -------------------------------------------------------------------------------- Chapter 1  Overview     With the increasing demands on communication service and opening of China's telecommunication market, personal wireless communication that caters for popular requirements is gradually becoming the trend for the development of telecommunication.     In order to help telecommunication enterprises to increase their competitiveness and solve the problems associated with telephone, UTStarcom Co. developed its PAS™ (Personal Access phone System) Xiao Ling Tong wireless telephone system to making use of the potential of current telephone resource. 1.1 Purpose     This technical Proposal is made for Ningbo Telecommunication Branch Co. to facilitate the selection of wireless telephone project. 1.2 Background     User:  Ningbo Telecommunication Branch Co.     Supplier:  UTStarcom (China) Co. Ltd.     Upon accomplishment of this project, it will greatly increase the competitiveness of Ningbo Telecommunication Branch Co. in the telecommunication business and effectively use the existing telephone resource. 1.3 Features and advantages of PAS™     PAS™ wireless telephone system is an extension and supplement to the local telephone network by using high quality digital technology to connect wireless telephone XiaoLingTong system to the local telephone network, it makes conventional wire-type local telephone to be mobile within its coverage range and can freely dial any local, domestic and international telephone numbers without any restriction. In addition, it adopts one-side billing method that is equivalent to the conventional telephone billing standard. This makes the Wireless Telephone XiaoLingTong to be a cheap and convenient personal wireless telephone. (1)PAS™ system is an extension and supplement to local telephone network; (2) PAS™ is the new business shining point of local telephone and secondarily develop the resource of the local telephone system; (3) Dynamic frequency allocation with no need for frequency planning and short period of network construction [***]; (4) Low cost and quick return of investment; (5) Support high density telephone business and is flexible for various coverage requirements; (6) Support high-speed data business[***]; (7) "Green mobile phone" with low power [***], small but with high quality and long waiting hours; (8) Provide multiple value-added businesses: e.g. short messages, calling telephone number display, positioning of 110 warning. (9) Mixed networking of high and low power Radio Ports By combining high and low power Radio Ports, coverage can be solved by high power Radio Ports, while calling volume by low power Radio Ports. 3 -------------------------------------------------------------------------------- (10)Support large calling volume Using low power Radio Ports and group control technology can satisfactorily solve the problem of large calling volume. (11)Short construction period and easy to construct As low power Radio Ports use twisted pairs to supply power, it greatly increases the easiness of construction and thus shortens construction period. (12)Radio Ports use remote power supply Radio Ports using remote power supply facilitate to lower the overall cost of system and construction complexity. (13)With V5 connection, it facilitates upgrading to the next generation of network (14) WACOS technology With the increasing demands for the new business of the current telecommunication network, more and more manufacturers and business operators are seeking new network architecture to construct multimedia business network with low cost and complexity. PAS network-based WACOS system provides users with voice business and at the same time support multi-business IP connection, which is an ideal solution for the next generation network and facilitates to upgrade the current wireless local telephone system to the next generation telecommunication network. (18)Adjustability of Radio Ports Facilitate to construct dedicated network, virtual network and increase calling volume. (19)Can provide multiple value-added businesses (20) Versatility of mobile phones Can choose various mobile phones of different manufacturers. (21)High telecommunication channel and law cost ratio Low construction cost per telecommunication channel.     PASTM utilize the existing telephone resource and make it possible to communicate within the whole urban area and thus opens new business opportunity for telecommunication departments. PASTM has now been widely used in Southeast Asia and multiple provinces of China. In July 1996, PASTMparticipated in the connection network test organized by Telecommunication General Bureau; in March 1999, it passed the appraisal of connection network experts from Telecommunication Management Bureau of Ministry of Information Industry; PASTM uses a frequency range of 1900-1920MHz that is in conformance with the wireless connection frequency range by TDMA/TDD method approved by the National Wireless Committee.     PASTM system has gained good results in some areas, for example, in Yuhang and Zhaoqing cities, [***] of users holds the wireless telephones as their second telephone, and the calling volume of each user increased [***]. With the development of the market, the income of wireless telephone business will increased rapidly. Within [***], the new users with wireless telephones increased [***] of the original wire-type telephone number. PASTM system has been installed in more than ten provinces in China with a capacity of more than [***] lines. The system has been welcomed for its stability. 4 -------------------------------------------------------------------------------- 1.4 Definition     Explanations to some abbreviated English phases:     PAS   Personal access phone system     PS   Personal system handset     RP   Radio Port     RPC   Radio Port controller     RT   Local terminal     ATC   Air channel controller     LE   local exchanger     CDR   Detailed calling record Chapter 2  Networking principle 2.1 Coverage priority Priority --------------------------------------------------------------------------------   Type -------------------------------------------------------------------------------- Most important   Government organization; stores; main streets; living houses; professional market; Important   Entertainments; streets; schools Normal   Plants; hotels; open spaces 2.2 Averaged calling volume in busy hours     The design requirement on averaged calling volume in busy hours is different for different range of a city, e.g. there will be more calling volume in the urban area and less calling volume in the sparsely lived suburb areas.     The solution takes the following indexes: Dense area [***] Sub-dense area [***] Normal area [***] 5 -------------------------------------------------------------------------------- 2.3 Assumption of calling loss     The solution assumes loss of air calling [***] loss of wireless system [***] 2.4 Coverage method     The solution uses mixed big and small stations with a consideration of range division. 2.5 Frequency planning The system uses frequency range approved by Ningbo Wireless Committee for the PAS wireless connection network of Ningbo Telecommunication Branch Co. Frequency range approved by the Wireless Committee Frequency requirement of PASTM system: Control carrier frequency(C-ch):[***] Control carrier frequency(C-ch)  [***] Voice carrier frequency(T-ch):[***] (excluding control carrier frequency) 6 -------------------------------------------------------------------------------- Chapter 3  Networking solution for PASTM system of Ningbo Telecommunication Branch Co. 3.1 City Introduction     Ningbo city is one of the 14 opening-up port cities, it has a long history and under its jurisdiction are Qingxian, Xiangshan and Linghai counties, and Yuyao, Cixi and Hongfa three county-level cities. The city proper consists of Haishu, Jiangdong, Jiangbei, Zhenhai and Zhaolun boroughs with a population of 5.3 million and an area of 9000 km2. 3.2 Division of coverage     The PAS Xiao Ling Tong solution covers the majority of Ningbo city, The coverage area shall be as follows: [***]. 3.3 Introduction of division     Each zone has different geographical environment and social environment, for example, some zones are busy commercial areas, some are residential areas, some are sparsely populated development zones and suburb areas, and some are densely populated old urban areas. In order to properly use the frequency resources and station equipments, we must first a clear planning as to the whole network and designate different expected calling volume and service priorities for different areas.     Division definition: In the range has the same wireless environment and calling density is homogeneous and calling directions are generally the same.     According to the status of Ningbo city, the coverage of urban area can be divided into three level's calling model: A: [***] B: [***] C: [***] Zone A: [***] Calling density     In this zone are some busy commercial areas such as bazaars, governmental organizations and commercial streets etc., and places such as commerce, schools, finance, hospitals, organization, and bus and railway stations. It features large population flow and high population density. Therefore, the geographical environment is relatively complex and calling volume is large.     Zone A is mainly distributed in [***].     As to zone A, we should consider both calling volume and coverage. Therefore, in this zone we use relatively more small power stations and at the same time adopt relatively higher group control ratio.     In this zone we use [***]. In total we will use [***]. 7 -------------------------------------------------------------------------------- Zone B: [***] Calling density:     Relative to [***] calling volume is relatively small. In this zone are numerous residential areas, some department stores and supermarkets etc. It features good indoor coverage and relatively low calling volume, however, there may exist some local big calling volume demand.     The [***] zone of Ningbo city mainly includes: [***].     As to zone B, the main concentration is on coverage and also on calling volume for some local areas. We will use both high and low power stations and at the same time partly use group control method.     In this zone we use [***]. In total we will use [***]. Zone C: [***] Calling density:     Relative to [***] mainly consists of areas with more open spaces. In this zone are plants, small building of 1~3 floors and even some open spaces. The zone features [***] calling volume, and therefore coverage is the main consideration.     The [***] of Ningbo city the area excluding [***] with an area of around [***].     As to the zone, we will only consider coverage and use [***].     In this zone we will use [***]. In total we will use [***]. Coverage statistics     The PAS project covers areas of types A, B and C with a total area of [***]. The system will use [***] with specifics as shown in the following table:     Coverage --------------------------------------------------------------------------------   RPC number --------------------------------------------------------------------------------   200mwRP number --------------------------------------------------------------------------------   10mwRP number -------------------------------------------------------------------------------- Zone A   [***]   [***]   [***]   [***] Zone B   [***]   [***]   [***]   [***] Zone C   [***]   [***]   [***]   [***] Total   [***]   [***]   [***]   [***] 3.4 Network architecture as shown in the following graph:     [***] Note: [***] and network management of Ningbo city urban area, Qingxian county, Zhaobei and Zhenghai will be located in [***] of Ningbo city. [***] will be connected by using Ethernet network. There will be a [***] interface for each RT, and the link is [***]. The connection of each RT to each [***] is [***] and to 8 -------------------------------------------------------------------------------- commonly connected [***] is [***]; the connection of each [***] to each RT is [***]; PGTS1 connects to [***] by [***] respectively; the connection of [***] is by [***]; the connection of [***] of Yuyao city and Cixi city to PGTC is by [***] respectively. It is used to handle [***] roaming among [***]. 3.5 Analyses of network capacity     As to the high power station of wireless telephone system that usually installed on top of high building (above 25 meter), it features large coverage that spans the nearby [***] stations. According to the air interface protocol of PASTM system, mobile phones can at most use the business channels of the two nearby stations, therefore, the usable channel number within its coverage is [***].     According to statistics analysis of UTStarcom Co. on coverage of high power station system, on average [***] of stations can use the nearby two stations, [***] of stations can use the nearby one station and only [***] of stations work individually. A system with [***] stations and [***] channels can provide a calling volume of [***], A system with [***] stations and [***] channels can provide a calling volume of [***] and A system with only [***] station and [***] channels can provide a calling volume of [***].     Zone A:  As to a total of [***] power stations of zone A, the supplied calling volume is [***]. As to [***] power stations, in addition to [***] stations, there will another [***] complimentary stations that use group controls of [***] stations. As a result, supplied calling volume is [***]. The total calling volume for Zone A is [***].     According to rules of chapter 3, on average each user has [***], the total supported users is: [***]     Zone B:  As to a total of [***] power stations of zone B, the supplied calling volume is [***]. As to [***] power stations, in addition to [***] stations, there will another [***] complimentary stations that use group controls of [***] stations. As a result, supplied calling volume is [***]. The total calling volume for Zone A is [***].     According to rules of chapter 3, on average each user uses [***], the total supported users is: [***]     Zone C:  As to a total of [***] high power stations of zone C, the supplied calling volume is [***].     The total calling volume for Zone B is [***].     According to rules of chapter 3, on average each user uses [***], the total supported users is: [***] 9 -------------------------------------------------------------------------------- The capacity of the whole system is shown in the following table: Zones --------------------------------------------------------------------------------   RPC number --------------------------------------------------------------------------------   Station number --------------------------------------------------------------------------------   RT number --------------------------------------------------------------------------------   ATC number --------------------------------------------------------------------------------   Erl. --------------------------------------------------------------------------------   User number -------------------------------------------------------------------------------- Zone A   [***]   [***]   [***]   [***]   [***]   [***] Zone B   [***]   [***]   [***]   [***]   [***]   [***] Zone C   [***]   [***]   [***]   [***]   [***]   [***] Total   [***]   [***]   [***]   [***]   [***]   [***] 3.6 Statistics of transmission links [***] Branch name --------------------------------------------------------------------------------   RP number --------------------------------------------------------------------------------   RPC number --------------------------------------------------------------------------------   E1 links between RPC-RTs -------------------------------------------------------------------------------- Integrated building   [***]   [***]   [***] Jiangdong branch   [***]   [***]   [***] Zhilan   [***]   [***]   [***] Zheng Da Fang   [***]   [***]   [***] Wangchun   [***]   [***]   [***] Shuguang   [***]   [***]   [***] Minglou   [***]   [***]   [***] Zijuan   [***]   [***]   [***] Qiwen   [***]   [***]   [***] Wenjiao   [***]   [***]   [***] Total   [***]   [***]   [***] -------------------------------------------------------------------------------- Note: The control room for actually storing RPCs should be in conformance with the project's requirements. 3.7 Determination of ATC and [***] port number     Total number of [***] supported by the system/user number supported by each [***] interface. The capacity of each [***] interface can support is [***] and the system capacity is [***].     As a result, [***] interface number = [***]. Considering the initial telephone number subscribed is not very large, the solution provide [***] interfaces and it can be extended after demands increase (there exists sufficient redundancy in [***]). 10 -------------------------------------------------------------------------------- 3.8 System redundancy     In total the system has [***],[***] RTs and [***] ATCs, among which each RPC can at most connect [***] RPs, each RTs can at most connect [***] RPCs and RTs, ATCs can connect [***] E1s. Thus, the system has a redundancy of [***] RPs and [***] RPCs;each RT has a redundancy of [***] E1s. 3.9 Roaming analysis     The system roaming can be classified as [***] roaming, i.e., [***].     [***] roaming with the same zone is realized by using [***]. The connection of each [***] within [***] to [***] is by [***], the calling volume provided by [***] is [***], the calling volume supported by each [***] is [***], the total calling volume supported by [***] is [***]. Considering the calling-in and dailing-out effects, the roaming calling volume supported by the network is [***].At this stage, the designed calling volume for [***] is [***], therefore, the roaming rate is [***].     Inter-city roaming is realized by using [***]. For roaming between [***], connections between [***]are by [***], the calling volume supported by [***] is [***]. Suppose that on average the calling volume per user is [***], then the supported roaming user numer is [***]. 3.10 Network management system 3.10.1 Constitution of network management     The network management system consists of operation maintenance management, data management, warning management and wireless connection management.     The software used in network management is the network management platform NETMAN from UTStarcom Co. (As to specific functions, please refer to the technical manual) (1)Main features and functions of NETMAN platform: •Based on Windows 95/Windows NT operating system •Adopt 100 BASE-T/10 BASE-T Ethernet interface and RS232 & V.24 interface. •With user-friendly interfaces, vivid mapping images of network and equipments. •Easy to operate and with low cost. •Support remote dialing-in equipment monitoring. •Use multiple series interfaces and support multiple sub-network monitoring. •Multi-task management of communication system, and support synchronizing and asynchronizing commands.     Operating functions of NETMAN system: •Editing and monitoring for multiple sub-network system mapping images of [***]. •Remote monitoring and multi-function management. 11 -------------------------------------------------------------------------------- •Monitoring of warning, Trap login and fault analysis. •Get/set system configuration and running mode for each node. •Routing control and loop setup for equipments (2)Management of NETMAN to [***] •Connect and interrupt a [***]. •Set a communication interface and [***]. •Block/open [***]. •Set maintenance mode for [***]. •Reset [***]. •Designate [***]. •Collect and display the running status for the following equipments: [***] [***] [***] [***] [***] [***] •Collect communication business volume data per hour for [***]. •Enquire the configuration data of control channel for [***]. •Enquire the current warning status of [***]. •Enquire the past warning data of system. •Install and edit running data, setup group control mode, [***]. 3.10.2 Design of network management network     The network management system of Ningbo city adopts the modulized design philosophy, and the LAN is constructed by using Ethernet bridge and Ethernet switch.     The software used for maintenance terminal and calling terminals are based on TCP/IP protocol, the communication connection of Netman and CDR platform to each [***] constitutes the [***] of network management system. As [***] are concentrated in the integrated building, they are connected with LAN by using Ethernet network connection. The network management system of Ningbo city adopts the modulized design method, initially, all [***] in [***] are located in the 12 -------------------------------------------------------------------------------- same building, [***] can be connected to [***] with LAN. [***] uses 10 BASE-T Ethernet interface, and [***] uses 100 BASE-T Ethernet interface, as is shown in the following graph:[***] NinBo Telecom Branch PAS Wireless Access Network Equipment and Price List 1 Radio Port Controller(RPC) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 2 GPS Systme(GPS)[***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 3 Radio Port(RP) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 4 Wireless Access Equipment RT Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 5 Air Traffic Control (ATC,S-ATC) and Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 13 -------------------------------------------------------------------------------- 6 PAS Roming Gateway(PGTS/PGTC) And Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 7 S-ATC Hareware [***] and Software         Sales Price (No Discount) -------------------------------------------------------------------------------- Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   No Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 8 NetMan software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 9 Netman system Hardware [***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] NingBo City ZhenHai District Telecom Branch PAS Wireless Access Equipment and Price List 1 Radio Port Controller(RPC) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 2 GPS System(GPS) [***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------       No Discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 14 -------------------------------------------------------------------------------- 3 PR(RP) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 4 Wireless Access Equipment RT Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 5 Netman System Equipment [***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] Ci Xi city Telecom Branch PAS Wireless Access Network Equipment and Price List 1 Radio Port Control(RPC) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 2 GPS System(GPS)[***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   No discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 3 Radio Port (RP) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 15 -------------------------------------------------------------------------------- 4 Wireless Access Equipment RT Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   (31% Discount Price) (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 5 Air Roaming Module (ATC,S-ATC) and Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 6 PASRoaming Gateway (PGTS/PGTC) and Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 7 NetMan SystemSoftware Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 8 NetMan SystemHardware [***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   No Discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] YuYao City Telecom Branch PAS Wireless Access Equipment and Price List 1 Radio Port Control(RPC) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 16 -------------------------------------------------------------------------------- 2 GPSSystem (GPS)[***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   No Discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 3 Radio Port (RP) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 4 Wireless Access Equipment RT Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 5 Air Roaming Module (ATC,S-ATC) and Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 6 PASRoaming Gateway (PGTS/PGTC) and Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 7 NetMan System Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 8 NetMan System Hardware [***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   No Discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 17 -------------------------------------------------------------------------------- NingBo City BeiLun District Telecom Branch PAS Wireless Access Equipment and Price List 1 Radio Port Control(RPC) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 2 GPS System(GPS)[***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   No Discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 3 Radio Port (RP) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 4 Wireless Access Equipment RT Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] NetMan System Hardware [***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] Jin County Telecom Branch PAS Wireless Access Equipment and Price List 1 Radio Port Control(RPC) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 18 -------------------------------------------------------------------------------- 2 GPS System (GPS)[***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   No Discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 3 Radio Port (RP) Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 4 Wireless Access Equipment RT Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 5 Air Roaming Module (ATC,S-ATC) and Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 6 PASRoaming Gateway (PGTS/PGTC) and Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   Discount Price --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 7 NetMan System Software Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Discount Price (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] 19 -------------------------------------------------------------------------------- 8 NetMan System Hardware [***] Description --------------------------------------------------------------------------------   Deployment Description --------------------------------------------------------------------------------   Product Number --------------------------------------------------------------------------------   Unit Price(USD) --------------------------------------------------------------------------------   Quantity --------------------------------------------------------------------------------   Total (USD) --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   No Discount (USD) -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***]   [***]   [***]   [***] District --------------------------------------------------------------------------------   Price after [***] Discount(USD) --------------------------------------------------------------------------------   User -------------------------------------------------------------------------------- [***]   [***]   [***] PRICE SUERVEY PER SYSTEM 16-Mar-01 SYSTEM --------------------------------------------------------------------------------       Total Price (USD) --------------------------------------------------------------------------------   Total price (RMB) at the rate of: [***] --------------------------------------------------------------------------------     Sub-Total for Equipment --------------------------------------------------------------------------------   [***]   [***] 2. SERVICE   [***]   [***]   [***]         [***]   [***]         USD   RMB TOTAL PRICE (FOB Hangzhou)       [***]   [***] 20 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.62 [Translation] CONTRACT Translation Verification Contents NinBo Telecom Branch PAS Wireless Access Network Equipment and Price List NingBo City ZhenHai District Telecom Branch PAS Wireless Access Equipment and Price List Ci Xi city Telecom Branch PAS Wireless Access Network Equipment and Price List YuYao City Telecom Branch PAS Wireless Access Equipment and Price List NingBo City BeiLun District Telecom Branch PAS Wireless Access Equipment and Price List Jin County Telecom Branch PAS Wireless Access Equipment and Price List PRICE SUERVEY PER SYSTEM 16-Mar-01

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.4 AMENDMENT     THIS AMENDMENT ("Amendment") dated the 31st day of August, 2001, amends the Transportation Agreement dated as of January 10, 2001 (the "Agreement") between The United States Postal Service ("USPS") and Federal Express Corporation ("FedEx"). Preamble     WHEREAS, USPS and FedEx entered into the Agreement in order to provide for the transportation of certain Products (as such term is defined in the Agreement"),     WHEREAS, the parties now desire to amend certain provisions of the Agreement as more specifically set forth in this Agreement.     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Amendment, the parties agree as follows:     1.  The parties agree that certain revisions to Attachments 1 and 2 to Exhibit A are necessary. Accordingly, the parties shall meet for the purpose of making mutually agreed revisions to Attachments 1 and 2. The parties shall make such revisions by December 1, 2001.     2.  Notwithstanding anything contained in Attachments 1 and 2 to Exhibit A, during any Schedule Period that USPS commits to provide and, if FedEx agrees to lift, a minimum of [*] outbound [*], FedEx shall be deemed to have committed to provide lift of [*] outbound [*]. For purposes of the foregoing, the following parameters shall apply:     [*] --------------------------------------------------------------------------------     3.  Section 3.9.1 of the Operations Specification is hereby amended by adding a new bullet to such section as follows: •For the Day-turn Operations only, any Tuesday immediately following one of the foregoing holidays that occurs on a Monday.     For purposes of computing the average daily Minimum Guaranteed Volume, as set forth in Section 11.1 of the Agreement, for the Day-turn Operations only, no Tuesday identified in Section 3.9.1 shall be considered in such computation.     4.  Section 3.9.2 of the Operations Specification is hereby amended by adding a new bullet to such section as follows: •Additionally, no Day-turn products will be tendered by USPS to FedEx on any Tuesday immediately following one of the holidays listed in section 3.9.1 that occurs on a Monday.     5.  All capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Agreement.     6.  Except as amended by this Amendment, the terms and conditions of the Agreement shall remain in full force and effect and are ratified and confirmed in all respects.     IN WITNESS WHEREOF, the parties have signed this Amendment in duplicate, one for each of the Parties, as of August 31, 2001.   THE UNITED STATES POSTAL SERVICE   By:   /s/ LESLIE A. GRIFFITH    --------------------------------------------------------------------------------   Title:   Contracting Officer   FEDERAL EXPRESS CORPORATION   By:   /s/ PAUL J. HERRON    --------------------------------------------------------------------------------   Title:   Vice President, Postal Transportation Management *BLANK SPACES CONTAINED CONFIDENTIAL INFORMATION WHICH HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 2 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.4

Exhibit 10.66 UTSTARCOM, INC. 2001 DIRECTOR OPTION PLAN (Amended July 10, 2001)      1. Purposes of the Plan. The purposes of this 2001 Director Option Plan are to attract and retain the best available personnel for service as Outside Directors (as defined herein) of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board.           All options granted hereunder shall be nonstatutory stock options.      2. Definitions. As used herein, the following definitions shall apply:           (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 of the Company.           (d) "Company" means UTStarcom, Inc., a Delaware corporation.           (e) "Director" means a member of the Board.           (f) "Disability" means total and permanent disability as defined in section 22(e)(3) of the Code.           (g) "Employee" means any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a Director’s fee by the Company shall not be sufficient in and of itself to constitute employment by the Company.           (h) "Exchange Act" means the Securities Exchange Act of 1934, as amended.           (i) "Fair Market Value" means, as of any date, the 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 Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination as reported in The Wall Street Journal or such other source as the Board deems reliable;                (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board 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 Board.           (j) "Inside Director" means a Director who is an Employee.           (k) "Option" means a stock option granted pursuant to the Plan.           (l) "Optioned Stock" means the Common Stock subject to an Option.           (m) "Optionee" means a Director who holds an Option.           (n) "Outside Director" means a Director who is not an Employee.           (o) "Parent" means a parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.           (p) "Plan" means this 2001 Director Option Plan.           (q) "Share" means a share of the Common Stock, as adjusted in accordance with Section 10 of the Plan.           (r) "Subsidiary" means a subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of 1986.      3. Stock Subject to the Plan. Subject to the provisions of Section 10 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 1,200,000 Shares (the Pool"). The Shares may be authorized, but unissued, or reacquired Common Stock.           If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated). Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan.      4. Administration and Grants of Options under the Plan.           (a) Procedure for Grants. All grants of Options to Outside Directors under this Plan shall be automatic and nondiscretionary and shall be made strictly in accordance with the following provisions:                (i) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be covered by Options. -2-                (ii) Each Outside Director shall be automatically granted an Option to purchase eighty thousand (80,000) Shares (the "First Option") on the date on which the later of the following events occurs: (A) the effective date of this Plan, as determined in accordance with Section 6 hereof, or (B) the date on which such person first becomes an Outside Director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy (the "Anniversary Date"); provided, however, that an Inside Director who ceases to be an Inside Director but who remains a Director shall not receive a First Option.                (iii) At such time as each Outside Director’s First Option is fully vested, each Outside Director shall be automatically granted an Option to purchase twenty thousand (20,000) Shares (a "Subsequent Option") on the Anniversary Date of each year provided he or she is then an Outside Director. In the event an Outside Director does not receive a First Option due to previously being an Inside Director, such Outside Director shall receive a Subsequent Option at the Company’s first annual meeting of the stockholders following such conversion from an Inside Director to an Outside Director and at each subsequent annual stockholder meeting thereafter, provided such Outside Director is serving as an Outside Director on each such date.                (iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof, any exercise of an Option granted before the Company has obtained stockholder approval of the Plan in accordance with Section 16 hereof shall be conditioned upon obtaining such stockholder approval of the Plan in accordance with Section 16 hereof.                (v) The terms of a First Option granted hereunder shall be as follows:                     (A) the term of the First Option shall be ten (10) years.                     (B) the First Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Sections 8 and 10 hereof.                     (C) the exercise price per Share shall be one hundred percent (100%) of the Fair Market Value per Share on the date of grant of the First Option.                     (D) subject to Section 10 hereof, the First Option shall become exercisable as to twenty-five percent (25%) of the Shares subject to the First Option on each anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such dates.                (vi) The terms of a Subsequent Option granted hereunder shall be as follows:                     (A) the term of the Subsequent Option shall be ten (10) years.                     (B) the Subsequent Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Sections 8 and 10 hereof. -3-                     (C) the exercise price per Share shall be one hundred percent (100%) of the Fair Market Value per Share on the date of grant of the Subsequent Option.                     (D) subject to Section 10 hereof, the Subsequent Option shall become exercisable as to one hundred percent (100%) of the Shares subject to the Subsequent Option on the anniversary of its date of grant, provided that the Optionee continues to serve as a Director on such date.                (vii) In the event that any Option granted under the Plan would cause the number of Shares subject to outstanding Options plus the number of Shares previously purchased under Options to exceed the Pool, then the remaining Shares available for Option grant shall be granted under Options to the Outside Directors on a pro rata basis. No further grants shall be made until such time, if any, as additional Shares become available for grant under the Plan through action of the Board or the stockholders to increase the number of Shares which may be issued under the Plan or through cancellation or expiration of Options previously granted hereunder.      5. Eligibility. Options may be granted only to Outside Directors. All Options shall be automatically granted in accordance with the terms set forth in Section 4 hereof.           The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate the Director’s relationship with the Company at any time.      6. Term of Plan. The Plan shall become effective upon the later to occur of its adoption by the Board or its approval by the stockholders of the Company as described in Section 16 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 11 of the Plan.      7. Form of Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall consist of (i) cash, (ii) check, (iii) other Shares, provided Shares acquired from the Company, (x) have been owned by the Optionee for more than six (6) months on the date of surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (iv) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan, or (v) any combination of the foregoing methods of payment.      8. Exercise of Option.           (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable at such times as are set forth in Section 4 hereof; provided, however, that no Options shall be exercisable until stockholder approval of the Plan in accordance with Section 16 hereof has been obtained.           An Option may not be exercised for a fraction of a Share. -4-                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 full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section 7 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 stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment shall 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 10 of the Plan.                Exercise of an Option in any manner shall result in a decrease in the number of Shares which 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 Continuous Status as a Director. Subject to Section 10 hereof, in the event an Optionee’s status as a Director terminates (other than upon the Optionee’s death or Disability), the Optionee may exercise his or her Option, but only within three (3) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not vested as to his or her entire Option on the date of such termination, the shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.           (c) Disability of Optionee. In the event Optionee’s status as a Director terminates as a result of Disability, the Optionee may exercise his or her Option, but only within twelve (12) months following the date of such termination, and only to the extent that the Optionee was entitled to exercise it on the date of such termination (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not vested as to his or her entire Option on the date of termination, the shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.           (d) Death of Optionee. In the event of an Optionee’s death, the Optionee’s estate or a person who acquired the right to exercise the Option by bequest or inheritance may exercise the Option, but only within twelve (12) months following the date of death, and only to the extent that the Optionee was entitled to exercise it on the date of death (but in no event later than the expiration of its ten (10) year term). To the extent that the Optionee was not vested as to his or her entire an Option on the date of death, the shares covered by the unvested portion of the Option shall revert to the Plan. To the extent that the Optionee’s estate or a person who acquired the right to exercise such Option does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. -5-      9. Non-Transferability of Options. The Option 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 and may be exercised, during the lifetime of the Optionee, only by the Optionee.      10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.           (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Option, the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per Share covered by each such outstanding Option, and the number of Shares issuable pursuant to the automatic grant provisions of Section 4 hereof shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued Shares 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. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option.           (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, to the extent that an Option has not been previously exercised, it shall terminate immediately prior to the consummation of such proposed action.           (c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation or the sale of substantially all of the assets of the Company, outstanding Options may be assumed or equivalent options may be substituted by the successor corporation or a Parent or Subsidiary thereof (the Successor Corporation). If an Option is assumed or substituted for, the Option or equivalent option shall continue to be exercisable as provided in Section 4 hereof for so long as the Optionee serves as a Director or a director of the Successor Corporation. Following such assumption or substitution, if the Optionee’s status as a Director or director of the Successor Corporation, as applicable, is terminated other than upon a voluntary resignation by the Optionee, the Option or option shall become fully exercisable, including as to Shares for which it would not otherwise be exercisable. Thereafter, the Option or option shall remain exercisable in accordance with Sections 8(b) through (d) above.                If the Successor Corporation does not assume an outstanding Option or substitute for it an equivalent option, the Option shall become fully vested and exercisable, including as to Shares for which it would not otherwise be exercisable. In such event the Board shall notify the Optionee that the Option shall be fully exercisable for a period of thirty (30) days from the date of such notice, and upon the expiration of such period the Option shall terminate.                For the purposes of this Section 10(c), an Option shall be considered assumed if, following the merger or sale of assets, the Option confers the right to purchase or receive, for each Share of -6- Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by olders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). If such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Board may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.      11. Amendment and Termination of the Plan.           (a) Amendment and Termination. The Board may at any time amend, alter, suspend, or discontinue the Plan, but no amendment, alteration, suspension, or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. In addition, no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by law or agreement or if such amendment would:                (i) expand the classes of persons to whom grants may be made under Section 4 or 5 of the Plan;                (ii) increase the number of Shares authorized for grant under Section 3 of the Plan;                (iii) increase the number of Shares which may be granted to any one participant under Section 4 of the Plan, except as provided in Section 10(a) of the Plan;                (iv) allow the creation of additional types of awards;                (v) permit decreasing the exercise price on any outstanding Option;                (vi) permit acceleration of the exercisability of any Option, except as provided in Section 10 of the Plan; or                (vii) change any of the provisions of this Section 11.           (b) 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 the Plan had not been amended or terminated.      12. Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date determined in accordance with Section 4 hereof. -7-      13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option 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, state securities laws, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.           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 any of the aforementioned relevant provisions of law.           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.      14. 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.      15. Option Agreement. Options shall be evidenced by written option agreements in such form as the Board shall approve.      16. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law and any stock exchange rules. -8-

  Exhibit 10.45 EMPLOYMENT AGREEMENT      This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the first day of January, 2001, by and between Illinois Superconductor Corporation, a Delaware corporation (the “Company”), and Dennis Craig (the “Employee”). W I T N E S S E T H :      WHEREAS, the Employee is now employed by the Company as the Senior Vice President — Manufacturing;      WHEREAS, the Company wishes to ensure that it will continue to have the benefits of the Employee’s services on the terms and conditions hereinafter set forth; and      WHEREAS, the Employee desires to continue to work for the Company on the terms and conditions hereinafter set forth;      NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto hereby agree as follows:              1. Employment; Term. The Company hereby employs the Employee, and the Employee hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth herein. The term of this Agreement shall commence on the date hereof (the “Effective Date”) and, unless earlier terminated in accordance with Paragraph 5, shall end on December 31, 2002, with the term of employment being that period between the Effective Date and December 31, 2002 (that period, as extended pursuant to the following sentence, the “Term”). As of January 1, 2003, and as of each subsequent January 1st, (each an “Automatic Renewal Date”), unless either party shall have given to the other written notice of non-extension at least sixty (60) days prior to such Automatic Renewal Date, the Term shall, unless earlier terminated in accordance with Paragraph 5, extend automatically for a period of one (1) year to the anniversary of the then otherwise scheduled expiration date of this Agreement. If there is a “Change of Control” (as defined in Paragraph 6(e) below), the Term shall, unless earlier terminated in accordance with Paragraph 5, extend automatically to the second anniversary of the date of the Change of Control, provided that the second anniversary of the date of the Change of Control is later than the last day of the Term as determined without regard to the Change of Control. Certain provisions of this Agreement shall continue in effect after the Term as specifically set forth herein.   --------------------------------------------------------------------------------                2.     Employment.                      (a)  The Employee shall serve as the Company’s Chief Technology Officer. The Employee shall report to the Chief Executive Officer of the Company.                      (b)  The Employee shall have such authority and responsibility as may reasonably be assigned by the Chief Executive Officer or the Board of Directors of the Company (the “Board”).                      (c)  During the period the Employee is employed by the Company, the Employee shall devote the Employee’s normal full business time and attention to the business and affairs of the Company and use the Employee’s best efforts to perform faithfully the duties and responsibilities of the Employee’s position as described herein.              3.     Compensation.                      (a)  The Company shall pay the Employee a base salary (the “Base Salary”) of not less than One Hundred Sixty Thousand Dollars ($160,000) per annum, payable at least monthly, in accordance with the Company’s payroll practices less such deductions as shall be required to be withheld by applicable law and regulations. The Board shall conduct an annual review of the Employee’s Base Salary and Bonus (as defined in Paragraph 3(b)below), but in no event shall the Base Salary be decreased without the consent of the Employee. Any increase in the Base Salary or change in the Bonus shall be in the sole discretion of the Board.                      (b)  Subject to Paragraph 6(c) hereof, for each calendar year completed during the Term, the Employee shall be eligible to receive a bonus (the “Bonus”) of an amount up to 50% of the Base Salary for such year. The amount of the Bonus payable to the Employee for a particular year, if any, shall be based on the accomplishment of corporate and individual performance goals as determined by the Board. The corporate and individual performance goals referenced in the preceding sentence shall be established by the Board and communicated to the Employee before the end of the first quarter of the applicable year. In the event of a disagreement over the attainment of such goals and objectives, the Compensation Committee of the Board shall have final authority to determine the award of the Bonus. The Bonus payable for a particular year, if any, shall be paid no later than March 15th of the following year and may be paid in cash, Company stock or a combination of the two as determined by the Board in its sole discretion.              4.     Benefits. -2- --------------------------------------------------------------------------------                        (a)  The Company agrees to reimburse the Employee for all reasonable and necessary travel, business entertainment and other business expenses incurred by the Employee in connection with the performance of the Employee’s duties under this Agreement. Such reimbursements shall be made by the Company within a reasonable time after submission by the Employee of vouchers in accordance with the Company’s standard policies and procedures.                      (b)  The Employee shall be entitled to participate in any and all medical insurance, group health, disability insurance, pension and other similar benefit plans which are made generally available by the Company to its senior executives, which shall not be less favorable than those available to any other group of employees of the Company. The Company, in its sole discretion, may at any time amend or terminate its benefit plans or programs.                      (c)  The Employee shall be entitled to receive four (4) weeks of annual paid vacation in accordance with the Company’s vacation policy for its senior executives. The Employee shall be entitled to all paid holidays the Company makes available to its employees.              5.     Termination. The Employee’s employment hereunder may be terminated prior to the end of the Term under the following circumstances:                      (a)  Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.                      (b)  Total Disability. The Company may terminate the Employee’s employment hereunder at any time after the Employee’s “Total Disability.” “Total Disability” means (i) the Employee becomes entitled to receive disability benefits under the Company’s long-term disability plan, or, in the absence of such a plan, (ii) the Employee’s inability to perform the duties and responsibilities contemplated under this Agreement for a period of more than one hundred eighty (180) consecutive days due to physical or mental incapacity or impairment. Such termination shall become effective five (5) business days after the Company gives notice of such termination to the Employee, or to the Employee’s spouse or legal representative (in case of mental incapacitation).                      (c)  Termination by the Company With or Without Cause. The Company may terminate the Employee’s employment hereunder with or without Cause at any time after the Company provides thirty (30) days’ written notice (or a shorter period of time, to be determined in good faith by the Board to be essential to prevent serious damage to the -3- --------------------------------------------------------------------------------   Company) to the Employee to such effect. The term “Cause” shall mean any of the following: (i) willful malfeasance or willful misconduct by the Employee in connection with the Employee’s employment; (ii) the Employee’s gross negligence in performing any of the Employee’s duties under this Agreement; (iii) the Employee’s conviction of, or entry of a plea of guilty to, or entry of a plea of nolo contendere with respect to any crime other than a traffic violation or infraction which is a misdemeanor; (iv) the Employee’s willful and continuing breach of any written policy applicable to all employees adopted by the Company concerning conflicts of interest, political contributions, standards of business conduct or fair employment practices, procedures with respect to compliance with securities laws or any similar matters, or adopted pursuant to the requirements of any government contract or regulation; or (v) any other material breach by the Employee of this Agreement after the Company provides written notification to the Employee of such breach and the Employee fails within five (5) days of receipt of such notification to cure the circumstances which gave rise to such breach.                      (d)  Termination by the Employee With or Without Good Reason. The Employee’s employment hereunder may be terminated by the Employee as specified below with, or upon thirty (30) days’ prior notice without, Good Reason. For purposes of this Agreement, “Good Reason” means any of the following, without the consent of the Employee: (i) any change in, or diminution of, the Employee’s duties or responsibilities that is inconsistent in any material and adverse respect with the Employee’s duties and responsibilities as contemplated under Section 2 of this Agreement, provided that neither a change in the Employee’s title nor a change in the Employee’s duties and responsibilities alone, without a corresponding material adverse change in the Employee’s duties or other responsibilities shall constitute Good Reason, and provided further that changes in reporting relationships of other employees to the Employee, including those which occur as a result of strategic business developments such as the sale of a business unit or the outsourcing of a business function, shall not be construed as “adverse” to the Employee for purposes of determining whether Good Reason exists; (ii) any reduction of the Employee’s Base Salary or maximum Bonus level; (iii) any other material breach by the Company of this Agreement after the Employee provides written notification to the Company of such breach and the Company fails within thirty (30) days of receipt of such notification to cure the circumstances which gave rise to such breach, or (iv) any requirement by the Company that the Employee relocate the Employee’s principal office (currently located in Mount Prospect, Illinois) to a location more than thirty-five (35) miles from the Employee’s principal office at the time the Company makes such request. Notwithstanding the foregoing, no act or omission by the Company shall constitute Good Reason hereunder unless the Employee gives the Company written notice thereof within thirty (30) days after he has actual knowledge of such act or -4- --------------------------------------------------------------------------------   omission, and the Company fails to remedy such act or omission within thirty (30) days after receiving such notice.                      6.     Compensation Following Termination Prior to the End of the Term. In the event that the Employee’s employment hereunder is terminated prior to the end of the Term, the Employee shall be entitled only to the following compensation and benefits upon such termination:                              (a)  Termination by Reason of Death or Total Disability. In the event that the Employee’s employment is terminated prior to the expiration of the Term by reason of the Employee’s death or Total Disability, pursuant to Paragraph 5(a) or 5(b) hereof, respectively, the Employee (or the Employee’s spouse or estate, as the case may be) shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices and any unpaid Bonus previously awarded by the Board in respect of a completed calendar year pursuant to Paragraph 3(b) hereof;     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof; and     iii.   the benefits to which the Employee and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements.                              (b)  Termination by the Company Without Cause or Termination by the Employee With Good Reason. In the event that the Employee’s employment is terminated by the Company without Cause pursuant to Paragraph 5(c) hereof, or by the Employee with Good Reason pursuant to Paragraph 5(d) hereof, the Employee shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices and any unpaid Bonus previously awarded by the Board pursuant to Paragraph 3(b) hereof; -5- --------------------------------------------------------------------------------     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof;     iii.   subject to Paragraph 6(e) hereof, continued payment of the Base Salary (as determined under Paragraph 3(a) hereof) in accordance with the Company’s standard payroll practices for one (1) year following the date of such termination; provided that such continued payments shall be offset by any salary, wage, or similar payments paid or payable, directly or indirectly, to the Employee during the year following the date of termination from another employer or recipient of the Employee’s services (such payments being determined without regard to any individual waivers or other similar arrangements).     iv.   the benefits to which the Employee and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements; and     v.   subject to Paragraph 6(e) hereof, continuation of health and insurance benefits (other than disability insurance benefits) for one (1) year following the date of such termination on the same terms and conditions as in effect immediately prior to the termination; provided that the Company shall not be required to provide benefits otherwise required by this clause (v) after such time as the Employee becomes entitled to receive benefits of the same type from another employer or recipient of the Employee’s services (such entitlement being determined without regard to any individual waivers or other similar arrangements).                                 (c)  Termination by the Company for Cause or Termination by the Employee Without Good Reason. In the event that the Employee’s employment is terminated prior to the expiration of the Term of this Agreement by the Company for Cause pursuant to Paragraph 5(c) hereof or by the Employee without Good Reason pursuant to Paragraph 5(d) hereof, the Employee shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices;     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof; and -6- --------------------------------------------------------------------------------     iii.   the benefits to which the Employee and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements. Notwithstanding the foregoing, in no event shall any unpaid Bonus previously awarded by the Board pursuant to Paragraph 3(b) hereof be paid following a termination by the Company for Cause pursuant to Paragraph 5(c) hereof or by the Employee without Good Reason pursuant to Paragraph 5(d) hereof.                                 (d)  Termination due to Company’s Notice of Non-Extension. In the event that during the Term the Company provides the Employee with a notice of non-extension as described in Section 1 hereof, upon the termination of the Employee’s employment by the Company pursuant to such notice, the Employee shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices and any unpaid Bonus previously awarded by the Board pursuant to Paragraph 3(b) hereof;     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof;     iii.   continued payment of the Base Salary (as determined under Paragraph 3(a) hereof) in accordance with the Company’s standard payroll practices for six (6) months following the date of such termination; provided that such continued payments shall be offset by any salary, wage, or similar payments paid or payable, directly or indirectly, to the Employee during the year following the date of termination from another employer or recipient of the Employee’s services (such payments being determined without regard to any individual waivers or other similar arrangements);     iv.   the benefits to which the Employee and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements; and -7- --------------------------------------------------------------------------------     v.   continuation of health and insurance benefits (other than disability insurance benefits) for six (6) months following the date of such termination on the same terms and conditions as in effect immediately prior to the termination; provided that the Company shall not be required to provide benefits otherwise required by this clause (v) after such time as the Employee becomes entitled to receive benefits of the same type from another employer or recipient of the Employee’s services (such entitlement being determined without regard to any individual waivers or other similar arrangements).                                 (e)  Termination Upon or Following a Change of Control. If there is a “Change of Control” (as defined below) and the Employee’s employment is terminated by the Company without Cause or by the Employee with Good Reason prior to the expiration of the Term of this Agreement and within two (2) years following a Change of Control, the words “two (2) years” shall replace the words “one (1) year” in clauses (iii) and (v) of Paragraph 6(b). For purposes of this Agreement, a Change of Control shall be deemed to have occurred if:   i.   the stock of the Company ceases to be registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended; or     ii.   the stockholders of the Company approve a definitive agreement (A) to merge or consolidate the Company with or into another corporation other than a majority-owned subsidiary of the Company, pursuant to which (x) the Company is not the surviving or resulting entity or (y) the persons who were the members of the Board prior to such approval do not represent a majority of the directors of the surviving, resulting or acquiring entity or the parent thereof, or (B) to sell or otherwise dispose of all or substantially all of the Company’s assets; or     iii.   during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board.                                 (f)  No Other Benefits or Compensation. Except as may be specifically provided under this Agreement or under the terms of any incentive compensation, employee benefit or fringe benefit plan applicable to the Employee at the time of the termination -8- --------------------------------------------------------------------------------   of the Employee’s employment prior to the end of the Term, the Employee shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to any future period after such termination.                                 (g)  Waiver of Personal Liability. To the extent permitted by applicable law, Executive hereby acknowledges that he shall have recourse only to the Company (and its successors-in-interest) with respect to any claims he may have for compensation or benefits arising in connection with his employment, whether or not under this Agreement or under any other plan, program, or arrangement, including, but not limited to any agreement relating to the grant or exercise of stock options or other equity rights in the Company. To the extent permitted by applicable law, the Executive hereby waives any such claims for compensation, benefits and equity rights against officers, directors, stockholders or other representatives in their personal or separate capacities.                        7.     Confidentiality, Ownership, and Covenants of Non-Competition and Non-Solicitation.                                 (a)  Confidentiality. The Employee recognizes that the Company’s business interests require the fullest practical protection and confidential treatment of all information not generally known within the relevant trade group or by the public, including all documents, writings, memoranda, business plans, illustrations, designs, plans, processes, programs, inventions, computer software, reports, sources of supply, customer lists, supplier lists, trade secrets and all other valuable or unique information and techniques acquired, developed or used by the Company relating to its businesses, operations, employees and customers (hereinafter collectively termed “Protected Information”). The Employee expressly acknowledges and agrees that Protected Information constitutes trade secrets and confidential and proprietary business information of the Company. No Protected Information shall include information which is or becomes part of the public domain through no breach of this Agreement by the Employee. The Employee agrees that Protected Information is essential to the success of the Company’s business, and it is the policy of the Company to maintain as secret and confidential Protected Information which gives the Company a competitive advantage over those who do not know the Protected Information and is expressly and implicitly protected by the Company from unauthorized disclosure. Accordingly, the Employee agrees to keep secret Protected Information and to treat confidentially and not to knowingly permit any other entity to, directly or indirectly, appropriate, divulge, disclose or otherwise disseminate to any other entity nor use in any manner for the Employee, and not to intentionally use or aid others in using any such Protected Information in competition with the Company or its Affiliates except to the extent that disclosure is required by law; provided, however, that the Employee shall provide the -9- --------------------------------------------------------------------------------   Company with notice as far in advance of any required disclosure as is practicable in order for the Company to obtain an order for the assurance that any information required to be disclosed will be treated as Protected Information and the Employee shall use all reasonable efforts to cooperate with the Company in connection therewith and in furtherance thereof. The obligation of non-disclosure of information shall continue to exists for so long as such information remains Protected Information. For purposes of this Agreement, trade secrets are subject to the protection of the Illinois Trade Secret Act. The provisions of this Paragraph 7(a) are not intended to supersede or limit the effect of any prior confidentiality or proprietary rights agreements previously executed by the Employee including the Confidential Information, Proprietary Rights and Non-Competition Agreement between the Company and the Employee, a copy of which is attached hereto as Exhibit B. However, if there is any conflict between the terms and conditions of this Agreement and the Confidential Information, Proprietary Rights and Non-Competition Agreement attached hereto as Exhibit B, then the terms and conditions of this Agreement, as interpreted by the Board, shall govern.                                 (b)  Ownership. The Employee hereby assigns to the Company all of the Employee’s right (including patent rights, copyrights, trade secret rights, and all other rights throughout the world), title and interest in and to Inventions, whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by the Employee, either alone or jointly with others, during the course of the performance of services for the Company. The Employee shall also assign to, or as directed by, the Company, all of the Employee’s right, title and interest in and to any and all Inventions, the full title to which is required to be in the United States government by a contract between the Company and the United States government or any of its agencies. For the purpose of this Agreement, the term “Inventions” collectively refers to any and all inventions, trade secrets, improvements, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs, and techniques regarding any of the foregoing. The provisions of this Paragraph 7(b) are not intended to supersede or limit the effect of any prior confidentiality or proprietary rights agreements previously executed by the Employee including the Confidential Information, Proprietary Rights and Non-Competition Agreement between the Company and the Employee, a copy of which is attached hereto as Exhibit B. However, if there is any conflict between the terms and conditions of this Agreement and the Confidential Information, Proprietary Rights and Non-Competition Agreement attached hereto as Exhibit B, then the terms and conditions of this Agreement, as interpreted by the Board, shall govern. -10- --------------------------------------------------------------------------------                                   (c)  Covenants of Non-Competition and Non-Solicitation. The Employee acknowledges that the Employee’s services pursuant to this Agreement are unique and extraordinary, that the Company will be dependent upon the Employee for the development and growth of its business and related functions, and that the Employee will continue to develop personal relationships with significant customers of the Company and to have control of confidential information concerning, and lists of customers of, the Company. The Employee further acknowledges that the business of the Company is international in scope and cannot be confined to any particular geographic area of the United States. For the foregoing reasons, the Employee covenants and agrees that at no time during the Restriction Period (as defined below) shall the Employee either alone or as a stockholder, partner, consultant, owner, agent, creditor, co-venturer of any other entity or in any other capacity, directly or indirectly, engage in the Business (as defined below); provided that nothing herein shall prohibit the Employee from being an owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Employee does not actively participate in the business of such corporation. For the purpose of this Paragraph 7(c), the “Business” means the business of developing, manufacturing and marketing high temperature superconductivity products designed to enhance the quality, capacity, coverage and flexibility of cellular, personal communication services and other wireless telecommunications services.                        For the reasons acknowledged by the Employee at the beginning of this Paragraph 7(c), the Employee additionally acknowledges, covenants, and agrees that at no time during the Term nor during the period commencing on the date of termination of the Employee’s employment with the Company and ending the day following the first anniversary of the date of termination of the Employee’s employment with the Company for any reason, shall the Employee, directly or indirectly, either alone or as a stockholder, partner, consultant, adviser, owner, agent, creditor, co-venturer of any other entity, or in any other capacity, (i) knowingly sell to or solicit sales of products produced in the Business to any customer or account which was a customer or account of the Company during the Employee’s employment with the Company, or (ii) (other than through general, non targeted advertisements) intentionally solicit, hire, knowingly attempt to solicit or hire, or knowingly participate in any attempt to solicit or hire any person who was an employee of the Company or any of its Affiliates during the Employee’s employment with the Company.                        For purposes of this Agreement, the Restriction Period means the Term and the period commencing on the date of termination of the Employee’s employment with the Company and ending the day following the first anniversary of the date of termination of the Employee’s employment with the Company for any reason; provided that the Company may -11- --------------------------------------------------------------------------------   elect to extend the Restriction Period for up to one (1) year beyond the first anniversary of the date of termination of the Employee’s employment with the Company if (A) the Company provides written notice of its intent to so extend the Restriction Period at least six (6) months prior to the date on which the Restriction Period would otherwise expire and (B) the Company pays to the Employee the Base Salary, without offset for salary, wages or similar payments from another employer during such extended period, at the rate such Base Salary was being paid to the Employee at the time of termination, for one (1) year beyond the period for which the Company would otherwise be obligated to continue the Base Salary pursuant to this Agreement in the absence of the extension of the Restriction Period.                        (d)  Equitable Remedies. The Employee acknowledges, covenants and agrees that, in the event the Employee shall violate any provisions of this Section 8, the Company will have the right to enforce this Agreement by all remedies that may be available at law or in equity.                        8.     Assignability; Binding Effect. This Agreement is a personal contract calling for the provision of unique services by the Employee, and the Employee’s rights and obligations hereunder may not be sold, transferred, assigned or pledged. In the event of any attempted assignment or transfer of rights hereunder by the Employee contrary to the provisions hereof (other than as may be required by law), the Company will have no further liability for payments hereunder. The rights and obligations of the Company hereunder will be binding upon and run in favor of the successors and assigns of the Company and, in connection therewith, and notwithstanding any other provision of this Agreement to the contrary, in the event that there is such a successor or assign, on and after the date of such succession or assignment, “Company” shall thereupon instead refer to such successor or assign, as the case may be. This Agreement does not create, and shall not be interpreted or construed to create, any rights enforceable by any person not a party to this Agreement, except as specifically provided herein.                        9.     Entire Agreement. This Agreement represents the entire agreement between the parties concerning the Employee’s employment with the Company and supersedes all prior negotiations, discussions, understandings and agreements, whether written or oral, between the Employee and the Company relating to the subject matter of this Agreement. All prior employment agreements, between the Company and the Employee shall remain in full force and effect with respect all matters addressed in such prior employment agreements occurring on or before the effective date of this Agreement.                        10.     Amendment or Modification, Waiver. No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing signed by -12- --------------------------------------------------------------------------------   the Employee and by a duly authorized officer of the Company other that the Employee. No waiver by any party to this Agreement of any breach by another party of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.                        11.     Notices. All notices, demands or other communications of any kind to be given or delivered under this Agreement shall be in writing and shall be deemed to have been properly given if (a) delivered by hand, (b) delivered by a nationally recognized overnight courier service, (c) sent by registered or certified United States Mail, return receipt requested and first class postage prepaid, or (d) facsimile transmission followed by a confirmation copy delivered by a nationally recognized overnight courier service. Such communications shall be sent to the parties at their respective addresses as follows:       If to the Employee   Dennis Craig -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------   If to the Company:   Illinois Superconductor Corporation     451 Kingston Court     Mount Prospect, IL 60056     Attention: Vice President of Human Resources   with a copy to:   Barry M. Abelson, Esquire     Pepper Hamilton LLP     3000 Two Logan Square     18th & Arch Streets     Philadelphia, PA 19103-2799     FAX: 215-981-4750 Either party may change such address for delivery to the other party by delivery of a notice in conformity with the provisions of this Section specifying such change. Notice shall be deemed to have been properly given (i) on the date of delivery, if delivery is by hand, (ii) three (3) days after the date of mailing if sent by certified or registered mail, (iii) one (1) day after date of delivery to the overnight courier if sent by overnight courier, or (iv) the next business day after the date of transmission by facsimile. -13- --------------------------------------------------------------------------------                          12.     Severability. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable shall not be affected, and each provision of this Agreement shall be validated and shall be enforced to the fullest extent permitted by law. If for any reason any provision of this Agreement containing restrictions is held to cover an area or to be for a length of time that is unreasonable or in any other way is construed to be too broad or to any extent invalid, such provision shall not be determined to be entirely null, void and of no effect; instead, it is the intention and desire of both the Company and the Employee that, to the extent that the provision is or would be valid or enforceable under applicable law, any court of competent jurisdiction shall construe and interpret or reform this Agreement to provide for a restriction having the maximum enforceable area, time period and such other constraints or conditions (although not greater than those currently contained in this Agreement) as shall be valid and enforceable under the applicable law.                        13.     Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.                        14.     Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience of reference, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.                        15.     Withholding Taxes. All salary, benefits, reimbursements and any other payments to the Employee under this Agreement shall be subject to all applicable payroll and withholding taxes and deductions required by any law, rule or regulation of any federal, state or local authority. [THIS SPACE INTENTIONALLY LEFT BLANK] -14- --------------------------------------------------------------------------------                          16.     Applicable Law/ Jurisdiction. The laws of the State of Illinois shall govern the interpretation, validity and performance of the terms of this Agreement, without reference to rules relating to conflicts of law. The parties select and irrevocably submit to the exclusive jurisdiction of a court of competent jurisdiction located in the State of Illinois for any action to enforce, construe or interpret this Agreement. The Employee and the Company each hereby waives any objection to venue in such state on the basis of forum non-conveniens.                        IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first above written.           ILLINOIS SUPERCONDUCTOR CORPORATION     By:   /s/ George Calhoun       --------------------------------------------------------------------------------       GEORGE CALHOUN       Chief Executive Officer         /s/ Dennis Craig       --------------------------------------------------------------------------------       DENNIS CRAIG -15-

Exhibit 10.1 EMPLOYMENT AGREEMENT   This Employment Agreement (the "Agreement") is made as of the 28th day of June, 2001, by and between MOTO PHOTO, INC. a Delaware corporation ("Employer"), and LAWRENCE P. DESTRO ("Employee"). This Agreement is based on the following understandings: a. Employer is the franchisor and operator of retail stores providing one hour photo processing, portraiture, and related imaging services and merchandise. Employer's system (the "System") of franchised and Employer-owned stores has approximately 321 stores in the United States and approximately 36 in Canada. b. Employer wishes to employ Employee to secure his leadership of Employer in meeting the competitive and other pressures facing Employer and its franchisees. c. Employer and Employee desire to enter into an employment agreement upon the terms and conditions set forth in this Agreement. The parties agree as follows: 1. Term. The term of this Agreement ("the Term") shall be from July 1, 2001 through December 31, 2002, unless this Agreement is sooner terminated in accordance with Section 11 of this Agreement. Commencing January 1, 2002, the Term shall be extended so that it shall always be for a period of one (1) year until and unless either party gives the other party a one-year notice to terminate Employee's employment under this Agreement or Employee's employment is sooner terminated in accordance with Section 11 of this Agreement. For example, on February 15, 2002, the Term of this Agreement shall be for one (1) year through February 14, 2003. 2. Duties . Employer employs Employee as Chief Executive Officer, and Employee accepts such employment upon the terms and conditions specified in this Agreement. As Chief Executive Officer, Employee will report to the Board of Directors of Employer. He shall have the following duties:   2.1 Employee shall be responsible for establishing the strategic direction of Employer and Employer's franchise system, establishing operating goals and corporate policies, overseeing Employer's operations, and hiring and discharging senior management.   2.2 Employee shall perform such other reasonable duties consistent with those of a senior corporate executive as directed from time to time by the Board of Directors. 3 . Compensation.   3.1 Base Compensation. As base compensation for Employee's services to Employer during the Term, Employer shall pay Employee a salary at the rate of Two Hundred Fifty Thousand Dollars ($250,000) per employment year (April 1 through March 31), payable in such manner as Employer pays its other executives. 3.2 Prepaid Bonus. Upon execution of this Agreement by both parties, Employer shall pay Employee a bonus of Thirty Thousand Dollars ($30,000) in lieu of an incentive bonus for fiscal year 2001. 3.3 Guaranteed Bonus. Employer shall pay Employee minimum guaranteed bonuses which shall be credited against the amount of the incentive bonuses, if any, to be paid as provided in Section 3.4 of this Agreement. In order to receive any given bonus, Employee must be in Employer's employ on the date specified. The guaranteed bonuses shall be as follows: 3.3.1 On June 30, 2002, Twenty-Five Thousand Dollars ($25,000) to be applied against the incentive bonus for fiscal year 2002. 3.3.2 On December 31, 2002, Twenty-Five Thousand Dollars ($25,000) to be applied against the incentive bonus for fiscal year 2002. 3.3.3 On June 30, 2003, Twenty-Five Thousand Dollars ($25,000) to be applied against the incentive bonus for fiscal year 2003) 3.4 Incentive Bonus. Employer shall pay Employee incentive bonuses as follows, provided Employee is in Employer's employ on the date the bonus is to be paid: 3.4.1 Bonus for Operating Results: The incentive bonus for operating results shall be based on the pre-tax profit of Employer. "Pre-tax profit" shall mean the profit, if any, reflected in the audited financial statements of Employer for a given fiscal year but shall exclude charges, approved by the Compensation Committee of Employer's Board of Directors (the "Compensation Committee"), associated with major changes in the strategy of Employer, including, but not limited to, reorganization charges and sale of Employer-owned stores. For Employee to receive the bonus, the pre-tax profit must be at least ninety percent (90%) of the "bonus floor" specified in this Section 3.4.1; Employer will pay an additional bonus of five percent of profits that exceed the bonus floor. For fiscal year 2002, the bonus floor is a pre-tax profit of Five Hundred Thousand Dollars ($500,000) and the bonus is Twenty-Five Thousand Dollars ($25,000). For fiscal year 2003, the bonus floor is One Million Five Hundred Thousand Dollars ($1,500,000) and the bonus is Seventy-Five Thousand Dollars ($75,000). There is no cap on the amount of bonus that Employee can earn. 3.4.2 Bonus for Improvement in System Sales Trends: The bonus for improvement in the System sales trends shall be based on the year-over-year comp store sales trends of the System, as reflected in the operating statements for Employer-owned stores and in the royalty reports for franchised stores. For Employee to receive the bonus, the sales trend must be equal to or better than the percentage specified. For fiscal year 2002, the year-over-year sales trend must be flat or better and the bonus is Twenty-Five Thousand Dollars ($25,000). For fiscal year 2003, the year-over-year sales trend must be positive three percent (3%) or better and the bonus is Fifty Thousand Dollars ($50,000). 3.4.3 Bonus for New Concept/Strategy Development: The Compensation Committee may, at its discretion, grant Employee additional bonuses for successful new concept/strategy development for Employer and the System. The incentive bonus, if any, shall be paid no later than March 15 of each year for the preceding year. 3.5 Annual Review. By April 1 of each year during the Term, commencing April 1, 2002, the Compensation Committee will review the compensation of Employee for the subsequent employment year. The base compensation may be increased and the bonus program may be amended or eliminated; provided, however, that the bonus amounts set for fiscal years 2002 and 2003 shall be no lower than those specified in Sections 3.3 and 3.4. 3.6 Relocation Expenses. Employer shall reimburse Employee for his relocation expenses as set forth in Exhibit A attached to and made part of this Agreement. 3.7 Stock Options. The Compensation Committee has authorized the grant of stock options as of the first day of the Term, as follows: Employer shall grant Employee two options to purchase a total of eight hundred thousand (800,000) shares of Employer's voting common stock at an exercise price equal to the greater of twenty cents ($.20) per share or the fair market value on the date of grant. One option shall be an incentive stock option for four hundred thousand (400,000) shares under Employer's 1992 Performance and Equity Incentive Plan (the "Plan"). It shall vest as to fifty percent of the shares on July 1, 2001 or when Employee signs this Agreement, whichever is later ("the anniversary date"), and as to the other fifty percent on the anniversary date in 2002. The other option, for four hundred thousand (400,000) shares, shall be non-qualified and granted outside of the Plan. It shall vest as to fifty percent of the shares on the anniversary date in 2003 and as to the other fifty percent of the shares on the anniversary date in 2004. Each option shall expire five years after the date of grant. The incentive option shall also provide that, if there is a Change in Control (as defined in Section 10 of this Agreement) during the first twelve (12) months of the Term, the option vests as to the unexercised shares. The non-qualified option shall provide that, if there is a Change in Control of Employer after the first twelve (12) months of the Term, the option vests as to all shares. 4. Restrictive Covenants. 4.1 Duties. During the Term, Employee shall devote his best efforts and full time, subject to Section 5, to advance the business and welfare of Employer. Employee shall not take any action against the best interest of Employer and he shall pursue no other business interests during the term of this Agreement that conflict with his employment with the Employer.   4.2 Covenant Not to Compete. Employee acknowledges that Employer's activities are international in scope. Employee therefore covenants that, during the Term and, except as provided in this Agreement, for a period of two (2) years after the termination of Employee's employment with Employer, its successors, and/or assigns, or cessation of payment to Employee under this Agreement, whichever is later, Employee will not, directly or indirectly, engage or be interested (as principal, agent, manager, employee, consultant, owner, partner, officer, director, stockholder, trustee or otherwise) in any entity engaged in a business which competes in a material manner with Employer within a three mile radius of any business location of Employer or any of its subsidiaries, affiliates, or franchisees. Employee's ownership of less than two percent (2%) of the outstanding voting stock of any publicly held corporation, or any other entity specifically authorized by the Board of Directors of Employer, shall not constitute a violation of this Section 4.   4.2.1 Notwithstanding the provisions of Section 4.2, if Employee's employment with Employer is terminated by Employer without cause or by Employee with good reason, then the post-termination period of the covenant against competition set forth in Section 4.2 shall apply for only one (1) year after termination of Employee's employment.. For purposes of this Section 4.2.1, the term "good reason" shall mean that:   (a) Employer has relocated its corporate headquarters more than one hundred (100) miles from Dayton, Ohio;   (b) Employer has directed Employee to take an unlawful action or omission that has a reasonable probability of exposing Employee and/or Employer to criminal liability and Employer has not rescinded its request within thirty (30) days after Employee gives Employer written notice of his unwillingness to take the action/omission and his reasons for such unwillingness;   (c) Without Employee's consent, Employer has substantially decreased Employee's responsibilities and/or has reduced Employee's base compensation (unless Employer has made similar reductions in the base compensation of Employer's other senior executives); and/or   (d) Employer fails to comply with any material provision of this Agreement and has not cured such failure within thirty (30) days after Employee has given written notice of such non-compliance to Employer. 4.3 Confidentiality. During the term of this Agreement and thereafter, Employee shall not at any time, other than for the benefit of the Employer: (i) divulge, furnish, disclose, or make accessible to any person, firm, or corporation, or use for his own purposes, any Confidential Information; (ii) make or cause to be made any copies, facsimiles, or other reproductions of any Confidential Information without Employer's express written consent; or (iii) remove any Confidential Information from Employer's premises or fail or refuse to surrender (notwithstanding the failure of Employer to make demands for such materials) the same to Employer immediately upon termination of Employee's employment with Employer or at any time upon Employer's request. For purposes of this Agreement, the term "Confidential Information" shall mean (a) any information with respect to Employer's accounts, plans, business policies, software, know-how, trade secrets, customers, franchisees, prospects, mailing lists, suppliers, pricing policies or rates, marketing techniques, or any other information which may now or in the future be considered confidential or proprietary information of Employer and (b) manuals, files, records, software, memoranda, correspondence, drawings, designs, or other writings belonging to or in the possession of Employer or which may be produced by or come into Employer's possession in the course of Employee's employment with Employer. "Confidential Information" shall include all Confidential Information, regardless of the form in which it is communicated to, made available to, or accessed by Employee, whether verbal, in writing, in electronic format, on the Internet, on Employer's intranet/extranet, or otherwise. 4.4 Solicitation of Employer's Employees. For a period of two (2) years after the termination of Employee's employment with Employer, its successors, or assigns, or cessation of payment to Employee under this Agreement, whichever is later, Employee shall not (i) employ or attempt to employ directly or indirectly, personally or through any entity with which Employee may be associated (as principal, agent, manager, employee, consultant, owner, partner, officer, director, stockholder, trustee, or otherwise) any employee of Employer, its subsidiaries, and/or affiliates, or (ii) induce any employee of any franchisee of Employer to leave the employment of any franchisee. 4.5 Equitable Relief. The parties acknowledge and agree that a breach of this Section 4 cannot be compensated for by monetary damages and that any remedy at law is inadequate. Accordingly, Employee agrees that, in the event of a breach of any restrictive covenant set forth in this Agreement, Employer may seek and obtain a temporary restraining order, preliminary injunction, and permanent injunction restraining Employee from violating Section 4 of this Agreement, in addition to any other legal relief available to Employer. For the purposes of this provision, the parties confer jurisdiction upon the courts located in Montgomery County, Ohio, and agree on venue in Montgomery County, Ohio. Employee specifically consents to personal jurisdiction in such courts, regardless of where he may be domiciled or resident at the time any action is brought. 4.6 Reformation. If any provision of this Section 4 should be determined by the court of competent jurisdiction to be unenforceable by reason of its being for too great a period of time, for too large a geographic area, and/or for too great a range of activities, it shall be reformed to extend over only the maximum period of time, geographic area, and/or range of activities as to which it may be enforceable. 4.7 Effect of Termination. Termination or expiration of this Agreement for any reason shall not affect any obligations of Employee under this Section 4. 5. Vacation. Employee shall be entitled to vacation in accordance with Employer's policy, to be taken at such times as determined by Employee, subject to Employer's prior approval and to Employee's giving sufficient notice so that Employer's business may operate effectively in Employee's absence. Notwithstanding the foregoing, for any year during the Term that Employer's policy would provide for Employee to have three weeks of vacation, Employee shall be entitled to four weeks of vacation. Notwithstanding Employer policy, Employee shall be entitled to take vacation during the first year of the Term. 6. Health and Insurance Plan; Fringe Benefits. Employee, his wife, and his children shall be entitled to participate in all plans or agreements maintained by Employer relating to health insurance, subject to the terms and conditions of such plans in effect from time to time. Employee shall also be entitled to all other fringe benefits provided senior officers of Employer, including participation in Employer's 401(k) plan in accordance with Employer's policy; provided, however, that Employee's automobile allowance shall be determined as provided in Section 8 of this Agreement. In addition, Employer shall pay for the following: 6.1 Employer shall pay Employee's current COBRA coverage until Employee and his family are eligible for coverage under Employer's health insurance plan. 6.2 Employer shall pay for a physical examination for Employee, at a cost not to exceed $1,500 of expenses unreimbursed by Employer's health plan, once every twelve months during the Term. 7. Reimbursement for Expenses. Employer shall reimburse Employee for all reasonable expenses incurred on behalf of Employer in line with Employer policies. 8. Automobile. So long as Employee is employed by Employer, Employer shall furnish Employee an automobile allowance of $675 per month, subject to Employer's policy. Employer shall reimburse Employee for auto-related expenses in accordance with Employer's policy. 9. Notice. Any notice required by this Agreement shall be in writing and shall be delivered by certified mail, courier service, or in person to the parties at the following addresses unless and until a different address has been designated by written notice to the other party: Employer: Moto Photo, Inc. 4444 Lake Center Drive Dayton, Ohio 45426 Attn: Corporate Counsel   Employee: Lawrence P. Destro 110 Rogers Way Duxbury, MA 02332 Notices shall be deemed to have been received as follows: by personal delivery -- at the time of delivery; by delivery service -- on the next business day following the date on which the notice was given to the delivery service; and by certified mail -- three days after the date of mailing. 10. Change in Control. For the purposes of this Agreement, "Change in Control" means that: 10.1 In excess of forty-nine percent (49%) of Employer's outstanding shares of voting common stock has been acquired other than directly from Employer in exchange for cash or property by any person; or 10.2 There shall be a merger, consolidation, or other combination of Employer with one or more corporations as a result of which more than forty-nine percent (49%) of the voting stock of the merged, consolidated, or combined corporation is held by former stockholders of the corporations (other than Employer) which are parties to such merger, consolidation, or other combination; or 10.3 Three (3) or more persons meeting the following requirements are elected to the Board of Directors by the stockholders of Employer voting in person or by proxy and fill three (3) Board positions at the same time: 10.3.1 Such persons are not nominated as candidates by the Board of Directors of Employer in proxy statements forwarded to stockholders during any period which covers two consecutive annual stockholders meetings of Employer; and 10.3.2 Such persons so elected are nominated as candidates for the Board of Directors by anyone other than the Board of Directors of Employer or those acting on behalf of the Board. For purposes of this Section 10, the term "person" shall have the same meaning as in Section 13 of the Securities Exchange Act of 1934, as amended, and the term "Employer" includes successors by merger or otherwise. 11. Termination. Employer may terminate Employee's employment under this Agreement, with or without cause, upon written notice to Employee. 11.1 Termination for Cause. If Employee's employment is terminated for cause or if Employee terminates his employment without good reason, Employee shall not be entitled to any severance and all benefits and compensation from Employer shall cease effective with the date of termination. For purposes of this Agreement, the term "cause" means any one or more of the following situations or occurrences: 11.1.1 Dishonesty, embezzlement, fraud, actions involving moral turpitude, or Employee's being convicted of a felony. For purposes of this Section 11.1.1, an action "involving moral turpitude" and/or a "felony" shall have occurred if it, in the sole reasonable judgment of the Board of Directors of Employer: (a) impairs the financial operations of Employer; (b) holds Employer out in a bad light to the public; and/or (c) impedes Employee's ability to function as Chief Executive Officer of Employer, including by reason of his loss of reputation or his having lost the confidence of Employer's employees and/or franchisees. 11.1.2 Gross neglect of duty (following written notice from Employer and fifteen (15) days within which to cure) or gross insubordination by Employee, including the failure to abide by any reasonable and material instructions of Employer; provided, however, that it will not be reasonable if such instructions request or demand actions which would be inconsistent with the duties of a senior corporate executive. In the second instance of gross neglect of duty, Employer shall have no obligation to give Employee written notice and opportunity to cure but may terminate Employee's employment immediately. 11.1.3 Material breach of the provisions of Section 4 of this Agreement. 11.2 Challenge to Termination. Should Employee dispute that his discharge was for cause or that he terminated his employment without good reason, Employee must submit his claim to arbitration in accordance with Section 14 of this Agreement within sixty (60) days after termination of his employment. If the arbitrators determine that the discharge was for cause, or if Employee does not request arbitration within sixty (60) days after the termination of Employee's employment, Employer shall have no liability whatsoever under this Agreement from and after the date of termination. 11.3 Termination Without Cause. If the termination of Employee is without cause or if Employee terminates his employment with good reason, Employer shall be responsible for payment of base compensation as provided in Section 3.1 of this Agreement (at the rate effective upon the date of termination), for the remainder of the Term. In addition, so long as Employer is paying base compensation pursuant to this Section 1.3, Employer shall continue to provide the fringe benefits which Employee was receiving before his termination, including use of suitable office space at Employer's headquarters, secretarial support, and an automobile allowance; provided, however, that Employee shall be responsible for auto-related expenses. Payment of the base compensation amounts shall be made on Employer's pay dates for employees at its corporate headquarters. Payment of compensation and provision of fringe benefits shall be subject to mitigation as provided in Section 13 of this Agreement and to the terms of any applicable health and/or insurance plans of Employer. Employee shall not be entitled to contribute to Employer's 401(k) plan after termination of his employment. 11.4 Termination Upon or Following Change in Control. If this Agreement is terminated without cause upon or following a Change in Control, Employer shall pay Employee the amounts payable (including fringe benefits) under the provisions of Section 11.3 of this Agreement, subject to the provisions of Section 13 of this Agreement; provided, however, that if the Change in Control results from a merger or other consolidation and the survivor corporation terminates this Agreement within one (1) year following the completion of the merger or consolidation, the first One Hundred Fifty Thousand Dollars ($150,000) of the base compensation amounts payable pursuant to Section 11.3 shall not be subject to mitigation. 11.5 Voluntary Termination. Should Employee voluntarily terminate his employment with Employer without good reason, all obligations of Employer shall be extinguished as of the date of termination of employment, but Employee shall remain subject to all of his covenants in Section 4. 12. Death or Disability. If Employee dies during the Term, this Agreement shall terminate as if Employee had voluntarily terminated his employment; provided, however, that, for the balance of the Term (calculated as of the day before Employee's death) or for six (6) months following Employee's death, whichever is longer, Employer shall pay Employee's spouse or his estate, as applicable, Employee's then-current base compensation as provided in Section 3.1 of this Agreement and the benefits contemplated by Sections 6 and 8 of this Agreement. For purposes of Exhibit A to this Agreement, Employee's death shall not constitute a "voluntary termination." If Employee is disabled and cannot perform his duties under this Agreement, he will receive base compensation for the first six (6) months of continuous disability at the rate in effect at the time the disability began. After six (6) months of continuous disability, Employee will receive seventy percent (70%) of the compensation he was receiving at the time the disability began until the earlier of death, Employee's no longer being disabled, or the end of the Term. Any amounts owed under this provision will be reduced by amounts paid to Employee under Employer's long term disability insurance program. ` 13. Mitigation. In the event of termination of this Agreement, Employee shall use his best efforts to mitigate his damages, if any, by seeking suitable employment for which he is qualified. Except as otherwise provided in this Agreement, any payments due Employee under Section 11 of this Agreement will be reduced by any salary, consulting fees or other income (with the exception of investment income) and by any fringe benefits received by Employee from a third party during the applicable period. For purposes of this Section 13, "suitable employment" shall mean employment as a senior executive. 14. Arbitration. In the event of any controversy or claim arising out of or relating to this Agreement, including statutory claims arising under state or federal laws (the "Claim"), the parties shall submit the matter to non-binding mediation before a mediator to whom both parties have agreed. If the parties fail to reach a mutually acceptable solution at mediation, then, except, at Employer's option, as provided in Section 4.6 of this Agreement, the Claim shall be settled by arbitration in Dayton, Ohio in accordance with the Commercial Rules of Arbitration of the American Arbitration Association and shall not be litigated in court. The arbitrator shall be chosen by Employee by drawing a name from a group of names prepared from a list of the members of the National Academy of Arbitrators residing within one hundred (100) miles of Dayton, Ohio; provided, however, that Employee not know or have had any previous contact or relationship with the arbitrator. The decision of the arbitrator shall be final and binding upon all parties to this Agreement and their successors and assigns. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The expenses of mediation and arbitration shall be borne equally by the parties. 15. Governing Law. This Agreement takes effect upon its execution by Employer in Ohio. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio governing agreements to be performed wholly within Ohio and without reference to Ohio's conflict of laws provisions. 16. Assignability. This Agreement is personal to Employee, who shall have no right to assign it. The terms of this Agreement shall be binding upon, shall inure to the benefit of, and shall be enforceable by Employer, its successors, and assigns. 17. Waiver. The waiver by either party of any breach of any provision of this Agreement shall not be construed as or constitute a continuing waiver of breach of that provision or a waiver of any breach of any other provision of this Agreement. 18. Severability. Except as expressly provided to the contrary in this Agreement, each portion, section, part, term, and/or provision of this Agreement shall be considered severable. If, for any reason, any section, part, term, and/or provision in this Agreement is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation by a court or agency having valid jurisdiction, such invalidity shall not impair the operation of, or have any other effect upon, such other portions, sections, parts, terms, and/or provisions of this Agreement as may remain otherwise intelligible. The latter shall continue to be given full force and effect and bind the parties to this Agreement, and the invalid portions, sections, parts, terms, and/or provisions shall be deemed not to be a part of this Agreement. 19. Complete Agreement; Modification. This Agreement and the Exhibit(s) to it, if any, constitute the entire, full, and complete agreement between Employer and Employee concerning the subject matter of this Agreement and supersede all prior agreements, whether written or oral. This Agreement supersedes all prior agreements, written or oral, is intended as a complete and exclusive statement of the terms of the Agreement between parties, and may be amended, modified, or rescinded only by a written instrument executed by both parties. The parties agree that, for purposes of execution of this Agreement, signatures transmitted by facsimile transmission shall be as binding as original signatures. 20. Captions. All captions in this Agreement are intended solely for the convenience of the parties, and none shall be deemed to affect the meaning or construction of any provision of this Agreement. 21. Multiple Copies. This Agreement may be executed in multiple copies, each of which shall be deemed an original, and all of which, taken together, shall constitute one instrument.     IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. WITNESSES: EMPLOYEE:     By /s/ Lawrence P. Destro, an individual     MOTO PHOTO, INC.     By /s/ Michael F. Adler Authorized Signer and Chairman of the Board of Directors     EXHIBIT A Relocation Expenses (1)   Maximum Expense Expense Reimbursable 1. Moving Expenses $17,000 (Employee shall obtain three (3) quotes from moving companies) 2. Interim Housing 10,000 (Not to exceed ninety (90) days)(2) 3. Three (3) house-hunting trips(2) 5,000 4. Trip home 2,000 (Every other weekend for ninety (90) days)(2) 5. Driving family vehicles to Dayton 2,000 6. Realtor Fees on sale of residence 55,000 (Employee shall negotiate a fee of five percent (5%) or less) (3) 7. Closing costs on homes in Duxbury and Dayton 4,000 8. Miscellaneous relocation expenses 2,000 Total $97,000 maximum   ____________________   Note (1): Employer will not gross-up for taxes. Employee shall be responsible for all taxes due on reimbursement for relocation expenses. Note (2): Employee may take the reimbursement otherwise payable under Items 3 and 4 and apply it instead to interim housing expenses, if applicable. Note (3): Reimbursement for realtor fees is subject to repayment by Employee as follows: if Employee voluntarily terminates his employment with Employer on or before December 31, 2001, Employee shall repay the full amount of the reimbursement for realtor fees. If Employee voluntarily terminates his employment with Employer after December 31, 2001 but on or before December 31, 2002, Employee shall pay Employer a prorated portion of the reimbursement. The pro-ration shall be calculated on a monthly basis as of the end of each calendar month. For example, if Employee voluntarily terminates his employment on March 15, 2002, he would repay ten-twelfths, or eighty-three percent (83%) of the reimbursement; and if Employee voluntarily terminates his employment on November 29, 2002, he would repay two-twelfths or sixteen and sixty-six hundredths percent (16.66%) of the reimbursement.

    CREDIT AGREEMENT dated as of April 3, 2001   by and among   F.Y.I. INCORPORATED,   BANK OF AMERICA, N.A., as Administrative Agent,   BANC OF AMERICA SECURITIES LLC, as Sole Lead Arranger and Sole Book Manager,   SUNTRUST BANK, as Syndication Agent,   WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION, as Documentation Agent   and   THE LENDERS NAMED HEREIN     $297,500,000 REVOLVING CREDIT LOAN FACILITY       TABLE OF CONTENTS   ARTICLE  1 - Definitions   Section 1.1  Definitions, etc. Section 1.2  Other Definitional Provisions Section 1.3  Accounting Terms and Determinations. Section 1.4  Financial Covenants   ARTICLE 2 - Loans Section 2.1  Commitments Section 2.2  Notes Section 2.3  Repayment of Loans Section 2.4  Interest Section 2.5  Borrowing Procedure Section 2.6  Optional Prepayments, Conversions and Continuations of Loans, Reduction of Commitments Section 2.7  Mandatory Prepayments Section 2.8  Minimum Amounts Section 2.9  Certain Notices Section 2.10  Use of Proceeds Section 2.11  Fees Section 2.12  Computations Section 2.13  Termination or Reduction of Commitments Section 2.14  Letters of Credit   ARTICLE 3 - Payments Section 3.1  Method of Payment Section 3.2  Pro Rata Treatment Section 3.3  Sharing of Payments, Etc Section 3.4  Non-Receipt of Funds by the Administrative Agent Section 3.5  Withholding Taxes Section 3.6  Withholding Tax Exemption Section 3.7  Reinstatement of Obligations   ARTICLE 4 – Yield Protection and Illegality Section 4.1  Additional Costs Section 4.2  Limitation on Types of Loans Section 4.3  Illegality Section 4.4  Treatment of Affected Loans Section 4.5  Compensation. F.Y.I. Section 4.6  Capital Adequacy Section 4.7  Additional Interest on Eurodollar Loans   ARTICLE  5 - Security Section 5.1  Collateral Section 5.2  Guaranties Section 5.3  New Subsidiaries Section 5.4  Additional Security Section 5.5  Release of Collateral Section 5.6  Setoff Section 5.7  Landlord and Mortgagee Waivers   ARTICLE  6 - Conditions Precedent   Section 6.1  Initial Loans and Letter of Credit Conditions Section 6.2  All Extensions of Credit Section 6.3  Closing Certificate   ARTICLE 7 - Representations and Warranties Section 7.1  Corporate Existence Section 7.2  Financial Statements Section 7.3  Corporate Action: No Breach Section 7.4  Operation of Business Section 7.5  Intellectual Property Section 7.6  Litigation and Judgments Section 7.7  Rights in Properties; Liens Section 7.8  Enforceability Section 7.9  Approvals Section 7.10  Debt Section 7.11  Taxes Section 7.12  Margin Securities Section 7.13  ERISA; Plans Section 7.14  Disclosure Section 7.15  Capitalization Section 7.16  Agreements Section 7.17  Compliance with Laws Section 7.18  Investment Company Act Section 7.19  Public Utility Holding Company Act Section 7.20  Environmental Matters Section 7.21  Labor Disputes and Acts of God Section 7.22  Material Contracts Section 7.23  Bank Accounts Section 7.24  Outstanding Securities Section 7.25  Solvency Section 7.26  Employee Matters Section 7.27  Insurance Section 7.28  Common Enterprise   ARTICLE 8 - Affirmative Covenants Section 8.1  Reporting Requirements Section 8.2  Maintenance of Existence, Conduct of Business Section 8.3  Maintenance of Properties Section 8.4  Taxes and Claims Section 8.5  Insurance Section 8.6  Inspection Rights Section 8.7  Keeping Books and Records Section 8.8  Compliance with Laws Section 8.9  Compliance with Agreements Section 8.10  Further Assurances Section 8.11  ERISA; Plans Section 8.12  Trade Accounts Payable Section 8.13  No Consolidation Section 8.14  Interest Rate Protection   ARTICLE 9 - Negative Covenants Section 9.1  Debt Section 9.2  Limitation on Liens Section 9.3  Mergers, Etc. Section 9.4  Restricted Payments Section 9.5  Investments Section 9.6  Limitation on Issuance of Capital Stock Section 9.7  Transactions With Affiliates Section 9.8  Disposition of Property Section 9.9  Sale and Leaseback Section 9.10  Lines of Business Section 9.11  Environmental Protection Section 9.12  Intercompany Transactions Section 9.13  Management Fees Section 9.14  Modification of Other Agreements Section 9.15  ERISA Plans Section 9.16  Dividend Restrictions   ARTICLE 10 - Financial Covenants Section 10.1  Consolidated Net Worth Section 10.2  Ratio of Funded Debt to EBITDA Section 10.3  Consolidated Fixed Charge Coverage Ratio Section 10.4  Capital Expenditures   ARTICLE 11 - Default Section 11.1  Events of Default Section 11.2  Remedies Section 11.3  Cash Collateral Section 11.4  Performance by the Administrative Agent   ARTICLE 12 - The Administrative Agent Section 12.1  Appointment, Powers and Immunities Section 12.2  Reliance by the Administrative Agent Section 12.3  Defaults Section 12.4  Rights as Lender Section 12.5  Indemnification Section 12.6  Non-Reliance on the Administrative Agent and Other Lenders Section 12.7  Resignation of the Administrative Agent Section 12.8  Several Commitments Section 12.9  Documentation Agent, Lead Arranger and Syndication Agent   ARTICLE 13 - Miscellaneous Section 13.1  Expenses Section 13.2  INDEMNIFICATION Section 13.3  Limitation of Liability Section 13.4  No Duty Section 13.5  No Fiduciary Relationship Section 13.6  Equitable Relief Section 13.7  No Waiver; Cumulative Remedies Section 13.8  Successors and Assigns Section 13.9  Survival Section 13.10  ENTIRE AGREEMENT Section 13.11  Amendments Section 13.12  Maximum Interest Rate Section 13.13  Notices Section 13.14  GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS Section 13.15  Counterparts Section 13.16  Severability Section 13.17  Headings Section 13.18  Construction Section 13.19  Independence of Covenants Section 13.20  Confidentiality Section 13.21  WAIVER OF JURY TRIAL Section 13.22  Approvals and Consent Section 13.23  Agent for Services of Process     INDEX TO EXHIBITS   Exhibit Description of Exhibit Section       A Form of Assignment and Acceptance 1.1 B Form of Note 1.1 and 2.2 C Form of Subordination Agreement 1.1 D Form of Swingline Note 1.1 and 2.2 E Form of Notice of Borrowings, Conversions, Continuations or Prepayments 2.9 F Form of Solvency Certificate 1.1, 6.1, 8.1 G Form of Compliance Certificate 8.1 H Form of Master Guaranty 1.1 I Form of Joinder Agreement 1.1 J Form of Extension Agreement 1.1 and 2.1   INDEX TO SCHEDULES   Schedule Description of Schedule     1.1(a) Mortgaged Properties 1.1(b) Permitted Liens 2.14 Existing Letters of Credit 7.4 Permits, Franchises, Licenses and Authorizations constituting Governmental Requirements or involving Governmental Authorities 7.6 Litigation and Judgments 7.7 Ownership of Real Properties 7.10 Existing Debt 7.11 Taxes 7.13 Plans 7.15 Capitalization; Options, etc. 7.22 Material Contracts 7.23 Bank Accounts 7.26 Employee Matters 7.27 Insurance 9.5 Investments 9.15 ERISA Plans   CREDIT AGREEMENT   THIS CREDIT AGREEMENT, dated as of April 3, 2001, is by and among F.Y.I. INCORPORATED ("F.Y.I."), a Delaware corporation, each of the banks or other lending institutions which is a party hereto (as evidenced by the signature pages of this Agreement) or which may from time to time become a party hereto or any successor or assignee thereof (individually, a "Lender" and, collectively, the "Lenders"), BANK OF AMERICA, N.A., a national banking association, as administrative agent for itself and the other Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent"), SUNTRUST BANK, as syndication agent, and WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION, as documentation agent.   RECITALS:   F.Y.I. has requested that the Lenders extend credit to F.Y.I. in the form of a revolving credit facility.  The Lenders are willing to extend such credit to F.Y.I. upon the terms and conditions hereinafter set forth.   NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows:   ARTICLE 1   DEFINITIONS   SECTION 1.1             DEFINITIONS, ETC. AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:   "Accounting Changes" means as specified in Section 1.3(a).   "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person or of any business or division of a Person, (b) the acquisition by a Person of 50% or more of the Capital Stock of any Person or otherwise causing any Person to become a Subsidiary of the acquiring Person, or (c) a merger, consolidation, amalgamation or any other combination of a Person with another Person.   "Additional Costs" means as specified in Section 4.1(a).   "Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of one percent) determined by the Administrative Agent to be equal to (a) the Eurodollar Rate for such Eurodollar Loan for such Interest Period divided by (b) one minus the Reserve Requirement for such Eurodollar Loan for such Interest Period.   "Administrative Agent" means as specified in the initial paragraph of this Agreement.   "Affiliate" means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds fifty percent or more of any class of voting Capital Stock of such Person; or (c) fifty percent or more of the voting Capital Stock of which is directly or indirectly beneficially owned or held by the Person in question.  The term "control" means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; provided, however, in no event shall the Administrative Agent, the Lead Arranger or any Lender be deemed an Affiliate of F.Y.I. or any of its Subsidiaries.   "Agreement" means this Agreement and any and all amendments, modifications, supplements, renewals, extensions or restatements hereof.   "Applicable Lending Office" means for each Lender and each Type of Loan, the Lending Office of such Lender (or an Affiliate of such Lender) designated for such Type of Loan below its name on the signature pages hereof (or, with respect to a Lender that becomes a party to this Agreement pursuant to an assignment made in accordance with Section 13.8, in the Assignment and Acceptance executed by it) or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to F.Y.I. and the Administrative Agent as the office by which its Loans of such Type are to be made and maintained.   "Applicable Margin" means, with respect to any period and with respect to Prime Rate Loans, Eurodollar Loans and the Commitment Fees, the percentage set forth in the table below that corresponds to the ratio of (a) Funded Debt as of the date of the relevant financial statements referred to below to (b) EBITDA for the four fiscal quarters of  F.Y.I. then most recently ended as of the date of such financial statements, calculated in accordance with Section 1.4:       Applicable Margins For   Funded Debt to EBITDA Ratio   Eurodollar Loans   Prime Rate Loans   Commitment Fee   Greater than 2.50 to 1.00   2.000%   0.500%   0.375%   Greater than 2.00 to 1.00 but less than or equal to 2.50 to 1.00   1.750%   0.250%   0.350%   Greater than 1.50 to 1.00 but less than or equal to 2.00 to 1.00   1.500%   0%   0.300%   Greater than 1.00 to 1.00 but less than or equal to 1.50 to 1.00   1.250%   0%   0.250%   Less than or equal to 1.00 to 1.00   1.125%   0%   0.250%     For purposes hereof and notwithstanding the preceding sentence, the Applicable Margin for the period from the Effective Date to the first Calculation Date thereafter shall be deemed to be 1.500% for Eurodollar Loans, 0% for Prime Rate Loans and 0.300% for Commitment Fees and shall thereafter be calculated on each Calculation Date based upon the preceding table and the financial statements delivered by F.Y.I. pursuant to Section 8.1(b) and the certificate delivered by F.Y.I. pursuant to Section 8.1(c); provided, that if  F.Y.I. fails to deliver to the Administrative Agent such financial statements or certificate on or before the relevant Calculation Date, the Applicable Margin shall be deemed to be the percentage reflected in the preceding table as if the ratio of Funded Debt to EBITDA were greater than 2.50 to 1.00 until the date such statements and certificate are received by the Administrative Agent, after which the Applicable Margin shall be determined as otherwise provided herein.   "Asset Disposition" means the disposition of any or all of the Property (other than sales of Inventory in the ordinary course of business and the grant of a Lien as security) of F.Y.I. or any of its Subsidiaries, whether by sale, lease, transfer, assignment, condemnation or otherwise, but excluding any involuntary disposition resulting from casualty damage to Property.   "Assignee" means as specified in Section 13.8(b).   "Assigning Lender" means as specified in Section 13.8(b).   "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and its Assignee and accepted by the Administrative Agent pursuant to Section 13.8(e), in substantially the form of Exhibit A hereto.   "B&B Letter of Credit" means a Letter of Credit issued by BNP Paribas, Chicago Branch (formerly known as Banque Paribas) in favor of the Fifth Third Bank, as trustee, or any successor thereto (the "Trustee") for the benefit of the holders of those certain $2,400,000 Prince George's County, Maryland Variable Rate Demand/Fixed Rate Revenue Bonds (B&B Records Center, Inc. Facility) 1989 Issue as a replacement for the letter of credit issued by Crestar Bank in favor of the Trustee, in a face amount not to exceed $2,500,000, and issued under the Commitments, as such Letter of Credit may be renewed, extended or replaced.   "Bank of America" means Bank of America, N.A., a national banking association.   "Bankruptcy Code" means as specified in Section 11.1(e).   "Basle Accord" means the proposals for risk-based capital framework described by the Basle Committee on Banking Regulations and Supervisory Practices in its paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988, as amended, supplemented and otherwise modified and in effect from time to time, or any replacement thereof.   "Business Day" means (a) any day on which commercial banks are not authorized or required to close in New York, New York, Dallas, Texas or Charlotte, North Carolina, and (b) with respect to all borrowings, payments, Conversions, Continuations, Interest Periods and notices in connection with Eurodollar Loans, any day which is a Business Day described in clause (a) above and which is also a day on which dealings in Dollar deposits are carried out in the London interbank market.   "Calculation Date" means the date occurring each quarter during the term of this Agreement which is 15 days after the date upon which quarterly financial statements of F.Y.I. and its consolidated Subsidiaries are required by Section 8.1(b) to be delivered to the Administrative Agent (or, if such date is not a Business Day, the next succeeding Business Day).   "Capital Expenditures" means, for any period, expenditures (including the aggregate amount of Capital Lease Obligations incurred during such period) made by F.Y.I. or any of its Subsidiaries to acquire or construct fixed assets, plant or equipment (including renewals, improvements or replacements, but excluding repairs) during such period and which, in accordance with GAAP, are classified as capital expenditures, exclusive of any expenditures for Acquisitions.   "Capital Lease Obligations" means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal Property, which obligations are classified as a capital lease on a balance sheet of such Person under GAAP.  For purposes of this Agreement, the amount of such Capital Lease Obligations shall be the capitalized amount thereof, determined in accordance with GAAP.   "Capital Stock" means corporate stock and any and all shares, partnership interests, limited partnership interests, limited liability company interests, membership interests, equity interests, participations, rights or other equivalents (however designated) of corporate stock or any of the foregoing issued by any entity (whether a corporation, a partnership or another entity).   "Change of Control" means the existence or occurrence of any of the following after the Closing Date: (a) any Person or two or more Persons acting as a group (as defined in Section 13d-3 of the Securities Exchange Act of 1934) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of F.Y.I.; (b) individuals who, as of the Closing Date, constitute the Board of Directors of F.Y.I. (the "F.Y.I. Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of F.Y.I.; provided, however, that any individual becoming a director of F.Y.I. subsequent to the Closing Date whose election, or nomination for election by F.Y.I.'s shareholders was approved by a vote of at least a majority of the directors then comprising the F.Y.I. Incumbent Board shall be considered as though such individual were a member of the F.Y.I. Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) or other actual or threatened solicitation of proxies or contest by or on behalf of a Person other than the Board of Directors of F.Y.I.; or (c) the consummation of any transaction the result of which is that any Person or group beneficially owns more of the voting stock of F.Y.I. than is beneficially owned, in the aggregate, by the "Permitted Holders" as such term is defined in the Prior Agreement.   "Closing Date" means April 3, 2001, the date of this Agreement.   "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated and rulings issued thereunder.   "Collateral" means all Property of any nature whatsoever upon which a Lien is created or purported to be created by any Loan Document as security for the Obligations or any portion thereof.   "Commitment" means, as to any Lender, the obligation of such Lender to make or continue Loans and incur or participate in Letter of Credit Liabilities hereunder in an aggregate principal amount at any one time outstanding up to but not exceeding the amount set forth opposite the name of such Lender on the signature pages hereto under the heading "Commitment" or, if such Lender is a party to an Assignment and Acceptance, the amount set forth in the most recent Assignment and Acceptance of such Lender, as the same may be reduced or terminated pursuant to Section 2.13 or 11.2, and "Commitments" means such obligations of all Lenders.  As of the Closing Date, the aggregate principal amount of the Commitments is $297,500,000.   "Commitment Percentage"  means, as to any Lender, the percentage equivalent of a fraction, the numerator of which is the amount of the Commitment of such Lender, and the denominator of which is the aggregate amount of the Commitments of all of the Lenders, as adjusted from time to time in accordance with Section 13.8.   "Consolidated Fixed Charge Coverage Ratio"  means, for any period, the ratio of (a)(i) EBITDAR of F.Y.I. and its Subsidiaries for such period minus (ii) Maintenance Capital Expenditures made by F.Y.I. and its Subsidiaries during such period minus (iii) taxes of F.Y.I. and its Subsidiaries paid or payable in cash during such period, to (b) the Fixed Charges of F.Y.I. and its Subsidiaries for such period.   "Consolidated Net Income" means, for any period, the net income (or loss) of F.Y.I. and its Subsidiaries (or other applicable Person) for such period, determined on a consolidated basis in accordance with GAAP.   "Consolidated Net Worth" means, at any particular time, all amounts which, in conformity with GAAP, would be included as stockholders' equity on a consolidated balance sheet of F.Y.I. and its Subsidiaries.   "Continue", "Continuation" and "Continued" shall refer to the continuation pursuant to Section 2.6 of a Eurodollar Loan as a Eurodollar Loan of the same Type from one Interest Period to the next Interest Period.   "Contract Rate" means as specified in Section 13.12(a).   "Convert", "Conversion" and "Converted" shall refer to a conversion pursuant to Section 2.6 or Article 4 of one Type of Loan into the other Type of Loan.   "Currency Hedge Agreement" means any currency hedge or exchange agreement, option or futures contract or other agreement intended to protect against or manage a Person's exposure to fluctuations in currency exchange rates. "Current Date" means a date occurring no more than 30 days prior to the Closing Date or such earlier date which is reasonably acceptable to the Administrative Agent.   "Debt" means as to any Person at any time (without duplication): (a) all indebtedness, liabilities and obligations of such Person for borrowed money, (b) all indebtedness, liabilities and obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments, (c) all indebtedness, liabilities and obligations of such Person to pay the deferred purchase price of Property or services, except trade accounts payable of such Person arising in the ordinary course of business that are not past due by more than 120 days, and excluding Seller Earn Out which is contingent, (d) all Capital Lease Obligations of such Person, (e) all asset securitizations programs and any other off balance sheet financings, (f) all Debt of others Guaranteed by such Person, (g) all indebtedness, liabilities and obligations secured by a Lien existing on Property owned by such Person, whether or not the indebtedness, liabilities or obligations secured thereby have been assumed by such Person or are non-recourse to such Person, (h) all reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers' acceptances, surety or other bonds and similar instruments, (i) all indebtedness, liabilities and obligations of such Person to redeem or retire shares of Capital Stock of such Person, (j) all indebtedness, liabilities and obligations of such Person under Interest Rate Protection Agreements or Currency Hedge Agreements, and (k) all indebtedness, liabilities and obligations of such Person in respect of unfunded vested benefits under any Plan.   "Debt Issuance" means any issuance by F.Y.I. or any Subsidiary of F.Y.I. of any Debt of F.Y.I. or such Subsidiary, respectively, which Debt is issued or sold by F.Y.I. or any Subsidiary of F.Y.I. primarily for the purpose of raising capital or increasing liquidity and which Debt consists of Debt of the types referred to in clauses (a) or (b) of the definition of "Debt", but not of the types of Debt referred to in clauses (c), (d), (f), (h), (i), (j) or (k) of the definition of "Debt" and which Debt is not permitted under Section 9.1.  The incurrence of Seller Subordinated Debt does not constitute a "Debt Issuance."   "Default" means an Event of Default or the occurrence of an event or condition which with notice or lapse of time or both would become an Event of Default.   "Default Rate" means, (a) in respect of any principal of any Loan or any Reimbursement Obligation at all times during which an Event of Default has occurred and is continuing, and (b) in respect of any principal of any Loan, any Reimbursement Obligation or any other amount payable by F.Y.I. under this Agreement or any other Loan Document which is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period of such Event of Default or during the period commencing on the due date until such amount is paid in full, respectively, equal to the lesser of (i) the sum of two percent (2%) plus the Prime Rate as in effect from time to time plus the Applicable Margin for Prime Rate Loans for the applicable period or (ii) the Maximum Rate; provided, however, that if such Event of Default relates to, or if such amount in default is, principal of a Eurodollar Loan and the due date is a day other than the last day of an Interest Period therefor, the "Default Rate" for such principal shall be, for the period from and including the due date and to but excluding the last day of the Interest Period therefor, the lesser of (A) two percent plus the interest rate for such Eurodollar Loan for such Interest Period as provided in Section 2.4(a)(ii) hereof  or (B) the Maximum Rate and, thereafter, the rate provided for above in this definition.   "Deposit Account" means a deposit account maintained by F.Y.I. with a bank selected by F.Y.I. and reasonably acceptable to the Administrative Agent.   "Documentation Agent" means Wells Fargo Bank Texas, National Association, in its capacity as documentation agent.   "Dollars" and "$" mean lawful money of the U.S.   "Domestic Subsidiary" means any Subsidiary of F.Y.I. which is organized under the laws of the United States or one of the States thereof.   "EBITDA" means, for any period, without duplication, the sum of the following for F.Y.I. and its Subsidiaries (or other applicable Person) for such period determined on a consolidated basis in accordance with GAAP: (a) Consolidated Net Income, plus (b) Interest Expense, plus (c) income and franchise taxes to the extent deducted in determining Consolidated Net Income, plus (d) depreciation and amortization expense and other non-cash, non-tax items to the extent deducted in determining Consolidated Net Income, minus (e) non-cash income to the extent included in determining Consolidated Net Income; provided, however, that for purposes of calculating the EBITDA of F.Y.I. and its consolidated Subsidiaries for any period of four consecutive fiscal quarters including, without limitation, the four consecutive fiscal quarter period used in determining compliance with the twelve month trailing EBITDA requirement in the definition of Permitted Acquisition, (i) the EBITDA associated with any Person or assets acquired in a Permitted Acquisition during such period of four consecutive fiscal quarters shall be added, without duplication, if either (A) the financial statements of the Person or assets acquired from which such EBITDA would be determined were audited by independent certified public accountants of recognized standing acceptable to the Administrative Agent or (B) the Permitted Acquisition and the EBITDA of the Person or assets acquired were approved in writing by the Required Lenders; and (ii) the EBITDA associated with any Person or assets disposed of in a Permitted Disposition during such period of four consecutive fiscal quarters shall be deducted.   "EBITDAR" means, for any period, without duplication, the sum of the following for F.Y.I. and its Subsidiaries (or other applicable Person) for such period determined on a consolidated basis in accordance with GAAP:  (a) EBITDA, plus (b) Rental Expense.   "Effective Date" means the date upon which all conditions precedent to the obligations of the Lenders to make Loans hereunder specified in Article 6 hereof have been satisfied and, as a result thereof, the initial Loans are made hereunder.   "Eligible Assignee" means (a) any Affiliate of a Lender or (b) any commercial bank, savings and loan association, savings bank, finance company, insurance company, pension fund, mutual fund or other financial institution (whether a corporation, partnership or other entity) acceptable to the Administrative Agent and approved by F.Y.I., which approval shall not unreasonably be withheld, provided, however, that any  Person referred to in this clause (b) shall not be required to be approved by F.Y.I. if a Default has then occurred and is continuing.   "Environmental Law" means any federal, state, local or foreign law, statute, code or ordinance, principle of common law, rule or regulation, as well as any Permit, order, decree, judgment or injunction issued, promulgated, approved or entered thereunder, relating to pollution or the protection, cleanup or restoration of the environment or natural resources, or to the public health or safety, or otherwise governing the generation, use, handling, collection, treatment, storage, transportation, recovery, recycling, discharge or disposal of Hazardous Materials, including, without limitation as to U.S. laws, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986, 99-499, 100 Stat. 1613, the Resource Conservation and Recovery Act of 1976, 42 U. S. C. Section 6901 et seq., the Occupational Safety and Health Act, 29 U S.C. Section 651 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Clean Water Act, 33 U. S. C. Section 1251 et seq., the Emergency Planning and Community Right to Know Act, 42 U. S. C. Section 11001 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq., and the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., and any state or local counterparts.   "Environmental Liabilities" means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel, expert and consulting fees and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand, by any Person, whether based in contract, tort, implied or express warranty, strict liability or criminal, penal or civil statute, including, without limitation, any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, arising from environmental, health or safety conditions or the Release or threatened Release of a Hazardous Material into the environment.   "Equity Issuance" means any issuance by F.Y.I. or any Subsidiary of F.Y.I. of any Capital Stock of F.Y.I. or such Subsidiary, respectively.   "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereunder.   "ERISA Affiliate" means any corporation or trade or business which is a member of a group of entities, organizations or employers of which a Loan Party is also a member and which is treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the Code.   "Eurodollar Daily Floating Rate" means the fluctuating rate of interest equal to the Eurodollar Rate (for a one month Interest Period) on the second preceding Business Day, as adjusted on a daily basis for as long as the Swingline Advance to which such rate relates is outstanding and as adjusted from time to time in the Administrative Agent's sole discretion for then-applicable reserve requirements, deposits insurance assessment rates and other regulatory costs.   "Eurodollar Loans" means Loans that bear interest at rates based upon the Eurodollar Rate and the Adjusted Eurodollar Rate.   "Eurodollar Rate" means, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Dow Jones Markets Service (formerly known as Telerate) Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period.  If for any reason such rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).   "Event of Default" means as specified in Section 11.1.   "Existing B of A Letter of Credit" means that certain Letter of Credit issued by Bank of America National Trust & Savings Association in favor of the New York State Workers Compensation Board as beneficiary in a face amount of $5,000,000 having an expiration date of March 31, 2003, which Letter of Credit was issued pursuant to an Application and Agreement for Standby Letter of Credit, dated as of January 27, 1998, between F.Y.I. and QCSINET Acquisition Corp., a wholly-owned Subsidiary of F.Y.I., as Applicants, and Bank of America Texas, N.A., as credit-provider.   "Existing Debt" means the Debt of F.Y.I. under that certain Amended and Restated Credit Agreement dated as of February 17, 1998 by and among F.Y.I., the lenders party thereto and Banque Paribas, as agent, as amended.   "Existing Letters of Credit" means the outstanding letters of credit identified on Schedule 2.14.   "Extension Agreement" means an agreement in substantially the form of Exhibit J pursuant to which F.Y.I., the Administrative Agent and an individual Lender may agree to extend the Maturity Date in accordance with the terms of Section 2.1(d).   "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest one-sixteenth of one percent (1/100 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 (a) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published on such next succeeding Business Day, the Federal Funds Rate for any day shall be the average rate charged to the Administrative Agent (in its individual capacity) on such day on such transactions as determined by the Administrative Agent.   "Fee Letter" means the letter dated as of December 29, 2000 among F.Y.I., the Administrative Agent and the Lead Arranger.   "Fixed Charges" means, for any period, the sum of (a) cash Interest Expense of F.Y.I. and its Subsidiaries during such period, plus (b) all scheduled payments (as such scheduled payments are reduced by application of any prepayments) of principal with respect to the Loans and other outstanding Debt during such period, plus (c) Rental Expense of F.Y.I. and its Subsidiaries during such period, plus (d) Seller Earn Outs paid in cash by F.Y.I. and its Subsidiaries during such period.   "Foreign Debt and Investment" means as specified in Section 9.1(e).   "Foreign Subsidiary" means any Subsidiary of F.Y.I. which is organized under the laws of a country or province other than the United States or a State thereof.   "Funded Debt" means, at any particular time, the sum, without duplication, of (a) the aggregate principal amount of all Debt for borrowed money of F.Y.I. and its Subsidiaries outstanding, determined on a consolidated basis, plus (b) the aggregate principal amount of all Debt of F.Y.I. and its Subsidiaries outstanding, determined on a consolidated basis, secured by any Lien on any Property of F.Y.I. or any of its Subsidiaries (including, without limitation, all recourse and non-recourse Capital Lease Obligations), plus (c) the aggregate principal amount of all Debt Guaranteed by F.Y.I. and its Subsidiaries outstanding, determined on a consolidated basis.   "Funded Debt to EBITDA Ratio" means as specified in Section 10.2.   "F.Y.I." means as specified in the initial paragraph of this Agreement.   "F.Y.I. Common Stock" means the common stock of F.Y.I., par value $.01 per share.   "F.Y.I. Equity Documents" means F.Y.I.'s Certificate of Incorporation and the F.Y.I. Common Stock.   "GAAP" means generally accepted accounting principles, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question.  Accounting principles are applied on a "consistent basis" when the accounting principles applied in a current period are comparable in all material respects to those accounting principles applied in a preceding period.   "Governmental Authority" means any nation or government, any state, provincial or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.   "Governmental Requirement" means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, Permit, certificate, license, authorization or other directive or requirement of any federal, state, county, municipal, parish, provincial or other Governmental Authority or any department, commission, board, court, agency or any other instrumentality of any of them.   "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation as to the payment thereof or to protect the obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.  The term "Guarantee" used as a verb has a corresponding meaning.  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum anticipated liability in respect thereof (assuming such Person is required to perform thereunder).   "Guaranties" means the guaranty agreements, in form and substance satisfactory to the Administrative Agent, (including, without limitation, the Master Guaranty) executed at any time pursuant to this Agreement by any of the Subsidiaries of F.Y.I. or any other Loan Party in favor of the Administrative Agent for the benefit of the Administrative Agent and the Lenders, and any guaranty agreement executed pursuant to Section 5.3 hereof, and any and all amendments, modifications, supplements, renewals, extensions or restatements thereof.   "Hazardous Material" means any substance, product, liquid, waste, pollutant, chemical, contaminant, insecticide, pesticide, gaseous or solid matter, organic or inorganic matter, fuel, micro-organisms, ray, odor, radiation, energy, vector, plasma, constituent or material which (a) is or becomes listed, regulated or addressed under any Environmental Law or (b) is, or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any Environmental Law, including, without limitation, asbestos, petroleum, underground storage tanks (whether empty or containing any substance) and polychlorinated biphenyls.   "Intellectual Property" means any U.S. or foreign patents, patent applications, trademarks, trade names, service marks, brand names, logos and other trade designations (including unregistered names and marks), trademark and service mark registrations and applications, copyrights and copyright registrations and applications, inventions, invention disclosures, protected formulae, formulations, processes, methods, trade secrets, computer software, computer programs and source codes, manufacturing research and similar technical information, engineering know-how, customer and supplier information, assembly and test data drawings or royalty rights.   "Intercompany Debt" means as specified in Section 9.1(e).   "Interest Expense" means, for any period and for any Person, the sum of (a) interest expense of such Person calculated without duplication on a consolidated basis for such period in accordance with GAAP, plus (b) expenses paid under Interest Rate Protection Agreements and Currency Hedge Agreements during such period, minus (c) payments received under Interest Rate Protection Agreements and Currency Hedge Agreements during such period.   "Interest Period" means, with respect to any Eurodollar Loan, each period commencing on the date such Loan is made or Converted from a Prime Rate Loan or (if Continued) the last day of the next preceding Interest Period with respect to such Loan, and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as F.Y.I. may select as provided in Section 2.9 hereof, except that each such Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month.  Notwithstanding the foregoing: (a) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (b) any Interest Period which would otherwise extend beyond the Maturity Date shall end on the Maturity Date; (c) no more than seven (7) Interest Periods for Eurodollar Loans shall be in effect at the same time; (d) no Interest Period shall have a duration of less than one month and, if the Interest Period for any Eurodollar Loans would otherwise be a shorter period, such Loans shall not be available hereunder; (e) no Interest Period shall have a duration of more than six months; and (f) no Interest Period for a Loan may commence before and end after any principal repayment date unless, after giving effect thereto, the aggregate principal amount of the Eurodollar Loans having Interest Periods that end after such principal payment date shall be equal to or less than the amount of the Loans scheduled to be outstanding hereunder after such principal payment date.  The permitted length of Interest Periods will not limit the terms of any Interest Rate Protection Agreement.   "Interest Rate Protection Agreements" means, with respect to F.Y.I. or any Subsidiary of F.Y.I., an interest rate swap, cap or collar agreement or similar arrangement between F.Y.I. or any Subsidiary of F.Y.I. and one or more Lenders that are parties to this Agreement, Affiliates of such Lenders or other entities that would qualify as "Eligible Assignees" under this Agreement, providing for the transfer or mitigation of interest rate risks either generally or under specified contingencies.   "Inventory" means all inventory now owned or hereafter acquired by F.Y.I. or any of its Subsidiaries wherever located and whether or not in transit, which is or may at any time be held for sale or lease, or furnished under any contract (exclusive of leases of real Property covered by a Mortgage) for service or held as raw materials, work in process, or supplies or materials used or consumed in the business of F.Y.I. or any of its Subsidiaries.   "Investments" means as specified in Section 9.5.   "Issuing Bank" means Bank of America, except with respect to the Existing Letters of Credit (other than the Existing B of A Letter of Credit), for which "Issuing Bank" means BNP Paribas, Chicago Branch.   "Joinder Agreement" means an agreement which has been or will be executed by a Subsidiary of F.Y.I. adding it as a party to the Master Guaranty and certain of the other Security Documents, in substantially the form of Exhibit I, as the same may be amended or otherwise modified.   "Lead Arranger" means Banc of America Securities LLC, in its capacity as sole lead arranger and sole book manager.   "Lender" and "Lenders" means as specified in the initial paragraph of this Agreement.   "Letter of Credit" means any standby letter of credit issued by the Issuing Bank for the account of F.Y.I. (or F.Y.I. and any of its Subsidiaries) pursuant to this Agreement (which letter of credit shall be irrevocable unless otherwise agreed by the Issuing Bank and F.Y.I.).   "Letter of Credit Agreement" means, with respect to each Letter of Credit to be issued by the Issuing Bank therefor, the letter of credit application and reimbursement agreement which such Issuing Bank requires to be executed by the account party or parties in connection with the issuance of such Letter of Credit.   "Letter of Credit Liabilities" means, at any time, the aggregate undrawn face amounts of all outstanding Letters of Credit and all unreimbursed drawings under Letters of Credit issued pursuant to the Commitments.   "Lien" means any lien, mortgage, security interest, tax lien, financing statement, pledge, charge, hypothecation or other encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law or otherwise.   "Loan Documents" means this Agreement, the Notes, the Security Documents, the Fee Letter, the Letters of Credit, the Letter of Credit Agreements, any Interest Rate Protection Agreement or Currency Hedge Agreement between F.Y.I. or any Subsidiary of F.Y.I. and any Lender or any Affiliate of any Lender, any Subordination Agreements, and all other agreements, documents and instruments now or hereafter executed and/or delivered pursuant to or in connection with any of the foregoing, and any and all amendments, modifications, supplements, renewals, extensions or restatements thereof.   "Loan Party" means F.Y.I., each of its Subsidiaries and any other Person who is or becomes a party to any agreement, document or instrument that Guarantees or secures payment or performance of the Obligations or any part thereof.   "Loans" means as specified in Section 2.1(a).   "Maintenance Capital Expenditures" means, for any period and for any Person and its Subsidiaries, the amount of depreciation expense on the tangible assets of such Persons (not including any amortization of goodwill or other non-tangible assets) determined on a consolidated basis in accordance with GAAP.   "Master Guaranty" means guaranty of the Domestic Subsidiaries of F.Y.I. in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, in substantially the form of Exhibit H, as the same may be modified pursuant to one or more Joinder Agreements and as the same may be otherwise modified from time to time.   "Material Adverse Effect" means any material adverse effect, or the occurrence of any event or the existence of any condition that could reasonably be expected to have a material adverse effect, on (a) the business or financial condition or performance of F.Y.I. and its Subsidiaries, taken as a whole, (b) the ability of F.Y.I. to pay and perform the Obligations when due, or (c) the validity or enforceability of (i) any of the Loan Documents, (ii) any Lien created or purported to be created by any of the Loan Documents or the required priority of any such Lien, or (iii) the rights and remedies of the Administrative Agent or the Lenders under any of the Loan Documents.   "Material Contracts" means, as to any Person, any supply, purchase, service, employment, tax, indemnity, shareholder or other agreement or contract for which the aggregate amount or value of services performed or to be performed for or by, or funds or other Property transferred or to be transferred to or by, such Person or any of its Subsidiaries party to such agreement or contract, or by which such Person or any of its Subsidiaries or any of their respective Properties are otherwise bound, during any fiscal year of the Person exceeds $5,000,000 as of the Closing Date with respect to expenditures required by such Person, or $10,000,000 as of the Closing Date with respect to revenues which the other party to the contract is required to pay to such Person, and any and all amendments, modifications, supplements, renewals or restatements thereof.   "Material Subsidiary" means any Subsidiary of F.Y.I. which is not a Nonmaterial Subsidiary.   "Maturity Date" means April 3, 2004, as such date may be extended from time to time with respect to some or all of the Lenders pursuant to Section 2.1(d), or if such date is not a Business Day, the next succeeding Business Day.   "Maximum Foreign Amount" means as specified in Section 9.1(e).   "Maximum Rate" means, with respect to any Lender, the maximum non-usurious interest rate (or, if the context so permits or requires, an amount of interest calculated at such rate), if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received with respect to the particular Obligations as to which such rate is to be determined, payable to such Lender pursuant to this Agreement or any other Loan Document, under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum non-usurious interest rate than applicable laws now allow.  The Maximum Rate shall be calculated in a manner that takes into account any and all fees, payments and other charges in respect of the Loan Documents that constitute interest under applicable law.  Each change in any interest rate provided for herein based upon the Maximum Rate resulting from a change in the Maximum Rate shall take effect without notice to F.Y.I.  at the time of such change in the Maximum Rate.  For purposes of determining the Maximum Rate under Texas law to the extent applicable, if at all, the applicable rate ceiling shall be the indicated rate ceiling described in, and computed in accordance with, the Texas Credit Code.   "Mortgaged Properties" means, collectively, the fee-owned Properties and leasehold interests in the Properties listed on Schedule 1.1(a) hereof which are or are to be subject to the Mortgages, and any such after-acquired Properties which become subject to a Mortgage pursuant to Section 5.4 hereof.   "Mortgages" means the deed of trusts, leasehold deeds of trust, mortgages, leasehold mortgages, collateral assignments of leases and other real estate security documents, in form and substance satisfactory to the Administrative Agent, executed at any time pursuant to this Agreement by F.Y.I. or any of its Subsidiaries or any other Loan Party in favor of the Administrative Agent for the benefit of the Administrative Agent and the Lenders with respect to any Mortgaged Property, and any and all amendments, modifications, supplements, renewals or restatements thereof.   "Multiemployer Plan" means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made by or are required from any Loan Party or any ERISA Affiliate since 1974 and which is covered by Title IV of ERISA.   "Net Proceeds" means, with respect to any Asset Disposition, (a) the gross amount of cash received by F.Y.I. or any of its Subsidiaries from such Asset Disposition, minus (b) the amount, if any, of all taxes paid or payable by F.Y.I. or any of its Subsidiaries directly resulting from such Asset Disposition (including the amount, if any, estimated by F.Y.I. in good faith at the time of such Asset Disposition for taxes payable by F.Y.I. or any of its Subsidiaries on or measured by net income or gain resulting from such Asset Disposition), minus (c) the reasonable out-of-pocket costs and expenses incurred by F.Y.I. or such Subsidiary in connection with such Asset Disposition (including reasonable brokerage fees paid to a Person other than an Affiliate of F.Y.I. and including any transfer or similar taxes) excluding any fees or expenses paid to an Affiliate of F.Y.I., minus (d) amounts applied to the repayment of indebtedness (other than the Obligations) secured by a Permitted Lien on the Property subject to the Asset Disposition, minus (e) the actual amount refunded to the buyer as a result of a post-closing purchase price adjustment which occurs within 180 days of the closing and is provided for in the asset purchase agreement or the stock purchase agreement as provided to the Lenders prior to the Acquisition.  "Net Proceeds" with respect to any Asset Disposition shall also include proceeds (after deducting any amounts specified in clauses (b), (c) and (d) of the preceding sentence) of insurance with respect to any actual or constructive loss of Property, an agreed or compromised loss of Property or the taking of any Property under the power of eminent domain and condemnation awards and awards in lieu of condemnation for the taking of Property under the power of eminent domain, except such proceeds and awards as are released to and used by F.Y.I. or any of its Subsidiaries in accordance with Section 8.5(b).  "Net Proceeds" means, with respect to any Equity Issuance or Debt Issuance, (a) the gross amount of cash or other consideration received from such Equity Issuance or Debt Issuance, as the case may be, minus (b) the reasonable out-of-pocket costs and expenses incurred by the issuer in connection with such Equity Issuance or Debt Issuance, as the case may be (including reasonable underwriting fees paid to a Person other than an Affiliate of F.Y.I.) excluding any fees or expenses paid to an Affiliate of F.Y.I.   "Nonconsenting Lender" means as specified in Section 13.11.   "Nonmaterial Subsidiary" means, as of any date of determination, a Subsidiary of F.Y.I. (a) which has total tangible assets that are less than $15,000,000, (b) which has net worth that is less than $15,000,000, and (c) which has revenues that are less than $15,000,000 during the twelve-month period then most recently ended.  For purposes of this definition, total tangible assets, net worth and revenues of a Subsidiary shall be determined on a consolidated basis for such Subsidiary and for all Subsidiaries of such Subsidiary.   "Notes" means the promissory notes made by F.Y.I. evidencing the Loans (including, without limitation, the Swingline Advances) in the form of Exhibit B or, as to the Swingline Advances,  Exhibit D hereto, and also includes such promissory notes issued in registered form pursuant to Section 2.2(b).   "Obligations" means any and all (a) indebtedness, liabilities and obligations of the Loan Parties, or any of them, to the Administrative Agent, the Lead Arranger, the Issuing Bank and the Lenders, or any of them, evidenced by and/or arising pursuant to any of the Loan Documents, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, including, without limitation, (i) the obligations of the Loan Parties to repay the Loans, the Letter of Credit Liabilities and the Reimbursement Obligations, to pay interest on the Loans, the Letter of Credit Liabilities and Reimbursement Obligations (including, without limitation, interest, if any, accruing after any bankruptcy, insolvency, reorganization or other similar filing) and to pay all fees, indemnities, costs and expenses (including attorneys' fees) provided for in the Loan Documents and (ii) the indebtedness constituting the Loans, the Letter of Credit Liabilities, the Reimbursement Obligations and such fees, indemnities, costs and expenses, and (b) indebtedness, liabilities and obligations of F.Y.I. or any of its Subsidiaries under any and all Interest Rate Protection Agreements and Currency Hedge Agreements that it may enter into with any Lender or any Affiliate of a Lender to the extent permitted by Section 9.1(f).   "Operating Lease" means, with respect to any Person, any lease, rental or other agreement for the use by that Person of any Property which is not a Capital Lease Obligation.   "Outstanding Credit" means, at any particular time, the sum of (a) the outstanding principal amount of the Loans (inclusive of the Swingline Advances), plus (b) the Letter of Credit Liabilities.   "Payor" means as specified in Section 3.4.   "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any of its functions under ERISA.   "Pension Plan" means an employee pension benefit plan as defined in Section 3(2) of ERISA (including a Multiemployer Plan) which is subject to the funding requirements under Section 302 of ERISA or Section 412 of the Code, in whole or in part, and which is maintained or contributed to currently or at any time within the six years immediately preceding the Closing Date or, in the case of a Multiemployer Plan, at any time since September 2, 1974, by F.Y.I. or any subsidiary of F.Y.I. or any ERISA Affiliate for employees of F.Y.I. or any subsidiary of F.Y.I. or any ERISA Affiliate.   "Peril" means as specified in Section 8.5(a).   "Permit" means any permit, certificate, approval, order, license or other authorization.   "Permitted Acquisition" means any Acquisition which has been approved in writing by the Administrative Agent and the Required Lenders or any other Acquisition which satisfies each of the following requirements: (a) the acquiror (or surviving corporation if the acquisition is by means of a merger) is F.Y.I. or any Subsidiary of F.Y.I., (b) the assets to be acquired in connection with such Acquisition are assets that are to be used in the existing businesses of the acquiror as such business is presently conducted, (c) such Acquisition has been approved by the Board of Directors of the acquired entity, (d) the acquired entity shall have generated positive EBITDA during the twelve-month period preceding the Acquisition, which positive EBITDA shall be audited or reviewed by an accounting firm acceptable to the Administrative Agent if (but only if) the Acquisition involves total consideration paid or payable of $10,000,000 or more, after adjusting for excess owners' compensation and other pro forma charges as validated, using reasonable standards and methods, by the Administrative Agent, (e) after giving effect to such Acquisition and any Debt incurred in connection therewith, Funded Debt does not exceed 2.50 times EBITDA for the four fiscal quarters most recently completed of F.Y.I. and its Subsidiaries (and including the acquired entity's trailing twelve-month EBITDA as adjusted for any interest not acquired, if audited or reviewed by an accounting firm acceptable to the Administrative Agent) (EBITDA may include proforma adjustments to an acquired entity's earnings, as adjusted for any interest not acquired, acceptable to the Administrative Agent), (f) such Acquisition shall not exceed $25,000,000 in cash consideration and any Debt assumed or guaranteed in connection therewith, without Required Lenders' approval, (g) the aggregate amount of all such Acquisitions made on or after March 1, 2001 shall not exceed $60,000,000 in cash consideration and any Debt assumed or guaranteed in connection therewith in any twelve-month period without Required Lenders' approval, (h) prior to and after giving effect to the Acquisition, no Default shall exist, (i) after giving effect to such Acquisition, F.Y.I. will not violate any financial covenant, and (j) no material part of the Property or business operations to be acquired are located outside the U.S. or Canada; provided, however, that up to $10,000,000 (valued at total purchase consideration including any Debt assumed or guaranteed in connection therewith) in Acquisitions made on or after the Closing Date and during the term of this Agreement will be deemed to be Permitted Acquisitions despite their failure to meet the requirements of items (d) and (j) preceding so long as no such acquired entity or entities shall have annual sales (individually for any one such acquired entity or in the aggregate for all such acquired entities) in excess of $10,000,000 or cumulative EBITDA losses (individually for any one such acquired entity or in the aggregate for all such acquired entities) in excess of $1,500,000 incurred, in each case during the twelve-month period preceding the respective dates of acquisition.   "Permitted Acquisition Documents" means any acquisition agreement and each other material agreement, document or instrument executed or delivered in connection with or pursuant to any Permitted Acquisition.   "Permitted Capital Expenditures" means as specified in Section 10.4.   "Permitted Dispositions" means the disposition by F.Y.I. or any Subsidiary of F.Y.I. of all or substantially all of the Property or Capital Stock of certain Subsidiaries of F.Y.I. on or before December 31, 2001, provided that (a) the EBITDA of all such Subsidiaries shall not exceed $3,200,000in the aggregate, (b) the tangible net assets of all such Subsidiaries shall not exceed $10,000,000in the aggregate, and (c) no Default or Event of Default exists at the time of such disposition or proposed disposition.   "Permitted Liens" means:   (a)           Liens disclosed on Schedule 1.1(b) hereto as to F.Y.I. and its Material Subsidiaries (as applicable, as described on such schedule);   (b)           Liens securing the Obligations in favor of the Administrative Agent (for the benefit of the Administrative Agent and the Lenders) pursuant to the Loan Documents;   (c)           Encumbrances consisting of easements, zoning restrictions or other restrictions on the use of real Property or, as to the real Property referred to in clause (ii) below only, imperfections to title that (i) as to any Mortgaged Property, do not (individually or in the aggregate) materially affect the value of the Property encumbered thereby or materially impair the ability of F.Y.I. or any of its Subsidiaries to use such Property in its businesses, and none of which is violated in any material respect by existing or proposed structures or land use, and (ii) as to any real Property other than Mortgaged Property, were entered into in the ordinary course of business and could not have a Material Adverse Effect;   (d)           Liens for taxes, assessments or other governmental charges that are not delinquent or which are being contested in good faith and for which adequate reserves have been established;   (e)           Liens of mechanics, materialmen, warehousemen, carriers, landlords or other similar statutory Liens securing obligations that are not yet due and are incurred in the ordinary course of business or which are being contested in good faith and for which adequate reserves have been established;   (f)            Liens resulting from good faith deposits to secure payment of workmen's compensation or other social security programs or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, contracts (other than for payment of Debt) or leases, all in the ordinary course of business;   (g)           Purchase-money Liens on any Property hereafter acquired or the assumption after the Closing Date of any Lien on Property existing at the time of such acquisition (and not created in contemplation of such acquisition), or a Lien incurred or assumed after the Closing Date in connection with any conditional sale or other title retention agreement or Capital Lease Obligation; provided that:   (i)            any Property subject to the foregoing is acquired by F.Y.I. or any of its Subsidiaries in the ordinary course of its business and the Lien on the Property attaches concurrently or within 90 days after the acquisition thereof;   (ii)           the Debt secured by any Lien so created, assumed or existing shall not exceed the lesser of the cost or fair market value at the time of acquisition of the Property covered thereby; and   (iii)          each such Lien shall attach only to the Property so acquired and the proceeds thereof;   (h)           Easements, rights-of-way, restrictions and other Liens and imperfections to title that are approved by the Administrative Agent and are listed on Exhibit B to any Mortgage; and   (i)            Any extension, renewal or replacement of any of the foregoing, provided that Liens permitted hereunder shall not be extended or spread to cover any additional indebtedness or Property;   provided, however, that none of the Permitted Liens (except those in favor of the Administrative Agent) may attach or relate to the Capital Stock of or any other ownership interest in F.Y.I. or any of its Subsidiaries.   "Permitted Share Repurchases" means repurchases by F.Y.I. of F.Y.I. Common Stock made after the Closing Date, not to exceed $30,000,000 in the aggregate.   "Person" means any individual, corporation, trust, association, company, partnership, joint venture, limited liability company, Governmental Authority or other entity.   "Plan" means any employee benefit plan as defined in Section 3(3) of ERISA, or any comparable plan of a Governmental Authority, established or maintained or contributed to by any Loan Party or any ERISA Affiliate, including any Pension Plan.   "Prime Rate" means, at any time, the rate of interest per annum equal to the higher of (a) the Federal Funds Rate plus one-half of one percent (0.50%) or (b) the rate of interest established from time to time by Bank of America as its prime rate, which rate may not be the lowest rate of interest charged by Bank of America to its customers.  Each change in any interest rate provided for herein based upon the Prime Rate resulting from a change in the Prime Rate shall take effect without notice to F.Y.I. at the time of such change in the Prime Rate.   "Prime Rate Loans" means Loans that bear interest at rates based upon the Prime Rate.   "Principal Office" means the principal office of the Administrative Agent in Dallas, Texas, presently located at 901 Main Street, Dallas, Texas 75202.   "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Code.   "Projections" means F.Y.I.'s forecasted consolidated (a) balance sheets, (b) income statements, and (c) cash flow statements, together with appropriate supporting details and a statement of underlying assumptions, prepared on or about the Closing Date.   "Property" means property of all kinds, real, personal or mixed, tangible or intangible (including, without limitation, all rights relating thereto), whether owned or acquired on or after the Closing Date.   "Quarterly Date" means the last day of each March, June, September and December of each year, the first of which shall be the first such day after the Closing Date.   "Receivables" means, as at any date of determination thereof, each and every "account" as such term is defined in the UCC and includes, without limitation, the unpaid portion of the obligation, as stated on the respective invoice, or, if there is no invoice, other writing, of a customer of F.Y.I. or any of its Subsidiaries in respect of Inventory sold and shipped or services rendered by F.Y.I. or any of its Subsidiaries.   "Register" means as specified in Section 13.8(d).   "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time.   "Regulatory Change" means, with respect to any Lender, any change after the Closing Date in any U.S. federal or state laws or foreign laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders including such Lender of or under any U.S. federal or state laws or foreign laws or regulations (whether or not having the force of law) by any Governmental Authority charged with the interpretation or administration thereof.   "Reimbursement Obligation" means the obligation of F.Y.I. (as account party or parties, respectively) to reimburse the Issuing Bank for any drawing under a Letter of Credit.   "Release" means, as to any Person, any release, spill, emission, leaking, pumping, injection, deposit, discharge, disposal, disbursement, leaching or migration of Hazardous Materials into the indoor or outdoor environment or into or out of Property owned by such Person, including, without limitation, the movement of Hazardous Materials through or in the air, soil, surface water or ground water.   "Remedial Action" means a actions required to (a) cleanup, remove, respond to, treat or otherwise address Hazardous Materials in the indoor or outdoor environment, (b) prevent the Release or threat of Release or minimize the further Release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform studies and investigations on the extent and nature of any actual or suspected contamination, the remedy or remedies to be used or health effects or risks of such contamination, or (d) perform post-remedial monitoring, care or remedy of a contaminated site.   "Rental Expense" means, for any period and for any Person, the rental or lease expense of such Person under operating leases calculated without duplication on a consolidated basis for such period as determined in accordance with GAAP.   "Reportable Event" means any of the events set forth in Section 4043 of ERISA.   "Required Lenders" means, at any date of determination, the Lenders having in the aggregate more than sixty-six and two-thirds of one percent (66 2/3%) (in Dollar amount as to any one or more of the following) of the sum of the aggregate outstanding Commitments (or, if the Commitments have terminated or expired, the aggregate outstanding principal amount of the Loans and the aggregate Letter of Credit Liabilities).   "Required Payment" means as specified in Section 3.4.   "Reserve Requirement" means, for any Eurodollar Loan of any Lender for any Interest Period therefor, the maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under any regulations of the Board of Governors of the Federal Reserve System (or any successor) by such Lender for deposits exceeding $1,000,000 against "Eurocurrency Liabilities" as such term is used in Regulation D. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such Lenders by reason of any Regulatory Change against (a) any category of liabilities which includes deposits by reference to which the Eurodollar Rate or the Adjusted Eurodollar Rate is to be determined or (b) any category of extensions of credit or other assets which include Eurodollar Loans.   "Responsible Officer" means, as to any Loan Party, the chief financial officer, chief operating officer or chief executive officer of such Person.   "Restricted Payment" means (a) any dividend or other distribution (whether in cash, Property or obligations), direct or indirect, on account of (or the setting apart of money for a sinking or other analogous fund for) any shares of any class of Capital Stock of F.Y.I. or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in equity securities of F.Y.I.; (b) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of F.Y.I. or any of its Subsidiaries now or hereafter outstanding; (c) any loan, advance or payment (pursuant to a tax sharing agreement or otherwise) to F.Y.I.; and (d) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of F.Y.I. or any of its Subsidiaries now or hereafter outstanding.   "Sale and Leaseback Transaction" means as specified in Section 9.9.   "Security Agreements" means the security agreements, in form and substance satisfactory to the Administrative Agent, executed at any time pursuant to this Agreement by F.Y.I. or any of its Subsidiaries or any other Loan Party in favor of the Administrative Agent for the benefit of the Administrative Agent and the Lenders, and any security agreement executed pursuant to Section 5.3 hereof, and any and all amendments, modifications, supplements, renewals, extensions or restatements thereof.   "Security Documents" means the Guaranties, the Security Agreements and the Mortgages, as they may be amended, modified, supplemented, renewed, extended or restated from time to time, and any and all other agreements, deeds of trust, mortgages, chattel mortgages, security agreements, pledges, guaranties, assignments of proceeds, assignments of income, assignments of contract rights, assignments of partnership interests, assignments of royalty interests, assignments of performance or other collateral assignments, completion or surety bonds, standby agreements, subordination agreements, undertakings and other agreements, documents, instruments and financing statements now or hereafter executed and/or delivered by any Loan Party in connection with or as security or assurance for the payment or performance of the Obligations or any part thereof.   "Seller Earn Out" means any obligation incurred by F.Y.I. or a Subsidiary in connection with a Permitted Acquisition which (i) is only payable by F.Y.I. for performance by a seller, or a shareholder, officer or director of a seller, of obligations over the passage of time (e.g., non-compete payments) or in the event certain future performance goals are achieved with respect to the assets or business acquired and (ii) provides that the maximum potential liability of F.Y.I. or any Subsidiary with respect thereto is limited.   "Seller Subordinated Debt" means any Debt of F.Y.I. (and not of any Subsidiary of F.Y.I.) which (a) is owed to a seller as part of the purchase consideration for a Permitted Acquisition, (b) is subordinated to the Obligations pursuant to a Subordination Agreement, (c) does not, when aggregated with the principal balance of all other Seller Subordinated Debt, exceed $10,000,000 in principal amount, (d) does not have an interest rate in excess of twelve percent (12%) per annum, and (e) is unsecured.  Seller Subordinated Debt may be convertible into Capital Stock of F.Y.I.   "Solvency Certificate" means a certificate substantially in the form of Exhibit F attached hereto.   "Solvent" means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair saleable 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, (c) 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, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is engaged.  In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount which, in light of the facts and circumstances existing at such time, represents the amount (net of contribution rights) that can reasonably be expected to become an actual or matured liability.   "Subordination Agreement" means a Subordination Agreement substantially similar to the form attached hereto as Exhibit C, relating to Seller Subordinated Debt.   "Subsidiary" means, with respect to any Person, any corporation or other entity of which at least a majority of the outstanding shares of stock or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors (or Persons performing similar functions) of such corporation or entity (irrespective of whether or not at the time, in the case of a corporation, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries.   "Swingline Advances" means as specified in Section 2.1(a).   "Syndication Agent" means SunTrust Bank, in its capacity as syndication agent.   "Type" means any type of Loan (i.e., a Prime Rate Loan or Eurodollar Loan).   "UCC" means the Uniform Commercial Code as in effect in the State of Texas and/or any other jurisdiction, the laws of which may be applicable to or in connection with the creation, perfection or priority of any Lien on any Property created pursuant to any Security Document.   "UCP" means as specified in Section 2.14(b).   "U.S." means the United States of America.   "Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary of such Person all of whose outstanding Capital Stock (other than directors' qualifying shares, if any) shall at the time be owned by such Person and/or one or more of its Wholly-Owned Subsidiaries.   SECTION 1.2             OTHER DEFINITIONAL PROVISIONS.  ALL DEFINITIONS CONTAINED IN THIS AGREEMENT ARE EQUALLY APPLICABLE TO THE SINGULAR AND PLURAL FORMS OF THE TERMS DEFINED.  THE WORDS "HEREOF", "HEREIN" AND "HEREUNDER" AND WORDS OF SIMILAR IMPORT REFERRING TO THIS AGREEMENT REFER TO THIS AGREEMENT AS A WHOLE AND NOT TO ANY PARTICULAR PROVISION OF THIS AGREEMENT.  UNLESS OTHERWISE SPECIFIED, ALL ARTICLE AND SECTION REFERENCES PERTAIN TO THIS AGREEMENT.  TERMS USED HEREIN THAT ARE DEFINED IN THE UCC, UNLESS OTHERWISE DEFINED HEREIN, SHALL HAVE THE MEANINGS SPECIFIED IN THE UCC.   SECTION 1.3             ACCOUNTING TERMS AND DETERMINATIONS.   (A)           ALL ACCOUNTING TERMS NOT SPECIFICALLY DEFINED HEREIN SHALL BE CONSTRUED IN ACCORDANCE WITH GAAP CONSISTENT WITH SUCH ACCOUNTING PRINCIPLES APPLIED IN THE PREPARATION OF THE AUDITED FINANCIAL STATEMENTS REFERRED TO IN SECTION 7.2(A). ALL FINANCIAL INFORMATION DELIVERED TO THE ADMINISTRATIVE AGENT PURSUANT TO SECTION 8.1 SHALL BE PREPARED IN ACCORDANCE WITH GAAP APPLIED ON A BASIS CONSISTENT WITH SUCH ACCOUNTING PRINCIPLES APPLIED IN THE PREPARATION OF THE AUDITED FINANCIAL STATEMENTS REFERRED TO IN SECTION 7.2(A) OR IN ACCORDANCE WITH SECTION 8.7.  IN THE EVENT THAT ANY "ACCOUNTING CHANGES" (AS DEFINED BELOW) OCCUR AND SUCH CHANGES RESULT IN A CHANGE IN THE METHOD OF CALCULATION OF FINANCIAL COVENANTS, STANDARDS OR TERMS IN THIS AGREEMENT, THEN F.Y.I. AND THE ADMINISTRATIVE AGENT AGREE TO ENTER INTO NEGOTIATIONS IN ORDER TO AMEND SUCH PROVISIONS OF THIS AGREEMENT SO AS TO EQUITABLY REFLECT SUCH ACCOUNTING CHANGES WITH THE DESIRED RESULT THAT THE CRITERIA FOR EVALUATING F.Y.I.'S FINANCIAL CONDITION SHALL BE THE SAME AFTER SUCH ACCOUNTING CHANGES AS IF SUCH ACCOUNTING CHANGES HAD NOT BEEN MADE.  UNTIL SUCH TIME AS SUCH AN AMENDMENT SHALL HAVE BEEN EXECUTED AND DELIVERED BY F.Y.I., THE ADMINISTRATIVE AGENT AND THE REQUIRED LENDERS, ALL FINANCIAL COVENANTS, STANDARDS AND TERMS IN THIS AGREEMENT SHALL CONTINUE TO BE CALCULATED OR CONSTRUED AS IF SUCH ACCOUNTING CHANGES HAD NOT OCCURRED.  "ACCOUNTING CHANGES" MEANS:  (I) CHANGES IN ACCOUNTING PRINCIPLES REQUIRED BY THE PROMULGATION OF ANY RULE, REGULATIONS, PRONOUNCEMENT OR OPINION BY THE FINANCIAL ACCOUNTING STANDARDS BOARD, THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS OR THE SECURITIES AND EXCHANGE COMMISSION (OR SUCCESSORS THERETO OR AGENCIES WITH SIMILAR FUNCTIONS) AFTER THE CLOSING DATE; AND (II) CHANGES IN ACCOUNTING PRINCIPLES APPROVED BY F.Y.I.'S CERTIFIED PUBLIC ACCOUNTANTS AND IMPLEMENTED AFTER THE CLOSING DATE.   (B)           F.Y.I. SHALL DELIVER TO THE ADMINISTRATIVE AGENT AND THE LENDERS, AT THE SAME TIME AS THE DELIVERY OF ANY ANNUAL OR QUARTERLY FINANCIAL STATEMENT UNDER SECTION 8.1, (I) A DESCRIPTION, IN REASONABLE DETAIL, OF ANY MATERIAL VARIATION BETWEEN THE APPLICATION OF GAAP EMPLOYED IN THE PREPARATION OF THE NEXT PRECEDING ANNUAL, QUARTERLY OR MONTHLY FINANCIAL STATEMENTS AS TO WHICH NO OBJECTION HAS BEEN MADE IN ACCORDANCE WITH THE LAST SENTENCE OF SUBSECTION (A) PRECEDING AND (II) REASONABLE ESTIMATES OF THE DIFFERENCE BETWEEN SUCH STATEMENTS ARISING AS A CONSEQUENCE THEREOF.   (C)           TO ENABLE THE READY AND CONSISTENT DETERMINATION OF COMPLIANCE WITH THE COVENANTS SET FORTH IN THIS AGREEMENT (INCLUDING ARTICLE 10 HEREOF), NEITHER F.Y.I. NOR ANY OF ITS SUBSIDIARIES WILL CHANGE THE LAST DAY OF ITS FISCAL YEAR FROM DECEMBER 31, OR THE LAST DAYS OF THE FIRST THREE FISCAL QUARTERS OF F.Y.I. AND ITS SUBSIDIARIES IN EACH OF ITS FISCAL YEARS FROM THAT EXISTING ON THE CLOSING DATE.  ANY SUBSIDIARY OF F.Y.I. CREATED OR ACQUIRED AFTER THE CLOSING DATE SHALL, AS SOON AS REASONABLY PRACTICABLE, BE PUT ON A FISCAL YEAR ENDING DECEMBER 31.   SECTION 1.4             FINANCIAL COVENANTS.  THE FINANCIAL COVENANTS CONTAINED IN ARTICLE 10 SHALL BE CALCULATED ON A CONSOLIDATED BASIS FOR F.Y.I. AND ITS SUBSIDIARIES.   ARTICLE 2   LOANS   SECTION 2.1              COMMITMENTS.   (A)           LOANS. SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, EACH LENDER SEVERALLY AGREES TO MAKE ONE OR MORE REVOLVING CREDIT LOANS TO F.Y.I. FROM TIME TO TIME FROM AND INCLUDING THE EFFECTIVE DATE TO BUT EXCLUDING THE MATURITY DATE UP TO BUT NOT EXCEEDING THE AMOUNT OF SUCH LENDER'S COMMITMENT AS THEN IN EFFECT; PROVIDED, HOWEVER, THAT (I) THE OUTSTANDING CREDIT APPLICABLE TO A LENDER SHALL NOT AT ANY TIME EXCEED THE REMAINDER OF SUCH LENDER'S COMMITMENT THEN IN EFFECT MINUS SUCH LENDER'S COMMITMENT PERCENTAGE OF THE SWINGLINE ADVANCES THEN OUTSTANDING AND (II) THE OUTSTANDING CREDIT OF ALL LENDERS SHALL NOT AT ANY TIME EXCEED THE REMAINDER OF THE COMMITMENTS THEN IN EFFECT MINUS THE SWINGLINE ADVANCES THEN OUTSTANDING.  (SUCH REVOLVING CREDIT LOANS REFERRED TO IN THIS SECTION 2.1(A) NOW OR HEREAFTER MADE BY THE LENDERS TO F.Y.I. FROM AND INCLUDING AND AFTER THE EFFECTIVE DATE ARE HEREINAFTER COLLECTIVELY CALLED THE "LOANS".)  ALL LOANS MADE BY THE LENDERS (AS DEFINED IN THIS AGREEMENT OR THE PRIOR AGREEMENT) OR THEIR PREDECESSORS IN INTEREST TO F.Y.I. OR ANY SUBSIDIARY OF F.Y.I. UNDER THE PRIOR AGREEMENT THAT ARE OUTSTANDING AS OF THE EFFECTIVE DATE SHALL HEREAFTER BE LOANS HEREUNDER AND SHALL BE DEEMED TO HAVE BEEN MADE TO F.Y.I. UNDER THIS AGREEMENT.  SUBJECT TO THE FOREGOING LIMITATIONS AND THE OTHER TERMS AND CONDITIONS OF THIS AGREEMENT, F.Y.I. MAY, PRIOR TO THE MATURITY DATE, BORROW, REPAY AND REBORROW THE LOANS HEREUNDER.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, F.Y.I. MAY FROM TIME TO TIME REQUEST, AND BANK OF AMERICA MAY AT ITS DISCRETION FROM TIME TO TIME ADVANCE (BUT SHALL IN NO EVENT BE OBLIGATED TO ADVANCE), LOANS WHICH ARE TO BE FUNDED SOLELY BY BANK OF AMERICA (THE "SWINGLINE ADVANCES"); PROVIDED, HOWEVER, THAT (A) THE AGGREGATE PRINCIPAL AMOUNT OF THE SWINGLINE ADVANCES OUTSTANDING AT ANY TIME SHALL NOT EXCEED $10,000,000 AND THE AGGREGATE PRINCIPAL AMOUNT OF THE LOANS OUTSTANDING AT ANY TIME (INCLUSIVE OF THE SWINGLINE ADVANCES) SHALL NOT EXCEED THE AGGREGATE PRINCIPAL AMOUNT OF THE COMMITMENTS, (B) ALL SWINGLINE ADVANCES SHALL BEAR INTEREST AS SET FORTH IN SECTION 2.4(A)(III), (C) EACH SWINGLINE ADVANCE SHALL BE PAYABLE ON DEMAND, BUT IN ANY EVENT NO LATER THAN THE 7TH DAY AFTER THE MAKING OF SUCH SWINGLINE ADVANCE, AND (D) BANK OF AMERICA SHALL GIVE THE ADMINISTRATIVE AGENT AND EACH LENDER WRITTEN NOTICE OF THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF THE SWINGLINE ADVANCES UPON THE WRITTEN REQUEST OF THE ADMINISTRATIVE AGENT OR ANY LENDER (BUT NO MORE OFTEN THAN ONCE EVERY CALENDAR QUARTER).  FURTHERMORE, UPON ONE BUSINESS DAY'S PRIOR WRITTEN NOTICE GIVEN BY BANK OF AMERICA TO THE ADMINISTRATIVE AGENT AND THE OTHER LENDERS AT ANY TIME AND FROM TIME TO TIME (INCLUDING, WITHOUT LIMITATION, AT ANY TIME FOLLOWING THE OCCURRENCE OF A DEFAULT OR AN EVENT OF DEFAULT) AND, IN ANY EVENT AND WITHOUT THE NECESSITY OF ANY SUCH NOTICE, ON THE BUSINESS DAY IMMEDIATELY PRECEDING THE MATURITY DATE, EACH LENDER (INCLUDING, WITHOUT LIMITATION, BANK OF AMERICA) SEVERALLY AGREES, AS PROVIDED IN THE FIRST SENTENCE OF THIS SECTION 2.1(A), AND NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, THE EXISTENCE OF ANY DEFAULT OR EVENT OF DEFAULT OR THE INABILITY OR FAILURE OF F.Y.I. OR ANY OF ITS SUBSIDIARIES  OR ANY OTHER LOAN PARTY TO SATISFY ANY CONDITION PRECEDENT TO FUNDING ANY OF THE LOANS CONTAINED IN ARTICLE 6 (WHICH CONDITIONS PRECEDENT SHALL NOT APPLY TO THIS SENTENCE), TO MAKE A LOAN, IN THE FORM OF A PRIME RATE LOAN, IN AN AMOUNT EQUAL TO ITS COMMITMENT PERCENTAGE OF THE AGGREGATE PRINCIPAL AMOUNT OF THE SWINGLINE ADVANCES THEN OUTSTANDING, AND THE PROCEEDS OF SUCH LOANS SHALL BE PROMPTLY PAID BY THE ADMINISTRATIVE AGENT TO BANK OF AMERICA AND APPLIED AS A REPAYMENT OF THE AGGREGATE PRINCIPAL AMOUNT OF THE SWINGLINE ADVANCES THEN OUTSTANDING.   (B)           CONTINUATION AND CONVERSION OF LOANS.  SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, F.Y.I. MAY BORROW THE LOANS AS PRIME RATE LOANS OR AS EURODOLLAR LOANS (EXCEPT FOR LOANS WHICH CONSTITUTE SWINGLINE ADVANCES) AND, UNTIL THE MATURITY DATE, MAY CONTINUE EURODOLLAR LOANS OR CONVERT LOANS (OTHER THAN LOANS WHICH CONSTITUTE SWINGLINE ADVANCES) OF ONE TYPE INTO LOANS OF THE OTHER TYPE.   (C)           LENDING OFFICES.  LOANS OF EACH TYPE MADE BY EACH LENDER SHALL BE MADE AND MAINTAINED AT SUCH LENDER'S APPLICABLE LENDING OFFICE FOR LOANS OF SUCH TYPE.   (D)           EXTENSIONS.  THE MATURITY DATE MAY BE EXTENDED ON BOTH THE FIRST AND SECOND ANNIVERSARIES OF THE CLOSING DATE AS SET FORTH IN THIS SECTION 2.1(D), IN EACH CASE FOR A PERIOD OF 364 DAYS MEASURED FROM THE MATURITY DATE THEN IN EFFECT.  IF F.Y.I. WISHES TO REQUEST AN EXTENSION OF THE MATURITY DATE, IT SHALL GIVE NOTICE TO THAT EFFECT TO THE ADMINISTRATIVE AGENT NOT LESS THAN 45 DAYS NOR MORE THAN 60 DAYS PRIOR TO THE FIRST AND/OR SECOND ANNIVERSARY OF THE CLOSING DATE. THE ADMINISTRATIVE AGENT SHALL PROMPTLY NOTIFY EACH LENDER OF RECEIPT OF SUCH REQUEST. EACH LENDER SHALL ENDEAVOR TO RESPOND TO SUCH REQUEST, WHETHER AFFIRMATIVELY OR NEGATIVELY (SUCH DETERMINATION IN THE SOLE DISCRETION OF SUCH LENDER), BY NOTICE TO F.Y.I. AND THE ADMINISTRATIVE AGENT WITHIN 30 DAYS OF RECEIPT OF SUCH REQUEST. SUBJECT TO THE EXECUTION BY F.Y.I., THE ADMINISTRATIVE AGENT AND SUCH LENDERS OF A DULY COMPLETED EXTENSION AGREEMENT IN SUBSTANTIALLY THE FORM OF EXHIBIT J, THE MATURITY DATE APPLICABLE TO THE COMMITMENT OF EACH LENDER SO AFFIRMATIVELY NOTIFYING F.Y.I. AND THE ADMINISTRATIVE AGENT SHALL BE EXTENDED FOR THE PERIOD SPECIFIED ABOVE; PROVIDED THAT NO MATURITY DATE OF ANY LENDER SHALL BE EXTENDED UNLESS LENDERS HAVING AT LEAST 51% IN AGGREGATE AMOUNT OF THE COMMITMENTS IN EFFECT AT THE TIME ANY SUCH EXTENSION IS REQUESTED SHALL HAVE ELECTED SO TO EXTEND THEIR COMMITMENTS. ANY LENDER WHICH DOES NOT GIVE SUCH NOTICE TO F.Y.I. AND THE ADMINISTRATIVE AGENT SHALL BE DEEMED TO HAVE ELECTED NOT TO EXTEND AS REQUESTED AND THE COMMITMENT OF EACH NON-EXTENDING LENDER SHALL TERMINATE ON THE MATURITY DATE DETERMINED WITHOUT GIVING EFFECT TO SUCH REQUESTED EXTENSION.  F.Y.I. SHALL HAVE THE RIGHT TO REPLACE ANY SUCH NON-EXTENDING LENDER WITH ANOTHER PERSON PURSUANT TO THE PROVISIONS OF SECTION 13.11.   SECTION 2.2             NOTES.  THE LOANS MADE BY EACH LENDER SHALL BE EVIDENCED BY A SINGLE PROMISSORY NOTE OF F.Y.I. IN SUBSTANTIALLY THE FORM OF EXHIBIT B HERETO, PAYABLE TO THE ORDER OF SUCH LENDER IN A PRINCIPAL AMOUNT EQUAL TO ITS COMMITMENT (AS ORIGINALLY IN EFFECT OR THEREAFTER INCREASED) AND OTHERWISE DULY COMPLETED; PROVIDED, HOWEVER, THAT THE SWINGLINE ADVANCES MADE BY BANK OF AMERICA SHALL BE EVIDENCED BY A SINGLE PROMISSORY NOTE OF F.Y.I. IN THE MAXIMUM ORIGINAL PRINCIPAL AMOUNT OF $10,000,000 PAYABLE TO THE ORDER OF BANK OF AMERICA IN SUBSTANTIALLY THE FORM OF EXHIBIT D HERETO, DATED THE CLOSING DATE.  EACH LENDER IS HEREBY AUTHORIZED BY F.Y.I. TO ENDORSE ON THE SCHEDULE (OR A CONTINUATION THEREOF) ATTACHED TO THE NOTE OF SUCH LENDER, TO THE EXTENT APPLICABLE, THE DATE, AMOUNT AND TYPE OF AND THE INTEREST PERIOD FOR EACH LOAN MADE BY SUCH LENDER TO F.Y.I. AND THE AMOUNT OF EACH PAYMENT OR PREPAYMENT OF PRINCIPAL OF SUCH LOAN RECEIVED BY SUCH LENDER, PROVIDED THAT ANY FAILURE BY SUCH LENDER TO MAKE ANY SUCH ENDORSEMENT SHALL NOT AFFECT THE OBLIGATIONS OF F.Y.I. UNDER SUCH NOTE OR THIS AGREEMENT IN RESPECT OF SUCH LOAN.   SECTION 2.3             REPAYMENT OF LOANS.  F.Y.I. SHALL PAY TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF EACH APPLICABLE LENDER THE OUTSTANDING PRINCIPAL OF THE LOANS EXISTING ON THE MATURITY DATE.  FOR PURPOSES OF THIS SECTION 2.3, THE AGGREGATE UNDRAWN FACE AMOUNT OF ALL LETTERS OF CREDIT AND THE AGGREGATE AMOUNT OF THE OUTSTANDING REIMBURSEMENT OBLIGATIONS SHALL BE ADDED TO THE OUTSTANDING PRINCIPAL BALANCE OF THE LOANS FOR PURPOSES OF DETERMINING THE AMOUNT F.Y.I. MUST PAY TO THE ADMINISTRATIVE AGENT UNDER THIS SECTION 2.3.  MORE SPECIFICALLY, IF ANY LETTERS OF CREDIT OR REIMBURSEMENT OBLIGATIONS ARE OUTSTANDING AS OF THE MATURITY DATE, THEN, IN ADDITION TO THE REPAYMENT OF ALL OUTSTANDING LOANS ON THE MATURITY DATE, F.Y.I. SHALL DELIVER TO THE ADMINISTRATIVE AGENT CASH OR CASH EQUIVALENTS IN AN AMOUNT EQUAL TO THE AGGREGATE UNDRAWN FACE AMOUNT OF ALL LETTERS OF CREDIT AND THE AGGREGATE AMOUNT OF ALL OUTSTANDING REIMBURSEMENT OBLIGATIONS, SUCH CASH OR CASH EQUIVALENTS TO BE PLEDGED TO THE ADMINISTRATIVE AGENT AS SECURITY FOR THE OBLIGATIONS PURSUANT TO DOCUMENTATION SATISFACTORY TO THE ADMINISTRATIVE AGENT IN FORM AND SUBSTANCE.   SECTION 2.4             INTEREST.   (A)           INTEREST RATE.  F.Y.I. SHALL PAY TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF EACH LENDER INTEREST ON THE UNPAID PRINCIPAL AMOUNT OF EACH LOAN MADE BY SUCH LENDER TO F.Y.I. FOR THE PERIOD COMMENCING ON THE DATE OF SUCH LOAN TO BUT EXCLUDING THE DATE SUCH LOAN SHALL BE PAID IN FULL, AT THE FOLLOWING RATES PER ANNUM:   (I)            DURING THE PERIODS SUCH LOAN IS A PRIME RATE LOAN, THE LESSER OF (A) THE PRIME RATE PLUS THE APPLICABLE MARGIN OR (B) THE MAXIMUM RATE;   (II)           DURING THE PERIODS SUCH LOAN IS A EURODOLLAR LOAN, THE LESSER OF (A) THE EURODOLLAR RATE PLUS THE APPLICABLE MARGIN OR (B) THE MAXIMUM RATE; AND   (III)          WITH RESPECT TO SWINGLINE ADVANCES, THE LESSER OF (A) EURODOLLAR DAILY FLOATING RATE PLUS THE APPLICABLE MARGIN (FOR EURODOLLAR LOANS), OR (B) THE MAXIMUM RATE.   (B)           PAYMENT DATES.  ACCRUED INTEREST ON THE LOANS SHALL BE DUE AND PAYABLE IN ARREARS AS FOLLOWS:   (I)            IN THE CASE OF PRIME RATE LOANS, ON EACH QUARTERLY DATE;   (II)           IN THE CASE OF EACH EURODOLLAR LOAN, ON THE LAST DAY OF THE INTEREST PERIOD WITH RESPECT THERETO AND, IN THE CASE OF A EURODOLLAR LOAN HAVING AN INTEREST PERIOD OF SIX (6) MONTHS, ON THE DAY IN THE THIRD SUCCEEDING CALENDAR MONTH NUMERICALLY CORRESPONDING TO THE COMMENCEMENT DATE OF SUCH INTEREST PERIOD (OR, IF NO NUMERICALLY CORRESPONDING DATE EXISTS, ON THE LAST BUSINESS DAY OF SUCH THIRD SUCCEEDING CALENDAR MONTH);   (III)          UPON THE PAYMENT OR PREPAYMENT OF ANY LOAN OR THE CONVERSION OF ANY LOAN TO A LOAN OF THE OTHER TYPE (BUT ONLY ON THE PRINCIPAL AMOUNT SO PAID, PREPAID OR CONVERTED); AND   (IV)          ON THE MATURITY DATE.   (C)           DEFAULT INTEREST.  NOTWITHSTANDING THE FOREGOING, F.Y.I. SHALL PAY TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF EACH LENDER INTEREST AT THE APPLICABLE DEFAULT RATE ON ANY PRINCIPAL OF ANY LOAN MADE BY SUCH LENDER, ANY REIMBURSEMENT OBLIGATION OWING TO SUCH LENDER AND (TO THE FULLEST EXTENT PERMITTED BY LAW) ANY OTHER AMOUNT PAYABLE BY F.Y.I. UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO SUCH LENDER, WHICH IS NOT PAID IN FULL WHEN DUE (WHETHER AT STATED MATURITY, BY ACCELERATION OR OTHERWISE) OR WHICH IS OUTSTANDING DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, FOR THE PERIOD FROM AND INCLUDING THE DUE DATE THEREOF OR THE DATE OF THE OCCURRENCE OF SUCH EVENT OF DEFAULT (AS APPLICABLE) TO BUT EXCLUDING THE DATE THE SAME IS PAID IN FULL.  INTEREST PAYABLE AT THE DEFAULT RATE SHALL BE PAYABLE FROM TIME TO TIME ON DEMAND BY THE ADMINISTRATIVE AGENT.   SECTION 2.5             BORROWING PROCEDURE.  F.Y.I. SHALL GIVE THE ADMINISTRATIVE AGENT NOTICE OF EACH BORROWING HEREUNDER IN ACCORDANCE WITH SECTION 2.9.  NOT LATER THAN 1:00 P.M. (DALLAS, TEXAS TIME) ON THE DATE SPECIFIED FOR EACH BORROWING HEREUNDER, EACH LENDER WILL MAKE AVAILABLE THE AMOUNT OF THE LOAN TO BE MADE BY IT ON SUCH DATE TO THE ADMINISTRATIVE AGENT, AT THE PRINCIPAL OFFICE, IN IMMEDIATELY AVAILABLE FUNDS, FOR THE ACCOUNT OF F.Y.I.  THE AMOUNT SO RECEIVED BY THE ADMINISTRATIVE AGENT SHALL, SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, BE MADE AVAILABLE TO F.Y.I. BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS TO THE APPLICABLE DEPOSIT ACCOUNT NO LATER THAN 1:00 P.M.   SECTION 2.6             OPTIONAL PREPAYMENTS, CONVERSIONS AND CONTINUATIONS OF LOANS, REDUCTION OF COMMITMENTS.  SUBJECT TO SECTIONS 2.7 AND 2.8, F.Y.I. SHALL HAVE THE RIGHT FROM TIME TO TIME TO PREPAY THE LOANS, TO CONVERT ALL OR PART OF A LOAN (OTHER THAN A SWINGLINE ADVANCE) OF ONE TYPE INTO A LOAN OF ANOTHER TYPE OR TO CONTINUE EURODOLLAR LOANS; PROVIDED THAT:  (A) F.Y.I. SHALL GIVE THE ADMINISTRATIVE AGENT NOTICE OF EACH SUCH PREPAYMENT, CONVERSION OR CONTINUATION AS PROVIDED IN SECTION 2.9, (B) EURODOLLAR LOANS MAY ONLY BE CONVERTED ON THE LAST DAY OF THE INTEREST PERIOD, UNLESS F.Y.I., CONCURRENTLY WITH MAKING ANY SUCH PREPAYMENT, PAYS ALL AMOUNTS OWING TO THE ADMINISTRATIVE AGENT AND THE LENDERS UNDER SECTION 4.5, (C) EXCEPT FOR CONVERSIONS OF EURODOLLAR LOANS INTO PRIME RATE LOANS, NO CONVERSIONS OR CONTINUATIONS SHALL BE MADE WHILE A DEFAULT HAS OCCURRED AND IS CONTINUING, (D) OPTIONAL PREPAYMENTS OF THE LOANS SHALL BE APPLIED FIRST TO THE SWINGLINE ADVANCES (UNTIL SUCH ADVANCES ARE PAID IN FULL) AND THEN TO THE LOANS OTHER THAN THE SWINGLINE ADVANCES, AND (E) OPTIONAL PREPAYMENTS OF THE LOANS MADE ON OR AFTER THE MATURITY DATE SHALL BE APPLIED TO THE THEN-REMAINING INSTALLMENTS OF PRINCIPAL OF THE LOANS PRO RATA.   SECTION 2.7             MANDATORY PREPAYMENTS.   (A)           ASSET DISPOSITIONS.  F.Y.I. SHALL, WITHIN TWO BUSINESS DAYS AFTER EACH DAY ON WHICH IT OR ANY OF ITS SUBSIDIARIES RECEIVES ANY NET PROCEEDS FROM AN ASSET DISPOSITION, PAY TO THE ADMINISTRATIVE AGENT, AS A PREPAYMENT OF THE LOANS, AN AGGREGATE AMOUNT EQUAL TO 100% OF THE NET PROCEEDS FROM SUCH ASSET DISPOSITION.  NOTWITHSTANDING THE FOREGOING, NO SUCH PREPAYMENT WILL BE REQUIRED PURSUANT TO THIS SECTION 2.7(A) (I) FROM THE NET PROCEEDS FROM ANY SINGLE ASSET DISPOSITION OF USED EQUIPMENT IF SUCH NET PROCEEDS ARE $250,000 OR LESS AND ARE FULLY RE-INVESTED IN EQUIPMENT USED IN THE ORDINARY COURSE OF THE BUSINESS OF THE PERSON MAKING SUCH ASSET DISPOSITION WITHIN 180 DAYS OF SUCH ASSET DISPOSITION, SO LONG AS THE NET PROCEEDS FROM ALL SUCH ASSET DISPOSITIONS IN ANY ONE CALENDAR YEAR DO NOT EXCEED $250,000, (II) FROM THE NET PROCEEDS OF ANY EXPROPRIATION OR CONDEMNATION OF REAL PROPERTY IF AND TO THE EXTENT THAT SUCH NET PROCEEDS ARE, AS A RESULT OF SUCH EXPROPRIATION OR CONDEMNATION, RE-INVESTED IN SIMILAR REAL PROPERTY OR USED TO MODIFY OTHER THEN-EXISTING REAL PROPERTY USED IN THE ORDINARY COURSE OF THE BUSINESS OF THE PERSON WHOSE REAL PROPERTY IS AFFECTED THEREBY WITHIN 180 DAYS OF RECEIPT OF PROCEEDS OF SUCH EXPROPRIATION OR CONDEMNATION, (III) FROM THE NET PROCEEDS OF ANY OF THE PERMITTED DISPOSITIONS, OR (IV) UNTIL THE CUMULATIVE NET PROCEEDS RECEIVED AT ANY TIME FROM ALL ASSET DISPOSITIONS MADE ON OR AFTER DECEMBER 31, 2000, EXCLUSIVE OF THE PERMITTED DISPOSITIONS, EXCEEDS 15% OF F.Y.I.'S CONSOLIDATED TANGIBLE NET ASSETS AS OF THE DATE OF SUCH ASSET DISPOSITION (IN WHICH CASE A PREPAYMENT SHALL BE MADE IN THE AMOUNT OF THE NET PROCEEDS FROM ANY ASSET DISPOSITION IN EXCESS OF SUCH AMOUNT, OR IF, AS OF THE DATE OF DETERMINATION, CUMULATIVE NET PROCEEDS FROM PRIOR ASSET DISPOSITIONS EXCEED 15% OF F.Y.I.'S CONSOLIDATED TANGIBLE NET ASSETS, F.Y.I. SHALL PAY TO THE ADMINISTRATIVE AGENT, AS A PREPAYMENT OF THE LOANS, IN ADDITION TO 100% OF THE NET PROCEEDS FROM SUCH ASSET DISPOSITION, THE AMOUNT OF SUCH CUMULATIVE NET PROCEEDS FROM PRIOR ASSET DISPOSITIONS IN EXCESS OF 15% OF F.Y.I.'S CONSOLIDATED TANGIBLE NET ASSETS).  NOTWITHSTANDING THE FOREGOING, IN CONNECTION WITH ANY ASSET DISPOSITION CONSISTING OF THE DISPOSITION OF ASSETS ACQUIRED IN A PERMITTED ACQUISITION, TO THE EXTENT THAT THE DISPOSITION OF SUCH ASSETS WAS CONTEMPLATED AND DISCLOSED TO THE LENDERS AT THE TIME OF THE CONSUMMATION OF THE PERMITTED ACQUISITION IN WHICH THE ASSETS WERE ACQUIRED, AND IF SUCH ASSET DISPOSITION OCCURS WITHIN ONE YEAR OF THE CLOSING OF THE PERMITTED ACQUISITION, THE PREPAYMENT REQUIRED UNDER THIS SECTION 2.7(A) SHALL BE LIMITED TO THE LESSER OF 100% OF THE NET PROCEEDS OF THE ASSET DISPOSITION OR AN AMOUNT EQUAL TO THE PRINCIPAL AMOUNT OF ANY LOANS ADVANCED IN CONNECTION WITH THE PERMITTED ACQUISITION.   (B)           EQUITY ISSUANCES.  F.Y.I. SHALL, ON EACH DAY THAT IT RECEIVES ANY NET PROCEEDS FROM ANY EQUITY ISSUANCE, PAY TO THE ADMINISTRATIVE AGENT, AS A PREPAYMENT OF THE LOANS, AN AGGREGATE AMOUNT EQUAL TO 100% OF THE NET PROCEEDS FROM SUCH EQUITY ISSUANCE; PROVIDED, HOWEVER, THAT NO PREPAYMENT SHALL BE REQUIRED IF AND TO THE EXTENT THAT THE CAPITAL STOCK ISSUED IN SUCH EQUITY ISSUANCE IS (I) ISSUED TO A SELLER AS PART OF THE PURCHASE CONSIDERATION FOR A PERMITTED ACQUISITION, (II) ISSUED TO RAISE CASH TO PAY PART OF THE PURCHASE CONSIDERATION FOR A SPECIFIC PERMITTED ACQUISITION CONTEMPLATED AT THE TIME OF SUCH ISSUANCE AND THE PROCEEDS OF WHICH ARE SUBSEQUENTLY EXPENDED FOR SUCH PURPOSE, OR (III) ISSUED TO AN OFFICER, DIRECTOR, EMPLOYEE OR CONSULTANT OF EITHER F.Y.I. OR A SUBSIDIARY OF F.Y.I. IN CONSIDERATION FOR SERVICES RENDERED OR PURSUANT TO ANY EMPLOYEE BENEFIT OR INCENTIVE PLAN.  THIS SECTION 2.7(B) SHALL NOT APPLY IF THE FUNDED DEBT TO EBITDA RATIO IS LESS THAN 2.00 TO 1.00 AFTER GIVING EFFECT TO THE EQUITY ISSUANCE AND TO APPLICATION OF THE PROCEEDS THEREOF.   (C)           DEBT ISSUANCES.  F.Y.I. SHALL, ON EACH DAY THAT IT OR ANY OF ITS SUBSIDIARIES RECEIVES ANY NET PROCEEDS FROM ANY DEBT ISSUANCE, PAY TO THE ADMINISTRATIVE AGENT, AS A PREPAYMENT OF THE LOANS, AN AGGREGATE AMOUNT EQUAL TO 100% OF THE NET PROCEEDS FROM SUCH DEBT ISSUANCE.  NO DEBT ISSUANCES MAY BE MADE WITHOUT THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT AND THE REQUIRED LENDERS.   (D)           COMMITMENTS.  IF AT ANY TIME THE OUTSTANDING CREDIT EXCEEDS THE COMMITMENTS, WITHIN THREE BUSINESS DAY AFTER THE OCCURRENCE THEREOF F.Y.I. SHALL PAY TO THE ADMINISTRATIVE AGENT THE AMOUNT OF SUCH EXCESS AS A PREPAYMENT OF THE LOANS (OR, IF THE LOANS HAVE BEEN PAID IN FULL, TO REDUCE OR TO PROVIDE CASH COLLATERAL TO SECURE THE OUTSTANDING LETTER OF CREDIT LIABILITIES RELATING TO LETTERS OF CREDIT ISSUED PURSUANT TO THE COMMITMENTS).   (E)           APPLICATION OF MANDATORY PREPAYMENTS.  ALL PREPAYMENTS PURSUANT TO SECTIONS 2.7(A), 2.7(B) OR 2.7(C) PRECEDING SHALL BE APPLIED FIRST TO ANY SWINGLINE ADVANCES UNTIL SUCH ADVANCES ARE PAID IN FULL.   SECTION 2.8             MINIMUM AMOUNTS.  EXCEPT FOR CONVERSIONS AND PREPAYMENTS PURSUANT TO SECTION 2.7 AND ARTICLE 4, EACH BORROWING, EACH CONVERSION AND EACH PREPAYMENT OF PRINCIPAL OF THE LOANS SHALL BE IN AN AMOUNT AT LEAST EQUAL TO $1,000,000 OR AN INTEGRAL MULTIPLE OF $500,000 IN EXCESS THEREOF; PROVIDED, HOWEVER, THAT EACH BORROWING OF SWINGLINE ADVANCES SHALL BE IN AN AMOUNT AT LEAST EQUAL TO $100,000 OR IN INTEGRAL MULTIPLES OF $50,000 IN EXCESS THEREOF (BORROWINGS, PREPAYMENTS OR CONVERSIONS OF OR INTO LOANS OF DIFFERENT TYPES OR, IN THE CASE OF EURODOLLAR LOANS, HAVING DIFFERENT INTEREST PERIODS AT THE SAME TIME HEREUNDER SHALL BE DEEMED SEPARATE BORROWINGS, PREPAYMENTS AND CONVERSIONS FOR PURPOSES OF THE FOREGOING, ONE FOR EACH TYPE OR INTEREST PERIOD).   SECTION 2.9             CERTAIN NOTICES.  NOTICES BY F.Y.I. TO THE ADMINISTRATIVE AGENT OF TERMINATIONS OR REDUCTIONS OF COMMITMENTS, OF BORROWINGS AND ISSUANCES OF LETTERS OF CREDIT, CONVERSIONS, CONTINUATIONS AND PREPAYMENTS OF LOANS AND OF THE DURATION OF INTEREST PERIODS SHALL BE IRREVOCABLE AND SHALL BE EFFECTIVE ONLY IF RECEIVED BY THE ADMINISTRATIVE AGENT NOT LATER THAN 11:00 A.M. (DALLAS, TEXAS TIME) ON THE BUSINESS DAY PRIOR TO OR ON THE DATE OF THE RELEVANT TERMINATION, REDUCTION, BORROWING OR ISSUANCE, CONVERSION, CONTINUATION OR PREPAYMENT OR THE FIRST DAY OF SUCH INTEREST PERIOD SPECIFIED BELOW:     Notice   Number of Business Days Prior         Terminations or Reductions of Commitments   1 Borrowing of Swingline Advances   same day   Borrowing of Prime Rate Loans   same day   Borrowing of Eurodollar Loans   3   Conversions or Continuations of Loans   3   Prepayment of Prime Rate Loans   same day   Prepayments of Eurodollar Loans   same day   Issuances of Letters of Credit   5     Each such notice of termination or reduction shall specify the amount of the Commitments to be terminated or reduced.  Each such notice of borrowing, Conversion, Continuation or prepayment shall specify the Loans to be borrowed, Converted, Continued or prepaid and the amount (subject to Section 2.8 hereof) and Type of the Loans to be borrowfed (and, with respect to Prime Rate Loans, whether any of such Loans shall consist of Swingline Advances), Converted, Continued or prepaid (and, in the case of a Conversion, the Type of Loans to result from such Conversion) and the date of borrowing, Conversion, Continuation or prepayment (which shall be a Business Day).  Notices of borrowings, Conversions, Continuations or prepayments shall be in the form of Exhibit E hereto, appropriately completed as applicable.  Each such notice of the duration of an Interest Period shall specify the Loans to which such Interest Period is to relate.  The Administrative Agent shall promptly notify the Lenders of the contents of each such notice.  In the event F.Y.I. fails to select the Type of Loan, or the duration of any Interest Period for any Eurodollar Loan, within the time period and otherwise as provided in this Section 2.9, such Loan (if outstanding as Eurodollar Loan) will be automatically Converted into a Prime Rate Loan on the last day of preceding Interest Period for such Loan or (if outstanding as a Prime Rate Loan) will remain as, or (if not then outstanding) will be made as, a Prime Rate Loan.  F.Y.I. may not borrow any Eurodollar Loans, Convert any Loans into Eurodollar Loans or Continue any Loans as Eurodollar Loans if the interest rate for such Eurodollar Loans would exceed the Maximum Rate.   SECTION 2.10           USE OF PROCEEDS.   (A)           F.Y.I. REPRESENTS AND WARRANTS TO AND COVENANTS WITH THE ADMINISTRATIVE AGENT AND THE LENDERS THAT THE PROCEEDS OF THE LOANS TO BE MADE ON AND AFTER THE EFFECTIVE DATE SHALL BE USED FOR WORKING CAPITAL AND GENERAL CORPORATE PURPOSES OF F.Y.I. AND ITS SUBSIDIARIES IN THE ORDINARY COURSE OF BUSINESS, TO FINANCE PARTIALLY OR WHOLLY FUTURE PERMITTED ACQUISITIONS, INCLUDING THE TRANSACTION COSTS OF F.Y.I. AND ITS SUBSIDIARIES ASSOCIATED WITH SUCH PERMITTED ACQUISITIONS, AND TO FINANCE PARTIALLY OR WHOLLY FUTURE PERMITTED SHARE REPURCHASES.   (B)           NONE OF THE PROCEEDS OF ANY LOAN HAVE BEEN OR WILL BE USED TO ACQUIRE ANY SECURITY IN ANY TRANSACTION THAT IS SUBJECT TO SECTION 13 OR 14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, OR TO PURCHASE OR CARRY ANY MARGIN STOCK (WITHIN THE MEANING OF REGULATIONS T, U OR X OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM).   SECTION 2.11           FEES.   (A)           F.Y.I. AGREES TO PAY TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF EACH LENDER A COMMITMENT FEE (THE "COMMITMENT FEES") ON THE DAILY AVERAGE UNUSED OR UNFUNDED AMOUNT OF SUCH LENDER'S COMMITMENT, FOR THE PERIOD FROM AND INCLUDING THE CLOSING DATE TO AND INCLUDING THE MATURITY DATE, AT THE RATE EQUAL TO THE APPLICABLE MARGIN PER ANNUM BASED ON A 360 DAY YEAR AND THE ACTUAL NUMBER OF DAYS ELAPSED, WHICH ACCRUED COMMITMENT FEES SHALL BE PAYABLE IN ARREARS ON EACH QUARTERLY DATE BEGINNING ON JUNE 30, 2001 AND ON THE MATURITY DATE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, ANY AND ALL SWINGLINE ADVANCES OUTSTANDING FROM TIME TO TIME SHALL BE WHOLLY EXCLUDED, AND SHALL NOT COUNT AS USED OR FUNDED AMOUNTS, FOR PURPOSES OF DETERMINING THE UNUSED OR UNFUNDED AMOUNT OF EACH LENDER'S COMMITMENT IN ACCORDANCE WITH THIS SECTION 2.11(A).   (B)           F.Y.I. AGREES TO PAY TO THE ADMINISTRATIVE AGENT (FOR THE ACCOUNT OF THE ADMINISTRATIVE AGENT AND/OR THE LENDERS, AS MAY BE SPECIFIED IN THE FEE LETTER) SUCH ADDITIONAL FEES AS ARE SPECIFIED IN THE FEE LETTER, WHICH FEES SHALL BE PAYABLE IN SUCH AMOUNTS AND ON SUCH DATES AS ARE SPECIFIED THEREIN.  SUCH ADDITIONAL FEES SHALL INCLUDE, WITHOUT LIMITATION, AN UPFRONT FEE PAYABLE BY F.Y.I. TO EACH LENDER ON THE EFFECTIVE DATE IN THE AMOUNT AGREED UPON AMONG THE ADMINISTRATIVE AGENT AND/OR THE LEAD ARRANGER AND SUCH LENDER.   SECTION 2.12           COMPUTATIONS.  INTEREST AND FEES PAYABLE BY F.Y.I. HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS SHALL BE COMPUTED ON THE BASIS OF A YEAR OF 360 DAYS (EXCEPT AS STATED IN THE PROVISO BELOW) AND THE ACTUAL NUMBER OF DAYS ELAPSED (INCLUDING THE FIRST DAY BUT EXCLUDING THE LAST DAY) OCCURRING IN THE PERIOD FOR WHICH PAYABLE UNLESS, IN THE CASE OF INTEREST, SUCH CALCULATION WOULD RESULT IN A USURIOUS RATE, IN WHICH CASE INTEREST SHALL BE CALCULATED ON THE BASIS OF A YEAR OF 365 OR 366 DAYS, AS THE CASE MAY BE; PROVIDED, HOWEVER, THAT INTEREST PAYABLE BY F.Y.I. HEREUNDER ON ALL PRIME RATE LOANS SHALL BE ON THE BASIS OF A COMPLETED YEAR OF 365 OR 366 DAYS, AS APPLICABLE.   SECTION 2.13           TERMINATION OR REDUCTION OF COMMITMENTS.   (A)           OPTIONAL.  F.Y.I. SHALL HAVE THE RIGHT TO TERMINATE OR REDUCE IN PART THE UNUSED PORTION OF THE COMMITMENTS AT ANY TIME AND FROM TIME TO TIME, PROVIDED THAT (I) F.Y.I. SHALL GIVE NOTICE OF EACH SUCH TERMINATION OR REDUCTION AS PROVIDED IN SECTION 2.9, (II) EACH PARTIAL REDUCTION SHALL BE IN AN AGGREGATE AMOUNT OF AT LEAST $1,000,000 OR AN INTEGRAL MULTIPLE OF $500,000 IN EXCESS THEREOF, AND (III) F.Y.I. SHALL NOT HAVE THE RIGHT TO TERMINATE OR REDUCE IN PART ANY UNUSED PORTION OF THE COMMITMENTS THAT COULD OR MAY BE REQUIRED TO BE ADVANCED BY THE LENDERS TO REFINANCE SWINGLINE ADVANCES THEN OUTSTANDING.  THE COMMITMENTS MAY NOT BE REINSTATED OR INCREASED AFTER THEY HAVE BEEN TERMINATED OR REDUCED.   (B)           MANDATORY.  EACH MANDATORY PREPAYMENT OF THE LOANS PURSUANT TO SECTION 2.7 SHALL PERMANENTLY REDUCE THE COMMITMENTS BY THE AMOUNT OF THE PREPAYMENT, WHICH REDUCTION MAY NOT BE REINSTATED.   SECTION 2.14           LETTERS OF CREDIT.   (A)           SUBJECT TO THE TERMS AND PROVISIONS OF THIS AGREEMENT, F.Y.I. MAY UTILIZE THE COMMITMENTS BY REQUESTING THAT THE ISSUING BANK ISSUE LETTERS OF CREDIT; PROVIDED, THAT THE AGGREGATE AMOUNT OF OUTSTANDING LETTER OF CREDIT LIABILITIES UNDER THE COMMITMENTS SHALL NOT AT ANY TIME EXCEED $25,000,000.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EACH OF THE EXISTING LETTERS OF CREDIT SHALL BE DEEMED, AND SHALL BE, A LETTER OF CREDIT ISSUED HEREUNDER.  UPON THE LATER OF (I) THE DATE OF THIS AGREEMENT OR (II) THE DATE OF ISSUE OF EACH LETTER OF CREDIT, THE ISSUING BANK SHALL BE DEEMED, WITHOUT FURTHER ACTION BY ANY PARTY HERETO, TO HAVE SOLD TO EACH LENDER, AND EACH LENDER SHALL BE DEEMED, WITHOUT FURTHER ACTION BY ANY PARTY HERETO, TO HAVE PURCHASED FROM THE ISSUING BANK, A PARTICIPATION TO THE EXTENT OF SUCH LENDER'S COMMITMENT PERCENTAGE IN SUCH LETTER OF CREDIT.   (B)           F.Y.I. SHALL GIVE THE ISSUING BANK (WITH A COPY TO THE ADMINISTRATIVE AGENT) AT LEAST FIVE BUSINESS DAYS IRREVOCABLE PRIOR NOTICE (EFFECTIVE UPON RECEIPT) SPECIFYING THE DATE OF EACH LETTER OF CREDIT AND THE NATURE OF THE TRANSACTIONS TO BE SUPPORTED THEREBY.  THE ISSUING BANK SHALL, ON A QUARTERLY BASIS, NOTIFY EACH APPLICABLE LENDER OF THE CONTENTS OF ALL SUCH NOTICES RECEIVED FROM F.Y.I. DURING SUCH QUARTER AND OF SUCH LENDER'S COMMITMENT PERCENTAGE OF THE AMOUNT OF ALL SUCH LETTERS OF CREDIT PROPOSED DURING SUCH QUARTER.  EACH LETTER OF CREDIT SHALL HAVE AN EXPIRATION DATE THAT DOES NOT EXCEED ONE YEAR FROM THE DATE OF ISSUANCE (PROVIDED, HOWEVER, THAT THE B&B LETTER OF CREDIT MAY HAVE AN EXPIRATION DATE THAT IS UP TO EIGHTEEN MONTHS AFTER THE DATE OF ISSUANCE AND THE EXISTING B OF A LETTER OF CREDIT MAY HAVE AN EXPIRATION DATE THAT EXTENDS TO MARCH 31, 2003) AND THAT DOES NOT EXTEND BEYOND THE MATURITY DATE, SHALL BE PAYABLE IN DOLLARS, SHALL SUPPORT A TRANSACTION ENTERED INTO IN THE ORDINARY COURSE OF THE ACCOUNT PARTY'S OR PARTIES' BUSINESS, SHALL BE SATISFACTORY IN FORM AND SUBSTANCE TO THE ISSUING BANK, AND SHALL BE ISSUED PURSUANT TO SUCH AGREEMENTS, DOCUMENTS AND INSTRUMENTS (INCLUDING A LETTER OF CREDIT AGREEMENT) AS THE ISSUING BANK MAY REASONABLY REQUIRE, NONE OF WHICH SHALL BE INCONSISTENT WITH THIS SECTION 2.14.  EACH LETTER OF CREDIT SHALL (I) PROVIDE FOR THE PAYMENT OF DRAFTS PRESENTED FOR, ON OR THEREUNDER BY THE BENEFICIARY IN ACCORDANCE WITH THE TERMS THEREOF, WHEN SUCH DRAFTS ARE ACCOMPANIED BY THE DOCUMENTS (IF ANY) DESCRIBED IN THE LETTER OF CREDIT AND (II) TO THE EXTENT NOT INCONSISTENT WITH THE TERMS HEREOF OR ANY APPLICABLE LETTER OF CREDIT AGREEMENT, BE SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 (TOGETHER WITH ANY SUBSEQUENT REVISION THEREOF APPROVED BY A CONGRESS OF THE INTERNATIONAL CHAMBER OF COMMERCE AND ADHERED TO BY THE ISSUING BANK, THE "UCP"), AND SHALL, AS TO MATTERS NOT GOVERNED BY THE UCP, BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.   (C)           F.Y.I. AGREES TO PAY TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF EACH LENDER, IN ARREARS ON EACH QUARTERLY DATE BEGINNING ON JUNE 30, 2001 AND ON THE MATURITY DATE, A NONREFUNDABLE LETTER OF CREDIT FEE WITH RESPECT TO EACH LETTER OF CREDIT ISSUED IN AN AMOUNT EQUAL TO THE PRODUCT OF (I) THE APPLICABLE MARGIN FOR EURODOLLAR LOANS IN EFFECT ON THE DATE OF ISSUANCE OF SUCH LETTER OF CREDIT (WITH RESPECT TO THE FEE DUE ON THE FIRST QUARTERLY DATE AFTER ISSUANCE) OR ON THE FIRST DAY OF THE APPLICABLE QUARTER OR OTHER PERIOD BEGINNING AFTER THE CALENDAR QUARTER DURING WHICH THE ISSUANCE OF SUCH LETTER OF CREDIT OCCURRED (WITH RESPECT TO THE FEE DUE ON EACH SUBSEQUENT QUARTERLY DATE OR ON THE MATURITY DATE), MULTIPLIED BY (II) THE DAILY AVERAGE FACE AMOUNT OF THE LETTERS OF CREDIT IN EFFECT DURING THE APPLICABLE PERIOD.  THE ADMINISTRATIVE AGENT AGREES TO PAY TO EACH LENDER, PROMPTLY AFTER RECEIVING ANY PAYMENT OF LETTER OF CREDIT FEES REFERRED TO ABOVE IN THIS SUBSECTION (C), SUCH LENDER'S COMMITMENT PERCENTAGE OF SUCH FEES.  F.Y.I. FURTHER AGREES TO PAY TO THE ISSUING BANK FOR ITS OWN ACCOUNT, ON THE DATE OF ISSUANCE OF SUCH LETTER OF CREDIT AND ON EACH ANNIVERSARY OF SUCH DATE OF ISSUANCE (IF SUCH LETTER OF CREDIT THEN REMAINS OUTSTANDING), AN AMOUNT EQUAL TO 0.125% OF THE FACE AMOUNT OF THE LETTER OF CREDIT BEING ISSUED.  IN ADDITION TO THE FOREGOING FEES, F.Y.I. SHALL PAY OR REIMBURSE THE ISSUING BANK FOR SUCH NORMAL AND CUSTOMARY COSTS AND EXPENSES, INCLUDING, WITHOUT LIMITATION, ADMINISTRATIVE, ISSUANCE, AMENDMENT, PAYMENT AND NEGOTIATION CHARGES, AS ARE INCURRED OR CHARGED BY THE ISSUING BANK IN ISSUING, EFFECTING PAYMENT UNDER, AMENDING OR OTHERWISE ADMINISTERING ANY LETTER OF CREDIT.   (D)           UPON RECEIPT FROM THE BENEFICIARY OF ANY LETTER OF CREDIT OF ANY DEMAND FOR PAYMENT OR OTHER DRAWING UNDER SUCH LETTER OF CREDIT, THE ISSUING BANK SHALL PROMPTLY NOTIFY F.Y.I. AND EACH APPLICABLE LENDER AS TO THE AMOUNT TO BE PAID AS A RESULT OF SUCH DEMAND OR DRAWING AND THE RESPECTIVE PAYMENT DATE.  IF AT ANY TIME THE ISSUING BANK SHALL MAKE A PAYMENT TO A BENEFICIARY OF A LETTER OF CREDIT PURSUANT TO A DRAWING UNDER SUCH LETTER OF CREDIT, EACH LENDER WILL PAY TO THE ISSUING BANK, IMMEDIATELY UPON THE ISSUING BANK'S DEMAND AT ANY TIME COMMENCING AFTER SUCH PAYMENT UNTIL REIMBURSEMENT THEREFOR IN FULL BY F.Y.I., AN AMOUNT EQUAL TO SUCH LENDER'S COMMITMENT PERCENTAGE OF SUCH PAYMENT, TOGETHER WITH INTEREST ON SUCH AMOUNT FOR EACH DAY FROM THE DATE OF SUCH PAYMENT TO THE DATE OF PAYMENT BY SUCH LENDER OF SUCH AMOUNT AT A RATE OF INTEREST PER ANNUM EQUAL TO THE FEDERAL FUNDS RATE.   (E)           F.Y.I. SHALL BE IRREVOCABLY AND UNCONDITIONALLY OBLIGATED TO IMMEDIATELY REIMBURSE THE ISSUING BANK FOR ANY AMOUNTS PAID BY THE ISSUING BANK UPON ANY DRAWING UNDER ANY LETTER OF CREDIT ISSUED PURSUANT TO THE COMMITMENTS, WITHOUT PRESENTMENT, DEMAND, PROTEST OR OTHER FORMALITIES OF ANY KIND. THE ISSUING BANK WILL PAY TO EACH LENDER SUCH LENDER'S COMMITMENT PERCENTAGE OF ALL AMOUNTS RECEIVED FROM OR ON BEHALF OF F.Y.I. FOR APPLICATION IN PAYMENT, IN WHOLE OR IN PART, OF THE REIMBURSEMENT OBLIGATION IN RESPECT OF ANY LETTER OF CREDIT, BUT ONLY TO THE EXTENT SUCH LENDER HAS MADE PAYMENT TO THE ISSUING BANK IN RESPECT OF SUCH LETTER OF CREDIT PURSUANT TO SUBSECTION (D) ABOVE.  OUTSTANDING REIMBURSEMENT OBLIGATIONS SHALL BEAR INTEREST AT THE DEFAULT RATE AND SUCH INTEREST SHALL BE PAYABLE ON DEMAND.   (F)            THE REIMBURSEMENT OBLIGATIONS OF F.Y.I. UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE ABSOLUTE, UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PERFORMED STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS UNDER ALL CIRCUMSTANCES WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE FOLLOWING CIRCUMSTANCES.   (I)            ANY LACK OF VALIDITY OR ENFORCEABILITY OF ANY LETTER OF CREDIT OR ANY OTHER LOAN DOCUMENT;   (II)           ANY AMENDMENT OR WAIVER OF OR ANY CONSENT TO DEPARTURE FROM ANY LOAN DOCUMENT;   (III)          THE EXISTENCE OF ANY CLAIM, SETOFF, COUNTERCLAIM, DEFENSE OR OTHER RIGHT WHICH ANY LOAN PARTY OR OTHER PERSON MAY HAVE AT ANY TIME AGAINST ANY BENEFICIARY OF ANY LETTER OF CREDIT, THE ADMINISTRATIVE AGENT, THE ISSUING BANK, THE LENDERS OR ANY OTHER PERSON, WHETHER, IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY UNRELATED TRANSACTION;   (IV)          ANY STATEMENT, DRAFT 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 WHATSOEVER, PROVIDED, THAT THE FAILURE OF THE ISSUING BANK TO DISCOVER SUCH FORGERY, FRAUD, INVALIDITY OR INSUFFICIENCY SHALL NOT HAVE CONSTITUTED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT BY THE ISSUING BANK;   (V)           PAYMENT BY THE ISSUING BANK UNDER ANY LETTER OF CREDIT AGAINST PRESENTATION OF A DRAFT OR OTHER DOCUMENT THAT DOES NOT COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, PROVIDED, THAT SUCH PAYMENT SHALL NOT HAVE CONSTITUTED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ISSUING BANK; AND   (VI)          ANY OTHER CIRCUMSTANCE WHATSOEVER, WHETHER OR NOT SIMILAR TO ANY OF THE FOREGOING, PROVIDED THAT SUCH OTHER CIRCUMSTANCE OR EVENT SHALL NOT HAVE BEEN THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ISSUING BANK.   (G)           F.Y.I. ASSUMES ALL RISKS OF THE ACTS OR OMISSIONS OF ANY BENEFICIARY OF ANY LETTER OF CREDIT WITH RESPECT TO ITS USE OF SUCH LETTER OF CREDIT.  NEITHER THE ADMINISTRATIVE AGENT, THE ISSUING BANK, THE LENDERS NOR ANY OF THEIR RESPECTIVE OFFICERS OR DIRECTORS SHALL HAVE ANY RESPONSIBILITY OR LIABILITY TO F.Y.I. OR ANY OTHER PERSON FOR: (I) THE FAILURE OF ANY DRAFT TO BEAR ANY REFERENCE OR ADEQUATE REFERENCE TO ANY LETTER OF CREDIT, OR THE FAILURE OF ANY DOCUMENTS TO ACCOMPANY ANY DRAFT AT NEGOTIATION, OR THE FAILURE OF ANY PERSON TO SURRENDER OR TO TAKE UP ANY LETTER OF CREDIT OR TO SEND DOCUMENTS APART FROM DRAFTS AS REQUIRED BY THE TERMS OF ANY LETTER OF CREDIT, OR THE FAILURE OF ANY PERSON TO NOTE THE AMOUNT OF ANY INSTRUMENT ON ANY LETTER OF CREDIT, (II) ERRORS, OMISSIONS, INTERRUPTIONS OR DELAYS IN TRANSMISSION OR DELIVERY OF ANY MESSAGES, (III) IN THE ABSENCE OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ISSUING BANK, THE VALIDITY, SUFFICIENCY OR GENUINENESS OF ANY DRAFT OR OTHER DOCUMENT, OR ANY ENDORSEMENT(S) THEREON, EVEN IF ANY SUCH DRAFT, DOCUMENT OR ENDORSEMENT SHOULD IN FACT PROVE TO BE IN ANY AND ALL RESPECTS INVALID, INSUFFICIENT, FRAUDULENT OR FORGED OR ANY STATEMENT THEREIN IS UNTRUE OR INACCURATE IN ANY RESPECT, (IV) THE PAYMENT BY THE ISSUING BANK TO THE BENEFICIARY OF ANY LETTER OF CREDIT AGAINST PRESENTATION OF ANY DRAFT OR OTHER DOCUMENT THAT DOES NOT COMPLY WITH THE TERMS OF THE LETTER OF CREDIT, OR (V) ANY OTHER CIRCUMSTANCE WHATSOEVER IN MAKING OR FAILING TO MAKE ANY PAYMENT UNDER A LETTER OF CREDIT; PROVIDED, HOWEVER, THAT, NOTWITHSTANDING THE FOREGOING, THE ACCOUNT PARTY OR PARTIES SHALL HAVE A CLAIM AGAINST THE ISSUING BANK, AND THE ISSUING BANK SHALL BE LIABLE TO THE ACCOUNT PARTY OR PARTIES, TO THE EXTENT OF ANY DIRECT, BUT NOT INDIRECT OR CONSEQUENTIAL, DAMAGES SUFFERED BY THE ACCOUNT PARTY OR PARTIES WHICH IT OR THEY PROVE IN A FINAL NONAPPEALABLE JUDGMENT WERE CAUSED BY (A) THE ISSUING BANK'S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE IN DETERMINING WHETHER DOCUMENTS PRESENTED UNDER ANY LETTER OF CREDIT COMPLIED WITH THE TERMS THEREOF OR (B) THE ISSUING BANK'S WILLFUL FAILURE TO PAY UNDER ANY LETTER OF CREDIT AFTER PRESENTATION TO IT OF DOCUMENTS STRICTLY COMPLYING WITH THE TERMS AND CONDITIONS OF SUCH LETTER OF CREDIT.  THE ISSUING BANK MAY ACCEPT DOCUMENTS THAT APPEAR ON THEIR FACE TO BE IN ORDER, WITHOUT RESPONSIBILITY FOR FURTHER INVESTIGATION, REGARDLESS OF ANY NOTICE OR INFORMATION TO THE CONTRARY.   ARTICLE 3   PAYMENTS   SECTION 3.1             METHOD OF PAYMENT.  ALL PAYMENTS OF PRINCIPAL, INTEREST, FEES AND OTHER AMOUNTS TO BE MADE BY THE F.Y.I. UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE MADE TO THE ADMINISTRATIVE AGENT AT THE PRINCIPAL OFFICE FOR THE ACCOUNT OF EACH LENDER'S APPLICABLE LENDING OFFICE IN DOLLARS AND IN IMMEDIATELY AVAILABLE FUNDS, WITHOUT SETOFF, DEDUCTION OR COUNTERCLAIM, NOT LATER THAN 11:00 A.M. (DALLAS, TEXAS TIME) ON THE DATE ON WHICH SUCH PAYMENT SHALL BECOME DUE (EACH SUCH PAYMENT MADE AFTER SUCH TIME ON SUCH DUE DATE TO BE DEEMED TO HAVE BEEN MADE ON THE NEXT SUCCEEDING BUSINESS DAY).  F.Y.I. SHALL, AT THE TIME OF MAKING ANY SUCH PAYMENT, SPECIFY TO THE ADMINISTRATIVE AGENT THE SUMS PAYABLE BY F.Y.I. UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH SUCH PAYMENT IS TO BE APPLIED (AND IN THE EVENT THAT F.Y.I. FAILS TO SO SPECIFY, OR IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, THE ADMINISTRATIVE AGENT MAY APPLY SUCH PAYMENT TO THE OBLIGATIONS IN SUCH ORDER AND MANNER AS THE ADMINISTRATIVE AGENT MAY ELECT, SUBJECT TO SECTION 3.2); PROVIDED, HOWEVER, THAT, UNLESS BANK OF AMERICA EXPRESSLY AGREES TO THE CONTRARY, SUCH PAYMENT SHALL BE APPLIED FIRST TO ANY SWINGLINE ADVANCES UNTIL SUCH ADVANCES ARE PAID IN FULL.  UPON THE OCCURRENCE AND DURING THE CONTINUATION OF AN EVENT OF DEFAULT, ALL PROCEEDS OF ANY COLLATERAL, AND ALL FUNDS FROM TIME TO TIME ON DEPOSIT IN ANY CONCENTRATION ACCOUNT OR ANY COLLECTION ACCOUNT, IF ANY, REFERRED TO IN SECTION 8.13, MAY BE APPLIED BY THE ADMINISTRATIVE AGENT TO THE OBLIGATIONS IN SUCH ORDER AND MANNER AS THE ADMINISTRATIVE AGENT MAY ELECT, SUBJECT TO SECTION 3.2; PROVIDED, HOWEVER, THAT, UNLESS BANK OF AMERICA EXPRESSLY AGREES TO THE CONTRARY, SUCH PROCEEDS AND FUNDS SHALL BE APPLIED FIRST TO ANY OUTSTANDING SWINGLINE ADVANCES UNTIL SUCH ADVANCES ARE PAID IN FULL.  EACH PAYMENT RECEIVED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT FOR THE ACCOUNT OF A LENDER SHALL BE PAID PROMPTLY TO SUCH LENDER, IN IMMEDIATELY AVAILABLE FUNDS, FOR THE ACCOUNT OF SUCH LENDER'S APPLICABLE LENDING OFFICE.  WHENEVER ANY PAYMENT UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE STATED TO BE DUE ON A DAY THAT IS NOT A BUSINESS DAY, SUCH PAYMENT MAY BE MADE ON THE NEXT SUCCEEDING BUSINESS DAY, AND SUCH EXTENSION OF TIME SHALL IN SUCH CASE BE INCLUDED IN THE COMPUTATION OF THE PAYMENT OF INTEREST AND COMMITMENT FEE, AS THE CASE MAY BE.   SECTION 3.2             PRO RATA TREATMENT.  EXCEPT TO THE EXTENT OTHERWISE PROVIDED IN THIS AGREEMENT:  (A) EACH LOAN SHALL BE MADE BY THE LENDERS UNDER SECTION 2.1, EACH PAYMENT OF COMMITMENT FEES UNDER SECTION 2.11(A) SHALL BE MADE FOR THE ACCOUNT OF THE LENDERS, AND EACH TERMINATION OR REDUCTION OF THE COMMITMENTS UNDER SECTION 2.13 SHALL BE APPLIED TO THE COMMITMENTS OF THE LENDERS, PRO RATA ACCORDING TO THE RESPECTIVE UNUSED COMMITMENTS; (B) THE MAKING, CONVERSION AND CONTINUATION OF LOANS OF A PARTICULAR TYPE (OTHER THAN CONVERSIONS PROVIDED FOR BY SECTION 4.4) SHALL BE MADE PRO RATA AMONG THE LENDERS HOLDING LOANS OF SUCH TYPE ACCORDING TO THE AMOUNTS OF THEIR RESPECTIVE COMMITMENTS; (C) EACH PAYMENT AND PREPAYMENT BY F.Y.I. OF PRINCIPAL OF OR INTEREST ON LOANS OF A PARTICULAR TYPE SHALL BE MADE TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF THE LENDERS HOLDING LOANS OF SUCH TYPE PRO RATA IN ACCORDANCE WITH THE RESPECTIVE UNPAID PRINCIPAL AMOUNTS OF SUCH LOANS HELD BY SUCH LENDERS; (D) INTEREST PERIODS FOR LOANS OF A PARTICULAR TYPE SHALL BE ALLOCATED AMONG THE LENDERS HOLDING LOANS OF SUCH TYPE PRO RATA ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS HELD BY SUCH LENDERS; AND (E) THE LENDERS (OTHER THAN THE ISSUING BANK) SHALL PURCHASE PARTICIPATIONS IN THE LETTERS OF CREDIT PRO RATA IN ACCORDANCE WITH THEIR COMMITMENT PERCENTAGES.   SECTION 3.3             SHARING OF PAYMENTS, ETC. IF A LENDER SHALL OBTAIN PAYMENT OF ANY PRINCIPAL OF OR INTEREST ON ANY OF THE OBLIGATIONS DUE TO SUCH LENDER HEREUNDER THROUGH THE EXERCISE OF ANY RIGHT OF SETOFF, BANKER'S LIEN, COUNTERCLAIM OR SIMILAR RIGHT, OR OTHERWISE, IT SHALL PROMPTLY PURCHASE FROM THE OTHER LENDERS PARTICIPATIONS IN THE OBLIGATIONS HELD BY THE OTHER LENDERS IN SUCH AMOUNTS, AND MAKE SUCH ADJUSTMENTS FROM TIME TO TIME AS SHALL BE EQUITABLE TO THE END THAT ALL THE LENDERS SHALL SHARE PRO RATA IN ACCORDANCE WITH THE UNPAID PRINCIPAL AND INTEREST ON THE OBLIGATIONS THEN DUE TO EACH OF THEM.  TO SUCH END, ALL OF THE LENDERS SHALL MAKE APPROPRIATE ADJUSTMENTS AMONG THEMSELVES (BY THE RESALE OF PARTICIPATIONS SOLD OR OTHERWISE) IF ALL OR ANY PORTION OF SUCH EXCESS PAYMENT IS THEREAFTER RESCINDED OR MUST OTHERWISE BE RESTORED.  F.Y.I. AGREES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, THAT ANY LENDER, SO PURCHASING A PARTICIPATION IN THE OBLIGATIONS BY THE OTHER LENDERS MAY EXERCISE ALL RIGHTS OF SETOFF, BANKER'S LIEN, COUNTERCLAIM OR SIMILAR RIGHTS WITH RESPECT TO SUCH PARTICIPATION AS FULLY AS IF SUCH LENDER WERE A DIRECT HOLDER OF OBLIGATIONS IN THE AMOUNT OF SUCH PARTICIPATION.  NOTHING CONTAINED HEREIN SHALL REQUIRE ANY LENDER TO EXERCISE ANY SUCH RIGHT OR SHALL AFFECT THE RIGHT OF ANY LENDER TO EXERCISE, AND RETAIN THE BENEFITS OF EXERCISING, ANY SUCH RIGHT WITH RESPECT TO ANY OTHER INDEBTEDNESS, LIABILITY OR OBLIGATION OF F.Y.I. OR ANY OF ITS SUBSIDIARIES.   SECTION 3.4             NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT.  UNLESS THE ADMINISTRATIVE AGENT SHALL HAVE BEEN NOTIFIED BY A LENDER OR F.Y.I. (THE "PAYOR") PRIOR TO THE DATE ON WHICH SUCH LENDER IS TO MAKE PAYMENT TO THE ADMINISTRATIVE AGENT OF THE PROCEEDS OF A LOAN TO BE MADE BY IT HEREUNDER OR F.Y.I. IS TO MAKE A PAYMENT TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF ONE OR MORE OF THE LENDERS, AS THE CASE MAY BE (SUCH PAYMENT BEING HEREIN CALLED THE "REQUIRED PAYMENT"), WHICH NOTICE SHALL BE EFFECTIVE UPON RECEIPT, THAT THE PAYOR DOES NOT INTEND TO MAKE THE REQUIRED PAYMENT TO THE ADMINISTRATIVE AGENT, THE ADMINISTRATIVE AGENT MAY ASSUME THAT THE REQUIRED PAYMENT HAS BEEN MADE AND MAY, IN RELIANCE UPON SUCH ASSUMPTION (BUT SHALL NOT BE REQUIRED TO), MAKE THE AMOUNT THEREOF AVAILABLE TO THE INTENDED RECIPIENT ON SUCH DATE AND, IF THE PAYOR HAS NOT IN FACT MADE THE REQUIRED PAYMENT TO THE ADMINISTRATIVE AGENT, THE RECIPIENT OF SUCH PAYMENT SHALL, ON DEMAND, PAY TO THE ADMINISTRATIVE AGENT THE AMOUNT MADE AVAILABLE TO IT TOGETHER WITH INTEREST THEREON IN RESPECT OF THE PERIOD COMMENCING ON THE DATE SUCH AMOUNT WAS SO MADE AVAILABLE BY THE ADMINISTRATIVE AGENT UNTIL THE DATE THE ADMINISTRATIVE AGENT RECOVERS SUCH AMOUNT AT A RATE PER ANNUM EQUAL TO THE FEDERAL FUNDS RATE FOR SUCH PERIOD.   SECTION 3.5             WITHHOLDING TAXES.   (A)           ALL PAYMENTS BY F.Y.I. OF PRINCIPAL OF AND INTEREST ON THE LOANS AND OF ALL FEES AND OTHER AMOUNTS PAYABLE UNDER THE LOAN DOCUMENTS SHALL BE MADE FREE AND CLEAR OF, AND WITHOUT DEDUCTION BY REASON OF, ANY PRESENT OR FUTURE TAXES, LEVIES, DUTIES, IMPOSTS, ASSESSMENTS OR OTHER CHARGES LEVIED OR IMPOSED BY ANY GOVERNMENTAL AUTHORITY (OTHER THAN TAXES ON THE OVERALL NET INCOME OF ANY LENDER).  IF ANY SUCH TAXES, DUTIES, IMPOSTS, ASSESSMENTS OR OTHER CHARGES ARE SO LEVIED OR IMPOSED, F.Y.I. WILL (I) MAKE ADDITIONAL PAYMENTS IN SUCH AMOUNTS SO THAT EVERY NET PAYMENT OF PRINCIPAL OF AND INTEREST ON THE LOANS AND OF ALL OTHER AMOUNTS PAYABLE BY IT UNDER THE LOAN DOCUMENTS, AFTER WITHHOLDING OR DEDUCTION FOR OR ON ACCOUNT OF ANY SUCH PRESENT OR FUTURE TAXES, DUTIES, IMPOSTS, ASSESSMENTS OR OTHER CHARGES (INCLUDING ANY TAX IMPOSED ON OR MEASURED BY NET INCOME OF A LENDER ATTRIBUTABLE TO PAYMENTS MADE TO OR ON BEHALF OF A LENDER PURSUANT TO THIS SECTION 3.5 AND ANY PENALTIES OR INTEREST ATTRIBUTABLE TO SUCH PAYMENTS), WILL NOT BE LESS THAN THE AMOUNT PROVIDED FOR HEREIN OR THEREIN ABSENT SUCH WITHHOLDING OR DEDUCTION (PROVIDED THAT F.Y.I. SHALL NOT HAVE ANY OBLIGATION TO PAY SUCH ADDITIONAL AMOUNTS TO ANY LENDER TO THE EXTENT THAT SUCH TAXES, DUTIES, IMPOSTS, ASSESSMENTS OR OTHER CHARGES ARE LEVIED OR IMPOSED BY REASON OF THE FAILURE OF SUCH LENDER TO COMPLY WITH THE PROVISIONS OF SECTION 3.6), (II) MAKE SUCH WITHHOLDING OR DEDUCTION, AND (III) REMIT THE FULL AMOUNT DEDUCTED OR WITHHELD TO THE RELEVANT GOVERNMENTAL AUTHORITY IN ACCORDANCE WITH APPLICABLE LAW.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, F.Y.I. WILL, UPON WRITTEN REQUEST OF ANY LENDER, REIMBURSE EACH SUCH LENDER FOR THE AMOUNT OF (A) SUCH TAXES, DUTIES, IMPORTS, ASSESSMENTS OR OTHER CHARGES SO LEVIED OR IMPOSED BY ANY GOVERNMENTAL AUTHORITY AND PAID BY SUCH LENDER AS A RESULT OF PAYMENTS MADE BY F.Y.I. UNDER OR WITH RESPECT TO THE LOANS AND LETTER OF CREDIT LIABILITIES OTHER THAN SUCH TAXES, DUTIES, IMPORTS, ASSESSMENTS AND OTHER CHARGES PREVIOUSLY WITHHELD OR DEDUCTED BY F.Y.I. WHICH HAVE PREVIOUSLY RESULTED IN THE PAYMENT OF THE REQUIRED ADDITIONAL AMOUNT TO THE LENDER, AND (B) SUCH TAXES, DUTIES, ASSESSMENTS AND OTHER CHARGES SO LEVIED OR IMPOSED WITH RESPECT TO ANY LENDER REIMBURSEMENT UNDER THE FOREGOING CLAUSE (A), SO THAT THE NET AMOUNT RECEIVED BY SUCH LENDER (NET OF PAYMENTS MADE UNDER OR WITH RESPECT TO THE LOANS AND LETTER OF CREDIT LIABILITIES) AFTER SUCH REIMBURSEMENT WILL NOT BE LESS THAN THE NET AMOUNT THE LENDER WOULD HAVE RECEIVED IF SUCH TAXES, DUTIES, ASSESSMENTS AND OTHER CHARGES ON SUCH REIMBURSEMENT HAD NOT BEEN LEVIED OR IMPOSED.  F.Y.I. SHALL FURNISH PROMPTLY TO THE ADMINISTRATIVE AGENT FOR DISTRIBUTION TO EACH AFFECTED LENDER, AS THE CASE MAY BE, UPON REQUEST OF SUCH LENDER, OFFICIAL RECEIPTS EVIDENCING ANY SUCH PAYMENT, WITHHOLDING OR REDUCTION.   (B)           F.Y.I. WILL INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH LENDER (WITHOUT DUPLICATION) AGAINST, AND REIMBURSE THE ADMINISTRATIVE AGENT AND EACH LENDER FOR, ALL PRESENT AND FUTURE TAXES, LEVIES, DUTIES, IMPOSTS, ASSESSMENTS OR OTHER CHARGES (INCLUDING INTEREST AND PENALTIES) LEVIED OR COLLECTED (WHETHER OR NOT LEGALLY OR CORRECTLY IMPOSED, ASSESSED, LEVIED OR COLLECTED), EXCLUDING, HOWEVER, ANY TAXES IMPOSED ON THE OVERALL NET INCOME OF THE ADMINISTRATIVE AGENT OR SUCH LENDER OR ANY LENDING OFFICE OF THE ADMINISTRATIVE AGENT OR SUCH LENDER BY ANY JURISDICTION IN WHICH THE ADMINISTRATIVE AGENT OR SUCH LENDER OR ANY SUCH LENDING OFFICE IS LOCATED, ON OR IN RESPECT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS OR THE OBLIGATIONS OR ANY PORTION THEREOF (THE "REIMBURSABLE TAXES").  ANY SUCH INDEMNIFICATION SHALL BE ON AN AFTER-TAX BASIS, TAKING INTO ACCOUNT ANY SUCH REIMBURSABLE TAXES IMPOSED ON THE AMOUNTS PAID AS INDEMNITY.   (C)           WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER TERM OR PROVISION OF THIS AGREEMENT, THE OBLIGATIONS OF F.Y.I. UNDER THIS SECTION 3.5 SHALL SURVIVE THE PAYMENT OF THE LOANS AND THE OTHER OBLIGATIONS AND TERMINATION OF THE COMMITMENTS.   SECTION 3.6             WITHHOLDING TAX EXEMPTION.  EACH LENDER THAT IS NOT INCORPORATED OR OTHERWISE FORMED UNDER THE LAWS OF THE U.S. OR A STATE THEREOF AGREES THAT IT WILL, PRIOR TO OR ON OR ABOUT THE CLOSING DATE OR THE DATE UPON WHICH IT BECOMES A PARTY TO THIS AGREEMENT AND IF IT IS LEGALLY ABLE TO DO SO, DELIVER TO F.Y.I., FOR AND ON BEHALF OF F.Y.I., AND THE ADMINISTRATIVE AGENT TWO DULY COMPLETED COPIES OF U.S. INTERNAL REVENUE SERVICE FORM W-8ECI OR W-8BEN, AS APPROPRIATE, CERTIFYING IN ANY CASE THAT SUCH LENDER IS ENTITLED TO RECEIVE PAYMENTS FROM F.Y.I. UNDER ANY LOAN DOCUMENT WITHOUT DEDUCTION OR WITHHOLDING OF ANY U.S. FEDERAL INCOME TAXES.  EACH LENDER WHICH SO DELIVERS A FORM W-8ECI OR W-8BEN FURTHER UNDERTAKES TO DELIVER TO F.Y.I., FOR AND ON BEHALF OF F.Y.I., AND THE ADMINISTRATIVE AGENT TWO ADDITIONAL COPIES OF SUCH FORM (OR A SUCCESSOR FORM) ON OR BEFORE THE DATE 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 F.Y.I. OR THE ADMINISTRATIVE AGENT, IN EACH CASE CERTIFYING THAT SUCH LENDER IS ENTITLED TO RECEIVE PAYMENTS FROM F.Y.I. UNDER ANY LOAN DOCUMENT WITHOUT DEDUCTION OR WITHHOLDING OF ANY U.S. FEDERAL INCOME TAXES, UNLESS 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 LENDER FROM DULY COMPLETING AND DELIVERING ANY SUCH FORM WITH RESPECT TO IT AND SUCH LENDER ADVISES F.Y.I., FOR AND ON BEHALF OF F.Y.I., AND THE ADMINISTRATIVE AGENT THAT IT IS NOT CAPABLE OF RECEIVING SUCH PAYMENTS WITHOUT ANY DEDUCTION OR WITHHOLDING OF U.S. FEDERAL INCOME TAX.   SECTION 3.7             REINSTATEMENT OF OBLIGATIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, IF THE PAYMENT OF ANY AMOUNT OF PRINCIPAL OF OR INTEREST  WITH RESPECT TO THE LOANS, THE REIMBURSEMENT OBLIGATIONS OR ANY OTHER AMOUNT OF THE OBLIGATIONS, OR ANY PORTION THEREOF, IS RESCINDED, VOIDED OR MUST OTHERWISE BE REFUNDED BY THE ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING BANK UPON THE INSOLVENCY, BANKRUPTCY OR REORGANIZATION OF F.Y.I. OR ANY OTHER LOAN PARTY OR OTHERWISE FOR ANY REASON WHATSOEVER, THEN EACH OF (A) THE OBLIGATIONS, (B) THE LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, THIS AGREEMENT, THE NOTES AND THE SECURITY DOCUMENTS), (C) THE INDEBTEDNESS, LIABILITIES AND OBLIGATIONS OF F.Y.I. AND ANY OTHER LOAN PARTY UNDER THE LOAN DOCUMENTS, AND (D) ALL LIENS FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS CREATED UNDER OR EVIDENCED BY THE LOAN DOCUMENTS, 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.   ARTICLE 4   YIELD PROTECTION AND ILLEGALITY   SECTION 4.1             ADDITIONAL COSTS.   (A)           F.Y.I. SHALL PAY DIRECTLY TO EACH LENDER FROM TIME TO TIME, PROMPTLY UPON THE REQUEST OF SUCH LENDER, THE COSTS ACTUALLY INCURRED BY SUCH LENDER WHICH SUCH LENDER DETERMINES ARE DIRECTLY ATTRIBUTABLE TO ITS MAKING OR MAINTAINING OF ANY EURODOLLAR LOANS TO F.Y.I. OR ITS OBLIGATION TO MAKE OR CREATE ANY OF SUCH LOANS HEREUNDER TO F.Y.I., OR ANY REDUCTION IN ANY AMOUNT RECEIVABLE BY SUCH LENDER HEREUNDER FROM F.Y.I. IN RESPECT OF ANY SUCH LOANS OR OBLIGATIONS (SUCH INCREASES IN COSTS AND REDUCTIONS IN AMOUNTS RECEIVABLE BEING HEREIN CALLED "ADDITIONAL COSTS"), RESULTING FROM ANY REGULATORY CHANGE WHICH:   (I)            CHANGES THE BASIS OF TAXATION OF ANY AMOUNTS PAYABLE TO SUCH LENDER UNDER THIS AGREEMENT OR ITS NOTES IN RESPECT OF ANY OF SUCH LOANS (OTHER THAN TAXES IMPOSED ON THE OVERALL NET INCOME OF SUCH LENDER OR ITS APPLICABLE LENDING OFFICE FOR ANY OF SUCH LOANS BY THE JURISDICTION IN WHICH SUCH LENDER HAS ITS PRINCIPAL OFFICE OR SUCH APPLICABLE LENDING OFFICE);   (II)           IMPOSES OR MODIFIES ANY RESERVE, SPECIAL DEPOSIT, MINIMUM CAPITAL, CAPITAL RATIO OR SIMILAR REQUIREMENT RELATING TO ANY EXTENSIONS OF CREDIT OR OTHER ASSETS OF, OR ANY DEPOSITS WITH OR OTHER LIABILITIES OR COMMITMENTS OF, SUCH LENDER (INCLUDING ANY OF SUCH LOANS OR ANY DEPOSITS REFERRED TO IN THE DEFINITION OF "EURODOLLAR RATE" IN SECTION 1.1 HEREOF, BUT EXCLUDING THE RESERVE REQUIREMENT TO THE EXTENT IT IS INCLUDED IN THE CALCULATION OF THE ADJUSTED EURODOLLAR RATE); OR   (III)          IMPOSES ANY OTHER CONDITION AFFECTING THIS AGREEMENT OR THE NOTES OR ANY OF SUCH EXTENSIONS OF CREDIT OR LIABILITIES OR COMMITMENTS.   Each Lender will notify F.Y.I. (with a copy to the Administrative Agent) of any event occurring after the Closing Date which will entitle such Lender to compensation pursuant to this Section 4.1(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and (if so requested by F.Y.I.) will designate a different Applicable Lending Office for the Eurodollar Loans of such Lender if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, violate any law, rule or regulation or be in any way disadvantageous to such Lender, provided that such Lender shall have no obligation to so designate an Applicable Lending Office located in the U.S. Each Lender will furnish F.Y.I. with a certificate setting forth the basis, amount and computation of each request of such Lender for compensation under this Section 4.1(a).  If any Lender requests compensation from F.Y.I. under this Section 4.1(a), F.Y.I. may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or Continue making, or Convert Prime Rate Loans into, Eurodollar Loans until the Regulatory Change giving rise to such request ceases to be in effect (in which case the provisions of Section 4.4 hereof shall be applicable).   (B)           WITHOUT LIMITING THE EFFECT OF THE FOREGOING PROVISIONS OF THIS SECTION 4.1, IN THE EVENT THAT, BY REASON OF ANY REGULATORY CHANGE, ANY LENDER EITHER (I) INCURS ADDITIONAL COSTS BASED ON OR MEASURED BY THE EXCESS ABOVE A SPECIFIED LEVEL OF THE AMOUNT OF A CATEGORY OF DEPOSITS OR OTHER LIABILITIES OF SUCH LENDER WHICH INCLUDES DEPOSITS BY REFERENCE TO WHICH THE INTEREST RATE ON EURODOLLAR LOANS IS DETERMINED AS PROVIDED IN THIS AGREEMENT OR A CATEGORY OF EXTENSIONS OF CREDIT OR OTHER ASSETS OF SUCH LENDER WHICH INCLUDES EURODOLLAR LOANS OR (II) BECOMES SUBJECT TO RESTRICTIONS ON THE AMOUNT OF SUCH A CATEGORY OF LIABILITIES OR ASSETS WHICH IT MAY HOLD, THEN, IF SUCH LENDER SO ELECTS BY NOTICE TO F.Y.I. (WITH A COPY TO THE ADMINISTRATIVE AGENT), THE OBLIGATION OF SUCH LENDER TO MAKE OR CONTINUE MAKING, OR CONVERT PRIME RATE LOANS INTO, EURODOLLAR LOANS HEREUNDER SHALL BE SUSPENDED UNTIL SUCH REGULATORY CHANGE CEASES TO BE IN EFFECT (IN WHICH CASE THE PROVISIONS OF SECTION 4.4 HEREOF SHALL BE APPLICABLE).   (C)           DETERMINATIONS AND ALLOCATIONS BY ANY LENDER FOR PURPOSES OF THIS SECTION 4.1 OF THE EFFECT OF ANY REGULATORY CHANGE ON ITS COSTS OF MAINTAINING ITS OBLIGATION TO MAKE LOANS OR OF MAKING OR MAINTAINING LOANS OR ON AMOUNTS RECEIVABLE BY IT IN RESPECT OF LOANS AND OF THE ADDITIONAL AMOUNTS REQUIRED TO COMPENSATE SUCH LENDER IN RESPECT OF ANY ADDITIONAL COSTS, SHALL BE CONCLUSIVE IN THE ABSENCE OF MANIFEST ERROR, PROVIDED THAT SUCH DETERMINATIONS AND ALLOCATIONS ARE MADE ON A REASONABLE BASIS.   SECTION 4.2             LIMITATION ON TYPES OF LOANS.  ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, IF WITH RESPECT TO ANY EURODOLLAR LOANS FOR ANY INTEREST PERIOD THEREFOR:   (A)           THE ADMINISTRATIVE AGENT REASONABLY DETERMINES (WHICH DETERMINATION SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR) THAT QUOTATIONS OF INTEREST RATES FOR THE RELEVANT DEPOSITS REFERRED TO IN THE DEFINITION OF "EURODOLLAR RATE" IN SECTION 1.1 HEREOF ARE NOT BEING PROVIDED IN THE RELATIVE AMOUNTS OR FOR THE RELATIVE MATURITIES FOR PURPOSES OF DETERMINING THE RATE OF INTEREST FOR SUCH LOANS AS PROVIDED IN THIS AGREEMENT; OR   (B)           REQUIRED LENDERS REASONABLY DETERMINE (WHICH DETERMINATION SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR) AND NOTIFY THE ADMINISTRATIVE AGENT THAT THE RELEVANT RATES OF INTEREST REFERRED TO IN THE DEFINITION OF "EURODOLLAR RATE" OR "ADJUSTED EURODOLLAR RATE" IN SECTION 1.1 HEREOF ON THE BASIS OF WHICH THE RATE OF INTEREST FOR SUCH LOANS FOR SUCH INTEREST PERIOD IS TO BE DETERMINED DO NOT ACCURATELY REFLECT THE COST TO THE LENDERS OF MAKING OR MAINTAINING SUCH LOANS FOR SUCH INTEREST PERIOD;   then the Administrative Agent shall give F.Y.I. prompt notice thereof and, so long as such condition remains in effect, the Lenders shall be under no obligation to make Eurodollar Loans or to Convert Prime Rate Loans into Eurodollar Loans and F.Y.I. shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans into Prime Rate Loans in accordance with the terms of this Agreement.   SECTION 4.3             ILLEGALITY.  NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, IN THE EVENT THAT IT BECOMES UNLAWFUL FOR ANY LENDER OR ITS APPLICABLE LENDING OFFICE TO (A) HONOR ITS OBLIGATION TO MAKE EURODOLLAR LOANS HEREUNDER OR (B) MAINTAIN EURODOLLAR LOANS HEREUNDER, THEN SUCH LENDER SHALL PROMPTLY NOTIFY F.Y.I. FOR AND ON BEHALF OF F.Y.I. (WITH A COPY TO THE ADMINISTRATIVE AGENT) THEREOF AND SUCH LENDER'S OBLIGATION TO MAKE OR MAINTAIN EURODOLLAR LOANS AND TO CONVERT PRIME RATE LOANS INTO EURODOLLAR LOANS HEREUNDER SHALL BE SUSPENDED UNTIL SUCH TIME AS SUCH LENDER MAY AGAIN MAKE AND MAINTAIN EURODOLLAR LOANS (IN WHICH CASE THE PROVISIONS OF SECTION 4.4 HEREOF SHALL BE APPLICABLE).   SECTION 4.4             TREATMENT OF AFFECTED LOANS.  IF THE OBLIGATION OF ANY LENDER TO MAKE OR CONTINUE, OR TO CONVERT PRIME RATE LOANS INTO, EURODOLLAR LOANS IS SUSPENDED PURSUANT TO SECTION 4.1 OR 4.3 HEREOF, SUCH LENDER'S EURODOLLAR LOANS SHALL BE AUTOMATICALLY CONVERTED INTO PRIME RATE LOANS ON THE LAST DAY(S) OF THE THEN CURRENT INTEREST PERIOD(S) FOR THE EURODOLLAR LOANS (OR, IN THE CASE OF A CONVERSION REQUIRED BY SECTION 4.1(B) OR 4.3 HEREOF, ON SUCH EARLIER DATE AS SUCH LENDER MAY SPECIFY TO F.Y.I., WITH A COPY TO THE ADMINISTRATIVE AGENT) AND, UNLESS AND UNTIL SUCH LENDER GIVES NOTICE AS PROVIDED BELOW THAT THE CIRCUMSTANCES SPECIFIED IN SECTION 4.1 OR 4.3 HEREOF WHICH GAVE RISE TO SUCH CONVERSION NO LONGER EXIST:   (A)           TO THE EXTENT THAT SUCH LENDER'S EURODOLLAR LOANS HAVE BEEN SO CONVERTED, ALL PAYMENTS AND PREPAYMENTS OF PRINCIPAL WHICH WOULD OTHERWISE BE APPLIED TO SUCH LENDER'S EURODOLLAR LOANS SHALL BE APPLIED INSTEAD TO ITS PRIME RATE LOANS; AND   (B)           ALL LOANS WHICH WOULD OTHERWISE BE MADE OR CONTINUED BY SUCH LENDER AS EURODOLLAR LOANS SHALL BE MADE AS OR CONVERTED INTO PRIME RATE LOANS AND ALL LOANS OF SUCH LENDER WHICH WOULD OTHERWISE BE CONVERTED INTO EURODOLLAR LOANS SHALL BE CONVERTED INSTEAD INTO (OR SHALL REMAIN AS) PRIME RATE LOANS.   If such Lender gives notice to F.Y.I. (with a copy to the Administrative Agent) that the circumstances specified in Section 4.1 or 4.3 hereof which gave rise to the Conversion of such Lender's Eurodollar Loans pursuant to this Section 4.4 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Loans are outstanding, such Lender's Prime Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by such Lender are held pro rata (as to principal amounts, Types and Interest Periods) in accordance with their respective Commitments.   SECTION 4.5             COMPENSATION. F.Y.I. SHALL PAY TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF EACH LENDER, PROMPTLY UPON THE REQUEST OF SUCH LENDER THROUGH THE ADMINISTRATIVE AGENT, SUCH AMOUNT OR AMOUNTS AS SHALL BE SUFFICIENT (IN THE REASONABLE OPINION OF SUCH LENDER) TO COMPENSATE IT FOR ANY LOSS, COST OR EXPENSE INCURRED BY IT AS A RESULT OF:   (A)           ANY PAYMENT, PREPAYMENT OR CONVERSION OF A EURODOLLAR LOAN FOR ANY REASON (INCLUDING, WITHOUT LIMITATION, THE ACCELERATION OF THE OUTSTANDING LOANS PURSUANT TO SECTION 11.2) ON A DATE OTHER THAN THE LAST DAY OF AN INTEREST PERIOD FOR SUCH LOAN; OR   (B)           ANY FAILURE BY F.Y.I. FOR ANY REASON (INCLUDING, WITHOUT LIMITATION, THE FAILURE OF ANY CONDITIONS PRECEDENT SPECIFIED IN ARTICLE 6 TO BE SATISFIED) TO BORROW, CONVERT OR PREPAY A EURODOLLAR LOAN ON THE DATE FOR SUCH BORROWING, CONVERSION OR PREPAYMENT SPECIFIED IN THE RELEVANT NOTICE OF BORROWING, PREPAYMENT OR CONVERSION UNDER THIS AGREEMENT.   SECTION 4.6             CAPITAL ADEQUACY.  IF, AFTER THE CLOSING DATE, ANY LENDER SHALL HAVE DETERMINED THAT THE ADOPTION OR IMPLEMENTATION OF ANY APPLICABLE LAW, RULE OR REGULATION REGARDING CAPITAL ADEQUACY (INCLUDING, WITHOUT LIMITATION, ANY LAW, RULE OR REGULATION IMPLEMENTING THE BASLE ACCORD), 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 SUCH LENDER (OR ITS PARENT) WITH ANY GUIDELINE, REQUEST OR DIRECTIVE REGARDING CAPITAL ADEQUACY (WHETHER OR NOT HAVING THE FORCE OF LAW) OF ANY CENTRAL BANK OR OTHER GOVERNMENTAL AUTHORITY (INCLUDING, WITHOUT LIMITATION, ANY GUIDELINE OR OTHER REQUIREMENT IMPLEMENTING THE BASLE ACCORD), HAS OR WOULD HAVE THE EFFECT OF REDUCING THE RATE OF RETURN ON SUCH LENDER'S (OR ITS PARENT'S) CAPITAL AS A CONSEQUENCE OF ITS OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY TO A LEVEL BELOW THAT WHICH SUCH LENDER (OR ITS PARENT) COULD HAVE ACHIEVED BUT FOR SUCH ADOPTION, IMPLEMENTATION, CHANGE OR COMPLIANCE (TAKING INTO CONSIDERATION SUCH LENDER'S POLICIES WITH RESPECT TO CAPITAL ADEQUACY) BY AN AMOUNT DEEMED BY SUCH LENDER TO BE MATERIAL, THEN FROM TIME TO TIME, WITHIN TEN BUSINESS DAYS AFTER DEMAND BY SUCH LENDER (WITH A COPY TO THE ADMINISTRATIVE AGENT), F.Y.I. SHALL PAY TO SUCH LENDER SUCH ADDITIONAL AMOUNT OR AMOUNTS AS WILL COMPENSATE SUCH LENDER (OR ITS PARENT) FOR SUCH REDUCTION.  A CERTIFICATE OF SUCH LENDER CLAIMING COMPENSATION UNDER THIS SECTION 4.6 AND SETTING FORTH THE ADDITIONAL AMOUNT OR AMOUNTS TO BE PAID TO IT HEREUNDER SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR, PROVIDED THAT THE DETERMINATION THEREOF IS MADE ON A REASONABLE BASIS.  IN DETERMINING SUCH AMOUNT OR AMOUNTS, SUCH LENDER MAY USE ANY REASONABLE AVERAGING AND ATTRIBUTION METHODS.   SECTION 4.7             ADDITIONAL INTEREST ON EURODOLLAR LOANS.  F.Y.I. SHALL PAY TO THE ADMINISTRATIVE AGENT, FOR THE ACCOUNT OF EACH LENDER FROM TIME TO TIME, ADDITIONAL INTEREST ON THE UNPAID PRINCIPAL AMOUNT OF EACH EURODOLLAR LOAN HELD BY SUCH LENDER, FROM THE DATE OF THE MAKING OF SUCH EURODOLLAR LOAN UNTIL SUCH PRINCIPAL AMOUNT IS PAID IN FULL, AT AN INTEREST RATE PER ANNUM DETERMINED BY SUCH LENDER IN GOOD FAITH EQUAL TO THE POSITIVE REMAINDER (IF ANY) OF (A) THE ADJUSTED EURODOLLAR RATE APPLICABLE TO SUCH EURODOLLAR LOAN MINUS (B) THE EURODOLLAR RATE APPLICABLE TO SUCH EURODOLLAR LOAN.  EACH PAYMENT OF ADDITIONAL INTEREST PURSUANT TO THIS SECTION 4.7 SHALL BE PAYABLE BY F.Y.I. ON EACH DATE UPON WHICH INTEREST IS PAYABLE ON SUCH EURODOLLAR LOAN PURSUANT TO SECTION 2.4(B); PROVIDED, HOWEVER, THAT F.Y.I. SHALL NOT BE OBLIGATED TO MAKE ANY SUCH PAYMENT OF ADDITIONAL INTEREST UNTIL THE FIRST BUSINESS DAY AFTER THE DATE WHEN F.Y.I. HAS BEEN INFORMED (I) THAT SUCH LENDER IS SUBJECT TO A RESERVE REQUIREMENT AND (II) OF THE AMOUNT OF SUCH RESERVE REQUIREMENT (AFTER WHICH TIME F.Y.I. SHALL BE OBLIGATED TO MAKE ALL SUCH PAYMENTS OF ADDITIONAL INTEREST, INCLUDING, WITHOUT LIMITATION, SUCH PAYMENT OF ADDITIONAL INTEREST THAT OTHERWISE WOULD HAVE BEEN PAYABLE BY F.Y.I. ON OR PRIOR TO SUCH TIME HAD F.Y.I. BEEN EARLIER INFORMED). ARTICLE 5   SECURITY   SECTION 5.1             COLLATERAL.  TO SECURE THE FULL AND COMPLETE PAYMENT AND PERFORMANCE OF THE OBLIGATIONS, F.Y.I. SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES  IN EXISTENCE ON THE CLOSING DATE TO, GRANT TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS A PERFECTED, FIRST PRIORITY LIEN (EXCEPT FOR PERMITTED LIENS, IF ANY, WHICH ARE EXPRESSLY PERMITTED BY THE LOAN DOCUMENTS TO HAVE PRIORITY OVER THE LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT) ON ALL OF ITS RIGHT, TITLE AND INTEREST IN AND TO THE FOLLOWING PROPERTY, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, PURSUANT TO THE SECURITY DOCUMENTS:   (A)           ALL CAPITAL STOCK OF EACH OF THE DOMESTIC SUBSIDIARIES THAT ARE NOT NONMATERIAL SUBSIDIARIES (SUBJECT TO THE LAST SENTENCE OF THIS SECTION 5.1) OF F.Y.I. NOW OWNED OR HEREAFTER ACQUIRED BY F.Y.I. OR ANY SUBSIDIARY OF F.Y.I.; AND   (B)           THE LESSER OF (I) 65% OF THE SHARES OF EACH CLASS OF CAPITAL STOCK OF EACH FOREIGN SUBSIDIARY (WHETHER PRESENT OR FUTURE) THAT IS NOT A NONMATERIAL SUBSIDIARY (SUBJECT TO THE LAST SENTENCE OF THIS SECTION 5.1) AND THAT IS A DIRECT, WHOLLY-OWNED SUBSIDIARY OF F.Y.I. OR OF A DOMESTIC SUBSIDIARY OF F.Y.I., OR (II) ALL OF THE SHARES OF EACH CLASS OF CAPITAL STOCK OF EACH SUCH FOREIGN SUBSIDIARY, IN EACH CASE OWNED AS OF THE CLOSING DATE OR THEREAFTER ACQUIRED BY F.Y.I. OR SUCH DOMESTIC SUBSIDIARY. F.Y.I. COVENANTS THAT NONE OF THE CAPITAL STOCK TO BE PLEDGED IN ACCORDANCE WITH THIS SECTION 5.1 SHALL BE SUBJECT TO ANY TRANSFER RESTRICTIONS, SHAREHOLDERS’ AGREEMENT, OR OTHER RESTRICTION EXCEPT FOR SUCH RESTRICTIONS UNDER APPLICABLE SECURITIES LAWS AND SUCH RESTRICTIONS, IF ANY, AS MAY BE REASONABLY ACCEPTABLE TO ADMINISTRATIVE AGENT.  IN CONNECTION WITH AND IN ADDITION TO THE FOREGOING, F.Y.I. AND ITS APPLICABLE SUBSIDIARIES SHALL EXECUTE AND/OR DELIVER SUCH SECURITY DOCUMENTS AND FURTHER AGREEMENTS, DOCUMENTS, AND INSTRUMENTS (INCLUDING, WITHOUT LIMITATION, STOCK CERTIFICATES, STOCK POWERS, AND FINANCING STATEMENTS) AS ADMINISTRATIVE AGENT MAY REASONABLY REQUEST IN ORDER FOR IT TO OBTAIN AND MAINTAIN THE PERFECTED, FIRST PRIORITY LIENS TO BE GRANTED IN ACCORDANCE WITH THIS SECTION 5.1. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 5.1, THE CAPITAL STOCK OF ONE OR MORE NONMATERIAL SUBSIDIARIES (AS THE ADMINISTRATIVE AGENT MAY REQUEST) SHALL BE REQUIRED TO BE PLEDGED IN ACCORDANCE WITH THIS SECTION 5.1 AS IF SUCH NONMATERIAL SUBSIDIARIES WERE MATERIAL SUBSIDIARIES IF AND TO THE EXTENT NECESSARY TO ENSURE THAT (I) THE AGGREGATE TOTAL ASSETS OF ALL NONMATERIAL SUBSIDIARIES WHOSE CAPITAL STOCK HAS NOT BEEN PLEDGED DOES NOT EXCEED FIVE PERCENT OF THE TOTAL ASSETS OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, (II) THE AGGREGATE NET WORTH OF ALL NONMATERIAL SUBSIDIARIES WHOSE CAPITAL STOCK HAS NOT BEEN PLEDGED DOES NOT EXCEED FIVE PERCENT OF THE TOTAL NET WORTH OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, AND (III) THE AGGREGATE REVENUES OF ALL NONMATERIAL SUBSIDIARIES WHOSE CAPITAL STOCK HAS NOT BEEN PLEDGED DOES NOT EXCEED FIVE PERCENT OF THE REVENUES OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS.   SECTION 5.2             GUARANTIES.  EACH DOMESTIC SUBSIDIARY OF F.Y.I. IN EXISTENCE ON THE CLOSING DATE SHALL GUARANTEE THE PAYMENT AND PERFORMANCE OF THE OBLIGATIONS PURSUANT TO THE MASTER GUARANTY.   SECTION 5.3             NEW SUBSIDIARIES.  CONTEMPORANEOUSLY WITH THE CREATION OR ACQUISITION OF ANY SUBSIDIARY OF F.Y.I. AFTER THE CLOSING DATE, F.Y.I. SHALL AND SHALL CAUSE EACH OF ITS SUBSIDIARIES TO:   (A)           GRANT OR CAUSE TO BE GRANTED TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS, (I) IF THE SUBSIDIARY IS A DOMESTIC SUBSIDIARY AND IS NOT A NONMATERIAL SUBSIDIARY (SUBJECT TO THE PROVISO AT THE END OF THIS SECTION 5.3(A)), A PERFECTED, FIRST PRIORITY SECURITY INTEREST IN ALL CAPITAL STOCK OR OTHER OWNERSHIP INTERESTS IN OR INDEBTEDNESS OF SUCH SUBSIDIARY OWNED BY F.Y.I. OR BY ANY SUBSIDIARY OF F.Y.I. OR, (II) IF THE SUBSIDIARY IS A FOREIGN SUBSIDIARY AND IS NOT A NONMATERIAL SUBSIDIARY (SUBJECT TO THE PROVISO AT THE END OF THIS SECTION 5.3(A)), A PERFECTED, FIRST PRIORITY SECURITY INTEREST IN SIXTY-FIVE PERCENT (65%) OF  CAPITAL STOCK OR OTHER OWNERSHIP INTERESTS IN OR INDEBTEDNESS OF SUCH SUBSIDIARY OWNED BY F.Y.I. OR BY ANY SUBSIDIARY OF F.Y.I. (TO THE EXTENT SUCH CAPITAL STOCK OR OTHER OWNERSHIP INTERESTS OR INDEBTEDNESS ARE ALREADY NOT SO PLEDGED TO THE ADMINISTRATIVE AGENT); PROVIDED, HOWEVER, THAT THE CAPITAL STOCK OF ONE OR MORE NONMATERIAL SUBSIDIARIES (AS THE ADMINISTRATIVE AGENT MAY REQUEST) SHALL BE REQUIRED TO BE PLEDGED IN ACCORDENCE WITH THIS SECTION 5.3(A) AS IF SUCH NONMATERIAL SUBSIDIARIES WERE MATERIAL SUBSIDIARIES IF AND TO THE EXTENT NECESSARY TO ENSURE THAT (A) THE AGGREGATE TOTAL ASSETS OF ALL NONMATERIAL SUBSIDIARIES WHOSE CAPITAL STOCK HAS NOT BEEN PLEDGED DOES NOT EXCEED FIVE PERCENT OF THE TOTAL ASSETS OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, (B) THE AGGREGATE NET WORTH OF ALL NONMATERIAL SUBSIDIARIES WHOSE CAPITAL STOCK HAS NOT BEEN PLEDGED DOES NOT EXCEED FIVE PERCENT OF THE TOTAL NET WORTH OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, AND (C) THE AGGREGATE REVENUES OF ALL NONMATERIAL SUBSIDIARIES WHOSE CAPITAL STOCK HAS NOT BEEN PLEDGED DOES NOT EXCEED FIVE PERCENT OF THE REVENUES OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS;   (B)           CAUSE EACH DOMESTIC SUBSIDIARY TO GUARANTEE THE PAYMENT AND PERFORMANCE OF THE OBLIGATIONS BY EXECUTING AND DELIVERING TO THE ADMINISTRATIVE AGENT A JOINDER AGREEMENT PURSUANT TO WHICH SUCH DOMESTIC SUBSIDIARY BECOMES A PARTY TO THE MASTER GUARANTY, AND WHICH JOINDER AGREEMENT ALSO PROVIDES THAT SUCH SUBSIDIARY AGREES TO COMPLY WITH ALL OF THE COVENANTS CONTAINED IN THIS AGREEMENT APPLICABLE TO IT; AND   (C)           IF AND TO THE EXTENT REQUIRED BY SECTION 5.4, CAUSE EACH SUCH SUBSIDIARY TO EXECUTE AND DELIVER TO THE ADMINISTRATIVE AGENT AN APPROPRIATE SECURITY AGREEMENT, SUBSTANTIALLY IN THE FORM OF THE SECURITY AGREEMENTS DELIVERED BY OTHER SUBSIDIARIES OF F.Y.I., AND SUCH OTHER SECURITY DOCUMENTS AS THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST TO GRANT THE ADMINISTRATIVE AGENT, FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS, A PERFECTED, FIRST PRIORITY LIEN (EXCEPT FOR PERMITTED LIENS, IF ANY, WHICH ARE EXPRESSLY PERMITTED BY THE LOAN DOCUMENTS TO HAVE PRIORITY OVER THE LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT) ON ALL PROPERTY OF SUCH SUBSIDIARY (OTHER THAN IMMATERIAL PROPERTIES IN WHICH THE ADMINISTRATIVE AGENT HAS AGREED IT WILL NOT REQUIRE A LIEN).   SECTION 5.4             ADDITIONAL SECURITY.   (A)           IF THE FUNDED DEBT TO EBITDA RATIO SHALL AT ANY TIME EXCEED 2.50 TO 1.00 FOR TWO CONSECUTIVE FISCAL QUARTERS OF F.Y.I.,  F.Y.I. SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES OTHER THAN NONMATERIAL SUBSIDIARIES (SUBJECT TO SECTION 5.4(B)) TO, WITHIN TEN BUSINESS DAYS THEREAFTER, GRANT OR CAUSE TO BE GRANTED TO THE ADMINISTRATIVE AGENT, FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS, A PERFECTED, FIRST PRIORITY LIEN IN ALL PROPERTY OF F.Y.I. AND SUCH SUBSIDIARIES (OTHER THAN IMMATERIAL PROPERTIES IN WHICH ADMINISTRATIVE AGENT HAS AGREED IT WILL NOT REQUIRE A LIEN) IN WHICH A LIEN WAS NOT PREVIOUSLY GRANTED IN ACCORDANCE WITH SECTION 5.1 OR 5.3 , WHICH LIENS SHALL BE GRANTED PURSUANT TO SUCH SECURITY DOCUMENTS IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT AS THE ADMINISTRATIVE AGENT MAY REQUEST FROM TIME TO TIME.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IF THE FUNDED DEBT TO EBITDA RATIO SHALL AT ANY TIME EXCEED 2.50 TO 1.00 FOR TWO CONSECUTIVE FISCAL QUARTERS OF F.Y.I., F.Y.I. SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES OTHER THAN NONMATERIAL SUBSIDIARIES (SUBJECT TO SECTION 5.4(B)) TO, WITHIN TEN BUSINESS DAYS THEREAFTER AND CONTEMPORANEOUSLY WITH THE ACQUISITION OF ANY FEE REAL PROPERTY OR THE EXECUTION OF ANY LEASE OF REAL PROPERTY CONCURRENTLY THEREWITH OR THEREAFTER EXECUTE, ACKNOWLEDGE AND DELIVER TO THE ADMINISTRATIVE AGENT A MORTGAGE OR AN AMENDMENT OR MODIFICATION TO AN EXISTING MORTGAGE COVERING (I) ALL FEE REAL PROPERTY THEN OWNED OR THEN BEING OR THEREAFTER ACQUIRED, RESPECTIVELY, F.Y.I. OR ANY OF SUCH SUBSIDIARIES AND (II) ALL OF F.Y.I.'S OR ANY OF SUCH SUBSIDIARIES' RIGHTS AND INTERESTS AS LESSEE, IN, TO AND UNDER EACH REAL ESTATE LEASE THEN IN EXISTENCE OR THEN BEING OR THEREAFTER ENTERED INTO, RESPECTIVELY, TOGETHER WITH EVIDENCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT AND ITS COUNSEL, INCLUDING, WITHOUT LIMITATION, IF REQUESTED BY THE ADMINISTRATIVE AGENT, A COMMITMENT FOR A MORTGAGEE POLICY OF TITLE INSURANCE IN FAVOR OF THE ADMINISTRATIVE AGENT, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT, THAT THE MORTGAGE CREATES A VALID, FIRST PRIORITY LIEN ON THE FEE ESTATE OR LEASEHOLD ESTATE, AS THE CASE MAY BE, IN FAVOR OF THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS (EXCEPT FOR PERMITTED LIENS, IF ANY, WHICH ARE EXPRESSLY PERMITTED BY THE LOAN DOCUMENTS TO HAVE PRIORITY OVER THE LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT), TOGETHER WITH APPRAISALS AND SURVEYS IF REQUESTED BY THE ADMINISTRATIVE AGENT; PROVIDED, HOWEVER, THAT (A) WITH RESPECT TO ANY FEE REAL PROPERTY HAVING A FAIR MARKET VALUE OF LESS THAN $200,000, F.Y.I. AND SUCH SUBSIDIARIES SHALL NOT BE REQUIRED TO EXECUTE, ACKNOWLEDGE OR DELIVER SUCH MORTGAGE OR AMENDMENT OR MODIFICATION TO AN EXISTING MORTGAGE UNLESS OR UNTIL FEE REAL PROPERTY OR PROPERTIES HAVING AN AGGREGATE FAIR MARKET VALUE OF $200,000 OR MORE WOULD BE COVERED BY ANY SUCH MORTGAGE OR AMENDMENT OR MODIFICATION TO AN EXISTING MORTGAGE AND, UNTIL SUCH TIME, SHALL NOT BE REQUIRED TO DELIVER SUCH MORTGAGEE POLICY OF TITLE INSURANCE OR SUCH APPRAISALS (UNLESS REQUIRED BY LAWS OR REGULATIONS APPLICABLE TO ANY LENDER) OR SURVEYS WITH RESPECT TO SUCH PROPERTIES OR WAIVERS OF LANDLORD LIENS OR LANDLORD AGREEMENTS REFERRED TO HEREIN AND (B) WITH RESPECT TO ANY LEASE OF REAL PROPERTY, F.Y.I. AND SUCH SUBSIDIARIES SHALL NOT BE REQUIRED TO EXECUTE, ACKNOWLEDGE OR DELIVER SUCH MORTGAGE OR AMENDMENT OR MODIFICATION TO AN EXISTING MORTGAGE IF THE TANGIBLE PROPERTY OF F.Y.I. AND/OR ITS SUBSIDIARIES LOCATED AND TO BE LOCATED THEREON DOES NOT EXCEED $500,000 IN AGGREGATE FAIR MARKET VALUE.  FOLLOWING THE DATE OF EACH SUCH ACQUISITION OF PROPERTY, IF REQUESTED BY THE ADMINISTRATIVE AGENT OR THE REQUIRED LENDERS,  F.Y.I. SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES WITH AN INTEREST IN SUCH PROPERTIES TO, (A) DELIVER OR CAUSE TO BE DELIVERED TO THE ADMINISTRATIVE AGENT, A MORTGAGEE POLICY OF TITLE INSURANCE INSURING THE LIENS OF THE MORTGAGE COVERING SUCH FEE REAL PROPERTY IN AN AMOUNT REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT ON STANDARD FORM POLICIES (EXCEPT FOR PERMITTED LIENS, IF ANY, WHICH ARE EXPRESSLY PERMITTED BY THE LOAN DOCUMENTS TO HAVE PRIORITY OVER THE LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT) AND (B) PROVIDE THE ADMINISTRATIVE AGENT WITH A CURRENT ENVIRONMENTAL ASSESSMENT OF SUCH PROPERTY IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT.  IN ADDITION, WITH RESPECT TO EACH SUCH LEASEHOLD ESTATE, F.Y.I. SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES TO, USE ITS BEST REASONABLE EFFORTS TO OBTAIN EITHER (1) WAIVERS OF LANDLORD'S LIENS FROM EACH LESSOR OR (2) LANDLORD AGREEMENTS FROM EACH LESSOR, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT.   (B)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 5.4(A), IN THE EVENT THAT ADDITIONAL SECURITY IS REQUIRED TO BE GRANTED IN ACCORDANCE WITH SECTION 5.4(A), ONE OR MORE NONMATERIAL SUBSIDIARIES (AS THE ADMINISTRATIVE AGENT MAY REQUEST) SHALL BE REQUIRED TO GRANT LIENS IN ACCORDANCE WITH SECTION 5.4(A) AS IF SUCH NONMATERIAL SUBSIDIARIES WERE MATERIAL SUBSIDIARIES IF AND TO THE EXTENT NECESSARY TO ENSURE THAT (I) THE AGGREGATE TOTAL ASSETS OF ALL NONMATERIAL SUBSIDIARIES THAT HAVE NOT GRANTED SUCH LIENS DOES NOT EXCEED FIVE PERCENT OF THE TOTAL ASSETS OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, (II) THE AGGREGATE NET WORTH OF ALL NONMATERIAL SUBSIDIARIES THAT HAVE NOT GRANTED SUCH LIENS DOES NOT EXCEED FIVE PERCENT OF THE TOTAL NET WORTH OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS, AND (III) THE AGGREGATE REVENUES OF ALL NONMATERIAL SUBSIDIARIES THAT HAVE NOT GRANTED SUCH LIENS DOES NOT EXCEED FIVE PERCENT OF THE REVENUES OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS.   SECTION 5.5             RELEASE OF COLLATERAL.   (A)           UPON ANY SALE, TRANSFER OR OTHER DISPOSITION OF COLLATERAL THAT IS EXPRESSLY PERMITTED UNDER SECTION 9.8 AND UPON FIVE BUSINESS DAYS PRIOR WRITTEN REQUEST BY F.Y.I., THE ADMINISTRATIVE AGENT SHALL EXECUTE AT F.Y.I.'S EXPENSE SUCH DOCUMENTS AS MAY BE NECESSARY TO EVIDENCE THE RELEASE BY THE ADMINISTRATIVE AGENT OF ITS LIENS ON SUCH COLLATERAL; PROVIDED, HOWEVER, THAT (I) THE ADMINISTRATIVE AGENT SHALL NOT BE REQUIRED TO RELEASE ANY LIEN ON ANY COLLATERAL IF A DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, (II) THE ADMINISTRATIVE AGENT SHALL NOT BE REQUIRED TO EXECUTE ANY SUCH DOCUMENT ON TERMS WHICH, IN THE ADMINISTRATIVE AGENT'S OPINION, WOULD EXPOSE THE ADMINISTRATIVE AGENT TO LIABILITY OR CREATE ANY OBLIGATION NOT REIMBURSED BY F.Y.I. OR ENTAIL ANY CONSEQUENCES OTHER THAN THE RELEASE OF SUCH LIEN WITHOUT RECOURSE OR WARRANTY, AND (III) SUCH RELEASE SHALL NOT IN ANY MANNER DISCHARGE, AFFECT OR IMPAIR ANY OF THE OBLIGATIONS OR ANY OF THE ADMINISTRATIVE AGENT'S LIENS ON ANY COLLATERAL RETAINED BY F.Y.I. OR ANY OF ITS SUBSIDIARIES, INCLUDING, WITHOUT LIMITATION, ITS LIENS ON THE PROCEEDS OF ANY SUCH SALE, TRANSFER OR OTHER DISPOSITION.   (B)           IF, AFTER ADDITIONAL SECURITY HAS BEEN GRANTED IN ACCORDANCE WITH SECTION 5.4, THE FUNDED DEBT TO EBITDA RATIO IS LESS THAN 2.25 TO 1.00 FOR TWO CONSECUTIVE FISCAL QUARTERS OF F.Y.I. AND F.Y.I., AT SUCH TIME, HAS AN INVESTMENT GRADE RATING FROM EITHER MOODY'S INVESTORS SERVICE, INC. (BAA3 OR BETTER) OR STANDARD & POOR'S CORPORATION (BBB- OR BETTER) ON AN UNSECURED BASIS, THE ADMINISTRATIVE AGENT SHALL, UPON THE REQUEST OF F.Y.I., EXECUTE AT F.Y.I.'S EXPENSE SUCH DOCUMENTS AS MAY BE NECESSARY TO EVIDENCE THE RELEASE BY THE ADMINISTRATIVE AGENT OF ITS LIENS ON ANY OR ALL COLLATERAL GRANTED AS ADDITIONAL SECURITY IN ACCORDANCE WITH SECTION 5.4; PROVIDED, HOWEVER, THAT (I) THE ADMINISTRATIVE AGENT SHALL NOT BE REQUIRED TO RELEASE ANY LIEN ON ANY COLLATERAL IF A DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, (II) THE ADMINISTRATIVE AGENT SHALL NOT BE REQUIRED TO EXECUTE ANY SUCH DOCUMENT ON TERMS WHICH, IN THE ADMINISTRATIVE AGENT'S OPINION, WOULD EXPOSE THE ADMINISTRATIVE AGENT TO LIABILITY OR CREATE ANY OBLIGATION NOT REIMBURSED BY F.Y.I. OR ENTAIL ANY CONSEQUENCES OTHER THAN THE RELEASE OF SUCH LIEN WITHOUT RECOURSE OR WARRANTY, AND (III) SUCH RELEASE SHALL NOT IN ANY MANNER DISCHARGE, AFFECT OR IMPAIR ANY OF THE OBLIGATIONS OR ANY OF THE ADMINISTRATIVE AGENT'S LIENS ON ANY COLLATERAL RETAINED BY F.Y.I. OR ANY OF ITS SUBSIDIARIES, INCLUDING, WITHOUT LIMITATION, ITS LIENS ON THE PROCEEDS OF ANY SUCH SALE, TRANSFER OR OTHER DISPOSITION.   SECTION 5.6             SETOFF.  IF AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, EACH LENDER IS HEREBY AUTHORIZED AT ANY TIME AND FROM TIME TO TIME, WITHOUT NOTICE TO F.Y.I., ANY OTHER LOAN PARTY OR ANY OTHER PERSON (ANY SUCH NOTICE BEING HEREBY EXPRESSLY WAIVED BY F.Y.I.), TO SET OFF AND APPLY ANY AND ALL DEPOSITS (GENERAL, TIME OR DEMAND, PROVISIONAL OR FINAL) AT ANY TIME HELD AND OTHER INDEBTEDNESS AT ANY TIME OWING BY SUCH LENDER TO OR FOR THE CREDIT OR THE ACCOUNT OF F.Y.I. AGAINST ANY AND ALL OF THE OBLIGATIONS NOW OR HEREAFTER EXISTING UNDER THIS AGREEMENT, SUCH LENDER'S NOTE OR ANY OTHER LOAN DOCUMENT, IRRESPECTIVE OF WHETHER OR NOT THE ADMINISTRATIVE AGENT OR SUCH LENDER SHALL HAVE MADE ANY DEMAND UNDER THIS AGREEMENT, SUCH LENDER'S NOTE OR ANY SUCH OTHER LOAN DOCUMENT AND ALTHOUGH SUCH OBLIGATIONS MAY BE UNMATURED.  EACH LENDER AGREES PROMPTLY TO NOTIFY F.Y.I. (WITH A COPY TO THE ADMINISTRATIVE AGENT) AFTER ANY SUCH SETOFF AND APPLICATION, PROVIDED THAT THE FAILURE TO GIVE SUCH NOTICE SHALL NOT AFFECT THE VALIDITY OF SUCH SETOFF AND APPLICATION.  THE RIGHTS AND REMEDIES OF EACH LENDER HEREUNDER ARE IN ADDITION TO OTHER RIGHTS AND REMEDIES (INCLUDING, WITHOUT LIMITATION, OTHER RIGHTS OF SETOFF) WHICH SUCH LENDER MAY HAVE.   SECTION 5.7             LANDLORD AND MORTGAGEE WAIVERS.  ON OR BEFORE THE CLOSING DATE WITH RESPECT TO A LEASE OF REAL PROPERTY AS TO WHICH THE ADMINISTRATIVE AGENT HAS OR IS, IN ACCORDANCE WITH ARTICLE 5 HEREOF, REQUIRED TO HAVE A LEASEHOLD MORTGAGE, AND PRIOR TO OR CONCURRENTLY WITH F.Y.I. OR ANY OF ITS SUBSIDIARIES ENTERING INTO A LEASE OF REAL PROPERTY ON OR AFTER THE CLOSING DATE AS TO WHICH THE ADMINISTRATIVE AGENT HAS OR IS, IN ACCORDANCE WITH ARTICLE 5, REQUIRED TO HAVE A LEASEHOLD MORTGAGE, F.Y.I. SHALL, UNLESS THE ADMINISTRATIVE AGENT HAS WAIVED SUCH REQUIREMENT IN ITS DISCRETION AS TO ANY PARTICULAR LEASED PROPERTY, PROVIDE TO THE ADMINISTRATIVE AGENT AN AGREEMENT OF SUCH OF THE LANDLORDS AND THEIR LENDERS RELATING TO SUCH LEASED PROPERTIES, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT, INCLUDING, WITHOUT LIMITATION, ANY LEASED PROPERTIES WHERE THE LANDLORD (I) OWNS ANY CAPITAL STOCK OF F.Y.I., (II) HOLDS ANY SELLER SUBORDINATED DEBT, OR (III) IS THE BENEFICIARY OF OR PAYEE UNDER ANY SELLER EARN OUT.   ARTICLE 6   CONDITIONS PRECEDENT   SECTION 6.1             INITIAL LOANS AND LETTER OF CREDIT CONDITIONS.  THE AGREEMENT OF THE ADMINISTRATIVE AGENT AND THE LENDERS TO ENTER INTO THIS AGREEMENT, AND EACH OF THE OBLIGATIONS OF EACH LENDER TO MAKE ITS INITIAL LOAN UNDER THIS AGREEMENT AND THE OBLIGATION OF THE ISSUING BANK TO ISSUE THE INITIAL LETTER OF CREDIT UNDER THIS AGREEMENT ARE SUBJECT TO THE CONDITIONS PRECEDENT THAT THE ADMINISTRATIVE AGENT SHALL HAVE RECEIVED, ON OR BEFORE THE EFFECTIVE DATE, ALL OF THE FOLLOWING IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT AND, IN THE CASE OF ACTIONS TO BE TAKEN, EVIDENCE THAT THE FOLLOWING REQUIRED ACTIONS HAVE BEEN TAKEN TO THE SATISFACTION OF THE ADMINISTRATIVE AGENT:   (A)           RESOLUTIONS.  RESOLUTIONS OF THE BOARD OF DIRECTORS OF  F.Y.I. AND EACH MATERIAL SUBSIDIARY CERTIFIED BY ITS SECRETARY OR AN ASSISTANT SECRETARY WHICH AUTHORIZE THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH LOAN PARTY OF THE LOAN DOCUMENTS TO WHICH IT IS OR IS TO BE A PARTY;   (B)           INCUMBENCY CERTIFICATE.  A CERTIFICATE OF INCUMBENCY CERTIFIED BY THE SECRETARY OR AN ASSISTANT SECRETARY OF F.Y.I. AND EACH MATERIAL SUBSIDIARY CERTIFYING THE NAME OF EACH OFFICER OR OTHER REPRESENTATIVE OF SUCH LOAN PARTY (I) WHO IS AUTHORIZED TO SIGN THE LOAN DOCUMENTS TO WHICH SUCH LOAN PARTY IS OR IS TO BE A PARTY (INCLUDING ANY CERTIFICATES CONTEMPLATED THEREIN), TOGETHER WITH SPECIMEN SIGNATURES OF EACH SUCH OFFICER OR OTHER REPRESENTATIVE, AND (II) WHO WILL, UNTIL REPLACED BY OTHER OFFICERS OR REPRESENTATIVES DULY AUTHORIZED FOR THAT PURPOSE, ACT AS ITS REPRESENTATIVE FOR THE PURPOSES OF SIGNING DOCUMENTS AND GIVING NOTICES AND OTHER COMMUNICATIONS IN CONNECTION WITH THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREBY;   (C)           ARTICLES OR CERTIFICATES OF INCORPORATION, ETC.  THE ARTICLES OR CERTIFICATES OF INCORPORATION, CERTIFICATE OF FORMATION, CERTIFICATE OF LIMITED PARTNERSHIP, PARTNERSHIP AGREEMENT OR OTHER APPLICABLE CONSTITUTIONAL DOCUMENT OF F.Y.I. AND EACH MATERIAL SUBSIDIARY CERTIFIED BY THE SECRETARY OF STATE OR OTHER APPLICABLE GOVERNMENTAL AUTHORITY OF THE STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION OF SUCH LOAN PARTY AND DATED AS OF A CURRENT DATE;   (D)           BYLAWS.  THE BYLAWS OF F.Y.I. AND EACH MATERIAL SUBSIDIARY CERTIFIED BY THE SECRETARY OR AN ASSISTANT SECRETARY OF SUCH LOAN PARTY;   (E)           GOVERNMENTAL CERTIFICATES.  CERTIFICATES OF APPROPRIATE OFFICIALS AS TO THE EXISTENCE AND GOOD STANDING, STATUS OR COMPLIANCE, AS APPLICABLE, OF F.Y.I. AND EACH MATERIAL SUBSIDIARY IN THEIR RESPECTIVE JURISDICTIONS OF INCORPORATION OR ORGANIZATION AND ANY AND ALL JURISDICTIONS WHERE SUCH LOAN PARTY IS QUALIFIED TO DO BUSINESS AS A FOREIGN CORPORATION OR OTHER ENTITY, EACH SUCH CERTIFICATE TO BE DATED AS OF A CURRENT DATE;   (F)            NOTES.  THE NOTES DULY COMPLETED AND EXECUTED BY F.Y.I.;   (G)           GUARANTIES.  A MASTER GUARANTY EXECUTED BY EACH OF THE DOMESTIC SUBSIDIARIES OF F.Y.I.;   (H)           SECURITY AGREEMENTS.  SECURITY AGREEMENTS EXECUTED BY F.Y.I. AND EACH OF ITS SUBSIDIARIES WHICH ARE REQUIRED TO GRANT LIENS IN ACCORDANCE WITH ARTICLE 5 (INCLUDING, WITHOUT LIMITATION, SECURITY AGREEMENTS REQUIRED IN ACCORDANCE WITH SECTION 5.1 AND SECURITY AGREEMENTS, TO BE HELD IN ESCROW BY THE ADMINISTRATIVE AGENT, REQUIRED IN ACCORDANCE WITH SECTION 5.4);   (I)            STOCK CERTIFICATES.  THE STOCK CERTIFICATES REPRESENTING ALL OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF EACH OF THE SUBSIDIARIES OF F.Y.I. ACCOMPANIED BY APPROPRIATE STOCK POWERS SIGNED IN BLANK;   (J)            FINANCING STATEMENTS.  FINANCING STATEMENTS AND ALL OTHER REQUISITE FILING DOCUMENTS EXECUTED BY THE LOAN PARTIES NECESSARY OR APPROPRIATE TO PERFECT THE LIENS CREATED PURSUANT TO THE SECURITY DOCUMENTS (INCLUDING, WITHOUT LIMITATION, FINANCING STATEMENTS RELATING TO THE SECURITY AGREEMENTS REQUIRED IN ACCORDANCE WITH SECTION 5.1 AND FINANCING STATEMENTS, TO BE HELD IN ESCROW BY THE ADMINISTRATIVE AGENT, RELATING TO THE SECURITY AGREEMENTS REQUIRED IN ACCORDANCE WITH SECTION 5.4);   (K)           LIEN RELEASES.  RELEASES OR ASSIGNMENTS OF LIENS AND UCC-3 FINANCING STATEMENTS IN RECORDABLE FORM, AS MAY BE NECESSARY TO REFLECT THAT THE LIENS CREATED BY THE SECURITY DOCUMENTS ARE FIRST PRIORITY LIENS (EXCEPT FOR PERMITTED LIENS, IF ANY, WHICH ARE EXPRESSLY PERMITTED BY THE LOAN DOCUMENTS TO HAVE PRIORITY OVER THE LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT);   (L)            LIEN SEARCHES. LIEN SEARCHES IN THE NAMES OF F.Y.I. AND EACH OF ITS MATERIAL SUBSIDIARIES (AND IN ALL NAMES UNDER WHICH EACH SUCH PERSON HAS DONE BUSINESS WITHIN THE LAST FIVE YEARS AND IN ALL NAMES OF PERSONS WHO PREVIOUSLY OWNED ANY OF THE PROPERTIES CONSTITUTING COLLATERAL AS THE ADMINISTRATIVE AGENT MAY REQUIRE) IN EACH STATE, COUNTY, PARISH OR OTHER JURISDICTION WHERE EACH SUCH PERSON MAINTAINS AN OFFICE OR HAS PROPERTY, SHOWING NO FINANCING STATEMENTS OR OTHER LIEN INSTRUMENTS OF RECORD EXCEPT FOR PERMITTED LIENS (AND LIENS RELEASED IN ACCORDANCE WITH SECTION 6.1(K));   (M)          LEASES.  IF REQUESTED BY THE ADMINISTRATIVE AGENT, COPIES OF ALL LEASES (AND ALL AMENDMENTS AND SUPPLEMENTS THERETO) PURSUANT TO WHICH F.Y.I. OR ANY OF ITS SUBSIDIARIES LEASES MORTGAGED PROPERTIES;   (N)           CONSENTS.  COPIES OF ALL MATERIAL CONSENTS NECESSARY FOR THE EXECUTION, DELIVERY AND PERFORMANCE BY EACH OF THE LOAN PARTIES OF THE LOAN DOCUMENTS TO WHICH IT IS A PARTY, WHICH CONSENTS SHALL BE CERTIFIED BY A RESPONSIBLE OFFICER OF THE APPLICABLE LOAN PARTY AS TRUE AND CORRECT COPIES OF SUCH CONSENTS AS OF THE EFFECTIVE DATE;   (O)           PERMITS. IF REQUESTED BY THE ADMINISTRATIVE AGENT, COPIES OF ALL MATERIAL PERMITS AFFECTING F.Y.I. OR ANY OF ITS MATERIAL SUBSIDIARIES IN CONNECTION WITH ITS BUSINESSES OR ANY OF THE PROPERTIES OWNED OR LEASED BY IT, AND EVIDENCE SATISFACTORY TO THE ADMINISTRATIVE AGENT THAT F.Y.I. AND EACH OF ITS MATERIAL SUBSIDIARIES ARE ABLE TO CONDUCT THEIR BUSINESSES WITH THE USE OF SUCH PERMITS IN FULL FORCE AND EFFECT;   (P)           PAYMENT OF PRINCIPAL, INTEREST, FEES AND EXPENSES.  F.Y.I. SHALL HAVE PAID IN FULL (I) ALL OUTSTANDING PRINCIPAL OF, AND ALL ACCRUED AND UNPAID INTEREST AND FEES WITH RESPECT TO, THE EXISTING DEBT, (II) ALL FEES DUE ON OR BEFORE THE EFFECTIVE DATE AS SPECIFIED IN THIS AGREEMENT OR IN THE FEE LETTER, AND (III) ALL FEES AND EXPENSES OF OR INCURRED BY THE ADMINISTRATIVE AGENT AND ITS COUNSEL TO THE EXTENT BILLED ON OR BEFORE THE EFFECTIVE DATE AND PAYABLE PURSUANT TO THIS AGREEMENT;   (Q)           REGULATORY APPROVALS. EVIDENCE SATISFACTORY TO THE ADMINISTRATIVE AGENT THAT ALL FILINGS, CONSENTS OR APPROVALS WITH OR OF GOVERNMENTAL AUTHORITIES NECESSARY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS HAVE BEEN MADE AND OBTAINED, AS APPLICABLE, INCLUDING, WITHOUT LIMITATION, ALL APPROVALS OR FILINGS (IF ANY) REQUIRED UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 AND THE LAPSE OF ALL WAITING PERIODS WITH RESPECT THERETO;   (R)            COMPLIANCE WITH LAWS.  AS OF THE EFFECTIVE DATE, EACH PERSON THAT IS A PARTY TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS SHALL HAVE COMPLIED WITH ALL GOVERNMENTAL REQUIREMENTS NECESSARY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS;   (S)           NO PROHIBITIONS.  NO GOVERNMENTAL REQUIREMENT SHALL PROHIBIT THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND NO ORDER, JUDGMENT OR DECREE OF ANY GOVERNMENTAL AUTHORITY OR ARBITRATOR SHALL, AND NO LITIGATION OR OTHER PROCEEDING SHALL BE PENDING OR THREATENED WHICH WOULD, ENJOIN, PROHIBIT, RESTRAIN OR OTHERWISE ADVERSELY AFFECT THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS OR OTHERWISE HAVE A MATERIAL ADVERSE EFFECT;   (T)            NO MATERIAL ADVERSE CHANGE.  AS OF THE EFFECTIVE DATE, NO MATERIAL ADVERSE CHANGE SHALL HAVE OCCURRED WITH RESPECT TO THE CONDITION (FINANCIAL OR OTHERWISE), RESULTS OF OPERATIONS, BUSINESS, OPERATIONS, CAPITALIZATION, ASSETS OR LIABILITIES (ACTUAL OR CONTINGENT) OF F.Y.I. AND ITS SUBSIDIARIES TAKEN AS A WHOLE SINCE DECEMBER 31, 1999;   (U)           FINANCIAL STATEMENTS.  IF AND TO THE EXTENT NOT PREVIOUSLY DELIVERED TO THE ADMINISTRATIVE AGENT, COPIES OF EACH OF THE FINANCIAL STATEMENTS REFERRED TO IN SECTION 7.2;   (V)           OPINIONS OF COUNSEL.  FAVORABLE OPINIONS (OR COMFORT LETTERS WITH RESPECT TO CLAUSE (II) SUCCEEDING) OF (I) LOCKE LIDDELL & SAPP, LLP, COUNSEL FOR THE LOAN PARTIES, AND SUCH OTHER COUNSEL AS MAY BE ACCEPTABLE TO THE ADMINISTRATIVE AGENT, IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT WITH RESPECT TO F.Y.I. AND ITS SUBSIDIARIES WITH RESPECT TO THE LOAN DOCUMENTS AND (II) SUCH OTHER COUNSEL AS MAY BE ACCEPTABLE TO THE ADMINISTRATIVE AGENT REGARDING THE POWER AND AUTHORITY OF EACH OF THE SUBSIDIARIES OF F.Y.I. TO EXECUTE AND DELIVER ITS GUARANTY AND SECURITY AGREEMENT UNDER THE LAWS OF ITS JURISDICTION OF INCORPORATION OR ORGANIZATION, AS THE ADMINISTRATIVE AGENT MAY REQUIRE;   (W)          OPINIONS OF LOCAL COUNSEL.  IF AND TO THE EXTENT NOT PREVIOUSLY DELIVERED TO THE ADMINISTRATIVE AGENT, A FAVORABLE OPINION OR COMFORT LETTER (AS THE ADMINISTRATIVE AGENT MAY REQUIRE) OF LOCAL COUNSEL TO THE ADMINISTRATIVE AGENT IN EACH STATE OR PROVINCE WHERE MORTGAGED PROPERTIES OR INVENTORY OWNED BY F.Y.I. OR ITS SUBSIDIARIES ARE LOCATED IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT; AND   (X)            ACCOUNTANT'S LETTER.  IF AND TO THE EXTENT NOT PREVIOUSLY DELIVERED TO THE ADMINISTRATIVE AGENT, A LETTER FROM F.Y.I. AUTHORIZING THE INDEPENDENT PUBLIC ACCOUNTANT OF F.Y.I. AND ITS SUBSIDIARIES TO COMMUNICATE WITH THE ADMINISTRATIVE AGENT AND THE LENDERS AND ACKNOWLEDGING RELIANCE BY THE ADMINISTRATIVE AGENT AND THE LENDERS ON PAST, PRESENT AND FUTURE FINANCIAL STATEMENTS.   (Y)           WIRING INSTRUCTIONS.  WRITTEN INSTRUCTIONS FROM F.Y.I. TO THE ADMINISTRATIVE AGENT WITH RESPECT TO THE DISBURSEMENT OF THE PROCEEDS OF THE LOANS;   (Z)            INSURANCE POLICIES.  ORIGINALS OF CERTIFICATES OF INSURANCE EVIDENCING ALL INSURANCE POLICIES REQUIRED BY THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, TOGETHER WITH ENDORSEMENTS NAMING THE ADMINISTRATIVE AGENT AS LOSS PAYEE UNDER ALL SUCH CASUALTY INSURANCE POLICIES AND THE ADMINISTRATIVE AGENT AS AN ADDITIONAL INSURED PARTY UNDER ALL SUCH LIABILITY POLICIES AND, IF REQUESTED BY THE ADMINISTRATIVE AGENT, COPIES OF ALL SUCH INSURANCE POLICIES.   (AA)         LETTER OF CREDIT AGREEMENT.  WITH RESPECT TO ANY ISSUANCE OF A LETTER OF CREDIT, A LETTER OF CREDIT AGREEMENT IN THE FORM REQUIRED BY THE ISSUING BANK WITH RESPECT THERETO EXECUTED BY F.Y.I.;   (BB)         SOLVENCY CERTIFICATE; CONTRIBUTION AGREEMENT.  (I) A SOLVENCY CERTIFICATE; AND (II) CONTRIBUTION AGREEMENTS (OR APPLICABLE AMENDMENTS TO ANY SUCH AGREEMENTS EXISTING AS OF THE EFFECTIVE DATE) BETWEEN AND AMONG F.Y.I. AND ITS SUBSIDIARIES TO EVIDENCE APPLICABLE RIGHTS OF CONTRIBUTION;   (CC)         NO MATERIAL LITIGATION.  AS OF THE EFFECTIVE DATE, NO ACTION, SUIT, INVESTIGATION, OR PROCEEDING SHALL BE PENDING OR THREATENED BEFORE ANY GOVERNMENTAL AUTHORITY THAT PURPORTS TO AFFECT F.Y.I. OR ANY OF ITS SUBSIDIARIES THAT COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT OR THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON THE ABILITY OF F.Y.I. OR ANY OF ITS SUBSIDIARIES TO PERFORM THEIR OBLIGATIONS UNDER THE LOAN DOCUMENTS;   (DD)         DUE DILIGENCE REVIEW.  RECEIPT AND REVIEW, WITH RESULTS SATISFACTORY TO ADMINISTRATIVE AGENT AND ITS COUNSEL, OF INFORMATION REGARDING LITIGATION, TAX, ACCOUNTING, LABOR, INSURANCE, PENSION LIABILITIES (ACTUAL OR CONTINGENT), REAL ESTATE LEASES, MATERIAL CONTRACTS, DEBT AGREEMENTS, PROPERTY OWNERSHIP, ENVIRONMENTAL MATTERS, CONTINGENT LIABILITIES AND MANAGEMENT OF F.Y.I. AND ITS SUBSIDIARIES; AND   (EE)         INFORMATION SYSTEMS REVIEW. RECEIPT AND REVIEW, WITH RESULTS SATISFACTORY TO ADMINISTRATIVE AGENT, OF A COMPLETE REVIEW OF F.Y.I.'S AND ITS SUBSIDIARIES' INFORMATION SYSTEMS BY AN INDEPENDENT FIRM ACCEPTABLE TO F.Y.I. AND THE ADMINISTRATIVE AGENT.   F.Y.I. shall deliver, or cause to be delivered, to the Administrative Agent sufficient counterparts of each agreement, document or instrument to be received by the Administrative Agent under this Section 6.1 to permit the Administrative Agent to distribute a copy of the same to each of the Lenders.   SECTION 6.2             ALL EXTENSIONS OF CREDIT.  THE OBLIGATION OF EACH LENDER TO MAKE ANY LOAN (INCLUDING THE INITIAL LOAN) AND THE OBLIGATION OF THE ISSUING BANK TO ISSUE ANY LETTER OF CREDIT (INCLUDING THE INITIAL LETTER OF CREDIT) UNDER THIS AGREEMENT ARE SUBJECT TO THE SATISFACTION OF EACH OF THE CONDITIONS PRECEDENT SET FORTH IN SECTION 6.1 AND EACH OF THE FOLLOWING ADDITIONAL CONDITIONS PRECEDENT:   (A)           NO DEFAULT OR MATERIAL ADVERSE EFFECT.  NO DEFAULT OR MATERIAL ADVERSE EFFECT SHALL HAVE OCCURRED AND BE CONTINUING, OR WOULD RESULT FROM SUCH LOAN OR LETTER OF CREDIT;   (B)           REPRESENTATIONS AND WARRANTIES.  ALL OF THE REPRESENTATIONS AND WARRANTIES OF F.Y.I. AND ITS SUBSIDIARIES AND THE OTHER LOAN PARTIES CONTAINED IN ARTICLE 7 HEREOF AND IN THE OTHER LOAN DOCUMENTS SHALL BE TRUE AND CORRECT ON AND AS OF THE DATE OF SUCH LOAN OR LETTER OF CREDIT WITH THE SAME FORCE AND EFFECT AS IF SUCH REPRESENTATIONS AND WARRANTIES HAD BEEN MADE ON AND AS OF SUCH DATE, EXCEPT TO THE EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY BY THEIR TERMS MADE ONLY AS OF THE CLOSING DATE OR ANOTHER SPECIFIED DATE; AND   (C)           ADDITIONAL DOCUMENTATION.  THE ADMINISTRATIVE AGENT SHALL HAVE RECEIVED SUCH ADDITIONAL APPROVALS, OPINIONS, AGREEMENT, DOCUMENTS AND INSTRUMENTS AS THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST.   Each notice of borrowing or request for the issuance of a Letter of Credit by F.Y.I. hereunder shall constitute a representation and warranty by F.Y.I. that the conditions precedent set forth in Sections 6.2(a) and (b) have been satisfied (both as of the date of such notice and, unless F.Y.I. otherwise notifies the Administrative Agent prior to the date of such borrowing or Letter of Credit, as of the date of such borrowing or Letter of Credit).   SECTION 6.3             CLOSING CERTIFICATE.  THE AGREEMENT OF THE ADMINISTRATIVE AGENT AND THE LENDERS TO ENTER INTO THIS AGREEMENT, THE OBLIGATIONS OF THE LENDERS TO MAKE THE INITIAL LOAN AND THE OBLIGATION OF THE ISSUING BANK TO ISSUE THE INITIAL LETTER OF CREDIT ARE SUBJECT TO THE CONDITION THAT THE ADMINISTRATIVE AGENT RECEIVE, CONCURRENTLY WITH THE EXECUTION AND DELIVERY OF THIS AGREEMENT, A CLOSING CERTIFICATE IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT CERTIFYING AS TO THE SATISFACTION OF EACH OF THE CONDITIONS PRECEDENT SET FORTH IN SECTION 6.1.   ARTICLE 7   REPRESENTATIONS AND WARRANTIES   F.Y.I. represents and warrants to the Administrative Agent and the Lenders that the following statements are and, after giving effect to the transactions contemplated hereby, will be true, correct and complete:   SECTION 7.1             CORPORATE EXISTENCE.  EACH LOAN PARTY (A) IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS INCORPORATION OR ORGANIZATION, (B) HAS ALL REQUISITE POWER AND AUTHORITY TO OWN ITS PROPERTIES AND CARRY ON ITS BUSINESS AS NOW BEING OR AS PROPOSED TO BE CONDUCTED, AND (C) IS QUALIFIED TO DO BUSINESS IN ALL JURISDICTIONS IN WHICH THE NATURE OF ITS BUSINESS MAKES SUCH QUALIFICATION NECESSARY AND WHERE FAILURE TO SO QUALIFY WOULD HAVE A MATERIAL ADVERSE EFFECT.  EACH LOAN PARTY HAS THE POWER AND AUTHORITY AND LEGAL RIGHT TO EXECUTE, DELIVER AND PERFORM ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS TO WHICH IT IS OR MAY BECOME A PARTY.  F.Y.I. IS A HOLDING COMPANY AND IS NOT AN OPERATING COMPANY AND DOES NOT ENGAGE IN ANY MATERIAL BUSINESS OPERATIONS APART FROM THE OWNERSHIP AND MANAGEMENT OF ITS SUBSIDIARIES.   SECTION 7.2             FINANCIAL STATEMENTS.   (A)           F.Y.I. HAS DELIVERED TO THE ADMINISTRATIVE AGENT AND THE LENDERS AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF F.Y.I. AND ITS SUBSIDIARIES AS OF AND FOR THE FISCAL YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999, INCLUDING, WITHOUT LIMITATION, BALANCE SHEETS AND INCOME AND CASH FLOW STATEMENTS.  TO F.Y.I.'S KNOWLEDGE, SUCH FINANCIAL STATEMENTS ARE TRUE AND CORRECT, HAVE BEEN PREPARED IN ACCORDANCE WITH GAAP AND FAIRLY AND ACCURATELY PRESENT, ON A CONSOLIDATED BASIS, THE FINANCIAL CONDITION OF F.Y.I. AND ITS CONSOLIDATED SUBSIDIARIES, AS OF THE RESPECTIVE DATES INDICATED THEREIN AND THE RESULTS OF OPERATIONS FOR THE RESPECTIVE PERIODS INDICATED THEREIN.  THERE HAS NOT BEEN, AS OF THE CLOSING DATE OR THE EFFECTIVE DATE, ANY MATERIAL ADVERSE CHANGE IN THE BUSINESS, CONDITION (FINANCIAL OR OTHERWISE), OPERATIONS OR PROPERTIES OF F.Y.I. OR ITS SUBSIDIARIES OR SINCE THE EFFECTIVE DATES OF THE MOST RECENT APPLICABLE FINANCIAL STATEMENTS REFERRED TO IN THIS SECTION 7.2(A).   (B)           THE PROJECTIONS WERE PREPARED BY F.Y.I. ON A BASIS SUBSTANTIALLY CONSISTENT WITH THE FINANCIAL STATEMENTS REFERRED TO IN SECTION 7.2(A).  THE PROJECTIONS REPRESENT, AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, THE GOOD FAITH ESTIMATE OF F.Y.I. CONCERNING THE PROBABLE FINANCIAL CONDITION AND PERFORMANCE OF F.Y.I. AND ITS SUBSIDIARIES BASED ON ASSUMPTIONS BELIEVED TO BE REASONABLE AT THE TIME MADE.   SECTION 7.3             CORPORATE ACTION: NO BREACH.  THE EXECUTION, DELIVERY AND PERFORMANCE BY EACH LOAN PARTY OF THE LOAN DOCUMENTS TO WHICH IT IS OR MAY BECOME A PARTY AND COMPLIANCE WITH THE TERMS AND PROVISIONS HEREOF AND THEREOF HAVE BEEN DULY AUTHORIZED BY ALL REQUISITE CORPORATE OR OTHER ENTITY ACTION ON THE PART OF THE LOAN PARTIES AND DO NOT AND WILL NOT (A) VIOLATE OR CONFLICT WITH, OR RESULT IN A BREACH OF, OR REQUIRE ANY CONSENT UNDER (I) THE ARTICLES OR CERTIFICATES OF INCORPORATION OR BYLAWS OF ANY LOAN PARTY, (II) ANY GOVERNMENTAL REQUIREMENT APPLICABLE TO A LOAN PARTY OR ANY OF ITS PROPERTY OR ANY ORDER, WRIT, INJUNCTION OR DECREE OF ANY GOVERNMENTAL AUTHORITY OR ARBITRATOR APPLICABLE TO A LOAN PARTY OR ANY OF ITS PROPERTY, OR (III) ANY MATERIAL AGREEMENT, DOCUMENT OR INSTRUMENT TO WHICH ANY LOAN PARTY IS A PARTY OR BY WHICH ANY LOAN PARTY OR ANY OF ITS PROPERTY IS BOUND OR SUBJECT, OR (B) CONSTITUTE A DEFAULT UNDER ANY SUCH MATERIAL AGREEMENT, DOCUMENT OR INSTRUMENT, OR RESULT IN THE CREATION OR IMPOSITION OF ANY LIEN (EXCEPT UNDER THE SECURITY DOCUMENTS AS PROVIDED IN ARTICLE 5) UPON ANY OF THE REVENUES OR PROPERTY OF ANY LOAN PARTY.   SECTION 7.4             OPERATION OF BUSINESS.  THE LOAN PARTIES POSSESS ALL MATERIAL PERMITS, FRANCHISES, LICENSES AND AUTHORIZATIONS NECESSARY OR APPROPRIATE TO CONDUCT THEIR RESPECTIVE BUSINESSES SUBSTANTIALLY AS NOW CONDUCTED AND WHERE THE FAILURE TO DO SO WOULD CONSTITUTE OR RESULT IN A MATERIAL ADVERSE EFFECT.  ALL OF SUCH MATERIAL PERMITS, FRANCHISES, LICENSES AND AUTHORIZATIONS OF F.Y.I. AND ITS MATERIAL SUBSIDIARIES WHICH CONSTITUTE A GOVERNMENTAL REQUIREMENT OR WHICH ARE OR ARE TO BE ISSUED BY ANY GOVERNMENTAL AUTHORITY ARE DISCLOSED ON SCHEDULE 7.4.  NONE OF SUCH PERSONS IS IN MATERIAL VIOLATION OF ANY SUCH PERMITS, FRANCHISES, LICENSES OR AUTHORIZATIONS.   SECTION 7.5             INTELLECTUAL PROPERTY.  THE LOAN PARTIES OWN OR POSSESS (OR WILL BE LICENSED OR HAVE THE FULL RIGHT TO USE) ALL INTELLECTUAL PROPERTY WHICH IS NECESSARY FOR THE OPERATION OF THEIR RESPECTIVE BUSINESSES AS PRESENTLY CONDUCTED AND AS PROPOSED TO BE CONDUCTED, WITHOUT ANY KNOWN CONFLICT WITH THE RIGHTS OF OTHERS WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS WILL NOT MATERIALLY ALTER OR IMPAIR, INDIVIDUALLY OR IN THE AGGREGATE, ANY OF SUCH RIGHTS OF SUCH PERSONS.  NO PRODUCT OF THE LOAN PARTIES INFRINGES UPON ANY INTELLECTUAL PROPERTY OWNED BY ANY OTHER PERSON, AND NO CLAIM OR LITIGATION IS PENDING OR, TO THE KNOWLEDGE OF F.Y.I. OR ANY OF ITS SUBSIDIARIES, THREATENED AGAINST ANY LOAN PARTY OR ANY SUCH PERSON CONTESTING ITS RIGHT TO USE ANY PRODUCT OR MATERIAL WHICH COULD HAVE A MATERIAL ADVERSE EFFECT.  THERE IS NO VIOLATION BY ANY LOAN PARTY OF ANY RIGHT OF SUCH LOAN PARTY WITH RESPECT TO ANY MATERIAL INTELLECTUAL PROPERTY OWNED OR USED BY SUCH LOAN PARTY WHICH WOULD CONSTITUTE OR RESULT IN A MATERIAL ADVERSE EFFECT.   SECTION 7.6             LITIGATION AND JUDGMENTS.  EACH MATERIAL ACTION, SUIT, INVESTIGATION OR PROCEEDING BEFORE OR BY ANY GOVERNMENTAL AUTHORITY OR ARBITRATOR PENDING OR, TO THE KNOWLEDGE OF  F.Y.I. OR ANY OF ITS SUBSIDIARIES, THREATENED AGAINST OR AFFECTING ANY LOAN PARTY IS DISCLOSED ON SCHEDULE 7.6.  NONE OF SUCH ACTIONS, SUITS, INVESTIGATIONS OR PROCEEDINGS COULD, IF ADVERSELY DETERMINED, HAVE A MATERIAL ADVERSE EFFECT.  AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, THERE ARE NO OUTSTANDING JUDGMENTS AGAINST ANY LOAN PARTY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES.   SECTION 7.7             RIGHTS IN PROPERTIES; LIENS.  EACH OF THE LOAN PARTIES HAS GOOD AND INDEFEASIBLE TITLE TO OR, EXCEPT AS EXPRESSLY STATED TO THE CONTRARY ON SCHEDULE 1.1(A), VALID LEASEHOLD INTERESTS IN ITS PROPERTIES AND ASSETS, REAL AND PERSONAL, INCLUDING THE PROPERTIES, ASSETS AND LEASEHOLD INTERESTS REFLECTED IN THE FINANCIAL STATEMENTS DESCRIBED IN SECTION 7.2, AND NONE OF THE PROPERTIES OR LEASEHOLD INTERESTS OF F.Y.I. OR ANY OF ITS MATERIAL SUBSIDIARIES OR, TO THE BEST OF F.Y.I.'S KNOWLEDGE WITHOUT UNDERTAKING A CURRENT LIEN SEARCH, ANY OF ITS NONMATERIAL SUBSIDIARIES IS SUBJECT TO ANY LIEN, EXCEPT PERMITTED LIENS.  EXCEPT AS DISCLOSED ON SCHEDULE 7.7, NEITHER F.Y.I. NOR ANY OF ITS SUBSIDIARIES OWNS ANY RIGHT, TITLE OR INTEREST IN ANY REAL PROPERTIES.   SECTION 7.8             ENFORCEABILITY. THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS TO WHICH EACH OF THE LOAN PARTIES IS A PARTY HAVE BEEN DULY AUTHORIZED BY RESOLUTIONS OF THE BOARD OF DIRECTORS OF SUCH LOAN PARTY (OR OTHER APPROPRIATE ACTION AUTHORIZING SUCH EXECUTION, DELIVERY AND PERFORMANCE HAS BEEN TAKEN WITH RESPECT TO EACH LOAN PARTY THAT IS NOT A CORPORATION).  THE LOAN DOCUMENTS HAVE BEEN DULY AND VALIDLY EXECUTED AND DELIVERED BY EACH OF THE LOAN PARTIES THAT IS A PARTY THERETO AND CONSTITUTE THE LEGAL, VALID AND BINDING OBLIGATIONS OF THE LOAN PARTIES, ENFORCEABLE AGAINST THE LOAN PARTIES IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT AS LIMITED BY BANKRUPTCY, INSOLVENCY OR OTHER LAWS OF GENERAL APPLICATION RELATING TO THE ENFORCEMENT OF CREDITORS' RIGHTS AND GENERAL PRINCIPLES OF EQUITY.   SECTION 7.9             APPROVALS.  NO AUTHORIZATION, APPROVAL OR CONSENT OF, AND NO FILING OR REGISTRATION WITH OR NOTICE TO, ANY GOVERNMENTAL AUTHORITY OR THIRD PARTY IS OR WILL BE NECESSARY FOR THE EXECUTION, DELIVERY OR PERFORMANCE BY ANY LOAN PARTY OF ANY OF THE LOAN DOCUMENTS TO WHICH IT IS A PARTY OR FOR THE VALIDITY OR ENFORCEABILITY THEREOF, EXCEPT FOR SUCH CONSENTS, APPROVALS AND FILINGS AS HAVE BEEN VALIDLY OBTAINED OR MADE AND ARE IN FULL FORCE AND EFFECT.  NONE OF THE LOAN PARTIES HAS FAILED TO OBTAIN ANY MATERIAL GOVERNMENTAL CONSENT, APPROVAL, LICENSE, PERMIT, FRANCHISE OR OTHER GOVERNMENTAL AUTHORIZATION NECESSARY FOR THE OWNERSHIP OF ANY OF ITS PROPERTIES OR THE CONDUCT OF ITS BUSINESS.   SECTION 7.10           DEBT.  AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, THE LOAN PARTIES AND THEIR SUBSIDIARIES HAVE NO DEBT EXCEPT FOR (A) THE OBLIGATIONS AND (B) THE DEBT DISCLOSED ON SCHEDULE 7.10 HERETO.   SECTION 7.11           TAXES.  THE LOAN PARTIES HAVE FILED ALL TAX RETURNS (FEDERAL, STATE AND LOCAL) REQUIRED TO BE FILED, INCLUDING ALL INCOME, FRANCHISE, EMPLOYMENT, PROPERTY AND SALES TAX RETURNS, AND HAVE PAID ALL OF THEIR RESPECTIVE LIABILITIES (OTHER THAN LIABILITIES WHICH DO NOT, IN THE AGGREGATE, EXCEED $100,000 IN AMOUNT) FOR TAXES, ASSESSMENTS, GOVERNMENTAL CHARGES AND OTHER LEVIES THAT ARE DUE AND PAYABLE, EXCEPT SUCH TAXES, IF ANY, THE PAYMENT OF WHICH IS CURRENTLY BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS DILIGENTLY CONDUCTED BY OR ON BEHALF OF SUCH PERSON AND AS TO WHICH, IF REQUIRED BY GAAP, SUCH PERSON HAS ESTABLISHED ADEQUATE RESERVES.  F.Y.I. IS NOT AWARE OF ANY PENDING INVESTIGATION OF ANY LOAN PARTY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, BY ANY TAXING AUTHORITY OR OF ANY PENDING BUT UNASSESSED TAX LIABILITY OF ANY LOAN PARTY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, OTHER THAN WITH RESPECT TO (A) AD VALOREM OR OTHER REAL PROPERTY TAXES NOT IN EXCESS OF $100,000 AS TO ANY SUCH PERSON AND (B) OTHER TAXES IN AN AGGREGATE AMOUNT AS TO ANY SUCH PERSON WHICH COULD NOT, IF AN ADVERSE DETERMINATION IS MADE WITH RESPECT TO SUCH TAXES, MATERIALLY AND ADVERSELY AFFECT SUCH PERSON, WHICH (AS TO EACH OF CLAUSES (A) AND (B) PRECEDING) ARE CURRENTLY BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS DILIGENTLY CONDUCTED BY OR ON BEHALF OF SUCH PERSON AND AS TO WHICH, IF REQUIRED BY GAAP, SUCH PERSON HAS ESTABLISHED ADEQUATE RESERVES.  NO TAX LIENS HAVE BEEN FILED AND, EXCEPT AS DISCLOSED ON SCHEDULE 7.11, NO CLAIMS ARE BEING ASSERTED AGAINST ANY LOAN PARTY OR ANY OF THEIR RESPECTIVE SUBSIDIARIES, WITH RESPECT TO ANY TAXES; PROVIDED, HOWEVER, THAT, WITH RESPECT TO THE NONMATERIAL SUBSIDIARIES, SUCH REPRESENTATION IS MADE ONLY TO THE BEST OF F.Y.I.'S KNOWLEDGE WITHOUT UNDERTAKING A CURRENT LIEN SEARCH.  EXCEPT AS DISCLOSED ON SCHEDULE 7.11 HERETO, AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, NONE OF THE U.S. INCOME TAX RETURNS OF THE LOAN PARTIES OR ANY OF THEIR RESPECTIVE SUBSIDIARIES ARE UNDER AUDIT.  THE CHARGES, ACCRUALS AND RESERVES ON THE BOOKS OF THE LOAN PARTIES IN RESPECT OF TAXES OR OTHER GOVERNMENTAL CHARGES ARE IN ACCORDANCE WITH GAAP.   SECTION 7.12           MARGIN SECURITIES.  NONE OF THE LOAN PARTIES OR ANY OF THEIR RESPECTIVE 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 (WITHIN THE MEANING OF REGULATIONS T, U OR X OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM), AND NO PART OF THE PROCEEDS OF ANY LOAN WILL BE USED TO PURCHASE OR CARRY ANY MARGIN STOCK OR TO EXTEND CREDIT TO OTHERS FOR THE PURPOSE OF PURCHASING OR CARRYING MARGIN STOCK.   SECTION 7.13           ERISA; PLANS.  NEITHER ANY LOAN PARTY NOR ANY ERISA AFFILIATE MAINTAINS OR CONTRIBUTES TO, OR HAS ANY OBLIGATION UNDER, ANY PENSION PLAN OTHER THAN THE PENSION PLANS IDENTIFIED ON SCHEDULE 7.13.  EXCEPT AS SPECIFIED ON SCHEDULE 7.13, EACH PLAN OF EACH LOAN PARTY IS IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE PROVISIONS OF ERISA AND THE CODE.  EXCEPT AS SPECIFIED ON SCHEDULE 7.13, NEITHER A REPORTABLE EVENT NOR A PROHIBITED TRANSACTION HAS OCCURRED WITHIN THE LAST 60 MONTHS WITH RESPECT TO ANY PLAN.  NO NOTICE OF INTENT TO TERMINATE A PENSION PLAN HAS BEEN FILED, NOR HAS ANY PENSION PLAN BEEN TERMINATED.  NO CIRCUMSTANCES EXIST WHICH CONSTITUTE GROUNDS ENTITLING THE PBGC TO INSTITUTE PROCEEDINGS TO TERMINATE, OR APPOINT A TRUSTEE TO ADMINISTER, A PENSION PLAN, NOR HAS THE PBGC INSTITUTED ANY SUCH PROCEEDINGS.  NEITHER ANY OF THE LOAN PARTIES NOR ANY ERISA AFFILIATE HAS COMPLETELY OR PARTIALLY WITHDRAWN FROM A MULTIEMPLOYER PLAN.  EACH LOAN PARTY AND EACH ERISA AFFILIATE HAVE MET THEIR MINIMUM FUNDING REQUIREMENTS UNDER ERISA AND THE CODE WITH RESPECT TO ALL OF THEIR PLANS SUBJECT TO SUCH REQUIREMENTS, AND, AS OF THE CLOSING DATE AND THE EFFECTIVE DATE EXCEPT AS SPECIFIED ON SCHEDULE 7.13, THE PRESENT VALUE OF ALL VESTED BENEFITS UNDER EACH FUNDED PLAN (EXCLUSIVE OF ANY MULTIEMPLOYER PLAN) DOES NOT AND WILL NOT EXCEED THE FAIR MARKET VALUE OF ALL SUCH PLAN ASSETS ALLOCABLE TO SUCH BENEFITS, AS DETERMINED ON THE MOST RECENT VALUATION DATE OF SUCH PLAN AND IN ACCORDANCE WITH ERISA.  NEITHER ANY OF THE LOAN PARTIES NOR ANY ERISA AFFILIATE HAS INCURRED ANY LIABILITY TO THE PBGC UNDER ERISA.  NO LITIGATION IS PENDING OR THREATENED CONCERNING OR INVOLVING ANY PLAN.  THERE ARE NO UNFUNDED OR UNRESERVED LIABILITIES (ON EITHER A GOING-CONCERN BASIS OR A WIND-UP BASIS) RELATING TO ANY PLAN THAT COULD, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT IF SUCH LOAN PARTY WERE REQUIRED TO FUND OR RESERVE SUCH LIABILITY IN FULL.  AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, NO FUNDING WAIVERS HAVE BEEN OR WILL HAVE BEEN REQUESTED OR GRANTED UNDER SECTION 412 OF THE CODE WITH RESPECT TO ANY PLAN.  NO UNFUNDED OR UNRESERVED LIABILITY FOR BENEFITS UNDER ANY PLAN OR PLANS OR (EXCLUSIVE OF ANY MULTIEMPLOYER PLANS) EXCEEDS $2,000,000 WITH RESPECT TO ANY SUCH PLAN OR $4,000,000 WITH RESPECT TO ALL SUCH PLANS IN THE AGGREGATE AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, ON EITHER A GOING-CONCERN BASIS OR A WIND-UP BASIS.   SECTION 7.14           DISCLOSURE.  NO WRITTEN STATEMENT, REPORT, REPRESENTATION OR WARRANTY MADE BY ANY LOAN PARTY IN ANY LOAN DOCUMENT OR FURNISHED TO THE ADMINISTRATIVE AGENT OR ANY LENDER BY ANY LOAN PARTY IN CONNECTION WITH THE LOAN DOCUMENTS OR THE MAKING OF THE LOANS OR ISSUANCE OF THE LETTERS OF CREDIT AS CONTEMPLATED HEREBY CONTAINS ANY UNTRUE STATEMENT (AT THE TIME SUCH STATEMENT WAS MADE) OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS HEREIN OR THEREIN NOT MISLEADING.  THERE IS NO FACT KNOWN TO F.Y.I. WHICH HAS HAD A MATERIAL ADVERSE EFFECT, AND THERE IS NO FACT KNOWN TO F.Y.I. WHICH MIGHT IN THE FUTURE HAVE A MATERIAL ADVERSE EFFECT, EXCEPT AS MAY HAVE BEEN DISCLOSED IN WRITING TO THE ADMINISTRATIVE AGENT AND THE LENDERS.   SECTION 7.15           CAPITALIZATION.   (A)           ON AND AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, THE AUTHORIZED CAPITAL STOCK, SHARE OWNERSHIP AND PAR VALUE PER SHARE OF EACH OF THE SUBSIDIARIES OF F.Y.I. ARE LISTED ON SCHEDULE 7.15.   (B)           ALL OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF F.Y.I. AND ITS SUBSIDIARIES HAS BEEN VALIDLY ISSUED AND IS FULLY PAID AND NONASSESSABLE.  EXCEPT AS DESCRIBED ON SCHEDULE 7.15, THERE ARE NO OUTSTANDING SUBSCRIPTIONS, OPTIONS, WARRANTS, CALLS OR RIGHTS (INCLUDING PREEMPTIVE RIGHTS) TO ACQUIRE, AND NO OUTSTANDING SECURITIES OR INSTRUMENTS CONVERTIBLE INTO, CAPITAL STOCK OF F.Y.I. OR ANY OF ITS SUBSIDIARIES.   (C)           ON AND AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, EACH MATERIAL SUBSIDIARY OF F.Y.I. IS IDENTIFIED AS SUCH ON SCHEDULE 7.15 AND, EXCEPT AS SO IDENTIFIED, F.Y.I. DOES NOT HAVE ANY MATERIAL SUBSIDIARIES ON AND AS OF SUCH DATE.   SECTION 7.16           AGREEMENTS.  NONE OF THE LOAN PARTIES IS A PARTY TO ANY INDENTURE, LOAN, CREDIT AGREEMENT, STOCK PURCHASE AGREEMENT OR ANY LEASE OR OTHER AGREEMENT, DOCUMENT OR INSTRUMENT, OR SUBJECT TO ANY CHARTER OR CORPORATE RESTRICTION, THAT COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.  NONE OF THE LOAN PARTIES IS IN DEFAULT IN ANY RESPECT IN THE PERFORMANCE, OBSERVANCE OR FULFILLMENT OF ANY OF THE OBLIGATIONS, COVENANTS OR CONDITIONS CONTAINED IN ANY AGREEMENT, DOCUMENT OR INSTRUMENT BINDING ON IT OR ITS PROPERTIES, EXCEPT FOR INSTANCES OF NONCOMPLIANCE THAT, INDIVIDUALLY OR IN THE AGGREGATE, COULD NOT HAVE A MATERIAL ADVERSE EFFECT.   SECTION 7.17           COMPLIANCE WITH LAWS.  NONE OF THE LOAN PARTIES IS IN VIOLATION OF ANY GOVERNMENTAL REQUIREMENT, EXCEPT FOR INSTANCES OF NON-COMPLIANCE THAT, INDIVIDUALLY OR IN THE AGGREGATE, COULD NOT HAVE A MATERIAL ADVERSE EFFECT.   SECTION 7.18           INVESTMENT COMPANY ACT.  NONE OF THE LOAN PARTIES IS AN "INVESTMENT COMPANY" WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.   SECTION 7.19           PUBLIC UTILITY HOLDING COMPANY ACT.  NONE OF THE LOAN PARTIES IS A "HOLDING COMPANY" OR A "SUBSIDIARY COMPANY" OF A "HOLDING COMPANY" OR AN "AFFILIATE" OF A "HOLDING COMPANY" OR A "PUBLIC UTILITY" WITHIN THE MEANING OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, AS AMENDED.   SECTION 7.20           ENVIRONMENTAL MATTERS.   (A)           EXCEPT FOR INSTANCES OF NONCOMPLIANCE WITH OR EXCEPTIONS TO ANY OF THE FOLLOWING REPRESENTATIONS AND WARRANTIES THAT COULD NOT HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT:   (I)            THE LOAN PARTIES AND ALL OF THEIR RESPECTIVE PROPERTIES AND OPERATIONS ARE IN FULL COMPLIANCE WITH ALL ENVIRONMENTAL LAWS IN ALL MATERIAL RESPECTS.  NEITHER F.Y.I. NOR ANY OF ITS SUBSIDIARIES IS AWARE OF, AND NEITHER F.Y.I. NOR ANY OF ITS SUBSIDIARIES HAS RECEIVED WRITTEN NOTICE OF, ANY PAST, PRESENT OR FUTURE CONDITIONS, EVENTS, ACTIVITIES, PRACTICES OR INCIDENTS WHICH MAY INTERFERE WITH OR PREVENT THE COMPLIANCE OR CONTINUED COMPLIANCE BY ANY LOAN PARTY WITH ALL ENVIRONMENTAL LAWS;   (II)           THE LOAN PARTIES HAVE OBTAINED ALL PERMITS THAT ARE REQUIRED UNDER APPLICABLE ENVIRONMENTAL LAWS, AND ALL SUCH PERMITS ARE IN GOOD STANDING AND ALL SUCH PERSONS ARE IN COMPLIANCE WITH ALL OF THE TERMS AND CONDITIONS THEREOF;   (III)          NO HAZARDOUS MATERIALS EXIST ON, ABOUT OR WITHIN OR HAVE BEEN (TO F.Y.I.'S OR ANY OF ITS SUBSIDIARIES' KNOWLEDGE) OR ARE BEING USED, GENERATED, STORED, TRANSPORTED, DISPOSED OF ON OR RELEASED FROM ANY OF THE PROPERTIES OF THE LOAN PARTIES EXCEPT IN COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS IN ALL MATERIAL RESPECTS.  THE USE WHICH THE LOAN PARTIES MAKE AND INTEND TO MAKE OF THEIR RESPECTIVE PROPERTIES WILL NOT RESULT IN THE USE, GENERATION, STORAGE, TRANSPORTATION, ACCUMULATION, DISPOSAL OR RELEASE OF ANY HAZARDOUS MATERIAL ON, IN OR FROM ANY OF THEIR PROPERTIES EXCEPT IN COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS;   (IV)          NEITHER THE LOAN PARTIES NOR ANY OF THEIR RESPECTIVE CURRENTLY OR PREVIOUSLY OWNED OR LEASED PROPERTIES OR OPERATIONS IS SUBJECT TO ANY OUTSTANDING OR, TO THE BEST OF F.Y.I.'S OR ANY OF ITS SUBSIDIARIES' KNOWLEDGE, THREATENED ORDER FROM OR AGREEMENT WITH ANY GOVERNMENTAL AUTHORITY OR OTHER PERSON OR SUBJECT TO ANY JUDICIAL OR ADMINISTRATIVE PROCEEDING WITH RESPECT TO (A) ANY FAILURE TO COMPLY WITH ENVIRONMENTAL LAWS, (B) ANY REMEDIAL ACTION, OR (C) ANY ENVIRONMENTAL LIABILITIES;   (V)           THERE ARE NO CONDITIONS OR CIRCUMSTANCES ASSOCIATED WITH THE CURRENTLY OR PREVIOUSLY OWNED OR LEASED PROPERTIES OR OPERATIONS OF THE LOAN PARTIES THAT COULD REASONABLY BE EXPECTED TO GIVE RISE TO ANY ENVIRONMENTAL LIABILITIES OR CLAIMS RESULTING IN ANY ENVIRONMENTAL LIABILITIES.  NONE OF THE LOAN PARTIES IS SUBJECT TO, OR HAS RECEIVED WRITTEN NOTICE OF ANY CLAIM FROM ANY PERSON ALLEGING THAT ANY OF THE LOAN PARTIES IS OR WILL BE SUBJECT TO, ANY ENVIRONMENTAL LIABILITIES;   (VI)          NONE OF THE PROPERTIES OF THE LOAN PARTIES IS A TREATMENT FACILITY (EXCEPT FOR THE RECYCLING OF HAZARDOUS MATERIALS GENERATED ON-SITE AND THE TREATMENT OF LIQUID WASTES SUBJECT TO THE CLEAN WATER ACT OR OTHER APPLICABLE ENVIRONMENTAL LAW) FOR TEMPORARY STORAGE OF HAZARDOUS MATERIALS GENERATED ON-SITE PRIOR TO THEIR DISPOSAL OFF-SITE) OR DISPOSAL FACILITY REQUIRING A PERMIT UNDER THE RESOURCE CONSERVATION AND RECOVERY ACT, 42 U.S.C. ' 6901 ET SEQ., REGULATIONS THEREUNDER OR ANY COMPARABLE PROVISION OF STATE LAW.  THE LOAN PARTIES AND THEIR SUBSIDIARIES ARE COMPLIANCE WITH ALL APPLICABLE FINANCIAL RESPONSIBILITY REQUIREMENTS OF ALL ENVIRONMENTAL LAWS; AND   (VII)         NONE OF THE LOAN PARTIES HAS FAILED TO FILE ANY NOTICE REQUIRED UNDER APPLICABLE ENVIRONMENTAL LAW REPORTING A RELEASE.   (B)           NO LIEN ARISING UNDER ANY ENVIRONMENTAL LAW HAS ATTACHED TO ANY PROPERTY OR REVENUES OF ANY LOAN PARTY.   SECTION 7.21           LABOR DISPUTES AND ACTS OF GOD.  NEITHER THE BUSINESS NOR THE PROPERTIES OF ANY LOAN PARTY ARE AFFECTED BY ANY FIRE, EXPLOSION, ACCIDENT, STRIKE, LOCKOUT OR OTHER LABOR DISPUTE, DROUGHT, STORM, HAIL, EARTHQUAKE, EMBARGO, ACT OF GOD OR OF THE PUBLIC ENEMY OR OTHER CASUALTY (WHETHER OR NOT COVERED BY INSURANCE) THAT IS HAVING OR COULD HAVE A MATERIAL ADVERSE EFFECT.   SECTION 7.22           MATERIAL CONTRACTS.  ATTACHED HERETO AS SCHEDULE 7.22 IS A COMPLETE LIST, AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, OF ALL MATERIAL CONTRACTS OF THE LOAN PARTIES, OTHER THAN THE LOAN DOCUMENTS.  ALL OF THE MATERIAL CONTRACTS ARE IN FULL FORCE AND EFFECT AND NONE OF THE LOAN PARTIES IS IN DEFAULT UNDER ANY MATERIAL CONTRACT AND, TO THE BEST OF F.Y.I.'S OR ANY OF ITS SUBSIDIARIES'  KNOWLEDGE AFTER DUE INQUIRY, NO OTHER PERSON THAT IS A PARTY THERETO IS IN DEFAULT UNDER ANY OF THE MATERIAL CONTRACTS.  NONE OF THE MATERIAL CONTRACTS PROHIBIT THE TRANSACTIONS CONTEMPLATED UNDER THE LOAN DOCUMENTS.  ALL OF THE MATERIAL CONTRACTS HAVE BEEN TRANSFERRED OR ASSIGNED TO, OR ARE CURRENTLY IN THE NAME OF, A LOAN PARTY.  F.Y.I. HAS DELIVERED TO THE ADMINISTRATIVE AGENT A COMPLETE AND CURRENT COPY OF EACH MATERIAL CONTRACT (OTHER THAN PURCHASE ORDERS ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS) EXISTING ON THE CLOSING DATE AND, WITH RESPECT TO EACH MATERIAL CONTRACT (OTHER THAN PURCHASE ORDERS ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS) ENTERED INTO AFTER THE CLOSING DATE, WILL DELIVER TO THE ADMINISTRATIVE AGENT A COMPLETE AND CURRENT COPY OF SUCH MATERIAL CONTRACT IN A REASONABLY PROMPT FASHION AFTER THE CREATION THEREOF.   SECTION 7.23           BANK ACCOUNTS.  AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, SCHEDULE 7.23 SETS FORTH THE ACCOUNT NUMBERS AND LOCATION OF ALL PRIMARY BANK ACCOUNTS OF F.Y.I.   SECTION 7.24           OUTSTANDING SECURITIES.  AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, ALL OUTSTANDING SECURITIES (AS DEFINED IN THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SUCCESSOR THERETO, AND THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION THEREUNDER) OF THE LOAN PARTIES HAVE BEEN OFFERED, ISSUED, SOLD AND DELIVERED IN COMPLIANCE WITH ALL APPLICABLE GOVERNMENTAL REQUIREMENTS.  AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, F.Y.I. HAS FILED ALL REGISTRATION STATEMENTS, REPORTS AND OTHER DOCUMENTS REQUIRED TO BE FILED BY IT WITH THE SECURITIES AND EXCHANGE COMMISSION AND ALL SUCH REGISTRATION STATEMENTS, REPORTS AND OTHER DOCUMENTS ARE TRUE AND CORRECT IN ALL MATERIAL RESPECTS.   SECTION 7.25           SOLVENCY.  F.Y.I. AND EACH OF ITS SUBSIDIARIES, AS A SEPARATE ENTITY, IS SOLVENT AS OF THE CLOSING DATE AND THE EFFECTIVE DATE.   SECTION 7.26           EMPLOYEE MATTERS.  EXCEPT AS SET FORTH ON SCHEDULE 7.26, AS OF THE CLOSING DATE AND THE EFFECTIVE DATE (A) NONE OF THE LOAN PARTIES OR ANY OF ITS RESPECTIVE SUBSIDIARIES, OR ANY OF ITS RESPECTIVE EMPLOYEES, IS SUBJECT TO ANY COLLECTIVE BARGAINING AGREEMENT, AND (B) NO PETITION FOR CERTIFICATION OR UNION ELECTION IS PENDING WITH RESPECT TO THE EMPLOYEES OF ANY LOAN PARTY OR ANY OF ITS RESPECTIVE SUBSIDIARIES, AND NO UNION OR COLLECTIVE BARGAINING UNIT HAS SOUGHT SUCH CERTIFICATION OR RECOGNITION WITH RESPECT TO THE EMPLOYEES OF ANY OF THE LOAN PARTIES OR ANY OF ITS RESPECTIVE SUBSIDIARIES.  THERE ARE NO STRIKES, SLOWDOWNS, WORK STOPPAGES OR CONTROVERSIES PENDING OR, TO THE BEST KNOWLEDGE OF F.Y.I. OR ANY OF ITS SUBSIDIARIES AFTER DUE INQUIRY, THREATENED AGAINST, ANY OF THE LOAN PARTIES OR ANY OF ITS RESPECTIVE SUBSIDIARIES, AND ITS RESPECTIVE EMPLOYEES, WHICH COULD HAVE, EITHER INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.  EXCEPT AS SET FORTH ON SCHEDULE 7.26, AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, NONE OF THE LOAN PARTIES OR ANY OF ITS RESPECTIVE SUBSIDIARIES IS SUBJECT TO AN EMPLOYMENT CONTRACT.   SECTION 7.27           INSURANCE.  SCHEDULE 7.27 SETS FORTH A SUMMARY DESCRIPTION OF ALL POLICIES OF INSURANCE THAT WILL BE IN EFFECT AS OF THE CLOSING DATE AND THE EFFECTIVE DATE FOR F.Y.I. AND ITS SUBSIDIARIES.  TO THE EXTENT SUCH POLICIES HAVE NOT BEEN REPLACED, NO NOTICE OF CANCELLATION HAS BEEN RECEIVED FOR SUCH POLICIES AND F.Y.I. AND ITS SUBSIDIARIES ARE IN COMPLIANCE WITH ALL OF THE TERMS AND CONDITIONS OF SUCH POLICIES.   SECTION 7.28           COMMON ENTERPRISE.  THE EXPERTISE AND EFFORTS OF F.Y.I. AND EACH OF ITS SUBSIDIARIES SUPPORT AND BENEFIT THE OTHER MEMBERS OF THEIR AFFILIATED CORPORATE GROUP.  F.Y.I. AND EACH SUBSIDIARY EXPECT TO DERIVE SUBSTANTIAL BENEFIT (AND F.Y.I. AND EACH SUBSIDIARY MAY REASONABLY BE EXPECTED TO DERIVE SUBSTANTIAL BENEFIT), DIRECTLY AND INDIRECTLY, FROM THE LOANS, LETTERS OF CREDIT AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, BOTH IN THEIR SEPARATE CAPACITIES AND AS A MEMBER OF AN AFFILIATED AND INTEGRATED CORPORATE GROUP.  F.Y.I. AND EACH SUBSIDIARY WILL RECEIVE REASONABLY EQUIVALENT VALUE IN EXCHANGE FOR THE COLLATERAL AND GUARANTY BEING PROVIDED BY IT PURSUANT TO ARTICLE 5 AS SECURITY FOR THE PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.   ARTICLE 8   AFFIRMATIVE COVENANTS   F.Y.I. covenants and agrees that, as long as the Obligations or any part thereof are outstanding or any Lender has any Commitment hereunder or any Letter of Credit remains outstanding, it will perform and observe, or cause to be performed and observed, the following covenants:   SECTION 8.1             REPORTING REQUIREMENTS.  F.Y.I. WILL FURNISH TO THE ADMINISTRATIVE AGENT (AND THE ADMINISTRATIVE AGENT SHALL DISTRIBUTE A COPY OF THE SAME TO EACH LENDER IN A REASONABLY PROMPT FASHION AFTER ITS RECEIPT THEREOF):   (A)           ANNUAL FINANCIAL STATEMENTS.  AS SOON AS AVAILABLE, AND IN ANY EVENT WITHIN 90 DAYS AFTER THE END OF EACH FISCAL YEAR OF F.Y.I., BEGINNING WITH THE FISCAL YEAR ENDING DECEMBER 31, 2000, (I) A COPY OF THE ANNUAL AUDIT REPORT OF F.Y.I. AND ITS CONSOLIDATED SUBSIDIARIES AS OF THE END OF AND FOR SUCH FISCAL YEAR THEN ENDED CONTAINING, ON A CONSOLIDATED AND (IF REQUESTED BY THE ADMINISTRATIVE AGENT) CONSOLIDATING BASIS, BALANCE SHEETS AND STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOW, IN EACH CASE SETTING FORTH IN COMPARATIVE FORM THE FIGURES FOR THE PRECEDING FISCAL YEAR, ALL IN REASONABLE DETAIL AND AUDITED AND CERTIFIED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF RECOGNIZED STANDING ACCEPTABLE TO THE ADMINISTRATIVE AGENT AND CONTAINING NO QUALIFICATION THERETO EXCEPT AS MAY BE REASONABLY ACCEPTABLE TO THE ADMINISTRATIVE AGENT, TO THE EFFECT THAT SUCH REPORT HAS BEEN PREPARED IN ACCORDANCE WITH GAAP, (II) A CERTIFICATE OF SUCH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO THE ADMINISTRATIVE AGENT (A) STATING THAT TO THEIR KNOWLEDGE NO DEFAULT HAS OCCURRED AND IS CONTINUING OR, IF IN THEIR OPINION A DEFAULT HAS OCCURRED AND IS CONTINUING, STATING THE NATURE THEREOF, AND (B) CONFIRMING THE CALCULATIONS SET FORTH IN THE OFFICER'S CERTIFICATE DELIVERED CONCURRENTLY THEREWITH, AND (III) IF REQUESTED BY THE ADMINISTRATIVE AGENT, UNAUDITED CONSOLIDATING BALANCE SHEETS AND STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOW, IN EACH CASE SETTING FORTH IN COMPARATIVE FORM THE FIGURES FOR THE PRECEDING FISCAL YEAR;   (B)           QUARTERLY FINANCIAL STATEMENTS.  AS SOON AS AVAILABLE, AND IN ANY EVENT WITHIN 45 DAYS AFTER THE END OF EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR OF F.Y.I., BEGINNING WITH THE FISCAL QUARTER ENDING MARCH 31, 2001, A COPY OF (I) AN UNAUDITED FINANCIAL REPORT OF F.Y.I. AND ITS CONSOLIDATED SUBSIDIARIES AS OF THE END OF SUCH FISCAL QUARTER AND FOR THE PORTION OF THE FISCAL YEAR THEN ENDED CONTAINING, ON A CONSOLIDATED BASIS, BALANCE SHEETS AND STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOW, IN EACH CASE SETTING FORTH IN COMPARATIVE FORM THE FIGURES FOR THE CORRESPONDING PERIOD OF THE PRECEDING FISCAL YEAR, ALL IN REASONABLE DETAIL CERTIFIED BY A RESPONSIBLE OFFICER OF F.Y.I. TO HAVE BEEN PREPARED IN ACCORDANCE WITH GAAP AND TO FAIRLY AND ACCURATELY PRESENT (SUBJECT TO YEAR-END AUDIT ADJUSTMENTS) THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF F.Y.I. AND ITS CONSOLIDATED SUBSIDIARIES, ON A CONSOLIDATED BASIS, AT THE DATE AND FOR THE PERIODS INDICATED THEREIN AND (II) MANAGEMENT'S FINANCIAL REPORTS COMPARING ACTUAL FINANCIAL RESULTS FOR THE PERIOD TO THE CURRENT BUDGET FOR THE PERIOD;   (C)           COMPLIANCE CERTIFICATE.  CONCURRENTLY WITH THE DELIVERY OF EACH OF THE FINANCIAL STATEMENTS REFERRED TO IN SECTIONS 8.1(A) AND 8.1(B)), A CERTIFICATE, SUBSTANTIALLY IN THE FORM OF EXHIBIT G  HERETO, OF A RESPONSIBLE OFFICER OF F.Y.I. (I) STATING THAT, TO THE BEST OF SUCH OFFICER'S KNOWLEDGE, NO DEFAULT HAS OCCURRED AND IS CONTINUING OR, IF A DEFAULT HAS OCCURRED AND IS CONTINUING, STATING THE NATURE THEREOF AND THE ACTION THAT HAS BEEN TAKEN AND IS PROPOSED TO BE TAKEN WITH RESPECT THERETO, AND (II) SHOWING (WITH RESPECT TO EACH CERTIFICATE DELIVERED CONCURRENTLY WITH THE DELIVERY OF EACH OF THE FINANCIAL STATEMENTS REFERRED TO IN SECTION 8.1(A) AND 8.1(B)) IN REASONABLE DETAIL THE CALCULATIONS DEMONSTRATING COMPLIANCE WITH SECTION 9.5(I) AND ARTICLE 10, (III) SUMMARIZING ALL MATERIAL INFORMATION REGARDING EACH ACQUISITION MADE DURING THE FISCAL QUARTER THEN MOST RECENTLY ENDED, WHICH INFORMATION SHALL INCLUDE THE NAMES OF THE ACQUIROR AND THE ENTITY WHOSE CAPITAL STOCK OR ASSETS WERE ACQUIRED, THE NATURE OF THE ASSETS OWNED BY THE ACQUIRED ENTITY OR ACQUIRED DIRECTLY (AS APPLICABLE), THE NATURE OF THE BUSINESS OF THE ACQUIRED ENTITY OR IN WHICH THE ASSETS ACQUIRED WERE AND WILL BE UTILIZED (AS APPLICABLE), THE AMOUNT OF THE PURCHASE PRICE AND ALL OTHER CONSIDERATION PAID AND PAYABLE IN CONNECTION WITH SUCH ACQUISITION AND THE FORM OF SUCH PURCHASE PRICE OR OTHER CONSIDERATION, THE REMAINING AMOUNT (IF ANY) IN EACH "BASKET" REFERRED TO IN THE DEFINITION OF THE TERM "PERMITTED ACQUISITION" AFTER GIVING EFFECT TO ALL OF SUCH ACQUISITIONS AND SUCH OTHER INFORMATION AS THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST, (IV) ATTACHING (UNLESS THE ADMINISTRATIVE AGENT HAS AGREED THAT THE SAME NEED NOT BE ATTACHED) THE MOST RECENT FINANCIAL STATEMENTS OF THE ENTITY WHOSE CAPITAL STOCK OR ASSETS WERE ACQUIRED THAT ARE AVAILABLE TO F.Y.I. AND (IF THE ADMINISTRATIVE AGENT SO REQUESTS) A COPY OF ALL PERMITTED ACQUISITION DOCUMENTS RELATING TO SUCH ACQUISITION REFERRED TO IN CLAUSE (III) PRECEDING, AND (V) CERTIFYING THAT EACH ACQUISITION REFERRED TO IN CLAUSE (III) PRECEDING IS A PERMITTED ACQUISITION (AND INCLUDING FINANCIAL DATA SUPPORTING SUCH CERTIFICATION IF REQUESTED BY THE ADMINISTRATIVE AGENT) AND THAT NO OTHER ACQUISITIONS WERE CONSUMMATED DURING THE FISCAL QUARTER THEN MOST RECENTLY ENDED;   (D)           BUDGET.  PROMPTLY UPON ANY REQUEST THEREFOR BY THE ADMINISTRATIVE AGENT,  A COPY OF THE BUDGET OF F.Y.I. AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS FOR EACH FISCAL YEAR (SEGREGATED BY ENTITY WITH RESPECT TO EACH ENTITY, IF ANY, TO BE ACQUIRED WHICH IS INCLUDED IN SUCH BUDGET AND SEGREGATED BY QUARTER OR MONTH AND SETTING FORTH ALL MATERIAL ASSUMPTIONS);   (E)           MANAGEMENT LETTERS.  PROMPTLY UPON ANY REQUEST THEREFOR BY THE ADMINISTRATIVE AGENT, A COPY OF ANY MANAGEMENT LETTER OR WRITTEN REPORT SUBMITTED TO ANY LOAN PARTY BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS WITH RESPECT TO THE BUSINESS, CONDITION (FINANCIAL OR OTHERWISE), OPERATIONS, PROSPECTS OR PROPERTIES OF ANY SUCH PERSON;   (F)            NOTICE OF LITIGATION.  PROMPTLY AFTER THE COMMENCEMENT THEREOF, NOTICE OF ALL ACTIONS, SUITS AND PROCEEDINGS BEFORE ANY GOVERNMENTAL AUTHORITY OR ARBITRATOR AFFECTING ANY LOAN PARTY WHICH, IF DETERMINED ADVERSELY TO ANY SUCH PERSON COULD HAVE A MATERIAL ADVERSE EFFECT;   (G)           NOTICE OF DEFAULT.  AS SOON AS POSSIBLE AND IN ANY EVENT IMMEDIATELY UPON F.Y.I.'S KNOWLEDGE OR THE KNOWLEDGE OF ANY SUBSIDIARY OF F.Y.I. OF THE OCCURRENCE OF ANY DEFAULT, A WRITTEN NOTICE SETTING FORTH THE DETAILS OF SUCH DEFAULT AND THE ACTION THAT F.Y.I. OR SUCH SUBSIDIARY HAS TAKEN AND PROPOSES TO TAKE WITH RESPECT THERETO, AND F.Y.I. WILL ALSO AT THAT TIME PROVIDE NOTICE OF SUCH DEFAULT TO EACH HOLDER OF SELLER SUBORDINATED DEBT;   (H)           ERISA REPORTS.  PROMPTLY AFTER THE FILING OR RECEIPT THEREOF, COPIES OF ALL REPORTS, INCLUDING ANNUAL REPORTS, AND NOTICES WHICH ANY LOAN PARTY OR ANY OF ITS ERISA AFFILIATES FILES WITH OR RECEIVES FROM THE PBGC OR THE U.S. DEPARTMENT OF LABOR UNDER ERISA; AND AS SOON AS POSSIBLE AND IN ANY EVENT WITHIN FIVE DAYS AFTER ANY SUCH PERSON KNOWS OR HAS REASON TO KNOW THAT ANY PENSION PLAN IS INSOLVENT, OR THAT ANY REPORTABLE EVENT OR PROHIBITED TRANSACTION HAS OCCURRED WITH RESPECT TO ANY PLAN OR THAT THE PBGC, ANY LOAN PARTY OR ANY ERISA AFFILIATE HAS INSTITUTED OR WILL INSTITUTE PROCEEDINGS UNDER ERISA TO TERMINATE OR WITHDRAW FROM OR REORGANIZE ANY PENSION PLAN, A CERTIFICATE OF A RESPONSIBLE OFFICER OF SUCH LOAN PARTY SETTING FORTH THE DETAILS AS TO SUCH INSOLVENCY, WITHDRAWAL, REPORTABLE EVENT, PROHIBITED TRANSACTION, TAX OR PENALTY OR TERMINATION AND THE ACTION THAT SUCH LOAN PARTY HAS TAKEN AND PROPOSES TO TAKE WITH RESPECT THERETO;   (I)            REPORTS TO OTHER CREDITORS.  PROMPTLY AFTER THE FURNISHING THEREOF, A COPY OF ANY STATEMENT OR REPORT FURNISHED BY ANY LOAN PARTY TO ANY OTHER PARTY PURSUANT TO THE TERMS OF ANY INDENTURE, LOAN, STOCK PURCHASE OR CREDIT OR SIMILAR AGREEMENT AND NOT OTHERWISE REQUIRED TO BE FURNISHED TO THE ADMINISTRATIVE AGENT AND THE LENDERS PURSUANT TO ANY OTHER SUBSECTION OF THIS SECTION 8.1;   (J)            NOTICE OF MATERIAL ADVERSE EFFECT.  WITHIN FIVE BUSINESS DAYS AFTER F.Y.I. OR ANY SUBSIDIARY OF F.Y.I. BECOMES AWARE THEREOF, WRITTEN NOTICE OF ANY MATTER THAT COULD HAVE A MATERIAL ADVERSE EFFECT;   (K)           PROXY STATEMENTS, ETC.  PROMPTLY UPON ANY REQUEST THEREFOR BY THE ADMINISTRATIVE AGENT, ONE COPY OF EACH FINANCIAL STATEMENT, REPORT, NOTICE OR PROXY STATEMENT SENT BY ANY LOAN PARTY TO ITS STOCKHOLDERS GENERALLY AND ONE COPY OF EACH REGULAR, PERIODIC OR SPECIAL REPORT, REGISTRATION STATEMENT OR PROSPECTUS FILED BY ANY LOAN PARTY WITH ANY SECURITIES EXCHANGE OR THE SECURITIES AND EXCHANGE COMMISSION OR ANY SUCCESSOR AGENCY, AND OF ALL PRESS RELEASES AND OTHER STATEMENTS MADE BY ANY OF THE LOAN PARTIES TO THE PUBLIC CONTAINING MATERIAL DEVELOPMENTS IN ITS BUSINESS;   (L)            NOTICE OF NEW PROPERTIES AND SUBSIDIARIES.  IF ADDITIONAL SECURITY HAS BEEN GRANTED (AND NOT RELEASED) IN ACCORDANCE WITH THE TERMS OF SECTION 5.4, CONCURRENTLY WITH THE DELIVERY OF EACH OF THE FINANCIAL STATEMENTS REFERRED TO IN SECTIONS 8.1(A) AND 8.1(B), NOTICE OF (I) ANY REAL PROPERTY ACQUIRED OR ANY LEASE OF REAL PROPERTY WHICH MEETS THE CRITERIA SET FORTH IN SECTION 5.4 ENTERED INTO BY F.Y.I. OR ANY OF ITS SUBSIDIARIES AS LESSEE, (II) ANY ADDITIONAL PATENTS, COPYRIGHTS AND TRADEMARKS, AND ANY OTHER INTELLECTUAL PROPERTY OF WHICH THE ADMINISTRATIVE AGENT SHOULD BE AWARE IN ORDER TO ENSURE ITS LIEN THEREON, ACQUIRED BY F.Y.I. OR ANY OF ITS SUBSIDIARIES, AND (III) THE CREATION OR ACQUISITION OF ANY DIRECT OR INDIRECT SUBSIDIARY OF F.Y.I. AFTER THE CLOSING DATE AND SUBSEQUENT TO THE LAST DELIVERY OF SUCH INFORMATION;   (M)          APPRAISALS.  FROM TIME TO TIME IF THE ADMINISTRATIVE AGENT DETERMINES THAT SUCH APPRAISALS ARE REQUIRED TO COMPLY WITH APPLICABLE GOVERNMENTAL REQUIREMENTS OR TO SYNDICATE THE LOANS, APPRAISALS OF THE MORTGAGED PROPERTIES REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE ADMINISTRATIVE AGENT (SUCH APPRAISALS TO BE AT THE EXPENSE OF F.Y.I.);   (N)           INSURANCE.  WITHIN 30 DAYS AFTER ANY REQUEST THEREFOR BY THE ADMINISTRATIVE AGENT, A REPORT IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT SUMMARIZING ALL MATERIAL INSURANCE COVERAGE MAINTAINED BY F.Y.I. AND ITS SUBSIDIARIES AS OF THE DATE OF SUCH REPORT AND ALL MATERIAL INSURANCE COVERAGE PLANNED TO BE MAINTAINED BY SUCH PERSONS IN THE SUBSEQUENT FISCAL YEAR;   (O)           PLAN INFORMATION.  FROM TIME TO TIME, AS REASONABLY REQUESTED BY THE ADMINISTRATIVE AGENT OR ANY LENDER, SUCH BOOKS, RECORDS AND OTHER DOCUMENTS RELATING TO THE ANY PENSION PLAN AS THE ADMINISTRATIVE AGENT OR ANY LENDER SHALL SPECIFY; PRIOR TO ANY TERMINATION, PARTIAL TERMINATION OR MERGER OF A PENSION PLAN COVERING EMPLOYEES OF F.Y.I. OR ANY SUBSIDIARY OF F.Y.I. OR ANY ERISA AFFILIATE, OR A TRANSFER OF ASSETS OF A PENSION PLAN COVERING EMPLOYEES OF F.Y.I. OR ANY SUBSIDIARY OF F.Y.I. OR ANY ERISA AFFILIATE, WRITTEN NOTIFICATION THEREOF; PROMPTLY UPON F.Y.I.'S OR ANY F.Y.I. SUBSIDIARY'S RECEIPT THEREOF, A COPY OF ANY DETERMINATION LETTER OR ADVISORY OPINION REGARDING ANY PENSION PLAN RECEIVED FROM ANY GOVERNMENTAL AUTHORITY AND ANY AMENDMENT OR MODIFICATION THERETO AS MAY BE NECESSARY AS A CONDITION TO OBTAINING A FAVORABLE DETERMINATION LETTER OR ADVISORY OPINION; AND PROMPTLY UPON THE OCCURRENCE THEREOF, WRITTEN NOTIFICATION OF ANY ACTION REQUESTED BY ANY GOVERNMENTAL AUTHORITY TO BE TAKEN AS A CONDITION TO ANY SUCH DETERMINATION LETTER OR ADVISORY OPINION;   (P)           ENVIRONMENTAL ASSESSMENTS AND NOTICES.  PROMPTLY AFTER THE RECEIPT THEREOF, A COPY OF EACH ENVIRONMENTAL ASSESSMENT (INCLUDING ANY ANALYSIS RELATING THERETO) PREPARED WITH RESPECT TO ANY REAL PROPERTY OF ANY LOAN PARTY AND EACH NOTICE SENT BY ANY GOVERNMENTAL AUTHORITY RELATING TO ANY FAILURE OR ALLEGED FAILURE TO COMPLY WITH ANY ENVIRONMENTAL LAW OR ANY LIABILITY WITH RESPECT THERETO;   (Q)           GENERAL INFORMATION.  PROMPTLY, SUCH OTHER INFORMATION CONCERNING THE LOAN PARTIES AND THEIR RESPECTIVE SUBSIDIARIES AS THE ADMINISTRATIVE AGENT OR ANY LENDER MAY FROM TIME TO TIME REASONABLY REQUEST; AND   (R)            SOLVENCY CERTIFICATE.  AT THE TIME OF THE MAKING OF THE INITIAL LOAN OR THE ISSUANCE OF THE INITIAL LETTER OF CREDIT AND AT THE MAKING OF EACH LOAN THEREAFTER, A SOLVENCY CERTIFICATE.   SECTION 8.2             MAINTENANCE OF EXISTENCE, CONDUCT OF BUSINESS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO (EXCEPT AS MAY BE OTHERWISE PERMITTED BY SECTION 9.3), PRESERVE AND MAINTAIN ITS CORPORATE EXISTENCE AND ALL OF ITS MATERIAL LEASES, PRIVILEGES, LICENSES, PERMITS, FRANCHISES, QUALIFICATIONS, INTELLECTUAL PROPERTY, INTANGIBLE PROPERTY AND RIGHTS THAT ARE NECESSARY IN THE ORDINARY CONDUCT OF ITS BUSINESS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, CONDUCT ITS BUSINESS IN AN ORDERLY AND EFFICIENT MANNER IN ACCORDANCE WITH GOOD BUSINESS PRACTICES, IN EACH CASE IN ALL MATERIAL RESPECTS.   SECTION 8.3             MAINTENANCE OF PROPERTIES.  F.Y.I. WILL, AND WILL IN ALL MATERIAL RESPECTS CAUSE EACH OF ITS SUBSIDIARIES TO, MAINTAIN, KEEP AND PRESERVE ALL OF ITS PROPERTIES NECESSARY OR APPROPRIATE IN THE PROPER CONDUCT OF ITS BUSINESS IN GOOD REPAIR, WORKING ORDER AND CONDITION (ORDINARY WEAR AND TEAR EXCEPTED) AND MAKE ALL NECESSARY REPAIRS, RENEWALS, REPLACEMENTS, BETTERMENTS AND IMPROVEMENTS THEREOF.   SECTION 8.4             TAXES AND CLAIMS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, PAY OR DISCHARGE AT OR BEFORE MATURITY OR BEFORE BECOMING DELINQUENT (A) ALL TAXES, LEVIES, ASSESSMENTS AND GOVERNMENTAL CHARGES (OTHER THAN THOSE WHICH DO NOT, IN THE AGGREGATE, EXCEED $100,000 IN AMOUNT) IMPOSED ON IT OR ITS INCOME OR PROFITS OR ANY OF ITS PROPERTY AND (B) ALL LAWFUL CLAIMS FOR LABOR, MATERIAL AND SUPPLIES, WHICH, IF UNPAID, MIGHT BECOME A LIEN UPON ANY OF ITS PROPERTY; PROVIDED, HOWEVER, THAT NEITHER F.Y.I. NOR ANY OF ITS SUBSIDIARIES SHALL BE REQUIRED TO PAY OR DISCHARGE ANY TAX, LEVY, ASSESSMENT OR GOVERNMENTAL CHARGE OR CLAIM FOR LABOR, MATERIAL OR SUPPLIES WHOSE AMOUNT, APPLICABILITY OR VALIDITY IS BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS BEING DILIGENTLY PURSUED AND FOR WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED UNDER GAAP.   SECTION 8.5             INSURANCE.   (A)           F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, KEEP INSURED BY FINANCIALLY SOUND AND REPUTABLE INSURERS ALL PROPERTY OF A CHARACTER USUALLY INSURED BY RESPONSIBLE CORPORATIONS ENGAGED IN THE SAME OR A SIMILAR BUSINESS SIMILARLY SITUATED AGAINST LOSS OR DAMAGE OF THE KINDS AND IN THE AMOUNTS CUSTOMARILY INSURED AGAINST BY SUCH CORPORATIONS OR ENTITIES AND CARRY SUCH OTHER INSURANCE AS IS USUALLY CARRIED BY SUCH CORPORATIONS OR ENTITIES, PROVIDED THAT IN ANY EVENT F.Y.I. AND ITS SUBSIDIARIES (AS APPROPRIATE) WILL MAINTAIN:   (I)            PROPERTY INSURANCE. INSURANCE AGAINST LOSS OR DAMAGE COVERING SUBSTANTIALLY ALL OF THE TANGIBLE REAL AND PERSONAL PROPERTY AND IMPROVEMENTS OF F.Y.I. AND EACH OF ITS SUBSIDIARIES BY REASON OF ANY PERIL (AS DEFINED BELOW) IN SUCH AMOUNTS (SUBJECT TO ANY DEDUCTIBLES AS SHALL BE SATISFACTORY TO THE ADMINISTRATIVE AGENT) AS SHALL BE REASONABLE AND CUSTOMARY AND SUFFICIENT TO AVOID THE INSURED NAMED THEREIN FROM BECOMING A CO-INSURER OF ANY LOSS UNDER SUCH POLICY, BUT IN ANY EVENT IN SUCH AMOUNTS AS ARE REASONABLY AVAILABLE AS DETERMINED BY F.Y.I.'S INDEPENDENT INSURANCE BROKER REASONABLY ACCEPTABLE TO THE ADMINISTRATIVE AGENT.   (II)           AUTOMOBILE LIABILITY INSURANCE FOR BODILY INJURY AND PROPERTY DAMAGE.  INSURANCE IN RESPECT OF ALL VEHICLES (WHETHER OWNED, HIRED OR RENTED BY F.Y.I. OR ANY OF ITS SUBSIDIARIES) AT ANY TIME LOCATED AT, OR USED IN CONNECTION WITH, ITS PROPERTIES OR OPERATIONS AGAINST LIABILITIES FOR BODILY INJURY AND PROPERTY DAMAGE IN SUCH AMOUNTS AS ARE THEN CUSTOMARY FOR VEHICLES USED IN CONNECTION WITH SIMILAR PROPERTIES AND BUSINESSES, BUT IN ANY EVENT TO THE EXTENT REQUIRED BY APPLICABLE LAW.   (III)          COMPREHENSIVE GENERAL LIABILITY INSURANCE.  INSURANCE AGAINST CLAIMS FOR BODILY INJURY, DEATH OR PROPERTY DAMAGE OCCURRING ON, IN OR ABOUT THE PROPERTY (AND ADJOINING STREETS, SIDEWALKS AND WATERWAYS) OF F.Y.I. AND ITS SUBSIDIARIES, IN SUCH AMOUNTS AS ARE THEN CUSTOMARY FOR PROPERTY SIMILAR IN USE IN THE JURISDICTIONS WHERE SUCH PROPERTIES ARE LOCATED.   (IV)          WORKER'S COMPENSATION INSURANCE.  WORKER'S COMPENSATION INSURANCE (INCLUDING EMPLOYERS' LIABILITY INSURANCE) TO THE EXTENT REQUIRED BY APPLICABLE LAW, WHICH MAY BE SELF-INSURANCE TO THE EXTENT PERMITTED BY APPLICABLE LAW.   (V)           PRODUCT LIABILITY INSURANCE.  INSURANCE AGAINST CLAIMS FOR BODILY INJURY, DEATH OR PROPERTY DAMAGE RESULTING FROM THE USE OF PRODUCTS SOLD BY F.Y.I. OR ANY OF ITS SUBSIDIARIES TO THE EXTENT AND IN SUCH AMOUNTS AS THEN CUSTOMARILY MAINTAINED BY RESPONSIBLE PERSONS ENGAGED IN BUSINESSES SIMILAR TO THAT OF F.Y.I. AND/OR ANY OF ITS SUBSIDIARIES.   (VI)          BUSINESS INTERRUPTION INSURANCE.  INSURANCE AGAINST LOSS OF OPERATING INCOME EARNED FROM THE OPERATION OF THE PROPERTIES OF F.Y.I. AND ITS SUBSIDIARIES, BY REASON OF ANY PERIL (TO THE EXTENT REASONABLY AVAILABLE) AFFECTING THE OPERATION THEREOF, AND INSURANCE AGAINST ANY OTHER INSURABLE LOSS OF OPERATING INCOME BY REASON OF ANY BUSINESS INTERRUPTION AFFECTING F.Y.I. OR ANY OF ITS SUBSIDIARIES TO THE EXTENT COVERED BY STANDARD BUSINESS INTERRUPTION POLICIES IN THE APPLICABLE STATES.   Such insurance shall be written by financially responsible companies selected by F.Y.I. and having an A.M. Best Rating of "A-" or better and being in a financial size category of "VI" or larger, or by other companies reasonably acceptable to the Required Lenders.  No later than the date of the making of the initial Loan or the issuance of the initial Letter of Credit, each policy referred to in this Section 8.5 shall provide that it will not be canceled, amended or reduced except after not less than 30 days' prior written notice to the Administrative Agent and shall also provide that the interests of the Administrative Agent and the Lenders shall not be invalidated by any act or negligence of F.Y.I. or any of its Subsidiaries.  F.Y.I. will advise the Administrative Agent promptly of any policy cancellation, reduction or amendment.  For purposes hereof, the term "Peril" shall mean, collectively, fire, lightning, flood, windstorm, hail, explosion, riot and civil commotion, vandalism and malicious mischief, damage from aircraft, vehicles and smoke and other perils covered by the "all-risk" endorsement then in use in the jurisdictions where the Properties of F.Y.I. and its Subsidiaries are located.   (B)           IF A DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, F.Y.I. WILL CAUSE ALL PROCEEDS OF INSURANCE PAID ON ACCOUNT OF THE LOSS OF OR DAMAGE TO ANY PROPERTY OF F.Y.I. OR ANY OF ITS SUBSIDIARIES AND ALL AWARDS OF COMPENSATION FOR ANY PROPERTY OF F.Y.I. OR ANY OF ITS SUBSIDIARIES TAKEN BY CONDEMNATION OR EMINENT DOMAIN TO BE PAID DIRECTLY TO THE ADMINISTRATIVE AGENT TO BE APPLIED AGAINST OR HELD AS SECURITY FOR THE OBLIGATIONS, AT THE ELECTION OF THE ADMINISTRATIVE AGENT AND THE REQUIRED LENDERS.   SECTION 8.6             INSPECTION RIGHTS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, PERMIT REPRESENTATIVES AND AGENTS OF THE ADMINISTRATIVE AGENT AND EACH LENDER, DURING NORMAL BUSINESS HOURS AND UPON REASONABLE NOTICE TO F.Y.I., TO EXAMINE, COPY AND MAKE EXTRACTS FROM ITS BOOKS AND RECORDS, TO VISIT AND INSPECT ITS PROPERTIES AND TO DISCUSS ITS BUSINESS, OPERATIONS AND FINANCIAL CONDITION WITH ITS OFFICERS AND INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.  F.Y.I. WILL AUTHORIZE ITS ACCOUNTANTS IN WRITING (WITH A COPY TO THE ADMINISTRATIVE AGENT) TO COMPLY WITH THIS SECTION 8.6.  THE ADMINISTRATIVE AGENT OR ITS REPRESENTATIVES MAY, AT ANY TIME AND FROM TIME TO TIME AT F.Y.I.'S EXPENSE, CONDUCT FIELD EXAMS FOR SUCH PURPOSES AS THE ADMINISTRATIVE AGENT MAY REASONABLY REQUEST.   SECTION 8.7             KEEPING BOOKS AND RECORDS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, MAINTAIN APPROPRIATE BOOKS OF RECORD AND ACCOUNT IN ACCORDANCE WITH GAAP CONSISTENTLY APPLIED IN WHICH TRUE, FULL AND CORRECT ENTRIES WILL BE MADE OF ALL THEIR RESPECTIVE DEALINGS AND BUSINESS AFFAIRS.  IF ANY ACCOUNTING CHANGES FROM THE ACCOUNTING PRINCIPLES USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS REFERENCED IN SECTION 8.1 ARE HEREAFTER REQUIRED OR PERMITTED BY GAAP AND ARE ADOPTED BY ANY F.Y.I. OR ANY OF ITS SUBSIDIARIES, THE PROVISIONS OF SECTION 1.3(A) SHALL BE APPLICABLE THERETO; PROVIDED THAT, UNTIL ANY NECESSARY AMENDMENTS HAVE BEEN MADE, THE CERTIFICATE REQUIRED TO BE DELIVERED UNDER SECTION 8.1(C) HEREOF DEMONSTRATING COMPLIANCE WITH ARTICLE 10 SHALL INCLUDE CALCULATIONS SETTING FORTH THE ADJUSTMENTS FROM THE RELEVANT ITEMS AS SHOWN IN THE CURRENT FINANCIAL STATEMENTS BASED ON THE CHANGES TO GAAP TO THE CORRESPONDING ITEMS BASED ON GAAP AS USED IN THE FINANCIAL STATEMENTS REFERENCED IN SECTION 7.2(A), IN ORDER TO DEMONSTRATE HOW SUCH FINANCIAL COVENANT COMPLIANCE WAS DERIVED FROM THE CURRENT FINANCIAL STATEMENTS.   SECTION 8.8             COMPLIANCE WITH LAWS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, COMPLY WITH ALL APPLICABLE GOVERNMENTAL REQUIREMENTS, EXCEPT FOR INSTANCES OF NONCOMPLIANCE THAT COULD NOT HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.   SECTION 8.9             COMPLIANCE WITH AGREEMENTS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, COMPLY WITH ALL AGREEMENTS, CONTRACTS AND INSTRUMENTS BINDING ON IT OR AFFECTING ITS PROPERTIES OR BUSINESS, EXCEPT FOR INSTANCES OF NONCOMPLIANCE THAT COULD NOT HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.   SECTION 8.10           FURTHER ASSURANCES.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, EXECUTE AND DELIVER SUCH FURTHER AGREEMENTS, DOCUMENTS AND INSTRUMENTS AND TAKE SUCH FURTHER ACTION AS MAY BE REASONABLY REQUESTED BY THE ADMINISTRATIVE AGENT TO CARRY OUT THE PROVISIONS AND PURPOSES OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, TO EVIDENCE THE OBLIGATIONS AND TO CREATE, PRESERVE, MAINTAIN AND PERFECT THE LIENS OF THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF ITSELF AND THE LENDERS IN AND TO THE COLLATERAL AND THE REQUIRED PRIORITY OF SUCH LIENS.   SECTION 8.11           ERISA; PLANS.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS ERISA AFFILIATES TO, COMPLY WITH ALL MINIMUM FUNDING REQUIREMENTS AND ALL OTHER MATERIAL REQUIREMENTS OF ERISA OR OTHER COMPARABLE GOVERNMENTAL REQUIREMENT, IF APPLICABLE, SO AS NOT TO GIVE RISE TO ANY LIABILITY THEREUNDER.   SECTION 8.12           TRADE ACCOUNTS PAYABLE.  F.Y.I. WILL, AND WILL CAUSE EACH OF ITS SUBSIDIARIES TO, PAY ALL TRADE ACCOUNTS PAYABLE BEFORE THE SAME BECOME MORE THAN 90 DAYS PAST DUE, EXCEPT (A) TRADE ACCOUNTS PAYABLE CONTESTED IN GOOD FAITH OR (B) TRADE ACCOUNTS PAYABLE IN AN AGGREGATE AMOUNT NOT TO EXCEED AT ANY TIME OUTSTANDING $400,000 AND WITH RESPECT TO WHICH NO PROCEEDING TO ENFORCE COLLECTION HAS BEEN COMMENCED OR, TO THE KNOWLEDGE OF F.Y.I. OR ANY SUBSIDIARY OF F.Y.I., THREATENED.   SECTION 8.13           NO CONSOLIDATION.  F.Y.I. WILL, AND (EXCEPT WITH RESPECT TO CLAUSE (A) SUCCEEDING WHICH SHALL NOT BE APPLICABLE TO SUBSIDIARIES OF F.Y.I.) WILL CAUSE EACH OF ITS SUBSIDIARIES TO:   (A)           WITH RESPECT TO F.Y.I. ONLY, PROVIDE THAT, AT ALL TIMES, AT LEAST ONE (1) MEMBER OF ITS BOARD OF DIRECTORS OR AT LEAST ONE (1) OF ITS OFFICERS WILL BE A PERSON WHO IS NOT AN OFFICER, DIRECTOR OR EMPLOYEE OF ANY AFFILIATE OF F.Y.I. OR ANY OTHER SUBSIDIARY;   (B)           MAINTAIN CORPORATE RECORDS AND BOOKS OF ACCOUNT SEPARATE FROM THOSE OF ANY CORPORATION WHICH IS AN AFFILIATE OF F.Y.I. AND SEPARATE FROM THOSE OF ANY SUBSIDIARY OF F.Y.I.;   (C)           NOT COMMINGLE ITS FUNDS OR ASSETS WITH THOSE OF ANY CORPORATION WHICH IS AN AFFILIATE OF F.Y.I. OR WITH THOSE OF ANY SUBSIDIARY OF F.Y.I.; AND   (D)           PROVIDE THAT ITS BOARD OF DIRECTORS WILL HOLD ALL APPROPRIATE MEETINGS (OR, TO THE EXTENT ALLOWED BY APPLICABLE LAW, ACT BY WRITTEN CONSENT) TO AUTHORIZE AND APPROVE SUCH PERSON'S CORPORATE ACTIONS.   SECTION 8.14           INTEREST RATE PROTECTION.  F.Y.I. WILL, COMMENCING ON OR BEFORE THE 120TH DAY AFTER THE CLOSING DATE, MAINTAIN IN FULL FORCE AND EFFECT FOR A PERIOD OF TWO YEARS, ONE OR MORE INTEREST RATE PROTECTION AGREEMENTS, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT, THAT ENABLE F.Y.I. TO FIX OR PLACE A LIMIT UPON A RATE OF INTEREST WITH RESPECT TO AT LEAST AN AGGREGATE NOTIONAL AMOUNT OF THE LESSER OF $50,000,000 OR 100% OF THE FUNDED DEBT OF F.Y.I. AND ITS SUBSIDIARIES BEARING INTEREST AT A VARIABLE RATE.   ARTICLE 9   NEGATIVE COVENANTS   Each of F.Y.I. and each of its Subsidiaries jointly and severally covenants and agrees that, as long as the Obligations or any part thereof are outstanding or any Lender has any Commitment hereunder or any Letter of Credit remains outstanding, it will perform and observe, or cause to be performed and observed, the following covenants:   SECTION 9.1             DEBT.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, INCUR, CREATE, ASSUME OR PERMIT TO EXIST ANY DEBT, EXCEPT:   (A)           DEBT OF F.Y.I. AND ITS SUBSIDIARIES TO THE LENDERS PURSUANT TO THE LOAN DOCUMENTS;   (B)           EXISTING DEBT DESCRIBED ON SCHEDULE 7.10 HERETO AND RENEWALS, REPLACEMENTS (ON TERMS NO MORE ONEROUS TO THE BORROWER THAN THE EXISTING TERMS), AND EXTENSIONS OF SUCH DEBT WHICH DO NOT INCREASE THE OUTSTANDING PRINCIPAL AMOUNT OF, SUCH DEBT AND THE TERMS AND PROVISIONS OF WHICH ARE NOT MATERIALLY MORE ONEROUS THAN THE TERMS AND CONDITIONS OF SUCH DEBT ON THE CLOSING DATE;   (C)           PURCHASE MONEY DEBT (INCLUDING, WITHOUT LIMITATION, CAPITAL LEASE OBLIGATIONS) SECURED BY PURCHASE MONEY LIENS, WHICH DEBT AND LIENS ARE PERMITTED UNDER AND MEET ALL OF THE REQUIREMENTS OF CLAUSE (G) OF THE DEFINITION OF "PERMITTED LIENS" CONTAINED IN SECTION 1.1; PROVIDED, HOWEVER, THAT (I) THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF PURCHASE MONEY DEBT (INCLUDING, WITHOUT LIMITATION, CAPITAL LEASE OBLIGATIONS) PERMITTED BY THIS SECTION 9.1(C) PLUS (II) THE AGGREGATE, UNAMORTIZED SALES PRICE PAID TO F.Y.I. AND/OR ITS SUBSIDIARIES WITH RESPECT TO SALES OF PROPERTY IN CONNECTION WITH SALE AND LEASEBACK TRANSACTIONS SHALL NOT AT ANY TIME EXCEED $10,000,000;   (D)           SELLER SUBORDINATED DEBT AND OTHER DEBT THAT IS SUBORDINATED TO THE OBLIGATIONS PURSUANT TO DOCUMENTATION IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT ("OTHER SUBORDINATED DEBT"); PROVIDED, HOWEVER, THAT (I) THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF SELLER SUBORDINATED DEBT SHALL NOT AT ANY TIME EXCEED $10,000,000, (II) THE AGGREGATE PRINCIPAL AMOUNT OF OTHER SUBORDINATED DEBT SHALL NOT AT ANY TIME EXCEED $10,000,000, (III) ANY OTHER SUBORDINATED DEBT CREATED OR INCURRED SHALL BE UNSECURED AND SHALL NOT MATURE UNTIL AFTER THE MATURITY DATE, AND (IV) NO SELLER SUBORDINATED DEBT OR OTHER SUBORDINATED DEBT MAY BE CREATED OR INCURRED DURING THE CONTINUANCE OF ANY DEFAULT OR EVENT OF DEFAULT OR IF A DEFAULT OR EVENT OF DEFAULT WOULD RESULT FROM THE CREATION OR INCURRENCE OF SUCH DEBT;   (E)           INTERCOMPANY DEBT BETWEEN OR AMONG F.Y.I. AND ANY OF ITS WHOLLY-OWNED SUBSIDIARIES INCURRED IN THE ORDINARY COURSE OF BUSINESS, SUBJECT TO THE REQUIREMENT THAT ANY AND ALL OF THE DEBT PERMITTED PURSUANT TO THIS SECTION 9.1(E) SHALL BE UNSECURED, SHALL BE EVIDENCED BY INSTRUMENTS SATISFACTORY TO THE ADMINISTRATIVE AGENT WHICH WILL BE PLEDGED TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS AND SHALL BE SUBORDINATED TO THE OBLIGATIONS PURSUANT TO A SUBORDINATION AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT (THE FOREGOING BEING REFERRED TO AS "INTERCOMPANY DEBT"); PROVIDED ALSO THAT THE AGGREGATE SUM OF (I) THE OUTSTANDING PRINCIPAL AMOUNT OF THE LOANS, ADVANCES AND OTHER EXTENSIONS OF CREDIT MADE TO FOREIGN SUBSIDIARIES BY F.Y.I. AND ITS DOMESTIC SUBSIDIARIES PLUS (II) THE INVESTMENTS BY F.Y.I. IN ANY FOREIGN SUBSIDIARY (COLLECTIVELY, THE "FOREIGN DEBT AND INVESTMENT") SHALL NOT AT ANY TIME EXCEED AN AMOUNT EQUAL TO THE PRODUCT OF THE BOOK VALUE OF THE TOTAL ASSETS OF F.Y.I. AND ITS SUBSIDIARIES, ON A CONSOLIDATED BASIS IN ACCORDANCE WITH GAAP, MULTIPLIED BY 5% (SUCH PRODUCT HEREIN THE "MAXIMUM FOREIGN AMOUNT").   (F)            OBLIGATIONS UNDER INTEREST RATE PROTECTION AGREEMENTS AND CURRENCY HEDGE AGREEMENTS, PROVIDED THAT EACH COUNTERPARTY SHALL BE BANK OF AMERICA OR ANOTHER COUNTERPARTY RATED IN ONE OF THE THREE HIGHEST RATING CATEGORIES OF STANDARD AND POORS CORPORATION OR MOODY'S INVESTORS SERVICE, INC., AND PROVIDED THAT THE MAXIMUM AMOUNT FOR WHICH INTEREST MAY BE FIXED OR CAPPED UNDER ALL SUCH INTEREST RATE PROTECTION AGREEMENTS MAY NOT EXCEED ONE HUNDRED PERCENT (100%) OF THE DEBT OF F.Y.I. AND ITS SUBSIDIARIES, AND PROVIDED FURTHER, HOWEVER, THAT THE MAXIMUM AMOUNT OF CURRENCY FOR WHICH RISK MAY BE HEDGED UNDER A CURRENCY HEDGE AGREEMENT MAY NOT EXCEED ONE HUNDRED PERCENT (100%) OF THE FOREIGN CURRENCY AT RISK IN THE TRANSACTIONS IN WHICH F.Y.I. AND ITS SUBSIDIARIES ARE ENGAGED;   (G)           LIABILITIES OF F.Y.I. OR ANY F.Y.I. SUBSIDIARY IN RESPECT OF UNFUNDED VESTED BENEFITS UNDER ANY PLAN IF AND TO THE EXTENT THAT THE EXISTENCE OF SUCH LIABILITIES WILL NOT CONSTITUTE, CAUSE OR RESULT IN A DEFAULT; AND   (H)           UP TO $27,500,000 OF ADDITIONAL OBLIGATIONS UNDER THIS AGREEMENT (SECURED BY THE COLLATERAL) IN THE EVENT THAT F.Y.I. IS ABLE TO IDENTIFY EXISTING OR ADDITIONAL LENDERS WILLING TO COMMIT TO ADVANCE SUCH ADDITIONAL AMOUNT, PROVIDED THAT (I) IF F.Y.I. IDENTIFIES ADDITIONAL LENDERS WILLING TO COMMIT SUCH ADDITIONAL AMOUNT, F.Y.I. SHALL GIVE THE EXISTING LENDERS NOTICE OF ITS INTENT TO AMEND THIS AGREEMENT TO INCLUDE SUCH ADDITIONAL LENDERS AND THE EXISTING LENDERS SHALL HAVE A 30 DAY PERIOD AFTER THE RECEIPT OF SUCH NOTICE TO INCREASE THEIR COMMITMENTS HEREUNDER PRIOR TO ANY SUCH AMENDMENT, (II) AS OF THE CLOSING DATE AND THE EFFECTIVE DATE, NONE OF THE LENDERS PARTY HERETO HAVE AGREED TO COMMIT TO ADVANCE ANY SUCH ADDITIONAL AMOUNT, (III) THE WEIGHTED AVERAGE LIFE TO MATURITY AND MAXIMUM CONTRACTUAL INTEREST RATE OF SUCH ADDITIONAL OBLIGATIONS SHALL NOT EXCEED (OR, IN THE CASE OF MATURITY, BE MATERIALLY LESS THAN) THOSE OF THE CURRENT OBLIGATIONS, (IV) NO CHANGES TO THE COVENANTS CONTAINED HEREIN WILL BE MADE WITHOUT THE CONSENT OF REQUIRED LENDERS, (V) NO DEFAULT OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, AND (VI) SUCH ADDITIONAL COMMITMENTS AND OBLIGATIONS MUST BE EVIDENCED BY AN AMENDMENT TO THIS AGREEMENT IN FORM AND SUBSTANCE SATISFACTORY TO THE ADMINISTRATIVE AGENT (WITHOUT FURTHER APPROVAL BY OR EXECUTION OF SUCH AMENDMENT BY THE LENDERS (OTHER THAN THE EXISTING OR NEW LENDERS PROVIDING SUCH INCREASED OR NEW COMMITMENTS) BEING REQUIRED);   provided, however, that, notwithstanding the foregoing, the aggregate outstanding principal amount of Debt of F.Y.I. and the Subsidiaries of F.Y.I., exclusive of Debt referred to in clauses (a) and (h) preceding, shall not at any time exceed $25,000,000.   SECTION 9.2             LIMITATION ON LIENS.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, INCUR, CREATE, ASSUME OR PERMIT TO EXIST ANY LIEN UPON ANY OF ITS PROPERTY OR REVENUES, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, EXCEPT PERMITTED LIENS.   SECTION 9.3             MERGERS, ETC. F.Y.I. WILL NOT, AND WILL NOT PERMIT ITS SUBSIDIARIES TO, (A) BECOME A PARTY TO A MERGER OR CONSOLIDATION, (B) WIND-UP, DISSOLVE OR LIQUIDATE ITSELF, OR (C) PURCHASE OR ACQUIRE ALL OR A MATERIAL OR SUBSTANTIAL PART OF THE BUSINESS OR PROPERTIES OF ANY PERSON; PROVIDED, HOWEVER, THAT (I) PERMITTED ACQUISITIONS (BUT NO OTHER ACQUISITIONS) SHALL BE PERMITTED, AND (II)  ANY SUBSIDIARY OF F.Y.I. THAT IS NOT A FOREIGN SUBSIDIARY MAY MERGE WITH AND INTO F.Y.I. IF F.Y.I. IS THE ENTITY SURVIVING SUCH MERGER AND ANY SUBSIDIARY OF F.Y.I. THAT IS NOT A FOREIGN SUBSIDIARY MAY MERGE WITH AND INTO ANY WHOLLY-OWNED SUBSIDIARY OF F.Y.I. THAT IS NOT A FOREIGN SUBSIDIARY IF SUCH WHOLLY-OWNED SUBSIDIARY IS THE ENTITY SURVIVING SUCH MERGER AND NO CONSIDERATION IS GIVEN BY THE SURVIVING ENTITY IN SUCH MERGER OTHER THAN CAPITAL STOCK OF THE SURVIVING ENTITY AND SUCH CAPITAL STOCK IS PLEDGED TO THE ADMINISTRATIVE AGENT, ON BEHALF OF THE ADMINISTRATIVE AGENT AND THE LENDERS, AS SECURITY FOR THE OBLIGATIONS PURSUANT TO SECTION 9.6. THE SURVIVING ENTITY IN ANY SUCH MERGER SHALL RATIFY THE SECURITY DOCUMENTS AND OTHER OBLIGATIONS OF THE NON-SURVIVING ENTITY UNDER THE LOAN DOCUMENTS.   SECTION 9.4             RESTRICTED PAYMENTS.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, MAKE ANY RESTRICTED PAYMENTS, EXCEPT:   (A)           SUBSIDIARIES OF F.Y.I. MAY DECLARE AND PAY DIVIDENDS TO F.Y.I.;   (B)           THE SUBSIDIARIES OF F.Y.I. MAY MAKE TAX PAYMENTS TO F.Y.I. IF AND TO THE EXTENT THAT ALL SUCH PAYMENTS ARE PROMPTLY PAID BY F.Y.I. TO THE APPROPRIATE GOVERNMENTAL AUTHORITY TO WHOM SUCH PAYMENTS ARE OWED; PROVIDED THAT IN NO EVENT SHALL SUCH PAYMENTS BE GREATER THAN THE AMOUNTS ACTUALLY PAID BY F.Y.I. IN RESPECT OF SUCH TAXES;   (C)           TO THE EXTENT REQUIRED BY THE TERMS OF ANY EMPLOYMENT AGREEMENT, PURCHASES BY F.Y.I. OF SHARES OF F.Y.I. COMMON STOCK FROM EMPLOYEES OF F.Y.I. OR ITS SUBSIDIARIES UPON THE TERMINATION OF THE EMPLOYMENT OF SUCH EMPLOYEES, PROVIDED THAT THE AMOUNT PAID THEREFOR SHALL NOT EXCEED THE FAIR MARKET VALUE OF SUCH SHARES TO BE PURCHASED AND SHALL NOT EXCEED $250,000 IN THE AGGREGATE DURING ANY FISCAL YEAR OR A CUMULATIVE TOTAL OF $350,000 IN THE AGGREGATE DURING THE TERM OF THIS AGREEMENT AND F.Y.I. SHALL GRANT TO THE ADMINISTRATIVE AGENT, FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS, A LIEN ON ALL OF SUCH SHARES PURCHASED BY F.Y.I. AS SECURITY FOR THE OBLIGATIONS PURSUANT TO A PLEDGE AGREEMENT IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT;   (D)           F.Y.I. MAY MAKE PERMITTED SHARE REPURCHASES; AND   (E)           TO THE EXTENT PERMITTED UNDER SECTIONS 9.5(G) AND 9.5(H);   provided, however, that no Restricted Payments may be made pursuant to clauses (a), (b), (c), (d) or (e) preceding if a Default exists at the time of such Restricted Payment or would result therefrom.   SECTION 9.5             INVESTMENTS.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, MAKE OR PERMIT TO REMAIN OUTSTANDING ANY ADVANCE, LOAN, EXTENSION OF CREDIT OR CAPITAL CONTRIBUTION TO OR INVESTMENT IN ANY PERSON, OR PURCHASE OR OWN ANY STOCK, BONDS, NOTES, DEBENTURES OR OTHER SECURITIES OF ANY PERSON, OR BE OR BECOME A JOINT VENTURER WITH OR PARTNER OF ANY PERSON (ALL SUCH TRANSACTIONS BEING HEREIN CALLED "INVESTMENTS"), EXCEPT:   (A)           INVESTMENTS IN OBLIGATIONS OR SECURITIES RECEIVED IN SETTLEMENT OF DEBTS (CREATED IN THE ORDINARY COURSE OF BUSINESS) OWING TO F.Y.I. OR ANY OF ITS SUBSIDIARIES;   (B)           EXISTING INVESTMENTS IDENTIFIED ON SCHEDULE 9.5 HERETO;   (C)           INVESTMENTS IN SECURITIES ISSUED OR GUARANTEED BY THE U.S. OR ANY AGENCY THEREOF WITH MATURITIES OF ONE YEAR OR LESS FROM THE DATE OF ACQUISITION;   (D)           INVESTMENTS IN CERTIFICATES OF DEPOSIT AND EURODOLLAR TIME DEPOSITS WITH MATURITIES OF SIX MONTHS OR LESS FROM THE DATE OF ACQUISITION, BANKERS' ACCEPTANCES WITH MATURITIES NOT EXCEEDING SIX MONTHS AND OVERNIGHT BANK DEPOSITS, IN EACH CASE WITH ANY LENDER OR WITH ANY DOMESTIC COMMERCIAL BANK HAVING CAPITAL AND SURPLUS IN EXCESS OF $500,000,000;   (E)           INVESTMENTS IN REPURCHASE OBLIGATIONS WITH A TERM OF NOT MORE THAN SEVEN DAYS FOR SECURITIES OF THE TYPES DESCRIBED IN CLAUSE (C) PRECEDING WITH ANY LENDER OR WITH ANY DOMESTIC COMMERCIAL BANK HAVING CAPITAL AND SURPLUS IN EXCESS OF $500,000,000;   (F)            INVESTMENTS IN COMMERCIAL PAPER OF A DOMESTIC ISSUER RATED A-1 OR BETTER OR P-1 OR BETTER BY STANDARD & POOR'S CORPORATION OR MOODY'S INVESTORS SERVICES, INC., RESPECTIVELY, MATURING NOT MORE THAN SIX MONTHS FROM THE DATE OF ACQUISITION, INCLUDING, WITHOUT LIMITATION, THE DREYFUS CASH MANAGEMENT PLUS FUND OR SIMILAR FUNDS USED TO FACILITATE EFFICIENT SHORT-TERM CASH MANAGEMENT;   (G)           (I) INVESTMENTS BY F.Y.I. AND ITS SUBSIDIARIES IN ITS SUBSIDIARIES EXISTING ON THE CLOSING DATE, (II) ANY INVESTMENTS OF F.Y.I. IN ITS SUBSIDIARIES WHICH REPRESENT AMOUNTS INVESTED IN SUCH SUBSIDIARY TO ENABLE SUCH SUBSIDIARY (A) TO PAY ALL OR A PORTION OF THE PURCHASE CONSIDERATION FOR A PERMITTED ACQUISITION, (B) TO MAKE PERMITTED CAPITAL EXPENDITURES, (C) TO RETIRE ANY EXISTING DEBT, OR (D) TO RETIRE ANY DEBT ASSUMED IN CONNECTION WITH A PERMITTED ACQUISITION, AND (III) INVESTMENTS BY F.Y.I. IN WHOLLY-OWNED SUBSIDIARIES OF F.Y.I.; PROVIDED, THAT THE FOREIGN DEBT AND INVESTMENTS SHALL NOT AT ANY TIME EXCEED AN AMOUNT EQUAL TO THE MAXIMUM FOREIGN AMOUNT.   (H)           INTERCOMPANY DEBT PERMITTED PURSUANT TO SECTION 9.1(E);   (I)            UP TO $10,000,000 IN INVESTMENTS MADE BY F.Y.I., AND OWNED BY F.Y.I. AND NOT ANY SUBSIDIARY OF F.Y.I., IN PUBLICLY TRADED EQUITY SECURITIES OF A PERSON WHOSE MATERIAL BUSINESS AND PROPERTIES ARE ALL LOCATED IN THE U.S. OR CANADA AND WHO IS ENGAGED IN A BUSINESS SIMILAR OR COMPLEMENTARY TO THE BUSINESS OF F.Y.I. OR A SUBSIDIARY OF F.Y.I. AND WHICH HAS GENERATED POSITIVE EBITDA DURING THE TWELVE-MONTH PERIOD PRECEDING THE PURCHASE OF SUCH SECURITIES SO LONG AS THE AGGREGATE OF SUCH EQUITY SECURITIES OWNED BY F.Y.I. DOES NOT AT ANY TIME EXCEED (A) 5% OF THE TOTAL ASSETS OF F.Y.I. AND ITS CONSOLIDATED SUBSIDIARIES AS DETERMINED IN ACCORDANCE WITH GAAP;   (J)            INVESTMENTS WHICH CONSTITUTE PERMITTED ACQUISITIONS; AND   (K)           INVESTMENTS MADE IN THE ORDINARY COURSE OF BUSINESS BY MMS SECURITIES, INC.;   provided, however, that no Investments may be made by F.Y.I. or any of its Subsidiaries pursuant to clause (g) or (h) preceding if a Default exists at the time of such Investment or would result therefrom.   SECTION 9.6             LIMITATION ON ISSUANCE OF CAPITAL STOCK.  F.Y.I. WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, AT ANY TIME ISSUE, SELL, ASSIGN OR OTHERWISE DISPOSE OF (A) ANY OF ITS CAPITAL STOCK, (B) ANY SECURITIES EXCHANGEABLE FOR OR CONVERTIBLE INTO OR CARRYING ANY RIGHTS TO ACQUIRE ANY OF ITS CAPITAL STOCK, OR (C) ANY OPTION, WARRANT OR OTHER RIGHT TO ACQUIRE ANY OF ITS CAPITAL STOCK; PROVIDED, HOWEVER, THAT, IF AND TO THE EXTENT NOT OTHERWISE PROHIBITED BY THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS (I) A SUBSIDIARY OF F.Y.I. MAY ISSUE ADDITIONAL SHARES OF ITS CAPITAL STOCK TO F.Y.I. FOR FULL AND FAIR CONSIDERATION, AND (II) F.Y.I. MAY ENGAGE IN ANY MERGER PERMITTED UNDER CLAUSE (II) OF THE PROVISO TO SECTION 9.3; PROVIDED, FURTHER, HOWEVER, THAT ALL OF SUCH ADDITIONAL SHARES OF CAPITAL STOCK REFERRED TO IN CLAUSES (I) AND (II) PRECEDING AND ANY SHARES OF CAPITAL STOCK ISSUED IN ANY MERGER REFERRED TO IN CLAUSE (II) PRECEDING SHALL BE PLEDGED TO THE ADMINISTRATIVE AGENT, ON BEHALF OF THE ADMINISTRATIVE AGENT AND THE LENDERS, AS SECURITY FOR THE OBLIGATIONS PURSUANT TO A PLEDGE AGREEMENT IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT.   SECTION 9.7             TRANSACTIONS WITH AFFILIATES.  EXCEPT FOR (A) THE PAYMENT OF SALARIES, BONUS AND INCENTIVE COMPENSATION IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PRUDENT BUSINESS PRACTICES, AND (B) THE FURNISHING OF EMPLOYMENT BENEFITS IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PRUDENT BUSINESS PRACTICES, F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, ENTER INTO ANY TRANSACTION, INCLUDING, WITHOUT LIMITATION, THE PURCHASE, SALE OR EXCHANGE OF PROPERTY OR THE RENDERING OF ANY SERVICE, WITH ANY AFFILIATE, OFFICER OR DIRECTOR OF F.Y.I. OR SUCH SUBSIDIARY EXCEPT IN THE ORDINARY COURSE OF AND PURSUANT TO THE REASONABLE REQUIREMENTS OF F.Y.I.'S OR SUCH SUBSIDIARY'S BUSINESS AND UPON FAIR AND REASONABLE TERMS NO LESS FAVORABLE TO F.Y.I. OR SUCH SUBSIDIARY, RESPECTIVELY, THAN WOULD BE OBTAINED IN A COMPARABLE ARMS-LENGTH TRANSACTION WITH A PERSON NOT AN AFFILIATE, OFFICER OR DIRECTOR OF F.Y.I. OR SUCH SUBSIDIARY, RESPECTIVELY.   SECTION 9.8             DISPOSITION OF PROPERTY.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, SELL, LEASE, ASSIGN, TRANSFER OR OTHERWISE DISPOSE OF ANY OF ITS PROPERTY, EXCEPT:   (A)           DISPOSITIONS OF INVENTORY IN THE ORDINARY COURSE OF BUSINESS,   (B)           ASSET DISPOSITIONS BY F.Y.I. AND ITS SUBSIDIARIES TO PERSONS OTHER THAN F.Y.I. AND ITS SUBSIDIARIES IF EACH OF THE FOLLOWING CONDITIONS HAS BEEN SATISFIED: (I) THE NET PROCEEDS FROM ANY SINGLE ASSET DISPOSITION OR SERIES OF RELATED ASSET DISPOSITIONS IN ANY FISCAL YEAR OF F.Y.I. DO NOT EXCEED $250,000 AND THE CUMULATIVE NET PROCEEDS FROM ALL ASSET DISPOSITIONS DO NOT EXCEED $500,000, (II) THE CONSIDERATION RECEIVED BY F.Y.I. OR ITS SUBSIDIARIES IS AT LEAST EQUAL TO THE FAIR MARKET VALUE OF SUCH ASSETS, (III) THE SOLE CONSIDERATION RECEIVED IS CASH PAYABLE AT THE CLOSING, PROVIDED, HOWEVER, THAT UP TO A CUMULATIVE TOTAL OF $125,000 OF PROPERTY MAY BE DISPOSED OF BY F.Y.I. AND ITS SUBSIDIARIES ON A COMBINED BASIS ON TERMS WHICH DEFER PAYMENT OF A PORTION OF THE PURCHASE PRICE, (IV) NO DEFAULT EXISTS AT THE TIME OF OR WILL RESULT FROM SUCH ASSET DISPOSITION, AND (V) F.Y.I. MAKES, OR CAUSES THE APPROPRIATE SUBSIDIARY TO MAKE, ANY PAYMENT REQUIRED UNDER SECTION 2.7;   (C)           ASSET DISPOSITIONS BY F.Y.I. AND ITS SUBSIDIARIES TO F.Y.I. OR ANOTHER SUBSIDIARY IF EACH OF THE FOLLOWING CONDITIONS HAS BEEN SATISFIED: (I) THE AGGREGATE FAIR MARKET VALUE OF THE ASSETS SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED SHALL NOT EXCEED $250,000 IN AGGREGATE AMOUNT DURING ANY FISCAL YEAR, (II) THE ASSETS SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED SHALL, IF SUBJECT TO A FIRST PRIORITY LIEN IN FAVOR OF THE ADMINISTRATIVE AGENT AND THE LENDERS, CONTINUE TO BE SUBJECT TO A PERFECTED, FIRST PRIORITY LIEN (EXCEPT FOR PERMITTED LIENS, IF ANY, WHICH ARE EXPRESSLY PERMITTED BY THE LOAN DOCUMENTS TO HAVE PRIORITY OVER THE LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT) IN FAVOR OF THE ADMINISTRATIVE AGENT AND THE LENDERS, AND (III) NO DEFAULT EXISTS AT THE TIME OF OR WILL RESULT FROM SUCH ASSET DISPOSITION;   (D)           DISPOSITIONS OF PROPERTY NO LONGER USED OR USEFUL IN THE ORDINARY COURSE OF BUSINESS;   (E)           ASSET DISPOSITIONS THAT WERE CONTEMPLATED AND DISCLOSED TO THE LENDERS AT THE TIME OF ANY PERMITTED ACQUISITION IF THE ASSET DISPOSITION OCCURS, AND THE NET PROCEEDS THEREOF ARE APPLIED, AS REQUIRED OR PERMITTED BY SECTION 2.7;   (F)            ASSET DISPOSITIONS BY SUBSIDIARIES OF F.Y.I., AND ASSET DISPOSITIONS CONSISTING OF A SALE OF ALL OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF A SUBSIDIARY OF F.Y.I., IF THE AGGREGATE FAIR MARKET VALUE OF THE PROPERTY SOLD OR OTHERWISE TRANSFERRED IN CONNECTION WITH ALL OF SUCH ASSET DISPOSITIONS ON OR AFTER THE CLOSING DATE DOES NOT EXCEED TEN PERCENT OF THE NET BOOK VALUE OF THE TANGIBLE ASSETS OF F.Y.I. AND ITS SUBSIDIARIES AS OF THE DATE OF ANY SUCH ASSET DISPOSITION;   (G)           PERMITTED DISPOSITIONS; AND   (H)           TO THE EXTENT PERMITTED BY SECTION 9.9, SALE AND LEASEBACK TRANSACTIONS.   SECTION 9.9             SALE AND LEASEBACK.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, ENTER INTO ANY ARRANGEMENT WITH ANY PERSON PURSUANT TO WHICH IT LEASES FROM SUCH PERSON REAL OR PERSONAL PROPERTY THAT HAS BEEN OR IS TO BE SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, BY IT TO SUCH PERSON (WHICH ARRANGEMENT IS HEREINAFTER CALLED A "SALE AND LEASEBACK TRANSACTION"); PROVIDED, HOWEVER, THAT F.Y.I. AND ITS MATERIAL SUBSIDIARIES MAY ENTER INTO SALE AND LEASEBACK TRANSACTIONS WITH ONE ANOTHER; PROVIDED, FURTHER, HOWEVER, THAT SALE AND LEASEBACK TRANSACTIONS ARE PERMITTED IF AND TO THE EXTENT THAT, AFTER GIVING EFFECT THERETO, F.Y.I. AND ITS SUBSIDIARIES WOULD BE IN COMPLIANCE WITH THE PROVISO CONTAINED IN SECTION 9.1(C).   SECTION 9.10           LINES OF BUSINESS.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, ENGAGE IN ANY LINE OR LINES OF BUSINESS ACTIVITY OTHER THAN THE BUSINESSES IN WHICH THEY ARE ENGAGED ON THE CLOSING DATE AND LINES OF BUSINESS REASONABLY RELATED THERETO.  F.Y.I. WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE REQUIRED LENDERS, BECOME AN OPERATING COMPANY AND WILL NOT ENGAGE IN ANY BUSINESS ACTIVITY EXCEPT FOR BUSINESS ACTIVITIES RELATING TO ITS OWNERSHIP AND MANAGEMENT OF ITS SUBSIDIARIES SUBSTANTIALLY CONSISTENT WITH ITS CURRENT BUSINESS ACTIVITIES.  F.Y.I. SHALL NOT AND SHALL NOT PERMIT ANY OF ITS SUBSIDIARIES TO OWN PROPERTY OR CONDUCT ANY MATERIAL BUSINESS OPERATIONS OUTSIDE THE U.S., CANADA OR, TO THE EXTENT PERMITTED BY THE LAST PROVISO IN THE DEFINITION OF PERMITTED ACQUISITIONS, MEXICO AND THE CARIBBEAN (PROVIDED THAT DATA CENTER DEL NORTE, S.A. DE C.V. MAY OWN PROPERTY AND CONDUCT MATERIAL BUSINESS OPERATIONS IN MEXICO AND NET DATA SERVICES, LTD. MAY OWN PROPERTY AND CONDUCT MATERIAL BUSINESS OPERATIONS IN ST. VINCENT, THE GRENADINES).   SECTION 9.11           ENVIRONMENTAL PROTECTION.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, (A) USE (OR PERMIT ANY TENANT TO USE) ANY OF ITS PROPERTIES FOR THE HANDLING, PROCESSING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS MATERIAL EXCEPT IN COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS, (B) GENERATE ANY HAZARDOUS MATERIAL EXCEPT IN COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS, (C) CONDUCT ANY ACTIVITY THAT IS LIKELY TO CAUSE A RELEASE OR THREATENED RELEASE OF ANY HAZARDOUS MATERIAL IN VIOLATION OF ANY ENVIRONMENTAL LAW, OR (D) OTHERWISE CONDUCT ANY ACTIVITY OR USE ANY OF ITS PROPERTIES IN ANY MANNER THAT VIOLATES OR IS LIKELY TO VIOLATE ANY ENVIRONMENTAL LAW OR CREATE ANY ENVIRONMENTAL LIABILITIES FOR WHICH F.Y.I. OR ANY OF ITS SUBSIDIARIES WOULD BE RESPONSIBLE, EXCEPT FOR CIRCUMSTANCES OR EVENTS DESCRIBED IN CLAUSES (A) THROUGH (D) PRECEDING THAT COULD NOT HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT.   SECTION 9.12           INTERCOMPANY TRANSACTIONS.  EXCEPT AS MAY BE EXPRESSLY PERMITTED OR REQUIRED BY THE LOAN DOCUMENTS, F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, CREATE OR OTHERWISE CAUSE OR PERMIT TO EXIST OR BECOME EFFECTIVE ANY CONSENSUAL ENCUMBRANCE OR RESTRICTION OF ANY KIND ON THE ABILITY OF ANY SUBSIDIARY TO (A) PAY DIVIDENDS OR MAKE ANY OTHER DISTRIBUTION TO F.Y.I. OR ANY OF ITS SUBSIDIARIES IN RESPECT OF SUCH SUBSIDIARY'S CAPITAL STOCK OR WITH RESPECT TO ANY OTHER INTEREST OR PARTICIPATION IN, OR MEASURED BY, ITS PROFITS, (B) PAY ANY INDEBTEDNESS OWED TO F.Y.I. OR ANY OF ITS SUBSIDIARIES, (C) MAKE ANY LOAN OR ADVANCE TO F.Y.I. OR ANY OF ITS SUBSIDIARIES, OR (D) SELL, LEASE OR TRANSFER ANY OF ITS PROPERTY TO F.Y.I. OR ANY OF ITS SUBSIDIARIES.   SECTION 9.13           MANAGEMENT FEES.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, PAY ANY MANAGEMENT, CONSULTING OR SIMILAR FEES (EXCLUDING DIRECTORS' FEES) TO ANY AFFILIATE OF F.Y.I. OR TO ANY DIRECTOR, OFFICER OR EMPLOYEE OF F.Y.I. OR ANY AFFILIATE OF F.Y.I.; PROVIDED, HOWEVER, THAT ANY SUBSIDIARY OF F.Y.I. MAY PAY MANAGEMENT OR SIMILAR FEES TO F.Y.I. TO THE EXTENT THAT THE AMOUNT OF SUCH FEES PAID IN ANY YEAR DOES NOT EXCEED FIFTEEN PERCENT OF THE GROSS REVENUES OF THE PAYING SUBSIDIARY FOR THAT YEAR.   SECTION 9.14           MODIFICATION OF OTHER AGREEMENTS.  F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, CONSENT TO OR IMPLEMENT ANY TERMINATION, AMENDMENT, MODIFICATION, SUPPLEMENT OR WAIVER OF (A) THE F.Y.I. EQUITY DOCUMENTS, IF THE SAME COULD HAVE A MATERIAL ADVERSE EFFECT OR OTHERWISE COULD BE MATERIALLY ADVERSE TO THE ADMINISTRATIVE AGENT OR THE LENDERS, (B) THE CERTIFICATE OF INCORPORATION OR BYLAWS (OR ANALOGOUS CONSTITUTIONAL DOCUMENTS) OF F.Y.I. OR ANY OF ITS SUBSIDIARIES IF THE SAME COULD HAVE A MATERIAL ADVERSE EFFECT OR OTHERWISE COULD BE MATERIALLY ADVERSE TO THE ADMINISTRATIVE AGENT OR THE LENDERS, OR (C) ANY OTHER MATERIAL CONTRACT TO WHICH IT IS A PARTY OR ANY PERMIT WHICH IT POSSESSES IF THE SAME COULD HAVE A MATERIAL ADVERSE EFFECT; PROVIDED, HOWEVER, THAT F.Y.I. AND ITS SUBSIDIARIES MAY AMEND OR MODIFY THE AGREEMENTS, DOCUMENTS AND INSTRUMENTS REFERRED TO IN CLAUSE (C) PRECEDING IF AND TO THE EXTENT THAT SUCH AMENDMENT OR MODIFICATION IS NOT SUBSTANTIVE OR MATERIAL AND COULD NOT HAVE A MATERIAL ADVERSE EFFECT.   SECTION 9.15           ERISA PLANS.  EXCEPT AS SPECIFIED ON SCHEDULE 9.15, F.Y.I. WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO:   (A)           ALLOW, OR TAKE (OR PERMIT ANY ERISA AFFILIATE TO TAKE) ANY ACTION WHICH WOULD CAUSE, ANY UNFUNDED OR UNRESERVED LIABILITY FOR BENEFITS UNDER ANY PLAN (EXCLUSIVE OF ANY MULTIEMPLOYER PLAN) TO EXIST OR TO BE CREATED THAT EXCEEDS $25,000 WITH RESPECT TO ANY SUCH PLAN OR $50,000 WITH RESPECT TO ALL SUCH PLANS IN THE AGGREGATE ON EITHER A GOING CONCERN OR A WIND-UP BASIS; OR   (B)           WITH RESPECT TO ANY MULTIEMPLOYER PLAN, ALLOW, OR TAKE (OR PERMIT ANY ERISA AFFILIATE TO TAKE) ANY ACTION WHICH WOULD CAUSE, ANY UNFUNDED OR UNRESERVED LIABILITY FOR BENEFITS UNDER ANY MULTIEMPLOYER PLAN TO EXIST OR TO BE CREATED, EITHER INDIVIDUALLY AS TO ANY SUCH PLAN OR IN THE AGGREGATE AS TO ALL SUCH PLANS, THAT COULD, UPON ANY PARTIAL OR COMPLETE WITHDRAWAL FROM OR TERMINATION OF ANY SUCH MULTIEMPLOYER PLAN OR PLANS, HAVE A MATERIAL ADVERSE EFFECT.   SECTION 9.16           DIVIDEND RESTRICTIONS. F.Y.I. WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO BE PARTY TO OR BOUND BY ANY AGREEMENT, DOCUMENT, INSTRUMENT, COVENANT OR OTHER RESTRICTION (OTHER THAN THIS AGREEMENT) WHICH RESTRICTS THE ABILITY OF SUCH SUBSIDIARY TO PAY DIVIDENDS TO, MAKE DISTRIBUTION TO, AND MAKE ADVANCE TO, F.Y.I. OR ANY SUBSIDIARY OF F.Y.I.   ARTICLE 10   FINANCIAL COVENANTS   F.Y.I. covenants and agrees that, as long as the Obligations or any part thereof are outstanding or any Lender has any Commitment hereunder or any Letter of Credit remains outstanding, it will perform and observe, or cause to be performed and observed, the following covenants:   SECTION 10.1           CONSOLIDATED NET WORTH.  F.Y.I. WILL AT ALL TIMES MAINTAIN CONSOLIDATED NET WORTH IN AN AMOUNT NOT LESS THAN THE SUM OF (A) $215,383,200 PLUS (B) 75% OF CUMULATIVE CONSOLIDATED NET INCOME, IF POSITIVE, FOR ANY FISCAL QUARTER, I.E., EXCLUSIVE OF NEGATIVE CONSOLIDATED NET INCOME FOR ANY FISCAL QUARTER, AFTER DECEMBER 31, 2000, PLUS (C) ALL NET PROCEEDS OF EACH EQUITY ISSUANCE AFTER DECEMBER 31, 2000, MINUS THE AMOUNT OF ANY STOCK REPURCHASE CONSUMMATED UNDER THE TERMS OF SECTION 9.4(C).   SECTION 10.2           RATIO OF FUNDED DEBT TO EBITDA.  F.Y.I. WILL NOT PERMIT THE RATIO, CALCULATED AS OF THE END OF EACH FISCAL QUARTER OF F.Y.I. COMMENCING WITH THE FISCAL QUARTER ENDED DECEMBER 31, 2000, OF (I) FUNDED DEBT TO (II) EBITDA (THE "FUNDED DEBT TO EBITDA RATIO") FOR THE FOUR FISCAL QUARTERS THEN ENDED FOR F.Y.I. AND ITS SUBSIDIARIES TO EXCEED THE RATIO SET FORTH BELOW FOR THE PERIOD DURING WHICH SUCH FISCAL QUARTER END OCCURS:   Period   Ratio From December 31, 2000, through and including September 30, 2002   3.00 to 1.00 From December 31, 2002 and at all times thereafter   2.50 to 1.00   SECTION 10.3           CONSOLIDATED FIXED CHARGE COVERAGE RATIO.  F.Y.I. WILL NOT PERMIT THE CONSOLIDATED FIXED CHARGE COVERAGE RATIO, CALCULATED AS OF THE END OF EACH FISCAL QUARTER OF F.Y.I. COMMENCING WITH THE FISCAL QUARTER ENDED MARCH 31, 2001, FOR THE FOUR FISCAL QUARTERS OF F.Y.I. THEN ENDED, TO BE LESS THAN THE RATIO SET FORTH BELOW FOR THE PERIOD DURING WHICH SUCH FISCAL QUARTER END OCCURS:   Period   Ratio From March 31, 2001, through and including September 30, 2002   1.25 to 1.00 From December 31, 2002 and at all times thereafter   1.50 to 1.00   SECTION 10.4           CAPITAL EXPENDITURES.  F.Y.I. WILL NOT PERMIT THE AGGREGATE CAPITAL EXPENDITURES OF F.Y.I. AND ITS SUBSIDIARIES (A) DURING THE FISCAL YEAR OF F.Y.I. ENDING DECEMBER 31, 2001 TO EXCEED $20,000,000, AND (B) FOR EACH SUBSEQUENT FISCAL YEAR OF F.Y.I., AN AMOUNT EQUAL TO THE AGGREGATE CAPITAL EXPENDITURES PERMITTED UNDER THIS SECTION 10.4 FOR THE PRIOR FISCAL YEAR OF F.Y.I. ("THE "PRIOR PERMITTED CAPITAL EXPENDITURES") PLUS 20% OF THE PRIOR PERMITTED CAPITAL EXPENDITURES (THE "PERMITTED CAPITAL EXPENDITURES").   ARTICLE 11   DEFAULT   SECTION 11.1           EVENTS OF DEFAULT.  EACH OF THE FOLLOWING SHALL BE DEEMED AN "EVENT OF DEFAULT":   (A)           F.Y.I. OR ANY OF ITS SUBSIDIARIES SHALL FAIL TO PAY, REPAY OR PREPAY WHEN DUE ANY AMOUNT OF PRINCIPAL OWING TO THE ADMINISTRATIVE AGENT OR ANY LENDER PURSUANT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR SHALL FAIL TO PAY WITHIN TWO DAYS AFTER THE DUE DATE THEREOF ANY INTEREST, FEE OR OTHER AMOUNT OR OTHER OBLIGATION OWING TO THE ADMINISTRATIVE AGENT OR ANY LENDER PURSUANT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT; PROVIDED THAT F.Y.I. SHALL HAVE UP TO 30 DAYS AFTER THE INVOICE DATE TO PAY OUTSTANDING FEES AND EXPENSES OTHER THAN THE COMMITMENT FEES, LETTER OF CREDIT FEES AND FEES PAYABLE IN ACCORDANCE WITH THE TERMS OF THE FEE LETTER.   (B)           ANY REPRESENTATION OR WARRANTY MADE OR DEEMED MADE BY F.Y.I. OR ANY OF ITS SUBSIDIARIES OR BY ANY LOAN PARTY IN ANY LOAN DOCUMENT OR IN ANY CERTIFICATE, REPORT, NOTICE OR FINANCIAL STATEMENT FURNISHED AT ANY TIME IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE FALSE, MISLEADING OR ERRONEOUS IN ANY MATERIAL RESPECT WHEN MADE OR DEEMED TO HAVE BEEN MADE.   (C)           F.Y.I. OR ANY OF ITS SUBSIDIARIES SHALL FAIL TO PERFORM, OBSERVE OR COMPLY WITH ANY COVENANT, AGREEMENT OR TERM CONTAINED IN SECTIONS 5.1, 5.2, 8.1(G), 8.1(J), 8.2 (OTHER THAN THE LAST SENTENCE OF SECTION 8.2), 8.6, OR 8.7, ARTICLE 9 (OTHER THAN SECTION 9.7, 9.11 AND 9.15) OR ARTICLE 10 OF THIS AGREEMENT; F.Y.I. OR ANY OF ITS SUBSIDIARIES SHALL FAIL TO PERFORM, OBSERVE OR COMPLY WITH ANY COVENANT, AGREEMENT OR TERM CONTAINED IN SECTIONS 5.3, 8.1 (OTHER THAN SECTIONS 8.1(G), OR 8.1(J)), 8.4, 8.5, 8.8, 8.9, 8.10, 8.12, 9.7 OR 9.11) AND SUCH FAILURE IS NOT REMEDIED OR WAIVED WITHIN TEN DAYS AFTER SUCH FAILURE COMMENCED; F.Y.I. OR ANY OF ITS SUBSIDIARIES SHALL FAIL TO PERFORM, OBSERVE OR COMPLY WITH ANY COVENANT, AGREEMENT OR TERM CONTAINED IN ANY SECURITY AGREEMENT AND SUCH FAILURE SHALL CONTINUE BEYOND ANY GRACE OR CURE PERIOD SPECIFIED IN SUCH SECURITY AGREEMENT; F.Y.I. OR ANY OF ITS SUBSIDIARIES SHALL FAIL TO PERFORM, OBSERVE OR COMPLY WITH ANY COVENANT, AGREEMENT OR TERM CONTAINED IN ANY MORTGAGE EXECUTED BY IT AND SUCH FAILURE SHALL CONTINUE BEYOND ANY GRACE OR CURE PERIOD SPECIFIED IN SUCH MORTGAGE; ANY GUARANTOR SHALL FAIL TO PERFORM, OBSERVE OR COMPLY WITH ANY COVENANT, AGREEMENT OR TERM CONTAINED IN ITS GUARANTY, SUBJECT TO ANY GRACE PERIOD APPLICABLE TO SUCH COVENANT, AGREEMENT OR TERM IN THIS AGREEMENT TO THE EXTENT THIS AGREEMENT IS INCORPORATED THEREIN BY REFERENCE; OR ANY LOAN PARTY SHALL FAIL TO PERFORM, OBSERVE OR COMPLY WITH ANY OTHER COVENANT, AGREEMENT OR TERM CONTAINED IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN COVENANTS TO PAY THE OBLIGATIONS) AND SUCH FAILURE IS NOT REMEDIED OR WAIVED WITHIN THE EARLIER TO OCCUR OF 30 DAYS AFTER SUCH FAILURE COMMENCED OR, IF A DIFFERENT GRACE PERIOD IS EXPRESSLY MADE APPLICABLE IN SUCH OTHER LOAN DOCUMENTS, SUCH APPLICABLE GRACE PERIOD.   (D)           F.Y.I. CEASES TO BE SOLVENT OR ANY OTHER LOAN PARTY (OTHER THAN A NONMATERIAL SUBSIDIARY) CEASES TO BE SOLVENT FOR A PERIOD EXCEEDING 15 DAYS FROM THE EARLIER OF THE DATE NOTICE OF SUCH FAILURE TO REMAIN SOLVENT IS GIVEN BY THE ADMINISTRATIVE AGENT TO F.Y.I. OR THE DATE F.Y.I. IS OBLIGATED TO GIVE NOTICE OF SUCH DEFAULT TO THE ADMINISTRATIVE AGENT UNDER SECTION 8.1(G), OR ANY LOAN PARTY (OTHER THAN A NONMATERIAL SUBSIDIARY) SHALL ADMIT IN WRITING ITS INABILITY TO, OR BE GENERALLY UNABLE TO, PAY ITS DEBTS AS SUCH DEBTS BECOME DUE; PROVIDED, HOWEVER, THAT IF ANY LOAN PARTY SHALL CEASE TO BE SOLVENT MORE THAN ONCE IN ANY TWELVE-MONTH PERIOD, SUCH OCCURRENCE SHALL IMMEDIATELY BECOME AN EVENT OF DEFAULT.   (E)           ANY LOAN PARTY (OTHER THAN A NONMATERIAL SUBSIDIARY) SHALL (I) APPLY FOR OR CONSENT TO THE APPOINTMENT OF, OR THE TAKING OF POSSESSION BY, A RECEIVER, CUSTODIAN, TRUSTEE, EXAMINER, LIQUIDATOR OR THE LIKE OF ITSELF OR OF ALL OR ANY SUBSTANTIAL PART OF ITS PROPERTY, (II) MAKE A GENERAL ASSIGNMENT FOR THE BENEFIT OF ITS CREDITORS, (III) COMMENCE A VOLUNTARY CASE UNDER THE UNITED STATES BANKRUPTCY CODE AS NOW OR HEREAFTER IN EFFECT (THE "BANKRUPTCY CODE"), (IV) INSTITUTE ANY PROCEEDING OR FILE A PETITION SEEKING TO TAKE ADVANTAGE OF ANY OTHER LAW RELATING TO BANKRUPTCY, INSOLVENCY, REORGANIZATION, LIQUIDATION, DISSOLUTION, WINDING-UP OR COMPOSITION OR READJUSTMENT OF DEBTS, (V) FAIL TO CONTROVERT IN A TIMELY AND APPROPRIATE MANNER, OR ACQUIESCE IN WRITING TO, ANY PETITION FILED AGAINST IT IN AN INVOLUNTARY CASE UNDER THE BANKRUPTCY CODE, OR (VI) TAKE ANY CORPORATE OR OTHER ACTION FOR THE PURPOSE OF EFFECTING ANY OF THE FOREGOING.   (F)            A PROCEEDING OR CASE SHALL BE COMMENCED, WITHOUT THE APPLICATION, APPROVAL OR CONSENT OF ANY OF THE LOAN PARTIES IN (OTHER THAN A NONMATERIAL SUBSIDIARY) ANY COURT OF COMPETENT JURISDICTION, SEEKING (I) ITS REORGANIZATION, LIQUIDATION, DISSOLUTION, ARRANGEMENT OR WINDING-UP, OR THE COMPOSITION OR READJUSTMENT OF ITS DEBTS, (II) THE APPOINTMENT OF A RECEIVER, CUSTODIAN, TRUSTEE, EXAMINER, LIQUIDATOR OR THE LIKE OF ANY OF THE LOAN PARTIES OR OF ALL OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR (III) SIMILAR RELIEF IN RESPECT OF ANY OF THE LOAN PARTIES UNDER ANY LAW RELATING TO BANKRUPTCY, INSOLVENCY, REORGANIZATION, WINDING-UP OR COMPOSITION OR ADJUSTMENT OF DEBTS, AND SUCH PROCEEDING OR CASE SHALL CONTINUE UNDISMISSED, OR AN ORDER, JUDGMENT OR DECREE APPROVING OR ORDERING ANY OF THE FOREGOING SHALL BE ENTERED AND CONTINUE UNSTAYED AND IN EFFECT, FOR A PERIOD OF 60 OR MORE DAYS; OR AN ORDER FOR RELIEF AGAINST ANY OF THE LOAN PARTIES SHALL BE ENTERED IN AN INVOLUNTARY CASE UNDER THE BANKRUPTCY CODE.   (G)           ANY ONE OR MORE OF THE LOAN PARTIES SHALL FAIL TO DISCHARGE WITHIN A PERIOD OF 30 DAYS AFTER THE COMMENCEMENT THEREOF ANY ATTACHMENT, SEQUESTRATION, FORFEITURE OR SIMILAR PROCEEDING OR PROCEEDINGS INVOLVING AN AGGREGATE AMOUNT IN EXCESS OF $5,000,000 AGAINST ANY OF ITS OR THEIR PROPERTIES.   (H)           A FINAL JUDGMENT OR JUDGMENTS FOR THE PAYMENT OF MONEY IN EXCESS OF $5,000,000 IN THE AGGREGATE SHALL BE RENDERED BY A COURT OR COURTS AGAINST THE LOAN PARTIES OR ANY OF THEM ON CLAIMS NOT COVERED BY INSURANCE OR AS TO WHICH THE INSURANCE CARRIER HAS DENIED RESPONSIBILITY AND THE SAME SHALL NOT BE PAID OR DISCHARGED, OR A STAY OF EXECUTION THEREOF SHALL NOT BE PROCURED, WITHIN 30 DAYS FROM THE DATE OF ENTRY THEREOF AND THE LOAN PARTIES SHALL NOT, WITHIN SAID PERIOD OF 30 DAYS, OR SUCH LONGER PERIOD DURING WHICH EXECUTION OF THE SAME SHALL HAVE BEEN STAYED, APPEAL THEREFROM AND CAUSE THE EXECUTION THEREOF TO BE STAYED DURING SUCH APPEAL.   (I)            ANY OF THE LOAN PARTIES SHALL FAIL TO PAY WHEN DUE ANY PRINCIPAL OF OR INTEREST ON ANY DEBT (OTHER THAN THE OBLIGATIONS) HAVING (EITHER INDIVIDUALLY OR IN THE AGGREGATE) A PRINCIPAL AMOUNT OF AT LEAST $5,000,000, OR THE MATURITY OF ANY SUCH DEBT SHALL HAVE BEEN ACCELERATED, OR ANY SUCH DEBT SHALL HAVE BEEN REQUIRED TO BE PREPAID PRIOR TO THE STATED MATURITY THEREOF, OR ANY EVENT SHALL HAVE OCCURRED (AND SHALL NOT HAVE BEEN WAIVED OR OTHERWISE CURED) THAT PERMITS (OR, WITH THE GIVING OF NOTICE OR LAPSE OF TIME OR BOTH, WOULD PERMIT) ANY HOLDER OR HOLDERS OF SUCH DEBT OR ANY PERSON ACTING ON BEHALF OF SUCH HOLDER OR HOLDERS TO ACCELERATE THE MATURITY THEREOF OR REQUIRE ANY SUCH PREPAYMENT.   (J)            THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL CEASE TO BE IN FULL FORCE AND EFFECT OR SHALL BE DECLARED NULL AND VOID OR THE VALIDITY OR ENFORCEABILITY THEREOF SHALL BE CONTESTED OR CHALLENGED BY ANY PERMITTED HOLDER, ANY LOAN PARTY, OR ANY OF ITS AFFILIATES, OR ANY LOAN PARTY SHALL DENY THAT IT HAS ANY FURTHER LIABILITY OR OBLIGATION UNDER ANY OF THE LOAN DOCUMENTS, OR ANY LIEN CREATED BY THE LOAN DOCUMENTS SHALL FOR ANY REASON CEASE TO BE A VALID, FIRST PRIORITY PERFECTED LIEN (EXCEPT FOR PERMITTED LIENS, IF ANY, WHICH ARE EXPRESSLY PERMITTED BY THE LOAN DOCUMENTS TO HAVE PRIORITY OVER THE LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT) UPON ANY OF THE COLLATERAL PURPORTED TO BE COVERED THEREBY.   (K)           ANY OF THE FOLLOWING EVENTS SHALL OCCUR OR EXIST WITH RESPECT TO ANY LOAN PARTY OR ANY ERISA AFFILIATE: (I) ANY PROHIBITED TRANSACTION INVOLVING ANY PLAN; (II) ANY REPORTABLE EVENT WITH RESPECT TO ANY PENSION PLAN; (III) THE FILING UNDER SECTION 4041 OF ERISA OF A NOTICE OF INTENT TO TERMINATE ANY PENSION PLAN OR THE TERMINATION OF ANY PENSION PLAN; (IV) ANY EVENT OR CIRCUMSTANCE THAT MIGHT CONSTITUTE GROUNDS ENTITLING THE PBGC TO INSTITUTE PROCEEDINGS UNDER SECTION 4042 OF ERISA FOR THE TERMINATION OF, OR FOR THE APPOINTMENT OF A TRUSTEE TO ADMINISTER, ANY PENSION PLAN, OR THE INSTITUTION BY THE PBGC OF ANY SUCH PROCEEDINGS; (V) ANY "ACCUMULATED FUNDING DEFICIENCY" (AS DEFINED IN SECTION 406 OF ERISA OR SECTION 412 OF THE CODE), WHETHER OR NOT WAIVED, SHALL EXIST WITH RESPECT TO ANY PLAN; OR (VI) COMPLETE OR PARTIAL WITHDRAWAL UNDER SECTION 4201 OR 4204 OF ERISA FROM A PLAN OR THE REORGANIZATION, INSOLVENCY OR TERMINATION (OTHER THAN IN CONNECTION WITH AN ACQUISITION AND IN COMPLIANCE WITH ERISA AND OTHER APPLICABLE LAWS) OF ANY PENSION PLAN; AND IN EACH CASE ABOVE, SUCH EVENT OR CONDITION, TOGETHER WITH ALL OTHER EVENTS OR CONDITIONS, IF ANY, HAVE SUBJECTED OR COULD IN THE REASONABLE OPINION OF REQUIRED LENDERS SUBJECT ANY LOAN PARTY OR ANY ERISA AFFILIATE TO ANY TAX, PENALTY OR OTHER LIABILITY TO A PLAN, A MULTIEMPLOYER PLAN, THE PBGC OR OTHERWISE (OR ANY COMBINATION THEREOF) WHICH IN THE AGGREGATE EXCEED OR COULD REASONABLY BE EXPECTED TO EXCEED $2,000,000.   (L)            THE OCCURRENCE OF A CHANGE OF CONTROL.   (M)          IF, AT ANY TIME, THE SUBORDINATION PROVISIONS OF ANY OF THE SELLER SUBORDINATED DEBT SHALL BE INVALIDATED OR SHALL OTHERWISE CEASE TO BE IN FULL FORCE AND EFFECT.   (N)           THE OCCURRENCE OF ANY MATERIAL ADVERSE EFFECT; PROVIDED, HOWEVER, THAT, FOR PURPOSES OF THIS SECTION 11.1(N), NO MATERIAL ADVERSE EFFECT SHALL BE DEEMED TO HAVE OCCURRED UNDER CLAUSE (A) OF THE DEFINITION OF MATERIAL ADVERSE EFFECT IN SECTION 1.1 UNLESS, BASED UPON THE FINANCIAL CONDITION OR FINANCIAL PERFORMANCE OF F.Y.I., IT IS NOT REASONABLE TO EXPECT THAT F.Y.I. WILL BE ABLE TO COMPLY WITH ALL ITS FINANCIAL COVENANTS SET FORTH IN ARTICLE 10.   SECTION 11.2           REMEDIES.  IF ANY EVENT OF DEFAULT SHALL OCCUR AND BE CONTINUING, THE ADMINISTRATIVE AGENT MAY AND, IF DIRECTED BY THE REQUIRED LENDERS, THE ADMINISTRATIVE AGENT SHALL DO ANY ONE OR MORE OF THE FOLLOWING:   (A)           ACCELERATION.  DECLARE ALL OUTSTANDING PRINCIPAL OF AND ACCRUED AND UNPAID INTEREST ON THE LOANS AND ALL OTHER AMOUNTS PAYABLE BY F.Y.I. OR ANY OF ITS SUBSIDIARIES UNDER THE LOAN DOCUMENTS IMMEDIATELY DUE AND PAYABLE (PROVIDED THAT, WITH RESPECT TO ANY INTEREST RATE PROTECTION AGREEMENT OR CURRENCY HEDGE AGREEMENT TO WHICH A LENDER OR AN AFFILIATE OF A LENDER IS THE COUNTERPARTY, SUCH LENDER OR AFFILIATE OF LENDER SHALL DETERMINE WHETHER OR NOT TO ACCELERATE AMOUNTS PAYABLE THEREUNDER AND IF SUCH COUNTERPARTY FAILS TO ACCELERATE SUCH OBLIGATIONS PRIOR TO THE DATE OF RECEIPT BY THE ADMINISTRATIVE AGENT OF ANY PROCEEDS FROM THE DISPOSITION OF COLLATERAL UNDER ANY SECURITY DOCUMENT, SUCH OBLIGATIONS SHALL NOT BE INCLUDED IN ANY PRO RATA DISTRIBUTIONS OF SUCH PROCEEDS), AND THE SAME SHALL THEREUPON BECOME IMMEDIATELY DUE AND PAYABLE, WITHOUT NOTICE, DEMAND, PRESENTMENT, NOTICE OF DISHONOR, NOTICE OF ACCELERATION, NOTICE OF INTENT TO ACCELERATE, PROTEST OR OTHER FORMALITIES OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY F.Y.I.;   (B)           TERMINATION OF COMMITMENTS.  TERMINATE THE COMMITMENTS (INCLUDING, WITHOUT LIMITATION, THE OBLIGATION OF THE ISSUING BANK TO ISSUE LETTERS OF CREDIT) WITHOUT NOTICE TO F.Y.I.;   (C)           JUDGMENT.  REDUCE ANY CLAIM TO JUDGMENT;   (D)           FORECLOSURE.  FORECLOSE OR OTHERWISE ENFORCE ANY LIEN GRANTED TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS TO SECURE PAYMENT AND PERFORMANCE OF THE OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS; OR   (E)           RIGHTS.  EXERCISE ANY AND ALL RIGHTS AND REMEDIES AFFORDED BY THE LAWS OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION, BY ANY OF THE LOAN DOCUMENTS, BY EQUITY OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, THE RIGHT OF SETOFF PROVIDED BY SECTION 5.6 OF THIS AGREEMENT;   PROVIDED, HOWEVER, THAT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT UNDER SECTION 11.1(E) OR SECTION 11.1(F), THE COMMITMENTS OF ALL OF THE LENDERS (INCLUDING, WITHOUT LIMITATION, THE OBLIGATION OF THE ISSUING BANK TO ISSUE LETTERS OF CREDIT) SHALL IMMEDIATELY AND AUTOMATICALLY TERMINATE, AND THE OUTSTANDING PRINCIPAL OF AND ACCRUED AND UNPAID INTEREST ON THE LOANS AND ALL OTHER AMOUNTS PAYABLE BY F.Y.I. UNDER THE LOAN DOCUMENTS SHALL THEREUPON BECOME IMMEDIATELY AND AUTOMATICALLY DUE AND PAYABLE, ALL WITHOUT NOTICE, DEMAND, PRESENTMENT, NOTICE OF DISHONOR, NOTICE OF ACCELERATION, NOTICE OF INTENT TO ACCELERATE, PROTEST OR OTHER FORMALITIES OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY THE F.Y.I.   SECTION 11.3           CASH COLLATERAL.  IF AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING F.Y.I. SHALL, IF REQUESTED BY THE ADMINISTRATIVE AGENT OR THE REQUIRED LENDERS, PLEDGE TO THE ADMINISTRATIVE AGENT AS SECURITY FOR THE OBLIGATIONS AN AMOUNT IN IMMEDIATELY AVAILABLE FUNDS EQUAL TO THE THEN OUTSTANDING LETTER OF CREDIT LIABILITIES, SUCH FUNDS TO BE HELD IN A CASH COLLATERAL ACCOUNT SATISFACTORY TO THE ADMINISTRATIVE AGENT WITHOUT ANY RIGHT OF WITHDRAWAL BY F.Y.I. OR ANY OF ITS SUBSIDIARIES.   SECTION 11.4           PERFORMANCE BY THE ADMINISTRATIVE AGENT.  IF ANY LOAN PARTY SHALL FAIL TO PERFORM ANY COVENANT OR AGREEMENT IN ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS, THE ADMINISTRATIVE AGENT MAY, AT THE DIRECTION OF THE REQUIRED LENDERS, PERFORM OR ATTEMPT TO PERFORM SUCH COVENANT OR AGREEMENT ON BEHALF OF SUCH LOAN PARTY.  IN SUCH EVENT, F.Y.I. OR ANY OF ITS SUBSIDIARIES SHALL, AT THE REQUEST OF THE ADMINISTRATIVE AGENT, PROMPTLY PAY ANY AMOUNT EXPENDED BY THE ADMINISTRATIVE AGENT OR THE LENDERS IN CONNECTION WITH SUCH PERFORMANCE OR ATTEMPTED PERFORMANCE TO THE ADMINISTRATIVE AGENT AT THE PRINCIPAL OFFICE, TOGETHER WITH INTEREST THEREON AT THE APPLICABLE DEFAULT RATE FROM AND INCLUDING THE DATE OF SUCH EXPENDITURE TO BUT EXCLUDING THE DATE SUCH EXPENDITURE IS PAID IN FULL.  NOTWITHSTANDING THE FOREGOING, IT IS EXPRESSLY AGREED THAT NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER SHALL HAVE ANY LIABILITY OR RESPONSIBILITY FOR THE PERFORMANCE OF ANY OBLIGATION OF F.Y.I. OR ANY OF ITS SUBSIDIARIES OR ANY OTHER LOAN PARTY UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.   ARTICLE 12   THE ADMINISTRATIVE AGENT   SECTION 12.1           APPOINTMENT, POWERS AND IMMUNITIES. EACH LENDER HEREBY IRREVOCABLY APPOINTS AND AUTHORIZES BANK OF AMERICA TO ACT AS ITS AGENT UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS WITH SUCH POWERS AND DISCRETION AS ARE SPECIFICALLY 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.  THE ADMINISTRATIVE AGENT (WHICH TERM AS USED IN THIS SENTENCE AND IN SECTION 12.5 SHALL INCLUDE ITS AFFILIATES (INCLUDING BANC OF AMERICA SECURITIES LLC) AND ITS OWN AND ITS AFFILIATES' OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS):  (A) SHALL NOT HAVE ANY DUTIES OR RESPONSIBILITIES EXCEPT THOSE EXPRESSLY SET FORTH IN THE LOAN DOCUMENTS AND SHALL NOT BE A TRUSTEE OR FIDUCIARY FOR ANY LENDER; (B) SHALL NOT BE RESPONSIBLE TO THE LENDERS FOR ANY RECITAL, STATEMENT, REPRESENTATION, OR WARRANTY (WHETHER WRITTEN OR ORAL) MADE IN OR IN CONNECTION WITH ANY LOAN DOCUMENT OR ANY CERTIFICATE OR OTHER DOCUMENT REFERRED TO OR PROVIDED FOR IN, OR RECEIVED BY ANY OF THEM UNDER, ANY LOAN DOCUMENT, OR FOR THE VALUE, VALIDITY, EFFECTIVENESS, GENUINENESS, ENFORCEABILITY, OR SUFFICIENCY OF ANY LOAN DOCUMENT, OR ANY OTHER DOCUMENT REFERRED TO OR PROVIDED FOR THEREIN OR FOR ANY FAILURE BY ANY LOAN PARTY OR ANY OTHER PERSON TO PERFORM ANY OF ITS OBLIGATIONS THEREUNDER; (C) SHALL NOT BE RESPONSIBLE FOR OR HAVE ANY DUTY TO ASCERTAIN, INQUIRE INTO, OR VERIFY THE PERFORMANCE OR OBSERVANCE OF ANY COVENANTS OR AGREEMENTS BY ANY LOAN PARTY OR THE SATISFACTION OF ANY CONDITION OR TO INSPECT THE PROPERTY (INCLUDING THE BOOKS AND RECORDS) OF ANY LOAN PARTY OR ANY OF ITS AFFILIATES; (D) SHALL NOT BE REQUIRED TO INITIATE OR CONDUCT ANY LITIGATION OR COLLECTION PROCEEDINGS UNDER ANY LOAN DOCUMENT; AND (E) SHALL NOT BE RESPONSIBLE FOR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY IT UNDER OR IN CONNECTION WITH ANY LOAN DOCUMENT, EXCEPT FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  THE ADMINISTRATIVE AGENT MAY EMPLOY AGENTS AND ATTORNEYS-IN-FACT AND SHALL NOT BE RESPONSIBLE FOR THE NEGLIGENCE OR MISCONDUCT OF ANY SUCH AGENTS OR ATTORNEYS-IN-FACT SELECTED BY IT WITH REASONABLE CARE.   SECTION 12.2           RELIANCE BY THE ADMINISTRATIVE AGENT.  THE ADMINISTRATIVE AGENT SHALL BE ENTITLED TO RELY UPON ANY CERTIFICATION, NOTICE, INSTRUMENT, WRITING, OR OTHER COMMUNICATION (INCLUDING, WITHOUT LIMITATION, ANY THEREOF BY TELEPHONE OR TELECOPY) BELIEVED BY IT TO BE GENUINE AND CORRECT AND TO HAVE BEEN SIGNED, SENT OR MADE BY OR ON BEHALF OF THE PROPER PERSON OR PERSONS, AND UPON ADVICE AND STATEMENTS OF LEGAL COUNSEL (INCLUDING COUNSEL FOR ANY LOAN PARTY), INDEPENDENT ACCOUNTANTS, AND OTHER EXPERTS SELECTED BY THE ADMINISTRATIVE AGENT.  THE ADMINISTRATIVE AGENT MAY DEEM AND TREAT THE PAYEE OF ANY NOTE AS THE HOLDER THEREOF FOR ALL PURPOSES HEREOF UNLESS AND UNTIL THE ADMINISTRATIVE AGENT RECEIVES AND ACCEPTS AN ASSIGNMENT AND ACCEPTANCE EXECUTED IN ACCORDANCE WITH SECTION 13.8.  AS TO ANY MATTERS NOT EXPRESSLY PROVIDED FOR BY THIS AGREEMENT, THE ADMINISTRATIVE AGENT SHALL NOT BE REQUIRED TO EXERCISE ANY DISCRETION OR TAKE ANY ACTION, BUT SHALL BE REQUIRED TO ACT OR TO REFRAIN FROM ACTING (AND SHALL BE FULLY PROTECTED IN SO ACTING OR REFRAINING FROM ACTING) UPON THE  INSTRUCTIONS OF THE REQUIRED LENDERS, AND SUCH INSTRUCTIONS SHALL BE BINDING ON ALL OF THE LENDERS; PROVIDED, HOWEVER, THAT THE ADMINISTRATIVE AGENT SHALL NOT BE REQUIRED TO TAKE ANY ACTION THAT EXPOSES THE ADMINISTRATIVE AGENT TO PERSONAL LIABILITY OR THAT IS CONTRARY TO ANY LOAN DOCUMENT OR APPLICABLE LAW.   SECTION 12.3           DEFAULTS.  THE ADMINISTRATIVE AGENT SHALL NOT BE DEEMED TO HAVE KNOWLEDGE OR NOTICE OF THE OCCURRENCE OF A DEFAULT UNLESS THE ADMINISTRATIVE AGENT HAS RECEIVED WRITTEN NOTICE FROM A LENDER OR THE BORROWER SPECIFYING SUCH DEFAULT AND STATING THAT SUCH NOTICE IS A "NOTICE OF DEFAULT".  IN THE EVENT THAT THE ADMINISTRATIVE AGENT RECEIVES SUCH A NOTICE OF THE OCCURRENCE OF A DEFAULT, THE ADMINISTRATIVE AGENT SHALL GIVE PROMPT NOTICE THEREOF TO THE LENDERS.  THE ADMINISTRATIVE AGENT SHALL TAKE SUCH ACTION WITH RESPECT TO SUCH DEFAULT AS IT SHALL DEEM APPROPRIATE OR AS SHALL REASONABLY BE DIRECTED BY THE REQUIRED LENDERS.   SECTION 12.4           RIGHTS AS LENDER.  WITH RESPECT TO ITS COMMITMENT AND THE LOANS MADE BY IT, BANK OF AMERICA (AND ANY SUCCESSOR ACTING AS THE ADMINISTRATIVE AGENT) IN ITS CAPACITY AS A LENDER HEREUNDER SHALL HAVE THE SAME RIGHTS AND POWERS HEREUNDER AS ANY OTHER LENDER AND MAY EXERCISE THE SAME AS THOUGH IT WERE NOT ACTING AS THE ADMINISTRATIVE AGENT, AND THE TERM "LENDER" OR "LENDERS" SHALL, UNLESS THE CONTEXT OTHERWISE INDICATES, INCLUDE THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.  BANK OF AMERICA (AND ANY SUCCESSOR ACTING AS THE ADMINISTRATIVE AGENT) AND ITS AFFILIATES MAY (WITHOUT HAVING TO ACCOUNT THEREFOR TO ANY LENDER) ACCEPT DEPOSITS FROM, LEND MONEY TO, MAKE INVESTMENTS IN, PROVIDE SERVICES TO, AND GENERALLY ENGAGE IN ANY KIND OF LENDING, TRUST, OR OTHER BUSINESS WITH ANY LOAN PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES AS IF IT WERE NOT ACTING AS THE ADMINISTRATIVE AGENT, AND BANK OF AMERICA (AND ANY SUCCESSOR ACTING AS THE ADMINISTRATIVE AGENT) AND ITS AFFILIATES MAY ACCEPT FEES AND OTHER CONSIDERATION FROM ANY LOAN PARTY OR ANY OF THEIR RESPECTIVE AFFILIATES FOR SERVICES IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE WITHOUT HAVING TO ACCOUNT FOR THE SAME TO THE LENDERS.   SECTION 12.5           INDEMNIFICATION.  THE LENDERS AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED UNDER SECTION 13.1 OR SECTION 13.2, BUT WITHOUT LIMITING THE OBLIGATIONS OF F.Y.I. UNDER SUCH SECTIONS) RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE COMMITMENT PERCENTAGES, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES), OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER THAT MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT (INCLUDING BY ANY LENDER) IN ANY WAY RELATING TO OR ARISING OUT OF ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER ANY LOAN DOCUMENT; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARE FOUND IN A FINAL, NON-APPEALABLE JUDGMENT RENDERED BY A COURT OF COMPETENT JURISDICTION TO HAVE ARISEN FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF, THE PERSON TO BE INDEMNIFIED.  WITHOUT LIMITING ANY PROVISION OF ANY LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON.  WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE (CALCULATED BASED ON THE COMMITMENT PERCENTAGES) OF ANY COSTS OR EXPENSES PAYABLE BY F.Y.I. UNDER SECTION 13.1 TO THE EXTENT THAT THE ADMINISTRATIVE AGENT IS NOT PROMPTLY REIMBURSED FOR SUCH COSTS AND EXPENSES BY F.Y.I.  IN THE CASE OF AN INVESTIGATION, LITIGATION, OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 12.5 APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY THE BORROWER, ITS DIRECTORS, SHAREHOLDERS, OR CREDITORS OR ANY PARTY ENTITLED TO INDEMNIFICATION HEREUNDER OR ANY OTHER PERSON AND WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED.   SECTION 12.6           NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER LENDERS.  EACH LENDER AGREES THAT IT HAS, INDEPENDENTLY AND WITHOUT RELIANCE ON THE ADMINISTRATIVE AGENT OR ANY OTHER LENDER, AND BASED ON SUCH DOCUMENTS AND INFORMATION AS IT HAS DEEMED APPROPRIATE, MADE ITS OWN CREDIT ANALYSIS OF THE LOAN PARTIES AND DECISION TO ENTER INTO THIS AGREEMENT AND 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 ANALYSIS AND DECISIONS IN TAKING OR NOT TAKING ACTION UNDER THE LOAN DOCUMENTS.  EXCEPT FOR NOTICES, REPORTS, AND OTHER DOCUMENTS AND INFORMATION 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 AFFAIRS, FINANCIAL CONDITION, OR BUSINESS OF ANY LOAN PARTY OR ANY OF THEIR AFFILIATES THAT MAY COME INTO THE POSSESSION OF ANY AGENT OR ANY OF ITS AFFILIATES.   SECTION 12.7           RESIGNATION OF THE ADMINISTRATIVE AGENT.  THE ADMINISTRATIVE AGENT MAY RESIGN AT ANY TIME BY GIVING NOTICE THEREOF TO THE LENDERS AND F.Y.I.  UPON ANY SUCH RESIGNATION, THE REQUIRED LENDERS SHALL HAVE THE RIGHT TO APPOINT A SUCCESSOR THE ADMINISTRATIVE AGENT, WHICH SUCCESSOR AGENT SHALL BE SUBJECT TO THE APPROVAL OF F.Y.I. IF AND SO LONG AS NO EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED, OR DELAYED.  IF NO SUCCESSOR THE ADMINISTRATIVE AGENT SHALL HAVE BEEN SO APPOINTED BY THE REQUIRED LENDERS AND SHALL HAVE ACCEPTED SUCH APPOINTMENT WITHIN THIRTY (30) DAYS AFTER THE RETIRING ADMINISTRATIVE AGENT’S GIVING OF NOTICE OF RESIGNATION, THEN THE RETIRING ADMINISTRATIVE AGENT MAY, ON BEHALF OF THE LENDERS, APPOINT A SUCCESSOR ADMINISTRATIVE AGENT WHICH SHALL BE A COMMERCIAL BANK ORGANIZED UNDER THE LAWS OF THE U.S. HAVING COMBINED CAPITAL AND SURPLUS OF AT LEAST FIVE HUNDRED MILLION DOLLARS ($500,000,000), WHICH SUCCESSOR AGENT SHALL BE SUBJECT TO THE APPROVAL OF F.Y.I., WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED, OR DELAYED.  UPON THE ACCEPTANCE OF ANY APPOINTMENT AS THE ADMINISTRATIVE AGENT HEREUNDER BY A SUCCESSOR, SUCH SUCCESSOR SHALL THEREUPON SUCCEED TO AND BECOME VESTED WITH ALL THE RIGHTS, POWERS, DISCRETION, PRIVILEGES, AND DUTIES OF THE RETIRING ADMINISTRATIVE AGENT, AND THE RETIRING ADMINISTRATIVE AGENT SHALL BE DISCHARGED FROM ITS DUTIES AND OBLIGATIONS HEREUNDER.  AFTER ANY RETIRING ADMINISTRATIVE AGENT’S RESIGNATION HEREUNDER AS THE ADMINISTRATIVE AGENT, THE PROVISIONS OF THIS ARTICLE 12 SHALL CONTINUE IN EFFECT FOR ITS BENEFIT IN RESPECT OF ANY ACTIONS TAKEN OR OMITTED TO BE TAKEN BY IT WHILE IT WAS ACTING AS THE ADMINISTRATIVE AGENT.   SECTION 12.8           SEVERAL COMMITMENTS.  THE COMMITMENTS AND OTHER OBLIGATIONS OF THE LENDERS UNDER ANY LOAN DOCUMENT ARE SEVERAL.  THE DEFAULT BY ANY LENDER IN MAKING A LOAN IN ACCORDANCE WITH ITS COMMITMENT SHALL NOT RELIEVE THE OTHER LENDERS OF THEIR OBLIGATIONS UNDER ANY LOAN DOCUMENT.  IN THE EVENT OF ANY DEFAULT BY ANY LENDER IN MAKING ANY LOAN, EACH NONDEFAULTING LENDER SHALL BE OBLIGATED TO MAKE ITS LOAN BUT SHALL NOT BE OBLIGATED TO ADVANCE THE AMOUNT WHICH THE DEFAULTING LENDER WAS REQUIRED TO ADVANCE HEREUNDER.  NO LENDER SHALL BE RESPONSIBLE FOR ANY ACT OR OMISSION OF ANY OTHER LENDER.   SECTION 12.9           DOCUMENTATION AGENT, LEAD ARRANGER AND SYNDICATION AGENT.  NONE OF THE DOCUMENTATION AGENT, THE LEAD ARRANGER NOR THE SYNDICATION AGENT, ACTING IN SUCH CAPACITIES, SHALL HAVE ANY OBLIGATIONS UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.   ARTICLE 13   MISCELLANEOUS   SECTION 13.1           EXPENSES.  WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE CONSUMMATED, F.Y.I. HEREBY AGREES, ON DEMAND, TO PAY OR REIMBURSE THE ADMINISTRATIVE AGENT AND EACH OF THE LENDERS FOR PAYING: (A) ALL REASONABLE OUT-OF-POCKET COSTS AND EXPENSES OF THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, NEGOTIATION, EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND ANY AND ALL WAIVERS, AMENDMENTS, MODIFICATIONS, RENEWALS, EXTENSIONS AND SUPPLEMENTS THEREOF AND THERETO, AND THE SYNDICATION OF THE COMMITMENTS AND THE LOANS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND EXPENSES OF LEGAL COUNSEL FOR THE ADMINISTRATIVE AGENT, (B) ALL REASONABLE OUT-OF-POCKET COSTS AND EXPENSES OF THE ADMINISTRATIVE AGENT AND THE LENDERS IN CONNECTION WITH ANY DEFAULT, THE EXERCISE OF ANY RIGHT OR REMEDY AND THE ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY TERM OR PROVISION HEREOF OR THEREOF, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND EXPENSES OF LEGAL COUNSEL FOR THE ADMINISTRATIVE AGENT AND THE LENDERS, (C) ALL TRANSFER, STAMP, DOCUMENTARY OR OTHER SIMILAR TAXES, ASSESSMENTS OR CHARGES LEVIED BY ANY GOVERNMENTAL AUTHORITY IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, (D) ALL COSTS, EXPENSES, ASSESSMENTS AND OTHER CHARGES INCURRED IN CONNECTION WITH ANY FILING, REGISTRATION, RECORDING OR PERFECTION OF ANY LIEN CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (E) ALL REASONABLE OUT-OF-POCKET COSTS AND EXPENSES INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH DUE DILIGENCE, COMPUTER SERVICES, COPYING, APPRAISALS, AUDITS (INCLUDING ENVIRONMENTAL AUDITS AND COLLATERAL AUDITS), FIELD EXAMS, INSURANCE, CONSULTANTS AND SEARCH REPORTS.   SECTION 13.2           INDEMNIFICATION.  F.Y.I. HEREBY AGREES TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES (INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES), CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' AND CONSULTANTS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY ANY LOAN PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE USE OR PROPOSED USE OF ANY LOAN OR LETTER OF CREDIT, (E) ANY AND ALL TAXES, LEVIES, DEDUCTIONS AND CHARGES IMPOSED ON THE ADMINISTRATIVE AGENT, THE ISSUING BANK OR ANY LENDER IN RESPECT OF ANY LETTER OF CREDIT, (F) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF THE PROPERTIES OF ANY LOAN PARTY, EXCEPT TO THE EXTENT THAT THE LOSS, DAMAGE OR CLAIM IS THE DIRECT RESULT OF AN INTENTIONAL AND AFFIRMATIVE ACT BY THE PERSON TO BE INDEMNIFIED THAT CONSTITUTES GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSON, OR (G) ANY INVESTIGATION, LITIGATION OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING; BUT EXCLUDING ANY OF THE FOREGOING TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.  THE OBLIGATIONS OF F.Y.I. UNDER THIS SECTION 13.2 SHALL SURVIVE THE REPAYMENT OF THE LOANS AND LETTER OF CREDIT LIABILITIES AND TERMINATION OF THE COMMITMENTS.   SECTION 13.3           LIMITATION OF LIABILITY.  NONE OF THE ADMINISTRATIVE AGENT, THE LEAD ARRANGER, ANY LENDER OR ANY AFFILIATE, OFFICER, DIRECTOR, EMPLOYEE, ATTORNEY OR AGENT THEREOF SHALL BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE IN GOOD FAITH, OR BE OTHERWISE LIABLE OR RESPONSIBLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING SUCH PERSON'S NEGLIGENCE), EXCEPT FOR SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  NONE OF THE ADMINISTRATIVE AGENT, THE LEAD ARRANGER, ANY LENDER OR ANY AFFILIATE, OFFICER, DIRECTOR, EMPLOYEE, ATTORNEY OR AGENT THEREOF SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND F.Y.I. HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE ANY OF THEM UPON, ANY CLAIM FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES SUFFERED OR INCURRED BY F.Y.I. OR ANY OTHER LOAN PARTY IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.  F.Y.I. HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE THE ADMINISTRATIVE AGENT, THE LEAD ARRANGER OR ANY LENDER OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS OR AGENTS FOR EXEMPLARY OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.   SECTION 13.4           NO DUTY.  ALL ATTORNEYS, ACCOUNTANTS, APPRAISERS AND OTHER PROFESSIONAL PERSONS AND CONSULTANTS RETAINED BY THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO ACT EXCLUSIVELY IN THE INTEREST OF THE ADMINISTRATIVE AGENT AND THE LENDERS AND SHALL HAVE NO DUTY OF DISCLOSURE, DUTY OF LOYALTY, DUTY OF CARE OR OTHER DUTY OR OBLIGATION OF ANY TYPE OR NATURE WHATSOEVER TO F.Y.I. OR ANY OF ITS SUBSIDIARIES OR ANY OF THEIR SHAREHOLDERS OR ANY OTHER PERSON.   SECTION 13.5           NO FIDUCIARY RELATIONSHIP.  THE RELATIONSHIP BETWEEN F.Y.I. AND EACH LENDER IS SOLELY THAT OF DEBTOR AND CREDITOR, AND NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER HAS ANY FIDUCIARY OR OTHER SPECIAL RELATIONSHIP WITH F.Y.I. OR ANY OTHER LOAN PARTY, AND NO TERM OR CONDITION OF ANY OF THE LOAN DOCUMENTS SHALL BE CONSTRUED SO AS TO DEEM THE RELATIONSHIP BETWEEN F.Y.I. AND ANY LENDER, OR ANY OTHER LOAN PARTY AND ANY LENDER, TO BE OTHER THAN THAT OF DEBTOR AND CREDITOR.  NO JOINT VENTURE OR PARTNERSHIP IS CREATED BY THIS AGREEMENT AMONG THE LENDERS OR AMONG F.Y.I. OR ANY OTHER LOAN PARTY AND THE LENDERS.   SECTION 13.6           EQUITABLE RELIEF.  F.Y.I. RECOGNIZES THAT, IN THE EVENT IT FAILS TO PAY, PERFORM, OBSERVE OR DISCHARGE ANY OR ALL OF THE OBLIGATIONS, ANY REMEDY AT LAW MAY PROVE TO BE INADEQUATE RELIEF TO THE ADMINISTRATIVE AGENT AND THE LENDERS. F.Y.I. THEREFORE AGREES THAT THE ADMINISTRATIVE AGENT AND THE LENDERS, IF THE ADMINISTRATIVE AGENT OR THE LENDERS SO REQUEST, SHALL BE ENTITLED TO TEMPORARY AND PERMANENT INJUNCTIVE RELIEF IN ANY SUCH CASE WITHOUT THE NECESSITY OF PROVING ACTUAL DAMAGES.   SECTION 13.7           NO WAIVER; CUMULATIVE REMEDIES.  NO FAILURE ON THE PART OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO EXERCISE AND NO DELAY IN EXERCISING, AND NO COURSE OF DEALING WITH RESPECT TO, ANY RIGHT, POWER OR PRIVILEGE UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL OPERATE AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY RIGHT, POWER OR PRIVILEGE UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT 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 AND THE OTHER LOAN DOCUMENTS ARE CUMULATIVE AND NOT EXCLUSIVE OF ANY RIGHTS AND REMEDIES PROVIDED BY LAW.   SECTION 13.8           SUCCESSORS AND ASSIGNS.   (A)           THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.  NEITHER F.Y.I. NOR ANY OTHER LOAN PARTY MAY ASSIGN OR TRANSFER ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT AND THE REQUIRED LENDERS.  ANY LENDER MAY SELL PARTICIPATIONS IN ALL OR A PORTION OF ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ALL OR A PORTION OF ITS COMMITMENTS AND THE LOANS OWING TO IT); PROVIDED, HOWEVER, THAT (I) SUCH LENDER'S OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ITS COMMITMENTS) SHALL REMAIN UNCHANGED, (II) SUCH LENDER SHALL REMAIN SOLELY RESPONSIBLE TO F.Y.I. FOR THE PERFORMANCE OF SUCH OBLIGATIONS, (III) SUCH LENDER SHALL REMAIN THE HOLDER OF ITS NOTES FOR ALL PURPOSES OF THIS AGREEMENT, (IV) F.Y.I. 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) SUCH LENDER SHALL NOT SELL A PARTICIPATION THAT CONVEYS TO THE PARTICIPANT THE RIGHT TO VOTE OR GIVE OR WITHHOLD CONSENTS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OTHER THAN (IF AND TO THE EXTENT THAT SUCH LENDER SO AGREES) THE RIGHT TO VOTE UPON OR CONSENT TO (A) ANY INCREASE OF SUCH LENDER'S COMMITMENTS (OTHER THAN AN INCREASE RESULTING FROM AN ASSIGNMENT TO OR IN FAVOR OF SUCH LENDER FROM ANOTHER LENDER IN ACCORDANCE WITH THIS AGREEMENT), (B) ANY REDUCTION OF THE PRINCIPAL AMOUNT OF, OR INTEREST TO BE PAID ON, THE LOANS OF SUCH LENDER, (C) ANY REDUCTION OF ANY COMMITMENT FEE OR OTHER AMOUNT PAYABLE TO SUCH LENDER UNDER ANY LOAN DOCUMENT IF AND TO THE EXTENT THAT SUCH REDUCTION WOULD DECREASE THE FEE OR OTHER AMOUNT PAYABLE TO THE PARTICIPANT, (D) ANY POSTPONEMENT OF ANY DATE FOR THE PAYMENT OF ANY AMOUNT PAYABLE IN RESPECT OF THE LOANS OF SUCH LENDER, (E) ANY RELEASE OF A MATERIAL PORTION OF THE COLLATERAL FROM THE LIENS CREATED BY THE SECURITY DOCUMENTS AND NOT OTHERWISE EXPRESSLY AUTHORIZED BY THE LOAN DOCUMENTS, AND (F) ANY RELEASE OF ANY LOAN PARTY FROM LIABILITY UNDER THE LOAN DOCUMENTS.   (B)           F.Y.I. AND EACH OF THE LENDERS AGREE THAT ANY LENDER (THE "ASSIGNING LENDER") MAY AT ANY TIME ASSIGN TO ONE OR MORE ELIGIBLE ASSIGNEES ALL, OR A PROPORTIONATE PART OF ALL, OF ITS RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ITS COMMITMENTS, LOANS, LETTERS OF CREDIT (EACH AN "ASSIGNEE"); PROVIDED, HOWEVER, THAT (I) EACH SUCH ASSIGNMENT SHALL BE OF A CONSTANT  PERCENTAGE OF THE ASSIGNING LENDER'S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND (II) EXCEPT IN THE CASE OF AN ASSIGNMENT OF ALL OF A LENDER'S RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, THE AMOUNT OF THE COMMITMENTS, LOANS AND LETTERS OF CREDIT OF THE ASSIGNING LENDER BEING ASSIGNED PURSUANT TO EACH ASSIGNMENT (DETERMINED AS OF THE DATE OF THE ASSIGNMENT AND ACCEPTANCE WITH RESPECT TO SUCH ASSIGNMENT) SHALL IN NO EVENT BE LESS THAN AN AGGREGATE AMOUNT EQUAL TO $5,000,000, AND (III) THE PARTIES TO EACH SUCH ASSIGNMENT SHALL EXECUTE AND DELIVER TO THE ADMINISTRATIVE AGENT FOR ITS ACCEPTANCE AND RECORDING IN THE REGISTER (AS DEFINED BELOW), AN ASSIGNMENT AND ACCEPTANCE, TOGETHER WITH THE NOTES SUBJECT TO SUCH ASSIGNMENT, AND A PROCESSING AND RECORDATION FEE OF $3,500.  UPON SUCH EXECUTION, DELIVERY, ACCEPTANCE AND RECORDING, FROM AND AFTER THE EFFECTIVE DATE SPECIFIED IN EACH ASSIGNMENT AND ACCEPTANCE, WHICH EFFECTIVE DATE SHALL BE AT LEAST FIVE BUSINESS DAYS AFTER THE EXECUTION THEREOF OR SUCH OTHER DATE AS MAY BE APPROVED BY THE ADMINISTRATIVE AGENT, (1) THE ASSIGNEE THEREUNDER SHALL BE A PARTY HERETO AS A "LENDER" AND, TO THE EXTENT THAT RIGHTS AND OBLIGATIONS HEREUNDER HAVE BEEN ASSIGNED TO IT PURSUANT TO SUCH ASSIGNMENT AND ACCEPTANCE, HAVE THE RIGHTS AND OBLIGATIONS OF A LENDER HEREUNDER AND UNDER THE LOAN DOCUMENTS, AND (2) THE ASSIGNING LENDER THEREUNDER SHALL, TO THE EXTENT THAT RIGHTS AND OBLIGATIONS HEREUNDER HAVE BEEN ASSIGNED BY IT PURSUANT TO SUCH ASSIGNMENT AND ACCEPTANCE, RELINQUISH ITS RIGHTS AND 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 LENDER'S RIGHTS AND OBLIGATIONS UNDER THE LOAN DOCUMENTS, SUCH LENDER SHALL CEASE TO BE A PARTY THERETO, PROVIDED THAT SUCH LENDER'S RIGHTS UNDER ARTICLE 4, SECTION 13.1 AND SECTION 13.2 ACCRUED THROUGH THE DATE OF ASSIGNMENT SHALL CONTINUE.   (C)           BY EXECUTING AND DELIVERING AN ASSIGNMENT AND ACCEPTANCE, THE ASSIGNING LENDER THEREUNDER AND THE ASSIGNEE THEREUNDER CONFIRM TO AND AGREE WITH EACH OTHER AND THE OTHER PARTIES HERETO AS FOLLOWS: (I) OTHER THAN AS PROVIDED IN SUCH ASSIGNMENT AND ACCEPTANCE, SUCH ASSIGNING LENDER MAKES NO REPRESENTATION OR WARRANTY AND ASSUMES NO RESPONSIBILITY WITH RESPECT TO ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS MADE IN OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE EXECUTION, LEGALITY, VALIDITY, ENFORCEABILITY, GENUINENESS, SUFFICIENCY OR VALUE OF THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT THERETO; (II) SUCH ASSIGNING LENDER MAKES NO REPRESENTATION OR WARRANTY AND ASSUMES NO RESPONSIBILITY WITH RESPECT TO THE FINANCIAL CONDITION OR RESULTS OF OPERATIONS OF ANY LOAN PARTY OR THE PERFORMANCE OR OBSERVANCE BY ANY LOAN PARTY OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS; (III) SUCH ASSIGNEE CONFIRMS THAT IT HAS RECEIVED A COPY OF THE OTHER LOAN DOCUMENTS, TOGETHER WITH COPIES OF THE FINANCIAL STATEMENTS REFERRED TO IN SECTION 7.2 AND SUCH OTHER DOCUMENTS AND INFORMATION AS IT HAS DEEMED APPROPRIATE TO MAKE ITS OWN CREDIT ANALYSIS AND DECISION TO ENTER INTO SUCH ASSIGNMENT AND ACCEPTANCE; (IV) SUCH ASSIGNEE WILL, INDEPENDENTLY AND WITHOUT RELIANCE UPON THE ADMINISTRATIVE AGENT OR SUCH ASSIGNING LENDER AND BASED ON SUCH DOCUMENTS AND INFORMATION AS IT SHALL DEEM APPROPRIATE AT THE TIME, CONTINUE TO MAKE ITS OWN CREDIT DECISIONS IN TAKING OR NOT TAKING ACTION UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; (V) SUCH ASSIGNEE CONFIRMS THAT IT IS AN ELIGIBLE ASSIGNEE; (VI) SUCH ASSIGNEE APPOINTS AND AUTHORIZES THE ADMINISTRATIVE AGENT TO TAKE SUCH ACTION AS AGENT ON ITS BEHALF AND EXERCISE SUCH POWERS UNDER THE LOAN DOCUMENTS AS ARE DELEGATED TO THE ADMINISTRATIVE AGENT BY THE TERMS THEREOF, TOGETHER WITH SUCH POWERS AS ARE REASONABLY INCIDENTAL THERETO; AND (VII) SUCH ASSIGNEE AGREES THAT IT WILL PERFORM IN ACCORDANCE WITH THEIR TERMS ALL OF THE OBLIGATIONS WHICH BY THE TERMS OF THE LOAN DOCUMENTS ARE REQUIRED TO BE PERFORMED BY IT AS A LENDER.   (D)           THE ADMINISTRATIVE AGENT SHALL MAINTAIN AT ITS PRINCIPAL OFFICE A COPY OF EACH ASSIGNMENT AND ACCEPTANCE DELIVERED TO AND ACCEPTED BY IT AND A REGISTER FOR THE RECORDATION OF THE NAMES AND ADDRESSES OF THE LENDERS AND THE COMMITMENTS OF, AND PRINCIPAL AMOUNT OF THE LOANS OWING TO, EACH LENDER FROM TIME TO TIME (THE "REGISTER").  THE ENTRIES IN THE REGISTER SHALL BE CONCLUSIVE AND BINDING FOR ALL PURPOSES, ABSENT MANIFEST ERROR, AND F.Y.I., THE ADMINISTRATIVE AGENT AND THE LENDERS MAY TREAT EACH PERSON WHOSE NAME IS RECORDED IN THE REGISTER AS A LENDER HEREUNDER FOR ALL PURPOSES UNDER THE LOAN DOCUMENTS.  THE REGISTER SHALL BE AVAILABLE FOR INSPECTION BY ANY BORROWER 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 ASSIGNEE REPRESENTING THAT IT IS AN ELIGIBLE ASSIGNEE, TOGETHER WITH THE NOTES SUBJECT TO SUCH ASSIGNMENT, THE ADMINISTRATIVE AGENT SHALL, IF SUCH ASSIGNMENT AND ACCEPTANCE HAS BEEN COMPLETED AND IS IN SUBSTANTIALLY THE FORM OF EXHIBIT A HERETO, (I) ACCEPT SUCH ASSIGNMENT AND ACCEPTANCE, (II) RECORD THE INFORMATION CONTAINED THEREIN IN THE REGISTER, AND (III) GIVE PROMPT WRITTEN NOTICE THEREOF TO F.Y.I.  WITHIN FIVE BUSINESS DAYS AFTER ITS RECEIPT OF SUCH NOTICE, F.Y.I., AT ITS EXPENSE, SHALL EXECUTE AND DELIVER TO THE ADMINISTRATIVE AGENT IN EXCHANGE FOR EACH SURRENDERED NOTE EVIDENCING PARTICULAR LOANS, A NEW NOTE EVIDENCING EACH SUCH LOANS PAYABLE TO THE ORDER OF SUCH ELIGIBLE ASSIGNEE IN AN AMOUNT EQUAL TO SUCH LOANS ASSIGNED TO IT AND, IF THE ASSIGNING LENDER HAS RETAINED ANY LOANS, A NEW NOTE EVIDENCING EACH SUCH LOANS PAYABLE TO THE ORDER OF THE ASSIGNING LENDER IN THE AMOUNT OF SUCH LOANS RETAINED BY IT (EACH SUCH PROMISSORY NOTE SHALL CONSTITUTE A "NOTE" FOR PURPOSES OF THE LOAN DOCUMENTS).  SUCH NEW NOTES SHALL BE DATED THE EFFECTIVE DATE OF SUCH ASSIGNMENT AND ACCEPTANCE AND SHALL OTHERWISE BE IN SUBSTANTIALLY THE FORM OF EXHIBITS C AND D HERETO, AS APPLICABLE.   (F)            ANY LENDER MAY, IN CONNECTION WITH ANY ASSIGNMENT OR PARTICIPATION OR PROPOSED ASSIGNMENT OR PARTICIPATION PURSUANT TO THIS SECTION 13.8, DISCLOSE TO THE ASSIGNEE OR PARTICIPANT OR PROPOSED ASSIGNEE OR PARTICIPANT ANY INFORMATION RELATING TO F.Y.I. OR ANY OF ITS SUBSIDIARIES OR ANY OTHER LOAN PARTY FURNISHED TO SUCH LENDER BY OR ON BEHALF OF F.Y.I. OR ANY OF ITS SUBSIDIARIES OR ANY OTHER LOAN PARTY PROVIDED THAT F.Y.I. SHALL HAVE NO LIABILITY FOR THE ACCURACY OF ANY SUCH INFORMATION EXCEPT (I) TO THE ADMINISTRATIVE AGENT AND THE LENDERS TO THE EXTENT EXPRESSLY PROVIDED HEREIN OR (II) AS OF THE DATE IT WAS FURNISHED BY F.Y.I.; PROVIDED THAT EACH SUCH ACTUAL OR PROPOSED ASSIGNEE OR PARTICIPANT SHALL AGREE TO BE BOUND BY THE PROVISIONS OF SECTION 13.20.   (G)           ANY LENDER MAY ASSIGN AND PLEDGE ALL OR ANY OF THE NOTES HELD BY IT TO ANY FEDERAL RESERVE BANK OR THE U.S. 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 SYSTEM AND/OR FEDERAL RESERVE BANK; PROVIDED, THAT, ANY PAYMENT MADE BY F.Y.I. FOR THE BENEFIT OF SUCH ASSIGNING AND/OR PLEDGING LENDER IN ACCORDANCE WITH THE TERMS OF THE LOAN DOCUMENTS SHALL SATISFY F.Y.I.'S OBLIGATIONS UNDER THE LOAN DOCUMENTS IN RESPECT THEREOF TO THE EXTENT OF SUCH PAYMENT.  NO SUCH ASSIGNMENT AND/OR PLEDGE SHALL RELEASE THE ASSIGNING AND/OR PLEDGING LENDER FROM ITS OBLIGATIONS HEREUNDER.   SECTION 13.9           SURVIVAL.  ALL REPRESENTATIONS AND WARRANTIES MADE OR DEEMED MADE IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR IN ANY DOCUMENT, STATEMENT OR CERTIFICATE FURNISHED IN CONNECTION WITH THIS AGREEMENT SHALL SURVIVE THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE MAKING OF THE LOANS, AND NO INVESTIGATION BY THE ADMINISTRATIVE AGENT OR ANY LENDER OR ANY CLOSING SHALL AFFECT THE REPRESENTATIONS AND WARRANTIES OR THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO RELY UPON THEM.  WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER OBLIGATION OF F.Y.I. HEREUNDER, THE OBLIGATIONS OF F.Y.I. UNDER ARTICLE 4 AND SECTIONS 13.1 AND 13.2 SHALL SURVIVE REPAYMENT OF THE LOANS AND THE LETTER OF CREDIT LIABILITIES, BUT SHALL NOT SURVIVE THE EXPIRATION OF ANY APPLICABLE STATUTE OF LIMITATIONS.   SECTION 13.10         ENTIRE AGREEMENT.  THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, TERM SHEETS, 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.   SECTION 13.11         AMENDMENTS.  NO AMENDMENT OR WAIVER OF ANY PROVISION OF THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT (EXCEPT FOR ANY INTEREST RATE PROTECTION AGREEMENTS OR CURRENCY HEDGE AGREEMENTS THAT ARE LOAN DOCUMENTS) TO WHICH F.Y.I. IS A PARTY, NOR ANY CONSENT TO ANY DEPARTURE BY F.Y.I. THEREFROM, SHALL IN ANY EVENT BE EFFECTIVE UNLESS THE SAME SHALL BE AGREED OR CONSENTED TO BY THE REQUIRED LENDERS AND F.Y.I. IN WRITING, AND EACH SUCH WAIVER OR CONSENT SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH GIVEN; PROVIDED, THAT NO AMENDMENT, WAIVER OR CONSENT SHALL, UNLESS IN WRITING AND SIGNED BY ALL OF THE LENDERS AND F.Y.I., DO ANY OF THE FOLLOWING: (A) INCREASE THE COMMITMENTS OF THE LENDERS OR SUBJECT THE LENDERS TO ANY ADDITIONAL OBLIGATIONS; (B) REDUCE THE PRINCIPAL OF, OR INTEREST ON, THE LOANS, LETTER OF CREDIT LIABILITIES OR ANY FEES OR OTHER AMOUNTS PAYABLE HEREUNDER; (C) POSTPONE ANY DATE FIXED FOR ANY PAYMENT (INCLUDING, WITHOUT LIMITATION, ANY MANDATORY PREPAYMENT) OF PRINCIPAL OF, OR INTEREST ON, THE LOANS, LETTER OF CREDIT LIABILITIES OR ANY FEES OR OTHER AMOUNTS PAYABLE HEREUNDER; (D) CHANGE THE COMMITMENT PERCENTAGES OR THE AGGREGATE UNPAID PRINCIPAL AMOUNT OF THE LOANS, LETTER OF CREDIT LIABILITIES OR THE NUMBER OR INTERESTS OF THE LENDERS WHICH SHALL BE REQUIRED FOR THE LENDERS OR ANY OF THEM TO TAKE ANY ACTION UNDER THIS AGREEMENT; (E) CHANGE ANY PROVISION CONTAINED IN THIS SECTION 13.11 OR MODIFY THE DEFINITION OF "REQUIRED LENDERS" CONTAINED IN SECTION 1.1; OR (F) RELEASE ALL OR SUBSTANTIALLY ALL OF THE COLLATERAL FROM THE LIENS CREATED BY THE SECURITY DOCUMENTS (PROVIDED THAT A RELEASE OF COLLATERAL IN ACCORDANCE WITH THE TERMS OF SECTION 5.4(B) SHALL NOT BE CONSIDERED TO BE A RELEASE OF ALL OR SUBSTANTIALLY ALL OF THE COLLATERAL FOR PURPOSES OF THIS SECTION 13.11) OR RELEASE ALL OR SUBSTANTIALLY ALL GUARANTIES OF ALL OR ANY PORTION OF THE OBLIGATIONS; PROVIDED FURTHER THAT THE AMENDMENT TO INCREASE THE AMOUNT OF THE COMMITTED OBLIGATIONS UNDER THIS AGREEMENT PERMITTED BY CLAUSE (H) OF SECTION 9.1 SHALL REQUIRE ONLY THE AGREEMENT OF (AND EXECUTION THEREOF BY) F.Y.I., THE ADMINISTRATIVE AGENT AND THE LENDERS (EXISTING OR NEW) COMMITTING TO ADVANCE SUCH INCREASE AMOUNT. THE ADMINISTRATIVE AGENT SHALL NOT TERMINATE A PAYMENT BLOCKAGE PERIOD UNDER ANY SUBORDINATION AGREEMENT WITHOUT THE CONSENT OF THE REQUIRED LENDERS.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 13.11, NO AMENDMENT, WAIVER OR CONSENT SHALL BE MADE WITH RESPECT TO ARTICLE 12 HEREOF WITHOUT THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT.  IF AT ANY TIME A LENDER BECOMES A NONCONSENTING LENDER (AS IDENTIFIED IN THIS SECTION 13.11), F.Y.I. SHALL HAVE THE RIGHT TO REPLACE SUCH LENDER WITH ANOTHER PERSON; PROVIDED THAT (I) SUCH NEW PERSON SHALL BE AN ELIGIBLE ASSIGNEE ACCEPTABLE TO THE ADMINISTRATIVE AGENT AND SUCH NEW PERSON SHALL EXECUTE AN ASSIGNMENT AND ACCEPTANCE, (II) F.Y.I. SHALL HAVE NO RIGHT TO REPLACE BANK OF AMERICA, (III) NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER SHALL HAVE ANY OBLIGATION TO F.Y.I. TO FIND SUCH OTHER PERSON, AND (IV) IN THE EVENT OF A REPLACEMENT OF A NONCONSENTING LENDER, IN ORDER FOR F.Y.I. TO BE ENTITLED TO REPLACE SUCH A LENDER, SUCH REPLACEMENT MUST TAKE PLACE NO LATER THAN 180 DAYS AFTER THE DATE THE NONCONSENTING LENDER SHALL NOTIFY F.Y.I. AND THE ADMINISTRATIVE AGENT OF ITS FAILURE TO AGREE TO ANY REQUESTED CONSENT, WAIVER, EXTENSION OR OTHER MODIFICATION.  EACH LENDER (OTHER THAN BANK OF AMERICA) AGREES TO ITS REPLACEMENT AT THE OPTION OF F.Y.I. PURSUANT TO THIS SECTION 13.11 AND IN ACCORDANCE WITH SECTION 13.8; PROVIDED THAT THE SUCCESSOR LENDER SHALL PURCHASE WITHOUT RECOURSE SUCH LENDER'S INTEREST IN THE OBLIGATIONS OF F.Y.I. TO SUCH LENDER FOR CASH IN AN AGGREGATE AMOUNT EQUAL TO THE AGGREGATE UNPAID PRINCIPAL THEREOF, ALL UNPAID INTEREST ACCRUED THEREON, ALL UNPAID COMMITMENT FEES ACCRUED FOR THE ACCOUNT OF SUCH LENDER, ANY BREAKAGE COSTS INCURRED BY THE SELLING LENDER BECAUSE OF THE PREPAYMENT OF ANY EURODOLLAR LOANS, ALL OTHER FEES (IF ANY) APPLICABLE THERETO AND ALL OTHER AMOUNTS (INCLUDING ANY AMOUNTS UNDER ARTICLE 4) THEN OWING TO SUCH LENDER HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT AND THE LOAN PARTIES SHALL EXECUTE A RELEASE ADDRESSED TO SUCH LENDER RELEASING SUCH LENDER FROM ALL CLAIMS ARISING IN CONNECTION WITH THE LOAN DOCUMENTS.  IN THE EVENT THAT EITHER (A) (X) F.Y.I. OR THE ADMINISTRATIVE AGENT HAS REQUESTED THE LENDERS TO CONSENT TO A DEPARTURE OR WAIVER OF ANY PROVISIONS OF THE LOAN DOCUMENTS OR TO AGREE TO ANY OTHER MODIFICATION THERETO, (Y) THE CONSENT, WAIVER OR OTHER MODIFICATION IN QUESTION REQUIRES THE AGREEMENT OF ALL LENDERS IN ACCORDANCE WITH THE TERMS OF THIS SECTION 13.11 AND (Z) REQUIRED LENDERS HAVE AGREED TO SUCH CONSENT, WAIVER OR OTHER MODIFICATION, OR (B) PURSUANT TO SECTION 2.1(D) F.Y.I. HAS REQUESTED AN EXTENSION TO THE MATURITY DATE AND AT LEAST 51% OF THE LENDERS HAVE AGREED TO EXTEND THE MATURITY DATE IN ACCORDANCE THEREWITH, THEN ANY LENDER WHO DOES NOT AGREE TO SUCH CONSENT, WAIVER, EXTENSION OR OTHER MODIFICATION SHALL BE DEEMED A "NONCONSENTING LENDER".   SECTION 13.12         MAXIMUM INTEREST RATE.   (A)           NO INTEREST RATE SPECIFIED IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL AT ANY TIME EXCEED THE MAXIMUM RATE.  IF AT ANY TIME THE INTEREST RATE (THE "CONTRACT RATE") FOR ANY OBLIGATION SHALL EXCEED THE MAXIMUM RATE, THEREBY CAUSING THE INTEREST ACCRUING ON SUCH OBLIGATION TO BE LIMITED TO THE MAXIMUM RATE, THEN ANY SUBSEQUENT REDUCTION IN THE CONTRACT RATE FOR SUCH OBLIGATION SHALL NOT REDUCE THE RATE OF INTEREST ON SUCH OBLIGATION BELOW THE MAXIMUM RATE UNTIL THE AGGREGATE AMOUNT OF INTEREST ACCRUED ON SUCH OBLIGATION EQUALS THE AGGREGATE AMOUNT OF INTEREST WHICH WOULD HAVE ACCRUED ON SUCH OBLIGATION IF THE CONTRACT RATE FOR SUCH OBLIGATION HAD AT ALL TIMES BEEN IN EFFECT.   (B)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, NONE OF THE TERMS AND PROVISIONS OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL EVER BE CONSTRUED TO CREATE A CONTRACT OR OBLIGATION TO PAY INTEREST AT A RATE IN EXCESS OF THE MAXIMUM RATE; AND NEITHER THE ADMINISTRATIVE AGENT NOR ANY LENDER SHALL EVER CHARGE, RECEIVE, TAKE, COLLECT, RESERVE OR APPLY, AS INTEREST ON THE OBLIGATIONS, ANY AMOUNT IN EXCESS OF THE MAXIMUM RATE.  THE PARTIES HERETO AGREE THAT ANY INTEREST, CHARGE, FEE, EXPENSE OR OTHER OBLIGATION PROVIDED FOR IN THIS AGREEMENT OR IN THE OTHER LOAN DOCUMENTS WHICH CONSTITUTES INTEREST UNDER APPLICABLE LAW SHALL BE, IPSO FACTO AND UNDER ANY AND ALL CIRCUMSTANCES, LIMITED OR REDUCED TO AN AMOUNT EQUAL TO THE LESSER OF (I) THE AMOUNT OF SUCH INTEREST, CHARGE, FEE, EXPENSE OR OTHER OBLIGATION THAT WOULD BE PAYABLE IN THE ABSENCE OF THIS SECTION 13.12(B) OR (II) AN AMOUNT, WHICH WHEN ADDED TO ALL OTHER INTEREST PAYABLE UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, EQUALS THE MAXIMUM RATE.  IF, NOTWITHSTANDING THE FOREGOING, THE ADMINISTRATIVE AGENT OR ANY LENDER EVER CONTRACTS FOR, CHARGES, RECEIVES, TAKES, COLLECTS, RESERVES OR APPLIES AS INTEREST ANY AMOUNT IN EXCESS OF THE MAXIMUM RATE, SUCH AMOUNT WHICH WOULD BE DEEMED EXCESSIVE INTEREST SHALL BE DEEMED A PARTIAL PAYMENT OR PREPAYMENT OF PRINCIPAL OF THE OBLIGATIONS AND TREATED HEREUNDER AS SUCH; AND IF THE OBLIGATIONS, OR APPLICABLE PORTIONS THEREOF, ARE PAID IN FULL, ANY REMAINING EXCESS SHALL PROMPTLY BE PAID TO F.Y.I. (AS APPROPRIATE).  IN DETERMINING WHETHER THE INTEREST PAID OR PAYABLE, UNDER ANY SPECIFIC CONTINGENCY, EXCEEDS THE MAXIMUM RATE, F.Y.I., THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, (I) CHARACTERIZE ANY NONPRINCIPAL PAYMENT AS AN EXPENSE, FEE OR PREMIUM RATHER THAN AS INTEREST, (II) EXCLUDE VOLUNTARY PREPAYMENTS AND THE EFFECTS THEREOF, AND (III) AMORTIZE, PRORATE, ALLOCATE AND SPREAD IN EQUAL OR UNEQUAL PARTS THE TOTAL AMOUNT OF INTEREST THROUGHOUT THE ENTIRE CONTEMPLATED TERM OF THE OBLIGATIONS, OR APPLICABLE PORTIONS THEREOF, SO THAT THE INTEREST RATE DOES NOT EXCEED THE MAXIMUM RATE AT ANY TIME DURING THE TERM OF THE OBLIGATIONS; PROVIDED THAT, IF THE UNPAID PRINCIPAL BALANCE IS PAID AND PERFORMED IN FULL PRIOR TO THE END OF THE FULL CONTEMPLATED TERM THEREOF, AND IF THE INTEREST RECEIVED FOR THE ACTUAL PERIOD OF EXISTENCE THEREOF EXCEEDS THE MAXIMUM RATE, THE ADMINISTRATIVE AGENT AND/OR THE LENDERS, AS APPROPRIATE, SHALL REFUND TO F.Y.I. THE AMOUNT OF SUCH EXCESS AND, IN SUCH EVENT, THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL NOT BE SUBJECT TO ANY PENALTIES PROVIDED BY ANY LAWS FOR CONTRACTING FOR, CHARGING, RECEIVING, TAKING, COLLECTING, RESERVING OR APPLYING INTEREST IN EXCESS OF THE MAXIMUM RATE.   SECTION 13.13         NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS PROVIDED FOR IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH F.Y.I. OR ANY OF ITS SUBSIDIARIES IS A PARTY SHALL BE GIVEN OR MADE BY TELECOPY OR IN WRITING AND TELECOPIED, MAILED BY CERTIFIED MAIL RETURN RECEIPT REQUESTED OR DELIVERED TO THE INTENDED RECIPIENT AT THE "ADDRESS FOR NOTICES" SPECIFIED BELOW ITS NAME ON THE SIGNATURE PAGES HEREOF (OR, WITH RESPECT TO A LENDER THAT BECOMES A PARTY TO THIS AGREEMENT PURSUANT TO AN ASSIGNMENT MADE IN ACCORDANCE WITH SECTION 13.8, IN THE ASSIGNMENT AND ACCEPTANCE EXECUTED BY IT); OR, AS TO ANY PARTY, AT SUCH OTHER ADDRESS AS SHALL BE DESIGNATED BY SUCH PARTY IN A NOTICE TO EACH OTHER PARTY GIVEN IN ACCORDANCE WITH THIS SECTION 13.13.  EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, ALL SUCH COMMUNICATIONS SHALL BE DEEMED TO HAVE BEEN DULY GIVEN WHEN TRANSMITTED BY TELECOPY OR PERSONALLY DELIVERED OR, IN THE CASE OF A MAILED NOTICE, UPON RECEIPT, IN EACH CASE GIVEN OR ADDRESSED AS AFORESAID; PROVIDED, HOWEVER, THAT NOTICES TO THE ADMINISTRATIVE AGENT SHALL BE DEEMED GIVEN WHEN RECEIVED BY THE ADMINISTRATIVE AGENT.   SECTION 13.14         GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS.  EXCEPT AS MAY BE EXPRESSLY STATED TO THE CONTRARY IN CERTAIN LOAN DOCUMENTS, THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES) AND APPLICABLE LAWS OF THE U.S.  F.Y.I. AND EACH OF ITS SUBSIDIARIES HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EACH OF (1) THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS AND (2) ANY TEXAS STATE COURT SITTING IN DALLAS COUNTY, TEXAS FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  EACH OF F.Y.I. AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SET FORTH UNDERNEATH ITS SIGNATURE HERETO.  EACH OF F.Y.I. AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.   SECTION 13.15         COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.   SECTION 13.16         SEVERABILITY.  ANY PROVISION OF THIS AGREEMENT HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID OR UNENFORCEABLE SHALL NOT IMPAIR OR INVALIDATE THE REMAINDER OF THIS AGREEMENT AND THE EFFECT THEREOF SHALL BE CONFINED TO THE PROVISION HELD TO BE INVALID OR ILLEGAL.   SECTION 13.17         HEADINGS.  THE HEADINGS, CAPTIONS AND ARRANGEMENTS USED IN THIS AGREEMENT ARE FOR CONVENIENCE ONLY AND SHALL NOT AFFECT THE INTERPRETATION OF THIS AGREEMENT.   SECTION 13.18         CONSTRUCTION.  EACH OF F.Y.I. AND EACH OF ITS SUBSIDIARIES, THE ADMINISTRATIVE AGENT AND EACH LENDER ACKNOWLEDGES THAT IT HAS HAD THE BENEFIT OF LEGAL COUNSEL OF ITS OWN CHOICE AND HAS BEEN AFFORDED AN OPPORTUNITY TO REVIEW THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS WITH ITS LEGAL COUNSEL AND THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED AS IF JOINTLY DRAFTED BY THE PARTIES HERETO.   SECTION 13.19         INDEPENDENCE OF COVENANTS.  ALL COVENANTS HEREUNDER SHALL BE GIVEN INDEPENDENT EFFECT SO THAT IF A PARTICULAR ACTION OR CONDITION IS NOT PERMITTED BY ANY OF SUCH COVENANTS, THE FACT THAT IT WOULD BE PERMITTED BY AN EXCEPTION TO, OR BE OTHERWISE WITHIN THE LIMITATIONS OF, ANOTHER COVENANT SHALL NOT AVOID THE OCCURRENCE OF A DEFAULT IF SUCH ACTION IS TAKEN OR SUCH CONDITION EXISTS.   SECTION 13.20         CONFIDENTIALITY.  EACH LENDER AGREES TO EXERCISE ITS BEST EFFORTS TO KEEP ANY INFORMATION DELIVERED OR MADE AVAILABLE BY ANY LOAN PARTY TO IT WHICH IS CLEARLY INDICATED TO BE CONFIDENTIAL INFORMATION, CONFIDENTIAL FROM ANYONE OTHER THAN PERSONS EMPLOYED OR RETAINED BY SUCH LENDER WHO ARE OR ARE EXPECTED TO BECOME ENGAGED IN EVALUATING, APPROVING, STRUCTURING OR ADMINISTERING THE LOANS; PROVIDED THAT NOTHING HEREIN SHALL PREVENT ANY LENDER FROM DISCLOSING SUCH INFORMATION (A) TO ANY OTHER LENDER, (B) TO ANY PERSON IF REASONABLY INCIDENTAL TO THE ADMINISTRATION OF THE LOANS, (C) UPON THE ORDER OF ANY COURT OR ADMINISTRATIVE AGENCY, (D) UPON THE REQUEST OR DEMAND OF ANY REGULATORY AGENCY OR AUTHORITY HAVING JURISDICTION OVER SUCH LENDER, (E) WHICH HAS BEEN PUBLICLY DISCLOSED, (F) IN CONNECTION WITH ANY LITIGATION TO WHICH THE ADMINISTRATIVE AGENT, ANY LENDER OR THEIR RESPECTIVE AFFILIATES MAY BE A PARTY, (G) TO THE EXTENT REASONABLY REQUIRED IN CONNECTION WITH THE EXERCISE OF ANY REMEDY UNDER THE LOAN DOCUMENTS, (H) TO SUCH LENDER'S LEGAL COUNSEL, INDEPENDENT AUDITORS AND AFFILIATES, AND (I) TO ANY ACTUAL OR PROPOSED PARTICIPANT OR ASSIGNEE OF ALL OR PART OF ITS RIGHTS HEREUNDER, SO LONG AS SUCH ACTUAL OR PROPOSED PARTICIPANT OR ASSIGNEE AGREES TO BE BOUND BY THE PROVISIONS OF THIS SECTION 13.20.   SECTION 13.21         WAIVER OF JURY TRIAL.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO 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 ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF ANY LOAN PARTY, THE ADMINISTRATIVE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.   SECTION 13.22         APPROVALS AND CONSENT.  EXCEPT AS MAY BE EXPRESSLY PROVIDED TO THE CONTRARY IN THIS AGREEMENT OR IN THE OTHER LOAN DOCUMENTS (AS APPLICABLE), IN ANY INSTANCE UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS WHERE THE APPROVAL, CONSENT OR EXERCISE OF JUDGMENT OF THE ADMINISTRATIVE AGENT OR ANY LENDER IS REQUESTED OR REQUIRED, (A) THE GRANTING OR DENIAL OF SUCH APPROVAL OR CONSENT AND THE EXERCISE OF SUCH JUDGMENT SHALL BE WITHIN THE SOLE DISCRETION OF THE ADMINISTRATIVE AGENT AND SUCH LENDER, AND THE ADMINISTRATIVE AGENT AND SUCH LENDER SHALL NOT, FOR ANY REASON OR TO ANY EXTENT, BE REQUIRED TO GRANT SUCH APPROVAL OR CONSENT OR TO EXERCISE SUCH JUDGMENT IN ANY PARTICULAR MANNER, REGARDLESS OF THE REASONABLENESS OF THE REQUEST OR THE ACTION OR JUDGMENT OF THE ADMINISTRATIVE AGENT OR SUCH LENDER, AND (B) NO APPROVAL OR CONSENT OF THE ADMINISTRATIVE AGENT OR ANY LENDER SHALL IN ANY EVENT BE EFFECTIVE UNLESS THE SAME SHALL BE IN WRITING AND THE SAME SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE FOR WHICH GIVEN.   SECTION 13.23         AGENT FOR SERVICES OF PROCESS.  EACH OF F.Y.I. AND EACH OF ITS SUBSIDIARIES HEREBY IRREVOCABLY DESIGNATES ANY OFFICER OF F.Y.I., AT THE OFFICES OF F.Y.I. AT 3232 MCKINNEY AVENUE, SUITE 900, DALLAS, TEXAS 75204, TO RECEIVE, FOR AND ON BEHALF OF SUCH PERSON, SERVICE OF PROCESS IN THE STATE OF TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.  EACH OF F.Y.I. AND EACH OF ITS SUBSIDIARIES AGREES THAT THE FAILURE OF ITS AGENT FOR SERVICE OF PROCESS TO GIVE ANY NOTICE OF ANY SUCH SERVICE OF PROCESS TO SUCH PERSON SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED THEREON.  IF, DESPITE THE FOREGOING, THERE IS FOR ANY REASON NO AGENT FOR SERVICE OF PROCESS OF SUCH PERSON AVAILABLE TO BE SERVED, THEN SUCH PERSON FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY THE MAILING THEREOF BY THE ADMINISTRATIVE AGENT OR THE REQUIRED LENDERS BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PERSON AT ITS ADDRESS LISTED ON THE SIGNATURE PAGES HEREOF.  NOTHING IN THIS SECTION 13.23 SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR THE LENDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST F.Y.I. OR ANY OF ITS SUBSIDIARIES OR ITS PROPERTY IN THE COURT OF ANY JURISDICTION.   IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.     F.Y.I. INCORPORATED                 By: /s/ Barry L. Edwards     Barry L. Edwards     Executive Vice President and Chief Financial Officer           Address for Notices:     3232 McKinney Avenue, Suite 900     Dallas, Texas 75204     Telecopy No.:  (214) 953-7556     Telephone No.:  (214) 953-7555     Attention:  Barry L. Edwards         BANK OF AMERICA, N.A., as Administrative Agent                 By: /s/ David A. Johanson     David A. Johanson       Vice President                       BANK OF AMERICA, N.A., as a Lender                   Commitment: By: /s/ Steven A. Mackenzie     $40,000,000 Steven A. Mackenzie       Vice President               Address for Notices:         Bank of America, N.A.       231 South LaSalle Street       Chicago, Illinois  60604       Telecopy No. (312) 974-9102       Telephone No. (312) 828-7933       Attention:  David Johanson               with a copy to:               Bank of America, N.A.       901 Main Street, 7th Floor       Dallas, Texas  75201       Telecopy No. (214) 209-3140       Telephone No. (214) 209-3680       Attention:  Steven A. Mackenzie         Lending Office for Prime Rate and Eurodollar Loans:     Bank of America, N.A.     231 South LaSalle Street     Chicago, Illinois  60604     Telecopy No. (312) 974-9102     Telephone No. (312) 828-7933     Attention:  David Johanson           with a copy to:           Bank of America, N.A.     901 Main Street, 14th Floor     Dallas, Texas  75201     Telecopy No. (214) 290-9442     Telephone No. (214) 209-9289     Attention:  Monica Barnes         SUNTRUST BANK, as syndication agent and as a Lender     Commitment:   By: /s/ Daniel S. Komitor   $40,000,000 Daniel S. Komitor     Director           Address for Notices:       Suntrust Bank       303 Peachtree St.     MC 1921-2nd Floor     Atlanta, Georgia 30308     Telecopy No. 404.588.8833     Telephone No. 404.724.3889     Attention: Daniel S. Komitor           Lending Office for Prime Rate and Eurodollar Loans:           Suntrust Bank     25 Park Place     Atlanta, Georgia  30303     Telecopy No. 404.232.1940     Telephone No. 404.588.7077     Attention: Tom Presley             WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION, as documentation agent and as a Lender     Commitment:   By: /s/ Zachary S. Johnson   $35,000,000 Zachary S. Johnson     Vice President           Address for Notices:             Wells Fargo Bank Texas, National Association     1445 Ross Avenue, 3rd Floor     Dallas, Texas  75202     Telecopy No.:  (214) 969-0370     Telephone No.:  (214) 740-1587     Attention:  Zachary Johnson           Lending Office for Prime Rate and Eurodollar Loans:           Wells Fargo Bank Texas, National Association     1445 Ross Avenue, 3rd Floor     Dallas, Texas  75202     Telecopy No.:  (214) 969-0370     Telephone No.:  (214) 740-1587     Attention:  Zachary Johnson         BANK ONE, NA, as a Lender     Commitment:   By: /s/ Thomas R. Freas   $25,000,000 Thomas R. Freas     Authorized Signatory           Address for Notices:             Bank One, NA     1717 Main Street     Dallas, Texas  75201     Telecopy No.: 214.290.2765     Telephone No.: 214.290.4110     Attention: Thomas R. Freas           Lending Office for Prime Rate and Eurodollar Loans:           Bank One, NA     1717 Main Street     Dallas, Texas  75201     Telecopy No.: 214.290.2765     Telephone No.: 214.290.4110     Attention: Thomas R. Freas         BNP PARIBAS, as a Lender     Commitment:   By: /s/ Jeff Tebeaux   $25,000,000 Jeff Tebeaux     Associate           By: /s/ Lloyd G. Cox     Name: Lloyd G. Cox     Title: Managing Director           Address for Notices:             BNP Paribas     12201 Merit Drive, Suite 860     Dallas, Texas  75251     Telecopy No.: 972.788.9140     Telephone No.: 972.788.9191     Attention: Jeff Tebeaux           Lending Office for Prime Rate and Eurodollar Loans:           BNP Paribas     1200 Smith Street, Ste. 3100     Houston, Texas  77002     Telecopy No.: 713.659.5228     Telephone No.:  713.659.4811     Attention: Donna Rose         FIRST UNION NATIONAL BANK, as a Lender     Commitment:   By: /s/ Jeffrey R. Stottler   $25,000,000 Jeffrey R. Stottler     Vice President           Address for Notices:             First Union National Bank     301 South College Street, 5th Floor DC5     Charlotte, North Carolina  28288-0760     Telecopy No.: 704.383.7611     Telephone No.: 704.715.8098     Attention: David Diggers           Lending Office for Prime Rate and Eurodollar Loans:           First Union National Bank     201 South College Street, 17th Floor NC1183     Charlotte, North Carolina  28288-1183     Telecopy No.: 704.383.7999     Telephone No.: 704.715.1876     Attention: Dianne Taylor         THE BANK OF NOVA SCOTIA, as a Lender     Commitment:   By: /s/ F.C.H. Ashby   $25,000,000 F.C.H. Ashby     Senior Manager Loan Operations           Address for Notices:             The Bank of Nova Scotia     Atlanta Agency     600 Peachtree Street N.E., Suite 2700     Atlanta, Georgia  30308     Telecopy No.:  (404) 888-8998     Telephone No.:  (404) 877-1552     Attention:  Twala Johnson           Lending Office for Prime Rate and Eurodollar Loans:           The Bank of Nova Scotia     Atlanta Agency     600 Peachtree Street N.E., Suite 2700     Atlanta, Georgia  30308     Telecopy No.:  (404) 888-8998     Telephone No.:  (404) 877-1552     Attention:  Twala Johnson         THE CHASE MANHATTAN BANK, as a Lender     Commitment:   By: /s/ Michael D.S. Kerner   $25,000,000 Michael D.S. Kerner     Vice President           Address for Notices:             The Chase Manhattan Bank     2200 Ross Avenue, 5th Floor     Dallas, Texas  75201     Telecopy No.:  (214) 965-2384     Telephone No.:  (214) 965-2503     Attention:  Michael D.S. Kerner           Lending Office for Prime Rate and Eurodollar Loans:           The Chase Manhattan Bank     2200 Ross Avenue, 5th Floor     Dallas, Texas  75201     Telecopy No.:  (214) 965-2384     Telephone No.:  (214) 965-2503     Attention:  Michael D.S. Kerner         WACHOVIA BANK, N.A., as a Lender     Commitment:   By: /s/ David L. Corts   $25,000,000 David L. Corts     Vice President           Address for Notices:             Wachovia Bank, N.A.     191 Peachtree Street     MC-GA-370     Atlanta, Georgia  30303     Telecopy No.:  (404) 332-4136     Telephone No.:  (404) 332-1093     Attention:  Brad Watkins           Lending Office for Prime Rate and Eurodollar Loans:           Wachovia Bank, N.A.     191 Peachtree Street     MC-GA-370     Atlanta, Georgia  30303     Telecopy No.:  (404) 332-332.4320     Telephone No.:  (404) 332-1127     Attention:  Carla Brooks         WASHINGTON MUTUAL BANK, as a Lender     Commitment:   By: /s/ Bruce Kendrex   $15,000,000 Bruce Kendrex     Vice President           Address for Notices:             Washington Mutual Bank     1201 Third Avenue, Suite 1445     Seattle Washington  98101     Telecopy No.:  (206) 490-2538     Telephone No.:  (206) 377-3888     Attention:  Bruce Kendrex           Lending Office for Prime Rate and Eurodollar Loans:           Washington Mutual Bank     1201 Third Avenue, Suite 1445     Seattle Washington  98101     Telecopy No.:  (206) 490-2538     Telephone No.:  (206) 377-3888     Attention:  Bruce Kendrex         TEXAS CAPITAL BANK, NATIONAL ASSOCIATION, as a Lender     Commitment:   By: /s/ Paul Howell   $10,000,000 Paul Howell     Vice President           Address for Notices:             Texas Capital Bank, National Association     2100 McKinney Avenue, Suite 900     Dallas, Texas  75201     Telecopy No.:  (214) 932-6604     Telephone No.:  (214) 932-6663     Attention:  Paul D. Howell           Lending Office for Prime Rate and Eurodollar Loans:         Texas Capital Bank, National Association     2100 McKinney Avenue, Suite 900     Dallas, Texas  75201     Telecopy No.:  (214) 932-6604     Telephone No.:  (214) 932-6663     Attention:  Paul D. Howell         RAYMOND JAMES BANK, FSB, as a Lender     Commitment:   By: /s/ John D. Hallstrom   $7,500,000 John D. Hallstrom     Vice President           Address for Notices:             Raymond James Bank, FSB     710 Carillon Parkway     St. Petersburg, Florida  33716     Telecopy No.:  (727) 575-5519     Telephone No.:  (727) 571-3333, x34847     Attention:  John D. Hallstrom           Lending Office for Prime Rate and Eurodollar Loans:         Raymond James Bank, FSB     710 Carillon Parkway     St. Petersburg, Florida  33716     Telecopy No.:  (727) 575-5519     Telephone No.:  (727) 571-3333, x34847     Attention:  John D. Hallstrom    

________________________________________________   CREDIT AGREEMENT dated as of April 14, 2000 among SUNBURY GENERATION, LLC, as Borrower BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, as WC Lender The Term Lenders Party Hereto From Time to Time and BAYERISCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as Administrative Agent ___________________________ BAYERISCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH Arranger and Syndication Agent   ________________________________________________   TABLE OF CONTENTS SECTION 1. DEFINITIONS  1 1.01 Defined Terms  1 1.02 Terms Generally  18 1.03 Accounting Terms  19 SECTION 2. THE CREDITS  19 2.01 Commitments  19 2.02 WC Borrowings and Term Loans  19 2.03 Requests for WC Borrowings  20 2.04 Funding of Loans  21 2.05 Termination and Reduction of WC Commitment  21 2.06 Repayment of Loans; Evidence of Debt  22 2.07 Voluntary Prepayment of Loans  22 2.08 Mandatory Prepayment of Loans  23 2.09 Payments Generally; Pro Rata Treatment; Sharing of Setoffs  24 2.10 Extension of WC Commitment  25 SECTION 3. INTEREST, FEES, YIELD PROTECTION, ETC.  26 3.01 Interest  26 3.02 Interest Elections  26 3.03 Fees  28 3.04 Alternate Rate of Interest  28 3.05 Increased Costs; Illegality  28 3.06 Break Funding Payments  30 3.07 Taxes  30 3.08 Mitigation Obligations  32 SECTION 4. REPRESENTATIONS AND WARRANTIES  32 4.01 Status and Ownership  32 4.02 Power and Authority  33 4.03 Execution and Binding Effect  33 4.04 Governmental Approvals; No Conflicts  33 4.05 Licenses and Permits  33 4.06 Financial Condition; No Material Adverse Change  34 4.07 Title to and Condition of Properties  34 4.08 Leases  35 4.09 Litigation and Environmental Matters  36 4.10 Compliance with Laws and Agreements  36 4.11 Regulatory Status  36 4.12 Taxes  36 4.13 ERISA 37 4.14 Disclosure  37 4.15 Subsidiaries  37 4.16 Insurance  37 4.17 Labor Matters  37 4.18 Solvency  38 4.19 Security Documents  38 4.20 Federal Reserve Regulations  39 SECTION 5. CONDITIONS  39 5.01 Effective Date  39 5.02 Each Borrowing  43 SECTION 6. AFFIRMATIVE COVENANTS  43 6.01 Financial Statements and Other Information  44 6.02 Notices of Material Events  45 6.03 Existence; Conduct of Business  46 6.04 Payment of Obligations  46 6.05 Performance of Material Project Contracts  46 6.06 Maintenance of Properties  46 6.07 Books and Records; Inspection Rights  47 6.08 Compliance with Laws  47 6.09 Use of Proceeds  47 6.10 Information Regarding Collateral  47 6.11 Insurance  48 6.12 Casualty and Condemnation  48 6.13 Debt Service Reserve Account  49 6.14 Application of Operating Cash Flow  50 6.15 Environmental Compliance  52 6.16 Hedging Agreements  52 6.17 Further Assurances  52 SECTION 7. NEGATIVE COVENANTS  53 7.01 Debt; Preferred Equity Interests  53 7.02 Liens  53 7.03 Fundamental Changes  55 7.04 Investments, Loans, Advances, Guarantees and Acquisitions  55 7.05 Capital Expenditures  55 7.06 Asset Sales  55 7.07 Sale and Lease-Back Transactions  56 7.08 Hedging Agreements  56 7.09 Restricted Payments 56 7.10 Transactions with Affiliates  56 7.11 Modification of Material Contracts and Other Documents  57 SECTION 8. EVENTS OF DEFAULT  57 SECTION 9. THE ADMINISTRATIVE AGENT  60 9.01 Appointment  60 9.02 General Nature of Administrative Agent's Duties  60 9.03 Exercise of Powers  61 9.04 General Exculpatory Provisions  61 9.05 Administration by the Administrative Agent  62 9.06 Lenders Not Relying on Administrative Agent or Other Lenders  63 9.07 Indemnification  63 9.08 Administrative Agent in its Individual Capacity  64 9.09 Holders of Notes  64 9.10 Successor Administrative Agent  64 9.11 Additional Administrative Agents  65 9.12 Calculations  65 9.13 Other Agents  65 SECTION 10. MISCELLANEOUS  66 10.01 Notices  66 10.02 Waivers; Amendments  67 10.03 Expenses; Indemnity; Damage Waiver  69 10.04 Successors and Assigns  70 10.05 Survival  72 10.06 Counterparts; Integration; Effectiveness  72 10.07 Severability  73 10.08 Right of Setoff  73 10.09 Governing Law; Jurisdiction; Consent to Service of Process  74 10.10 WAIVER OF JURY TRIAL  74 10.11 Headings  75 10.12 Interest Rate Limitation  75 ANNEX I              Principal Payment Schedule >   SCHEDULES : Schedule 1.01A Material Project Contracts Schedule 1.01B Mortgaged Properties Schedule 4.05(a) Required Permits Schedule 4.05(b) Environmental Permits Schedule 4.07(a) Title Exceptions Schedule 4.07(b) Condition of Assets Schedule 4.07(c) Real Estate Schedule 4.07(d) Condemnation; First Refusal Rights Schedule 4.08 Leases Schedule 4.09 Litigation and Environmental Matters Schedule 4.16 Insurance Schedule 7.02 Existing Liens Schedule 7.04 Existing Investments EXHIBITS : Exhibit A-1 Form of WC Note Exhibit A-2 Form of Term Note Exhibit B Form of Assignment Agreement Exhibit C Form of Borrowing/Continuation Request Exhibit D Form of Contract Assignment Exhibit E Form of Subordination Agreement Exhibit F Form of PPL Letter of Credit Exhibit G Form of Debt Service Reserve Letter of Credit Exhibit H Form of Security Agreement Exhibit I Form of Opinion of Counsel         CREDIT AGREEMENT, dated as of April 14, 2000, among SUNBURY GENERATION, LLC, BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, as WC Lender, the Term Lenders party hereto from time to time and BAYERISCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as Administrative Agent.     The parties hereto agree as follows: > > > > > SECTION 1.    DEFINITIONS     1.01    Defined Terms             As used in this Agreement, the following terms have the meanings specified in this Section.             "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.             "Administrative Agent" means Bayerische Landesbank Girozentrale, New York Branch, in its capacity as administrative agent for the Lenders hereunder.             "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.             "Affiliate Agreements" means, collectively, the Anthracite Silt Supply Agreement dated as of November 1, 1999 between the Borrower and Penfield, the Services Agreement dated as of November 1, 1999 between the Borrower and Penfield, the Power Purchase Agreement dated as of January 15, 2000 between the Borrower and ESI, the Brokering and Dispatch Agreement dated as of January 15, 2000 between the Borrower and ESI, the Master Affiliated Interest Agreement dated as of May 21, 1997 among the Borrower, WPSR and other Affiliates of WPSR, and the Tax Allocation Agreement dated as of September 1, 1994 among the Borrower, WPSR and other affiliates of WPSR, and any future agreements approved by the Administrative Agent to which the Borrower and any Affiliate or Affiliates are parties.             "Applicable Term Margin" means, at all times during the applicable period set forth below: (a) with respect to Term Eurodollar Borrowings the percentage per annum set forth below adjacent to the applicable period under the heading "Eurodollar Margin"; and (b) with respect to Term Federal Funds Borrowings, the percentage per annum set forth below adjacent to the applicable period under the heading "Federal Funds Margin." Period Eurodollar Margin Federal Funds Margin Initial Funding Date through March 31, 2004 1.25% 1.75% April 1, 2004 through March 31, 2008 1.50% 2.00% April 1, 2008 through March 31, 2012 1.75% 2.25% April 1, 2012 through March 31, 2016 2.00% 2.50% April 1, 2016 through March 31, 2018 2.25% 2.75%             "Applicable WC Margin" means (i) in the case of Eurodollar Loans, 1.25% per annum, and (ii) in the case of Federal Funds Loans, 2.00% per annum.             "Assignment Agreement" means an assignment and acceptance agreement, substantially in the form of Exhibit B or in any other form approved by the Administrative Agent and the Borrower, entered into by a Lender and an assignee (with the consent of the Borrower, if required by Section 10.04) and accepted by the Administrative Agent.             "Available Debt Service Reserve Account Balance" means, as of any date of determination, the amount equal to the lesser of (i) the amount of cash held in the Debt Service Reserve Account on such date plus the liquidation value (either giving effect to or assuming sale on such date) of Eligible Investments held in the Debt Service Reserve Account on such date, net of selling expenses (collectively, "available cash"), and (ii) the difference, if positive, between (A) the available cash in the Debt Service Reserve Account on such date, and (B) the Debt Service Reserve Requirement on such date.             "Available WC Commitment" means (i) at any time when the Debt Service Coverage Ratio, as shown in the most recent Quarterly Certificate delivered by the Borrower, is equal to or greater than 1.00, the excess, if any, of the WC Commitment Amount over the total WC Loans outstanding to the Borrower, and (ii) at any time when the Debt Service Coverage Ratio as shown in the most recent such Quarterly Certificate is less than 1.00, zero.             "Board" means the Board of Governors of the Federal Reserve System of the United States of America.             "Borrower" means Sunbury Generation, LLC, a Delaware limited liability company.             "Borrowing" means a borrowing consisting of one or more Loans of the same Type and Interest Period, if applicable, made, continued or converted on the same Business Day.             "Borrowing Request" means a request by the Borrower for a Borrowing pursuant to Section 2.03, substantially in the form of Exhibit C with appropriate modifications and insertions.             "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed, provided that, when used in connection with a Eurodollar Borrowing, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.             "Capital Expenditures" of any Person means expenditures (whether paid in cash or other consideration or accrued as a liability) for fixed or capital assets (excluding (i) any capitalized interest and any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations, (ii) any replacement assets acquired with the proceeds of insurance, (iii) purchases of emissions allowances and (iv) purchases of fuel inventory) made by such Person.             "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.             "Change in Control" means (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), other than WPSR or any Affiliate thereof, of shares representing more than 50% of the aggregate ordinary voting power or economic interests represented by the issued and outstanding equity securities of PDI on a fully diluted basis without the prior written consent of the Required Lenders (such consent not to be unreasonably withheld or delayed), (b) the failure of PDI or any Affiliate thereof to own directly, beneficially and of record, more than 50% of the aggregate ordinary voting power represented by the outstanding membership interests of the Borrower on a fully diluted basis, in each case, without the prior written consent of the Required Lenders (such consent not to be unreasonably withheld or delayed), or (c) the acquisition by any Person or group, other than PDI, WPSR and any Affiliates thereof, of Control over the Borrower (other than through the ownership of membership interests in the Borrower), or operating control over the Project, by contract or otherwise, without the prior written consent of the Required Lenders (such consent not to be unreasonably withheld or delayed). To avoid uncertainty in the interpretation of this definition, in the event of any dispute as to whether any required consent has been unreasonably withheld or delayed by any party hereto, the consent at issue shall be conclusively presumed not to have been given by such party until either (x) such party shall have given its express written consent to the matter at issue or (y) a final, nonappealable judgment shall have been issued by a court of competent jurisdiction determining that such party acted unreasonably in withholding or delaying its consent and directing such party to give its consent.             "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 3.07(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.             "Code" means the Internal Revenue Code of 1986, as amended from time to time.             "Collateral" means any and all "Collateral" or "Mortgaged Property," as defined in any applicable Security Document.             "Continuation Request" means a request by the Borrower to continue Eurodollar Loans pursuant to Section 3.02, substantially in the form of Exhibit C with appropriate modifications and insertions.             "Contract Assignment" means an Assignment of Contracts and Licenses, substantially in the form of Exhibit D, from the Borrower to the Administrative Agent for the benefit of the Lenders.             "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. The terms "Controlling" and "Controlled" have meanings correlative thereto.             "Debt" 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, (f) all Debt of others secured by (or for which the holder of such Debt 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 Debt secured thereby has been assumed, (g) all Guarantees by such Person of Debt 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 Debt of any Person shall include the Debt 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 Debt provide that such Person is not liable therefor, but shall not include current accounts payable incurred in the ordinary course of business.             "Debt Service" for any specified fiscal period, means the sum of (a) all interest expense (including the interest component of Capital Lease Obligations and allowance for borrowed funds used during construction), commitment and other fees, and hedging costs paid or payable by the Borrower in respect of all Debt of the Borrower (other than WC Loans and Subordinated Debt) during such period, and (b) the aggregate amount of all payments of principal of Debt of the Borrower (other than WC Loans and Subordinated Debt) made or scheduled to be made by the Borrower during such period.             "Debt Service Coverage Ratio" means, for any specified fiscal quarter of the Borrower, the quotient of (a) the aggregate Net Operating Cash Flow of the Borrower for the four consecutive fiscal quarters ended on the last day of such quarter, divided by (b) the aggregate Debt Service of the Borrower for the four consecutive fiscal quarters ended on the last day of such quarter.             "Debt Service Reserve Account" has the meaning assigned to such term in Section 6.13(a).             "Debt Service Reserve Letter of Credit" means an irrevocable standby letter of credit substantially in the form of Exhibit G, issued by an Eligible Bank in favor of the Administrative Agent, as agent for the Lenders, with an expiration date no earlier than one year from the date of issuance.             "Debt Service Reserve Requirement" means, as of the date of any determination, the excess, if any, of (i) the sum of (a) interest in respect of the Term Loans payable during the period of six months commencing on the day next following the end of the most recent fiscal quarter ended on or before the date of determination, calculated for such period by giving effect to the weighted average interest rate in effect with respect to such Loans at the end of such quarter and the payments described in the following clause, and (b) scheduled payments of principal of the Term Loans during such six-month period, over (ii) the amount available to be drawn under any unexpired Debt Service Reserve Letter of Credit then held by the Administrative Agent.             "Default" means any event or condition which constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.             "Determination Date" means, consecutively, each of December 31, 2005 and December 31, 2011.             "dollars" or "$" refers to lawful money of the United States of America.             "Effective Date" means the date on which the conditions specified in Section 5.01 are satisfied (or waived in accordance with Section 10.02).             "Eligible Bank" means a commercial bank having combined capital and surplus of at least $100,000,000 and a short-term credit rating of "P-1" from Moody's and "A-1" from Standard & Poor's, and otherwise reasonably satisfactory to the Administrative Agent.             "Eligible Investments" means any of the following: (i) demand deposits, time deposits or certificates of deposit maturing in 30 days or less from the date of issuance of any commercial bank having a combined capital and surplus of at least $100,000,000 and a short-term credit rating of P-1 from Moody's and A-1 from Standard & Poor's on the date of deposit or purchase; (ii) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith and credit of the United States of America maturing in 30 days or less from the date of investment; (iii) commercial paper maturing in 30 days or less from the date of investment having a rating of P-1 from Moody's or A-1 from Standard & Poor's on the date of investment; and (iv) money market funds having, at the time of the investment, ratings of at least P-1 by Moody's and A-1 from Standard & Poor's.             "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 Borrower 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.             "Environmental Permit" has the meaning assigned to such term in Section 4.05(b).             "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 Borrower, 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 Borrower or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower 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 Borrower or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower 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.             "ESI" means WPS Energy Services, Inc., a wholly-owned indirect Subsidiary of WPSR.             "Eurodollar" when used in conjunction with the term "Loan" or "Borrowing," means a Loan or Borrowing which bears interest at a rate determined by reference to the Adjusted LIBO Rate.             "Event of Default" has the meaning assigned to such term in Article 8.             "Excluded Taxes" means, with respect to any Lender, any other recipient of any payment to be made by or on account of any obligation of the Borrower under any Loan Document or the Administrative Agent, (a) income or franchise taxes imposed on (or measured by) its income or capital by the United States of America or the Federal Republic of Germany, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction to which any such Lender, other recipient or the Administrative Agent is subject, and (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 3.07(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or at the time of assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.07(a).             "Federal Funds Effective Rate" for any period, means a fluctuating interest rate per annum equal to, for each day during such period, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on that day (or if any day is not a Business Day, on the next preceding Business Day), 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 such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.             "Federal Funds" when used in conjunction with the term "Loan" or "Borrowing," means a Loan or Borrowing which bears interest at a rate determined by reference to the Federal Funds Effective Rate.             "FERC" means the United States Federal Energy Regulatory Commission.             "Financial Officer" means the chief financial officer, principal accounting officer, vice president in charge of finance or accounting, treasurer, or controller, any assistant treasurer or assistant controller, or any manager performing analogous limited liability company functions, of the Borrower.             "Foreign Lender" means any Lender that is organized under the laws of any jurisdiction other than the United States of America or any state thereof or the District of Columbia.             "Fuel Subordination Agreement" means the Fuel Subordination Agreement of even date herewith among the Administrative Agent, Penfield and the Borrower.             "GAAP" means generally accepted accounting principles in the United States of America, consistently applied.             "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 exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.             "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor as to enable the primary obligor to pay such Debt or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Debt or obligation, provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business.             "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.             "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.             "Historical Average DSCR" means the average of the Debt Service Coverage Ratios shown on all of the Quarterly Certificates delivered by the Borrower during (i) the period from the date of this Agreement to the first Determination Date, in the case of the first Renewal Date, or (ii) the period from the first Determination Date to the second Determination Date, in the case of the second Renewal Date.             "Historical Minimum DSCR" means the lowest Debt Service Coverage Ratio shown on any Quarterly Certificate delivered by the Borrower during (i) the period from the date of this Agreement to the first Determination Date, in the case of the first Renewal Date, or (ii) the period from the first Determination Date to the second Determination Date, in the case of the second Renewal Date.             "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended.             "Indemnified Taxes" means Taxes other than Excluded Taxes.             "Indemnitee" has the meaning assigned to such term in Section 10.03(b).             "Independent Engineer" means Parsons Energy & Chemicals Group Inc.             "Initial Funding Date" means the date, on or after the Effective Date, on which the Borrower proposes to borrow the Term Loans pursuant to a Borrowing Request delivered in accordance with this Agreement.             "Interest Payment Date" means (a) with respect to any Eurodollar Borrowing, the last day of the Interest Period applicable to such Eurodollar Borrowing and, in the case of a Eurodollar Borrowing with an Interest Period of more than six months' duration, the day prior to the last day of such Interest Period that occurs at an interval of six months' duration after the first day of such Interest Period, and (b) with respect to any Federal Funds Borrowing, the last day of each March, June, September and December.             "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three, six, nine or twelve months (or any other number of months less than twelve, if made available by the Administrative Agent) thereafter, as the Borrower may elect, provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Eurodollar Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent continuation of such Eurodollar Borrowing.             "Knowledge" means the actual knowledge, after due inquiry, of the officers or managers of the Borrower charged with responsibility for the relevant function or matter.             "Lender" means, depending on the context, the WC Lender or any Term Lender.             "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, a rate of interest per annum equal to 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.             "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, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.             "Loan" means any WC Loan or any Term Loan, as applicable; "Loans" means any or all of the WC Loans and the Term Loans.             "Loan Documents" means this Agreement, the WC Note, the Term Notes, each Subordination Agreement, the Fuel Subordination Agreement and the Security Documents.             "LOC Bank" means Bayerische Landesbank Girozentrale, New York Branch.             "Letter of Credit" means the PPL Letter of Credit or the Debt Service Reserve Letter of Credit, as applicable; "Letters of Credit" means the PPL Letter of Credit and the Debt Service Reserve Letter of Credit.             "Letter of Credit Exposure" means, at the time of any determination, the sum of (i) the amount then available to be drawn against the LOC Bank under the Letters of Credit, and (ii) any unpaid reimbursement obligations of WPSR to the LOC Bank with respect to the Letters of Credit.             "Margin Stock" has the meaning assigned to such term in Regulation U.             "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, or condition, financial or otherwise, of the Borrower, (b) the ability of the Borrower to perform any of its material obligations under any Loan Document or (c) the legality, validity or enforceability of any Loan Document.             "Material Debt" means Debt (other than Debt under the Loan Documents and Subordinated Debt) or obligations in respect of one or more Hedging Agreements, of the Borrower in an aggregate principal amount exceeding $1,000,000. For purposes of this definition, the "principal amount" of the obligations of the Borrower in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower would be required to pay if such Hedging Agreement were terminated at such time.             "Material Project Contract" means any of the contracts listed on Schedule 1.01A (excluding the Transition Services Contracts), as such schedule may be updated from time to time pursuant to Section 6.01(a)(iii).             "Moody's" means Moody's Investors Service, Inc.; provided, that if such corporation (or its successors or assigns) shall for any reason no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the Administrative Agent.             "Mortgage" means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be satisfactory in form and substance to the Administrative Agent.             "Mortgaged Property" means, initially, each parcel of real property and the improvements thereto owned by the Borrower and identified on Schedule 1.01B.             "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.             "Net Operating Cash Flow" for any specified period, means Operating Cash Flow for such period, less the sum of (i) operation expense, (ii) maintenance expense, (iii) expense related to non-operating income, and (iv) taxes other than income taxes on income of the Borrower for such period.             "Net Proceeds" means, with respect to any event, (a) the cash proceeds received in respect of such event, including (i) any cash received in respect of any non-cash proceeds, but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, (b) net of the sum of (i) all reasonable fees and out-of-pocket expenses paid by the Borrower to third parties in connection with such event, (ii) in the case of a sale, transfer, lease or other disposition of an asset (including pursuant to a sale and leaseback transaction), the amount of all payments required to be made by the Borrower as a result of such event to repay Debt (other than the Loans) secured by such asset or otherwise subject to mandatory payment as a result of such event and (iii) the amount of all taxes paid (or reasonably estimated to be payable) by the Borrower, and the amount of any reserves established by the Borrower to fund contingent liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer of the Borrower).             "Obligations" means (a) the due and punctual payment of (i) principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including fees, commissions, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower to the Lenders, or that are otherwise payable to the Lenders, under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Borrower under or pursuant to this Agreement and the other Loan Documents and (c) all obligations of the Borrower, monetary or otherwise, under each interest rate protection agreement entered into with any Lender (including any branch thereof) as counterparty in respect of any of the Loans.             "Officer" means the president, any vice president, the secretary, any assistant vice president, any assistant secretary, any Financial Officer, or any manager performing analogous limited liability company functions, of the Borrower.             "Operating Cash Flow" for any specified period, means the sum of (i) operating revenues and other operating income relating to the sale of electrical energy by the Borrower for such period, (ii) interest income and other non-operating income for such period and (iii) any amounts drawn during such period from the Borrower's reserves for operating expenses, reserves for capital expenditures and other reserves.             "Other Taxes" means any and all current or future stamp or documentary taxes or any other excise or property taxes, charges, recording fees or similar levies arising from any payment made to any Lender or the Administrative Agent hereunder or from the execution, delivery or enforcement of the Loan Documents.             "Parent" means Sunbury Holdings, LLC, a wholly-owned Subsidiary of PDI, and the sole member of the Borrower.             "Payment Date" has the meaning assigned to such term in Section 2.06(b).             "Participant" has the meaning assigned to such term in Section 10.04(e).             "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.             "PDI" means WPS Power Development, Inc., a wholly-owned indirect Subsidiary of WPSR.             "Penfield" means Penfield Collieries, LLC, a wholly-owned indirect Subsidiary of WPSR.             "Percentage" of any Lender means, at any time: (i) with respect to the Term Loans to be made by the Lenders on the Initial Funding Date the Percentage set forth opposite such Lender's name on the signature page hereto, and (ii) with respect to the aggregate amount of Term Loans which are outstanding at such time, the percentage which the aggregate principal amount of such Lender's Term Loans is of the total principal amount of the Term Loans outstanding at such time, in all cases as changed from time to time as a consequence of Assignment Agreements pursuant to Section 10.04 and as reflected in the Register at such time.             "Perfection Certificate" means a certificate in the form of Annex 2 to the Security Agreement or any other form approved by the Administrative Agent.             "Permitted Encumbrances" means: > > (a) Liens imposed by law for taxes or other governmental charges or > > assessments that are not yet due or are being contested in compliance with > > Section 6.04; > > > > (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and > > other like Liens imposed by law, arising in the ordinary course of business > > and securing obligations that are not overdue by more than 60 days or are > > being contested in compliance with Section 6.04; > > > > (c) pledges and deposits made in the ordinary course of business in > > compliance with workers' compensation, unemployment insurance and other > > social security laws or regulations; > > > > (d) deposits to secure the performance of bids, trade contracts, leases, > > statutory obligations, surety and appeal bonds, performance bonds and other > > obligations of a like nature, in each case in the ordinary course of > > business; > > > > (e) judgment liens in respect of judgments that do not constitute an Event > > of Default under clause (j) of Article 8; > > > > (f) easements, zoning restrictions, rights-of-way, encroachments and similar > > encumbrances on real property that do not secure any monetary obligations > > and do not materially detract from the value of the affected property or > > materially interfere with the ordinary conduct of business of the Borrower; > > and > > > > (g) Liens, easements, rights-of-way, encroachments and other encumbrances > > set forth on Schedule 4.07(c).             "Permitted Investments" means: > > (a) direct obligations of, or obligations the principal of and interest on > > which are unconditionally guaranteed by, the United States of America (or by > > any agency thereof to the extent that such obligations are backed by the > > full faith and credit of the United States of America), in each case > > maturing within one year from the date of acquisition thereof; > > > > (b) investments in commercial paper maturing within 270 days from the date > > of acquisition thereof and having, at such date of acquisition, the highest > > credit rating obtainable from Standard & Poor's or from Moody's; > > > > (c) investments in certificates of deposit, banker's acceptances and time > > deposits maturing within 180 days from the date of acquisition thereof > > issued or guaranteed by or placed with, and money market deposit accounts > > issued or offered by, any domestic office of any commercial bank organized > > under the laws of the United States of America or any State thereof that has > > a combined capital and surplus and undivided profits of not less than > > $500,000,000; and > > > > (d) fully collateralized repurchase agreements with a term of not more than > > 30 days for securities described in clause (a) of this definition and > > entered into with a financial institution satisfying the criteria described > > in clause (c) of this definition.             "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 Borrower 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.             "PPL" means PPL Electric Utilities Corporation, a Pennsylvania corporation formerly known as PP&L, Inc.             "PPL Letter of Credit" means an irrevocable standby letter of credit substantially in the form of Exhibit F, (or any substitution therefor) issued by an Eligible Bank in favor of PPL.             "Pro Forma Debt Service" for any specified fiscal period means the sum of (a) all interest expense (including the interest component of Capital Lease Obligations and allowance for borrowed funds used during construction), commitment and other fees, and hedging costs, payable in respect of all Debt of the Borrower (other than WC Loans and Subordinated Debt) outstanding at the end of the fiscal quarter immediately preceding the commencement of such fiscal period (the "reference date"), calculated for such period by giving effect to the weighted average interest rate in effect with respect to such Debt as of the reference date and the payment when due of the amounts referred to in the following clause, and (b) the aggregate amount of all payments of principal of Debt of the Borrower (other than WC Loans and Subordinated Debt) that, as of the reference date, were scheduled to be made during the specified period; provided, however, that Pro Forma Debt Service as of the reference date immediately prior to the Effective Date shall be calculated by giving effect to the borrowing of the Term Loans under this Agreement.             "Pro Forma Debt Service Coverage Ratio" means, as of the date of any determination, the quotient of (a) the Net Operating Cash Flow of the Borrower as shown on the most recent Quarterly Certificate, divided by (b) Pro Forma Debt Service for the fiscal quarter of the Borrower commencing on the day next following the end of the fiscal quarter covered by such Quarterly Certificate.             "Project" means the Sunbury Steam Electric Station, a four-unit coal-fired generating station, including two black start diesel generating sets and two oil-fired combustion turbine generators, with a nominal capacity of 436.7 MW, located on the Susquehanna River in Monroe township and the borough of Shamokin Dam, Snyder County, Pennsylvania, and certain facilities and other assets associated therewith and ancillary thereto.             "Project Cost" means the cost to the Borrower of acquiring the Project, including asset purchase costs, financing and legal fees, fuel inventory, materials and tools inventory, purchase of emissions allowances, a reserve for Capital Expenditures and purchases of emissions allowances, the initial funding of the Debt Service Reserve Account, fees incurred in connection with the Letters of Credit, and other transaction costs.             "Projected Average DSCR" means the average of the Debt Service Coverage Ratios projected at the end of each of the fiscal quarters of the Borrower occurring during the period of six years commencing on the relevant Determination Date, as determined by the Borrower and approved by the Renewal Independent Engineer.             "Quarterly Certificate" means a certificate of the Borrower delivered to the Administrative Agent pursuant to Section 6.01(a)(iii).             "Real Estate" has the meaning assigned to such term in Section 4.07(c).             "Register" has the meaning assigned to such term in Section 10.04(c).             "Regulation D," "Regulation T," "Regulation U" or "Regulation X" means, respectively, Regulation D, Regulation T, Regulation U or Regulation X, respectively, of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.             "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates.             "Renewal Date" means, consecutively, each of March 31, 2006 and March 31, 2012.             "Renewal Independent Engineer" means an independent engineering firm to be selected by the Borrower with the approval of the Administrative Agent.             "Renewal Requirements" means that as of the applicable Determination Date: > > (i) The Historical Minimum DSCR, the Historical Average DSCR and the > > Projected Average DSCR each shall have been equal to or greater than the > > amounts set forth opposite the applicable Determination Date in the > > following table:   Determination Date Historical Minimum DSCR Historical Average DSCR Projected Average DSCR December 31, 2005 1.00 1.55 1.90 December 31, 2011 1.00 1.85 2.80 > > (ii) The assets constituting the Project are capable of generating > > electricity for a period of at least two years after the Term Maturity Date > > in amounts and with efficiencies as contemplated in the Base Case of the > > Borrower's Confidential Information Memorandum dated November 1999; > > > > (iii) No Event of Default shall have occurred and be continuing; and > > > > (iv) The amount of cash and the fair market value of Eligible Investments on > > deposit in the Debt Service Reserve Account shall have been at least equal > > to the Debt Service Reserve Requirement.             "Required Lenders" means, at any time, the Lenders and the LOC Bank, or any combination of them, having, in the aggregate, Letter of Credit Exposure, outstanding WC Loans, outstanding Term Loans and unused WC Commitment representing more than 50% of the sum of the outstanding Letter of Credit Exposure, WC Loans and Term Loans, and unused WC Commitment at such time; or in the case of matters described in the definition of "Change of Control" in this Section and in Sections 7.11, 8, 9.10 and 10.02(d), 66-2/3% or more of such sum.             "Required Permit" has the meaning assigned to such term in Section 4.07(a).             "Restricted Cash Flow" has the meaning assigned thereto in Section 6.14(c).             "Restricted Payment" means (i) any dividend or other distribution by the Borrower (whether in cash, securities or other property) with respect to any shares of any class of equity securities of the Borrower or any other equity interest in the Borrower, (ii) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares or equity interest or any option, warrant or other right to acquire any such shares or equity interest, and (iii) any payment of principal, premium or interest with respect to Debt of the Borrower to any Affiliate, whether at maturity, upon acceleration or otherwise.             "Security Agreement" means the Security Agreement, substantially in the form of Exhibit H, between the Borrower and the Administrative Agent, for the benefit of the Lenders.             "Security Documents" means the Security Agreement, the Mortgage, the Contract Assignments, and each other security agreement, instrument or other document executed or delivered pursuant to Section 6.17 to secure any of the Obligations.             "Senior Company Guarantee" means an unconditional Guarantee, in form and substance reasonably satisfactory to the Administrative Agent, in favor of the Borrower and the Administrative Agent for the benefit of the Lenders, by any of WPSR, PDI, ESI, WPS Resources Capital Corporation, the Parent or Penfield, provided, that at the date of execution thereof such guarantor has an issuer rating of at least A3 from Moody's or at least A- from Standard & Poor's.             "Standard & Poor's" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.; provided, that if such corporation (or its successors or assigns) shall for any reason no longer perform the functions of a securities rating agency, "Standard & Poor's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the Administrative Agent.             "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D). Such reserve percentages shall include those imposed pursuant to Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.             "Subordinated Debt" means Debt of the Borrower to the Parent or any other Person that, in each instance, is fully and unconditionally subordinated to the Obligations as to payment of principal and interest pursuant to a Subordination Agreement or another agreement or instrument satisfactory to the Administrative Agent.             "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 of which securities 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 by the parent or one or more subsidiaries of the parent.             "Subordination Agreement" means a Subordination Agreement, substantially in the form of Exhibit E.             "Taxes" means any and all current or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.             "Term Commitment Amount" means the lesser of (i) $86,600,000 and (ii) an amount equal to 70 percent of the Project Cost, as certified by the Borrower to the Administrative Agent on or before the Effective Date.             "Term Lender" means each Person that has executed this Agreement as a Term Lender, and any other Person that shall have become a party hereto pursuant to an Assignment Agreement, excluding any Person that has ceased to be a party hereto pursuant to an Assignment Agreement.             "Term Loan" means a loan made by a Term Lender pursuant to Section 2.01(b) as to which a single Interest Period is in effect.             "Term Maturity Date" means March 31, 2018.             "Term Note" means a promissory note evidencing Term Loans substantially in the form of Exhibit A-2.             "Transition Services Contracts" means the contracts identified on Schedule 1.01A as "Transition Services Agreements."             "Type", when used in reference to any Loan refers to whether the rate of interest on such Loan is determined by reference to the Adjusted LIBO Rate or the Federal Funds Effective Rate.             "Uniform Commercial Code" when used in relation to any Collateral, means the Uniform Commercial Code as enacted and in effect in the jurisdiction in which such Collateral is located at the time of the attachment of a security interest thereto or, if different, the jurisdiction in which a Uniform Commercial Code financing statement is required to be filed in order to perfect a security interest in such Collateral.             "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.             "WC Borrowing" means a Borrowing consisting of one or more WC Loans.             "WC Commitment" means the commitment of the WC Lender to make WC Loans to the Borrower in an aggregate amount not in excess of the WC Commitment Amount, subject to the terms and conditions of this Agreement.             "WC Commitment Amount" means $2,700,000, or such lesser amount to which the WC Commitment may be reduced from time to time pursuant to Section 2.05(b).             "WC Loan" means a loan made by the WC Lender pursuant to Section 2.01(a) as to which a single Interest Period is in effect.             "WC Lender" means Bayerische Landesbank Girozentrale, Cayman Islands Branch.             "WC Maturity Date" means March 31, 2006, or such later date to which the Maturity Date may be extended in accordance with Section 2.10.             "WC Note" means a promissory note evidencing WC Loans substantially in the form of Exhibit A-1.             "WC Termination Date" means the earliest to occur of (i) February 28, 2006, or such later date to which the WC Termination Date shall be extended in accordance with Section 2.10, (ii) the date of termination or reduction in whole of the WC Commitment pursuant to Section 2.05 or Article 8 or (iii) the date of acceleration of all amounts payable under this Agreement and under the Notes pursuant to Article 8.             "WPSR" means WPS Resources Corporation, a Wisconsin corporation.     1.02      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" are not words of limitation, and the words "will" and "shall" both imply a promise and not mere intention. 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 Sections, Annexes, Exhibits and Schedules shall be construed to refer to Sections of, and Annexes, Exhibits and Schedules to, this Agreement, (e) all references to time of day shall mean New York City time, and (f) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Any reference to an applicable Lender shall mean (i) in the case of WC Loans, the WC Lender and (ii) in the case of Term Loans, the Term Lenders.     1.03     Accounting Terms             All accounting terms not specifically defined herein shall be construed in accordance with GAAP applied on a basis consistent with the principles employed in the preparation of the financial statements of the Borrower referred to in Section 6.01. Unless the context otherwise requires, any reference to a fiscal period refers to the relevant fiscal period of the Borrower. SECTION 2.     THE CREDITS     2.01    Commitments             (a) Subject to the terms and conditions set forth herein, the WC Lender agrees to make WC Loans to the Borrower from time to time at the Borrower's request on any Business Day during the period from the Initial Funding Date until the WC Termination Date in an aggregate principal amount not to exceed the Available WC Commitment. Within the foregoing limit and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow WC Loans.             (b) Subject to the terms and conditions hereof, each Term Lender severally agrees to make Term Loans to the Borrower on the Initial Funding Date in a principal amount equal to such Term Lender's Percentage of the Term Commitment Amount.     2.02     WC Borrowings and Term Loans             (a) Each WC Borrowing shall consist of WC Loans from the WC Lender. The Term Lenders shall not have any right or obligation to make WC Loans to the Borrower or to participate therein. Each WC Borrowing shall be in an aggregate principal amount that is an integral multiple of $100,000; provided, that one WC Borrowing may be in an aggregate amount that is equal to the entire unused balance of the Available WC Commitment.             (b) The Term Loans shall be made by the Term Lenders on the Initial Funding Date, in proportion to their respective Percentages, in an aggregate principal amount equal to the Term Commitment Amount. The failure of any Term Lender to make the Term Loans required to be made by it shall not relieve any other Term Lender of its obligations hereunder. The commitments of the Term Lenders are several, and no Lender shall be responsible for any other Lender's failure to make a Term Loan as required.             (c) Unless Section 3.04 is applicable, the Term Loans and each WC Borrowing shall be comprised entirely of Eurodollar Loans, in each case as the Borrower may request in accordance herewith. There shall not at any time be more than eight Interest Periods in effect with respect to WC Loans or more than four Interest Periods in effect with respect to Term Loans. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan, provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement or any other obligation of the Borrower or the Lenders under this Agreement.             (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Loans if the Interest Period requested with respect thereto would end after (i) the WC Maturity Date, in the case of WC Loans, or (ii) the Term Maturity Date, in the case of Term Loans.     2.03     Requests for WC Borrowings             To request a WC Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of a Federal Funds Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by delivery or telecopy to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: > (i) the aggregate amount of the requested WC Borrowing; > > (ii) the date of such WC Borrowing, which shall be a Business Day; > > (iii) the Type of the Borrowing, which shall be a Eurodollar Borrowing unless > Section 3.04 is applicable; > > (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be > applicable thereto, which shall be a period contemplated by the definition of > the term "Interest Period"; and > > (v) the location and number of the Borrower's account to which funds are to be > disbursed, which shall comply with the requirements of Section 2.04. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration.     2.04     Funding of Loans             (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. Subject to Section 5.02, the Administrative Agent will make such Loans available to the Borrower by promptly crediting or otherwise transferring the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request.             (b) Unless the Administrative Agent shall have received notice from a Term Lender prior to the Initial Funding Date that such Lender will not make available to the Administrative Agent such Lender's share of the Term Loans, the Administrative Agent may assume that such Lender has made such share available on the Initial Funding Date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Term Lender has not in fact made its share of the Term Loans available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Term Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate that would be otherwise applicable to such Borrowing. If a Term Lender pays the required amount to the Administrative Agent, then such amount shall constitute such Lender's Term Loan.     2.05     Termination and Reduction of WC Commitment             (a) Unless previously terminated, the WC Commitment shall terminate on the WC Termination Date.             (b) The Borrower may at any time terminate the WC Commitment, or from time to time reduce the WC Commitment Amount; provided, that (i) the Borrower shall not terminate the WC Commitment or reduce the WC Commitment Amount if, after giving effect to any concurrent prepayment of the WC Loans in accordance with Section 2.08(a), the sum of the WC Loans outstanding would exceed the WC Commitment Amount, and (ii) each such reduction shall be in an amount that is an integral multiple of $100,000.             (c) The Borrower shall notify the Administrative Agent of any election to terminate the WC Commitment or reduce the WC Commitment Amount under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the WC Lender of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided, that a notice of termination of the WC Commitment delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination of the WC Commitment or reduction of the WC Commitment Amount hereunder shall be permanent.     2.06     Repayment of Loans; Evidence of Debt             (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each applicable Lender the then unpaid principal amount of each WC Loan and Term Loan on the WC Maturity Date and Term Maturity Date, respectively.             (b) The principal amount of the Term Loans shall be payable in consecutive quarterly installments on the last day of each March, June, September and December, commencing on June 30, 2000, and in a final installment due on the Term Maturity Date (each, a "Payment Date"). Each such installment of principal shall be the amount set forth opposite the applicable Payment Date in the Principal Payment Schedule attached hereto as Annex I (or any lesser amount resulting from the application of mandatory prepayments pursuant to Section 2.08(b)), except that the final installment shall be the amount necessary to pay in full the unpaid principal amount of the Term Loans.             (c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the debt of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.             (d) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the class and Type thereof and the 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 Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof.             (e) The entries made in the accounts maintained pursuant to paragraph (c) or (d) of this Section shall, to the extent not inconsistent with any entries made in any Note, be prima facie evidence of the existence and amounts of the obligations recorded therein, provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.             (f) The Loans and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more Notes payable to the order of the payee named therein and its registered assigns.     2.07     Voluntary Prepayment of Loans             (a) The Borrower shall have the right at any time and from time to time to prepay any Loans in whole or in part on any Business Day, without premium or penalty (but subject to Section 3.06); provided, that: (i) no voluntary prepayment of Eurodollar Loans may be made on a day other than the last day of the Interest Period applicable thereto; (ii) each voluntary prepayment of Term Loans shall be in an amount equal to $1,000,000 or an integral multiple thereof and each voluntary prepayment of WC Loans shall be in an amount equal to $100,000 or an integral multiple thereof or, in each case, the outstanding principal balance of the Loans if less; (iii) no voluntary prepayment of Eurodollar Term Loans may be made that would result in the aggregate outstanding principal amount of Loans as to which a particular Interest Period is in effect being less than $1,000,000; and (iv) the Borrower shall have given the Administrative Agent written notice of such prepayment in accordance with paragraph (b) of this Section. Voluntary prepayments shall be accompanied by accrued interest to the extent required by Section 3.01. Each voluntary prepayment of Term Loans shall be applied to installments of principal in inverse order of maturity. Term Loans which are prepaid or repaid, in whole or in part, may not be reborrowed.             (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any voluntary prepayment hereunder (i) in the case of prepayment of Eurodollar Loans, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of Federal Funds Loans, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of Loans to be prepaid; provided, that, if a notice of prepayment is given in connection with a conditional notice of termination of the WC Commitment as contemplated by Section 2.05, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.05. Promptly following receipt of any such prepayment notice, the Administrative Agent shall advise the applicable Lenders of the contents thereof.     2.08     Mandatory Prepayment of Loans             (a) The principal amount of the Loans shall be prepaid under the following circumstances: > > (i) The WC Loans and the Term Loans shall be prepaid under the circumstances > > and to the extent of the amounts specified in Sections 6.12(c) and 6.14(c), > > pro rata in proportion to the respective principal amounts of the WC Loans > > and the Term Loans outstanding at the date of prepayment. Unless an Event of > > Default has occurred and is continuing, the Administrative Agent will cause > > prepayments pursuant to this paragraph from funds held by the Administrative > > Agent pursuant to Section 6.12(b) to be made, to the extent reasonably > > practicable, on the last day of the Interest Period or Periods then in > > effect with respect to the respective Loans; except that if an Event of > > Default has occurred and is continuing, the Administrative Agent may cause > > the Loans to be prepaid on any date selected by it. > > > > (ii) In the event that the Renewal Requirements shall not have been met on > > either Renewal Date, as demonstrated by the timely delivery to the > > Administrative Agent and the Lenders of the reports and certificates > > required by Section 6.01(c), commencing on such Renewal Date the Borrower > > shall thereafter, for so long as any Term Loans are outstanding, on the 5th > > Business Day following the delivery of each Quarterly Certificate prepay the > > Term Loans in an amount equal to the amount of Restricted Cash Flow shown on > > such Quarterly Certificate, less the amount of any prepayments required by > > Section 6.14(c). > > > > (iii) In the event of any partial reduction of the WC Commitment Amount > > pursuant to Section 2.05(b), then (i) at or prior to the date of such > > reduction, the Administrative Agent shall notify the Borrower and the WC > > Lender of the sum of the principal amount of the WC Loans then outstanding > > and (ii) if such sum would exceed the WC Commitment Amount after giving > > effect to such reduction, then the Borrower shall prepay WC Loans on the > > date of such reduction in amount sufficient to eliminate such excess. > > > > (iv) In the event of termination of the WC Commitment pursuant to Section > > 2.05(b), the Borrower shall prepay all WC Loans outstanding on the date of > > such termination.             (b) Each mandatory prepayment of Term Loans shall be applied ratably to the remaining installments of principal required under 2.06(b).     2.09     Payments Generally; Pro Rata Treatment; Sharing of Setoffs             (a) The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its office at 560 Lexington Avenue, New York, New York, or such other office as to which the Administrative Agent may notify the other parties hereto, except that payments pursuant to Sections 3.05, 3.06, 3.07 and 10.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.             (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal of Loans, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties and (ii) second, towards payment of principal of Loans then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal of Loans then due to such parties.             (c) If any Term Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of, or interest on, its Term Loans resulting in such Term Lender receiving payment of a greater proportion of the aggregate amount of its Term Loans and accrued interest thereon than the proportion received by any other Term Lender, then the Term Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Term Loans of other Term Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Term Lenders ratably in accordance with the aggregate amount of principal of, and accrued interest on, their respective Term Loans; provided, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Term Lender as consideration for the assignment of or sale of a participation in its Term Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Term Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Term Lender were a direct creditor of the Borrower in the amount of such participation.             (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each such Lender severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.             (e) If any Term Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Term Lender to satisfy such Lender's obligations under such Section until all such unsatisfied obligations are fully paid.     2.10     Extension of WC Commitment             Unless the WC Termination Date shall have previously occurred, at least 90 days but not more than 180 days before the WC Maturity Date, as then in effect, the Borrower may, by notice to the Administrative Agent, request the WC Lender to extend the WC Maturity Date and the WC Termination Date, in each case for a period of six years. The Administrative Agent shall promptly notify the WC Lender of such request. The Administrative Agent shall notify the Borrower in writing not later than 45 days prior to the WC Maturity Date if the WC Lender consents to the request and the conditions of such consent (including conditions relating to legal documentation and evidence of the obtaining of all necessary government approvals). If the Administrative Agent shall notify the Borrower in writing that the WC Lender has consented to the Borrower's extension request, and subject to the satisfaction of any conditions set forth in such notice, the WC Maturity Date and the WC Termination Date shall each be extended to the corresponding day of the month in the sixth consecutive year thereafter, and the terms "WC Maturity Date" and "WC Commitment Termination Date" shall thereafter refer to such dates as so extended. Only two such extension requests may be made pursuant to this Agreement. SECTION 3.     INTEREST, FEES, YIELD PROTECTION, ETC.     3.01     Interest             (a) Eurodollar WC Loans shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Loans plus the Applicable WC Margin; Eurodollar Term Loans shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Loans plus the Applicable Term Margin.             (b) Federal Funds WC Loans shall bear interest at the Federal Funds Effective Rate plus the Applicable WC Margin; Federal Funds Term Loans shall bear interest at the Federal Funds Effective Rate plus the Applicable Term Margin.             (c) Notwithstanding the foregoing, if an Event of Default has occurred and is continuing, then, so long as such Event of Default is continuing, all principal of and interest on each Loan and each fee and other amount payable by the Borrower hereunder shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in paragraphs (a) and (b) of this Section or (ii) in the case of any other amount, 2% plus the Federal Funds Effective Rate plus the Applicable WC Margin.             (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided, that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any payment of principal pursuant to Section 2.06(b), accrued interest on the amount paid shall be payable on the applicable Payment Date, (iii) in the event of any prepayment of any Loans pursuant to Section 2.07 or Section 2.08, accrued interest on the principal amount prepaid shall be payable on the date of such prepayment and (iv) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.             (e) All interest hereunder shall be computed on the basis of a year of 360 days, and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Adjusted LIBO Rate, LIBO Rate and Federal Funds Effective Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent clearly demonstrable error.     3.02     Interest Elections             (a) The Term Loans and each WC Borrowing initially shall be of the Type specified in the applicable Borrowing Request (which shall be a Eurodollar Borrowing unless Section 3.04 is applicable) and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to continue such Loans and, in the case of a Eurodollar Loans, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Loans, in which case each such portion shall be allocated ratably among the applicable Lenders holding the affected Loans.             (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic notice shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Continuation Request signed by the Borrower.             (c) Each telephonic notice and written Continuation Request pursuant to this Section shall specify the following information: > > (i) the Loans to which such Continuation Request applies and, if different > > options are being elected with respect to different portions of the > > principal amount thereof, the principal amount to be allocated to each > > resulting portion (in which case the information to be specified pursuant to > > clauses (iii) and (iv) of this paragraph shall be specified for each > > resulting portion); > > > > (ii) the effective date of the election made pursuant to such Continuation > > Request, which shall be a Business Day; > > > > (iii) that the resulting Loans are to be Eurodollar Loans (unless Section > > 3.04 applies); and > > > > (iv) with respect to Eurodollar Loans, the Interest Period to be applicable > > thereto after giving effect to such election, which shall be a period > > contemplated by the definition of the term "Interest Period."             (d) Promptly following receipt of a Continuation Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender's portion of the resulting Loans.             (e) If any Continuation Request requests Eurodollar Loans but does not specify an Interest Period, then the Borrower shall be deemed to have selected Eurodollar Loans with an Interest Period of one month's duration. If the Borrower fails to deliver a timely Continuation Request prior to the end of the Interest Period applicable to any Loans, then, unless such Loans are repaid as provided herein at the end of such Interest Period, such Loans shall be continued as Eurodollar Loans with an Interest Period of one month's duration.             (f) Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Loans may be continued as a Eurodollar Loans and (ii) unless repaid, all Eurodollar Loans shall be converted to Federal Funds Loans at the ends of the Interest Periods applicable thereto.     3.03     Fees             (a) The Borrower agrees to pay to the Administrative Agent and each Lender, for its own account, fees and other amounts payable in the amounts and at the times separately agreed upon between the Borrower and such party.             (b) All fees and other amounts payable to the Administrative Agent hereunder shall be paid to the Administrative Agent on the dates due, in immediately available funds. Fees and other amounts paid shall not be refundable under any circumstances.     3.04     Alternate Rate of Interest             If prior to the commencement of any Interest Period for any Eurodollar Loans: > > (i) the Administrative Agent determines (which determination shall be > > conclusive absent manifest error) that adequate and reasonable means do not > > exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as > > applicable, for such Interest Period; or > > > > (ii) the Administrative Agent is advised by any applicable Lender that the > > Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period > > will not adequately and fairly reflect the cost to such Lender of making or > > maintaining its Loan for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the applicable Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the applicable Lenders that the circumstances giving rise to such notice no longer exist, (i) any Continuation Request that requests the continuation of any Loans as Eurodollar Loans shall be ineffective, and (ii) if any Borrowing Request requests Eurodollar Loans, such Loans shall be made as Federal Funds Loans.     3.05     Increased Costs; Illegality             (a) If any Change in Law shall: > > (i) impose, modify or deem applicable any reserve, special deposit or > > similar requirement against assets of, deposits with or for the account of, > > or credit extended by, any Lender (except any such reserve requirement > > reflected in the Adjusted LIBO Rate); > > > > (ii) impose on any Lender or the London interbank market any other condition > > affecting this Agreement, any Eurodollar Loans made by such Lender or any > > participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan hereunder or to increase the cost to such Lender or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.             (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered.             (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.             (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided, that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; and provided further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, the 90-day period referred to above shall be extended to include the period of retroactive effect thereof.             (e) Notwithstanding any other provision of this Agreement, if, after the date of this Agreement, any Change in Law shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent: > > (i) such Lender may declare that Eurodollar Loans will not thereafter (for > > the duration of such unlawfulness) be made by such Lender hereunder (or be > > continued for additional Interest Periods), whereupon any request for a > > Eurodollar Loan or to continue a Eurodollar Loan, as applicable, for an > > additional Interest Period shall, as to such Lender only, be deemed a > > request for a Federal Funds Loan (or a request to convert a Eurodollar Loan > > into an Federal Funds Loan, as applicable), unless such declaration shall be > > subsequently withdrawn; and > > > > (ii) such Lender may require that all outstanding Eurodollar Loans made by > > it be converted to Federal Funds Loans, in which event all such Eurodollar > > Loans shall be automatically converted to Federal Funds Loans, as of the > > effective date of such notice as provided in the last sentence of this > > paragraph. For purposes of this paragraph, a notice to the Borrower by any Lender shall be effective as to each Eurodollar Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Eurodollar Loan; in all other cases such notice shall be effective on the date of receipt by the Borrower.     3.06     Break Funding Payments             In the event of (a) the payment or prepayment (voluntary or otherwise) of any principal of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto or (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.07(b) and is revoked in accordance therewith), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.     3.07     Taxes             (a) Any and all payments to the Administrative Agent or any Lender by or on account of any obligation of the Borrower hereunder and under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section), the applicable Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.             (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.             (c) The Borrower shall indemnify each Lender, within ten days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by such Lender on or with respect to any payment by or on account of any obligation of the Borrower under the Loan Documents (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.             (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority pursuant to Section 3.07(a), the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.             (e) Each Foreign Lender agrees that it will, not later than the date that it becomes a Lender hereunder, deliver to each of the Borrower and the Administrative Agent such certificates, documents or other evidence, as required by the Code or treasury regulations issued pursuant thereto, including (i) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United states federal income taxes, and (ii) any other certificate or statement requested by the Borrower and required by Treasury Regulation Section  1.1441-4 or Section  1.1441-6, in each case to establish that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes. Each Foreign Lender will use good faith efforts to apprise the Borrower and the Administrative Agent as promptly as practicable of any impending change in its tax status that would give rise to any obligation by the Borrower to pay any additional amounts pursuant to this Section 3.07. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments under the Loan Documents are not subject to United States withholding tax, the Borrower or the Administrative Agent shall withhold taxes from such payments at the applicable statutory rate in the case of payments to or for any Foreign Lender. Each Foreign Lender represents and warrants that each form supplied by it to the Borrower and the Administrative Agent pursuant to this Section 3.07 and not superseded by another form supplied by it, is or will be, as the case may be, complete and accurate.             (f) In the event that any Lender claims any tax credit or receives any reimbursement relating to any payment pursuant to this Section, such Lender shall reimburse the Borrower in an amount equal to the benefit to such Lender of such credit or reimbursement. The benefit to such Lender of such credit or reimbursement shall be the excess of (i) such Lender's total income or franchise taxes for the year in which the credit or reimbursement is taken into account over (ii) what such Lender's total income or franchise taxes for such year would have been in the absence of such credit or reimbursement. A certificate of such Lender setting forth in reasonable detail the calculation of the amount of the benefit shall be conclusive and binding, absent manifest error.     3.08     Mitigation Obligations             (a) If any Lender requests compensation under Section 3.05, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.07, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans (or any participation therein) hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the good faith judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.05 or 3.07, as applicable, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.             (b) If any Lender requests compensation under Section 3.05, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for account of any Lender pursuant to Section 3.07, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement and the other Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, that (i) the Borrower shall have received the prior consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 3.05 or payments required to be made pursuant to Section 3.07, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 4.     REPRESENTATIONS AND WARRANTIES             The Borrower represents and warrants to the Administrative Agent and the Lenders that:     4.01     Status and Ownership             (a) The Borrower is duly organized, validly existing and in good standing as a limited liability company under the laws of the State of Delaware, has all requisite limited liability company power and authority to carry on its business as now conducted, and is qualified or licensed to do business in, and is in good standing in the Commonwealth of Pennsylvania. There is no other jurisdiction where the ownership of the Borrower's properties or the nature of its activities or both makes such qualification or licensing necessary or advisable.             (b) All of the outstanding membership interests in the Borrower are owned, directly and beneficially, by the Parent.     4.02     Power and Authority             The Borrower has the limited liability company power and authority to execute, deliver, perform, and take all actions contemplated by, each of the Loan Documents to which it is a party, and all such action has been duly and validly authorized by all necessary limited liability company proceedings on its part and on the part of the Parent. The Borrower has the limited liability company power and authority to borrow pursuant to the Loan Documents to the fullest extent permitted hereby and thereby, and all necessary limited liability company action to authorize such borrowing has been taken.     4.03     Execution and Binding Effect             This Agreement and each of the other Loan Documents to which the Borrower is a party and which is required to be delivered on or before the Effective Date pursuant to Section 5.01 has been duly and validly executed and delivered by the Borrower. This Agreement and each such other Loan Document constitute, and the Notes when executed and delivered by the Borrower will constitute, the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with their terms, except as the enforceability hereof or thereof may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors' rights or by general principles of equity limiting the availability of equitable remedies.     4.04     Governmental Approvals; No Conflicts             The execution and delivery of this Agreement and the other Loan Documents, the borrowing of the Loans, the use of the proceeds thereof as permitted by this Agreement, and the consummation of any other transactions contemplated hereby and thereby (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority (excluding Uniform Commercial Code financing statements), (b) will not violate any applicable law or regulation or the organization certificate or limited liability company agreement of the Borrower or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower (other than Liens permitted by Section 7.02).     4.05     Licenses and Permits             (a) Schedule 4.05(a) lists all material permits, licenses, franchises and other governmental authorizations, consents and approvals, other than Environmental Permits, necessary to own or otherwise utilize, operate or maintain, or engage in the business of the Borrower as presently conducted (the "Required Permits"). Except as set forth in Schedule 4.05(a), the Borrower has not received any written notification that it is, or in the future may be considered to be, in violation of any of the Required Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any Governmental Authority applicable to any Required Permits, except for notifications of violations which would not individually or in the aggregate, create a Material Adverse Effect.             (b) The Borrower holds all of the permits, licenses and governmental authorizations listed on Schedule 4.05(b) (the "Environmental Permits"), which are all of the material permits, licenses and governmental authorizations required for the Borrower to own, operate, maintain and engage in its business under applicable Environmental Laws, and is in compliance with all such Environmental Permits, with respect to its assets, the operation or maintenance of its assets, and the business of the Borrower in connection with its assets, except where such failure to hold or comply with required Environmental Permits individually or in the aggregate, are not reasonably likely to create a Material Adverse Effect.     4.06     Financial Condition; No Material Adverse Change             (a) The Borrower has heretofore furnished to the Administrative Agent an unaudited balance sheet of the Borrower as of March 31, 2000. Such balance sheet presents fairly the financial condition of the Borrower as of March 31, 2000 in conformity with GAAP, subject to normal and recurring year-end audit adjustments.             (b) Since March 31, 2000 there has been no material adverse change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower, taken as a whole, and there has been no such material adverse change in the assets or financial condition of the Borrower described in the balance sheet referred to in paragraph (a) of this Section.     4.07     Title to and Condition of Properties             (a) Title. Except as set forth in Schedule 4.07(a) and except for other Permitted Encumbrances, the Borrower has good and marketable title to all of the Real Estate and all of the personal property material to its businesses, free and clear of all Liens, except for minor defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties for the purposes for which they were acquired.             (b) Condition. Except as set forth in Schedule 4.07(b), the tangible assets at the Project, taken as a whole, (i) are in good operating and usable condition and repair, free from any defects (except ordinary wear and tear, in light of their respective ages and historical usage, and except such minor defects as do not interfere with the use thereof in the conduct of the normal operation and maintenance thereof) and (ii) have been maintained consistent with the standards generally followed in the electrical utilities industry.             (c) Real Estate. Schedule 4.07(c) sets forth all real property owned, leased, used or occupied by the Borrower (the "Real Estate"), including a description of all land, and all Liens, encumbrances, easements or rights of way of record (or, if not of record, of which the Borrower has notice or Knowledge) granted on or appurtenant to or otherwise affecting such Real Estate, the zoning classification thereof, and all plants, buildings or other structures located thereon. Except as set forth on Schedule 4.07(c), to the Knowledge of the Borrower no fact or condition exists which would prohibit or materially adversely affect the ordinary rights of access to and from the Real Estate from and to the existing highways and roads, and there is no pending or threatened restriction or denial, governmental or otherwise, upon such ingress or egress. Except as set forth on Schedule 4.07(c), to the Knowledge of the Borrower: (i) the Borrower's occupation and use of the Real Estate is in material compliance with all applicable laws and regulations; (ii) there is not (A) any claim of adverse possession or prescriptive rights involving any of the Real Estate, (B) any structure located on any Real Estate which encroaches on or over the boundaries of neighboring or adjacent properties or (C) any structure of any other party which encroaches on or over the boundaries of any such Real Estate; and (iii) none of the Real Estate is located in a flood plain, flood hazard area, wetland or lakeshore erosion area within the meaning of any applicable order decree, statute, rule, or regulation. To the Knowledge of the Borrower, no public improvements have been commenced and none are planned which in either case may result in special assessments against any of the Real Estate or otherwise create a Material Adverse Effect. Except as set forth on Schedule 4.07(c), the Borrower has no Knowledge of any (i) planned or proposed increase in assessed valuations of any Real Estate, (ii) order, writ, injunction, or decree requiring repair, alteration or correction of any existing condition affecting any Real Estate or the systems or improvements thereat, or any condition or defect which could give rise to such an order, writ, injunction, or decree, or (iii) underground storage tanks, or any structural mechanical, or other defects of material significance affecting any Real Estate or the systems or improvements thereat (including, but not limited to, inadequacy for normal use of mechanical systems or disposal or water systems at or serving the Real Estate).             (d) Condemnation; First Refusal Rights. Except as set forth on Schedule 4.07(d), the Borrower has not received notice of, nor have Knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein.     4.08     Leases             Schedule 4.08 lists all real property leases under which the Borrower is a lessee or lessor and which (i) relate to the real or personal property of the Borrower, the operation or maintenance thereof, or the business of the Borrower in connection therewith and (ii) (A) provide for annual payments of more than $250,000 or (B) are material to the operation or condition (financial or otherwise) of the Borrower's property or the business of the Borrower in connection therewith. Except as set forth in Schedule 4.08, each such lease constitutes a valid, binding and enforceable obligation of the Borrower in accordance with its terms, and is in full force and effect; there are no existing material defaults by the Borrower or, to the Borrower's Knowledge, any other party thereunder; and no event has occurred which (whether with or without notice, lapse of time, or both) would constitute a material default by the Borrower or, to the Borrower's Knowledge, any other party thereunder, or would cause the acceleration of any of the Borrower's obligations thereunder or result in the creation of any Lien on any of the Borrower's property, or would give rise to an automatic termination, or the right of discretionary termination thereof, except such defaults and other events which would not individually or in the aggregate create a Material Adverse Effect.     4.09     Litigation and Environmental Matters             (a) Except as disclosed in Schedule 4.09, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the Knowledge of the Borrower, threatened against or affecting the Borrower (i) that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any Loan Document or the transactions contemplated hereby and thereby.             (b) Except as disclosed in Schedule 4.09, and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, the Borrower (i) has not failed to comply with any Environmental Law nor 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 and (iv) has no Knowledge of any basis for any Environmental Liability.     4.10     Compliance with Laws and Agreements             (a) The Borrower is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon 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.             (b) To the Knowledge of the Borrower there is no default or event which with notice or lapse of time, or both, would become a material default under any Material Project Contract, or would otherwise permit any party thereto to terminate or materially modify its obligations thereunder or entitle such party to damages or equitable relief;     4.11     Regulatory Status             (a) The Borrower is not an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940.             (b) The Borrower is not subject to regulation as a public utility company under the Holding Company Act, other than as an exempt wholesale generator subject to section 32 of the Holding Company Act.             (c) The Borrower is subject to regulation in the United States as a public utility only by FERC. It is also subject to regulation by the Department of Energy as to international exports of energy and by the Public Service Commission of Wisconsin as to its transactions with its public utility affiliate, Wisconsin Public Service Corporation.     4.12     Taxes             All tax and information returns required to be filed by or on behalf of the Borrower have been properly prepared, executed and filed. All Taxes upon the Borrower or upon any of its properties, incomes, sales or franchises which are due and payable have been paid, other than those not yet delinquent and payable without premium or penalty, and except for those being diligently contested in good faith by appropriate proceedings, and in each case adequate reserves and provisions for Taxes have been made on the books of the Borrower. The reserves and provisions for Taxes on the books of the Borrower are adequate for all open years and for its current fiscal period. The Borrower has no Knowledge of any proposed additional assessment or basis for any material assessment for additional Taxes (whether or not reserved against).     4.13     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. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, materially exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, materially exceed the fair market value of the assets of all such underfunded Plans.     4.14     Disclosure             The Borrower has disclosed to the Administrative Agent all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent in connection with the negotiation of the Loan Documents or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, that with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.     4.15     Subsidiaries             The Borrower has no Subsidiaries.     4.16     Insurance             Schedule 4.16 sets forth a description of all insurance maintained by or on behalf of the Borrower as of the date of this Agreement. As of the date of this Agreement, all premiums in respect of such insurance that are due and payable have been paid.     4.17     Labor Matters             As of the date of this Agreement, there are no strikes, lockouts or slowdowns against the Borrower pending or, to the Knowledge of the Borrower, threatened. The hours worked by and payments made to employees of the Borrower have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state or local law dealing with such matters, except where any such violations, individually and in the aggregate, would not be reasonably likely to result in a Material Adverse Effect. All material payments due from the Borrower, or for which any claim may be made against the Borrower on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of the Borrower.     4.18     Solvency             Immediately after the execution and delivery of the Loan Documents and immediately following the making of the Loans and after giving effect to the application of the proceeds of the Loans, (a) the fair value of the assets of the Borrower, taken at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Borrower will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following such date. For purposes of calculations pursuant to this Section 4.18, all Subordinated Debt shall be treated as equity of the Borrower rather than as Debt, but only if such Subordinated Debt is not "debt" for purposes of section 101(32) of the Bankruptcy Code.     4.19     Security Documents             (a) The Security Agreement is effective to create in favor of the Administrative Agent for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when (i) the financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate and (ii) all other applicable filings under the Uniform Commercial Code or otherwise that are required under the Loan Documents are made, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Borrower in such Collateral, in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 7.02.             (b) The Mortgage with respect to the Mortgaged Property is effective to create, in favor of the Administrative Agent for the benefit of the Lenders, a legal, valid and enforceable Lien, subject to the exceptions listed in the title insurance policy covering such Mortgage, on all of the right, title and interest of the Borrower in and to the Mortgaged Property and the proceeds thereof, and when such Mortgage is filed in the office specified on Schedule 4.19(b), such Mortgage will constitute a Lien on, and security interest in, all right, title and interest of the Borrower in the Mortgaged Property and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of persons pursuant to Liens expressly permitted by Section 7.02.             (c) The Contract Assignments are effective to create in favor of the Lender a legal, valid and enforceable Lien on and collateral assignment of all of the right, title and interest of the Borrower in and to the contracts, licenses and permits covered thereby and when all applicable filings under the Uniform Commercial Code or otherwise that are required under the Loan Documents are made, the Contract Assignments shall constitute fully perfected Liens on, and security interests in, all right, title and interest of the grantors thereunder in such Collateral, in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 7.02.     4.20     Federal Reserve Regulations             (a) The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.             (b) No part of the proceeds of the Loans will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase, acquire or carry any Margin Stock or for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulations T, U and X. SECTION 5.     CONDITIONS     5.01     Effective Date             The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02):             (a) Document Deliveries. The Administrative Agent shall have received the following documents, with sufficient copies for each Lender: > > (i) Either (A) a counterpart of this Agreement signed on behalf of each > > party hereto or (B) written evidence satisfactory to the Administrative > > Agent (which may include telecopy transmission of an executed signature page > > of this Agreement) that each such party has signed a counterpart of this > > Agreement; > > > > (ii) A WC Note payable to the WC Lender and a Term Note payable to each Term > > Lender, each in the principal amount of such Lender's Loans, dated the date > > of this Agreement, and signed on behalf of the Borrower; > > > > (iii) A Security Agreement, dated the date of this Agreement and signed on > > behalf of the Borrower, together with the following: > > > > > (A) all instruments and other documents, including Uniform Commercial Code > > > financing statements, required by law or reasonably requested by the > > > Administrative Agent (or the Administrative Agent's counsel) to be filed, > > > registered or recorded to create or perfect the Liens intended to be > > > created under the Security Agreement; and > > > > > > (B) a completed Perfection Certificate, dated the date of this Agreement > > > and signed by an Officer of the Borrower, together with all attachments > > > contemplated thereby, including the results of a search of the Uniform > > > Commercial Code (or equivalent) filings made with respect to the Borrower > > > in the jurisdictions contemplated by the Perfection Certificate and copies > > > of the financing statements (or similar documents) disclosed by such > > > search and evidence reasonably satisfactory to the Administrative Agent > > > (and its counsel) that the Liens indicated by such financing statements > > > (or similar documents) are permitted by Section 7.02 or have been > > > released; > > > > (iv) Counterparts of a Mortgage with respect to the Mortgaged Property > > signed on behalf of the record owner of such Mortgaged Property, together > > with: (A) a policy or policies of title insurance issued by a nationally > > recognized title insurance company, insuring the Lien of such Mortgage as a > > valid first Lien on the Mortgaged Property described therein, free of any > > other Liens except as permitted by Section 7.02, in form and substance > > reasonably acceptable to the Administrative Agent and the Administrative > > Agent's counsel, together with such endorsements, coinsurance and > > reinsurance as the Administrative Agent may reasonably request, (B) such > > surveys as may be required pursuant to such Mortgage or as the > > Administrative Agent may reasonably request, (C) a copy of the original > > permanent certificate or temporary certificate of occupancy as the same may > > have been amended or issued from time to time, covering each improvement > > located upon the Mortgaged Property subject to such Mortgage that were > > required to have been issued by the appropriate Governmental Authority for > > such improvement, (D) written confirmation from the applicable zoning > > commission or other appropriate Governmental Authority stating that, with > > respect to the Mortgaged Property subject to such Mortgage as built, it > > complies with existing land use and zoning ordinances, regulations and > > restrictions applicable to such Mortgaged Property, (E) a Phase I > > environmental report for the Mortgaged Property subject to such Mortgage by > > Chester Engineering (each such report to be satisfactory to the > > Administrative Agent and the Borrower), (F) such opinions of local counsel > > to the Borrower with respect to such Mortgage as the Administrative Agent > > shall reasonably require, and (G) such other customary documentation with > > respect to the Mortgage and the Mortgaged Property as the Administrative > > Agent may reasonably request; > > > > (v) One or more Contract Assignments with respect to the Material Project > > Contracts and all other power purchase, fuel supply, operation and > > maintenance contracts to which the Borrower is a party, in each case dated > > the date of this Agreement and signed on behalf of the Borrower; > > > > (vi) A Subordination Agreement with respect to any Subordinated Debt to be > > outstanding on the Initial Funding Date, dated the date of this Agreement > > and signed on behalf of the Borrower and the holder of such Subordinated > > Debt; > > > > (vii) The Fuel Subordination Agreement, duly executed by the parties > > thereto; > > > > (viii) A certificate of the secretary or analogous limited liability company > > manager of the Borrower, certifying as of the date of this Agreement: > > > > > (A) the names and true signatures of the Officers of the Borrower > > > authorized to sign the Loan Documents; > > > > > > (B) that attached thereto are true, correct and complete copies of: (1) > > > the organization certificate and limited liability company agreement of > > > the Borrower, together with all amendments thereto, as in effect on such > > > date; (2) the resolutions or other instrument of the Borrower's managers > > > or the Parent approving the execution, delivery and performance by the > > > Borrower of the Loan Documents to which it is a party; (3) all documents > > > evidencing other necessary limited liability company or other action by > > > the Borrower or the Parent, if any, with respect to the execution delivery > > > and performance of the Loan Documents by the Borrower and the Parent; and > > > (4) true and correct copies of all approvals of Governmental Authorities > > > required to be obtained by the Borrower in connection with the execution > > > and delivery of the Loan Documents and the performance of the transactions > > > contemplated therein (including orders of FERC and the Pennsylvania Public > > > Utilities Commission); and > > > > > > (C) that the resolutions and approvals referred to in the foregoing clause > > > (B) have not been modified, revoked or rescinded and are in full force and > > > effect on such date; > > > > (ix) Good standing certificates, dated as of a date not more than ten days > > prior to the date of this Agreement, of the Secretaries of State of the > > State of Delaware and the Commonwealth of Pennsylvania with respect to the > > Borrower; > > > > (x) A certificate of an Officer of the Borrower certifying, as of the date > > of this Agreement that (i) true, correct and complete copies of the Material > > Project Contracts and the Transition Services Contracts, and all amendments > > and supplements thereto, have been theretofore delivered to the > > Administrative Agent by or on behalf of the Borrower, and (ii) such Material > > Project Contracts and Transition Services Contracts have not been modified, > > revoked or rescinded and are in full force and effect on such date; > > > > (xi) [Reserved]; > > > > (xii) A certificate of an Officer of the Borrower, dated the date of this > > Agreement, to the effect that: (A) no Default or Event of Default has > > occurred or is continuing; (B) no event which could reasonably be expected > > to have a Material Adverse Effect has occurred and is continuing; (C) the > > representations and warranties of the Borrower set forth in each Loan > > Document are true and correct in all material respects on and as of the date > > of such certificate with the same force and effect as if made on and as of > > such date (or, if any such representation or warranty is expressly stated to > > have been made as of a specific date, as of such specific date); and (D) to > > such Officer's knowledge, after due inquiry, all Liens in favor of the > > Administrative Agent for the benefit of the Lenders pursuant to the Security > > Documents are in full force and effect and (subject to the filing of Uniform > > Commercial Code financing statements, and to any other necessary filings or > > recordings with Governmental Authorities having been made) with the required > > first priority, subject to Permitted Liens. > > > > (xiii) Copies of the following, each in form and substance reasonably > > satisfactory to the Administrative Agent: (A) a technical evaluation report > > with respect to the Project from the Independent Engineer; (B) an electric > > market analysis by ICF Resources Incorporated; and (C) a fuel evaluation > > report by John T. Boyd Company; > > > > (xiv) A favorable written opinion (addressed to the Administrative Agent and > > each Lender and dated the date of this Agreement) from Foley & Lardner on > > behalf of the Borrower, substantially in the form of Exhibit I, and covering > > such other matters relating to the Borrower, the Loan Documents or the > > transactions contemplated by the Loan Documents as the Administrative Agent > > shall reasonably request. The Borrower hereby requests such counsel to > > deliver such opinion. > > > > (xv) Certificates of insurance or other evidence reasonably satisfactory to > > the Administrative Agent that the insurance policies listed on Schedule 4.16 > > are in effect.             (b) Borrowing Requests. The Administrative Agent shall have received from the Borrower, not later than 11:00 a.m. on the third Business Day prior to the proposed Initial Funding Date, (i) a written request setting forth (A) the date on which the Borrower proposes to borrow the Term Loans, (B) the initial Interest Period or Interest Periods to be applicable to the Term Loans, (C) if more than one Interest Period is requested, the amounts of the Term Loans to be allocated to each, and (D) the location and number of the Borrower's account to which funds are to be disbursed, and, if the Borrower also proposes to make a WC Borrowing on the Initial Funding Date, a completed and signed Borrowing Request. Both requests may be combined in a single document.             (c) Debt Service Reserve Account. The Debt Service Reserve Account shall have been opened with the Administrative Agent and cash or Eligible Investments in an amount equal to the Debt Service Reserve Requirement (after giving effect to the delivery of the Debt Service Reserve Letter of Credit) shall have been deposited therein.             (d) Letters of Credit. The LOC Bank shall have issued and delivered (i) a Debt Service Reserve Letter of Credit in a stated amount of $6,500,000 to the Administrative Agent, and (ii) the PPL Letter of Credit to PPL.             (e) Governmental Approvals. All material approvals of Governmental Authorities necessary for the operation of the Project shall have been duly obtained, shall be in full force and effect, and shall not contain any conditions that, in the reasonable opinion of the Independent Engineer, are not capable of being satisfied by the Borrower in a manner consistent with the availability of funds and without materially adversely affecting the Project.             (f) Adverse Contingencies. There shall be no litigation or administrative proceeding, or regulatory development, that would reasonably be expected to have a Material Adverse Effect on (a) the business, assets, operations, prospects, condition (financial or otherwise) or Material Project Contracts of the Borrower, (b) the ability of the Borrower to perform any of its obligations under any Loan Document or (c) the rights of or benefits available to the Administrative Agent and the Lenders under any Loan Document.             (g) Outstanding Debt. After giving effect to the Loans, the Borrower shall not have outstanding any Debt, other than (i) Debt incurred under the Loan Documents and (ii) Debt permitted by Section 7.01.             (h) Fees and Expenses. The Administrative Agent shall have received all fees and other amounts due and payable by the Borrower on or before the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder on or before the Effective Date.             (i) Other. The Administrative Agent shall have received such other documentation and assurances as shall be reasonably required by it in connection with the Loan Documents and the transactions contemplated thereby. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) at or prior to 3:00 p.m., New York City time, on April 30, 2000. In the event such conditions are not so satisfied or waived, the Lenders' obligations hereunder shall terminate at such time.     5.02     Each Borrowing             The obligation of each Lender to make a Loan on the occasion of any Borrowing (including the making of the Term Loans) is subject to the further condition precedent that, both immediately prior to the making of such Loan and also after giving effect thereto and to the intended use thereof: (a) no Default or Event of Default shall have occurred and be continuing; (b) no event which could reasonably be expected to have a Material Adverse Effect shall have occurred and be continuing; (c) the representations and warranties of the Borrower set forth in each Loan Document shall be true and correct in all material respects on and as of the date of such Borrowing with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and (d) to the Knowledge of the Borrower, all Liens in favor of the Administrative Agent for the benefit of the Lenders pursuant to the Security Documents shall be in full force and effect with the required first priority, subject to Permitted Liens. Each Borrowing Request shall constitute a certification by the Borrower to the effect set forth in the preceding sentence (both as of the date of such notice and, unless the Borrower otherwise notifies the Administrative Agent prior to the date of such Borrowing, as of the date of such Borrowing). SECTION 6.     AFFIRMATIVE COVENANTS             Until the WC Commitment has expired or been terminated and the principal of and interest on each Loan and all fees and other amounts payable under the Loan Documents shall have been paid in full, the Borrower covenants and agrees with the Lenders that:     6.01     Financial Statements and Other Information             (a) The Borrower will furnish to the Administrative Agent (with a duplicate copy for each Lender): > > (i) within 120 days after the end of each fiscal year, an audited balance > > sheet of the Borrower and the related statements of income, member's equity > > and cash flows as of the end of and for such year, setting forth in each > > case in comparative form the comparable figures for the previous fiscal > > year, all reported on by Arthur Andersen LLP or other independent public > > accountants of recognized national standing (without a "going concern" or > > like qualification or exception and without any qualification or exception > > as to the scope of such audit) to the effect that such financial statements > > present fairly in all material respects the financial condition and results > > of operations of the Borrower in accordance with GAAP consistently applied; > > > > (ii) within 90 days after the end of each of the first three fiscal quarters > > of each fiscal year, a balance sheet of the Borrower and the related > > statements of income, member's equity and cash flows as of the end of and > > for such fiscal quarter and the then elapsed portion of the fiscal year, > > setting forth in each case in comparative form 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 one of its > > Financial Officers as presenting fairly in all material respects the > > financial condition and results of operations of the Borrower in accordance > > with GAAP consistently applied, subject to normal year-end audit adjustments > > and the absence of footnotes; > > > > (iii) not later than 45 days after the end of each fiscal quarter of the > > Borrower, commencing with the quarter ending June 30, 2000, a certificate of > > a Financial Officer of the Borrower setting forth in reasonable detail > > calculations of Net Operating Cash Flow and Debt Service of the Borrower > > for, and the Debt Service Coverage Ratio of the Borrower as of, the end of > > such fiscal quarter and, if during such quarter the Borrower has entered > > into any material power purchase, fuel supply, operation or maintenance > > agreement, or any other agreement the breach of which by any party thereto > > could reasonably be expected to have a Material Adverse Effect, such > > certificate shall be accompanied by (A) a true, correct and complete copy of > > each such agreement and (B) an updated Schedule 1.01A, identifying each such > > agreement as a Material Project Contract. Each such updated schedule, upon > > delivery, shall be deemed to be a part of this Agreement and shall supercede > > any earlier dated Schedule 1.01A. > > > > (iv) not later than November 1 in each year, projections prepared by a > > Financial Officer of the Borrower showing in reasonable detail the > > Borrower's projected operating revenues and operating expenses, and the > > Borrower's projected Capital Expenditures, for the following fiscal year; > > > > (v) promptly following any request therefor, such other information > > regarding the operations, business affairs and financial condition of the > > Borrower, or compliance with the terms of the Loan Documents, as the > > Administrative Agent may reasonably request.             (b) Each year, at the time of delivery of the annual financial statements of the Borrower pursuant to clause (i) of Section 6.01(a), the Borrower will furnish to the Administrative Agent a certificate of a Financial Officer of the Borrower, (i) setting forth the information required pursuant to Sections 1 and 2 of the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate or the date of the most recent certificate delivered pursuant to this paragraph and (ii) certifying that all Uniform Commercial Code financing statements or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above, and all other actions have been taken, to the extent necessary to protect and perfect the security interests under the Security Agreement for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period).             (c) Not earlier than 90 days and not later than five Business Days prior to each Renewal Date, the Borrower will furnish to the Administrative Agent (with a duplicate copy for each Lender): > > (i) a report of a Renewal Independent Engineer, dated not earlier than 90 > > days prior to the Renewal Date, stating whether or not the conditions > > specified in clauses (i) and (ii) of the definition of Renewal Requirements > > have been met as of the preceding Determination Date and including > > calculations, schedules and other information supporting in reasonable > > detail the conclusions contained therein; and > > > > (ii) a certificate, dated not more than five days prior to the delivery > > thereof and signed by a Financial Officer of the Borrower, to the effect > > that as of the preceding Determination Date and as of the date of such > > certificate (A) no Default or Event of Default had occurred or was > > continuing, and (B) the amount of cash and the fair market value of Eligible > > Investments on deposit in the Debt Service Reserve Account was at least > > equal to the Debt Service Reserve Requirement.     6.02     Notices of Material Events             (a) The Borrower will furnish to the Administrative Agent and each Lender written notice of the following, promptly after acquiring Knowledge thereof: > > (i) the occurrence of any Default; > > > > (ii) the filing or commencement of any action, suit or proceeding by or > > before any arbitrator or Governmental Authority against or affecting the > > Borrower that, if adversely determined, could reasonably be expected, in the > > good faith opinion of the Borrower, to result in a Material Adverse Effect; > > > > (iii) the occurrence of any ERISA Event that, alone or together with any > > other ERISA Events that have occurred, could reasonably be expected to > > result in liability of the Borrower in an aggregate amount exceeding > > $250,000; provided, that liability attributable to an ERISA Event that > > occurs with respect to the Plan of an ERISA Affiliate (other than the > > Borrower) shall be considered only if the ERISA Affiliates, in the aggregate > > but excluding the Borrower, do not, as of the date of such ERISA Event, have > > sufficient net worth to satisfy the liability attributable to the ERISA > > Event; and > > > > (iv) any other development that could reasonably be expected, in the good > > faith opinion of the Borrower, to result in a Material Adverse Effect. Each notice delivered under this paragraph shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.             (b) The Borrower will give written notice to the Administrative Agent not later than 30 days prior to the expiration date of the Debt Service Reserve Letter of Credit, stating whether the Borrower will, not later than the expiration date of such Debt Service Reserve Letter of Credit, (i) furnish the Administrative Agent with an extension of such Debt Service Reserve Letter of Credit or a new Debt Service Reserve Letter of Credit in a stated amount specified in such notice in place of the expiring Debt Service Reserve Letter of Credit, (ii) deposit cash and/or Eligible Investments in the Debt Service Reserve Account in an amount specified in such notice, or (iii) both.     6.03     Existence; Conduct of Business             The Borrower will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business, including, without limitation, the Required Permits and the Environmental Permits, except to the extent that any such failure could not reasonably be expected to have a Material Adverse Effect.     6.04     Payment of Obligations             The Borrower will pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect, 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 Borrower has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.     6.05     Performance of Material Project Contracts             The Borrower will perform and observe all of the covenants and agreements on its part to be performed under the Material Project Contracts, except to the extent that such noncompliance could not reasonably be expected to have a Material Adverse Effect.     6.06     Maintenance of Properties             The Borrower will keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.     6.07     Books and Records; Inspection Rights             (a) The Borrower will keep proper books of record and account in which full, true and correct entries are made of all transactions in relation to its business and activities.             (b) The Borrower will permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.     6.08     Compliance with Laws             The Borrower will comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, including without limitation the Required Permits and the Environmental Permits, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.     6.09     Use of Proceeds             The proceeds of the Term Loans will be used only to pay or reimburse Project Costs, including professional fees and other closing costs, and (b) to refinance certain existing Debt incurred in connection with the foregoing acquisition. The proceeds of the WC Loans will be used only for working capital and other general company purposes. No part of the proceeds of the Loans will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase, acquire or carry any Margin Stock or for any purpose that entails a violation of any of the regulations of the Board, including Regulations T, U and X.     6.10     Information Regarding Collateral             The Borrower will furnish to the Administrative Agent prompt written notice of any change in (i) its legal name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) the location of its chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned or held by it or on its behalf or any office or facility at which Collateral owned or held by it or on its behalf with an aggregate book value in excess of $250,000 is located (including the establishment of any such new office or facility), (iii) the identity or organizational structure of the Borrower such that a filed financing statement becomes misleading or (iv) the Federal Taxpayer Identification Number of the Borrower. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the Lender if any material portion of the Collateral is damaged or destroyed.     6.11     Insurance             (a) The Borrower will maintain, with financially sound and reputable insurance companies, (i) adequate insurance for its insurable properties, all to such extent and against such risks, including fire, casualty and other risks insured against by extended coverage, as is customary with corporations engaged in the same or similar businesses or having similar properties similarly situated, and (ii) such other insurance as is required pursuant to the terms of any Security Document.             (b) The Borrower will promptly upon request therefor, deliver or cause to be delivered to the Administrative Agent originals or duplicate originals of all such policies of insurance. All such insurance policies in respect of property insurance shall contain a standard loss payable clause and shall be endorsed to provide that, in respect of the interests of the Administrative Agent: (i) the Administrative Agent shall be an additional insured, as its interest may appear, with respect to all coverages, (ii) 30 days' prior written notice of any cancellation, reduction of amounts payable, or any changes and amendments shall be given to the Administrative Agent, and (iii) the Administrative Agent shall have the right, but not the obligation, to pay any premiums due or to acquire other such insurance upon the failure of the Borrower to pay the same or to so insure.     6.12     Casualty and Condemnation             (a) The Borrower will give the Administrative Agent prompt written notice of any material casualty or other material damage to the Project or any material part thereof or the commencement of any action or proceeding for the taking of the Project or any material part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding.             (b) If any casualty or damage to the Project or any taking of the Project or any part thereof under power of eminent domain or by condemnation or similar proceeding results in Net Proceeds (whether in the form of insurance proceeds, condemnation award or otherwise) in an amount in excess of 7.5% of the book value of the Project at the time of such event, determined in accordance with GAAP, the Administrative Agent, on behalf of the Lenders, is authorized to collect such Net Proceeds and, if received by the Borrower, such Net Proceeds shall be paid over promptly to the Administrative Agent. Within 30 days after the date of receipt by the Borrower of such Net Proceeds or the date of receipt by the Borrower of written notice from the Administrative Agent that it has received such Net Proceeds from a Person other than the Borrower, (i) the Borrower will give notice to the Administrative Agent, whether or not the Project (A) has been repaired, restored or replaced or (B) is capable of being repaired, restored or replaced within 180 days from the date of receipt of such Net Proceeds and, if the latter, whether or not the Borrower intends to repair, restore or replace the Project within such 180-day period, and (ii) will furnish the Administrative Agent with a report from an engineer or architect satisfactory to the Administrative Agent to the effect that the Project has been repaired, restored or replaced or can be repaired, restored or replaced within 180 days from the date of receipt of such Net Proceeds, and that the completed or contemplated restoration, repair or replacement of the Project has rendered, or when completed will render, the Project a complete, economically viable facility of substantially the same usefulness, design and construction and fully functional for the same purposes and uses as existed prior to the event described in paragraph (a) of this Section. The Administrative Agent will hold any Net Proceeds received by it in an interest bearing account in the name of the Borrower and, subject to receipt of the notice and report required by the preceding sentence, will pay over to the Borrower from time to time upon its written request, to the extent of such Net Proceeds and any accrued interest thereon, the amounts theretofore expended by the Borrower or required by the Borrower to pay liabilities incurred to repair, restore or replace the Project within such 180-day period, except that if a Default described in Section 8(e) shall have occurred and be continuing the Administrative Agent will hold any undisbursed Net Proceeds as Collateral until such Default shall be cured. If at the end of such 180-day period any Net Proceeds and accrued interest remain undisbursed, after completion of the restoration, repair or replacement of the Project, the Administrative Agent will pay over the remaining amount to the Borrower upon receipt of a certificate of a Financial Officer that the repair, restoration or replacement of Project has been completed.             (c) In the event that the Administrative Agent receives any Net Proceeds pursuant to paragraph (b) of this Section and (i) within 30 days thereafter the Administrative Agent has not received the notice and report required by paragraph (b) of this Section, or (ii) the Project has not been repaired, restored or replaced by the Borrower within 180 days from the date of receipt of such Net Proceeds, or (iii) an Event of Default shall have occurred and be continuing, the Administrative Agent will apply all Net Proceeds and any accrued interest thereon held by it to prepay the Loans in accordance with Section 2.08. Any amount remaining after such application will be paid over to the Borrower.     6.13     Debt Service Reserve Account             (a) The Borrower will open and maintain with the Administrative Agent an account in the name of the Borrower (the "Debt Service Reserve Account") and will deposit and maintain in such account cash or Eligible Investments, or both, in an amount the fair market value of which is equal at all times to not less than the Debt Service Reserve Requirement. The Administrative Agent will invest and reinvest any cash balances in the Debt Service Reserve Account in Eligible Investments as directed by the Borrower in writing from time to time; provided, that the Administrative Agent shall have no obligation to invest or reinvest any cash balances in the Debt Service Reserve Account in the absence of such written instructions. The Borrower hereby grants the Administrative Agent, for the benefit of the Lenders, a first priority security interest in the Debt Service Reserve Account, the Eligible Investments therein and the proceeds thereof. Proceeds of Eligible Investments held in the Debt Service Reserve Account shall be applied by the Borrower as provided in Section 6.14.             (b) Subject to Section 6.14(d), the Borrower shall be entitled to withdraw cash and/or Eligible Investments from the Debt Service Reserve Account, during the period of 10 Business Days following the date of delivery of each Quarterly Certificate, in an amount not in excess of the Available Debt Service Reserve Account Balance as of the end of the fiscal quarter covered by such Quarterly Certificate.     6.14     Application of Operating Cash Flow             (a) So long as no Event of Default has occurred and is continuing, the Borrower will make payments for the following items during each fiscal quarter, in the order of priority set forth below, only to the extent of the Operating Cash Flow for such fiscal quarter: > > (i) First: Amounts payable during such fiscal quarter with respect to the > > following items (whether or not accrued during such quarter): (A) all proper > > operation and maintenance expenses of the Project incurred by the Borrower, > > including (1) power production expenses (including fuel and emission > > allowance expenses), transmission expenses, distribution expenses and > > administrative and general expenses, net of amounts expensed during such > > quarter for fuel, emissions allowances, materials, supplies and other > > prepaid expenses recorded as assets by the Borrower during any preceding > > fiscal quarter; (2) reimbursement to the Parent or other Affiliates of the > > Borrower's reasonably allocable share of operation and maintenance expenses > > incurred by the Parent or such Affiliates for the benefit of the Borrower, > > to the extent such expenses would be proper operation and maintenance > > expenses if incurred directly by the Borrower; and (3) reasonable > > administrative fees to the Parent or other Affiliates of the Borrower; (B) > > Taxes, other than income taxes and (C) without duplication of any amounts > > included in clause (A) above, purchases of fuel inventories (to the extent > > that such payments are not then prohibited under the Fuel Subordination > > Agreement), emission allowance inventories, materials, supplies and other > > prepaid expenses; > > > > (ii) Next: Capital Expenditures necessary to complete, maintain, repair or > > replace the Project or any part thereof, to the extent permitted by Section > > 7.05; > > > > (iii) Next: Interest, fees and other amounts, other than principal, due > > under this Agreement and the Notes, and payments due under Hedging > > Agreements; > > > > (iv) Next: Principal due under this Agreement and the Notes, including > > voluntary and mandatory prepayments; > > > > (v) Next: Funding of any current deficiency in the Debt Service Reserve > > Account; and > > > > (vi) Finally: As provided in Section 6.14(c) below.             (b) If an Event of Default has occurred and is continuing, the Borrower shall apply all Operating Cash Flow in such order of priority as the Administrative Agent or the Required Lenders shall approve.             (c) Subject to Section 2.08(a)(ii) and paragraph (b) of this Section, the amount of Operating Cash Flow remaining after giving effect to the payments specified in clauses (i), (ii), (iii), (iv) and (v) of Section 6.14(a) ("Restricted Cash Flow"), shall be applied, commencing with the quarter beginning July 1, 2000, as follows: > > (i) If the Debt Service Coverage Ratio as shown in the most recent Quarterly > > Certificate is less than or equal to 1.00, the Borrower will, within 10 > > Business Days after delivery of such Quarterly Certificate, transfer to the > > Administrative Agent an amount equal to Restricted Cash Flow for the > > immediately preceding quarter, if any, plus all Restricted Cash Flow from > > previous fiscal quarters retained by the Borrower, and will direct the > > Administrative Agent to apply such amount, and if such amount is not > > sufficient, first to withdraw cash and the proceeds of Eligible Investments > > from the Debt Service Reserve Account, to the extent required, and then, if > > such additional amount is not sufficient, to draw on the Debt Service > > Reserve Letter of Credit to the extent of the amount available thereunder, > > or to the extent required, if less, and apply such amounts to prepay the > > Loans in accordance with Section 2.08, until, after giving effect to such > > prepayment, the Pro Forma Debt Service Coverage Ratio shall be equal to > > 1.50. > > > > (ii) If the Debt Service Coverage Ratio as shown in the most recent > > Quarterly Certificate is greater than 1.00 but less than or equal to 1.25, > > the Borrower will, within 10 Business Days after delivery of such Quarterly > > Certificate, transfer an amount equal to 50% of the Restricted Cash Flow for > > the immediately preceding quarter plus 50% of all Restricted Cash Flow from > > previous fiscal quarters retained by the Borrower (less any amounts > > previously transferred pursuant to this clause or clause (iii) below) to the > > Administrative Agent and will direct the Administrative Agent to deposit > > such amount in the Debt Service Reserve Account; and > > > > (iii) If the Debt Service Coverage Ratio as shown in the most recent > > Quarterly Certificate is greater than 1.25 but less than or equal to 1.50, > > the Borrower will deposit an amount equal to 25% of the Restricted Cash Flow > > for the immediately preceding quarter plus 25% of all Restricted Cash Flow > > from previous fiscal quarters retained by the Borrower (less any amounts > > previously transferred pursuant to this clause) to the Administrative Agent > > and will direct the Administrative Agent to deposit such amount in the Debt > > Service Reserve Account;. All accumulated Restricted Cash Flow remaining after making the transfers required in clauses (i), (ii) and (iii) above shall be retained by the Borrower and shall not be available for Restricted Payments until the Borrower is entitled to withdraw funds from the Debt Service Reserve Account pursuant to Section 6.14(d) below.             (d) If (i) the Debt Service Coverage Ratio as shown in the Borrower's Quarterly Certificates for four consecutive fiscal quarters shall have been equal to or greater than 1.5 but less than 1.75, or (ii) the Debt Service Coverage Ratio as shown in the Borrower's Quarterly Certificate for the immediately preceding fiscal quarter is equal to or greater than 1.75, the Borrower may withdraw cash and/or Eligible Investments from the Debt Service Reserve Account in an amount not in excess of the Available Debt Service Reserve Account Balance.             (e) Notwithstanding anything to the contrary in this Section 6.14: > > (i) The Borrower may make payments from Operating Cash Flow during any > > fiscal quarter without regard to the order of priority set forth in Section > > 6.14(a), or in excess of Operating Cash Flow for such quarter if, prior to > > any such non-conforming payment, the Borrower shall have caused to be > > delivered to the Administrative Agent a Senior Company Guarantee of the > > payment in full when due of all payments of principal and interest with > > respect to the Loans due or to become due (whether at stated maturity, by > > acceleration or otherwise) during the period from the date of such Senior > > Company Guarantee through the fourth consecutive Payment Date following such > > date; > > > > (ii) The Borrower may (A) withdraw cash and/or Eligible Investments from the > > Debt Service Reserve Account in an amount not in excess of the Available > > Debt Service Reserve Account Balance at the date of withdrawal and (B) make > > Restricted Payments from Restricted Cash Flow (including amounts deposited > > in, and subsequently withdrawn from the Debt Service Reserve Account) if, > > prior to any such withdrawal or Restricted Payment, the Borrower shall have > > caused to be delivered to the Administrative Agent a Senior Company Guaranty > > of payment to the Borrower upon demand by the Borrower of all amounts > > required by the Borrower for payment of the items enumerated in clauses (i) > > through (v), inclusive, of Section 6.14(a), subject to the limit that the > > aggregate amount so guaranteed shall not exceed the aggregate amount of > > Restricted Payments made pursuant to this Section 6.14(e)(ii); and > > > > (iii) The Borrower may from time to time withdraw cash and/or Eligible > > Investments from the Debt Service Reserve Account in an aggregate amount not > > in excess of the Available Debt Service Reserve Account Balance at the date > > of withdrawal, provided, that the entire amount so withdrawn is applied on > > such date to prepay the Loans pursuant to Section 2.07(a).     6.15     Environmental Compliance             The Borrower shall use and operate the Project in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, except where noncompliance with any of the foregoing could not reasonably be expected to have a Material Adverse Effect.     6.16     Hedging Agreements             Not later than six months after the Initial Funding Date, the Borrower will enter into Hedging Agreements, in form and substance and with counterparties reasonably satisfactory to the Administrative Agent, to fix the interest rate on 50% or more of the outstanding principal amount of the Term Loans until the Term Maturity Date.     6.17     Further Assurances             The Borrower will execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, Mortgages and other documents), that may be required under any applicable law, or which the Administrative Agent may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Borrower. The Borrower also agrees to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. SECTION 7.     NEGATIVE COVENANTS             Until the WC Commitment has expired or been terminated and the principal of and interest on each Loan and all fees and other amounts payable under the Loan Documents shall have been paid in full, the Borrower covenants and agrees with the Lenders that:     7.01     Debt; Preferred Equity Interests             (a) The Borrower will not create, incur, assume or permit to exist any Debt, except: > > (i) Debt under the Loan Documents; > > > > (ii) Subordinated Debt; > > > > (iii) Debt of the Borrower secured by Liens permitted by Sections > > 7.02(a)(iii) and 7.02(a)(iv). > > > > (iv) Debt of the Borrower incurred in the ordinary course of business or for > > the maintenance, replacement or improvement of any fixed or capital assets > > constituting the Project, provided that the aggregate principal amount of > > Debt permitted by this clause (iv), plus the aggregate amount of the > > Borrower's accounts payable to trade creditors for goods or services, shall > > not exceed $10,000,000 at any time outstanding; and > > > > (v) Debt to counterparties in respect of Hedging Agreements.             (b) The Borrower will not (i) issue any preferred membership or other equity interest or (ii) be or become liable in respect of any obligation (contingent or otherwise) to purchase, redeem, retire, acquire or make any other payment in respect of any membership or other equity interest in the Borrower or any option, warrant or other right to acquire any such membership or other equity interest.     7.02     Liens             (a) The Borrower will not create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: > > (i) Liens created under the Loan Documents; > > > > (ii) Permitted Encumbrances; > > > > (iii) any Lien on any property or asset of the Borrower existing on the date > > hereof and set forth in Schedule 7.02, provided that (i) such Lien shall not > > apply to any other property or asset of the Borrower and (ii) such Lien > > shall secure only those obligations which it secures on the date hereof and > > any extensions, renewals and replacements thereof that do not increase the > > outstanding principal amount thereof; > > > > (iv) Purchase-money Liens on any property hereafter acquired or the > > assumption of any Lien on property existing at the time of such acquisition > > (and not created in contemplation of such acquisition) or a Lien incurred in > > connection with any conditional sale or other title retention agreement or a > > capital lease; provided, that: > > > > > (A) Any property subject to any of the foregoing is acquired by the > > > Borrower in the ordinary course of its business and the Lien on any such > > > property attaches to such asset concurrently or within ninety (90) days > > > after the acquisition thereof; > > > > > > (B) The obligation secured by any Lien so created, assumed, or existing > > > shall not exceed one hundred percent (100%) of the lesser of the cost or > > > the fair market value as of the time of acquisition of the property > > > covered thereby to the Borrower; > > > > > > (C) Each such Lien shall attach only to the property so acquired and fixed > > > improvements thereon; and > > > > > > (D) The Debt secured by all such Liens shall not exceed $5,000,000 > > > (adjusted as provided in paragraph (b) of this Section) at any time > > > outstanding in the aggregate; > > > > (v) Liens securing Debt permitted by Section 7.01, other than Subordinated > > Debt; provided, that such Liens are subordinate in priority to the Liens of > > the Security Documents; > > > > (vi) Liens to secure Capital Expenditures contemplated by or arising under > > Material Project Contracts; provided, that such Liens: (i) are approved by > > the Administrative Agent in writing prior to the attachment thereof; (ii) > > are limited to the property to be acquired or constructed; (iii) do not > > secure indebtedness for borrowed money; and (iv) are subordinate in priority > > to the Liens of the Security Documents; > > > > (vii) Liens created pursuant to Material Project Contracts or in the > > ordinary course of business of the Borrower; provided, that such Liens: (i) > > are approved by the Administrative Agent in writing prior to the attachment > > thereof; (ii) do not secure indebtedness for borrowed money; and (iii) are > > subordinate in priority to the Liens of the Security Documents; and > > > > (viii) Minor encumbrances, capital leases and judgment liens (other than > > judgment liens which have been bonded paid or stayed within 90 days after > > attachment) not exceeding $5,000,000 in the aggregate.             (b) The total amount of Debt permitted by Section 7.02(a)(iv)(D) shall be increased on each anniversary of the date of this Agreement in proportion to the GDP Price Deflator for the immediately preceding calendar year. For purposes of this paragraph, "GDP Price Deflator" means the average of the four implicit price deflators for the gross domestic product reported by the United States Department of Commerce for the four quarters of the relevant calendar year.     7.03     Fundamental Changes             (a) The Borrower will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, whether now owned or hereafter acquired, or liquidate or dissolve.             (b) The Borrower will not engage to any material extent in any business other than business of the type conducted by the Borrower on the date of execution of this Agreement and business directly related thereto.     7.04     Investments, Loans, Advances, Guarantees and Acquisitions             The Borrower will not purchase, hold or acquire (including pursuant to any merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions (including pursuant to any merger)) any assets of any other Person constituting a business unit, except: > > (i) Permitted Investments; and > > > > (ii) investments existing on the date hereof and set forth in Schedule 7.04;     7.05     Capital Expenditures             The Borrower will not permit Capital Expenditures made by the Borrower in any fiscal year to exceed (i) $7,000,000 or (ii) 150% of the amount of Capital Expenditures projected in the most recent projections delivered by the Borrower to the Administrative Agent pursuant to Section 6.01(a)(iv), whichever amount is greater.     7.06     Asset Sales             The Borrower will not sell, transfer, lease or otherwise dispose (including pursuant to a merger) of any asset except, to the extent that any such transaction will not have a Material Adverse Effect, (i) sales, transfers, leases and other dispositions in the ordinary course of business in connection with the repair or replacement of any equipment or parts, (ii) sales, transfers, leases and other dispositions of obsolete equipment or parts which are no longer used or useful in the operation or maintenance of the Project, and (iii) sales or other dispositions of other property in an amount up to $500,000 with respect to any single transaction and up to $1,000,000 in the aggregate during any fiscal year.     7.07     Sale and Lease-Back Transactions             The Borrower will not enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.     7.08     Hedging Agreements             The Borrower will not enter into any Hedging Agreement, other than Hedging Agreements required or permitted by Section 6.16 and Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower is exposed in the conduct of its business or the management of its liabilities.     7.09     Restricted Payments             The Borrower will not declare or make, or agree to pay for or make, directly or indirectly, any Restricted Payment, except that so long as the conditions specified in Section 6.14(d) or Section 6.14(e)(ii) are applicable, the Borrower may make distributions with respect to the equity interest of the Parent in the Borrower and pay Subordinated Debt to the extent of its accumulated Restricted Cash Flow; provided, however, that the Borrower shall not make any Restricted Payments to any Person at any time when total cash and Eligible Investments on deposit in the Debt Service Reserve Account are less than the Debt Service Reserve Requirement.     7.10     Transactions with Affiliates             Except as otherwise required or permitted by the Affiliate Agreements, the Borrower will not sell, transfer, lease or otherwise dispose (including pursuant to a merger) any property or assets to, or purchase, lease or otherwise acquire (including pursuant to a merger) any property or assets from, or otherwise engage in any other transactions with, any Affiliates, except in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower than could be obtained on an arms-length basis from unrelated third parties, provided that notwithstanding anything in Section 7.01, 7.04, 7.06 and 7.09 to the contrary, the Borrower may participate in, and make payments under, any Affiliate cost-sharing or cost- or benefit-allocation program or agreement, including without limitation, overhead allocation payments, tax credit allocation, income tax allocation, service cost payments or Plan premium allocation payments, whether or not such payments or allocations are pursuant to a written agreement, provided that (i) in the case of any payment, cost sharing or overhead or cost allocation, such payment, sharing or allocation is in ordinary course of business of the Borrower and pursuant to the reasonable requirements of the Borrower's business, is in consideration of services or other benefits rendered or provided to the Borrower, and is upon fair and reasonable terms comparable to terms the Borrower would obtain in a comparable arms-length transaction, and (ii) in the case of any tax credit allocation or income tax allocation or other similar allocation, such allocation is applied consistently and in a fair and reasonable manner to all Affiliates included in the relevant consolidated tax return (after giving due effect to the intent of the Sections enumerated above).     7.11     Modification of Material Contracts and Other Documents             The Borrower will not (i) amend, modify or waive any of its rights under any Material Project Contract or terminate, cancel or permit the termination or cancellation of any Material Project Contract, (ii) amend, modify or waive any of its rights under any Required Permit or Environmental Permit, (iii) amend or modify its certificate of formation, limited liability company agreement or other organizational documents, or (iv) amend, modify or waive any of its rights under any Transition Service Contract or terminate, cancel or permit the termination or cancellation of any Transition Service Contract, in each case other than amendments, modifications or waivers that would not reasonably be expected to cause a Material Adverse Effect, without the prior written consent of the Required Lenders, in the case of matters described in clauses (i), (ii) and (iii) of this Section, or the Administrative Agent, in the case of matters described in clause (iv) of this Section. SECTION 8.     EVENTS OF DEFAULT             If any of the following events ("Events of Default") shall occur:             (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, or the Borrower shall fail to pay any interest on any Loan or any fee, commission or any other amount payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of more than five Business Days;             (b) WPSR shall fail to pay any reimbursement obligation, fee or other amount with respect to either Letter of Credit when and as the same shall become due and payable, and such failure shall continue unremedied for a period of more than five Business Days;             (c) any representation or warranty made or deemed made by or on behalf of the Borrower in or in connection with any Loan Document or any amendment or modification hereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification hereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;             (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 6.02, 6.03, or 6.09 or in Article 7;             (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document to which it is a party (other than those specified in clause (a) or (c) of this Article), and such failure shall continue unremedied for a period of 30 days after the Borrower shall have received written notice thereof from the Administrative Agent; provided, however, that if such Default cannot be cured by the Borrower within such 30-day period, it shall not constitute an Event of Default if curative action is instituted by the Borrower within such period and thereafter is diligently pursued until such Default is cured, so long as such Default is cured in any event within 30 days after the expiration of the initial 30-day period;             (f) the Borrower shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Debt, when and as the same shall become due and payable (after giving effect to any applicable grace period);             (g) any event or condition occurs that results in any Material Debt becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Debt or any trustee or agent on its or their behalf to cause any Material Debt to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity (in each case after giving effect to any applicable grace period), provided, that this clause shall not apply to secured Debt that becomes due solely as a result of the voluntary sale or transfer, or casualty loss, of the property or assets securing such Debt;             (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;             (i) the Borrower shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;             (j) the Borrower shall become insolvent; shall fail to pay, become unable to pay, or admit in writing that it is or will be unable to pay, its debts as they become due; or shall voluntarily suspend transaction of its business;             (k) one or more judgments for the payment of money in an aggregate amount not covered by insurance in excess of $5,000,000 shall be rendered against the Borrower and the same shall remain undischarged or unbonded for a period of 90 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower to enforce any such judgment;             (l) an ERISA Event shall have occurred that, in the opinion of the Administrative Agent or the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower in an aggregate amount exceeding (i) $1,000,000 in any year or (ii) $2,000,000 for all periods; provided, that liability attributable to an ERISA Event that occurs with respect to any Plan of an ERISA Affiliate (other than the Borrower) shall be considered only if the ERISA Affiliates, in the aggregate but excluding the Borrower do not, as of the date of such ERISA Event, have sufficient net worth to satisfy the liability attributable to the ERISA Event;             (m) any Loan Document shall cease, for any reason, to be in full force and effect, or the Borrower shall so assert in writing or shall disavow any of its obligations thereunder;             (n) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by the Borrower not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) as a result of the Administrative Agent's failure to maintain possession of any instrument, certificated security or negotiable document delivered to it under the Security Agreement;             (o) a Change in Control shall occur; or             (p) the amount on deposit in the Debt Service Reserve Account shall at any time be less than the Debt Service Reserve Requirement and the Borrower shall not within 30 days after it shall receive written notice from the Administrative Agent of such deficiency, either deposit cash in the Debt Service Reserve Account in the amount, or deliver to the Administrative Agent a Debt Service Reserve Letter of Credit in a stated amount, equal to the amount of such deficiency; then, and in every such event (other than an event described in clause(h) or (i) of this Section), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the WC Commitment, and thereupon the WC Commitment shall terminate immediately and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued under the Loan Documents, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event described in clause (h) or (i) of this Section, the WC Commitment shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued under the Loan Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 9.     THE ADMINISTRATIVE AGENT     9.01     Appointment             Each Lender hereby irrevocably appoints Bayerische Landesbank Girozentrale, acting through its New York Branch, to act as Administrative Agent for such Lender under this Agreement and the other Loan Documents. Each Lender hereby irrevocably authorizes the Administrative Agent to take such action on behalf of such Lender under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and to perform such duties, as are expressly delegated to or required of the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto. Bayerische Landesbank Girozentrale hereby agrees to act as Administrative Agent on behalf of the Lenders on the terms and conditions set forth in this Agreement and the other Loan Documents, subject to its right to resign as provided in Section 9.10. Each Lender hereby irrevocably authorizes the Administrative Agent to execute and deliver each of the Loan Documents executed after the date hereof and to accept delivery of such of the other Loan Documents delivered after the date hereof as may not require execution by the Administrative Agent (with such consents of the Lenders as required pursuant to Section 10.02). Each Lender agrees that the rights and remedies granted to the Administrative Agent under the Loan Documents shall be exercised exclusively by the Administrative Agent, and that no Lender shall have any right individually to exercise any such right or remedy, except to the extent expressly provided herein or therein.     9.02     General Nature of Administrative Agent's Duties             Notwithstanding anything to the contrary elsewhere in this Agreement or in any other Loan Document: > > (i) The Administrative Agent shall have no duties or responsibilities except > > those expressly set forth in this Agreement and the other Loan Documents, > > and no implied duties or responsibilities on the part of the Administrative > > Agent shall be read into this Agreement or any other Loan Document or shall > > otherwise exist. > > > > (ii) The duties and responsibilities of the Administrative Agent under this > > Agreement and the other Loan Documents shall be mechanical and > > administrative in nature, and the Administrative Agent shall not have a > > fiduciary relationship in respect of any Lender. > > > > (iii) The Administrative Agent is and shall be solely the agent of the > > Lenders. The Administrative Agent does not assume, and shall not at any time > > be deemed to have, any relationship of agency or trust with or for, or any > > other duty or responsibility to, the Borrower or any other Person (except > > only for its relationship as agent for, and its express duties and > > responsibilities to, the Lenders as provided in this Agreement and the other > > Loan Documents). > > > > (iv) The Administrative Agent shall be under no obligation to take any > > action hereunder or under any other Loan Document if the Administrative > > Agent believes in good faith that taking such action may conflict with any > > Law or any provision of this Agreement or any other Loan Document, or may > > require the Administrative Agent to qualify to do business in any > > jurisdiction where it is not then so qualified.     9.03     Exercise of Powers             The Administrative Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within the Administrative Agent's rights, powers or discretion in accordance with directions from the Required Lenders (or, to the extent this Agreement or such Loan Document expressly requires the direction or consent of some other Person or set of Persons, then instead in accordance with the directions of such other Person or set of Persons). In the absence of such directions, the Administrative Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent that this Agreement or such Loan Document expressly requires the direction or consent of the Required Lenders (or some other Person or set of Persons), in which case the Administrative Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on all the Lenders. The Administrative Agent shall not have any liability to any Person as a result of (a) the Administrative Agent acting or refraining from acting in accordance with the directions of the Required Lenders (or other applicable Person or set of Persons), (b) the Administrative Agent refraining from acting in the absence of instructions to act from the Required Lenders (or other applicable Person or set of Persons), whether or not the Administrative Agent has discretionary power to take such action, or (c) the Administrative Agent taking discretionary action it is authorized to take under this Section (subject, in the case of clauses (b) and (c), to the provisions of Section 9.04(i)).     9.04     General Exculpatory Provisions             Notwithstanding anything to the contrary elsewhere in this Agreement or any other Loan Document: > > (i) The Administrative Agent shall not be liable for any action taken or > > omitted to be taken by it under or in connection with this Agreement or any > > other Loan Document, unless caused by its own gross negligence or willful > > misconduct. > > > > (ii) The Administrative Agent shall not be responsible for (i) the > > execution, delivery, effectiveness, enforceability, genuineness, validity or > > adequacy of this Agreement or any other Loan Document, (ii) any recital, > > representation, warranty, document, certificate, report or statement in, > > provided for in, or received under or in connection with, this Agreement or > > any other Loan Document, (iii) any failure of the Borrower or any Lender to > > perform any of their respective obligations under this Agreement or any > > other Loan Document, or (iv) the existence, validity, enforceability, > > perfection, recordation, priority, adequacy or value, now or hereafter, of > > any Lien or other direct or indirect security afforded or purported to be > > afforded by any of the Loan Documents or otherwise from time to time. > > > > (iii) The Administrative Agent shall not be under any obligation to > > ascertain, inquire or give any notice relating to (i) the performance or > > observance of any of the terms or conditions of this Agreement or any other > > Loan Document on the part of the Borrower, (ii) the business, operations, > > condition (financial or otherwise) or prospects of the Borrower or any other > > Person, or (iii) except to the extent set forth in Section 9.05(f), the > > existence of any Default or Event of Default. > > > > (iv) The Administrative Agent shall not be under any obligation, either > > initially or on a continuing basis, to provide any Lender with any notices, > > reports or information of any nature, whether in its possession presently or > > hereafter, except for such notices, reports and other information expressly > > required by this Agreement or any other Loan Document to be furnished by the > > Administrative Agent to such Lender.     9.05     Administration by the Administrative Agent             (a) The Administrative Agent may rely upon any notice or other communication of any nature (written or oral, including but not limited to telephone conversations, whether or not such notice or other communication is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of the proper party or parties, and the Administrative Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication.             (b) The Administrative Agent may consult with legal counsel (including, without limitation, in-house counsel for the Administrative Agent or in-house or other counsel for the Borrower), independent public accountants and any other experts selected by it from time to time, and the Administrative Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts.             (c) The Administrative Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Administrative Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Administrative Agent shall deem it necessary or desirable that a matter be proved or established with respect to the Borrower or any Lender, such matter may be established by a certificate of the Borrower or such Lender, as the case may be, and the Administrative Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document).             (d) The Administrative Agent may fail or refuse to take any action unless it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Administrative Agent by reason of taking or continuing to take any such action.             (e) The Administrative Agent may perform any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact. 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.             (f) The Administrative Agent shall not be deemed to have any knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a "notice of default." If the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to each Lender.     9.06     Lenders Not Relying on Administrative Agent or Other Lenders             Each Lender acknowledges that: > > (i) Neither the Administrative Agent nor any other Lender has made any > > representations or warranties to it, and no act taken hereafter by the > > Administrative Agent or any other Lender shall be deemed to constitute any > > representation or warranty by the Administrative Agent or such other Lender > > to it. > > > > (ii) It has, independently and without reliance upon the Administrative > > Agent or any other Lender, and based upon such documents and information as > > it has deemed appropriate, made its own credit and legal analysis and > > decision to enter into this Agreement and the other Loan Documents. > > > > (iii) It will, independently and without reliance upon the Administrative > > Agent or any other Lender, and based upon such documents and information as > > it shall deem appropriate at the time, make its own decisions to take or not > > take action under or in connection with this Agreement and the other Loan > > Documents.     9.07     Indemnification             Each Lender agrees to reimburse and indemnify the Administrative Agent and its directors, officers, employees and agents (to the extent not reimbursed by the Borrower and without limitation of the obligations of the Borrower to do so, in each case pursuant to the terms of this Agreement and the other Loan Documents), based on its Percentage, from and against any and all amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature (including, without limitation, the fees and disbursements of counsel for the Administrative Agent or such other Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Administrative Agent or such other Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Administrative Agent or such other Person as a result of, or arising out of, or in any way related to or by reason of, this Agreement, any other Loan Document, any transaction from time to time contemplated hereby or thereby, or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan, provided that no Lender shall be liable for any portion of such amounts, losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the gross negligence or willful misconduct of the Administrative Agent or such other Person, as finally determined by a court of competent jurisdiction. Payments under this Section shall be due and payable on demand, and to the extent that any Lender fails to pay any such amount on demand, such amount shall bear interest for each day from the date of demand until paid (before and after judgment) at a rate per annum (calculated on the basis of a year of 360 days and actual days elapsed) which for each day shall be equal to the Federal Funds Effective Rate for such day.     9.08     Administrative Agent in its Individual Capacity             With respect to its Commitment and the Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lenders," "holders of Notes" and like terms shall include the Administrative Agent in its individual capacity as such. The Administrative Agent and its affiliates may, without liability to account, make loans to, accept deposits from, acquire debt or equity interests in, act as trustee under indentures of, and engage in any other business with, the Borrower and any stockholder, subsidiary or affiliate of the Borrower, as though the Administrative Agent were not the Administrative Agent hereunder.     9.09     Holders of Notes             The Administrative Agent may deem and treat the Lender which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until an Assignment Agreement with respect to the assignment or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 10.04. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Lender shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Lender or of any Note or Notes issued in exchange therefor.     9.10     Successor Administrative Agent             The Administrative Agent may resign at any time by giving 10 days' prior written notice thereof to the Lenders and the Borrower. The Administrative Agent may be removed by the Required Lenders at any time with or without cause by giving 10 days, prior written notice thereof to the Administrative Agent, the other Lenders and the Borrower. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed and consented to, and shall have accepted such appointment, within 30 days after such notice of resignation or removal, then the retiring Administrative Agent, on behalf of the Lenders, may appoint a successor Administrative Agent. Each successor Administrative Agent shall be a commercial bank or trust company organized under the Laws of the United States of America or any State thereof and having a combined capital and surplus of at least $1,000,000,000. The appointment of any successor Administrative Agent at any time pursuant to this Section shall be subject to the approval of the Borrower, provided that at such time there shall not have occurred and be continuing any Default or Event of Default, and provided further that the Borrower's consent to any such appointment shall not be unreasonably withheld. Upon the acceptance by a successor Administrative Agent of its appointment as Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Administrative Agent without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Administrative Agent, the Administrative Agent shall be discharged from its duties under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Administrative Agent under this Agreement. If and for so long as no successor Administrative Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Administrative Agent shall be sufficiently given if given by the Required Lenders, all notices or other communications required or permitted to be given to the Administrative Agent shall be given to each Lender, and all payments to be made to the Administrative Agent shall be made directly to the Borrower or Lender for whose account such payment is made.     9.11     Additional Administrative Agents             If the Administrative Agent shall from time to time deem it necessary or advisable, for its own protection in the performance of its duties hereunder or in the interest of the Lenders, the Administrative Agent and the Borrower shall execute and deliver a supplemental agreement and all other instruments and agreements necessary or advisable in the opinion of the Administrative Agent to constitute another commercial bank or trust company, or one or more other Persons approved by the Administrative Agent, to act as co-Administrative Agent, with such powers of the Administrative Agent as may be provided in such supplemental agreement, and to vest in such bank, trust company or Person, as such co-Administrative Agent, any properties, rights, powers, privileges and duties of the Administrative Agent under this Agreement or any other Loan Document. The appointment of any co-Administrative Agent at any time pursuant to this Section shall be subject to the approval of the Borrower, provided that at such time there shall not have occurred and be continuing any Default or Event of Default, and provided further that the Borrower's consent to any such appointment shall not be unreasonably withheld.     9.12     Calculations             The Administrative Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith, in the absence of its own gross negligence or willful misconduct. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Lender to whom payment was due but not made (except as provided in the preceding sentence) shall be to recover from the other Lenders any payment in excess of the amount to which they are determined to be entitled or, if the amount due was not paid by the Borrower, to recover such amount from the Borrower.     9.13     Other Agents             Notwithstanding anything in any Loan Document to the contrary, no Agent other than the Administrative Agent shall have any duty or obligation under the Loan Documents. SECTION 10.     MISCELLANEOUS     10.01     Notices             Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: > > (a) if to the Borrower: > > > > > Sunbury Generation, LLC > > > c/o WPS Power Development, Inc. > > > 677 Baeten Road > > > Green Bay, WI 54304 > > > Attention: George R. Wiesner > > > Assistant Controller  > > > > > > Telephone: (920) 490-6052 > > > Telecopy: (920) 496-9399  > > > > > > with a copy to: > > > > > >  Foley & Lardner > > > Firstar Center > > > 777 E. Wisconsin Ave. > > > Milwaukee, WI 53202-5367 > > > Attention: Mary Ann C. Halloin, Esq. > > > > > >  Telephone: (414) 297-5604 > > > Telecopy: (414) 297-4900 > > > > (b) if to the Administrative Agent: > > > > > Bayerische Landesbank Girozentrale > > > 560 Lexington Avenue > > > New York, NY 10022 > > > Attention: Export & Project Finance Department > > > > > > Telephone: (212) 310-9800 > > > Telecopy: (212) 310-9868 > > > > > > with a copy to: > > > > > > Emmet, Marvin & Martin, LLP > > > 120 Broadway > > > New York, NY 10271 > > > Attention: Julian A. McQuiston, Esq. > > > > > > Telephone: (212) 238-3000 > > > Telecopy: (212) 238-3100             (c) if to any other Lender, to it at its address (or telecopy number) set forth on its signature page to this Agreement or in its Assignment Agreement. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.     10.02     Waivers; Amendments             (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power under any Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders under the Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by the Borrower 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. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.             (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided, that no such agreement shall (i) increase the WC Commitment of the WC Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan, or reduce the rate of interest thereon, or reduce any fees or other amounts payable under the Loan Documents, without the written consent of each Lender affected thereby, (iii) postpone any scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees or other amounts payable under the Loan Documents, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of reduction or expiration of the WC Commitment, without the written consent of each Lender affected thereby, (iv) change any provision hereof in a manner that would alter the pro rata sharing of payments required by any Loan Document, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, or (vi) release any of the Collateral from the Liens of the Loan Documents (except as expressly provided in the Mortgage or the Security Agreement), without the consent of each Lender; and provided, further, that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent.             (c) If any Lender other than Bayerische Landesbank Girozentrale fails to consent to any action, waiver, or amendment requested by Borrower when such Lender's consent is required hereunder (for purposes hereof, a "Dissenting Lender"), the Borrower may, at its sole expense and effort, upon notice to the Dissenting Lender and the Administrative Agent, require the Dissenting Lender to assign and delegate, without recourse, all its interests, rights and obligations under this Agreement and the other Loan Documents to an assignee (for purposes hereof, a "Replacement Lender") that shall assume such obligations in accordance with and subject to the restrictions contained in Section 10.04; provided, that (i) the Borrower shall have received the prior consent of the Required Lenders, and (ii) the Dissenting Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the Replacement Lender (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts).             (d) If the Borrower is reasonably unable to obtain a Replacement Lender for any Dissenting Lender, the Borrower, the Parent, and/or any of their Affiliates may purchase, and the Dissenting Lender shall sell and assign to the Borrower, the Parent, or such Affiliate, as the case may be (for purposes hereof, the "Purchaser"), without recourse, all of the Dissenting Lender's interests, rights and obligations under this Agreement and the other Loan Documents; provided, that (i) the Borrower shall have received the prior consent of the Required Lenders, (ii) the Dissenting Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the Purchaser (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), and (iii) the Purchaser, the Borrower, and the Administrative Agent shall have entered into a subordination and waiver agreement ("Subordination Agreement") on terms and conditions acceptable to the Required Lenders whereby (A) all payments in respect of the Purchaser's Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder shall be subordinated on substantially the same terms and conditions as other Subordinated Debt, (B) the Purchaser shall waive all of its interests, rights, and remedies in respect of the Liens created under the Security Documents, and (C) the Purchaser shall waive all of its rights to exercise any of the voting or consent rights of the Lenders under any of the Loan Documents, in each case for so long as Purchaser continues to own such interests, rights, and obligations. All of the terms, conditions, and waivers set forth in any such Subordination Agreement shall expire and be of no further force and effect upon the sale and assignment of the Purchaser's interests, rights and obligations under this Agreement and the other Loan Documents to a Replacement Lender in accordance with paragraph (c) of this Section.             (e) For purposes of this Section 10.02, "Required Lenders" shall be determined without reference to the sum of the outstanding Term Loans of the Dissenting Lender.     10.03     Expenses; Indemnity; Damage Waiver             (a) The Borrower shall pay all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (other than any Affiliate acting in the capacity of a Lender), including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with (i) any amendments, modifications or waivers of the provisions of any Loan Document (whether or not the transactions contemplated thereby shall be consummated), and (ii) in connection with the enforcement or protection of the rights of the Administrative Agent and the Lenders in connection with the Loan Documents, including the Administrative Agent's rights under this Section, or in connection with the Loans made hereunder, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.             (b) The Borrower shall indemnify the Administrative Agent, each Lender and each Related Party thereof (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the transactions contemplated thereby, (ii) any Loan or the use of the proceeds thereof, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower, or any Environmental Liability related in any way to the Borrower or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided, that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee (including claims of any Lender resulting from the gross negligence or willful misconduct of the Administrative Agent).             (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent an amount equal to the product of such unpaid amount multiplied by a fraction, the numerator of which is the outstanding principal balance of such Lender's Loans and the denominator of which is the outstanding principal balance of all Loans (in each case determined as of the time that the applicable unreimbursed expense or indemnity payment is sought), provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as applicable, was incurred by or asserted against the Administrative Agent in its capacity as such.             (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, any Loan Document or any agreement, instrument or other document contemplated thereby, the Transactions or any Loan or the use of the proceeds thereof.             (e) All amounts due under this Section shall be payable promptly but in no event later than ten days after written demand therefor.     10.04     Successors and Assigns             (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of the Administrative Agent and each Lender) any legal or equitable right, remedy or claim under or by reason of any Loan Document.             (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it); provided, that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent must give its prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) in the case of the WC Lender all of its rights and obligations (including all the WC Loans at the time owing to it and the WC Commitment) shall be assigned, (iii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Term Loans, the amount of the Term Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment Agreement with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless the Borrower and the Administrative Agent otherwise consent, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment Agreement together with, unless otherwise agreed by the Administrative Agent, a processing and recordation fee of $5,000, and (v) if the assignee is a Foreign Lender, the assignee shall deliver to the Borrower and the Administrative Agent the documents required by Section 3.07(e); and provided, further, that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment Agreement, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Term Lender under the Loan Documents, and the assigning Term Lender thereunder shall, to the extent of the interest assigned by such Assignment Agreement, be released from its obligations under the Loan Documents (and, in the case of an Assignment Agreement covering all of the assigning Term Lender's rights and obligations under the Loan Documents, such Term Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.05, 3.06, 3.07 and 10.03). Any assignment or transfer by a Term Lender of rights or obligations under the Loan Documents that does not comply with this paragraph shall be treated for purposes of the Loan Documents as a sale by such Term Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.             (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York City a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, the amount of the WC Commitment of the WC Lender, and the principal amounts of the Loans owing to each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive absent clearly demonstrable error, and the Borrower and each Lender may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.             (d) Upon its receipt of a duly completed Assignment Agreement executed by an assigning Lender and an assignee, the processing and recordation fee referred to in paragraph (b) of this Section, any written consent to such assignment required by paragraph (b) of this Section, and, if applicable, the documents required by Section 3.07(e), the Administrative Agent shall accept such Assignment Agreement and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.             (e) Any Lender may, without the consent of the Borrower, the Administrative Agent or any other Lender, sell participations to one or more banks or other entities (each such bank or other entity being called a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement and the other Loan Documents (including all or a portion of the Loans owing to it); provided, that (i) such Lender's obligations under the Loan Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under the Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of any Loan Documents; provided, that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.05 and 3.06 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided that such Participant agrees to be subject to Section 2.09(c) as though it were a Lender.             (f) A Participant shall not be entitled to receive any greater payment under Section 3.05 or 3.07 than the Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.07 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Sections 3.07(e), 3.07(f) and 3.08 as though it were a Lender.             (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under the Loan Documents to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest, provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations under the Loan Documents or substitute any such pledgee or assignee for such Lender as a party hereto.     10.05     Survival             All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of any Loan Document and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under the Loan Documents is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 3.05, 3.06, 3.07, 9 and 10.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans and the termination of the Commitments or the termination of this Agreement or any provision hereof.     10.06     Counterparts; Integration; Effectiveness     This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which, when taken together, shall constitute but one contract. This Agreement and any separate letter agreements with respect to fees and expenses payable to the Administrative Agent and any Lender constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Agreement.     10.07     Severability             In the event any one or more of the provisions contained in this Agreement should be held 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 (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.     10.08     Right of Setoff             If an Event of Default shall have occurred and be continuing, each of the Lenders and their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by it to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by it, irrespective of whether or not it shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each the Lenders and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that it may have.     10.09     Governing Law; Jurisdiction; Consent to Service of Process             (a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.             (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that, to the extent permitted by applicable law, all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by applicable law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or the other Loan Documents against the Borrower, or any of its property, in the courts of any jurisdiction.             (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.             (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.             10.10     WAIVER OF JURY TRIAL             EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.     10.11     Headings             Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.     10.12     Interest Rate Limitation             Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively the "charges"), shall exceed the maximum lawful rate (the "maximum rate") that may be contacted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all of the charges payable in respect thereof, shall be limited to the maximum rate and, to the extent lawful, the interest and the charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated, and the interest and the charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the maximum rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. [Continued and executed on the following pages]               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. > > > > > SUNBURY GENERATION, LLC > > > > > > > > > > By:___________________________ > > > > > Name: Ralph G. Baeten > > > > > Title: Treasurer     > > > > > BAYERISCHE LANDESBANK GIROZENTRALE, > > > > > NEW YORK BRANCH, > > > > > as Administrative Agent > > > > > > > > > > By:___________________________ > > > > > Name: Alexander Kohnert > > > > > Title: First Vice President > > > > > > > > > > > > > > > > > > > > By:___________________________ > > > > > Name: Christopher A. Stolarski > > > > > Title: Vice President   > > > > > BAYERISCHE LANDESBANK GIROZENTRALE, > > > > > CAYMAN ISLANDS BRANCH, > > > > > as WC Lender > > > > > > > > > > By:___________________________ > > > > > Name: Alexander Kohnert > > > > > Title: First Vice President > > > > > > > > > > > > > > > > > > > > By:___________________________ > > > > > Name: Christopher A. Stolarski > > > > > Title: Vice President > > > > > > > > > > > > > > > > > > > > Address for Notices > > > > > > > > > > : > > > > > > > > > > > > > > > > > > > > Bayerische Landesbank Girozentrale, > > > > > Cayman Islands Branch > > > > > c/o Bayerische Landesbank Girozentrale > > > > > 560 Lexington Avenue > > > > > New York, NY 10022 > > > > > Attention: Export & Project Finance Department > > > > > > > > > > > > > > >   > > > > > > > > > > Telephone: (212) 310-9800 > > > > > Telecopy: (212) 310-9868 > > > > > > > > > >   Percentage: 100%  > > > > > BAYERISCHE LANDESBANK GIROZENTRALE, > > > > > CAYMAN ISLANDS BRANCH, > > > > > as Term Lender > > > > > > > > > > By:___________________________ > > > > > Name: Alexander Kohnert > > > > > Title: First Vice President > > > > > > > > > >   > > > > > > > > > > By:___________________________ > > > > > Name: Christopher A. Stolarski > > > > > Title: Vice President > > > > > > > > > > Address for Notices > > > > > > > > > > : > > > > > > > > > > > > > > > > > > > > Bayerische Landesbank Girozentrale, > > > > > Cayman Islands Branch > > > > > c/o Bayerische Landesbank Girozentrale > > > > > 560 Lexington Avenue > > > > > New York, NY 10022 > > > > > Attention: Export & Project Finance Department > > > > > > > > > > Telephone: (212) 310-9800 > > > > > Telecopy: (212) 310-9868 > > > > > > > > > >   Credit Agreement dated as of April 14, 2000 among Sunbury Generation, LLC Bayerische Landesbank Girozentrale, Cayman Islands Branch, et al. PRINCIPAL PAYMENT SCHEDULE   Payment Date Installment Percentage > Installment Amount > Principal Balance June 30, 2000 > > 1.825% $1,527,525 $82,172,475 September 30, 2000 > > 1.825% $1,527,525 $80,644,950 December 31, 2000 > > 1.825% $1,527,525 $79,117,425 March 31, 2001 > > 1.825% $1,527,525 $77,589,900 June 30, 2001 > > 1.825% $1,527,525 $76,062,375 September 30, 2001 > > 1.825% $1,527,525 $74,534,850 December 31, 2001 > > 1.825% $1,527,525 $73,007,325 March 31, 2002 > > 1.825% $1,527,525 $71,479,800 June 30, 2002 > > 0.575% $481,275 $70,998,525 September 30, 2002 > > 0.575% $481,275 $70,517,250 December 31, 2002 > > 0.575% $481,275 $70,035,975 March 31, 2003 > > 0.575% $481,275 $69,554,700 June 30, 2003 > > 1.000% $837,000 $68,717,700 September 30, 2003 > > 1.000% $837,000 $67,880,700 December 31, 2003 > > 1.000% $837,000 $67,043,700 March 31, 2004 > > 1.000% $837,000 $66,206,700 June 30, 2004 > > 1.000% $837,000 $65,369,700 September 30, 2004 > > 1.000% $837,000 $64,532,700 December 31, 2004 > > 1.000% $837,000 $63,695,700 March 31, 2005 > > 1.000% $837,000 $62,858,700 June 30, 2005 > > 1.000% $837,000 $62,021,700 September 30, 2005 > > 1.000% $837,000 $61,184,700 December 31, 2005 > > 1.000% $837,000 $60,347,700 March 31, 2006 > > 1.000% $837,000 $59,510,700 June 3O, 2006 > > 1.150% $962,550 $58,548,150 September 30, 2006 > > 1.150% $962,550 $57,585,600 December 31, 2006 > > 1.150% $962,550 $56,623,050 March 31, 2007 > > 1.150% $962,550 $55,660,500 June 30, 2007 > > 1.150% $962,550 $54,697,950 September 30, 2007 > > 1.150% $962,550 $53,735,400 December 31, 2007 > > 1.150% $962,550 $52,772,850 March 31, 2008 > > 1.150% $962,550 $51,810,300 June 30, 2008 > > 1.300% $1,088,100 $50,722,200 September 30, 2008 > > 1.300% $1,088,100 $49,634,100 December 31, 2008 > > 1.300% $1,088,100 $48,546,000 March 31, 2009 > > 1.300% $1,088,100 $47,457,900 June 30, 2009 > > 1.300% $1,088,100 $46,369,800 September 30, 2009 > > 1.300% $1,088,100 $45,281,700 December 31, 2009 > > 1.300% $1,088,100 $44,193,600 March 3l, 2010 > > 1.300% $1,088,100 $43,105,500 June 30, 2010 > > 1.300% $1,088,100 $42,017,400 September 30, 2010 > > 1.300% $1,088,100 $40,929,300 December 31, 2010 > > 1.300% $1,088,100 $39,841,200 March 3l, 2011 > > 1.300% $1,088,100 $38,753,100 June 30, 2011 > > 1.300% $1,088,100 $37,665,000 September 30, 2011 > > 1.300% $1,088,100 $36,576,900 December 31, 2011 > > 1.300% $1,088,100 $35,488,800 March 31, 2012 > > 1.300% $1,088,100 $34,400,700 June 30, 2012 > > 1.450% $1,213,650 $33,187,050 September 30, 2012 > > 1.450% $1,213,650 $31,973,400 December 31, 2012 > > 1.450% $1,213,650 $30,759,750 March 3l, 2013 > > 1.450% $1,213,650 $29,546,100 June 30, 2013 > > 1.600% $1,339,200 $28,206,900 September 30, 2013 > > 1.600% $1,339,200 $26,867,700 December 31, 2013 > > 1.600% $1,339,200 $25,528,500 March 3l, 2014 > > 1.600% $1,339,200 $24,189,300 June 30, 2014 > > 1.600% $1,339,200 $22,850,100 September 30, 2014 > > 1.600% $1,339,200 $21,510,900 December 31, 2014 > > 1.600% $1,339,200 $20,171,700 March 31, 2015 > > 1.600% $1,339,200 $18,832,500 June 30, 2015 > > 1.725% $1,443,825 $17,388,675 September 30, 2015 > > 1.725% $1,443,825 $15,944,850 December 31, 2015 > > 1.725% $1,443,825 $14,501,025 March 31, 2016 > > 1.725% $1,443,825 $13,057,200 June 30, 2016 > > 1.875% $1,569,375 $11,487,825 September 30, 2016 > > 1.875% $1,569,375 $ 9,918,450 December 31, 2016 > > 1.875% $1,569,375 $ 8,349,075 March 31, 2017 > > 1.875% $1,569,375 $ 6,779,700 June 30, 2017 > > 2.025% $1,694,925 $ 5,084,775 September 30, 2017 > > 2.025% $1,694,925 $ 3,389,850 December 31, 2017 > > 2.025% $1,694,925 $ 1,694,925 March 3l, 2018 > > 2.025% $1,694,925 0     $83,700,000              

ADDENDUM TO EMPLOYMENT AGREEMENT The EMPLOYMENT AGREEMENT entered into between enherent Corp. f/k/a PRT Group Inc. (herein called The Company) located at 12300 Ford Rd., Suite 450, Dallas, Texas, 75234, and Jack Mullinax (herein called EMPLOYEE), with an effective date of July 26, 1999, is hereby amended as follows: 2. Term:  The term of employment shall be extended for an additional twelve (12) month period beginning August 1, 2001 and ending July 31, 2002.              EMPLOYEE and Company agree that all other provisions of the EMPLOYMENT AGREEMENT shall continue in full force and effect and that both EMPLOYEE and Company shall be bound by said EMPLOYMENT AGREEMENT.   EMPLOYEE:   ENHERENT CORP.:       --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- SIGNATURE   SIGNATURE Jack Mullinax   Dan S. Woodward     President, CEO & Chairman       --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- DATE   DATE       --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- WITNESSED  BY   DATE  

10.1(aj) AMENDMENT NUMBER ONE TO THE JANUARY 1, 1997 RESTATEMENT OF THE SAUER-SUNDSTRAND EMPLOYEES’ SAVINGS AND RETIREMENT PLAN              WHEREAS, Sauer-Danfoss (US) Company (formerly known as Sauer-Danfoss, Inc. and Sauer-Sundstrand Company) sponsors the Sauer-Sundstrand Employees' Savings and Retirement Plan (the "Plan");              WHEREAS, Sauer-Danfoss (NA) Company (formerly known as Danfoss Fluid Power Inc.) was acquired and became a Related Employer under the Plan effective May 3, 2000;              WHEREAS, Sauer-Danfoss (NA) Company sponsors the Danfoss Fluid Power Employee Savings and Retirement Plan;              WHEREAS, both Sauer-Danfoss (US) Company and Sauer-Danfoss (NA) Company desire that that the Danfoss Fluid Power Employee Savings and Retirement Plan be merged into the Plan effective December 31, 2000;              WHEREAS, both Sauer-Danfoss (US) Company and Sauer-Danfoss (NA) Company desire that Sauer-Danfoss (NA) Company adopt the Plan for its employees effective January 1, 2001.              WHEREAS, pursuant to appropriate action of the Board of Directors of each of Sauer-Danfoss (US) Company and Sauer-Danfoss (NA) Company, the Danfoss Fluid Power Employee Savings and Retirement Plan was merged into the Plan effective December 31, 2000.              WHEREAS, pursuant to Section 17.3 of the Plan and appropriate action of the Board of Directors of each of Sauer-Danfoss (US) Company and Sauer-Danfoss (NA) Company, Sauer-Danfoss (NA) Company has adopted the Plan for its employees effective January 1, 2001.              NOW THEREFORE, pursuant to Section 14.1 of the Plan, Sauer-Danfoss  (US) Company hereby amends the Plan as follows, effective as of January 1, 2001, except as otherwise provided:              1.          Effective immediately, all references in the Plan to Sauer-Sundstrand Company are changed to Sauer-Danfoss (US) Company and Section 1.7 is amended specifically to read in its entirety as follows:              “1.7      “Company” shall mean Sauer-Danfoss (US) Company (formerly known as Sauer-Danfoss, Inc. and Sauer-Sundstrand Company), a Delaware corporation, or any successor thereto.”              2.          Section 1.10 is amended to read in its entirety as follows:              “1.10   “Early Retirement Date” shall mean the last day of the month in which the Participant has attained age 55 and completed five (5) years of Service.”              3.          Section 1.13 is amended to read in its entirety as follows:              “1.13   “Employee” shall mean any person who is employed by the Employer, provided, however, that the term shall not include any person who renders service to the Employer solely as an independent contractor or leased employee (as defined in Code Section 414(n)), nor shall it include any person covered by a collective bargaining agreement between employee representatives and the Employer if retirement benefits were the subject of good faith bargaining between such employee representatives and the Employer (unless the resulting bargaining agreement provides for such employee’s coverage under this Plan).”              4.          Section 1.26 is amended to read in its entirety as follows:              “1.26   “Normal Retirement Date” shall mean the date the Participant attains age 65; provided that for Participants who first become Participants after January 1, 2001, it shall mean the latter of the date the Participant attains age 65 or the 5th anniversary of the date that the Participant first became a Participant.”              5.          The name of the Plan is changed to “Sauer-Danfoss Employees’ Savings Plan” and all references in the Plan to the name of the Plan are changed accordingly. Furthermore, Section 1.29 is amended specifically to read in its entirety as follows:              “1.29   “Plan” shall mean this Sauer-Danfoss Employees’ Savings Plan (formerly known as the Sauer-Sundstrand Employees’ Savings and Retirement Plan), as amended from time-to-time. The Plan is intended to be a profit-sharing plan for purposes of Section 401(a)(27)(B) of the Code.”              6.          Section 2.1 is amended to read in its entirety as follows:              “2.1      Eligibility. If any of the following paragraphs apply to an Employee, such Employee shall become an Eligible Employee on the date as provided below: (a)         An Employee on January 1, 2001, who became an “Eligible Employee” under the terms of the Plan in effect on December 31, 2000, shall continue to be an Eligible Employee for purposes of the Plan on January 1, 2001. (b)        For purposes of Section 3.2, an Employee employed by the Employer on a regular full-time or part-time basis (customarily works at least 20 hours per week) shall become an Eligible Employee immediately upon the commencement of his employment by the Employer. For purposes of Section 3.1, such an Employee shall become an Eligible Employee on the date the Employee completes 6 consecutive months of employment by the Employer. (c)         For purposes of Section 3.2, an Employee who is employed by the Employer on a temporary or irregular basis shall become an Eligible Employee on the date on which he completes 1,000 Hours of Service in an Employment Year. For purposes of Section 3.1, such an Employee shall become an Eligible Employee on the first day of the Employment Year following the Employment Year in which the Employee completed 1,000 Hours of Service. (d)        An Employee who had been an Eligible Employee under this Plan and who is reinstated to active employment after a period during which he was not an actively employed Employee shall become an Eligible Employee on his date of reinstatement.”              7.          Section 3.1 is amended to read in its entirety as follows:              “3.1      Participation in Employer and Matching Contributions. Eligible Employees shall be eligible to receive Employer and Matching Contributions under Section 5.1 effective as of the first day of the pay period coincident with or following the date they became Eligible Employees. Notwithstanding any other provision of this Plan, Employees who accrue any benefit under the final average pay benefit formula (rather than the new cash balance formula) under the Sauer-Danfoss Employees’ Retirement Plan after December 31, 2000 shall not be eligible to receive Employer and Matching Contributions under Section 5.1.”              8.          Section 12.2(a)(iii) is amended to read as follows:              “12.2   Vesting (a)         .  .  . (iii)        Upon any other termination of employment, in accordance with the following schedule: Years of Service   Nonforfeitable Percentage   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Less than 3   0   3 or more   100   Notwithstanding the above schedule, Eligible Employees as of December 31, 2000 employed at the Employer’s West Branch, Iowa location shall be one hundred percent (100%) vested in their December 31, 2000 Employer and Matching Contribution Accounts and any subsequent earnings (or losses) attributable thereto. In no event shall the Nonforfeitable Percentage of amounts credited to the Employer and Matching Contribution Accounts of such Eligible Employees after December 31, 2000 be less than their Nonforfeitable Percentage as of December 31, 2000 determined in accordance with the following schedule:   Years of Service*   Nonforfeitable Percentage*   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   0   20   1   40   2   60   3   80   4 or more   100                                           .  .  .”              9.          Appendix A is added to the end of the Plan, in the form of Appendix A attached to this Amendment Number One and made a part hereof.              IN WITNESS WHEREOF, Sauer-Danfoss (US) Company has authorized the execution on its behalf of this Amendment Number One this 15th day of December, 2000.     By: /s/  Ronald C. Hanson     --------------------------------------------------------------------------------   Title:  Director Global Human Resources     --------------------------------------------------------------------------------   APPENDIX A TO SAUER-DANFOSS EMPLOYEES’ SAVINGS PLAN              This Appendix A to the Sauer-Danfoss Employees’ Savings Plan is applicable only to Employees who were previously Employees under the Danfoss Fluid Power Employee Savings and Retirement Plan (hereinafter referred to as the “Danfoss Plan”) which was merged into the Plan effective December 31, 2000. (Such Employees are hereinafter referred to as “Former Danfoss Employees”).              The provisions of the Plan shall apply to Former Danfoss Employees with the following modifications:              1.          Eligibility:  Former Danfoss Employees who were eligible to participate in the employee elective contribution, employer matching contribution or the employer discretionary contribution under the Danfoss Plan on December 31, 2000 shall be eligible to participate in the corresponding contributions under the Plan on January 1, 2001. Former Danfoss Employees who were not eligible to participate in any of such contributions under the Danfoss Plan as of December 31, 2000, shall be eligible to participate in such contributions under the Plan after satisfying the applicable Plan requirements for participation in such contributions. Periods of employment with Sauer-Danfoss (NA) Company (formerly known as Danfoss Fluid Power Inc.) prior to January 1, 2001, including employment prior to its May 3, 2000 date of acquisition, shall be included in determining such eligibility.              2.          Vesting:  For the purpose of determining vesting under the Plan, Former Danfoss Employees shall be credited with periods of employment with by Sauer-Danfoss (NA) Company (formerly known as Danfoss Fluid Power Inc.) prior to January 1, 2001, including employment prior to its May 3, 2000 acquisition. Furthermore, Former Danfoss Employees shall be one hundred percent (100%) vested in their December 31, 2000 Employer and Matching Contribution Accounts and any subsequent earnings (or losses) attributable thereto. In no event shall the Nonforfeitable Percentage of amounts credited to the Employer and Contribution Accounts of Former Danfoss Employees after December 31, 2000 be less than their Nonforfeitable Percentage as of December 31, 2000 determined in accordance with the following schedule:     Years of Service   Nonforfeitable Percentage   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     1 year   20 %     2 years   40 %     3 years   60 %     4 years   80 %     5 or more years   100 %              3.          Loans:  Former Danfoss Employees shall be eligible to obtain a loan from the Plan in accordance with the Plan’s loan provisions. Any loans outstanding under the Danfoss Plan on December 31, 2000 shall continue under their current terms.

EXHIBIT 10.18                                                                                                                                                                                     Execution Copy           ABINGTON SAVINGS BANK DEFINED CONTRIBUTION SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT                                                                                                                                                                                                                             TABLE OF CONTENTS PART 1. DEFINITIONS         1.1. Beneficiary     1.2. Board or Board of Directors     1.3. Change in Control     1.4. Code     1.5. Fund     1.6. Fund Balance     1.7. Good Reason     1.8. Normal Retirement Date     1.9. Trustee     1.10. Vested Benefit     1.11. Vested Percentage         PART 2. BANK CONTRIBUTIONS TO FUND; PAYMENTS FROM FUND TO EXECUTIVE         2.1. Establishment of and Contributions to the Fund     2.2. Additional Contributions Upon Change in Control.     2.3. Investment of the Fund.     2.4. Payments from Fund     2.5. No Benefits Upon Discharge for Cause     2.6. Discharge for Cause.         PART 3. ADDITIONAL PROVISIONS         3.1. Alternative Forms of Benefit Payment     3.2. Beneficiary Designation Procedure     3.3. Alienability and Assignment Prohibition     3.4. Binding Obligation of Bank and any Successor in Interest     3.5. Consultation with Tax Advisor.     3.6. Amendment     3.7. General     3.8. Headings     3.9. Applicable Law     3.10. Named Fiduciary and Plan Administrator     3.11. Claims Procedure     3.12. Arbitration     3.13. Entire Agreement     3.14. Interpretation     3.15. Employment     3.16. Communications   SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT              This Agreement, made and entered into as of July 26, 2001 by and between Abington Savings Bank, a Bank organized and existing under the laws of The Commonwealth of Massachusetts (the “Bank”) and a wholly-owned subsidiary of Abington Bancorp, Inc. (the “Holding Company”), and Kevin M. Tierney, Sr., a key employee and executive of the Bank (the “Executive”).  The effective date of this Agreement shall be July 26, 2001. WITNESSETH.              WHEREAS, the Executive is a valuable, key employee of the Bank, serving the Bank as a senior executive; and              WHEREAS, because of the Executive’s experience, knowledge of the affairs of the Bank, and reputation and contacts in the banking industry, the Bank deems the Executive’s continued employment with the Bank important for its future growth; and              WHEREAS, it is the desire of the Bank and in its best interest that the Executive’s services be retained; and              WHEREAS, in order to induce the Executive to continue in the employ of the Bank, the Bank has entered into this Agreement to provide him or his beneficiaries with certain benefits in accordance with the terms and conditions hereinafter set forth; and              WHEREAS, the Bank desires to establish a Fund (as defined in Section 1.5) and to contribute to the Fund certain assets that shall be held therein, subject to the terms of this Agreement, until such time as benefits have been paid to the Executive or his beneficiaries as specified herein;              NOW, THEREFORE, in consideration of services performed in the past and to be performed in the future as well as of the mutual promises and covenants herein contained, it is agreed as follows: Part 1. Definitions              1.1.       Beneficiary shall mean the person or persons designated by the Executive in accordance with Section 3.2 hereof to receive benefits under this Agreement after the death of the Executive.              1.2.       Board or Board of Directors shall mean the Board of Directors of the Bank, or, where the context requires, the Board of Directors of the Holding Company.              1.3.       Change in Control shall have the meaning defined in that certain Special Termination Agreement dated as of November 2, 1998 by and among the Holding Company, the Bank, and the Executive.              1.4.       Code shall mean the Internal Revenue Code of 1986, as amended.              1.5.       Fund shall mean the Fund established by the Bank pursuant to Section 2.1 with the contributions to be made under this Agreement.              1.6.       Fund Balance shall be the aggregate of all contributions made by the Bank to the Fund for the benefit of the Executive under this Agreement and the investment proceeds of such contributions.              1.7.       Good Reason shall mean:                            (a) A reduction in the Executive’s annual base salary as in effect on the date hereof; or                            (b) A significant diminution in the nature or scope of the Executive’s responsibilities, authorities, powers, functions or duties; or                            (c) A material breach by the Bank of any of the provisions of this Agreement which failure or breach shall have continued for thirty (30) days after written notice from the Executive to the Holding Company or the Bank specifying the nature of such failure or breach.              1.8.       Normal Retirement Date shall mean the date on which the Executive attains age sixty-five (65).              1.9.       Trustee shall mean the trustee to be appointed under that certain Trust Agreement established by the Bank in connection with this Agreement.              1.10.     Vested Benefit shall mean the amount of the Fund Balance that has become vested as of any particular date in time and shall be calculated by multiplying (i) the Fund Balance times (ii) the Vested Percentage.  The Vested Benefit shall be paid in the manner chosen by the Executive pursuant to Section 3.1.              1.11.     Vested Percentage shall be zero percent until the “Usual Full Vesting Date,” which date shall be the later to occur of the date which is (i) two years from the date of this Agreement or (ii) five years from the date the Executive commenced employment with the Bank. Thereafter the Vested Percentage shall be 100%. Notwithstanding the provisions of the first sentence of this Section 1.11, if any of the following shall occur before the Usual Full Vesting Date, the Vested Percentage shall become 100%:                            (a) The Executive terminates his employment with the Bank for Good Reason; or                            (b) The Executive dies; or                            (c) The Bank terminates the Executive’s employment without Cause; or                            (d) A Change in Control shall have occurred. Part 2. Bank Contributions to Fund; Payments from Fund to Executive              2.1.       Establishment of and Contributions to the Fund.  As of the date of this Agreement the Bank has established the Fund with the Trustee under the Trust Agreement for the benefit of the Executive.  As of the last day of each Calendar Year, if the Executive is employed by the Bank as of such date, the Bank will contribute to the Fund an amount equal to $[42,000] (the “Annual Contribution”).  The Bank will cease to have any further obligation to pay the Annual Contribution upon the earlier to occur of (i) the Normal Retirement Date or (ii) the date on which the Executive’s employment terminates for any reason.              2.2.       Additional Contributions Upon Change in Control.  Immediately upon a Change in Control, the Bank shall make an irrevocable contribution to the Fund in an amount that is equal to three times the amount of the then current Annual Contribution.  Payments made under this Section 2.2 shall not have any effect on the Bank’s continuing obligation to make Annual Contributions as provided for in Section 2.1, to the extent that the Executive remains employed at the end of a calendar year.              2.3.       Investment of the Fund.  The assets contributed by the Bank to the Fund will be invested by the Trustee as directed by the Executive pursuant to the Trust Agreement.  Under the terms of the Trust, the Executive will have responsibility to make all investment decisions.  The Executive shall bear all risk with respect to such investments.  The Bank will have no liability with respect to results obtained as a result of such investments.              2.4.       Payments from Fund                            (a) Termination of Service.  If the Executive terminates service as an employee with the Bank (other than (i) for Cause (which is provided for in Section 2.5), (ii) by reason of death (which is provided for in Section 2.4(b)) or (iii) before the Normal Retirement Date by reason of disability (which is provided for in Section 2.4(c))), he shall be entitled to receive the Vested Benefit, with such payment to commence on his Normal Retirement Date.  If the termination of employment is before the Normal Retirement Date, the Executive may commence to receive the Vested Benefit not later than 60 days after the termination of employment, with the permission of the Board. In the event that the Executive requests permission to commence receiving his Vested Benefit before his Normal Retirement Date and the Board refuses to grant permission for such early commencement of payments, the Executive may request the Board to reconsider its decision.  If the Board has not agreed to permit such early payment by a date which is thirty days after the request for reconsideration was made, the Executive shall have the right to receive upon written application to the Bank his Vested Benefit, less a penalty of 7%.                            (b) Death of the Executive.  Upon the Executive’s death, the Trustee shall pay to the estate of the Executive (or to his beneficiary if he shall have designated a beneficiary to receive payments pursuant to Section 3.2) the then remaining Fund Balance.                            (c) Disability.              (1) In the event that the Executive shall become “disabled” (as defined below) while in the employ of the Bank and prior to his Normal Retirement Date, the Bank shall continue to make Annual Contributions until such time as Executive commences to receive benefits (“Long Term Disability Date”) under the long term disability plan maintained by the Bank. From and after the Long Term Disability Date, the Vested Percentage shall equal 100%.  As of the Long Term Disability Date the Executive shall be entitled to receive the Fund Balance, with such payment to commence on his Normal Retirement Date.  With the permission of the Board, the Executive may commence to receive the Fund Balance not later than 60 days after the termination of employment. Payments under this Section 2.4(c) shall be in addition to any payments otherwise payable to the Executive as a result of disability under any other plans or agreements in effect from time to time.              (2) The Executive shall be considered to be “disabled” when he is no longer capable of performing the material aspects of his employment duties for the Bank as a result of physical and/or mental impairment.  The Executive shall be considered to be no longer “disabled” at such time as he returns to work in a position with responsibilities comparable to those inherent in the position in which he was employed on the date he became “disabled.”              (3) If the Executive recovers from his disability and returns to the employ of the Bank, the Bank will resume making Annual Contributions.              (4) In the event there is disagreement as to whether the provisions of this Section 2.4(c) are applicable, the Bank and the Executive (or his personal representative) each shall select a physician.  If the physicians are in disagreement, they shall select a third physician.  A majority opinion of the three physicians as to disability shall be binding on all the parties hereto.  The parties agree that the Bank will, regardless of the outcome of this procedure, reimburse the Executive (or his surviving spouse or Beneficiary, as the case may be) for the reasonable and necessary fees and costs directly attributable to such procedure.              2.5.       No Benefits Upon Discharge for Cause.  Should the Executive be discharged for Cause in accordance with the procedures set forth in Section 2.6 at any time (before or after his Normal Retirement Date), all Benefits under Part 2 of this Agreement shall be forfeited.  If a dispute arises as to discharge for “Cause”, such dispute shall be resolved by arbitration as set forth in Section 3.12 of this Agreement.              2.6.       Discharge for Cause.                            (a) Cause.  The term “Cause” shall mean the Executive’s deliberate dishonesty with respect to the Holding Company or the Bank or any subsidiary or affiliate thereof; conviction of a crime involving moral turpitude; or gross and willful failure to perform (other than on account of a medically determinable disability which renders the Executive incapable of performing such services) a substantial portion of the Executive’s duties and responsibilities as an officer of the Holding Company or the Bank, which failure continues for more than thirty days after written notice given to the Executive pursuant to a two-thirds vote of all of the members of the Board then in office, such vote to set forth in reasonable detail the nature of such failure.                            (b) No Limitation on Authority of Board.  As is provided in Section 3.15, nothing contained in this Agreement (and nothing contained in this Section 2.6) shall in any way limit the right of the Holding Company or the Bank to discharge the Executive with or without Cause or to limit the access of the Executive to the premises or assets of the Bank or the Holding Company. Part 3. Additional Provisions              3.1.       Alternative Forms of Benefit Payment.  The Executive shall have the right upon becoming subject to the Plan to elect the form of payment in which his Vested Benefit is to be paid.  The Executive shall designate the form of payment in which his Vested Benefit is to be paid in writing and shall submit such writing to the Executive Vice President or Treasurer of the Bank within [  ] months of the date of this Agreement. In any Calendar Year prior to the year in which amounts become payable hereunder, and at least six months prior to the Executive’s termination of employment, the Executive may change the form of payment he has elected. The Executive is entitled to receive the Vested Benefit in a lump sum or in monthly or annual installments payable over a period not to exceed five years.              3.2.       Beneficiary Designation Procedure. The Executive may designate one or more Beneficiaries to receive, upon the Executive’s death, specified percentages of any benefit payments to be paid hereunder.  The Executive shall designate any such Beneficiaries in writing and shall submit such writing to the Executive Vice President or Treasurer of the Bank.  Only designated Beneficiaries alive at the Executive’s death shall be entitled to share in the benefit payments.  If no designated Beneficiary is alive at the Executive’s death, his surviving spouse shall be entitled to all benefits payable under this Agreement.  If the Executive dies leaving neither a designated Beneficiary nor a surviving spouse, his estate shall be entitled to any benefits payable under this Agreement.              3.3.       Alienability and Assignment Prohibition.  Neither the Executive, his surviving spouse nor any other Beneficiary under this Agreement shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or otherwise encumber in advance any of the benefits payable hereunder nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony or separate maintenance owed by the Executive or his Beneficiary, nor be transferable by operation of law in the event of bankruptcy, insolvency or otherwise.  In the event the Executive or any Beneficiary attempts assignment, commutation, hypothecation, transfer or disposal of the benefits hereunder, the Bank’s liabilities shall forthwith cease and terminate.              3.4.       Binding Obligation of Bank and any Successor in Interest.  This Agreement shall bind the Executive and the Bank, their heirs, successors, personal representatives and assigns. The Bank expressly agrees that it shall not merge or consolidate into or with another bank or sell substantially all of its assets to another bank, firm or person until such bank, firm or person expressly agrees, in writing, to assume and discharge the duties and obligations of the Bank under this Agreement.              3.5.       Consultation with Tax Advisor. The Bank has advised the Executive to consult with a tax advisor to select the form and schedule for receipt of benefits under this Agreement.  The Executive acknowledges that the different form and timing choices he may select will result in differing tax consequences.              3.6.       Amendment. During the lifetime of the Executive, this Agreement may be amended only with the mutual written assent of the Executive and the Bank.              3.7.       General. The benefits provided by the Bank to the Executive pursuant to this Agreement are in the nature of a fringe benefit and shall in no event be construed to affect or limit the Executive’s current or prospective salary increases, cash bonuses or profit-sharing distributions or credits or his right to participate in or be covered by any qualified or non-qualified pension, profit-sharing, group, bonus or other supplemental compensation or fringe benefit plan.              3.8.       Headings.  Headings and subheadings in this Agreement are inserted for reference and convenience only and shall not be deemed a part of this Agreement.              3.9.       Applicable Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of The Commonwealth of Massachusetts without regard to its principles of conflicts of laws.              3.10.     Named Fiduciary and Plan Administrator. The Plan Administrator of this plan shall be Abington Savings Bank until another administrator is chosen by the Board.  As Plan Administrator, the Bank shall be responsible for the management, control and administration of the benefits to be provided under this Agreement.              3.11.     Claims Procedure.  In the event a dispute arises over benefits payable under this Agreement and benefits are not paid to the Executive (or to his estate in the case of the Executive’s death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the Plan Administrator named above within sixty (60) days from the date payments are refused.  The Plan Administrator shall review the written claim and if the claim is denied, in whole or in part, it shall provide in writing within sixty (60) days of receipt of such claim its specific reasons for such denial, reference to the provisions of this Agreement upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired.  A claim shall be deemed to have been denied if the Plan Administrator fails to take any action within the aforesaid sixty-day period.              If claimants desire a second review they shall notify the Plan Administrator in writing within ninety (90) days of the first claim denial.  Claimants may review this Agreement or any documents relating thereto and submit any written issues and comments they may feel appropriate.  In its sole discretion, the Plan Administrator shall then review the second claim and provide a written decision within sixty (60) days of receipt of such claim. This decision shall likewise state the specific reasons for the decision and shall include reference to specific provisions of this Agreement upon which the decision is based.              3.12.     Arbitration. Any controversy or claim arising out of or relating to the Agreement, or the breach thereof, or any failure to agree where agreement of the parties is necessary pursuant hereto, including the determination of the scope of this agreement to arbitrate, shall be resolved by the following procedures:                            (a) The parties agree to submit any dispute to final and binding arbitration administered by the American Arbitration Association (the “AAA”), pursuant to the Commercial Arbitration Rules of the AAA as in effect at the time of submission.  The arbitration shall be held in Boston, Massachusetts before a single neutral, independent, and impartial arbitrator (the “Arbitrator”).                            (b) Unless the parties have agreed upon the selection of the Arbitrator before then, the AAA shall appoint the Arbitrator within thirty (30) days after the submission to AAA for binding arbitration.  The arbitration hearings shall commence within fifteen (15) days after the selection of the Arbitrator.  Each party shall be limited to two pre-hearing depositions each lasting no longer than two (2) hours.  The parties shall exchange documents to be used at the hearing no later than ten (10) days prior to the hearing date.  Each party shall have no longer than three (3) hours to present its position, and the entire proceedings before the Arbitrator shall be on no more than two (2) hearing days within a two week period.  The award shall be made no more than ten (10) days following the close of the proceeding.  The Arbitrator’s award shall not include consequential, exemplary, or punitive damages.  The Arbitrator’s award shall be a final and binding determination of the dispute and shall be fully enforceable in any court of competent jurisdiction.  Except in a proceeding to enforce the results of the arbitration, neither party nor the Arbitrator may disclose the existence, content, or results of any arbitration hereunder without the prior written consent of both parties.              3.13.     Entire Agreement.  This Agreement constitutes the entire agreement between the parties pertaining to its subject matter and supersedes all prior and contemporaneous agreements, understandings, negotiations, prior draft agreements, and discussions of the parties, whether oral or written.              3.14.     Interpretation.  When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated.  Unless the context otherwise requires, throughout this Agreement, references to Sections refer to Sections of this Agreement. References to Sections include subsections, which are part of the related Section (e.g., a section numbered “Section 5.5(a)” would be part of “Section 5.5” and references to “Section 5.5” would also refer to material contained in the subsection described as “Section 5.5(a)”). The recitals hereto constitute an integral part of this Agreement.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The phrases “the date of this Agreement”, “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the Preamble to this Agreement.              3.15.     Employment. No provision of this Agreement shall be deemed to restrict or limit any existing employment agreement by and between the Holding Company or the Bank and the Executive, nor shall any conditions herein create specific employment rights to the Executive nor limit the right of the Holding Company or the Bank to discharge the Executive with or without Cause.  In a similar fashion, no provision shall limit the Executive’s rights to voluntarily terminate his employment at any time.              3.16.     Communications.  All notices and other communications hereunder shall be in writing and shall be given by hand, sent by facsimile transmission with confirmation of receipt requested, sent via a reputable overnight courier service with confirmation of receipt requested, or mailed by registered or certified mail (postage prepaid and return receipt requested) to the parties at the their respective addresses set forth below (or at such other address for a party as shall be specified by like notice), and shall be deemed given on the date on which delivered by hand or otherwise on the date of receipt as confirmed:                                         To the Bank or Holding Company:                                                      Abington Savings Bank                                                      536 Washington Street                                                      Abington, Massachusetts 02351                                                      Attention: Treasurer                                         To the Executive:                                                      Kevin M. Tierney, Sr.                                                      12 Hussey Avenue                                                      Danvers, Massachusetts 01923              IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under seal, as of the date first written above.         ABINGTON SAVINGS BANK           /S/Lewis J. Paragona   By: Vice President/Clerk --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Witness     Title                   EXECUTIVE                 By   /S/Kevin M. Tierney, Sr.         --------------------------------------------------------------------------------         Kevin M. Tierney, Sr.           The undersigned hereby guarantees the       obligations of Abington Savings Bank       under the foregoing agreement                 ABINGTON BANCORP, INC.                 By: James P. McDonough         --------------------------------------------------------------------------------       Title: President & Chief Executive Officer         --------------------------------------------------------------------------------                 [Seal]          

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 David Brewer (“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 15, 2000.   Alliance Capital Management L.P.   By:      Alliance Capital Management              Corporation, General Partner       Participant Signature:       /s/ David Brewer --------------------------------------------------------------------------------   David Brewer  

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.2 AMENDMENT     THIS AMENDMENT ("Amendment") dated the 13th day of December, 2001, amends the Transportation Agreement dated as of January 10, 2001 (the "Agreement") between The United States Postal Service ("USPS") and Federal Express Corporation ("FedEx"). Preamble     WHEREAS, USPS and FedEx entered into the Agreement in order to provide for the FedEx Services (as such term is defined in the Agreement"),     WHEREAS, the parties now desire to amend certain provisions of the Agreement as more specifically set forth in this Agreement.     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Amendment, the parties agree as follows:     1. Attachments 1 and 2 (Revision 9 of each) to Exhibit A are hereby deleted in their entirety and Attachments 1 and 2 (Revision 10 of each) to this Amendment are substituted in lieu thereof.     2. All capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Agreement.     3. Except as amended by this Amendment, the terms and conditions of the Agreement shall remain in full force and effect and are ratified and confirmed in all respects.     IN WITNESS WHEREOF, the parties have signed this Amendment in duplicate, one for each of the Parties, as of December 13, 2001.     THE UNITED STATES POSTAL SERVICE     By:   /s/ J. DWIGHT YOUNG            --------------------------------------------------------------------------------     Title:   Manager, National Mail Transportation Purchasing     FEDERAL EXPRESS CORPORATION     By:   /s/ PAUL J. HERRON            --------------------------------------------------------------------------------     Title:   Vice President, Postal Transportation Management -------------------------------------------------------------------------------- Attachment 1—Day Product [*] -------------------------------------------------------------------------------- Attachment 2—Night Product [*] *BLANK SPACES CONTAINED CONFIDENTIAL INFORMATION WHICH HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. -------------------------------------------------------------------------------- QuickLinks Exhibit 10.2

Exhibit 10.57 AMENDMENT NUMBER 2 TO MASTER LOAN PARTICIPATION AGREEMENT      This Amendment Number 2 to Master Loan Participation Agreement (this “Amendment”) is made as of this 30th day of June, 2001, by and between Goleta National Bank, a national banking association (“GNB”), and Ace Cash Express, Inc., a Texas corporation (“Participant”), with regard to the following:   A.   GNB and Participant entered into that certain Master Loan Agency Agreement dated August 11, 1999, as amended by that certain Amendment Number 1 to Master Loan Agency Agreement dated March 29, 2001 (the “Agency Agreement”), and contemporaneously with, and to reflect, the execution of this Amendment are amending the Agency Agreement by that certain Amendment Number 2 to Master Loan Agency Agreement of even date herewith.     B.   GNB and Participant entered into that certain Master Loan Participation Agreement dated August 11, 1999, as amended by that certain Amendment Number 1 to Master Loan Participation Agreement dated March 29, 2001 (the “Participation Agreement”).     C.   Section 12 of the Participation Agreement permits GNB and Participant to amend the Participation Agreement by a writing signed by them.     D.   GNB and Participant wish to implement the decrease in Participant’s undivided interest in the Bank Loans as of the POS Compliance Date (i.e., July 1, 2001) described in the Participation Agreement from * percent (*%) to * percent (*%), but are not readily able to, and currently prefer not to, modify their respective software systems for that purpose.     E.   GNB and Participant wish to amend the Participation Agreement to provide for a method, different than stated in the Participation Agreement, to pay the price for and the earnings on Participant’s decreased undivided interest in the Bank Loans from and after the POS Compliance Date.      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth, GNB and Participant hereby agree as follows:   1.   Section 2 of the Participation Agreement is hereby amended to read as follows: 1 --------------------------------------------------------------------------------   “2.   The purchase price for the undivided interest in each Bank Loan made prior to the POS Compliance Date that is purchased by Participant shall be * percent (*%) of the principal amount of such Bank Loan. The purchase price for the undivided interest in each Bank Loan made from and after the POS Compliance Date that is purchased by Participant shall be * percent (*%) of the principal amount of such Bank Loan, paid in accordance with Section 4(b) of this Agreement. In no event shall Participant acquire any participation in a Bank Loan related to an overdraft or funding by GNB in excess of the approved Bank Loan.”     2.   Section 4 of the Participation Agreement is hereby amended to read as follows:   “4.   (a)    The purchase price for the undivided interest in each Bank Loan made prior to the POS Compliance Date that is purchased by Participant shall be transferred from the Account to GNB on * and * percent (*%) of any payment of fees, interest or principal received by GNB each such Bank Loan shall be transferred to the Account on *; provided however, that if any instrument representing payment of the fee, principal or interest on a Bank Loan is later dishonored, rescinded or revoked, or GNB, for any reason, fails to receive good funds, then credit to the Account of Participant shall be transferred to GNB.         (b)    The purchase price for the undivided interest in each Bank Loan made from and after the POS Compliance Date that is purchased by Participant shall be paid by transfer from the Account to GNB, on *, of an amount equal to * percent (*%) of the principal amount of such Bank Loan and by GNB’s establishing an account payable to Participant equal to * percent (*%) of the principal amount of such Bank Loan. This account payable shall be satisfied and paid to Participant, and earnings on Participant’s participation interest shall be paid to Participant, by transfer to the Account by GNB, on *, of an amount equal to * percent (*%) of all fees, interest or principal received by GNB on each such Bank Loan, subject to the monthly adjustment described in Section 4(c) of this Agreement.         (c)    An adjustment (intended to reflect Participant’s ownership of a * percent (*%) rather than a * percent (*%) undivided interest in -------------------------------------------------------------------------------- *   Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and filed separately with the Securities and Exchange Commission. 2 --------------------------------------------------------------------------------           each Bank Loan made from and after the POS Compliance Date) shall be effected for each calendar month (or partial calendar month), commencing July 2001, by the wire transfer from Participant to GNB of the Participation Adjustment Amount on or before *. For this purpose:   (i)   “Participation Adjustment Amount” shall mean, for each calendar month (or partial calendar month), the Gross Amount for that calendar month (or partial calendar month) minus the Loan Loss for that calendar month (or partial calendar month).     (ii)   “Gross Amount” shall mean, for each calendar month (or partial calendar month), an amount equal to * percent (*%) of the Finance Charge Collections for that calendar month (or partial calendar month).     (iii)   “Finance Charge Collections” shall mean, for each calendar month (or partial calendar month), the total finance charges for all Bank Loans, made from and after the POS Compliance Date, charged by GNB in that calendar month (or partial calendar month), as reported in the GNB Loan Performance Report prepared as part of the GNB Monthly Loan Analysis Report.     (iv)   “Loan Loss” shall mean, for each calendar month (or partial calendar month), the product of the Gross Amount for that calendar month (or partial calendar month) multiplied by the Loan Loss Ratio for that calendar month (or partial calendar month).     (v)   “Loan Loss Ratio” shall mean, (A) for each of July, August, and September 2001 (or any partial time period in any such calendar month), * percent (*%), and (B) for each calendar month (or partial calendar month) after September 2001, a percentage equal to the Bank Loan Loss for that calendar month (or partial calendar month) divided by the -------------------------------------------------------------------------------- *   Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and filed separately with the Securities and Exchange Commission. 3 --------------------------------------------------------------------------------       Finance Charge Collections for that calendar month (or partial calendar month).     (vi)   “Bank Loan Loss” shall mean, for each calendar month (or partial calendar month), an amount equal to the result of (A) the Provision for Loan Losses of Participant, as reported in the Supplemental Statistical Data of Participant’s Quarterly Report on Form 10-Q or Annual Report on Form 10-K (as applicable) filed with the Securities and Exchange Commission for the fiscal quarter or the fiscal year (as applicable) immediately preceding the calendar quarter most recently ended before the particular calendar month (so, for example, the Provision for Loan Losses of Participant reported in Participant’s Annual Report on Form 10-K for its fiscal year ended June 30, 2001 will be used for each of October, November, and December of 2001, and the Provision for Loan Losses of Participant reported in Participant’s Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 2001 will be used for each of January, February, and March 2002), divided by (B) * percent (*%).       (d)   GNB and Participant acknowledge that application of the method described in Sections 4(b) and 4(c) of this Agreement may result in some variance from an exact allocation of earnings and losses on each Bank Loan made from and after the POS Compliance Date of * percent (*%) to GNB and * percent (*%) to Participant. Nevertheless, GNB and Participant agree that such method (i) is acceptable to and sufficient for them under the circumstances and (ii) shall supersede any inconsistent provision in this Agreement or the Agency Agreement regarding Bank Loans made from and after the POS Compliance Date.”   3.   Except as set forth in this Amendment, all terms herein that are defined in the Participation Agreement shall have the respective meanings set forth in the Participation Agreement. -------------------------------------------------------------------------------- *   Confidential treatment has been requested for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Such portions are omitted from this filing and filed separately with the Securities and Exchange Commission. 4 --------------------------------------------------------------------------------   4.   Except as amended hereby, the Participation Agreement is hereby affirmed in its entirety.     5.   This Amendment may be signed in counterparts with the same effect as if both Parties had signed the same paper; all counterparts are to be construed together to be one and the same document.      IN WITNESS WHEREOF, GNB and Participant have caused this Amendment to be duly executed by their respective officers as of the day and year first above written.   GOLETA NATIONAL BANK   By: /s/ Llewellyn W. Stone --------------------------------------------------------------------------------   Name: Llewellyn W. Stone   Title: Executive Vice President   ACE CASH EXPRESS, INC.   By: /s/ Jay B. Shipowitz --------------------------------------------------------------------------------   Name: Jay B. Shipowitz   Title: President and Chief Operating Officer 5 -------------------------------------------------------------------------------- AMENDMENT NUMBER 2 TO MASTER LOAN AGENCY AGREEMENT      This Amendment Number 2 to Master Loan Agency Agreement (this “Amendment”) is made as of this 30th day of June, 2001, by and between Goleta National Bank, a national banking association (“GNB”), and Ace Cash Express, Inc., a Texas corporation (“Ace”), with regard to the following:   A.   GNB and Ace entered into that certain Master Loan Agency Agreement dated August 11, 1999, as amended by that certain Amendment Number 1 to Master Loan Agency Agreement dated March 29, 2001 (the “Agreement”).     B.   Section 11.7 of the Agreement permits GNB and Ace to amend the Agreement by a writing signed by them.      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth, GNB and Ace hereby agree as follows:   1.   Section 2.1 of the Agreement is hereby amended to read as follows:     “2.1   Participation Agreement. Contemporaneous with this Agreement, the Parties are entering into a Master Loan Participation Agreement under which GNB agrees to sell to Ace, and Ace agrees to purchase from GNB, a *% participation in each of the Bank Loans made by GNB from the Effective Date and prior to the POS Compliance Date (as defined in Section 3.4(i)), and a *% participation in each of the Bank Loans made by GNB from and after the POS Compliance Date. That Master Loan Participation Agreement (as amended by Amendment Number 1 to Master Loan Participation Agreement dated March 29, 2001 and by Amendment Number 2 to Master Loan Participation Agreement dated June 30, 2001) is Exhibit D to this Agreement.”   2.   Except as set forth in this Amendment, all terms used herein that are defined in the Agreement shall have the respective meanings set forth in the Agreement.     3.   Except as amended hereby, the Agreement is hereby affirmed in its entirety.     4.   This Amendment may be signed in counterparts with the same effect as if both Parties had signed the same paper; all counterparts are to be construed together to be one and the same document.   --------------------------------------------------------------------------------      IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed by their respective officers as of the day and year first above written.   GOLETA NATIONAL BANK   By: /s/ Llewellyn W. Stone --------------------------------------------------------------------------------   Name: Llewellyn W. Stone   Title: Executive Vice President   ACE CASH EXPRESS, INC.   By: /s/ Jay B. Shipowitz --------------------------------------------------------------------------------   Name: Jay B. Shipowitz   Title: President and Chief Operating Officer 2

EMPLOYMENT AGREEMENT (As Amended 6/28/00) AGREEMENT made as of the 1st day of January, 2001, ("Agreement") among ARROW FINANCIAL CORPORATION, a New York corporation with its principal place of business at 250 Glen Street, Glens Falls, New York 12801 ("Arrow"), its wholly-owned subsidiary, GLENS FALLS NATIONAL BANK AND TRUST COMPANY, a national banking association with its principal place of business at 250 Glen Street, Glens Falls, New York 12801 (the "Bank"), and JOHN J. MURPHY residing at 33 Crownwood Lane, Queensbury, New York 12804 (the "Executive"). Recitals WHEREAS, Arrow and the Bank, consider the maintenance of a competent and experienced executive management team to be essential to the long-term success of Arrow and the Bank; and WHEREAS, in this regard, Arrow and the Bank have determined that it is in the best interests of each that the Executive continue to serve as Executive Vice President, Treasurer & Chief Financial Officer of Arrow and the Bank, pursuant to a written employment agreement; and WHEREAS, Arrow and the Bank have agreed with the Executive that the pre-existing employment agreement between the Executive and each of them should be replaced by this Agreement. NOW, THEREFORE, in furtherance of the interests described above and in consideration of the respective covenants and agreements herein contained, the parties hereto agree as follows: Employment Arrow and the Bank agree to employ the Executive and the Executive agrees to continue to serve as Executive Vice President, Treasurer and Chief Financial Officer of Arrow and the Bank during the term of this Agreement. Term The term of this Agreement shall commence on the date hereof and, unless the Executive becomes a Retired Early Employee under Paragraph 6 of this Agreement or such employment is earlier terminated as provided in Paragraph 7 of this Agreement, employment under this Employment Agreement shall terminate on December 31, 2003, or such earlier date on which the Executive's retirement (including early retirement if the Executive so elects) becomes effective under any retirement plan of Arrow then in effect. Annual Review. On or before December 31 of each year during the term of this Agreement, the Board of Directors of Arrow (the "Arrow Board"), or the committee of the Arrow Board, if any, duly authorized to make determinations regarding executives and the terms of their employment (the "Committee"), will consider and vote upon a proposal to extend to the Executive an offer to replace this Agreement with a new employment agreement (the "Replacement Agreement") commencing January 1 of the ensuing year. The Replacement Agreement will be for a new term of three years, will provide for a base annual salary for the Executive at commencement of the Replacement Agreement at least equal to the base annual salary of the Executive as of December 31 of the year just completed (the "Preceding Year-End"), will provide for other benefits having an aggregate value to the Executive at least equal to the aggregate value of the other benefits provided to the Executive as of the Preceding Year-End, and will contain other terms and conditions relating to the Executive's position and duties, place of performance, rights upon a change of control of Arrow or the Bank or a change of authority of the Executive, and rights in connection with any early termination of the employment of the Executive that are, in each such instance, at least as favorable to the Executive as the terms and conditions relating to such matters under this Agreement and generally shall be as favorable to the Executive as is this Agreement, as of the Preceding Year-End. If the Arrow Board or the Committee shall vote to offer such a Replacement Agreement to the Executive and the Executive shall accept, this Agreement shall terminate as of December 31 of the year of such offer and acceptance and the Replacement Agreement shall take effect as of January 1 of the ensuing year. If the Arrow Board or the Committee shall elect not to offer such a Replacement Agreement to the Executive or the Executive, having been offered such a Replacement Agreement, shall elect not to accept such Replacement Agreement, this Agreement and the employment of the Executive hereunder shall continue in full force and effect from the date of such election until the termination of this Agreement in accordance with its terms (such period to be referred to hereinafter as the "Winding-Down Period"), and the rights and obligations of each of the parties hereunder shall continue unchanged during the Winding-Down Period except as may be specifically provided otherwise in this Agreement. 3. Position and Duties The Executive shall continue to serve as Executive Vice President, Treasurer and Chief Financial Officer of Arrow and the Bank and shall have duties, responsibilities, and authority as normally attend such positions or as may reasonably be assigned to the Executive from time to time by the Arrow Board or the Board of Directors of the Bank (the "Bank Board") or the Chief Executive Officer of Arrow or the Bank. The Executive shall devote substantially all his working time and efforts to the business and affairs of Arrow and the Bank, provided however, that the Executive may, with the approval of the Arrow Board or the Chief Executive Officer of Arrow, serve as a director or officer of any non-competing business or engage in any other activity, including but not limited to, charitable or community activity, to the extent that they do not inhibit the performance of his duties hereunder. 4. Place of Performance In connection with the Executive's employment hereunder, the Executive shall be based at the principal executive offices of the Bank, except for required travel on business. The Executive shall not be required to change his residence from the area in which he now resides. The Bank shall furnish the Executive with office space, stenographic assistance, and such other facilities and services as shall be suitable to the Executive's position and adequate for the performance of his duties hereunder. 5. Compensation (a) Salary. Upon commencement of this Agreement, the base annual salary of the Executive should be $165,000.00, payable by the Bank in equal bi-weekly installments or at such other intervals as shall be agreed upon by the parties. In addition, the Executive shall receive from the Bank or Arrow such annual bonus, if any, as may be determined by the Arrow Board or the Committee. The Executive's base annual salary may be increased from time to time in accordance with the normal business practices of Arrow and the Bank as determined by the Arrow Board or the Committee, and, if so increased, such base annual salary shall not thereafter during the Executive's employment under this Agreement be decreased and the obligation of the Bank hereunder to pay the Executive's base annual salary shall thereafter relate to such increased base annual salary. Compensation of the Executive by base annual salary payments shall not prevent the Executive from participating in any other compensation or benefit plan of Arrow or the Bank in which he is entitled to participate and participation in any such other compensation or benefit plan shall not in any way limit or reduce the obligation of the Bank to pay the Executive's base annual salary hereunder. (b) Other Benefits. In addition to the compensation provided for in subparagraph (a) above, the Executive shall be entitled during the term of his employment under this Agreement (i) to participate in any and all employee benefit programs or stock purchase programs of Arrow or the Bank now or hereafter in effect and open to participation by qualifying employees of Arrow or the Bank generally, including but not limited to the retirement plan, supplemental retirement plan, employee stock purchase plan and employee stock ownership plan of Arrow or the Bank, and (ii) to enjoy certain personal benefits provided by Arrow or the Bank, including but not limited to: (A) life insurance on the life of the Executive, at no cost to the Executive, under a group plan maintained by Arrow; (B) disability insurance for the Executive, at no cost to the Executive, under a group plan maintained by Arrow; (C) comprehensive medical and dental insurance under a group plan provided by Arrow, with the Executive to pay only those amounts required to be paid thereunder by covered employees generally under the cost-sharing arrangements in effect from time to time under such plan; (D) reimbursement in full of all business, travel and entertainment expenses incurred by the Executive in performing his duties hereunder; and (E) fully paid vacation during each calendar year in accordance with the vacation policies of Arrow in effect from time to time. Arrow shall not make any material changes in any of the personal benefits itemized above adversely affecting the Executive unless such change occurs pursuant to a program applicable to all executive officers of Arrow and the adverse effect on the Executive is not proportionately greater than the adverse effect of the change on any other executive officer of Arrow previously enjoying such benefit. 6. Change of Control or Change of Authority (a) Retired Early Employee. If a Change of Control or Change of Authority (as such terms are defined in subparagraph 6(f) below) occurs during the term of the Executive's employment under this Employment Agreement, either the Executive, on the one hand, or Arrow or the Bank, on the other, may elect by written notice, given to the other party or parties, at any time within twelve (12) months after such Change of Control or Change of Authority, to terminate the employment of the Executive by Arrow and the Bank, whereupon the Executive will become a "Retired Early Employee," and will be entitled to receive such payments as are provided hereafter in this Paragraph 6. Such election and the termination of the Executive's employment shall become effective on the first day of the second calendar month commencing after delivery of the notice or on such earlier date as the Executive in his sole discretion may specify (the "Effective Date"). (b) Cash Payments. If the Executive should become a Retired Early Employee hereunder, the Bank shall, during the period commencing on the Effective Date and ending two years thereafter (the "Pay-Out Period"), make equal monthly payments to the Executive (which shall not be deemed base annual salary payments) in an amount such that the present value of all such payments, determined as of the Effective Date, equals two hundred ninety-nine percent (299%) of the Base Amount, as such term is defined in subparagraph 6(f) below. If at any time during the Pay-Out Period the Arrow Board in its sole discretion shall determine, upon application of the Retired Early Employee supported by substantial evidence, that the Retired Early Employee is then under a severe financial hardship resulting from (i) a sudden and unexpected illness or accident of the Retired Early Employee or any of his dependents (as defined in section 152(a) of the Internal Revenue Code), (ii) loss of the Retired Early Employee's property due to casualty, or (iii) other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Retired Early Employee, the Bank shall make available to the Retired Early Employee, in one (1) lump sum, an amount up to but not greater than the present value of all monthly payments remaining to be paid to him in the Pay-Out Period, calculated as of the date of such determination by the Arrow Board, for the purpose of relieving such severe financial hardship to the extent the same has not been or may not be relieved by (xi) reimbursement or compensation by insurance or otherwise, (xii) liquidation of the Retired Early Employee's assets (to the extent such liquidation would not itself cause severe financial hardship), or (xiii) distributions from other benefit plans. If (a) the lump sum amount thus made available is less than (b) the present value of all such remaining monthly payments, the Bank shall continue to pay to the Retired Early Employee monthly payments for the duration of the Pay-Out Period, but from such date forward such monthly payments will be in a reduced amount such that the present value of all such reduced payments will equal the difference between (b) and (a), above. The Retired Early Employee may elect to waive any or all payments due him under this subparagraph. (c) Death of Retired Early Employee. If the Retired Early Employee dies before receiving all monthly payments payable to him under subparagraph 6(b), above, the Bank shall pay to the Retired Early Employee's spouse, or if the Retired Early Employee leaves no spouse, to the estate of the Retired Early Employee, one (1) lump sum payment in an amount equal to the present value of all such remaining unpaid monthly payments, determined as of the date of death of the Retired Early Employee. (d) Indemnification of Executive. In the event a Change of Control or Change of Authority occurs, Arrow and the Bank shall indemnify the Executive for all legal fees and expenses subsequently incurred by the Executive in seeking to obtain or enforce any right or benefit provided under this Employment Agreement, not limited to the rights and benefits provided under this Paragraph 6 and whether or not the Executive has become a Retired Early Employee hereunder, provided, however, that such right to indemnification will not apply if and to the extent that a court of competent jurisdiction shall determine that any such fees and expenses have been incurred as a result of the Executive's bad faith. Indemnification payments payable hereunder by Arrow or the Bank shall be made not later than thirty (30) days after a request for payment has been received from the Executive with such evidence of indemnifiable fees and expenses as Arrow or the Bank may reasonably request. (e) No Offset. Amounts payable to a Retired Early Employee under this Paragraph 6 shall not be subject to any offset or reduction for (i) any amounts owed or claimed to be owed by the Retired Early Employee to Arrow or the Bank or their affiliates or (ii) any amounts of compensation or income received or generated by the Retired Early Employee as a result of any other employment or self-employment of the Retired Early Employee during the Pay-Out Period. The Retired Early Employee shall be under no obligation to seek other employment or gainful pursuit during the Pay-Out Period as a result of this Agreement, and shall be prohibited from accepting certain other forms of employment and from engaging in certain other types of business during the Pay-Out Period (as well as during certain other post-termination of employment periods) as and to the extent specified in Paragraph 8 of this Agreement. (f) Allocation. If the Executive should elect to become a Retired Early Employee under this Paragraph 6 and as a result of such election should become entitled to receive certain cash payments during the Pay-Out Period as set forth above, Arrow shall determine, as soon as practicable following its receipt from the Executive of written notice of such election, the amount, if any, of such future cash payments that may properly be allocated to the Retired Early Employee's future performance of his obligations not to compete with, solicit customers or employees from, or disparage Arrow or its affiliates under Paragraph 8 of this Agreement, with such allocation to be expressed as a single dollar amount equal to the present value on the Effective Date of the amounts of the required future payments thus allocated. When thus determined, the dollar amount of this allocation shall be communicated by Arrow to the Retired Early Employee. (g) Section 280G Tax Gross-Up. Notwithstanding anything to the contrary contained elsewhere in this Agreement or in any other agreement, plan or policy of or binding upon Arrow or the Bank, in the event that the aggregate payments or benefits to be made or afforded to the Executive under (i) this Agreement, (ii) any and all other agreements between the Executive and Arrow or its affiliates and (iii) any and all plans and arrangements of Arrow or its affiliates in which the Executive participates, should cause the Executive to be obligated to pay or to become liable for any Federal excise taxes under Section 4999(a) of the Code and/or any state or local excise taxes attributable to payments that qualify as "excess parachute payments" under Section 280G of the Code (collectively, such Federal, state and local taxes to be referred to as "Parachute Taxes"), Arrow promptly shall pay on behalf of the Executive or reimburse the Executive for the latter's payment of the following: (i) such Parachute Taxes; (ii) all Parachute Taxes payable by the Executive as a result of Arrow's payment or reimbursement of amounts under subsection (i), above, this subsection (ii) or subsection (iii) below; and (iii) all Federal, state, and local income taxes payable by the Executive as a result of Arrow's payment or reimbursement of amounts under subsections (i) and (ii), above, and this subsection (iii). (h) Definitions. (i) The "Base Amount" for purpose of this Paragraph 6 shall equal the average Annual Compensation (as defined below) of the Executive for the most recent five (5) taxable years ending before the date on which the Change of Control or Change of Authority occurred. "Annual Compensation" as used in the foregoing sentence shall mean, for any given taxable year of the Executive, all compensation payable by Arrow or the Bank to the Executive that is includible in the gross income of the Executive for such year for federal income tax purposes, plus any amount of salary otherwise payable by Arrow or the Bank to the Executive for such year (A) that is deferred under Section 401(k) of the Code under any plan maintained by Arrow or the Bank permitting such deferrals, or (B) that is deferred by the Executive under any nonqualified retirement or income deferral plan maintained by Arrow or the Bank, to the extent deferred amounts under such plan are excludable for federal income tax purposes from the gross income of the deferring employee in the year of deferral. (ii) A "Change of Control" shall be deemed to have occurred if (A) any individual corporation (other than Arrow), partnership, trust, association, pool, syndicate, or any other entity or any group of persons acting in concert becomes the beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the result of any one or more securities transactions (including gifts and stock repurchases but excluding transactions described in subdivision (B), following), of securities of Arrow possessing twenty-five percent (25%) or more of the voting power for the election of directors of such entity, (B) there shall be consummated any consolidation, merger or stock-for-stock exchange involving Arrow or the securities of Arrow in which the holders of voting securities of Arrow immediately prior to such consummation own, as a group, immediately after such consummation, voting securities of Arrow (or, if Arrow does not survive such transaction voting securities of the corporation surviving such transaction) having less than fifty percent (50%) of the total voting power in an election of directors of Arrow (or such other surviving corporation), excluding securities received by any members of such group which represent disproportionate percentage increases in their shareholdings vis-a-vis the other members of such group, (C) "approved directors" shall constitute less than a majority of the entire Arrow Board, with "approved directors" defined to mean the members of the Arrow Board as of the date of this Agreement and any subsequently elected members who shall be nominated or approved by a majority of the approved directors on the Arrow Board prior to such election, or (D) there shall be consummated any sale, lease, exchange or other transfer (in one transaction or a series of related transactions, excluding any transaction described in subdivision (B), above), of all, or substantially all, of the assets of Arrow to a party which is not controlled by or under common control with Arrow. (iii) "Change of Authority" shall be deemed to have occurred if the Executive is assigned duties by Arrow which, in the reasonable opinion of the Executive have materially less authority than those duties currently being performed by him and otherwise described herein. 7. Early Termination of Employment The employment of the Executive hereunder by Arrow and the Bank may be terminated or may terminate, other than as provided in Paragraph 2 of this Agreement or as permitted under Paragraph 6 of this Agreement, under the circumstances set forth below. (a) Termination for Cause. Arrow may terminate the Executive's employment under this Agreement prior to the normal expiration of its term for cause. "Cause" shall mean: (i) any willful misconduct by the Executive which is materially injurious to Arrow or the Bank, monetarily or otherwise; (ii) any willful failure by the Executive to follow the reasonable directions of the Arrow Board or the Bank Board or the Chief Executive Officer of Arrow or the Bank; or (iii) any failure by the Executive substantially to perform any reasonable directions of the Arrow Board or the Bank Board or the Chief Executive Officer of Arrow or the Bank (other than failure resulting from disability), within thirty (30) days after delivery to the Executive by the respective Board or Chief Executive Officer of a written demand for substantial performance, which written demand shall specifically identify the manner in which the respective Board or Chief Executive Officer believes that the Executive has not substantially performed. Notwithstanding the foregoing, the employment of the Executive hereunder shall not be deemed to have been terminated for cause unless and until: (A) reasonable notice is given to the Executive in writing setting forth the reasons Arrow intends to terminate the Executive for cause; (B) not sooner than thirty (30) days after delivery to the Executive of such notice, an opportunity is provided for the Executive to be heard before the Arrow Board and the Chief Executive Officer of Arrow, with counsel; and (C) after such hearing or opportunity to be heard, written notice of final termination for cause is delivered to the Executive, setting forth the specific reasons therefor, which termination shall be effective as of the date of the delivery of such notice. Termination for cause by Arrow shall require the affirmative vote of at least two-thirds (2/3) of the Arrow Board. The Executive will not be entitled to any further compensation for any period subsequent to the effective date of such termination, except for severance pay, if any, in accordance with the then existing severance policies of Arrow; provided, however, that any such termination for cause becoming effective after the Executive shall have elected to become a Retired Early Employee under Paragraph 6 of this Agreement will not affect the right of the Executive to receive all of the payments provided for therein. (b) Termination Without Cause. Arrow may terminate the Executive's employment under this Agreement prior to the normal expiration of its term without cause upon thirty (30) days' written notice. Termination without cause by Arrow shall require the affirmative vote of at least two-thirds (2/3) of the entire Arrow Board. In the event of any such termination without cause, the Bank shall pay to the Executive on the effective date of such termination one (1) lump sum payment in an amount equal to the greater of (i) the total amount of base annual salary payments which would have been payable to the Executive during the remaining term of the Agreement, assuming no early termination of the Agreement under Section 6 or this Section 7 and assuming the current base annual salary of the Executive on such date is unchanged throughout such remaining term, or (ii) an amount equal to one hundred percent (100%) of the current base annual salary of the Executive on such date. No attempted termination without cause under this subparagraph 7(b) shall be effective if the Executive shall have the right to elect, and shall have elected, to become a Retired Early Employee under Paragraph 6 of this Agreement, in which latter case the Executive will retain all of the rights of a Retired Early Employee specified in Paragraph 6, including the right to receive certain payments thereunder. (c) Termination for Disability. If, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall not have performed his duties hereunder on a full time basis for six (6) consecutive months, the Executive's employment under this Agreement may be terminated by Arrow upon thirty (30) days' written notice. Such termination for disability shall require the affirmative vote of a majority of the entire Arrow Board. The Executive's compensation during any period of disability prior to the effective date of such termination shall be the amounts normally payable to him in accordance with his then current base annual salary, reduced by the sum of the amounts, if any, paid to the Executive under disability benefit plans maintained by Arrow. The Executive shall not be entitled to any further compensation from the Bank for any period subsequent to the effective date of such termination, except for severance pay in accordance with then existing severance policies of Arrow; provided, however, that any such termination for disability occurring after the Executive shall have elected to become a Retired Early Employee under Paragraph 6 of this Agreement will not affect the right of the Executive to receive all of the payments provided for therein. (d) Termination for Breach by Employer.  In the event that Arrow or the Bank shall have materially breached any provision of this Agreement and such breach shall not have been cured within ten (10) days after delivery of written notice thereof to the breaching party by the Executive, identifying the breach with reasonable particularity, the Executive may cease to perform and may terminate this Agreement and his employment with Arrow and the Bank hereunder, without thereby forfeiting any cause of action he may have against the breaching party or parties as a result of such breach or otherwise. (e) Consensual Termination. All parties hereto may agree at any time to terminate this Agreement and the Executive's employment hereunder upon such terms and conditions as the parties may agree. (f) Termination by Executive During Winding-Down Period. At any point during a Winding-Down Period, the Executive may terminate his employment under this Agreement prior to the normal expiration date of his employment hereunder, for any reason or no reason, upon written notice delivered to Arrow. Such termination of employment shall become effective on the date indicated in the written notice, which date shall not be less than thirty (30) days nor more than ninety (90) days after delivery of the written notice. In the event of such termination of employment, neither Arrow nor the Bank shall have any obligation under this Agreement to make any payments or provide any benefits to the Executive, other than the obligation to make the base annual salary payments and to provide those benefits required to be paid or provided through the effective date of termination of employment pursuant to Paragraph 5 hereof, provided, however, that nothing herein shall reduce or affect any obligations that Arrow or the Bank may have to the Executive under any other agreement with the Executive or under any qualified or non-qualified employee benefit plan covering the Executive. 8. Non-Competition; Non-Solicitation; Non-Disparagement If the employment of the Executive with Arrow and/or the Bank is terminated by any party under Paragraph 6 or is terminated by the Executive other than pursuant to one of the provisions of this Agreement specifically authorizing the Executive to so terminate: (i) For a period of two (2) years following the effective date of such termination of employment, the Executive will not, directly or indirectly, manage, operate, or control, or accept or hold a position as a director, officer, employee, agent or partner of or adviser or consultant to, or otherwise perform substantial services for, any bank or insured financial institution or other corporation or entity engaged in the financial services business or a corporation or entity controlling any of the foregoing, excluding Arrow and its affiliates (any such other bank, institution, corporation or entity, a "Financial Institution"), if, as of the effective date of such termination of employment, such Financial Institution is in competition with Arrow or any of its affiliates in the Designated Area (as defined below) by virtue of such Financial Institution's having any office or branch located within the Designated Area or having immediate plans to establish any office or branch within the Designated Area. For purposes of the preceding sentence, the Designated Area as of any particular time will consist of all counties in the State of New York in which Arrow or any of its subsidiary banks or other affiliates engaged in providing financial services then maintains an office or a branch or has acted to establish an office or a branch. (ii) For a period of two (2) years following such termination of employment, the Executive will not, directly or indirectly, (a) acting on behalf of any Financial Institution, regardless of where such Financial Institution is located or doing business, solicit business for such Financial Institution from, or otherwise seek to obtain as a customer or client of such Financial Institution, any person or entity that, to the knowledge of the Executive, was a customer or client of Arrow or any of its subsidiary banks or other affiliates engaged in providing financial services at any point during the one-year period immediately preceding the effective date of such termination of employment; or (b) acting on behalf of any other corporation or entity, including any Financial Institution, regardless of where such other corporation or entity is located or doing business, employ or solicit as an employee of such corporation or entity or retain or seek to retain as an agent or consultant of such corporation or entity any individual employed by Arrow or any of its subsidiary banks or other affiliates engaged in providing financial services at any point during the one-year period immediately preceding the effective date of such termination of employment. (iii) For a period of ten (10) years following the effective date of such termination of employment, the Executive will not, directly or indirectly, make any one or more statements, declarations, announcements, assertions, remarks, comments or suggestions, orally or in writing, that individually or collectively are, or may be construed as being, defamatory, derogatory, negative, or disparaging to Arrow or its affiliates (including any successor to Arrow by merger or acquisition or any of such successor's affiliates), or to any director, officer, controlling shareholder, employee or agent of any of the foregoing. It is the intention of the parties to restrict the activities of the Executive under this Paragraph 8 only to the extent necessary for the protection of the legitimate business interests of Arrow, and the parties specifically covenant and agree that should any of the clauses or provisions of the restrictions set forth herein, under any set of circumstances, be held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, then and in that event, the court so holding may reduce the extent or duration of such restrictions or effect any other change to such restrictions to the extent necessary to render such restrictions enforceable by said court. 9. Confidential Information The Executive specifically acknowledges that all information pertaining to the Bank and Arrow received by him during the course of his employment hereunder which has been designated confidential or otherwise has not been made publicly available, including, without limitation, plans, strategies, projections, analyses, and information pertaining to customers or potential customers, is the exclusive property of Arrow and the Executive covenants and agrees not to disclose any of such information, without the express prior consent of the Arrow Board or the Chief Executive Officer of Arrow, during his employment hereunder or after termination of such employment, to anyone not employed or engaged by Arrow or a subsidiary thereof to render services to it. The Executive further covenants and agrees that he will not at any time use any such information, without such express prior consent, for his own benefit or the benefit of any party other than Arrow. This Paragraph 9 shall survive termination of the Agreement. 10. Successors and Assigns; Assumption by Successors This Agreement is a personal services contract which may not be assigned by the Bank or Arrow to, or assumed from the Bank or Arrow by, any other party without the prior consent of the Executive. All rights hereunder shall inure to the benefit of the parties hereto, their personal or legal representatives, heirs, successors and assigns. Arrow will require any successor (whether direct or indirect, by purchase, assignment, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Arrow in any consensual transaction expressly to assume this Agreement and to agree to perform hereunder in the same manner and to the same extent that Arrow would be required to perform if no such succession had taken place. References herein to "Arrow" or the "Bank" will be understood to refer to the successor or successors of Arrow or the Bank, respectively. 11. Notices Any notice required or desired to be given hereunder shall be in writing and shall be deemed given when delivered personally or sent by certified or registered mail, postage prepaid, to the addresses of the other parties set forth in the first Paragraph of this Agreement, provided that all notices to Arrow or the Bank shall be directed in each case to the Chief Executive Officer thereof. 12. Waiver of Breach Waiver by any party of a breach of any provision shall not operate as or be construed a waiver by such party of any subsequent breach hereof. 13. Invalidity The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions, which shall remain in full force and effect. 14. Entire Agreement; Written Modification; Termination This agreement contains the entire agreement among the parties concerning the employment of the Executive by Arrow and the Bank. No modification, amendment or waiver of any provision hereof shall be effective unless in writing specifically referring hereto and signed by the party against whom such provision as modified or amended or such waiver is sought to be enforced. This Agreement shall terminate as of the time Arrow or the Bank makes the final payment which it may be obligated to pay hereunder or provides the final benefit which it may be obligated to provide hereunder, or, if later, as of the time the last remaining restriction set forth in Paragraph 8 expires. Payment by Arrow or Bank. Any obligation of Arrow or the Bank to make a payment under any provision of this Agreement shall be deemed an obligation of both parties to make such payment, and the making of such payment by either such party shall be deemed performance of the obligation to pay by both such parties. 16. Counterparts This Agreement may be made and executed in counterparts, in which case all counterparts shall be deemed to constitute one original document for all purposes. 17. Governing Law This Agreement is governed by and is to be construed and enforced in accordance with the laws of the State of New York. 18. Authorization The Bank and Arrow represent and warrant that the execution of this Employment Agreement has been duly authorized by resolution of their respective Boards. This Paragraph 18 shall survive termination of the Agreement. IN WITNESS WHEREOF, the parties have executed or caused to be executed this Employment Agreement as of the day and year first above written. ARROW FINANCIAL CORPORATION By: Thomas L. Hoy, President & Chief Executive Officer GLENS FALLS NATIONAL BANK AND TRUST COMPANY By: Thomas L. Hoy, President & Chief Executive Officer "EXECUTIVE" John J. Murphy

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 April 2, 2001 David Wallace     Re: Employment with rStar Corporation Dear David:     This letter shall serve to confirm the agreement we reached in connection with your continued employment with rStar Corporation (the "Company") as its Vice President, General Counsel and Secretary. In that position, you will continue to report to the Chief Executive Officer of the Company.     As Vice President, General Counsel and Secretary, an exempt position, you will continue to receive a base salary of $15,416.66 per month, which will be paid in accordance with the Company's normal payroll procedures ("Annual Base Salary"). You will also be eligible to participate in an executive incentive program for the 2001 calendar year, with a bonus payable upon the meeting of specific performance objectives mutually agreed upon by you and the Company. The maximum sum payable to you under the 2001 executive incentive program shall be 30% of your Annual Base Salary.     In the event the Company terminates your employment with Cause (as defined below), you will not be entitled to receive any compensation or benefits of any type following the effective date of the termination for Cause.     In the event (a) you are terminated by the Company without Cause, or (b) you voluntarily terminate your employment for Good Reason (as defined below) within twelve (12) months following a Change of Control (as defined below), then you shall be entitled to receive: (x) a lump sum cash severance payment in an amount equal to fifty percent (50%) of your Annual Base Salary then in effect, subject to applicable withholdings in accordance with the Company's normal payroll practices; (y) one hundred percent (100%) of the executive incentive bonus that could be earned in that year, and (z) health insurance benefits at the same level of coverage as was provided to you immediately prior to the termination without Cause or the termination for Good Reason ("Health Care Coverage") by electing Federal COBRA continuation coverage, or similar coverage required under state law (collectively, "COBRA"), in which event the Company shall pay one hundred percent (100%) of your Health Care Coverage premiums and those of your dependents under COBRA for six (6) full months following the month in which you were terminated without Cause or you voluntarily terminated your employment for Good Reason.     For purposes of this letter, the following terms shall be defined as follows:     (a) "Cause" is defined as: (i) a material act of dishonesty made by you in connection with your responsibilities as an executive officer of the Company; (ii) conviction of, or plea of nolo contendere to, a felony, or a crime involving moral turpitude; (iii) your gross misconduct in connection with your duties as an executive officer of the Company; or (iv) continued substantial violations of your employment duties after (A) you have received a written demand for performance from the Company's Board of Directors that specifically sets forth the factual basis for the Board's belief that you have not substantially performed your duties, and (B) following a reasonable opportunity, not to be less than thirty (30) days, for you to cure any substantial failure of performance of your duties.     (b) "Change of Control" of the Company is defined as; (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) becoming the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than 51% of the total voting power represented by the -------------------------------------------------------------------------------- Company's then outstanding voting securities; or (ii) the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders or the Board of the Company; or (iii) the date on which the stockholders or the Board of the Company approve a plan of complete liquidation of the Company; or (iv) the date of the consummation of the sale or disposition by the Company of all or substantially all the Company's assets.     (c) "Good Reason" shall mean your voluntary resignation from the Company within ninety (90) days after the occurrence of any of the following; (i) without your express written consent, a material reduction of the duties, title, authority or responsibilities, relative to your duties, title, authority or responsibilities as in effect immediately prior to such reduction, or the assignment to you of such reduced duties, title, authority or responsibilities; (ii) a reduction by the Company in your annual Base Salary as in effect immediately prior to such reduction; (iii) a material reduction by the Company in the kind or level of employee benefits, including bonuses, to which you were entitled immediately prior to such reduction, with the result that your overall benefits package is materially reduced; (iv) your relocation to a facility or a location more than forty (40) miles from your residence at the time of the relocation without your express written consent; or (v) the failure of the Company to obtain the assumption of this agreement by any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.     The terms of this agreement may not be modified or amended except by a written agreement executed by you and an executive officer of the Company, and shall, together with the Confidential Information, Invention Assignment and Terms of Employment Agreement and such other written agreements you and the Company may enter in connection with your employment, constitute the entire agreement between you and the Company relating to the terms of your employment.     In order to indicate your assent to this agreement, please sign this letter and return it to me at your earliest convenience. Very truly yours, RSTAR CORPORATION /s/ Lance Mortensen Lance Mortensen Chief Executive Officer and President Agreed and Accepted: /s/ David Wallace -------------------------------------------------------------------------------- David Wallace -------------------------------------------------------------------------------- QuickLinks Exhibit 10.1

May 11, 2001 MEMC Electronic Materials, Inc. 501 Pearl Drive P.O. Box 8 St. Peters, MO 63376 Reference is made to the various credit, loan and guaranty agreements between MEMC Electronic Materials, Inc. ("MEMC" or "you"), MEMC Electronic Materials, S.p.A. ("MEMC S.p.A.") and the undersigned (collectively the "Credit Agreements"). You have advised us that you are contemplating the following: Loan(s) from the San Paolo Bank and/or one or more other banks to MEMC S.p.A. Such loan(s) would collectively be in the amount of approximately 70 million euro. One or more of these loan(s) would be supported by a pledge by MEMC S.p.A. of all or a portion of its fixed assets and/or accounts receivable. One or more of these loan(s) may also be guaranteed by MEMC. Additional Financing of MEMC and/or certain of its U.S. and Japanese subsidiaries by one or more Third Party Lenders . Such financings may be in the form of additional loans and/or capital equipment leases from third parties. Under such financing arrangements, (A) MEMC would pledge all or a portion of its accounts receivable, (B) MEMC Southwest Inc. would pledge all or a portion of its accounts receivable, (C) MEMC Pasadena, Inc. would pledge all or a portion of its accounts receivable, and/or (D) MEMC Japan Limited would pledge all or a portion of its fixed assets and/or accounts receivable. Any such loan(s) and/or capital equipment leases to MEMC's subsidiaries may be guaranteed by MEMC. Dividends from MEMC Korea Company, formerly known as Posco Hüls Co., Ltd. ("MKC") . You and your subsidiaries are contemplating receiving this year dividends of up to $25 million from MKC. This will confirm that E.ON AG, E.ON North America, Inc., Fidelia Corporation and E.ON International Finance B.V. will enter into a consent and waiver under the Credit Agreements pursuant to which E.ON AG, E.ON North America, Inc., Fidelia Corporation and E.ON International Finance B.V. would, subject to satisfactory documentation, (a) consent to the foregoing arrangements, (b) agree that you, MEMC S.p.A., MEMC Southwest Inc., MEMC Pasadena, Inc. and MEMC Japan Limited may pledge the assets described above in support of the financings described above, and (c) agree that you, MEMC S.p.A., MEMC Southwest Inc., MEMC Pasadena, Inc. and MEMC Japan Limited shall not be required to apply the proceeds of the dividends and financings described above as mandatory prepayments of the loans and guaranty under the Credit Agreements pursuant to the provisions requiring mandatory prepayments out of Consolidated Net Free Cash Flow, Net Proceeds, Restricted Net Free Cash Flow and Restricted Net Proceeds, and, in the case of the loan to MEMC S.p.A. and related MEMC guaranty, out of cash received from MKC by way of dividends, provided that the proceeds of the loans and dividends referred to in paragraphs 1, 2 and 3 above shall be used to pay down (with an ability to reborrow when needed) the outstanding amounts owing on the revolving credit loans constituting part of the Credit Agreements except to the extent (i) the proceeds of such loans and dividends are needed to satisfy the then current working capital needs, including making payments on scheduled maturities of third party loans and capital expenditures authorized by MEMC's Board of Directors, of MEMC and its subsidiaries, or (ii) the proceeds of such loans are used to repay the loan from E.ON International Finance B.V. to MEMC S.p.A., and provided, further, that the amount of receivables pledged pursuant to the loan and lease arrangements described in paragraph 2 above shall not exceed the lesser of (x) all of the receivables in the United States and Japan as of the effective date of the loan(s) or (y) $125 million. This will also confirm that to the extent MEMC S.p.A. makes principal payments on the loan from E.ON International B.V. after the date hereof, such loan will be converted into an adequately collateralized revolving line of credit in the amount of such principal payments on the same terms and conditions (other than pricing conditions) as the $100,000,000 Amended and Restated Revolving Credit Agreement dated as of December 31, 2000 between MEMC and E.ON AG, which will mature on April 1, 2002. This letter shall supercede in all respects the letter from the undersigned to you dated March 9, 2001. This letter may be executed in counterparts. Very truly yours, E.ON AG By: /s/ Dr. Erhard Schipporeit Name: Dr. Erhard Schipporeit Title: Chief Financial Officer By: /s/ Dr. Michael Bangert Name: Dr. Michael Bangert Title: Vice President E.ON NORTH AMERICA, INC. By: /s/ Joseph J. Supp Name: Joseph J. Supp Title: Vice President By: /s/ Ronald W. Smyth Name: Ronald W. Smyth Title: Vice President FIDELIA CORPORATION By: /s/ Joern Stuehmeier Name: Joern Stuehmeier Title: President   By: /s/ Peter J. Winnington Name: Peter J. Winnington Title: Treasurer E.ON INTERNATIONAL FINANCE B.V. By: /s/ S.A.L. Visser Name: S.A.L. Visser Title: Managing Director By: /s/ H.J. Wirix Name: H.J. Wirix Title: Managing Director ACKNOWLEDGED: MEMC ELECTRONIC MATERIALS, INC. By: /s/ Kenneth L. Young Name: Kenneth L. Young Title: Treasurer

THIRD AMENDMENT  TO OFFICE/WAREHOUSE LEASE                     THIS THIRD AMENDMENT TO OFFICE/WAREHOUSE LEASE is made this 28th day of  February 2001, by and between AETNA LIFE INSURANCE COMPANY, a Connecticut Corporation; as successor in interest to Opus Northwest, LLC, a Delaware limited liability company , hereinafter referred to as “Lessor”, and FARGO ELECTRONICS, INC., a Delaware corporation, hereinafter referred to as “Lessee”.   WITNESSETH THAT:                   WHEREAS,  Lessor and Lessee entered into that certain Office/Warehouse Lease dated June 10, 1996, as amended by Amendment to Lease dated as of June 10, 1996, as amended by a Second Amendment to Lease dated August 29, 1996, concerning certain Premises designated as Suite 1000A and 1000B in the Office/Warehouse Complex known and described as Flying Cloud Business Centre located at 6601 Flying Cloud Drive, Eden Prairie, MN 55344 and consisting of approximately 70,576 square feet (hereinafter referred to as the “Lease”) and                   WHEREAS, the parties desire to modify the terms and provisions set forth in said Lease.                   NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to as follows:   1.             The Lease term shall be extended commencing September 15, 2001 and ending the 31st day of December, 2006, unless the Lease shall sooner terminate as provided therein.   2.             Commencing January 1, 2002, paragraph 1 of the Second Amendment to Office/ Warehouse Lease shall be amended as follows:   a.             The Premises shall be expanded effective January 1, 2002, to include the  approximately 25,664 square foot space indicated on Exhibit A to this Third Amendment to Office/ Warehouse Lease.  The new premises will consist of approximately 96,240 square feet.    All terms and conditions of the Lease shall apply to the Expansion Space except as hereafter provided.   b.             The Base Rent shall be $16,433.60 payable in advance for the period 9/15/01 through 9/30/01 and then $30,813.00 per month, payable monthly, in advance, for the period from 10/01/01 through 12/31/01 and then $41,015.00 per month, payable monthly, in advance from 1/1/02 through 12/31/04 and then $43,165.00 per month, payable monthly, in advance, from 1/1/05 through 12/31/06.   c.             Lessee’s prorata share of excess Real Estate Taxes and Lessee’s prorata share of excess Operating Expenses shall be escalated by 12.58% to 47.18%.   3.             Lessee will be granted access to the 25,664 square foot Expansion Space for the month of December 2001 for the purpose of wiring, setting up equipment, etc. provided, however, Lessee is subject to all the terms, conditions and covenants of the Lease, including specifically Article IX, (“Insurance”), except, there shall be no Base Rent, real estate taxes or Operating Expenses payable by Lessee on the Expansion Space for the month of December 2001.   4.             Lessor shall provide the following improvements to the Expansion Space on orbefore December 1, 2001:   a.             Infill the openings in the demising wall, patch and finish tape seams. b.             Separately meter the gas and electrical service servicing the Expansion Space. c.             Upgrade the existing electrical service in the Expansion Space from 200 amps to 600 amps/480 volt.   5.             Lessor agrees to provide Lessee with a $50,000.00 allowance for retrofitting the Premises.  Said allowance, provided Lessee is not in default,  will be payable to Lessee upon Lessor’s receipt of paid invoices and lien waivers from all contractors, subcontractors and material suppliers associated with providing goods and services for any improvements to Lessee’s Premises.  Subject to Lessor’s review and approval of plans and specifications, pursuant to Article VIII of the Lease, Lessee shall have the right to reconfigure the Premises and Expansion Space at Lessee’s expense.   6.             Lessor agrees that there shall be no charge by Lessor for the review of plans or any inspections that Lessor deems necessary with regard to any alterations.  The Lessor shall make no variation or alterations on the work to be provided by Lessor if it has an impact on its budget or the completion schedule without the prior written consent of Lessee.    7.            Lessor shall not charge any supervisor fee, surcharges or any other charges in connection with Lessee’s alterations or any subsequent alterations during the Lease term.   8.     Lessor agrees to provide the Expansion Space improved as identified herein and provide Lessee with a Certificate of Occupancy for said space.   9.     Lessee shall have the right in common with other tenants to park passenger  vehicles in the common vehicle parking facilities at the Office/Warehouse Complex.  Upon Lessee’s request, Lessor shall designate as exclusive parking spaces to be used by Lessee, its agents, employees and invitees 262 parking stalls as indicated on Exhibit B attached hereto and incorporated herein by reference.  In the event Lessee so requests Lessor to make such designation, Lessee shall not be entitled to use any of the balance of the parking facilities of the Office/Warehouse Complex.  In the event Lessee reasonably determines that the tenants of the Office/Warehouse Complex are failing to abide by the parking designations made by Lessor pursuant to the provisions hereof, Lessor shall cooperate with Lessee in the enforcement of Lessee’s exclusive parking rights except for signs in connection therewith, which are at Lessee’s cost and expense.  All other costs and expenses of any special parking control in regard to exclusive designations and any cost and enforcement shall be an operating expense of the Office/Warehouse complex as identified in Article II, Additional Rent, of the Lease.   Anything herein to the contrary notwithstanding, Lessee shall have no rights to use the reserved parking spaces for any other Lessees at the Office/Warehouse Complex. 10.           Lessor will give written notice to Lessee of space that becomes available to Lessor for leasing during the term of this Lease in the Office/Warehouse Complex (“Offer Space”) Lessor’s notice will include the Base Rent for the Offer Space calculated at the market rate which Lessor would, as of the date upon which Lessor submits written notice to Lessee, expect to charge a new tenant for such space for the term in question, considering the condition of the Offer Space; provided, however, that space that is available as of the date of the Third Amendment to Office/Warehouse Lease shall not be included within the definition of Offer Space until it has been leased and has again become available for leasing.  Lessee shall have the right (“Right of Opportunity”), provided Lessee is not in default,  to lease Offer Space, if and only if:   a.             Lessee is not in default under the Lease; b.             The party in possession of the Offer Space has no desire to remain in possession; c.             Other tenants in the Building with rights to lease the Offer Space have no desire to lease it; and d.             Lessee delivers to Lessor written notice exercising its Right of Opportunity with respect to a given Offer Space (“Expansion Election Notice”) within  thirty  (30) days following receipt of Lessor’s notice of availability of the Offer Space.   If Lessee fails to timely exercise its right to lease Offer Space, Lessee shall have no further right to lease the Offer Space pursuant to this Section 12 until it has been leased and has again become available.  If Lessee exercises its right to lease Offer Space, Lessor and Lessee shall enter into an amendment to the Lease, subject to the following terms and conditions:   (i)The Base Rent for the Offer Space shall be at the rate which Lessor submits in its written notice to Lessee identified hereinabove.   (ii)Lessee’s prorata share of excess real estate taxes and excess operating expenses pursuant to the Lease shall be increased accordingly.   (iii)The Offer Space shall be delivered to and accepted by Lessee in its “as-is” condition when it becomes available.   (iv)The rental obligations of Lessee with respect to the Offer Space will commence on the date possession of the Offer Space is tendered by Lessor to Lessee.   (v)The Offer Space shall be added to the Premises for a term concurrent with the term of the Lease.   (vi)Except as herein specifically provided to the contrary, all of the terms, provisions and conditions set forth in the Lease shall apply to the Offer Space upon its addition to the Premises.   (vii)Lessee shall not have the right hereunder to exercise its Right of Opportunity with respect to part, but not all, of an Offer Space which becomes available.   (viii)Any improvements to be made to any Offer Space will be constructed by Lessee, at Lessee’s sole cost and expense, in accordance with plans and specifications submitted by Lessee and approved by Lessor, which approval will not be unreasonably withheld.   (ix)Within 15 days after receipt from Lessor, Lessee shall execute and deliver to Lessor those instruments Lessor may reasonably request to evidence any lease of Offer space under this Section 12.   (x)Lessor shall not be liable for failure to deliver possession of the Offer Space by reason of holding over by third parties, nor shall such failure impair the validity of the Lease or extend the term hereof.   (xi)The right of Lessee under this Section 12 will not be severed from the Lease or separately sold, assigned or transferred, and will expire on the expiration or earlier termination of the Lease.   11.           Lessee shall have the right, provided Lessee is not in default, to be exercised as hereinafter provided, to extend the term of the Lease for either one (1) period of two (2) years, or one (1) period of five (5) years, on the following terms and conditions and subject to the limitations hereinafter set forth, such extension period being in the Lease sometimes referred to as the “Renewal Term.”   (a)           That at the time hereinafter set forth for the exercise of the renewal option, the Lease shall be in full force and effect and Lessee shall not be in default in the performance of any of the terms, covenants and conditions therein contained in respect to a matter as to which notice of default has been given under the Office/Warehouse Lease which has not been remedied within the time limited in the Lease, but Lessor shall have the right, at its sole discretion, to waive the non-default conditions therein.   (b)           That the Renewal Term shall be upon the same terms, covenants and conditions as in the Lease provided; provided, however, the annual Base Rent for the Renewal Term shall be the fair market Base Rent rate for such space on the date such Renewal Term shall commence in relation to comparable (in quality and location) space located in the Minneapolis – St. Paul metropolitan area.  The fair market Base Rent for the Premises shall be determined as of the date six (6) months prior to commencement of the Renewal Term.  Provided Lessee has properly elected to renew the term of the Lease, and if Lessor and Lessee fail to agree at least four (4) months prior to commencement of the Renewal Term upon the fair market Base Rent of the Premises, the amount of the fair market Base Rent of the Premises shall be determined by arbitration in accordance with the provisions of Article XXXI of the Office/Warehouse Lease.  The fair market Base Rent of the Premises shall be based upon the highest and best use of the Premises; provided, however, the non-office areas of the Premises (production and warehouse areas) shall be based on the market rate for non-air-conditioned warehouse space only.  The rate for the office areas shall be based upon market rates for office areas.  In no event shall the Base Rent of the Premises for the Renewal Term be either less than the Base Rent rate payable nor more than 120% of the Base Rent rate payable (absent temporary abatements) by Lessee immediately prior to commencement of the Renewal Term.   (c)           That Lessee shall exercise its rights to extend the term of the Lease for the Renewal Term by notifying Lessor, in writing, of its election to exercise the right to renew and extend the term of the Lease no later than the date six (6) months prior to the expiration of the initial term of the Lease.  Upon notification with respect to such renewal, and for a period of sixty (60) days thereafter, the parties hereto shall make a good faith effort to agree upon the fair market Base Rent of the Premises for such Renewal Term.  In the event that Lessor and Lessee fail to agree within the sixty (60) day time period set forth in this subparagraph (c), the fair market Base Rent of the Premises for such Renewal Term shall be determined by Arbitration in the manner set forth in Article XXXI (“Arbitration”) of the Office/Warehouse Lease.  However, such arbitrators shall be directed to determine the fair market Base Rent for the Premises as above provided and in determining the same said appraisers shall be instructed to make said appraisal independently, without consulting with each other.  Any determination by arbitration or any agreement reached by the parties hereto with respect to such fair market Base Rent and resulting Base Rent of the Premises for such Renewal Term shall be expressed in writing and shall be executed by the parties hereto, and a copy thereof delivered to each of the parties.   12.   Lessor, at its sole cost and expense, will cause the Office/Warehouse Complex and the underlying land to be in compliance with all codes and regulations pursuant to any Federal, State or local governmental law, and shall so represent such compliance to Tenant.   13.   Except as amended herein, all other terms and conditions of the Lease shall remain in full force and effect.                   IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment to Office/Warehouse Lease as of the day and year first above written.     AETNA LIFE INSURANCE COMPANY     A Connecticut Corporation     (Lessor)           By:  UBS REALTY INVESTORS LLC     (f/k/a Allegis Realty Investors LLC), a Massachusetts limited liability company           Its:  INVESTMENT ADVISOR AND AGENT     BY  /S/  JOSEPH E. GAUKLER     ITS   DIRECTOR           FARGO ELECTRONICS, INC.     A Delaware Corporation     (Lessee)           BY  /S/ GARY R. HOLLAND           ITS   PRESIDENT      

Exhibit 10.16 INDEMNIFICATION AGREEMENT   This Indemnification Agreement (the "Agreement") is entered into as of the 27th day of March, 2001, by and among AMERICAN COMMUNITY PROPERTIES TRUST, INC., a Maryland business trust (the "Company"), and THOMAS J. SHAFER (the "Indemnitee"). WHEREAS, existing statutes, regulations, trust documents and bylaws regarding indemnification of trustees and officers and limitation of liability of trustees and officers are often not adequate to provide them with protection against risks to which they may be exposed by virtue of serving as trustees and officers of a business trust, WHEREAS, damages sought by class action plaintiffs in some cases amount to substantial dollar amounts and, whether or not the case is meritorious, the cost of defending these suits can be enormous with few individual trustees and officers having the resources to sustain such legal costs or a judgment in favor of the plaintiffs even in cases where the defendant was neither culpable nor profited personally to the detriment of the corporation; WHEREAS, it is generally recognized that the issues in controversy in such litigation are usually related to the knowledge, motives and intent of the trustee or officer and that he is usually the only witness with firsthand knowledge of the essential facts or of exculpating circumstances who is qualified to testify in his defense regarding matters of such subjective nature, and that the long period of time which normally and usually elapses before such suits can be disposed of can extend beyond the normal time for retirement for a trustee or officer, with the result that he, after retirement, or in the event of his death, his spouse, heirs, executors, administrators, as the case may be, may be faced with limited ability, undue hardship and an intolerable burden in launching and maintaining a proper and adequate defense of such party or his estate against claims for damages; WHEREAS, the trust instrument and bylaws of the Company and the rules and regulations governing the Company allow it to indemnify and hold harmless their management personnel and their affiliates and each of their respective trustees and officers for losses, claims, damages, expenses or liabilities incurred by such persons by reason of any action, omission to act or decision made by any such persons in connection with the business of the Company; WHEREAS the Board of Trustees (as defined in Article I hereto) has concluded that it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify the Indemnitees in reasonable and adequate manner to the fullest extent permitted by applicable law, to assume for itself maximum liability for expenses and damages in connection with claims lodged against them for their decisions and actions and to provide for the advancement of expenses incurred by the Indemnitees; and WHEREAS, the Indemnitees are willing to serve, for or on behalf of the Company on the condition that they be so indemnified. NOW, THEREFORE, in consideration of the mutual promises made herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: WITNESSETH I. DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings set forth below: A. "Board of Trustees" shall mean the board of trustees of the Company. B. "Change in Control" shall mean: (i) the acquisition by an 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 of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of either (x) the then-outstanding Common Shares of the Company (the "Outstanding Company Common Shares") or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of trustees (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for Common Shares or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any company controlled by the Company, or (C) any acquisition by any company pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of subsection (ii) of this definition; or (ii) the consummation of an amalgamation, merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a " Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of Common Shares and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring company in such Business Combination (which shall include, without limitation, a company which as a result of such transaction owns the Company or substantially all of the Company's assets either directly or through one or more subsidiaries) (such resulting or acquiring company is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership of the Outstanding Company Common Shares and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination, and (y) no Person (excluding the Acquiring Corporation, any Exempt Persons or any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 50% or more of the then-outstanding Common Shares of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such company entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination). C. "Disinterested Trustee" shall mean a trustee of the Company who neither is nor was a party to the Proceeding in respect of which indemnification or advance of expenses is being sought by an Indemnitee. D. "Expenses" shall mean, without limitation, expenses of Proceedings including all attorneys' fees, retainers, court costs, transcript costs, fees of experts, accounting and witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness or party in a Proceeding. E. "Bad Faith" shall mean with respect to a particular Indemnitee, such Indemnitee not having acted in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Proceeding such Indemnitee having acted in a certain manner without reasonable cause to believe his conduct was lawful. F. "Liabilities" shall mean liabilities of any type whatsoever, including without limitation, any judgments, fines, ERISA excise taxes and penalties, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such judgments, fines, penalties, or amounts paid in settlement) in connection with the investigation, defense, settlement or appeal of any Proceeding or any claim, issue or matter therein. G. "Official Status" describes the status of a person who is or was a trustee or officer of the Company, or a member of any committee of the Board of Trustees, and the status of a person who, while a trustee or officer of the Company, is or was serving at the request of the Company as a trustee or officer of an employee benefit plan. H. "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternative dispute resolution mechanism, investigation, administrative hearing or any other actual, threatened or completed proceeding whether civil, criminal, administrative or investigative, including, without limitation, any proceeding arising out of or relating to acts or omissions with respect to any and all related transactions, filings and other actions, whether or not such acts or omissions occurred prior to or subsequent to the date of this Agreement; provided, however, that the term Proceeding shall not include a Proceeding initiated by any of the Indemnitees against the Company or any trustee, officer, employee or agent of the Company unless (i) the Company has joined in or the Board of Trustees has consented to the initiation of such Proceeding, or (ii) the Proceeding is instituted after a Change in Control. I. "Voting Securities" shall mean any securities of an entity whose holder or holders are entitled to vote generally in the election of the Board of Trustees. II. TERM OF AGREEMENT This Agreement shall continue until and terminate with respect to any Indemnitee upon the later of: 1. 10 years after the date that such Indemnitee shall have ceased to serve as a trustee or officer of the Company or of any other corporation, partnership, limited liability company or partnership, joint venture, trust, employee benefit plan or other entity which such Indemnitee served at the request of the Company, or 2. The final termination of any Proceeding then pending in respect of which such Indemnitee is granted rights of indemnification of Liabilities or advancement of Expenses hereunder and of any Proceeding commenced by the Company pursuant to Section IV.E of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnitees and their heirs, executors and administrators. III. SERVICES BY INDEMNITEE, NOTICE OF PROCEEDINGS AND DEFENSE OF CLAIM A. Agreement to Serve. Each Indemnitee shall serve and/or continue to serve, at the will of the Company or under separate contract, if such exists, as a trustee or officer of the Company. This Agreement does not create any additional right for any of the Indemnitees to serve as directors or officers other than at the will of the Company or as otherwise provided by separate contract. Indemnitee's resignation as a trustee shall not constitute a breach of this Agreement. B. Notice of Proceedings. Each Indemnitee shall notify the Company promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification of Liabilities or advancement of Expenses covered hereunder, but the Indemnitee's omission to so notify the Company shall not relieve the Company from any liability which it may have to the Indemnitees under this Agreement unless such omission materially prejudices the rights of the Company (including, without limitation, the Company having lost any substantive or procedural rights with respect to the defense of any Proceeding). If such omission does materially prejudice the rights of the Company, the Company shall be relieved from liability under this Agreement to the extent of such prejudice; but such omission will not relieve the Company from any liability which it may owe to an Indemnitee otherwise than under this Agreement. C. Defense of Claims. The Company will be entitled to participate at its own expense in any Proceeding of which it has notice. The Company, jointly with any other indemnifying party similarly notified of any Proceeding, will be entitled to assume the defense of any Indemnitee therein, with counsel reasonably satisfactory to such Indemnitee; provided, however, that the prior written consent of the Indemnitee shall be required for the Company to assume the defense of an Indemnitee in a Proceeding (i) if there has been a Change in Control of the Company, or (ii) if the Indemnitee has reasonably concluded that there may be a conflict of interest between the Company and such Indemnitee, or between one Indemnitee and another, with respect to any Proceeding and has provided written notice thereof to the Company setting forth in reasonable detail the basis for the determination of such conflict of interest. After receipt of written notice from the Company to an Indemnitee of the Company's election to assume the defense of such Indemnitee in any Proceeding, the Company will not be liable to such Indemnitee under this Agreement for any Expenses subsequently incurred by such Indemnitee in connection with the defense thereof. An Indemnitee shall have the right to employ his own counsel in any such Proceeding, but the fees and expenses of such counsel incurred after receipt of written notice from the Company of its assumption of the defense thereof shall be at the expense of such Indemnitee unless: 1. The employment of counsel by such Indemnitee has been authorized in writing by the Company; 2. There is a conflict of interest between the Company and such Indemnitee with respect to such Proceeding and the Company has not employed separate counsel for such Indemnitee; or 3. The Company shall not in fact have employed counsel to assume the defense of such Indemnitee in such Proceeding or such counsel has not in fact assumed such defense or such counsel is not acting in connection therewith with reasonable diligence and Indemnitee has so notified the Company and the Company has not taken corrective action by causing such counsel to act thereafter with reasonable diligence or by substituting counsel; and in each such case the fees and expenses of such Indemnitee's counsel shall be paid as incurred, but in any event no later than 30 days within receipt of notice of such fees and expenses, by the Company pursuant to Article V. D. Settlement of Claims. The Company shall not settle any Proceeding in any manner which would impose any liability, penalty or limitation on any of the Indemnitees without the written consent of such Indemnitee; provided, however, that such Indemnitee shall not unreasonably withhold, delay or condition consent to any proposed settlement. The Company shall not be liable to indemnify any of the Indemnitees under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected by such Indemnitee without the Company's written consent. The Company shall not unreasonably withhold, delay or condition its consent to any proposed settlement. IV. INDEMNIFICATION A. In General. The Company shall indemnify any Indemnitees against any and all Expenses and Liabilities: (i) as provided in this Agreement, (ii) to the fullest extent consistent with applicable law in effect on the date hereof and to such greater extent as applicable law may hereafter from time to time permit, (iii) for any acts or omissions which occurred prior to each Indemnitee becoming a trustee of the Company, or establishing any formal relationship with the Company. The rights of the Indemnitees provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in this Article IV. It is expressly agreed and understood that the Company's indemnification to Indemnitee shall be absolute, total and unconditional with respect to any activity or event, including without limitation the preparation or distribution of any proxy statement, which occurs prior to the date of commencement of Indemnitee's service as a trustee of the Company and no process or procedure shall be needed to establish or confirm such indemnification, except as may be required by applicable law (provided Indemnitee is notified appropriately by the Company). B. Indemnification of a Party to a Proceeding. An Indemnitee shall be entitled to the rights of indemnification provided in this Section IV.B if, by reason of his Official Status, he is, or is threatened to be made, a party to any Proceeding. In accordance with this Section IV.B, an Indemnitee shall be indemnified against all Expenses and Liabilities actually incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, unless the acts or omissions of such Indemnitee are material to the matter giving rise to the Proceeding, and (a) were committed in Bad Faith (as determined pursuant to either Section IV.D.2 or Section IV.E below), or (b) were the result of active and deliberate dishonesty, or (c) for which the Indemnitee actually received an improper personal benefit in money, property or services; provided, however, that, if applicable law so provides, no indemnification against such Expenses and Liabilities shall be made in respect of any claim, issue or matter in a Proceeding brought by or on behalf of the Company as to which a final nonappealable judgment has been issued by a court of competent jurisdiction that the Indemnitee is liable to the Company, unless and to the extent that such court shall determine that such indemnification may be made. C. Indemnification for Expenses of Witness. Notwithstanding any other provision of this Agreement, to the extent that an Indemnitee, by reason of such Indemnitee's Official Status, has prepared to serve or has served as a witness in any Proceeding, such Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by or for him in connection therewith and that are not otherwise reimbursed. D. Specific Limitations on Indemnification. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated under this agreement to make any payment to any Indemnitee for indemnification with respect to any Proceeding: 1. To the extent that payment is actually made to such Indemnitee under any insurance policy or is made to such Indemnitee by the Company otherwise than pursuant to this Agreement. 2. If a court in such Proceeding has entered a judgment or other adjudication which is final and has become nonappealable and established that a claim of such Indemnitee for such indemnification arose from acts or omissions of such Indemnitee which are material to the matter giving rise to the Proceeding and (a) which were committed in bad faith, or (b) which were the result of active and deliberate dishonesty, or (c) for which the Indemnitee actually received an improper personal benefit in money, property or services. 3. For Liabilities in connection with Proceedings settled without the consent of the Company. 4. For an accounting of profits made from the purchase or sale by such Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934 or similar provisions of any federal, state or local statute or regulation. 5. For any liability of an Indemnitee in connection with insider trading as defined under the United States securities laws or similar provisions of any state or local statute or regulation. E. Determination of Bad Faith. 1. An Indemnitee will be deemed to have acted in Bad Faith if such is proven by a preponderance of the evidence by the Company in one of the forums listed below. Such Indemnitee subject to a claim by the Company that he acted in Bad Faith shall be entitled to select from among the following forums in which the validity of the Company's claim will be heard: (a) A court of competent jurisdiction, or (b) a panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by such Indemnitee and the last of whom is selected by the first two arbitrators so selected, the arbitration to be conducted under the Commercial Arbitration Rules of the American Arbitration Association. 2. As soon as practicable, and in no event later than thirty (30) days after written notice of such Indemnitee's choice of forum pursuant to this Section IV.E, the Company shall at its own expense, submit to the selected forum in such manner as is set forth above its claim that such Indemnitee is not entitled to indemnification. The fees and expenses of the selected forum in connection with making the determination contemplated hereunder shall be paid by the losing party. If the Company shall fail to submit the matter to the selected forum within thirty (30) days after such Indemnitee's written notice, the requisite determination that such Indemnitee has the right to indemnification shall be deemed to have been made. F. Directors' and Officers' Liability Insurance. In addition to the indemnification protection provided to the Indemnitee by the other sections of this Agreement, the Company shall also purchase and maintain Directors' and Officers' Liability Insurance, at its expense and in amounts that are subject to such terms as shall be determined by the Board of Trustees of the Company, to protect the Indemnitee against any expense, liability or loss incurred by it or him in any such capacity, or arising out of his status as such. V. ADVANCEMENT OF EXPENSES A. Advancement of Expenses. The Company shall advance to an Indemnitee all Expenses incurred by him in connection with any Proceeding for which such Indemnitee is entitled to indemnification pursuant to Article IV above, provided that such Indemnitee executes and submits an undertaking to repay Expenses advanced in the form of Exhibit A attached hereto (the "Undertaking"). B. Procedure for Advancement. The Company shall advance Expenses pursuant to subsection A above within ten (10) business days after the receipt by the Company of an Undertaking. Each Indemnitee hereby agrees to repay any Expenses advanced hereunder if it shall be determined that such Indemnitee is not entitled to be indemnified against such Expenses. Any advances and the undertaking to repay pursuant to this Article V shall bear interest at the prime rate for commercial loans as reported from time to time in The Wall Street Journal. VI. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS A. Burden of Proof. In making a determination with respect to entitlement to indemnification of Liabilities and advancement of Expenses hereunder, including a determination pursuant to Section IV.E, the tribunal making such determination shall consider the Indemnitee's right to such entitlement de novo. B. Effect of Other Proceedings. The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order or settlement or conviction, or upon a plea of nolo contendere or its equivalent shall not of itself affect the right of an Indemnitee to indemnification or create a presumption that such Indemnitee acted in Bad Faith but may be considered along with any other admissible evidence. C. Actions of Others. The knowledge and/or actions, or failure to act, of any trustee, officer, agent or employee of the Company shall not be imputed to the Indemnitees for purposes of determining the right to indemnification under this Agreement. VII. NON-EXCLUSIVITY AND MISCELLANEOUS A. Non-Exclusivity. The rights of such Indemnitee hereunder shall not be deemed exclusive of any other rights to which such Indemnitee may at any time be entitled under any provision of law, regulation, the Company's charter, bylaws, vote of shareholders, resolution of trustees or otherwise, and to the extent that during the term of this Agreement the rights of the then existing trustees and officers are more favorable to such trustees and officers than the rights currently provided to the Indemnitees under this Agreement, the Indemnitees shall be entitled to the full benefits of such more favorable rights. B. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, when received, or (ii) mailed by certified or registered mail with postage prepaid, on the date of receipt. If to an Indemnitee, addressed to the Indemnitee at the following addresses: Mr. Thomas J. Shafer 2928 Normandy Drive Ellicott City, MD 21043 With a copy to: Steven S. Snider, Esq. Hale and Dorr LLP 1455 Pennsylvania Avenue, N.W. Suite 1000 Washington, D.C. 20004 202-942-8484 (fax)   If to the Company, addressed to the Company at the following address: American Community Properties Trust c/o Edwin L. Kelly 222 Smallwood Village Center St. Charles, Maryland 20602 With a copy to: Alfred H. Moses, Esq. Covington & Burling 1201 Pennsylvania Avenue, N.W. Washington, D.C. 20004 C. GOVERNING LAW. THE PARTIES AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF MARYLAND WITHOUT REGARD TO ITS CHOICE OF LAW RULES. D. Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto in reference to the subject matter hereof, provided, however, that the parties acknowledge and agree that the trust documents and bylaws of the Company may contain provisions on the subject matter hereof and that this Agreement is not intended to, and does not, limit the rights or obligations of the parties hereto pursuant to such instruments. E. Successors and Assigns. The rights, benefits, responsibilities and obligations arising hereunder shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, assigns, successors, affiliates, agents and representatives. F. Amendment of Agreement and Schedules. No amendment, alteration, rescission or replacement of this Agreement or any provision hereof shall (i) be effective as to any Indemnitee or the Company unless executed in writing by the Indemnitee(s) affected thereby and the Company if affected thereby, or (ii) be effective as to any Indemnitee with respect to any action or inaction by such Indemnitee in the Indemnitee's Official Status prior to such amendment, alteration, rescission or replacement. G. Titles. The titles to the articles and sections of this Agreement are inserted for convenience or reference only and should not be deemed a part hereof or affect the construction or interpretation of any provisions hereof. H. Invalidity of Provisions. Every provision of this Agreement is severable, and the invalidity or unenforceability of any term or provision shall not affect the validity or enforceability of the remainder of this Agreement. I. Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. J. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: 1. The validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Article of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and 2. to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Article of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. K. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together constitute one agreement binding on all the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. The Company: AMERICAN COMMUNITY PROPERTIES TRUST     By: /s/ J. Michael Wilson _____________________________________ Name: J. Michael Wilson Title: Chairman   Indemnitee: /s/ Thomas J. Shafer ___________________________________________ Thomas J. Shafer EXHIBIT A FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED   Re: Undertaking to Repay Expenses Advanced Board of Trustees American Community Properties Trust (the Company): Pursuant to the Indemnification Agreement dated as of the ____ day of _____________, 2001, by and among the Company and the Indemnitees (the "Agreement"), the undersigned is an Indemnitee and is thereby entitled to advancement of expenses in connection with [DESCRIPTION OF PROCEEDING] (the "Proceeding"). Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement. I am subject to the Proceeding by reason of my Official Status or by reason of actions allegedly taken or omitted by me in such capacity. During the period of time to which the Proceeding relates I was [NAME OF POSITION HELD] of __ ______________________________ (the "_______"). Pursuant to Section V of the Indemnification Agreement, the Company is obligated to advance to me Expenses that are reasonably incurred by or for me in connection with the Proceeding, provided that I execute and submit to the Company an Undertaking in which I undertake to repay the Company for any Expenses paid by it on my behalf together with interest thereon at the prime rate for commercial loans as reported from time to time in The Wall Street Journal if it shall be determined that I am not entitled to be indemnified by the Company against such Expenses. I hereby affirm my good faith belief that I have met the standard of conduct necessary for indemnification by the Company and under the Agreement, and that as a condition to indemnification I shall evidence in writing reasonably satisfactory to the Company the Expenses incurred by me or on my behalf. [DESCRIPTION FO EXPENSES INCURRED OR TO BE INCURRED BY OR FOR INDEMNITEE] This letter shall constitute my undertaking to repay to the Company any Expenses paid by it on my behalf in connection with the Proceeding if it is determined that I am not entitled to be indemnified by the Company with respect to such Expenses as set forth in the Agreement. I hereby affirm my good faith belief that I have met the standard of conduct necessary for indemnification by the Company and that I am entitled to such indemnification.   __________________________________ Signature __________________________________ Name __________________________________ Date

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.2 Tanning Technology Corporation 1997 STOCK OPTION PLAN 1.Purpose. The purpose of this Plan is to strengthen Tanning Technology Corporation, a Delaware corporation (the "Company"), by providing an incentive to its employees, officers, consultants and directors and thereby encourage them to devote their abilities and industry to the success of the Company's business enterprise. It is intended that this purpose be achieved by extending to employees (including future employees), officers, consultants and directors of the Company and its Subsidiaries ("Eligible Individuals") an added long-term incentive for high levels of performance and extraordinary efforts through the grant of Incentive Stock Options and Nonqualified Stock Options (as each such term is herein defined). 2.Definitions. For purposes of the Plan:     2.1 "Agreement" means the written agreement between the Company and an Optionee evidencing the grant of an Option and setting forth the terms and conditions thereof.     2.2 "Board" means the Board of Directors of the Company.     2.3 "Cause" means, except as otherwise provided in an Agreement:     (a) in the case of an Optionee whose employment with the Company or a Subsidiary is subject to the terms of an employment agreement between such Optionee and the Company or Subsidiary, which employment agreement includes a definition of "Cause", the term "Cause" shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and     (b) in all other cases, (i) intentional failure to perform reasonably assigned duties, (ii) dishonesty or willful misconduct in the performance of duties, (iii) involvement in a transaction in connection with the performance of duties to the Company or any of its Subsidiaries which transaction is adverse to the interests of the Company or any of its Subsidiaries and which is engaged in for personal profit or (iv) willful violation of any law, rule or regulation in connection with the performance of duties (other than traffic violations or similar offenses).     2.4 "Change in Capitalization" means any increase or reduction in the number of Shares, any change (including, but not limited to, in the case of a spin-off, dividend or other distribution in respect of Shares, a change in value) in the Shares or any exchange of Shares for a different number or kind of shares or other securities of the Company or another corporation, by reason of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants or rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise.     2.5 "Code" means the Internal Revenue Code of 1986, as amended.     2.6 "Committee" means a committee, as described in Section 3.1, appointed by the Board from time to time to administer the Plan and to perform the functions set forth herein.     2.7 "Company" means Tanning Technology Corporation, a Delaware corporation.     2.8 "Disability" means, except as otherwise provided in an Agreement:     (a) in the case of an Optionee whose employment with the Company or a Subsidiary is subject to the terms of an employment agreement between such Optionee and the Company -------------------------------------------------------------------------------- or Subsidiary, which employment agreement includes a definition of "Disability", the term "Disability" shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and     (b) in all other cases, the term "Disability" as used in the Plan or any Agreement shall mean a physical or mental infirmity which impairs the Optionee's ability to perform substantially his or her duties for a period of one hundred eighty (180) consecutive days.     2.9 "Exchange Act" means the Securities Exchange Act of 1934, as amended.     2.10 "Fair Market Value" on any date means the closing sales prices of the Shares on such date on the principal national securities exchange on which such Shares are listed or admitted to trading, or, if such Shares are not so listed or admitted to trading, the average of the per Share closing bid price and per Share closing asked price on such date as quoted on the National Association of Securities Dealers Automated Quotation System or such other market in which such prices are regularly quoted, or, if there have been no published bid or asked quotations with respect to Shares on such date, or if such prices are not regularly quoted, the Fair Market Value shall be the value established by the Committee in good faith and, in the case of an Incentive Stock Option, in accordance with Section 422 of the Code; provided, however, on the effective date of the initial public offering of the Shares, "Fair Market Value" shall mean the price at which the Shares are offered to the public.     2.11 "Incentive Stock Option" means an Option satisfying the requirements of Section 422 of the Code and designated by the Committee as an Incentive Stock Option.     2.12 "Nonemployee Director" means a director of the Company who is a "nonemployee director" within the meaning of Rule 16b-3 promulgated under the Exchange Act.     2.13 "Nonqualified Stock Option" means an Option which is not an Incentive Stock Option.     2.14 "Option" means a Nonqualified Stock Option or an Incentive Stock Option.     2.15 "Optionee" means a person to whom an Option has been granted under the Plan.     2.16 "Outside Director" means a director of the Company who is an "outside director" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.     2.17 "Parent" means any corporation which is a parent corporation (within the meaning of Section 424(e) of the Code) with respect to the Company.     2.18 "Performance-Based Compensation" means any Option that is intended to constitute "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.     2.19 "Plan" means this Tanning Technology Corporation 1997 Stock Option Plan, as amended from time to time.     2.20 "Pooling Transaction" means an acquisition of the Company in a transaction which is intended to be treated as a "pooling of interests" under generally accepted accounting principles.     2.21 "Shares" means shares of the common stock, par value $0.01 per share, of the Company.     2.22 "Subsidiary" means any corporation which is a subsidiary corporation (within the meaning of Section 424(f) of the Code) with respect to the Company.     2.23 "Successor Corporation" means a corporation, or a parent or subsidiary thereof within the meaning of Section 424(a) of the Code, which issues or assumes an Option in a transaction to which Section 424(a) of the Code applies.     2.24 "Ten-Percent Stockholder" means an Eligible Individual, who, at the time an Incentive Stock Option is to be granted to him or her, owns (within the meaning of Section 422(b)(6) of the -------------------------------------------------------------------------------- Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, or of a Parent or a Subsidiary. 3.Administration.     3.1 The Plan shall be administered by the Committee, which shall hold meetings at such times as may be necessary for the proper administration of the Plan. The Committee shall consist of no fewer than two individuals, each of whom is a Nonemployee Director and, after the expiration of the "Reliance Period" as defined in the regulations promulgated under Section 162(m) of the Code, an Outside Director. The Committee shall keep minutes of its meetings. A quorum shall consist of not fewer than two (2) members of the Committee and a majority of a quorum may authorize any action. Any decision or determination reduced to writing and signed by a majority of all of the members of the Committee shall be as fully effective as if made by a majority vote at a meeting duly called and held.     3.2 No member of the Committee shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to the Plan or any transaction hereunder. The Company hereby agrees to indemnify each member of the Committee for all costs and expenses and, to the extent permitted by applicable law, any liability incurred in connection with defending against, responding to, negotiating for the settlement of or otherwise dealing with any claim, cause of action or dispute of any kind arising in connection with any actions in administering the Plan or in authorizing or denying authorization to any transaction hereunder.     3.3 Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time to:     (a) determine those Eligible Individuals to whom Options shall be granted under the Plan and the number of such Options to be granted and to prescribe the terms and conditions (which need not be identical) of each such Option, including the exercise price per Share subject to each Option, and make any amendment or modification to any Agreement consistent with the terms of the Plan. The Committee may delegate to one or more executive officers of the Company the authority set forth within this Section 3.3(a) with respect to grants to non-officer employees or consultants;     (b) to construe and interpret the Plan and any Agreements granted hereunder and to establish, amend and revoke rules and regulations for the administration of the Plan, including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Agreement, in the manner and to the extent it shall deem necessary or advisable, including so that the Plan complies with Rule 16b-3 under the Exchange Act, the Code to the extent applicable and other applicable law, and otherwise to make the Plan fully effective. All decisions and determinations by the Committee in the exercise of this power shall be final, binding and conclusive upon the Company, its Subsidiaries, the Optionees, and all other persons having any interest therein;     (c) to determine the duration and purposes for leaves of absence which may be granted to an Optionee on an individual basis without constituting a termination of employment or service for purposes of the Plan;     (d) to exercise its discretion with respect to the powers and rights granted to it as set forth in the Plan; and     (f)  generally, to exercise such powers and to perform such acts as it deems necessary or advisable to promote the best interests of the Company with respect to the Plan. 4.Stock Subject to the Plan; Grant Limitations.     4.1 The maximum number of Shares that may be made the subject of Options granted under the Plan is 3,289,094. The maximum number of Shares that may be the subject of Options granted to any Eligible Individual during any calendar year is 1,000,000. The maximum number of -------------------------------------------------------------------------------- Incentive Stock Options that may be granted to an Eligible Individual is 1,000,000. Upon a Change in Capitalization, the maximum number of Shares referred to in the first three sentences of this Section 4.1 shall be adjusted in number and kind pursuant to Section 8. The Company shall reserve for the purposes of the Plan, out of its authorized but unissued Shares or out of Shares held in the Company's treasury, or partly out of each, such number of Shares as shall be determined by the Board.     4.2 Upon the granting of an Option, the number of Shares available under Section 4.1 for the granting of further Options shall be reduced by the number of Shares in respect of which the Option is granted; provided, however, that if any Option is exercised by tendering Shares, either actually or by attestation, to the Company as full or partial payment of the exercise price, the maximum number of Shares available under Section 4.1 shall be increased by the number of Shares so tendered.     4.3 Whenever any outstanding Option or portion thereof expires, is canceled, is settled in cash (including the settlement of tax withholding obligations using Shares) or is otherwise terminated for any reason without having been exercised or payment having been made in respect of the entire Option, the Shares allocable to the expired, canceled, settled or otherwise terminated portion of the Option may again be the subject of Options granted hereunder. 5.Option Grants for Eligible Individuals.     5.1 Authority of Committee. Subject to the provisions of the Plan, the Committee shall have full and final authority to select those Eligible Individuals who will receive Options, and the terms and conditions of the grant to such Eligible Individuals shall be set forth in an Agreement.     5.2 Exercise Price. The purchase price or the manner in which the exercise price is to be determined for Shares under each Option shall be determined by the Committee and set forth in the Agreement; provided, however, that the exercise price per Share under each Incentive Stock Option shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder).     5.3 Maximum Duration. Options granted hereunder shall be for such term as the Committee shall determine, provided that an Incentive Stock Option shall not be exercisable after the expiration of ten (10) years from the date it is granted (five (5) years in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder). The Committee may, subsequent to the granting of any Option, extend the term thereof, but in no event shall the term of an Incentive Stock Option as so extended exceed the maximum term provided for in the preceding sentence.     5.4 Vesting. Each Option shall become exercisable in such installments (which need not be equal) and at such times as may be designated by the Committee and set forth in the Agreement. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Option expires. The Committee may accelerate the exercisability of any Option or portion thereof at any time.     5.5 Deferred Delivery of Option Shares. The Committee may, in its discretion, permit Optionees to elect to defer the issuance of Shares upon the exercise of one or more Nonqualified Stock Options granted pursuant to the Plan. The terms and conditions of such deferral shall be determined at the time of the grant of the Option or thereafter.     5.6 Limitations on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date of the grant) of Shares with respect to which Incentive Stock Options granted under the Plan and "incentive stock options" (within the meaning of Section 422 of the Code) granted under all other plans of the Company or its Subsidiaries (in either case determined without regard to this Section 5.6) are exercisable by an Optionee for the first time during any calendar year exceeds $100,000, such Incentive Stock Options shall be treated as Nonqualified Stock Options. In applying the limitation in the preceding sentence in the case of multiple Option grants, Options which were intended to be Incentive Stock Options shall be treated as -------------------------------------------------------------------------------- Nonqualified Stock Options according to the order in which they were granted such that the most recently granted Options are first treated as Nonqualified Stock Options. 6.Terms and Conditions Applicable to All Options.     6.1 Non-Transferability. Except as otherwise determined by the Committee at the time of grant or thereafter, no Option shall be transferable by the Optionee other than by will or by the laws of descent and distribution or, in the case of an Option other than an Incentive Stock Option, pursuant to a domestic relations order (within the meaning of Rule 16a-12 promulgated under the Exchange Act), and an Option shall be exercisable during the lifetime of such Optionee only by the Optionee or his or her guardian or legal representative. The terms of an Option shall be final, binding and conclusive upon the transferees, beneficiaries, executors, administrators, heirs and successors of the Optionee.     6.2 Method of Exercise. The exercise of an Option shall be made only by a written notice delivered in person or by mail to the Secretary of the Company at the Company's principal executive office, specifying the number of Shares to be exercised and, to the extent applicable, accompanied by payment therefor and otherwise in accordance with the Agreement pursuant to which the Option was granted. The exercise price for any Shares purchased pursuant to the exercise of an Option shall be paid, as determined by the Committee in its discretion, in either of the following forms (or any combination thereof): (a) cash or (b) the transfer, either actually or by attestation, to the Company of Shares upon such terms and conditions as determined by the Committee. In addition, Options may be exercised through a registered broker-dealer pursuant to such cashless exercise procedures which are, from time to time, deemed acceptable by the Committee. Any Shares transferred to the Company (or withheld upon exercise) as payment of the exercise price under an Option shall be valued at their Fair Market Value on the date of exercise of such Option. If requested by the Committee, the Optionee shall deliver the Agreement evidencing the Option to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an Option and the number of Shares that may be purchased upon exercise shall be rounded to the nearest number of whole Shares.     6.3 Rights of Optionees. No Optionee shall be deemed for any purpose to be the owner of any Shares subject to any Option unless and until (a) the Option shall have been exercised (including payment of the Withholding Taxes) pursuant to the terms thereof, (b) the Company shall have issued and delivered Shares to the Optionee, and (c) the Optionee's name shall have been entered as a stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such Shares, subject to such terms and conditions as may be set forth in the applicable Agreement.     6.4 Effect of Certain Transactions.     (a) In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option shall be assumed or an equivalent option substituted by the Successor Corporation; provided, however, that, unless otherwise determined by the Committee, such Options shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to such Options prior to such assumption or substitution. In the event that the Successor Corporation refuses to or does not assume the Option or substitute an equivalent option therefor, the Optionee shall have the right to exercise the Option as to all of the Shares subject to the Option as described below, including Shares as to which it would not otherwise be exercisable (a "Transaction Acceleration").     (b) Notwithstanding anything to the contrary contained in Section 6.4(a), in the event of a Transaction Acceleration, or in the event that the Committee determines to accelerate the exercisability of any Options in connection with any transaction involving the Company or its capital stock pursuant to Section 5.4, the Committee may, in its sole discretion, authorize the -------------------------------------------------------------------------------- redemption of the unexercised portion of the Option for a consideration per share of Common Stock equal to the excess of (i) the consideration payable per share of Common Stock in connection with such transaction, over (ii) the purchase price per Share subject to the Option.     (c) If an Option is exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Secretary shall notify the Optionee that the Option shall be fully exercisable for a period of fifteen (15) days (or such other period as shall be determined by the Committee) from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the option confers the right to purchase or receive upon exercise, for each Share subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). 7.Effect of a Termination of Employment. The Agreement evidencing the grant of each Option shall set forth the terms and conditions applicable to such Option upon a termination or change in the status of the employment of the Optionee by the Company or a Subsidiary (including a termination for Cause or by reason of Disability or change by reason of the sale of a Subsidiary), which shall be as the Committee may, in its discretion, determine at the time the Option is granted or thereafter. 8.Adjustment Upon Changes in Capitalization.     (a) In the event of a Change in Capitalization, the Committee shall conclusively determine the appropriate adjustments, if any, to (i) the maximum number and class of Shares or other stock or securities with respect to which Options (including Incentive Stock Options) may be granted under the Plan, (ii) the maximum number and class of Shares or other stock or securities with respect to which Options may be granted to any Eligible Individual during any calendar year, and (iii) the number and class of Shares or other stock or securities which are subject to outstanding Options granted under the Plan and the exercise price therefor, if applicable.     (b) Any such adjustment in the Shares or other stock or securities subject to outstanding Incentive Stock Options (including any adjustments in the exercise price) shall be made in such manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code.     (c) Except as the Committee may determine, if, by reason of a Change in Capitalization, an Optionee shall be entitled to exercise an Option with respect to new, additional or different shares of stock or securities, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the Shares subject to the Option prior to such Change in Capitalization. 9.Effect of Liquidation. Except as otherwise provided in an Agreement, in the event of the liquidation or dissolution of the Company (a "Liquidation"), the Plan and the Options issued hereunder shall continue in effect in accordance with their respective terms, except that following a Liquidation each Optionee shall be entitled to receive in respect of each Share subject to an outstanding Option, upon exercise of such Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of a Share was entitled to receive in the Liquidation in respect of a Share; provided, however, that such stock, securities, cash, property, or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to the Option prior to such Liquidation. -------------------------------------------------------------------------------- 10.Interpretation.     (a) The Plan is intended to comply with Rule 16b-3 promulgated under the Exchange Act and the Committee shall interpret and administer the provisions of the Plan or any Agreement in a manner consistent therewith. Any provisions inconsistent with such rule shall be inoperative and shall not affect the validity of the Plan.     (b) Unless otherwise expressly stated in the relevant Agreement, after the expiration of the Reliance Period, each Option granted under the Plan is intended to be Performance-Based Compensation. The Committee shall not be entitled to exercise any discretion otherwise authorized hereunder with respect to such Options if the ability to exercise such discretion or the exercise of such discretion itself would cause the compensation attributable to such Options to fail to qualify as Performance-Based Compensation. 11.Pooling Transactions. Notwithstanding anything contained in the Plan or any Agreement to the contrary, in the event of a transaction which is intended to constitute a Pooling Transaction, the Committee shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Company to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (a) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any Option, (b) providing that the payment or settlement in respect of any Option be made in the form of cash, Shares or securities of a successor or acquirer of the Company, or a combination of the foregoing, and (c) providing for the extension of the term of any Option to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any Option. 12.Termination and Amendment of the Plan or Modification of Options.     12.1 Plan Amendment or Termination. The Plan shall terminate on the day preceding the tenth anniversary of the date of its adoption by the Board and no Option may be granted thereafter. The Board may sooner terminate the Plan and the Board may at any time and from time to time amend, modify or suspend the Plan; provided, however, that:     (a) no such amendment, modification, suspension or termination shall impair or adversely alter any Options theretofore granted under the Plan, except with the consent of the Optionee, nor shall any amendment, modification, suspension or termination deprive any Optionee of any Shares which he or she may have acquired through or as a result of the Plan; and     (b) to the extent necessary under any applicable law, regulation or exchange requirement, no amendment shall be effective unless approved by the stockholders of the Company in accordance with applicable law, regulation or exchange requirement.     12.2 Modification of Options. No modification of an Option shall adversely alter or impair any rights or obligations under the Option without the consent of the Optionee. 13.Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or 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 other than under the Plan, and such arrangements may be either applicable generally or only in specific cases. -------------------------------------------------------------------------------- 14.Limitation of Liability. As illustrative of the limitations of liability of the Company, but not intended to be exhaustive thereof, nothing in the Plan shall be construed to:     (a) give any person any right to be granted an Option other than at the sole discretion of the Committee;     (b) give any person any rights whatsoever with respect to Shares except as specifically provided in the Plan;     (c) limit in any way the right of the Company or any Subsidiary to terminate the employment or service of any person at any time; or     (d) be evidence of any agreement or understanding, expressed or implied, that the Company will employ any person at any particular rate of compensation or for any particular period of time. 15.Regulations and Other Approvals; Governing Law.     15.1 Except as to matters of federal law, the Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Delaware without giving effect to conflicts of laws principles thereof.     15.2 The obligation of the Company to sell or deliver Shares with respect to Options granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.     15.3 The Board may make such changes to the Plan and any Agreement as may be necessary or appropriate to comply with the rules and regulations of any government authority, or to obtain for Eligible Individuals granted Incentive Stock Options the tax benefits under the applicable provisions of the Code and regulations promulgated thereunder.     15.4 Each Option is subject to the requirement that, if at any time the Committee determines, in its discretion, that the listing, registration or qualification of Shares issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Option or the issuance of Shares, no Options shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions as acceptable to the Committee.     15.5 Notwithstanding anything contained in the Plan or any Agreement to the contrary, in the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other regulations thereunder. The Committee may require any individual receiving Shares pursuant to an Option granted under the Plan, as a condition precedent to receipt of such Shares, to represent and warrant to the Company in writing that the Shares acquired by such individual are acquired without a view to any distribution thereof and will not be sold or transferred other than pursuant to an effective registration thereof under the Securities Act or pursuant to an exemption applicable under the Securities Act or the rules and regulations promulgated thereunder. The certificates evidencing any of such Shares shall be appropriately amended to reflect their status as restricted securities as aforesaid. -------------------------------------------------------------------------------- 16.Miscellaneous.     16.1 Multiple Agreements. The terms of each Option may differ from other Options granted under the Plan at the same time, or at some other time. The Committee may also grant more than one Option to a given Eligible Individual during the term of the Plan, either in addition to, or in substitution for, one or more Options previously granted to that Eligible Individual.     16.2 Withholding of Taxes.     (a) At such times as an Optionee recognizes taxable income in connection with the receipt of Shares hereunder (a "Taxable Event"), the Optionee shall pay to the Company an amount equal to the federal, state and local income taxes and other amounts as may be required by law to be withheld by the Company in connection with the Taxable Event (the "Withholding Taxes") prior to the issuance of such Shares. The Company shall have the right to deduct from any payment of cash to an Optionee an amount equal to the Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes. The Committee may provide in the Agreement, at the time of grant or at any time thereafter, that the Optionee, in satisfaction of the obligation to pay Withholding Taxes, may elect to have withheld a portion of the Shares then issuable to him or her having an aggregate Fair Market Value equal to the Withholding Taxes.     (b) If an Optionee makes a disposition, within the meaning of Section 424(c) of the Code and regulations promulgated thereunder, of any Share or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock Option within the two-year period commencing on the day after the date of the grant or within the one-year period commencing on the day after the date of transfer of such Share or Shares to the Optionee pursuant to such exercise, the Optionee shall, within ten (10) days of such disposition, notify the Company thereof, by delivery of written notice to the Company at its principal executive office. -------------------------------------------------------------------------------- TANNING TECHNOLOGY CORPORATION Tanning Technology Corporation 1997 Stock Option Plan (the "Plan") APPENDIX 1     The terms and provisions of the Plan shall govern the rights of all Optionees. This Appendix A is an appendix to the Plan. In the event that any conflict arises between the terms and conditions of the Plan and this Appendix A, the terms and conditions of this Appendix A shall prevail. Notwithstanding any provision in the Plan to the contrary, Options granted to Optionees who are residents in India shall be subject to the Plan's approval by the Reserve Bank of India, if required, and the following provisions: 1.The Option will be exercised in a cashless manner, as described below under "Cashless Exercise Program." 2.No remittance of money will be made from India. 3.The Optionee will be required to repatriate to India, any capital gains which may arise on the sale of the Option outside India within a reasonable time. 4.Any dividend earned by the Optionee shall be required to be repatriated to India within reasonable time. 5.Any holding of the securities pursuant to exercise of the Option shall be subject to RBI approval. With respect to any grants of Option made prior to such approval, all of the underlying Shares must be sold in connection with the cashless exercise, and none of such Shares may be retained. 6.At no point of time would an Optionee in India be allowed to exercise their Option when the Fair Market Value of the Shares on the date of exercise is less than the exercise price of the Shares. Option Exercise Price and Consideration.     (a) The per share exercise price for the Shares to be issued pursuant to the exercise of an Option shall be such price as is determined by the Committee at the time the Option is granted.     (b) The consideration for the Shares to be issued upon exercise of an Option shall be consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan. The cashless exercise program will be implemented in the manner described below: CASHLESS EXERCISE PROGRAM: The Cashless Exercise Program provides that the Optionee, upon exercise of an Option, will receive cash or Common Stock, or a combination thereof, equal to the difference between the Fair Market Value of the Shares on the exercise day and the Option exercise price. The transaction will be consummated through a broker, who will sell all or a portion of the Shares the Optionee is entitled to on exercise of all Options, on the open market. A portion of the proceeds from such sale will be transferred to the Company in satisfaction of the Optionee's exercise price. Any remaining Common Stock or cash will be remitted to the Optionee. No cash or other property will be transferred out of India. In the event that the Fair Market Value of the Shares on the exercise day is not sufficient to cover the Option exercise price, the Option will not be exercisable. Example: Assume a 5,000 share option grant, a Fair Market Value and exercise price of $10 per share at the time of grant, and a Fair Market Value on the date of exercise of $15 per share. The employee may receive the following: —total market value = $75,000 —total exercise price = $50,000 -------------------------------------------------------------------------------- —profit = $25,000 —cash = $25,000     or —shares = $25,000/15 = 1,666 So the employee receives $25,000 (in Indian Rupees) or 1,666 shares. The employee is free to choose any combination of cash and/or Common Stock. -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.2 Tanning Technology Corporation 1997 STOCK OPTION PLAN TANNING TECHNOLOGY CORPORATION Tanning Technology Corporation 1997 Stock Option Plan (the "Plan") APPENDIX 1

Exhibit 10.17   PACIFIC NORTHWEST BANK EMPLOYMENT AGREEMENT              THIS EMPLOYMENT AGREEMENT ("Agreement"), signed January 15, 1998, between PACIFIC NORTHWEST BANK ("Bank") and GEORGE P. BRACE ("Employee") takes effect on the effective date of the Reorganization ("Effective Date"). RECITALS A. InterWest Bancorp, Inc. ("InterWest") has entered into a Plan and Agreement of Reorganization ("Plan") with the Bank, under which the Bank will become a wholly owned subsidiary of InterWest ("Reorganization").     B. Employee is presently the Bank's Senior Vice President and the Manager of the Bellevue Financial Center. The Bank wishes to continue Employee's employment in that capacity under the terms and conditions of this Agreement.     C. Employee wishes to continue his employment at the Bank under the terms and conditions of this Agreement. AGREEMENT   The parties agree as follows.     1. Employment. The Bank will continue Employee's employment during the Term of this Agreement, and Employee accepts employment by the Bank on the terms and conditions set forth in this Agreement. Employee's title will be "Senior Vice President/Manager, Bellevue Financial Center."       2. Effective Date and Term.           (a) Effective Date. This Agreement is effective as of the Effective Date.         (b) Term. The term of this Agreement ("Term") is three years, beginning on the Effective Date.         (c) Abandonment of the Reorganization. If the Plan terminates before Closing, this Agreement will not become effective and will be void.       3. Duties. Employee will faithfully and diligently perform the duties assigned to Employee from time to time by the Bank's Chairman or President, consistent with the duties that have been normal and customary to Employee's position. Employee will use his best efforts to perform his duties and will devote full time and attention to these duties during working hours. Employee will report directly to the Bank's President. The Bank's board of directors may, from time to time, modify Employee's title or performance responsibilities to accommodate management succession, as well as any other management objectives of the Bank or of InterWest. Employee will assume any additional positions, duties, and responsibilities as may reasonably be requested of him with or without additional compensation, as appropriate and consistent with this Section 3.   4. Salary. Initially, Employee will receive a salary of $125,000 per year, to be paid in accordance with the Bank's regular payroll schedule.       5. Incentive Compensation. The Bank's board of directors, subject to ratification by InterWest's board of directors, will determine the amount of bonus, if any, to be paid by the Bank to Employee for each year during the Term. In making this determination, the Bank's board of directors will consider factors such as Employee's performance of his duties and the safety, soundness, and profitability of the Bank. Employee's bonus, if any, will reflect Employee's contribution to the performance of the Bank during the year.       6. Income Deferral and Benefits. Subject to eligibility requirements and in accordance with and subject to any policies adopted by the Bank's or InterWest's board of directors with respect to any benefit plans or programs, Employee will be entitled to receive benefits (including stock options) similar to those offered to other employees of the Bank or InterWest with position and duties comparable to those of Employee. The foregoing notwithstanding, it is the specific and agreed intent that the total compensation of Employee shall be, in the aggregate, comparable to the total compensation Employee is presently receiving at the Bank (including but not limited to benefits under any retirement plans or long-term disability plans).       7. Business Expenses. The Bank will reimburse Employee for ordinary and necessary expenses (including, without limitation, Bank automobile, travel, entertainment, and similar expenses) incurred in performing and promoting the Bank's business. Employee will present from time to time itemized accounts of these expenses, subject to any limits of Bank policy or the rules and regulations of the Internal Revenue Service.       8. Termination.           (a) Termination By Bank for Cause. If, before the end of the Term, the Bank terminates Employee's employment for Cause or Employee terminates his employment without Good Reason, the Bank will pay Employee the salary earned and expenses reimbursable under this Agreement incurred through the date of Employee's termination. Employee will have no right to receive compensation or other benefits for any period after termination under this Section 8(a).         (b) Other Termination By Bank. If, before the end of the Term, the Bank terminates Employee's employment without Cause or Employee terminates his employment for Good Reason (defined below), the Bank will pay Employee for the remainder of the Term the salary Employee would have been entitled to under this Agreement if his employment had not terminated.         (c) Death or Disability. This Agreement terminates (1) if Employee dies or (2) if Employee is unable to perform his duties and obligations under this Agreement for a period of 90 days as a result of a physical or mental disability arising at any time during the term of this Agreement, unless with reasonable accomodation Employee could continue to perform his duties under this Agreement and making these accomodations would not require the Bank to expend any funds. If termination occurs under this Section 8(c), Employee or his estate will be entitled to receive only the compensation and benefits earned and expenses reimbursable through the date this Agreement terminated.     (d) Employee Termination Window. During the period commencing with the 25th month of the Term through the 30th month of the Tem, Employee may terminate this Agreement by delivering written notice to the Bank and to InterWest. If Employee does so, regardless of whether Employee had Good Reason to terminate the Agreement, the Bank will pay Employee a single cash payment in an amount equal to Employee's W-2 income before salary deferrals over the twelve (12) months preceding the date of termination ("Total Annual Compensation").         (e) Termination Related to a Change in Control.         (1) Termination by Bank. If the Bank, or its successor in interest by merger, or its transferee in the event of a purchase and assumption transaction, (for reasons other than Employee's death, disability, or Cause) (1) terminates Employee's employment within one year following a Change in Control (as defined below) or (2) terminates Employee's employment before a Change in Control and a Change in Control occurs within nine months after the termination, the Bank will pay Employee the payment described in Section 8(e)(3).         (2) Termination by Employee. If Employee terminates Employee's employment, with or without Good Reason, within one year following a Change in Control, the Bank will pay Employee the payment described in Section 8(e)(3).         (3) Payments. If Section 8(e)(1) or (2) is triggered as described in those Sections, the Bank will pay Employee his Total Annual Compensation (as defined in Section 8(d) above).         (f) Limitations on Payments Related to Change in Control. The following apply notwithstanding any other provision of this Agreement:         (1) the payment described in Section 8(e)(3) will be less than the amount that would cause it to be a "parachute payment" within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code; and         (2) Employee's right to receive the payment described in Section 8(e)(3) terminates (i) immediately, if before the Change in Control transaction closes, Employee terminates his employment without Good Reason or the Bank terminates Employee's employment for Cause, or (ii) one year after a Change in Control occurs.         (g) Definition of "Change in Control". "Change in Control" means a change "in the ownership or effective control" or "in the ownership of a substantial portion of the assets" of InterWest, within the meaning of section 280G of the Internal Revenue Code.         (h) Return of Bank Property. If and when Employee ceases, for any reason, to be employed by the Bank, Employee must return to the Bank all keys, pass cards, identification cards and any other property of the Bank or InterWest. At the same time, Employee also must return to the Bank all originals and copies (whether in hard copy, electronic or other form) of any documents, drawings, notes, memoranda, designs, devices, diskettes, tapes, manuals, and specifications which constitute proprietary information or material of the Bank or InterWest. The obligations in this paragraph include the return of documents and other materials which may be in Employee's desk at work, in Employee's car or place of residence, or in any other location under Employee's control.   9. Definition of "Cause". "Cause" means any one or more of the following:         (a) Willful misfeasance or gross negligence in the performance of Employee's duties;         (b) Conviction of a crime in connection with his duties;         (c) Conduct demonstrably and significantly harmful to the Bank, as reasonably determined by the Bank's board of directors on the advice of legal counsel; or         (d) Permanent disability, meaning a physical or mental impairment which renders Employee incapable of substantially performing the duties required under this Agreement, and which is expected to continue rendering Employee so incapable for the reasonably foreseeable future.       10. Definition of "Good Reason". "Good Reason" means only any one or more of the following:         (a) Reduction, without Employee's consent, of Employee's salary or elimination of any compensation or benefit plan benefiting Employee, unless the reduction or elimination is generally applicable to substantially all similarly situated Bank employees (or employees of a successor or controlling entity of the Bank) formerly benefited;         (b) The assignment to Employee without his consent of any authority or duties materially inconsistent with Employee's position as of the date of this Agreement; or         (c) A relocation or transfer of Employee's principal place of employment that would require Employee to commute on a regular basis more than 60 miles each way from his current business office at the Bank on the date of this Agreement, unless Employee consents to the relocation or transfer.       11. Confidentiality. Employee will not, after signing this Agreement, including during and after its Term, use for his own purposes or disclose to any other person or entity any confidential information concerning the Bank or InterWest or their business operations or customers, unless (1) the Bank or InterWest consents to the use or disclosure of their respective confidential information, (2) the use or disclosure is consistent with Employee's duties under this Agreement, or (3) disclosure is required by law or court order.       12. Noncompetition.         (a) Participation in a Competing Business. During the Term and for eighteen (18) months after Employee's employment with the Bank, InterWest, or any Subsidiary of InterWest ends (regardless of whether Employee's employment ends at the end of the Term or at some other point after the end of the Term), Employee will not become involved with a Competing Business or serve, directly or indirectly, a Competing Business in any manner, including, without limitation, as a shareholder, member, partner, director, officer, manager, investor, organizer, "founder", employee, consultant, or agent; provided, however, that Employee may acquire and passively own an interest not to exceed 2% of the total equity interest in any entity (whether or not such entity is a Competing Business).     (b) No Solicitation. During the Term and for eighteen (18) months after Employee's employment with the Bank, InterWest, or any affiliate of InterWest ends (regardless of whether Employee's employment ends at the end of the Term or at some other point after the end of the Term), Employee will not directly or indirectly solicit or attempt to solicit (1) any employees of the Bank, InterWest, or any of InterWest's Subsidiaries, to leave their employment or (2) any customers of the Bank, InterWest, or any of InterWest's Subsidiaries to remove their business from the Bank, InterWest, or any of InterWest's Subsidiaries, or to participate in any manner in a Competing Business. Solicitation prohibited under this Section includes solicitation by any means, including, without limitation, meetings, letters, or other mailings, electronic communications of any kind, and internet communications.         (c) Employment Outside the Washington State. Nothing in this Agreement prevents Employee from accepting employment after the end of the Term outside Washington State from a Competing Business, as long as Employee will not (a) act as an employee or other representative or agent of the Competing Business within Washington State or (b) have any responsibilities for the Competing Business' operations within Washington State.         (d) Competing Business. "Competing Business" means any financial institution or trust company that competes with, or will compete in Washington State with, InterWest, the Bank, or any of InterWest's Subsidiaries. The term "Competing Business" includes, without limitation, any start-up or other financial institution or trust company in formation.       13. Enforcement.         (a) The Bank and Employee stipulate that, in light of all of the facts and circumstances of the relationship between Employee and the Bank, the agreements referred to in Sections 11 and 12 (including without limitation their scope, duration and geographic extent) are fair and reasonably necessary for the protection of the Bank's and InterWest's confidential information, goodwill and other protectable interests. If a court of competent jurisdiction should decline to enforce any of those covenants and agreements, Employee and the Bank request the court to reform these provisions to restrict Employee's use of confidential information and Employee's ability to compete with the Bank and InterWest to the maximum extent, in time, scope of activities, and geography, the court finds enforceable.         (b) Employee acknowledges that the Bank and InterWest will suffer immediate and irreparable harm that will not be compensable by damages alone, if Employee repudiates or breaches any of the provisions of Sections 11 or 12 or threatens or attempts to do so. For this reason, under these circumstances, the Bank and InterWest, in addition to and without limitation of any other rights, remedies or damages available to it at law or in equity, will be entitled to obtain temporary, preliminary, and permanent injunctions in order to prevent or retrain the breach, and neither the Bank nor InterWest will be required to post a bond as a condition for the granting of this relief.   14. Adequate Consideration. Employee specifically acknowledges the receipt of adequate consideration for the covenants contained in Sections 11 and 12 and that the Bank is entitled to require him to comply with these Sections. These Sections will survive termination of this Agreement. Employee represents that if his employment is terminated, whether voluntarily or involuntarily, Employee has experience and capabilities sufficient to enable Employee to obtain employment in areas which do not violate this Agreement and that the Bank's enforcement of a remedy by way of injunction will not prevent Employee from earning a livelihood.       15. Arbitration.         (a) Arbitration. At either party's request, the parties must submit any dispute, controversy or claim arising out of or in connection with, or relating to, this Agreement or any breach or alleged breach of this Agreement, to arbitration under the American Arbitration Association's rules then in effect (or under any other form of arbitration mutually acceptable to the parties). A single arbitrator agreed on by the parties will conduct the arbitration. If the parties cannot agree on a single arbitrator, each party must select one arbitrator and those two arbitrators will select a third arbitrator. This third arbitrator will hear the dispute. The arbitrator's decision is final (except as otherwise specifically provided by law) and binds the parties, and either party may request any court having jurisdiction to enter a judgment and to enforce the arbitrator's decision. The arbitrator will provide the parties with a written decision naming the substantially prevailing party in the action. This prevailing party is entitled to reimbursement from the other party for its costs and expenses, including reasonable attorneys’ fees.         (b) Governing Law. All proceedings will be held at a place designated by the arbitrator in King County, Washington. The arbitrator, in rendering a decision as to any state law claims, will apply Washington law.         (c) Exception to Arbitration. Notwithstanding the above, if Employee violates Section 11 or 12, the Bank will have the right to initiate the court proceedings described in Section 13(b), in lieu of an arbitration proceeding under this Section 15. The Bank may initiate these proceedings wherever appropriate within Washington State; but Employee will consent to venue and jurisdiction in King County, Washington.       16. Miscellaneous Provisions.         (a) Defined Terms. Capitalized terms used as defined terms, but not defined in this Agreement, will have the meanings assigned to those terms in the Plan.         (b) Entire Agreement. This Agreement constitutes the entire understanding between the parties concerning its subject matter and supersedes all prior agreements. Accordingly, Employee specifically waives the terms of and all of his rights under all employment, change-in-control and salary continuation agreements, whether written or oral, he has previously entered into with the Bank or any of its Subsidiaries or affiliates.         (c) Binding Effect. This Agreement will bind and inure to the benefit of the Bank's, InterWest's, and Employee's heirs, legal representatives, successors and assigns.         (d) Litigation Expenses. If either party successfully seeks to enforce any provision of this Agreement or to collect any amount claimed to be due under it, this party will be entitled to reimbursement from the other party for any and all of its out-of-pocket expenses and costs including, without limitation, reasonable attorneys' fees and costs incurred in connection with the enforcement or collection.     (e) Waiver. Any waiver by a party of its rights under this Agreement must be written and signed by the party waiving its rights. A party's waiver of the other party's breach of any provision of this Agreement will not operate as a waiver of any other breach by the breaching party.         (f) Counsel Review. Employee acknowledges that he has had the opportunity to consult with independent counsel with respect to the negotiation, preparation, and execution of this Agreement.         (g) Assignment. The services to be rendered by Employee under this Agreement are unique and personal. Accordingly, Employee may not assign any of his rights or duties under this Agreement.         (h) Amendment. This Agreement may be modified only through a written instrument signed by both parties and consented to by InterWest in writing.         (i) Severability. The provisions of this Agreement are severable. The invalidity of any provision will not affect the validity of other provisions of this Agreement.         (j) Governing Law and Venue. This Agreement will be governed by and construed in accordance with Washington law, except to the extent that certain matters may be governed by federal law. Except as otherwise provided in Section 15(c), the parties must bring any legal proceeding arising out of this Agreement in King County, Washington, and the parties will submit to jurisdiction in that county.         (k) Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same document.   Signed January 15, 1998:   PACIFIC NORTHWEST BANK       /s/ PATRICK M. FAHEY   --------------------------------------------------------------------------------   By:   Its: President       GEORGE P. BRACE, individually       /s/ GEORGE P. BRACE   --------------------------------------------------------------------------------   George P. Brace FIRST AMENDMENT TO PACIFIC NORTHWEST BANK EMPLOYMENT AGREEMENT   (GEORGE P. BRACE)                This First Amendment to Employment Agreement (“Amendment”) is made on the 23rd day of March, 2000, between INTERWEST BANCORP, INC. and PACIFIC NORTHWEST BANK (hereinafter jointly referred to as “Bank”) and GEORGE P. BRACE (“Employee”), who agree as follows:   RECITALS                This Amendment is made with reference to the following facts and objectives:                A.         Pacific Northwest Bank, in conjunction with a Plan and Merger Agreement of Reorganization whereby Pacific Northwest Bank was acquired by InterWest Bancorp, Inc., entered into an Employment Agreement with Employee (“Agreement”).                B.          Bank and Employee now wish to amend the Agreement to make it advantageous for Employee to continue his employment after June 16, 2000, the first date upon which Employee has the right to terminate employment with Bank and receive a one-time cash payment as provided under the “Employment Termination Window” provision of the Agreement.                C.          To achieve the goals set forth in B, above, the parties agree to amend the Agreement as set forth hereafter.   AMENDMENT                1.          Subparagraph (b), Term, of paragraph 2 of the Agreement, Effective Date and Term, is deleted in its entirety and the following shall be inserted in its place:                (b)        Term.  The term of this Agreement (“Term”) shall commence on the Effective Date and terminate on June 15, 2002, unless extended by written agreement.                2.          Paragraph 4, Salary, is deleted in its entirety and the following shall be inserted in its place:                4.          Salary.  Employee shall receive a salary set by the Compensation Committee for employees with comparable duties and experience, but not less than $130,000 per year, to be paid in accordance with the Bank’s regular payroll schedule.  Employee’s salary shall be reviewed annually.                3.          Subparagraph 8 (c), Termination, is amended to add the following at the end of the paragraph:   “. . . , together with a single cash payment in an amount equal to Employee’s W-2 income before salary deferrals over the 12 months preceding the death or disability, provided, however, if the death or disability occurs after June 16, 2000, the amount paid shall in no event be less than the amount Employee would receive if Employee terminated employment on June 16, 2000.”                4.          Subparagraph 8(d), Employee Termination Window, is deleted in its entirety and replaced with the following:                (d)        Employee Termination Window.  During the period commencing with June 16, 2000 through June 15, 2002, Employee may terminate this Agreement by delivering written notice to Bank.  If Employee does so, regardless of whether Employee had Good Reason to terminate the Agreement, Bank will pay Employee a single cash payment, payable within 30 days of termination, in an amount equal to Employee’s W-2 income before salary deferrals over the twelve (12) months preceding the date of termination (“Total Annual Compensation”); provided, however, that the amount paid under this section shall in no event be less than the amount Employee would receive if Employee terminated employment on June 16, 2000.                5.          Subparagraph 12(a), Participation in a Competing Business, is deleted in its entirety and replaced with the following:                (a)         Participation in a Competing Business.  During his employment with Bank and for twelve (12) months after Employee’s employment with Bank, or any Subsidiary of InterWest ends (regardless of whether Employee’s employment ends at the end of the Term or at some other point after the end of the Term), Employee will not become involved with a Competing Business or serve, directly or indirectly, a Competing Business in any manner, including, without limitation, as a shareholder, member, partner, director, officer, manager, investor, organizer, “founder,” employee, consultant, or agent; provided, however, that Employee may acquire and passively own an interest not to exceed 2% of the total equity interest in any entity (whether or not such entity is a Competing Business).                6.          Except as set forth in this Amendment, all the provisions of the Agreement shall remain unchanged and in full force and effect.     InterWest Bancorp, Inc.           By:  /s/ STEVEN M. WALDEN   --------------------------------------------------------------------------------           Stephen M. Walden, President and CEO       Pacific Northwest Bank           By:  /s/ PATRICK M. FAHEY   --------------------------------------------------------------------------------           Patrick M. Fahey, President and CEO       /S/ GEORGE P. BRACE   --------------------------------------------------------------------------------   George P. Brace  

Exhibit 10.11 MANATRON, INC. EXECUTIVE INCENTIVE PLAN FOR FISCAL 2001 ARTICLE I DECLARATION Section 1.   Establishment of Plan. The Manatron, Inc. Executive Incentive Plan for Fiscal 2001 (the "Plan") is established by Manatron, Inc. (the "Company") for fiscal year 2001, and may be continued, intact or as amended, from year to year, at the Company's option. The Plan is an annual incentive, performance, and bonus compensation program for eligible employees of the Company.           Section 2.   Objectives. The objectives of the Plan are to:               (a)   Reward the outstanding performance of certain Executive Employees who contribute significantly to the achievement of the Company's annual objectives; and               (b)   Facilitate the attraction and retention of superior personnel required for continued innovation, growth, and profitability.           Section 3.   Effective Dates. The effective date of the Plan is May 1, 2000. Each provision of the Plan applies until the effective date of an amendment of that provision. ARTICLE II DEFINITIONS                           The following terms shall have the definition stated, unless the context requires a different meaning: Section 1.   Pre-Tax Earnings. "Pre-Tax Earnings" shall mean the Company's corporate net income for the subject fiscal year as shown in the Company's annual audited financial statements for that fiscal year after all expenses but before the provision or credit for federal income taxes, adjusted to remove amounts expended for payments made or to be made pursuant to this Plan.       Section 2.   Award. "Award" means a contingent right to receive cash following the end of an Award Year.       Section 3.   Award Year. "Award Year" means a fiscal year for the Company as designated by the Committee.       Section 4.   Appraisal Division Operating Earnings. "Appraisal Division Operating Earnings" shall mean Appraisal Division revenues less related direct and indirect costs, less related selling, general and administrative expenses, less intercompany interest on applicable past due receivables, if any, for the subject year as shown in the Appraisal Division column of the Company's internal financial statements. Reference should be made to the detailed internal financial statement that were prepared for the year ended April 30, 2000 for further clarification. It does not include any corporate overhead allocations that were not in the prior year numbers if the format of the internal financial statements changes for some reason. In addition, it does not include any provision or credit for federal income taxes and should be adjusted to remove amounts expended for payments made or to be made pursuant to this plan.       Section 5.   Software Division Operating Earnings. "Software Division Operating Earnings" shall mean pretax earnings for the entire Company less Appraisal Division Operating Earnings for the subject year as shown in the Company's internal financial statements. It does not include any provision or credit for federal income taxes and should be adjusted to remove amounts expended for payments made or to be made pursuant to this plan.       Section 6.   Committee. "Committee" means the Compensation Committee of the Board of Directors of the Company which administers the Plan.       Section 7.   Executive Employee. "Executive Employee" means a full-time senior employee of the Company or one of the Company's subsidiaries determined by the Committee to have the potential of a direct and significant impact on the performance of the Company or to make a substantial contribution to the success of the Company.       Section 8.   Participant. "Participant" means an Executive Employee determined by the Committee to be eligible for an Award for the Award Year.       Section 9.   Plan. "Plan" means the Manatron, Inc. Executive Incentive Plan for Fiscal 2001. ARTICLE III PARTICIPATION Section 1.   Designation by Committee. An Executive Employee shall be a Participant in the Plan for an Award Year when designated as a Participant for that Award Year by the Committee. Executive Employees selected by the Committee for participation for the Award Year shall be notified in writing and provided with a copy of this Plan or with a written summary and explanation of the Plan.       Section 2.   Participation Limited to One Year. Designation as a Participant in the Plan for an Award Year is limited to that Award Year. Each Participant must be designated as a Participant by the Committee for each Award Year to be eligible to participate in the Plan for that Award Year. ARTICLE IV ADMINISTRATION Section 1.   Authority of Committee. The Plan will be administered by the Committee and (except with respect to his own Award) the Chief Executive Officer of the Company. If deemed by the Committee to be necessary, the Committee will adopt rules, policies, and forms for the administration, interpretation, and implementation of the Plan.       Section 2.   Determination of Award Amounts. The components of any Award, as listed in Article V, shall be determined by the Chief Executive Officer and the Committee. All decisions, determinations, and interpretations of the Chief Executive Officer and the Committee will be final and binding on all Participants. No member of the Committee shall be eligible to receive an Award pursuant to the Plan.       Section 3.   Limitation on Liability. Neither the Chief Executive Officer, any member of the Committee, nor any member of the Board of Directors shall be liable for any act or omission in connection with the performance of such person's duties or the exercise of such person's discretion related to any act or omission concerning the operation and administration of the Plan. ARTICLE V AWARDS Section 1.   Determination of Participant's Award Potential. Unless modified by the Committee or the Chief Executive Officer, each Participant's award potential shall be based on the following:          (a)          Personal Range. The Participant's maximum potential Award pursuant to this Plan for an Award Year shall be fifty percent (50%) of the base salary paid to the Participant during the Award Year.          (b)          Overall Company Performance. The target financial performance and other objectives of the Company that will be considered in determining Awards for the designated company participants are as follows for Fiscal 2001: (i)         Pre-Tax Earnings. An Award will be earned if the Company's Pre-Tax Earnings for the Award Year exceed the minimum threshold of Two Million Dollars ($2,000,000). Twelve percent (12%) of the Company's Pre-Tax Earnings for the Award Year in excess of the minimum threshold shall be available for Awards to Participants pursuant to the Plan. Sixty-five percent (65%) of the Pre-Tax Earnings component of an Award for an Award Year will be distributed to Participants pro-rata based on each Participant's base salary for the Award Year with the exception of the Chairman of the Board, in whose case only one half of his base salary for the Award Year will be used. The remaining thirty-five percent (35%) of the Pre-Tax Earnings component may be distributed to Participants based on their achievement of other written performance objectives, compliance with Company policies and the overall profitability of the Company as determined pursuant to Section 2 of Article IV ("Discretionary Portion").           (ii)          Other Objectives. An Award will also be earned if any of the following three variables (the "Variables") are achieved, provided that the Company has Pre-Tax Earnings for the Award Year of at least One Million Dollars ($1,000,000):           (a)          Line of Credit and Invested Cash Balances. As of April 30, 2000, the Company's line of credit balance was Four Hundred Seventy-four Thousand Three Hundred Thirty-six Dollars ($474,336), and the amount of invested cash was approximately Fifteen Thousand Dollars ($15,000). Two percent (2%) of any increase in the invested cash as of April 30, 2001, and any decrease in borrowings outstanding under the line of credit, shall be available for Awards to Participants pursuant to the Plan. In the event that the Board of Directors elects to borrow money or use the Company's cash to acquire another company, purchase the Company's common stock, or to fund any other significant nonbudgeted item, such amounts will be excluded when calculating any increase or decrease in the above amounts. In no event will the amount available for Awards to Participants under this subsection exceed Twenty-five Thousand Dollars ($25,000) .           (b)          Receivables. As of April 30, 2000, the Company had Three Million Seven Hundred Sixty-Two Thousand One Hundred Fifty-Eight Dollars ($3,762,158) of receivables that have been past due for more than 90 days. Two percent (2%) of any reduction in this amount excluding write-offs, as of April 30, 2001, shall be available for Awards to Participants pursuant to the Plan. In no event will the amount available for Awards to Participants under this subsection exceed Twenty-five Thousand Dollars ($25,000).           (c)          Sales Forecast. The Company's sales forecast for its fiscal year ended April 30, 2001, is Twenty-seven Million Five Hundred Thousand ($27,500,000). In the event at least ninety-five percent (95%) of this amount is achieved, then a total of Ten Thousand Dollars ($10,000) shall be available for Awards to Participants pursuant to the Plan. In the event more than one hundred percent (100%) of this amount is achieved, then an additional One Thousand Five Hundred Dollars ($1,500) for each percentage point in excess of one hundred percent (100%) shall be available for awards to Participants pursuant to the Plan. In no event will the amount available for awards to Participants under this subsection exceed Twenty-five Thousand Dollars ($25,000).           Sixty-five percent (65%) of the Variables components of an Award for an Award Year will be distributed to Participant's pro-rata based on each Participant's base salary for the Award Year with the exception of the Chairman of the Board, in whose case only one half of his base salary for the Award Year will be used. The remaining thirty-five percent (35%) of the total amount of the Variables component may be distributed to Participants based on their achievement of other written performance objectives, compliance with Company policies and the overall profitability of the Company as determined pursuant to Section 2 of Article IV ("Discretionary Portion").           (c)          Appraisal Division's Performance. The target financial performance and other objectives of the Appraisal Division that will be considered in determining Awards for the designated Appraisal Division Participants are as follows for Fiscal 2001:           (i)          Appraisal Division Operating Earnings. An Award will be earned if the Appraisal Division's Operating Earnings for the Award Year exceed the minimum threshold of One Million Six Hundred Dollars ($1,600,000). Five percent (5%) of the first One Million Six Hundred Dollars ($1,600,000) seven percent (7%) of the next Five Hundred Thousand Dollars ($500,000) and ten percent (10%) of all other Appraisal Division's Operating Earnings in excess of Two Million One Hundred Thousand Dollars ($2,100,000) shall be available for Awards to Participants pursuant to the Plan. Sixty-five percent (65%) of the Operating Earnings component of an Award for an Award Year will be distributed to Participants pro-rata based on each Participant's base salary for the Award Year. The remaining thirty-five percent (35%) of the Operating Earnings component may be distributed to Participants based on performance objectives, compliance with company policies and the overall profitability of the Company as determined pursuant to Section 2 of Article IV ("Discretionary Portion").           (ii)          Other Objectives. An Award will be earned if any of the following two variables (the "Variables") are achieved, provided that the Appraisal Division has Operating Earnings for the Award Year of at least One Million Dollars ($1,000,000):           (a)          Allegheny Project and Retention Receivables. As of April 30, 2000, the Appraisal Division had One Million Eight Hundred Fifty-four Thousand Three Hundred Ninety-four Dollars ($1,854,394) of Retention Receivables that it has not been recorded as revenue because the collection of such amounts is uncertain until the project is completed. Because the completion of the project on time and near budget is critical to the success of the Company, two percent (2%) of all Allegheny Retention Receivables collected during Fiscal 2001 shall be available for Awards to Participants pursuant to the Plan.           (b)          Sales Forecast. The Appraisal Division's forecast for its fiscal year ended April 30, 2001, is Eleven Million Five Hundred Thousand ($11,500,000). In the event at least ninety-five percent (95%) of this amount is achieved, then a total of Fifteen Thousand Dollars ($15,000) shall be available for Awards to Participants pursuant to the Plan. In the event more than one hundred percent (100%) of this amount is achieved, then an additional Two Thousand Dollars ($2,000) for each percentage point in excess of one hundred percent (100%) shall be available for awards to Participants pursuant to the Plan. In no event will the amount available for awards to Participants under this subsection exceed Fifty Thousand Dollars ($50,000).           Sixty-five percent (65%) of the Variables component of an Award for an Award Year will be distributed to Participant's pro-rata based on each Participant's base salary for the Award Year. The remaining thirty-five percent (35%) of the total amount of the Variables component may be distributed to Participants based on their achievement of other written performance objectives, compliance with Company policies and the overall profitability of the Company as determined pursuant to Section 2 of Article IV ("Discretionary Portion").           (d)          Software Division Performance. The target financial performance and other objectives of the Software Division that will be considered in determining Awards for the Designated Software Division Participants are as follows for Fiscal 2001:           (i)          Software Division Operating Earnings (Loss). An Award will be earned if the Software Division's Operating Loss for the Award Year is less than the minimum threshold of Four Hundred Thousand Dollars ($400,000). Twenty-five percent (25%) of the Company's Operating Earnings for the Award Year in excess of the minimum threshold shall be available for Awards to Participants pursuant to the Plan. Sixty-five percent (65%) of the Operating Earnings component of an Award for an Award Year will be distributed to Participants pro-rata based on each Participant's base salary for the Award Year with the exception of the Chairman of the Board, in whose case only one half of his base salary for the Award Year will be used. The remaining thirty-five percent (35%) of the Operating Earnings component may be distributed to Participants based on their achievement of other written performance objectives, compliance with Company policies and the overall profitability of the Company as determined pursuant to Section 2 of Article IV ("Discretionary Portion").           (ii)          Other Objectives. An Award will be earned if any of the following three variables (the "Variables") are achieved, provided that the Software Division's Operating Loss for the Award Year is not more than Four Hundred Thousand Dollars ($400,000):           (a)          Sales Forecast. The Software Division's sales forecast for its fiscal year ended April 30, 2001, is Sixteen Million Dollars ($16,000,000). In the event at least ninety-five percent (95%) of this amount is achieved, then a total of Twenty Thousand Dollars ($20,000) shall be available for Awards to Participants pursuant to the Plan. In the event more than one hundred percent (100%) of this amount is achieved, then an additional Two Thousand Five Hundred Dollars ($2,500) for each percentage point in excess of one hundred percent (100%) shall be available for Awards to Participants pursuant to the Plan. In no event will the amount available for awards to Participants under this subsection exceed Fifty Thousand Dollars ($50,000).           (b)          Customer Satisfaction.          In the event that the Software Division's overall customer satisfaction rating, which is based on the surveys that will be sent out during the Fiscal Year ending April 30, 2001, is at least 7.75, than a total of Ten Thousand Dollars ($10,000) shall be available for Awards to Participants pursuant to the Plan. In the event that the overall rating is 8.0 or better, than a total of Twenty-five Thousand Dollars ($25,000) shall be available for Awards to Participants pursuant to the Plan.           (c)          Revenue Per Employee.          In the event that the Software Division's Revenue Per Employee is at least $100,000 for the Fiscal Year ending April 30, 2001, than a total of Twenty Thousand Dollars ($20,000) shall be available for Awards to Participants pursuant to the Plan.           Sixty-five percent (65%) of the total amount of the Variables component of an Award for an Award Year will be distributed to Participant's pro-rata based on each Participant's base salary for the Award Year with the exception of the Chairman of the Board, in whose case only one half of his base salary for the Award Year will be used. The remaining thirty-five percent (35%) of the total amount of the Variables component may be distributed to Participants based on their achievement of other written performance objectives, compliance with Company policies and the overall profitability of the Company as determined pursuant to Section 2 of Article IV ("Discretionary Portion"). ARTICLE VI INDIVIDUAL ASSESSMENT AND ADJUSTMENT Section 1.   Participant's Award. The basis for Awards of any Award Year will be achievement of financial performance targets and other objectives as set forth in this Plan and, with respect to the Discretionary Portion, as determined in the sole discretion of the Chief Executive Officer and Committee. If the financial targets and other objectives are met for the Award Year, the Chief Executive Officer will calculate and determine the amount of the Award for each Participant based upon the extent to which the Company's financial performance targets and other objectives (as determined by the Chief Executive Officer) were achieved for the Award Year.       Section 2.   Partial Award. In the event an Executive Employee participates in the Plan for only part of an Award Year, the Award may be adjusted pro-rata based on the amount of time for which the Executive Employee was a Participant in the Plan. ARTICLE VII PAYMENT OF AWARDS                           Subject to Article VII, each Award, as finally determined for the Award Year, shall be paid to the Participant in cash as soon as administratively feasible following final determination and approval. ARTICLE VIII TERMINATION OF EMPLOYMENT Section 1.   Retirement, Death, Disability, or Other Termination. In the event of a Participant's death, disability, normal retirement, or termination of employment (unless Section 2 of this Article applies) during an Award Year, payment of the Award earned for that year will be pro-rated. In the event of death, payment shall be made to the Participant's designated beneficiary, or if there is no designated beneficiary, payment shall be made to the Participant's estate.       Section 2.   Forfeiture. In the event that a Participant is terminated for "cause," the Participant's entitlement to any Award, including any Award for a prior Award Year that has not been paid, shall be forfeited and the Award shall be canceled. For purposes of this Plan, termination shall be considered to be for "cause" if based upon (a) Participant's conviction of a crime involving moral turpitude or embezzlement; (b) Participant's willful activities in competition with the Company or in aid of its competitors; (c) Participant's willful and continued failure to substantially perform Participant's duties with the Company under this Plan (other than any such failure resulting from disability), under any employment agreement with the Company, or otherwise, after a written demand for substantial performance is delivered to Participant that specifically identifies the manner in which the Company believes Participant has failed to resume substantial performance of his or her duties on a continuous basis within 14 calendar days of receiving such demand; or (d) Participant willfully engaging in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of (b), (c) and (d) above, no act, or failure to act, on Participant's part shall be deemed "willful" unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the action or omission was in the best interest of the Company. ARTICLE IX GENERAL PROVISIONS Section 1.   No Right to Participate. Nothing in this Plan will be deemed to give a Participant or a Participant's legal representative or any other person or entity claiming under or through a Participant a contract or right to participate in the benefits of the Plan. The selection of an individual as an Executive Employee and as a Participant, as well as determination of the amount of any Award or any other determination relating to the Plan, shall be final and binding on all parties to this Plan.       Section 2.   No Employment Right. Participation in this Plan shall not be construed as constituting a commitment, guarantee, agreement, or understanding of any kind that the Company will continue to employ any Executive Employee or Participant, and this Plan shall not be construed as any type of employment contract or obligation between the Company and an Executive Employee or Participant.       Section 3.   Nontransferability. Neither a Participant nor any beneficiary of the Participant shall have any right to assign, transfer, attach, or hypothecate any Award, potential Award, or right to future payment of any Award or other benefit under this Plan. Payment of any amount due or to become due under this Plan shall not be subject to the claims of creditors of the Participant or to execution by attachment or garnishment or by any other legal or equitable proceeding.       Section 4.   Withholding. The Company shall have the right to deduct from any payment made under this Plan all amounts required by federal, state, or local tax laws to be withheld and shall apply to any payment made under this Plan all applicable payroll taxes and assessments.       Section 5.   Change in Capitalization. In the event of a reorganization, merger, consolidation, or other transaction in which the Company is not the surviving corporation, or upon the sale of substantially all of the property and assets of the Company or upon the dissolution or liquidation of the Company, this Plan will terminate on the effective date of such transaction. Participants shall be entitled to prompt payment of pro-rated Awards for the Award Year during which the event occurs unless this Plan continues in whole or in part or a successor plan is substituted.                           IN WITNESS WHEREOF, this instrument is executed as an act of the Company effective as of May 1, 2000. MANATRON, INC. By /s/ Paul R. Sylvester --------------------------------------------------------------------------------   By /s/ Gene Bledsoe --------------------------------------------------------------------------------   Paul R. Sylvester      President and Chief Executive Officer     Gene Bledsoe, Member, Compensation           Committee                     By /s/ Harry C. Vorys --------------------------------------------------------------------------------   By /s/ Stephen C. Waterbury --------------------------------------------------------------------------------   Harry C. Vorys, Member, Compensation Committee     Stephen C. Waterbury, Member Compensation Committee

Exhibit 10.1 PROMISSORY NOTE     $50,000.00   Phoenix, Arizona     August 22, 2001     Note Doc.08220150       FOR VALUED RECEIVED, and legally bound hereby, RRF LIMITED PARTNERSHIP (“Maker”), a Delaware partnership, InnSuites Hospitality Trust, General Partner, an Ohio real estate investment trust, having an office at 1615 East Northern Avenue, Suite 102, Phoenix, Arizona 85020 hereby promises to pay to the order of Rare Earth Development Company (“Payee”), an Arizona corporation, 1615 East Northern Avenue, Suite 102, Phoenix, Arizona 85020 or a such other place as the holder hereof may from time to time designate in writing, the principal sum of FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00), with interest on the unpaid principal balance thereon from time to time outstanding, at the rate of seven percent (7.00%) per annum, computed on a three hundred sixty (360)-day year, to be due and payable in installments of principal and interest as follows:   (A)                              Commencing on July 15, 2002, one annual payment of accrued but unpaid interest on the outstanding principal balance hereunder; and on July 15, 2002 (the “Maturity date”), one payment in the amount of the then unpaid principal balance hereunder and all sums and charges due and unpaid by Maker (collectively, the “Note”).   (B)                                Upon sale or refinance of hotel/s, half of net proceeds shall be made available at option of hotel to prepay on this note.   Payments shall be applied first to any charges or sums (other than principal and interest) due and payable by Maker, second to accrued and unpaid interest on the principal balance hereof, and then to further reduce the principal balance of this Note.   Maker shall gave the right any time during the term of this Note to repay all or part of the unpaid principal amount of the Note, together with any accrued and unpaid interest thereon any other sums or charges due hereunder without any prepayment premium or penalty.   Maker hereby waives for itself and, to the fullest extent not prohibited by applicable law, for any subsequent lienor, any right Maker may now or hereafter have under the doctrine of marshaling of assets or otherwise which would require Payee to proceed against certain property before proceeding against any other property. Maker hereby agrees that in the event part of principal or interest is not paid when due or the entire Note is not paid when due, then the rate of interest on this Note shall, at the election of Payee upon ten (10) days prior written notice, each of which is hereby expressly waived, be increased to nine and 00/100 percent (9.00%) per annum or the highest rate for which the parties may agree under applicable law, whichever is less (the “Default Rate”). Maker shall be obligated thereafter to pay interest on the then unpaid principal balance of the Note at the Default Rate, both before and after judgment, to be computed from the due date through and including the date of actual receipt of the overdue payment, whether a payment of interest or the entire Note.  Nothing herein shall be construed as an agreement or privilege to extend the date of the payment or any installment or the entire Note, or as a wavier of any other right or remedy accruing to Payee.   In the event that any regular payment of interest herein provided shall not be received by Payee on the date such payment is due, Payee shall have the right to assess Maker a late payment charge in the amount of two percent (2.0%) of such overdue quarterly installment, which shall become immediately due to Payee for the additional cost agreed compensation to Payee for the additional costs and expenses reasonable expected to be incurred by Payee by reason of such nonpayment.  Maker acknowledges that the exact amount of such cost and expenses may be difficult, if not impossible, to determine with certainty, and further acknowledges and confesses the amount of such charge to be a consciously considered, good faith estimate of the actual damage to Payee by reason of such default.  The Default Rate will only accrue for periods of delinquent installments except for such when Payee accepts late payments of installments accompanied by a late payment charge as specified above.   Upon any of the following Events of Default, at the election of Payee, the entire unpaid principle balance of the Note, together with all accrued but unpaid interest thereon at the Default Rate and all other sums or changes due hereunder, shall become due and payable:   (a)                                  Maker’s failure to pay when due any installment required to be paid hereunder, on or before the tenth (10th) day following the applicable due date;   (b)                                 Maker’s failure to pay when due any other payment required to be under this Note, subject to any notice and applicable grace period, if any;   (c)                                  Maker’s breach of any other covenant or agreement herein and such breach remains uncorrected at the expiration of any applicable grace period expressly provided for herein;   (d)                                 Any creditor’s proceeding in which Maker consents to the appointment or a receiver or trustee for any of its property; (e)                                  if any order, judgment or decree shall be entered, without the consent of Maker, upon an application of a creditor approving the appointment of a receiver or trustee for any of its property, and such order, judgment, decree, or appointment is not dismissed or stayed with an appropriate appeal bond within sixty (60) days following the entry or rendition thereof; or   (f)                                    if Maker (i) makes a general assignment for the benefit of creditors, (ii) fails to pay its debts generally as such debts become due, (iii) is found to be insolvent by a court of competent jurisdiction, (iv) voluntarily files a petition in bankruptcy or a petition or answer seeking readjustment of debts under any state or federal bankruptcy or like law, or (v) any such petition is filed against Maker and is not vacated or dismissed within sixty (60) days after filling thereof.   Notice of such election by Payee is hereby expressly waived as part of the consideration for this loan.  Nothing contained herein shall be construed to restrict the exercise of any other rights or remedies granted to Payee hereunder upon the failure of Maker to perform any provision hereof.   If this Note is not paid when due, whether at maturity or by acceleration, Maker promises to pay all costs incurred by Payee, including without limitation reasonable attorney’s fees to the fullest extent not prohibited by law, and all expenses incurred in connection with the protection or realization of any collateral, whether or not suit is filed hereon or on any instrument granted a security interest.   Maker hereby expressly acknowledges and represents that the indebtedness is for a business purpose and not consumer or household purposes.   Maker hereby waves demand, presentment for payment, protest, notice of protest, notice of non-payments and any and all lack of diligence or delays in collection or enforcement of this Note, and expressly consents to any extension of time of payment hereof, release of any party primarily or secondarily liable hereunder or any of the security for this Note, acceptance of other parties to be liable for any of the Note or of other security therefore, or any other indulgence or forbearance which may be made, without notice to any party and without in any way affecting the liability of any party.   No failure by Payee to exercise any right hereunder shall be construed as a waiver of the right to exercise the same or any other right any time or from time to time thereafter. This Note shall be construed and enforced according to, and governed by the laws of the State of Arizona.   Any notice required hereunder shall be in writing, and shall be given to the receiving party the notice by personal delivery or be certified mail, postage prepaid, return receipt requested, as follows:                   if to Payee, then addressed to Payee at 1615 East Northern Avenue Suite 102, Phoenix, Arizona 85020, (Tel.(602) 944-1500, Fax (602) 678-0281, with a copy to James W. Reynolds, Esq., Dillingham Cross, P.L.C., 5080 North 40th Street, Suite 335, Phoenix, Arizona 85018, (Tel.(602) 468-1811, Fax (602) 468-0442);                   if to Maker, then addressed to maker at 1615 East Northern Avenue, Suite 102, Phoenix, Arizona 85020, Attn: President (Tel.(602) 944-1500, Fax (602) 678-0281), with a copy to James B. Aronoff, Esq., Thompson Hine & Flory, LLP, 3900 Key center, 127 Public Square, Cleveland, Ohio 44114 (Tel.(216) 566-5500, Fax (216) 566-5800).   Any party may, be given notice in writing to designate another address as a place for service of notice. Such notices shall be deemed to be received when delivered, if delivered in person, or seven (7) business days after deposited in the United States mails, if mailed as herein above provided.   By acceptance of this Note, Payee agrees that, upon payment in full of the then unpaid principal balance of this Note, together with all unpaid interest and other sums payable to Payee under this Note, (a) Note shall be fully satisfied, (b) Payee shall promptly mark this Note as being paid in full, satisfied and discharged and shall return the same to Maker.       RRF LIMITED PARTNERSHIP, a   Delaware limited partnership,   InnSuites Hospitality Trust, General Partner, an Ohio real estate investment trust               By: /s/ Marc E. Berg       Name: Marc E. Berg     Title:  Executive Vice-President  

EXHIBIT 10.11 INDEMNIFICATION AGREEMENT                     This Indemnification Agreement is made as of the ____day of ___________, ___, by and between Wolverine World Wide, Inc., a Delaware Corporation (the "Corporation"), and ___________________________ ("Indemnitee"), a director and/or officer of the Corporation. R E C I T A L                     It is essential that the Corporation retain and attract the most capable persons available as directors and officers. There has been a substantial increase in corporate litigation that subjects directors and officers to great personal financial risks. Directors' and officers' liability insurance, if available at all, is becoming increasingly expensive and contains many limitations, deductibles, and exclusions. It is now and has always been the express policy of the Corporation to indemnify its directors and officers so as to provide them with the maximum possible protection permitted by law. In order to provide directors and officers with the maximum lawful indemnification, the Corporation has determined and agreed to enter into this Indemnification Agreement with Indemnitee.                     ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:           Section 1.          Definitions. As used in this Agreement: >           (a)          "Expenses" shall mean all costs, expenses and > obligations paid or incurred in connection with investigating, litigating, > being a witness in, defending or participating in, or preparing to litigate, > defend, be a witness in or participate in any matter that is the subject of a > Proceeding (as defined below), including attorneys' and accountants' fees and > court costs. >           (b)          "Proceeding" shall mean any threatened, pending or > completed action, suit or proceeding, or any inquiry or investigation, whether > brought by or in the right of the Corporation or otherwise and whether of a > civil, criminal, administrative or investigative nature, in which Indemnitee > may be or may have been involved as a party or otherwise by reason of the fact > that Indemnitee is or was a director, officer, employee, agent or fiduciary of > the Corporation, or by reason of any action taken by Indemnitee or any > inaction on Indemnitee's part while acting as a director, officer, employee, > agent or fiduciary of the Corporation, or by reason of the fact that > Indemnitee is or was serving at the request of the Corporation as a director, > officer, employee, agent or fiduciary of another corporation, partnership, > joint venture, trust or other enterprise. >           (c)          "Resolution Costs" shall include any amount paid in > connection with a Proceeding and in satisfaction of a judgment, fine, penalty > or any amount paid in settlement. --------------------------------------------------------------------------------           Section 2.          Agreement to Serve. Indemnitee agrees to serve as a director and/or officer of the Corporation for so long as Indemnitee is duly elected or appointed or until the tender of Indemnitee's written resignation.           Section 3.          Indemnification. The indemnification provided under this Agreement shall be as follows: >           (a)          The Corporation shall indemnify Indemnitee against all > Expenses actually and reasonably incurred by Indemnitee in connection with any > Proceeding. Additionally, in any Proceeding other than a Proceeding by or in > the right of the Corporation, the Corporation shall indemnify Indemnitee > against all Resolution Costs actually and reasonably incurred by Indemnitee in > connection with such Proceeding. No indemnification shall be made under this > subsection: >           (i)          With respect to remuneration paid to Indemnitee if it > shall be determined by a final judgment or other final adjudication that such > remuneration was in violation of law; > >           (ii)          On account of any suit in which judgment is rendered > against Indemnitee for an accounting of profits made from the purchase or sale > by Indemnitee of securities of the Corporation pursuant to the provisions of > Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or > similar provisions of any federal, state, or local law; > >           (iii)          On account of Indemnitee's conduct which is > determined by a final judgment or other final adjudication to have been > knowingly fraudulent, deliberately dishonest or willful misconduct; > >           (iv)          On account of Indemnitee's conduct which by a final > judgment or other final adjudication is determined to have been in bad faith, > in opposition to best interests of the Corporation or produced an unlawful > personal benefit; > >           (v)          With respect to a criminal proceeding if the Indemnitee > knew or reasonably should have known that Indemnitee's conduct was unlawful; > or > >           (vi)          If a final decision by a court having jurisdiction in > the matter shall determine that such indemnification is not lawful. >           (b)          In addition to any indemnification provided under > Subsection 3(a) above, the Corporation shall indemnify Indemnitee against any > Expenses or Resolution Costs incurred by Indemnitee, regardless of the nature > of the Proceeding in which Expenses and/or Resolution Costs were incurred, if > such -2- -------------------------------------------------------------------------------- > Expenses or Resolution Costs would have been covered under the directors' and > officers' liability insurance policies in effect on the effective date of this > Agreement or any such insurance policies which become effective on any > subsequent date. >           (c)          In addition to any indemnification provided under > Subsections 3(a) and 3(b) above, the Corporation hereby provides Indemnitee, > to the fullest extent allowed by law as presently or hereafter enacted or > interpreted, with indemnification against any Expenses and/or Resolution Costs > incurred by Indemnitee in connection with any Proceeding. To the extent a > change in the Delaware General Corporation Law (whether by statute or judicial > decision) permits greater indemnification, either by agreement or otherwise, > than presently provided by law or this Agreement, it is the intent of the > parties hereto that Indemnitee shall enjoy by this Agreement the greater > benefits so afforded by such change. >           (d)          Without limiting Indemnitee's right to indemnification > under any other provision of this Agreement, the Corporation shall indemnify > Indemnitee in accordance with the provisions of this subsection if Indemnitee > is a party to or threatened to be made a party to or otherwise involved in any > Proceeding by or in the right of the Corporation to procure a judgment in its > favor by reason of the fact that Indemnitee was or is a director and/or > officer of the Corporation or is or was serving at the request of the > Corporation as a director, officer, employee or agent of another corporation, > partnership, joint venture, trust or other enterprise, against all Expenses > actually and reasonably incurred by Indemnitee and any amounts paid by > Indemnitee in settlement of such Proceeding, but only if Indemnitee acted in > good faith in a manner which Indemnitee reasonably believed to be in or not > opposed to the best interests of the Corporation, except that no > indemnification shall be made under this subsection in respect of any claim, > issue or matter as to which Indemnitee shall have been finally adjudged to be > liable to the Corporation in the performance of his duty to the Corporation, > unless and only to the extent that any court in which such Proceeding was > brought shall determine upon application that, despite the adjudication of > liability but in view of all the circumstances of the case, Indemnitee is > fairly and reasonably entitled to indemnity for such amounts as such court > shall deem proper. >           (e)          Notwithstanding anything in this Agreement to the > contrary, prior to a Change in Control (as hereafter defined), Indemnitee > shall not be entitled to indemnification pursuant to this Agreement in > connection with any Proceeding initiated by Indemnitee against the Corporation > or any director, officer, employee, agent or fiduciary of the Corporation (in > such capacity) unless the Corporation has joined in or consented to the > initiation of such Proceeding. -3- --------------------------------------------------------------------------------           Section 4.          Payment of Indemnification. >           (a)          Expenses incurred by the Indemnitee and subject to > indemnification under Section 3 above shall be paid directly by the > Corporation or reimbursed to the Indemnitee within two (2) days after the > receipt of a written request of the Indemnitee providing that Indemnitee > undertakes to repay any amount paid or advanced under this section to the > extent that it is ultimately determined that Indemnitee is not entitled to > such indemnification. >           (b)          Except as otherwise provided in Section 4(a) above, any > indemnification under Section 3 above shall be made no later than thirty (30) > days after receipt by the Corporation of the written request of Indemnitee, > unless within said 30-day period the board of directors, by a majority vote of > a quorum consisting of directors who are not parties to such Proceeding, > determines that the Indemnitee is not entitled to the indemnification set > forth in Section 3 or unless the board of directors refers the Indemnitee's > indemnification request to independent legal counsel. In cases where there are > no directors who are not parties to the Proceeding, the indemnification > request shall be referred to independent legal counsel. If the indemnification > request is referred to independent legal counsel, then Indemnitee shall be > paid no later than forty-five (45) days after Indemnitee's initial notice to > the Corporation unless within that time independent legal counsel presents to > the board of directors a written opinion stating in unconditional terms that > indemnification is not allowed under Section 3 of this Agreement. If a Change > in Control (as defined in Section  5) occurs and results in individuals who > were directors prior to the circumstances giving rise to the Change in Control > ceasing for any reason to constitute a majority of the board of directors, the > above determination, if any, shall be made by independent legal counsel and > not the board of directors. The Corporation agrees to pay the reasonable fees > of the independent legal counsel and to fully indemnify such counsel against > any and all expenses (including attorneys' fees), claims, liabilities and > damages arising out of or relating to this Agreement or its engagement > pursuant thereto. If there has not been a Change in Control as defined in > Section 5, independent legal counsel shall be selected by the board of > directors or the executive committee of the board, and if there has been a > Change in Control, the independent legal counsel shall be selected by > Indemnitee. >           (c)          The right to indemnification payments as provided by > this Agreement shall be enforceable by Indemnitee in any court of competent > jurisdiction. The burden of proving that indemnification is not permitted by > this Agreement shall be on the Corporation or on the person challenging the > indemnification. Neither the failure of the Corporation, including its board > of directors, to have made a determination prior to the commencement of any > Proceeding that indemnification is proper, nor an actual determination by the > Corporation, including its board of directors or independent legal counsel, > that indemnification is not proper, shall bar the action or create a > presumption that -4- -------------------------------------------------------------------------------- > Indemnitee is not entitled to indemnification under this Agreement. If the > board of directors or independent legal counsel determines in accordance with > Section 4(b) above that Indemnitee would not be permitted to be indemnified in > whole or in part, Indemnitee shall have the right to commence litigation in > any court in the states of Michigan or Delaware having subject matter > jurisdiction thereof and in which venue is proper seeking an initial > determination by the court or challenging any such determination by the board > of directors or independent legal counsel, and the Corporation hereby consents > to service of process and to appear in any such proceeding. Expenses incurred > by Indemnitee in connection with successfully establishing Indemnitee's right > to indemnification, in whole or in part, shall also be reimbursed by the > Corporation.           Section 5.          Establishment of Trust. In the event of a Potential Change in Control of the Corporation, as hereafter defined, the Corporation shall, upon written request by Indemnitee, create a trust for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall fund such trust in an amount sufficient to satisfy any and all Expenses or Resolution Costs that may properly be subject to indemnification under Section 3 above anticipated at the time of each such request. The amount or amounts to be deposited in the trust pursuant to this funding obligation shall be determined by a majority vote of a quorum consisting of directors who are not parties to such Proceeding, the executive committee of the board of directors or the President of the Corporation. If all such individuals are parties to the Proceeding, the amount or amounts to be deposited in the trust shall be determined by independent legal counsel. The terms of the trust shall provide that upon a Change in Control (i) the trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii)  the trustee shall advance, within two (2) business days of a request by the Indemnitee, any amount properly payable to Indemnitee under Subsection 4(a) of this Agreement, (iii) the trust shall continue to be funded by the Corporation in accordance with the funding obligation set forth above, (iv) the trustee shall promptly pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such trust shall revert to the Corporation upon a final determination by a court of competent jurisdiction that the Indemnitee has been fully indemnified under the terms of this Agreement. The trustee shall be chosen by the Indemnitee and shall be a national or state bank having a combined capital and surplus of not less than $50,000,000. Nothing in this section shall relieve the Corporation of any of its obligations under this Agreement. At the time of each draw from the trust fund, the Indemnitee shall provide the trustee with a written request providing that Indemnitee undertakes to repay such amount to the extent that it is ultimately determined that Indemnitee is not entitled to such indemnification. Any funds, including interest or investment earnings thereon, remaining in the trust fund shall revert and be paid to the Corporation if (i) a Change in Control has not occurred, and (ii) if the executive committee of the board of directors or the Chairman or Chief Executive Officer of the Corporation determines that the circumstances giving rise to that particular funding of the trust no longer exists.                     For purposes of this section, a "Change in Control" shall be deemed to have occurred if (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities -5- -------------------------------------------------------------------------------- Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Corporation representing 20% or more of the total voting power represented by the Corporation's then outstanding voting securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the board of directors of the Corporation and any new director whose election by the board of directors or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the total voting power represented by the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets.                     For purpose of this section, a "Potential Change in Control" shall be deemed to have occurred if (i) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, or (ii) any person (including the Corporation) publicly announces an intention to take or to consider taking actions which once consummated would constitute a Change in Control, or (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, who is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 9.5% or more of the combined voting power of the Corporation's then outstanding voting securities, increases such person's beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof, or (iv) the board of directors adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.           Section 6.          Partial Indemnification; Successful Defense. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Expenses or Resolution Costs actually and reasonably incurred by Indemnitee but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such Expenses or Resolution Costs to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all claims relating in whole or in part to a Proceeding or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. -6- --------------------------------------------------------------------------------           Section 7.          Consent. Unless and until a Change in Control (as defined in Section 5) has occurred, the Corporation shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected without the Corporation's written consent. The Corporation shall not settle any Proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Corporation nor the Indemnitee will unreasonably withhold their consent to any proposed settlement.           Section 8.          Severability. If this Agreement or any portion thereof (including any provision within a single section, subsection or sentence) shall be held to be invalid, void or otherwise unenforceable on any ground by any court of competent jurisdiction, the Corporation shall nevertheless indemnify Indemnitee as to any Expenses or Resolution Costs with respect to any Proceeding to the full extent permitted by law or any applicable portion of this Agreement that shall not have been invalidated, declared void or otherwise held to be unenforceable.           Section 9.          Indemnification Hereunder Not Exclusive. The indemnification provided by this Agreement shall be in addition to any other rights to which Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise, both as to actions in Indemnitee's official capacity and as to actions in another capacity while holding such office.           Section 10.          No Presumption. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law.           Section 11.          Subrogation. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation to effectively bring suit to enforce such rights.           Section 12.          No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.           Section 13.          Notice. Indemnitee shall, as a condition precedent to his right to be indemnified under this Agreement, give to the Corporation notice in writing as soon as practicable of any claim for which indemnity will or could be sought under this Agreement. Notice to the Corporation shall be directed to Wolverine World Wide, Inc., 9341 Courtland -7- -------------------------------------------------------------------------------- Drive, Rockford, Michigan 49351, Attention: General Counsel. Notice shall be deemed received three (3) days after the date postmarked if sent by prepaid mail properly addressed. In addition, Indemnitee shall give the Corporation such information and cooperation as it may reasonably require and shall be within Indemnitee's power to give.           Section 14.          Counterparts. This Agreement may be executed in any number of counterparts, each of which shall constitute the original.           Section 15.          Continuation of Indemnification. The indemnification rights provided to Indemnitee under this Agreement, including the right provided under Subsection 4(a) above, shall continue after Indemnitee has ceased to be a director, officer, employee, agent or fiduciary of the Corporation or any other corporation, partnership, joint venture, trust or other enterprise in which Indemnitee served in any such capacity at the request of the Corporation.           Section 16.          Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Corporation, spouses, heirs, and personal and legal representatives.           Section 17.          Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effects to the principles of conflicts of laws.           Section 18.          Liability Insurance. To the extent the Corporation maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any officer, employee, agent or fiduciary of the Corporation.           Section 19.          Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Corporation or any affiliate of the Corporation against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two (2) years from the date of accrual of such cause of action, and any claim or cause of action of the Corporation or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern.           Section 20.          Amendments, Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. -8- --------------------------------------------------------------------------------   WOLVERINE WORLD WIDE By --------------------------------------------------------------------------------           Its --------------------------------------------------------------------------------               INDEMNITEE   -------------------------------------------------------------------------------- -9-

1993 LONG TERM INCENTIVE PLAN OF C. R. BARD, INC. (AS AMENDED AND RESTATED) SECTION 1--PURPOSE AND TERM OF PLAN The Long Term Incentive Plan of C. R. Bard, Inc. is designed to attract and retain the services of selected key employees of the Corporation and its Subsidiaries who are in a position to make a material contribution to the successful operation of the business of the Corporation and its Subsidiaries. Awards under the Plan shall be made to selected key employees in the form of Options, Restricted Stock, Stock Appreciation Rights and other stock-based awards. The Plan, as amended and restated, shall be effective on April 15, 1998. No awards may be made under the Plan after April 20, 2003. SECTION 2--DEFINITIONS For purposes of the Plan, the following terms shall have the indicated meanings: (a) "Board" means the Board of Directors of the Corporation. (b) "Change of Control Event" means a change of control of the nature that would be required to be reported in response to item (a) of the Current Report on Form 8-K as in effect on April 21, 1993 pursuant to Section 13 or 15(d) of the Exchange Act, provided that, without limitation, a "Change of Control Event" shall be deemed to have occurred if (i) any person shall become the beneficial owner, as those terms are defined herein, of capital stock of the Corporation, the voting power of which constitutes 20% or more of the general voting power of all of the Corporation's outstanding capital stock or (ii) individuals who, as of April 21, 1993, constitute the Board (the "Incumbent Board") cease for any reasons to constitute at least a majority of the Board, provided that any person becoming a Director subsequent to April 21, 1993 whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least three quarters of the Directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, which is or would be subject to Rule 14a-11 of the Regulation 14A promulgated under the Exchange Act) shall be, for purposes of the Plan, considered as though such person were a member of the Incumbent Board. No sale to underwriters or private placement of its capital stock by the Corporation nor any acquisition by the Corporation, through merger, purchase of assets or otherwise, effected in whole or in part by issuance or reissuance of shares of its capital stock, shall constitute a Change of Control Event. For purposes of the definition of "Change of Control Event," the following definitions shall be applicable: (i) The term "person" shall mean any individual, group, corporation or other entity. (ii) Any person shall be deemed to be the beneficial owner of any shares of capital stock of the Corporation: (A) which that person owns directly, whether or not of record, or (B) which that person has the right to acquire pursuant to any agreement or understanding or upon exercise of conversion rights, warrants, or options, or otherwise, or (C) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by an "affiliate" or "associate" (as defined in the rules of the Securities and Exchange Commission under the Securities Act of 1933) of that person, or (D) which are beneficially owned, directly or indirectly (including shares deemed owned through application of clause (B) above), by any other person with which that person or such person's "affiliate" or "associate" (defined as aforesaid) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of capital stock of the Corporation. (iii) The outstanding shares of capital stock of the Corporation shall include shares deemed owned through application of clauses (ii)(B), (C) and (D), above, but shall not include any other shares which may be issuable pursuant to any agreement or upon exercise of conversion rights, warrants or options, or otherwise, but which are not actually outstanding. (iv) Shares of capital stock, if any, held by The Chase Manhattan Bank N.A. under the Indenture and the Escrow Agreement dated as of November 1, 1971 between International Paper Company and said bank shall not be deemed owned by International Paper Company or by said bank for purposes of this Plan, so long as they are held by said bank under said Escrow Agreement, but said shares shall be deemed outstanding for the purpose of determining the aggregate number of outstanding shares of capital stock of the Corporation. (c) "Change of Control Exercise Period" means the 60-day period commencing upon the date of the first public disclosure of a Change of Control Event. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means the Compensation Committee of the Board or such other committee as may be designated by the Board. (f) "Common Stock" means the Common Stock of the Corporation, par value $0.25 per share. (g) "Corporation" means C. R. Bard, Inc., a New Jersey corporation. (h) "Director" means a member of the Board. (i) "Disinterested Persons" means Directors who are not full time employees of the Corporation and who are eligible to serve as Plan administrators or to approve Plan awards under the provisions of Rule 16b-3 promulgated under the Exchange Act. The preceding sentence shall have no effect if any specification of such persons is eliminated from the rules promulgated under Section 16 of the Exchange Act. (j) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (k) "Fair Market Value" of the Common Stock on a specified day means (1) the mean between the high and low sales price on that day as reported on the New York Stock Exchange - Composite Transactions Tape or, if no sale of the Common Stock shall have occurred on the New York Stock Exchange on that day, on the next preceding day on which there was a sale, or (2) in the case of a simultaneous exercise and sale, the actual price an optionee receives in the open market on the date of the exercise. If the Common Stock is not traded on the New York Stock Exchange, the Fair Market Value shall be the amount that is reasonably determined by the Committee. (l) "Limited Stock Appreciation Rights" shall have the meaning set forth in Section 4.8. (m) "Option" means an Option to purchase Common Stock awarded to a Participant as provided in Section 4. (n) "Option Period" means the period from the date of the grant of an Option to the date of its expiration as provided in Section 4.3. (o) "Optionee" means a Participant who has been granted an Option under the Plan. (p) "Participant" means a key employee, including officers and Directors who are employees, of the Corporation or any of its Subsidiaries who has been selected by the Committee to receive an award under the Plan. (q) "Performance-Based Awards" shall have the meaning set forth in Section 5.11. (r) "Plan" means the 1993 Long Term Incentive Plan of C. R. Bard, Inc. (s) "Restricted Period" means the vesting period, if any, of up to 10 years specified by the Committee pursuant to Section 5.2. (t) "Restricted Stock" means Common Stock awarded to a Participant subject to restrictions as provided in Section 5 as long as those restrictions are in effect. (u) "Retirement" means normal or early retirement under the terms of a pension plan of the Corporation or voluntary termination of employment, provided that in each case the Corporation must have given its prior consent to treat the person's termination of employment as a retirement. (v) "Stock Appreciation Right" means a right awarded to a Participant as provided in Section 4 to receive in the form of Common Stock or, with the consent of the Committee, cash, an amount equal to the excess of the Fair Market Value of a share of Common Stock on the day the right is exercised over the price at which the Participant could exercise an Option to purchase that share. (w) "Stock Award" means an award of Common Stock delivered in installments as specified by the Committee pursuant to Section 5.8. (x) "Subsidiary" means any corporation or other legal entity, domestic or foreign, more than 50% of the voting power of which is owned or controlled, directly or indirectly, by the Corporation. (y) "Unrestricted Stock" means Common Stock awarded to a Participant which Common Stock is not subject to a vesting period or installment delivery specified by the Committee. SECTION 3--GENERAL PROVISIONS 3.1 The Committee in its sole discretion shall select those key employees to whom awards are made under the Plan and shall specify the type of awards made, the number of Options, shares of Restricted Stock, Stock Awards, Unrestricted Stock and Stock Appreciation Rights which in each case are awarded, the Restricted Period, number of installments or Option Period applicable to the awards and any other conditions relating to the awards that are consistent with the Plan and that the Committee deems appropriate. Participants shall be selected from among the key employees of the Corporation and its Subsidiaries who are in a position to have a material impact on the future results of operations of the Corporation and its Subsidiaries. Participants may be selected and awards may be made at any time during the period that awards may be granted under the Plan. Participants do not have to be selected and awards do not have to be made at the same time by the Committee. Any award made to a Participant shall not obligate the Committee to make any subsequent awards to that Participant. 3.2 Shares of Common Stock acquired under the Plan may be authorized and unissued shares of Common Stock or authorized and issued shares of Common Stock held in the Corporation's treasury. Subject to Section 8.7, the total number of shares of Common Stock which may be acquired under the Plan shall not exceed 9,500,000. The number of shares of Common Stock available at any time for awards under the Plan shall be determined in a manner which reflects the number of shares of Common Stock then subject to outstanding awards and the number of shares of Common Stock previously acquired under the Plan. For purposes of such determinations, shares of Common Stock returned to the Corporation as a result of the forfeiture of Restricted Stock, Stock Awards or Options which expire or terminate, other than by reason of the exercise of Stock Appreciation Rights, shall again be available for awards under the Plan. SECTION 4--OPTIONS AND STOCK APPRECIATION RIGHTS 4.1 Subject to the provisions of this Section 4, the Committee may grant incentive Options and nonqualified Options with or without Stock Appreciation Rights to selected key employees of the Corporation and its Subsidiaries. Each Option shall be evidenced by a Stock Option Agreement between the Corporation and the Optionee which contains the terms and conditions specified by this Section 4 and such other terms and conditions as the Committee in its sole discretion shall specify. 4.2 The exercise price per share of Common Stock with respect to each Option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the day the Option is granted. 4.3 Except as otherwise specifically set forth in the grant thereof in accordance with this paragraph, each Option shall be for a term of up to ten years as determined by the Committee, and no Option shall be exercisable during the 12 months following the date of the grant. After the 12 month period, 25% of the total number of options granted are exercisable; after 24 months from the date of grant, 50% are exercisable; after 36 months, 75% are exercisable; and, after 48 months, 100% of the options granted are exercisable. Notwithstanding anything to the contrary in this paragraph, the Committee may, when granting Options to any person under the Plan, grant Options that are exercisable immediately or Options that are exercisable according to a schedule different from that set forth in the preceding sentence. In addition, notwithstanding any of the foregoing, upon the occurrence of a Change of Control Event, all Options shall be immediately exercisable. Accrued installments of Options may be exercised in whole or in part, and in no case may a fraction of a share be purchased under the Plan. 4.4 At the time any Option is exercised in whole or in part, the Optionee or other person exercising the Option shall pay to the Corporation, by certified or bank cashier's check payable to the order of the Corporation, and/or, to the extent permitted by law, Common Stock or other form of consideration acceptable to the Corporation, the full exercise price of the shares purchased, and the purchased shares shall be delivered to the Optionee promptly. No Optionee or his or her legal representatives, legatees or distributees, as the case may be, shall be deemed to be a holder of any shares upon the exercise of an Option until the date of issuance of a stock certificate to the Optionee for those shares. The proceeds from the sale of shares upon the exercise of Options shall be added to the general funds of the Corporation and used for general corporate purposes. 4.5 If an Optionee shall cease to be employed by the Corporation or any of its Subsidiaries prior to the end of the Option Period by reason of Retirement, (a) each Option granted prior to July 14, 1999, then held by the Optionee shall, to the extent that it was exercisable at the time of Retirement, remain exercisable for a period of (i) three months from the date of Retirement, if an incentive Option or (ii) three years from the last day of the month of Retirement, if a non-qualified Option, and thereafter, such Option shall terminate; and (b) each Option granted on or after July 14, 1999, then held by the Optionee shall, to the extent that it was exercisable at the time of Retirement, remain exercisable (i) for a period of three months from the date of Retirement, if an incentive Option or (ii) until the end of the Option Period relating to such Option, if a non-qualified Option. Notwithstanding anything in this Plan to the contrary, if an Optionee shall die after Retirement, each Option then held by the Optionee shall be exercisable to the extent, and during the period, that it would, but for the Optionee's death, have otherwise been exercisable after Retirement. Further, notwithstanding anything to the contrary contained in this Section 4.5, the Committee may, in its discretion, accelerate the vesting date and allow retiring employees to exercise outstanding Options which would not otherwise be exercisable under the Plan on the date of such employee's Retirement. If an Optionee shall cease to be employed by the Corporation or any of its Subsidiaries prior to the end of the Option Period by reason of death, each Option then held by the Optionee shall, without regard to the extent that it was exercisable at the time of death, be fully exercisable for a period of one year from the first day of the month in which the Optionee died, and thereafter, such Option shall terminate. If the employment of an Optionee with the Corporation shall terminate other than by reason of death or Retirement, each Option then held by the Optionee shall, to the extent it was exercisable on the date of termination, be exercisable until 60 days following the date of termination and thereafter, such Option shall terminate. Notwithstanding anything to the contrary contained in this Section 4.5, the Committee may, in its discretion, accelerate the vesting date and allow terminated employees to exercise outstanding Options which would not otherwise be exercisable under the Plan on the date of such employee's termination. Notwithstanding the foregoing, no Option shall be exercisable later than the end of the Option Period relating thereto. 4.6 The Committee may grant Stock Appreciation Rights to Optionees in tandem with non-qualified Options so that exercise of a Stock Appreciation Right will have the effect of terminating the Option or portion thereof to which it relates, and exercise of an Option or portion thereof to which a Stock Appreciation Right relates will have the effect of terminating the Stock Appreciation Right. Stock Appreciation Rights shall be exercisable in the same installments and be subject to the same terms and conditions as the Options to which they relate and to such other terms and conditions as the Committee in its sole discretion shall specify. 4.7 The aggregate Fair Market Value, determined as of the date an Option is granted, of the Common Stock for which any Participant may be awarded incentive Options which are first exercisable by the Participant during any calendar year under the Plan or any other stock option plan maintained by the Corporation or its Subsidiaries shall not exceed $100,000. 4.8 The Committee may, in its discretion, grant limited stock appreciation rights ("Limited Stock Appreciation Rights") that, notwithstanding any other provision of the Plan, may only be exercised during a Change of Control Exercise Period, and such Limited Stock Appreciation Rights shall be so exercisable during the Change of Control Exercise Period whether or not such person is then employed by the Corporation. Upon exercise of a Limited Stock Appreciation Right, the holder thereof shall be entitled to receive an amount in cash equal to the greater of (a) the Fair Market Value of the shares of the Common Stock with respect to which the Limited Stock Appreciation Right was exercised over the option price of such shares under the Plan and (b) if the Change of Control Event is the result of a transaction or a series of transactions, the highest price per share of Common Stock paid in such transaction or transactions during the Change of Control Exercise Period up to the date of exercise over the exercise price per share of Common Stock under the Plan. The Committee is authorized to amend the terms of a Limited Stock Appreciation Right held by any employee subject to Section 16 of the Exchange Act, as may be necessary so that the holding and exercise of such Limited Stock Appreciation Right will be exempt under such Section. 4.9 The maximum number of Options, Stock Appreciation Rights and Limited Stock Appreciation Rights that may be granted to each Participant during any calendar year shall not exceed 400,000. SECTION 5--RESTRICTED STOCK, STOCK AWARDS AND UNRESTRICTED STOCK 5.1 An award of Restricted Stock, Stock Awards and Unrestricted Stock to a Participant shall entitle the Participant to receive the number of shares of Common Stock specified by the Committee in accordance with the terms and conditions of this Section 5. 5.2 During the Restricted Period specified by the Committee, Restricted Stock awarded to a Participant may not be sold, assigned, transferred, pledged or otherwise encumbered, except as hereinafter provided. Except as otherwise provided by the Committee, the Restricted Period specified in respect of any award of Restricted Stock shall not be less than three years, except that the Committee may provide for a Restricted Period to terminate at any time after one year upon the attainment of performance-based objectives established as provided in clause (i) of Section 5.11. Except as provided in this Section 5.2 and/or as otherwise provided by the Committee, a Participant, as the owner of Restricted Stock, shall have all the rights of a holder of Common Stock, including but not limited to the right, subject to the provisions of Sections 8.7 and 8.8, to receive all dividends or dividend equivalents paid on and the right to vote such Restricted Stock. Notwithstanding anything to the contrary in the Plan, upon the occurrence of a Change of Control Event the Restricted Period applicable to Restricted Stock shall end and all restrictions on Restricted Stock shall expire. 5.3 If a Participant holding Restricted Stock ceases to be an employee of the Corporation or any of its Subsidiaries during the Restricted Period for any reason other than death or Retirement, the Committee may at the time of cessation of employment terminate the Restricted Period with respect to any or all of such Restricted Stock. If the Committee does not terminate the Restricted Period with respect to such Restricted Stock at the time of cessation of employment, such Restricted Stock shall be forfeited. 5.4 If a Participant holding Restricted Stock ceases to be an employee of the Corporation or any of its Subsidiaries during the Restricted Period by reason of death or Retirement, Restricted Stock held by that Participant shall become free of all restrictions thereon and, pursuant to Section 5.7, the Corporation shall deliver that Restricted Stock to that Participant or that Participant's beneficiary, as the case may be, within 60 days. 5.5 Each Participant awarded Restricted Stock, Stock Awards or Unrestricted Stock shall enter into such agreement with the Corporation as may be specified by the Committee in which the Participant agrees to the terms and conditions of the award and such other matters as the Committee in its sole discretion shall specify. 5.6 Each certificate representing Restricted Stock awarded under the Plan shall be registered in the name of the Participant to whom the Restricted Stock was awarded, deposited by the Participant with the Corporation together with a stock power endorsed in blank and bear the following, or a substantially similar, legend: "The transferability of this Certificate and the Common Stock represented hereby is subject to the terms and conditions, including forfeiture, contained in Section 5 of the 1993 Long Term Incentive Plan of C. R. Bard, Inc., as amended, and an Agreement entered into between the registered owner and C.R. Bard, Inc. Copies of the Plan and Agreement are on file in the executive office of C. R. Bard, Inc., 730 Central Avenue, Murray Hill, New Jersey 07974." 5.7 When the restrictions imposed by Section 5.2 and any related restrictions on Restricted Stock have expired or have otherwise been satisfied, the Corporation shall deliver to the Participant holding that Restricted Stock, or the Participant's legal representative, beneficiary or heir, a certificate or certificates, without the legend referred to in Section 5.6, for the number of shares of Restricted Stock deposited with the Corporation by the Participant pursuant to Section 5.6 with respect to which all restrictions have expired or been satisfied. At that time, the Agreement referred to in Section 5.5 shall terminate forthwith as to those shares. 5.8 Stock Awards shall be made by the Committee in numbers of shares, and, unless otherwise specified by the Committee and subject to Section 5.9, a Stock Award shall be delivered to a Participant in three approximately equal installments (in order to avoid the issuance of fractional shares) on the date of the Stock Award and on the following anniversaries of the date of the Stock Award. Stock Awards shall be made only in lieu of salary and cash bonuses. Notwithstanding anything to the contrary in the Plan, upon the occurrence of a Change of Control Event, any installment of a Stock Award not yet delivered shall become immediately deliverable. 5.9 No installment of shares shall be delivered on any anniversary of the date of the Stock Award to a Participant whose employment has been terminated, or who has, or has been, served notice of termination prior to the award or anniversary date of such installment; provided, however, that where such termination has occurred due to a Participant's death or retirement, the Committee may, in its discretion, waive this condition precedent to delivery of awarded but undelivered shares. Any shares not delivered to a Participant pursuant to this Section 5.9 may be subsequently awarded to another Participant. A Participant shall have no voting rights with respect to, and shall not be entitled to any dividends declared in respect of, any awarded but undelivered shares. 5.10 The Committee may award Unrestricted Stock to a Participant in lieu of salary or cash bonus, which Common Stock shall not be subject to forfeiture pursuant to this Section 5. Certificates representing Unrestricted Stock shall be delivered to the Participant as soon as practicable following the grant thereof. 5.11 Notwithstanding the foregoing, certain awards granted under this Section 5 of the Plan may be granted in a manner which is deductible by the Corporation under Section 162(m) of the Code. Such awards (the "Performance-Based Awards") shall be based upon earnings per share, net income, Group Financial Goals (as defined in the C. R. Bard, Inc. 1994 Executive Bonus Plan), return on shareholders' investment, return on assets, attainment of strategic and operational initiatives, appreciation in the price of Common Stock, customer income, market share, sales, net profits, economic value-added models or comparisons with the Standard & Poor's Medical Product Index and 500-Stock Index. With respect to Performance-Based Awards, (i) the Committee shall establish in writing the objective performance goals applicable to a given period of service no later than 90 days after the commencement of such period of service (but in no event after 25  percent of such period of service has elapsed) and (ii) no awards shall be granted to any participant for a given period of service until the Committee certifies in writing that the objective performance goals (and any other material terms) applicable to such period have been satisfied. The number of shares of Common Stock awarded as Performance-Based Awards during any calendar year shall not exceed 25,000. 5.12 The maximum number of shares of Common Stock that may be granted as Restricted Stock, Stock Awards and Unrestricted Stock in any calendar year shall not exceed 40 percent of the total number of shares of Common Stock granted or subject to awards granted under the Plan during such calendar year. SECTION 6--ADMINISTRATION 6.1 The Plan shall be administered by the Committee, which shall consist of Disinterested Persons (and in the case of awards granted to individuals subject to Section 162(m) of the Code, the Committee shall also consist of Directors who are "outside directors" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder), and such Directors shall serve at the pleasure of the Board. 6.2 Subject to the provisions of the Plan, the Committee shall have exclusive power to select the key employees who shall be Participants and to determine the amount of, or method of determining, the awards to be made to Participants. 6.3 The Committee's interpretation of the Plan and of any award granted under the Plan shall be final and binding on all Participants. 6.4 The Committee shall have the authority to establish, adopt or revise such rules and regulations relating to the Plan and to make such determinations as it deems necessary or advisable for the administration of the Plan. SECTION 7--AMENDMENT OR TERMINATION 7.1 The Board may amend any provision of the Plan and any agreement under the Plan at any time, provided that no amendment may be made that would (a) increase the maximum number of shares of Common Stock which may be acquired under the Plan, (b) extend the term during which Options may be granted under the Plan or (c) reduce the exercise price per share to less than the Fair Market Value of the Common Stock on the date an Option was granted unless the amendment has been approved by the stockholders of the Corporation. The Board shall also have the right to terminate the Plan at any time. Except with a Participant's consent, no amendment, suspension or termination shall impair the rights of the Participant in any Options, Restricted Stock or Stock Appreciation Rights awarded to the Participant under the Plan. 7.2 The Committee may refrain from designating Participants and from making any awards, but that shall not be deemed a termination of the Plan. No employee of the Corporation or any of its Subsidiaries shall have any claim or right to be granted awards under the Plan. SECTION 8--MISCELLANEOUS 8.1 The fact that a key employee of the Corporation or any of its Subsidiaries has been designated a Participant shall not confer on that employee any right to be retained in the employ of the Corporation or any of its Subsidiaries or to subsequent awards under the Plan. 8.2 No award under the Plan shall be taken into account in determining a Participant's compensation for purposes of any group life insurance or other employee benefit or pension plan of the Corporation, including the Company's Employees' Retirement Plan, Excess Benefit Plan and Supplemental Executive Retirement Plan. 8.3 The Plan shall not be deemed an exclusive method of providing incentive compensation for the officers and employees of the Corporation and its Subsidiaries, and it shall not preclude the Board from authorizing or approving other forms of incentive compensation. 8.4 All expenses and costs in connection with the operation of the Plan shall be borne by the Corporation. 8.5 Options, Restricted Stock and Stock Appreciation Rights awarded under the Plan shall not be transferable by a Participant other than by will or the laws of descent and distribution, and Options and Stock Appreciation Rights awarded under the Plan shall be exercisable during a Participant's lifetime only by the Participant. 8.6 A Participant may appoint a beneficiary, on a form supplied by the Committee, to exercise Options and Stock Appreciation Rights in the event of the Participant's death and may change that beneficiary at any time prior to the date of the Participant's death. 8.7 In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change, the maximum aggregate number and class of shares in which awards may be granted under the Plan, the number of shares subject to outstanding Options and Stock Appreciation Rights and the maximum number and class of shares in which Performance-Based Awards may be granted under the Plan in any calendar year shall be appropriately adjusted by the Committee, whose determination shall be conclusive. Any shares of stock or other securities distributed to a Participant with respect to Restricted Stock shall be subject to the restrictions and requirements imposed by Section 5, including depositing the certificates therefor with the Corporation together with a stock power and bearing a legend as provided in Section 5.6. 8.8 If the Corporation shall be consolidated or merged with another corporation, each Participant who has received Restricted Stock that is still subject to restrictions imposed by Section 5.2 may be required to deposit with the successor corporation the certificates for the stock or securities or the other property that the Participant is entitled to receive by reason of ownership of Restricted Stock in a manner consistent with Section 5.6, and such stock, securities or other property shall become subject to the restrictions and requirements imposed by Section 5, and the certificates therefor or other evidence thereof shall bear a legend similar in form and substance to the legend set forth in Section 5.6. 8.9 The Corporation shall have the right to deduct from any payment made under the Plan any federal, state or local income or other taxes required by law to be withheld with respect to such payment at the highest marginal individual income tax rate. It shall be a condition to the obligation of the Corporation to deliver shares or pay any cash pursuant to any award that the Participant pay to the Corporation such amount as may be requested by the Corporation for the purpose of satisfying any liability for such withholding taxes. Any award agreement may provide that the Participant may elect, in accordance with any condition set forth in such award agreement, to pay a portion or all of such with holding taxes by (a)  delivery of shares of Common Stock or (b) having shares of Common Stock withheld by the Corporation from the shares otherwise to be received. The number of shares so delivered or withheld shall have an aggregate Fair Market Value sufficient to satisfy the applicable withholding taxes. The acceptance of any such election by a Participant shall be at the sole discretion of the Committee, and, in the case of a Participant subject to Section 16 of the Exchange Act, the Corporation may require that the method of making such payment be in compliance with Section 16 and the rules and regulations thereunder. 8.10 The Plan shall be construed in accordance with the laws of the State of New Jersey. Notwithstanding anything to the contrary in the Plan, nothing in the Plan shall be construed to prevent the transfer of funds to a grant or trust for the purpose of paying benefits under the Plan. 8.11 If in the opinion of counsel for the Corporation, any issuance or delivery of shares of Common Stock to a Participant will violate the requirements of any applicable federal or state laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, or the Exchange Act), such issuance or delivery may be postponed until the Corporation is satisfied that the distribution will not violate such laws, rules or regulations. Certificates delivered to Participants pursuant to Section 5 hereof or issued on exercise of Options or Stock Appreciation Rights may bear such legends as the Corporation may deem advisable to reflect restrictions which may be imposed by law, including, without limitation, the Securities Act of 1933.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT     This Amendment, dated as of May 29, 2001, is entered into by (1) LTC PROPERTIES, INC., a Maryland corporation (the "Borrower"), (2) the financial institutions listed on the signature pages hereof (the "Lenders"), (3) SANWA BANK CALIFORNIA, as administrative agent (the "Administrative Agent") for the Lenders, (4) BANK OF MONTREAL, as syndication agent (the "Syndication Agent"), and (5) BNP PARIBAS, as documentation agent (the "Documentation Agent"). Recitals     A.  The Borrower, the Lenders, the Administrative Agent, the Syndication Agent and the Documentation Agent are parties to a Revolving Credit Agreement dated as of October 31, 2000, as amended by a First Amendment to Revolving Credit Agreement dated as of March 23, 2001 (said Revolving Credit Agreement, as so amended, herein called the "Credit Agreement"). Terms defined in the Credit Agreement and not otherwise defined herein have the same respective meanings when used herein, and the rules of interpretation set forth in Sections 1.2 and 1.3 of the Credit Agreement are incorporated herein by reference.     B.  The Borrower and the Lenders wish to amend the Credit Agreement to change the definition of "Applicable Value" and certain related provisions. Accordingly, the Borrower and the Lenders hereby agree as set forth below.     SECTION 1.  Amendments to Credit Agreement.  Subject to the terms and conditions of this Amendment, the Borrower and the Lenders hereby agree that the Credit Agreement is amended as set forth below.     (a) The definition of "Applicable Value" in Section 1.1 of the Credit Agreement is amended in full to read as follows:     "'Applicable Value' means, with respect to the Borrower and its Subsidiaries as of any date of determination, by reference to the most recent annual or quarterly balance sheet delivered by the Borrower to the Lenders (but subject to any subsequent impairment charges), (a) for any Owned Property, the lesser of (i) the Book Value thereof, net of depreciation applied on a pro rata basis, and (ii) the appraised value thereof determined pursuant to the most recent Appraisal (if any) obtained with respect thereto, in either case net of any impairment charges, (b) for any Mortgage Loan, the unpaid principal balance thereof, net of any impairment charges, and (c) for any REMIC Certificate, the book value thereof determined in accordance with GAAP."     (b) Clause (c) of the definition of "Eligible Owned Property" in Section 1.1 of the Credit Agreement is amended in full to read as follows:     "(c) an Owned Property subject to a lease under which any lease payment is 30 or more days past-due; provided, however, that an Owned Property (i) whose Operator is the subject of a bankruptcy proceeding or is otherwise insolvent and (ii) that is not ineligible for inclusion in the Borrowing Base pursuant to clause (f) below shall not be ineligible for inclusion in the Borrowing Base pursuant to this clause (c);."     (c) Clause (f) of the definition of "Eligible Owned Property" in Section 1.1 of the Credit Agreement is amended in full to read as follows:     "(f) an Owned Property (i) whose Operator is the subject of a bankruptcy proceeding or is otherwise insolvent and (ii) if any such bankruptcy proceeding is pursuant to Chapter 11 of the United States Bankruptcy Code, that is subject to (A) a lease that has been rejected in such bankruptcy proceeding or (B) a lease under which any lease payment is past-due by more than the -------------------------------------------------------------------------------- sum of (1) 60 days after the initiation of such bankruptcy proceeding plus (2) the number of days, if any (but not to exceed 29), by which such lease payment was past-due before the initiation of such bankruptcy proceeding;."     (d) Section 5.1(a)(i) of the Credit Agreement is amended in full to read as follows:     "(i) as soon as possible and in any event within 25 days after the end of each calendar month, a certificate duly executed by an Authorized Officer stating that (A) the number and identity of the Eligible Mortgage Loans and Eligible Owned Properties of the Borrower and its Subsidiaries and (B) the aggregate impairment charges in respect of Eligible Mortgage Loans and the aggregate impairment charges in respect of Eligible Owned Properties, in each case as specified in the Borrowing Base Certificate most recently delivered to the Lenders, have not changed or, if there has been any such change, setting forth the details thereof;."     (e) Annex 1 to the form of Borrowing Base Certificate attached to the Credit Agreement as Exhibit D is amended in full to be in the form attached hereto as Annex 1.     SECTION 2.  Conditions to Effectiveness.  This Amendment shall become effective as of the date first set forth above when and if the Administrative Agent receives a fee of $100,000, for the ratable account of the Lenders, and the following documents, each dated the date hereof, otherwise in form and substance satisfactory to the Administrative Agent and in the number of originals requested by the Administrative Agent:     (a) this Amendment, duly executed by the Borrower and the Lenders;     (b) consents to this Amendment, duly executed by the Guarantors; and     (c) such other approvals, opinions, evidence and documents as any Lender through the Administrative Agent may reasonably request.     SECTION 3.  Representations and Warranties of Borrower.  The Borrower represents and warrants to the Lenders and the Administrative Agent as set forth below.     (a) The execution, delivery and performance by the Borrower of this Amendment and the Credit Documents, as amended hereby, to which the Borrower is a party are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action and do not (i) contravene the Borrower's charter documents or bylaws, (ii) contravene any Governmental Rule or contractual restriction binding on or affecting the Borrower or (iii) result in or require the creation or imposition of any Lien (other than any created by the Credit Documents) upon or with respect to any of the properties now owned or hereafter acquired by the Borrower.     (b) No Governmental Action is required for the due execution, delivery or performance by the Borrower of this Amendment or any of the Credit Documents, as amended hereby, to which the Borrower is or is to be a party.     (c) This Amendment and each of the other Credit Documents, as amended hereby, to which the Borrower is a party constitute legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally.     (d) The Collateral Documents constitute valid Liens on the Collateral purported to be covered thereby and secure the payment of all obligations purported to be secured thereby; and the execution, delivery and performance of this Amendment do not adversely affect the Liens of the Collateral Documents. –2– --------------------------------------------------------------------------------     (e) The financial information as of December 31, 2000 and for the fiscal year then ended that was delivered by the Borrower to the Lenders pursuant to Section 5.1(a)(iv) of the Credit Agreement fairly presents the financial condition of the Borrower and the relevant Subsidiaries as of such date and the results of the operations of the Borrower and such Subsidiaries for the fiscal year ended on such date, all in accordance with GAAP applied on a consistent basis. Except as disclosed in the Borrower's report on Form 10-K for its fiscal year ended on December 31, 2000, since that date no event or situation has occurred that could reasonably be expected to have a Material Adverse Effect. The Borrower and its Subsidiaries have no material contingent liabilities except as disclosed in the aforementioned financial information.     (f)  The representations and warranties contained in the Credit Documents are correct on and as of the date hereof as though made on and as of such date (other than any such representations or warranties that, by their terms, refer to a specific date, in which case as of such specific date). No event has occurred and is continuing, or would result from the effectiveness of this Amendment, that constitutes a Default.     SECTION 4.  Reference to and Effect on Credit Documents.       (a) On and after the effective date of this Amendment, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or any other expression of like import referring to the Credit Agreement, and each reference in the other Credit Documents to "the Credit Agreement," "thereunder," "thereof," "therein" or any other expression of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by this Amendment.     (b) Except as specifically amended above, the Credit Agreement and the other Credit Documents shall remain in full force and effect and are hereby ratified and confirmed; provided, however, that the Borrower hereby ratifies and confirms the Release of Claims with respect to all "Released Matters" (as defined in the Release of Claims) as if that term had been defined to cover the period from the beginning of time through and including the date of this Amendment. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all obligations stated to be secured thereby under the Credit Documents, as amended hereby.     (c) Except as expressly set forth herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders under any of the Credit Documents or constitute a waiver of any provision of any of the Credit Documents.     SECTION 5.  Costs and Expenses.  The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment and the other instruments and documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities hereunder and thereunder.     SECTION 6.  Execution in Counterparts.  This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. –3– --------------------------------------------------------------------------------     SECTION 7.  Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF CALIFORNIA.     LTC PROPERTIES, INC.     By:                 --------------------------------------------------------------------------------         Name:             Title:         SANWA BANK CALIFORNIA, as Administrative Agent and Lender     By:                 -------------------------------------------------------------------------------- E. Leigh Irwin Senior Vice President     BANK OF MONTREAL, as Syndication Agent and Lender     By:                 --------------------------------------------------------------------------------         Name:             Title:         BNP PARIBAS, Los Angeles Branch, as Documentation Agent and Lender     By:                 --------------------------------------------------------------------------------         Name:             Title:         By:                 --------------------------------------------------------------------------------         Name:             Title:     S–1 --------------------------------------------------------------------------------     BANK HAPOALIM B.M.     By:                 --------------------------------------------------------------------------------         Name:             Title:         By:                 --------------------------------------------------------------------------------         Name:             Title:         BANK OF AMERICA, N.A.     By:                 --------------------------------------------------------------------------------         Name:             Title:         KEY CORPORATE CAPITAL INC.     By:                 --------------------------------------------------------------------------------         Name:             Title:         BHF (USA) CAPITAL CORPORATION     By:                 --------------------------------------------------------------------------------         Name:             Title:         By:                 --------------------------------------------------------------------------------         Name:             Title:     S–2 --------------------------------------------------------------------------------     WELLS FARGO BANK, N.A.     By:                 --------------------------------------------------------------------------------         Name:             Title:         BANK LEUMI USA     By:                 --------------------------------------------------------------------------------         Name:             Title:     S–3 -------------------------------------------------------------------------------- ANNEX 1 BORROWING BASE REPORT as of                          Book value of Eligible Mortgage Loans   $     Less: Impairment adjustments           -------------------------------------------------------------------------------- Applicable Value of Eligible Mortgage Loans   $       -------------------------------------------------------------------------------- Book value of Eligible Owned Properties   $     Less: Impairment adjustments           -------------------------------------------------------------------------------- Book value of Eligible Owned Properties, as adjusted   $     Less: Depreciation, allocated pro rata Appraisal to book adjustments   $       -------------------------------------------------------------------------------- Applicable Value of Eligible Owned Properties   $       -------------------------------------------------------------------------------- Borrowing Base Calculation       Sum of:       75% of total Applicable Value of Eligible Mortgage Loans   $   and       60% of total Applicable Value of Eligible Owned Properties   $       -------------------------------------------------------------------------------- Borrowing Base   $   Less: Advances outstanding   $   Less: Letters of Credit outstanding   $   Less: Unreimbursed drawings under Letters of Credit   $   Borrowing Base Availability (lesser of Borrowing Base and Aggregate Commitment, as it may be reduced pursuant to terms of Credit Agreement)   $   -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.1 SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT

EXHIBIT 10.23 [HEARME LETTERHEAD] September 10, 2001 John Theodorakis HearMe Dear John,     This letter documents decisions made by the HearMe Board of Directors with regard to your compensation during this challenging period of shutting down the Company. The goal of the Board of Directors is two-fold: 1) to retain you as the best person for the job, i.e., handling the legal aspects of our customer contracts in the hopes of providing the best possible return to the shareholders, and 2) to provide you an incentive to maximize the return to shareholders.     You will be entitled to an additional cash bonus (which will be subject to applicable taxes and withholding) to be paid from the total cash in excess of $1.5 Million available for distribution to stockholders in connection with the liquidation of HearMe pursuant to Plan of Liquidation and Dissolution approved by the HearMe Board on August 10, 2001 (the "Liquidation"), after all obligations of the Company are met (the "Distributable Excess Assets"). Your bonus will equal to 1% of the Distributable Excess Assets and payment of this bonus (or proportionate amounts of this bonus) will be made to you at the same time distributions from the Distributable Excess Assets are made to the stockholders. If your employment terminates prior to any distribution date related to the Liquidation under any circumstances other than the Company's terminating your employment without Cause, you will forfeit any portion of this bonus relating to distributions following the final date of your employment. If the Company terminates your employment without Cause (including, but not limited to, in connection with the retention of a liquidation management company or the transfer of the Company's assets to a liquidating trust), you will continue to be entitled to the proportionate amount of this bonus on each distribution date related to the Liquidation. To the extent it is necessary to make any determination as to the amount of the Distributable Excess Assets, the Board of Directors or its Compensation Committee will make such determination in good faith and such determination will be binding upon you.     By way of example, pursuant to the foregoing paragraph, if an aggregate of $5,000,000 were available for distribution to stockholders pursuant to the Liquidation, then (i) the stockholders would receive the initial $1,500,000, (ii) the Distributable Excess Assets would equal $3,500,000, (iii) you would receive a bonus (less applicable withholding) of $35,000 and (iv) the stockholders would receive the remaining Distributable Excess Assets after payment of all similar bonus payments.     You understand that your employment continues at all times to be on an at-will basis. --------------------------------------------------------------------------------     John, I personally want to thank you for your commitment and dedication in your tasks. Throughout your time with HearMe you have consistently demonstrated that you have an eye for detail and an ability to find creative solutions that suits you well for the challenges ahead. Sincerely,         /s/ JAMES SCHMIDT      10-SEP-2001     James Schmidt CEO         AGREED TO AND ACCEPTED:         /s/ JOHN THEODORAKIS    -------------------------------------------------------------------------------- John Theodorakis   September 10, 2001 -------------------------------------------------------------------------------- Date     --------------------------------------------------------------------------------

Exhibit 10.39 This is an agreement between MedicaLogic/Medscape, Inc. (“Medscape” or “the Company”), and the following individual (“Executive”): Name: Kevin Hutchinson Address 42 Hendrie Ave   Riverside, CT 06878 Background. Medscape has offered you employment as an executive of the company, and you have indicated your intent to accept our offer. In consideration of your continued employment by Medscape, you agree to the terms contained in this document. Employment. This document is your employment agreement Medscape hereby employs you as Chief Operating Officer. You agree to perform the job assigned to you in a careful and workmanlike manner and to abide by and enforce all rules established by Medscape. Compensation.  Medscape will pay you a base salary at the rate of $250,000.00 per year, payable in accordance with Medscape’s standard payroll policy. Any future increase in your base salary will be in the sole discretion of the Compensation Committee of the Board of Directors of Medscape. In addition to your base salary, in each year following the first full calendar year of your employment, Medscape will pay you an annual bonus if, in the judgment of the Compensation Committee, the qualifying criteria established by that Committee for payment of a bonus are met. Payment of a bonus is not guaranteed. If you have joined the Company prior to October 1st of a calendar year, you may also be eligible for payment of a pro-rated bonus for that year subject to the foregoing criteria. In addition, you will be entitled to such benefits as are generally provided to senior executives of Medscape. Your rights with respect to stock options will be covered in separate Stock Option Agreements for each grant. Services.  During normal business hours or, if applicable, the hours you are scheduled to work for Medscape, you agree to devote your full time, attention and energy to our business, and not to engage in any other business activity during that time without the prior written approval of Medscape. Conflict of Interest.  As a publicly-traded company, Medscape takes steps to protect its shareholders from problems caused by conflicts of interest. You must report any conflicts, or anything which might appear to be a conflict, to the General Counsel of Medscape. Examples of potential conflicts include, among other things significant investments in, or consulting services for, competing companies, gifts (other than gifts customary in a particular business, such as pens or shirts bearing a corporate logo) or loans or excessive payments for your services from business partners or customers, or engaging in any activity that may reflect adversely on Medscape's business, operations or reputation. In any conflict of interest situation, Medscape may require you to take measures to protect the Company’s interests, which may include declining to participate in the activity that created the conflict or returning payments, gifts or loans. Confidential Information. In your performing your job, you will have access to valuable and confidential information belonging to Medscape. Examples of confidential information include, among other things, specialized business techniques, methods, business plans and strategies, ideas, client/account lists, member lists, and employee lists.  You acknowledge that it cost us a lot of time, effort and money to develop our confidential information and materials, and that this information and material constitutes a valuable trade/business secret and special asset of Medscape. You agree not to disclose our confidential information and materials to any third party during the term of your employment and for two years afterwards, except as we may specifically authorize you in connection with the business of Medscape. Even in cases where we authorize disclosure (for example, to consider a possible business transaction with another company), you agree to use your best efforts to minimize any risks of inappropriate disclosure of the information through use of nondisclosure agreements and careful handling of materials. Regardless of whether you remain our employee, you may never disclose information that constitutes a trade secret of Medscape. Goodwill.  You acknowledge that the business of Medscape depends on the confidence Medscape’s clients and customers. You agree that any goodwill that you develop because of your work with Medscape is the property of Medscape, and not of you personally. Term. This agreement will expire on the third anniversary of its signing, unless either of us terminates your employment prior to that date. If you remain an employee of Medscape after the third anniversary of signing, your employment will become “at will.” Termination of Employment.  You may terminate your employment with us at any time by providing us with written notice of your resignation. We may also terminate your employment at any time and for any reason by providing you with written notice. Your employment with us will also terminate in the event of your death or Disability (as defined below). In the event that your employment is terminated other than as described below in the paragraph captioned “Severance Pay,” you or your estate, as the case may be, will be entitled only to your accrued and unpaid base salary as of the date of termination. All other benefits will cease as of the effective date of your termination (unless otherwise required by law). Survival of Terms. Your obligations under the following sections of this agreement will survive both termination of the agreement and termination of your employment for any reason: Confidential Information, Goodwill, Termination Obligations, Ownership of Intellectual Property, and Miscellaneous. In addition, if this agreement is in effect upon the date of termination of your employment, your rights under the section entitled Severance Pay, and Medscape’s rights under the section entitled Restrictive Covenants, will survive termination of your employment according to their terms. Disability. “Disability” means a mental or physical condition that renders you incapable of performing your duties and obligations under this agreement for a period of six consecutive months, or more than 210 days in any eight month period, in the written opinion of a competent physician specializing in such condition selected by the Board of Directors who has personally examined and evaluated your condition.  Medscape shall have the right to terminate your employment at any time following your Disability. Severance Pay. During the term of this agreement, if Medscape undergoes a Corporate Change (defined below) and Medscape subsequently terminates your employment (within the three year period from the date of this agreement) for other than Good Cause (defined below), you will receive as severance pay a lump sum amount equal to six month’s base salary (not including bonus) based on your salary as of the date of termination. You will not be entitled to any other payment, and all other benefits will cease as of the effective date of your termination (unless otherwise required by law).The severance pay will be payable within a reasonable amount of time following your termination, and will be contingent upon your execution of a release of claims in favor of Medscape. • “Corporate Change” shall mean any circumstance in which (i) Medscape is not the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than a previously wholly-owned subsidiary of Medscape), (ii) Medscape sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity (other than a wholly-owned subsidiary of Medscape), (iii) Medscape is to be dissolved and liquidated, (iv) any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, acquires or gains ownership or control (including, without limitations power to vote) of more than 50% of the outstanding shares of Medscape’s voting stock (based upon voting power), or (v) as a result of or in connection with a contested election of directors, the persons who were directors of Medscape before such election shall cease to constitute a majority of the Board of Directors of Medscape. • “Good Cause” shall mean (i) serious misconduct, including but not limited to misconduct harmful to the interests of Medscape which causes economic damage to the us (for example, misappropriation of Medscape funds), (ii) conduct which significantly interferes with the individual's ability to perform their duties (for example, abuse of alcohol or illicit drugs, or criminal or immoral acts that damage Medscape or its reputation), (iii) a finding of disability as provided in this Agreement under the section on Disability, or (iv) a material breach by you of this agreement that is not substantially cured within 30 days after receipt of written notice from Medscape of the breach. A determination that an employee’s termination by the Company was for Good Cause may only be made by the Company's Compensation Committee or the Board of Directors, which must prepare minutes of its meeting listing the reasons that Good Cause has been established. • Any action by the Company or its successors following a Corporate Change that (i) significantly reduces the scope or nature of the authority, powers, functions or duties of the Executive, (ii) lowers the Executive’s base salary by any amount, or (iii) reduces by one level or more the grade represented by the Executive’s then-current title and reporting line shall be deemed a termination of the Executive for the purposes of this section. Restrictive Covenants.  As long as this agreement remains in effect, during your employment with Medscape, you will not: (a) directly or indirectly, either as an employee, consultant, agent, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any business or organization that is directly competitive with the business of Medscape; (b) solicit, divert or take away, or attempt to solicit, divert or take away, the business of any clients, customers or accounts of Medscape (except on behalf of a business unrelated to the business of Medscape); or (c) encourage or solicit any employee to leave the employ of Medscape for any reason.  If you are terminated for Good Cause or under any circumstances which entitle you to severance pay under this agreement, the restrictions under (b) and (c) only will also apply for six months after your termination date. If you are in violation of these restrictions, the six month time period will cease to run during the period of your violation, and will resume once the violation has been cured. You acknowledge that these restrictions are necessary for the protection of the business and goodwill of Medscape and are reasonable.  You acknowledge that any breach of these restrictions is likely to cause Medscape substantial and irreparable damage and therefore, in the event of any such breach, Medscape will be entitled to specific performance and injunctive relief in addition to any other remedies that may be available, without proving actual damages. Medscape Employee Policies. You acknowledge that you have had an opportunity to review the current employee policies of Medscape. We may change the our employee policies at any time without prior notice. You specifically acknowledge that you have read, and you agree to abide by, Medscape policies regarding equal employment opportunity and sexual harassment, and that failure to follow these policies is a material breach of this Agreement. We do not intend that any communications we have with you, other than this agreement, confer on you any legally enforceable rights unless they are a formal written amendment to this agreement signed by both of us. Insider Trading. You agree not to misuse or disclose to outsiders any confidential information of Medscape that might enable you or others to make money in the stock market.  If you have access to non-public knowledge about Medscape or potential Medscape business partners, you may not use this information for personal gain. If you hear any rumors regarding the Medscape or its stock or its dealings with any other publicly-traded corporation which might affect the stock of either corporation, you should report them to the General Counsel as soon as possible. If you are a named “executive officer” of Medscape, you must comply with our insider trading policy, as amended from time to time by our Board of Directors, and you will also be required to report your transactions in Medscape stock to the federal government. Although we retain an outside consultant to assist you with these required filings, you acknowledge that the ultimate responsibility for the making the filings in a timely and accurate fashion and for complying with the laws regarding insider trading resides with you. Authority.  You may not enter into agreements on behalf of Medscape, or take any other actions in our name, unless you are authorized to do so under our signature authority, external communications, and other relevant policies. Termination Obligations. If you leave Medscape, you agree to return to us, as promptly as possible, any materials, equipment, or money that belongs to us (for example, correspondence, contracts, reports, price lists, manuals, mailing lists, client/account lists, advertising materials, contacts, credit cards, petty cash, checks, supplies, computer equipment, software, and files). Materials that you created using Medscape’s equipment and in the course of your employment as part of your job duties belong to us. Furthermore, after termination, you may not use our name in any public statements about your employment with us that are intended for wide distribution or announcement unless you receive our written permission. This restriction is not intended to prohibit you from using our name as part of your employment history in a resume, biography, or similar document, regardless of how widely that document may be distributed. Ownership of Intellectual Property.  You agree that any materials you produce as a result of your employment are “works for hire,” and you assign all your rights in these materials, including copyright and any moral or artists’ rights, to Medscape. You agree that Medscape will have complete title to (a) any invention or improvement that you make or reduce to practice while employed by us that relates in any way to our business or to our services, materials, procedures or methods, and (b) any idea, information or conception that you devise or suggest for Medscape’ use while employed by Medscape. You agree to reasonably cooperate with us in making any filings necessary to protect Medscape’s rights in such materials or inventions. Miscellaneous. 1. You agree that any violation by you of our agreement would result in irreparable damage to Medscape, and you agree that in such a case we are entitled (at a minimum) to an injunction to restrain your violation. We remain entitled to any other remedies under law.     2. If a court holds any term of our agreement unenforceable, then it is our mutual intent that the court either limit that term in a way that makes it enforceable (for example, by reducing a time period), or sever that term from the agreement while enforcing the other terms.     3. We may waive any terms of our agreement with respect to a violation by you without waiving our right to take action based on future violations (even if they are of the same type).     4. This agreement requires your personal services, and you agree not to assign it to any other person.  Medscape, however, may assign the agreement to any of our affiliates, divisions, or successors.     5. We both agree that this document constitutes the sole and complete agreement between us relating to the subject matter hereof.  Neither of us may make any modifications to our agreement except in writing. Your signature below indicates that you have read and understood the terms of this document, and that you agree to them as a condition of your employment by Medscape. MEDICALOGIC/MEDSCAPE, INC.   By:     -------------------------------------------------------------------------------- Name: Mark Boulding Title: General Counsel, Executive Vice President and Secretary   Employee:     --------------------------------------------------------------------------------   Kevin Hutchinson     Dated as of June 18, 2001.  

  Exhibit 10.4 WGL Holdings, Inc. 1999 Incentive Compensation Plan (As approved by Shareholders March 3, 2000) (As amended as of November 1, 2000)   --------------------------------------------------------------------------------   WGL HOLDINGS, INC. 1999 INCENTIVE COMPENSATION PLAN SECTION 1 PURPOSE      Purpose. The purpose of this 1999 Incentive Compensation Plan (the “Plan”) of WGL Holdings, Inc., a Virginia corporation (the “Company”), is to advance the interests of the Company and its stockholders by providing a means to attract, retain and reward officers and other key employees of, and consultants and other service providers to, the Company and Subsidiaries and to enable such persons to acquire or increase their interests in the Company and its success, thereby promoting a closer identity of interests between such persons and the Company’s stockholders. The Plan is intended to qualify certain compensation awarded under the Plan as “performance-based compensation” under Code section 162(m) to the extent deemed appropriate by the Committee. SECTION 2 GENERAL DEFINITIONS      Definitions. The definitions of awards under the Plan, including Options, SARs, Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of other awards, Dividend Equivalents, Other Stock-Based Awards and Cash Awards, are set forth in Section 6 of the Plan. Such awards, together with any other right or interest granted to a Participant under the Plan, are termed “Awards.” For purposes of the Plan, the following additional terms shall be defined as set forth below:      (a)  “Award Agreement” means any written agreement, contract, notice or other instrument or document evidencing or relating to an Award.      (b)  “Beneficiary” means the person, persons, trust or trusts which have been designated by a Participant in his most recent written beneficiary designation filed with the Committee to exercise the rights and receive the benefits specified under an Award upon such Participant’s death or, if there is no designated Beneficiary or surviving designated Beneficiary, then the person, persons, trust or trusts entitled by will or the laws of descent and distribution to exercise such rights and receive such benefits.      (c)  “Board” means the Board of Directors of the Company.      (d)  “Change of 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 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 (A) the then-outstanding shares of common stock of the Company or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that for purposes of this paragraph (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, or any corporation controlled by or otherwise affiliated with the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by or otherwise affiliated with the Company; or (D) any transaction described in clauses (A), (B), and (C) of paragraph (iv) of this definition; or        (ii) Individuals who, as of the close of business on November 1, 2000, constituted the Board of Directors of the Company (the “Incumbent Company Board”) cease for any reason to constitute at least a majority of the Board of Directors of the Company; provided, however, that any individual becoming a director subsequent to November 1, 2000 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 Company Board shall be considered as though such individual were a member of the Incumbent Company 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 Company Board; or - 2 - --------------------------------------------------------------------------------          (iii) 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 (A) the then-outstanding shares of common stock of Washington Gas Light Company (the “Utility”) or (B) 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 paragraph (iii), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Utility, (B) any acquisition by the Utility or any corporation controlled by or otherwise affiliated with the Utility, (C) 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 (C) any transaction described in clauses (A) and (B) of paragraph (V) of this definition; or        (iv) 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, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of outstanding the Company common stock and outstanding Company 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 Company common stock and outstanding Company voting securities, as the case may be, (B) 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, 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 (C) 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 Company Board at the time of the execution of the initial agreement, or of such Incumbent Company Board, providing for such Business Combination; or        (v) 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, (A) 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 (B) 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        (vi) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.      For purposes of this definition, the term “affiliated” includes any entity controlled by, controlling or under common control with the entity referred to.      (e)  “Code” means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include the regulations thereunder and successor provisions and regulations thereto.      (f)  “Committee” means the committee appointed by the Board to administer the Plan or, if no committee is appointed, the Board.      (g)  “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include the rules thereunder and successor provisions and rules thereto. - 3 - --------------------------------------------------------------------------------        (h)  “Fair Market Value” means, on any given day, the closing price of one share of Stock as reported on the New York Stock Exchange composite tape on such day or, if the Stock was not traded on such day, then on the next preceding day that the Stock was traded, all as reported by such source as the Committee may select.      (i)  “ISO” means any Option intended to be and designated as an incentive stock option within the meaning of Code section 422.      (j)  “Participant” means a person who, at a time when eligible under Section 5, has been granted an Award.      (k)  “Plan Year” means the Company’s fiscal year.      (l)  “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.      (m)  “Stock” means the common stock, no par value, of the Company and such other securities as may be substituted for Stock or for such other securities pursuant to Section 4(c).      (n)  “Subsidiary” or “Subsidiaries” means any corporation or corporations which, together with the Company, would form a group of corporations described in Code section 424(f). The term shall also refer to any entity designated as such by the Board for purposes of the Plan. SECTION 3 ADMINISTRATION      (a)  Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:        (i) to select persons to whom Awards may be granted;        (ii) to determine the type or types of Awards to be granted to each such person;        (iii) to determine the number of Awards to be granted, the number of shares of Stock to which an Award will relate, the terms and conditions of any Award (including, without limitation, any exercise price, any grant price or purchase price, any restriction or condition, any schedule for lapse of restrictions or conditions relating to transferability, forfeiture, exercisability or settlement and any waivers or accelerations thereof and any performance conditions (including, without limitation, any performance conditions relating to Awards not intended to be governed by Section 7(f) and any waivers and modifications thereof), based in each case on such considerations as the Committee shall determine) and all other matters to be determined in connection with an Award;        (iv) to determine whether, to what extent and under what circumstances an Award may be settled, or the exercise price of an Award may be paid, in cash, Stock, other Awards or other property, or an Award may be canceled, forfeited or surrendered;        (v) to determine whether, to what extent and under what circumstances cash, Stock, other Awards or other property payable with respect to an Award will be deferred either automatically, or at the election of the Committee or of the Participant;        (vi) to prescribe the form of each Award Agreement, which need not be identical for each Participant;        (vii) to adopt, amend, suspend, waive and rescind such rules and regulations and appoint such agents as the Committee may deem necessary or advisable to administer the Plan;        (viii) to correct any defect or omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Award, rules and regulations or Award Agreement; and          (ix) to make all other decisions and determinations as may be required under the terms of the Plan or as the Committee may deem necessary or advisable for the proper administration of the Plan. - 4 - --------------------------------------------------------------------------------        Other provisions of the Plan notwithstanding, the Board may perform any function of the Committee under the Plan, including, without limitation, for the purpose of ensuring that transactions under the Plan by Participants who are then subject to Section 16 of the Exchange Act in respect of the Company are exempt under Rule 16b-3. In any case in which the Board is performing a function of the Committee under the Plan, each reference to the Committee herein shall be deemed to refer to the Board.      (b)  Manner of Exercise of Committee Authority. Any determination or action of the Committee with respect to the Plan or any Award shall be taken in the sole and absolute discretion of the Committee and shall be final, conclusive and binding on all persons, including, without limitation, the Company, any Subsidiary, any Participant, any person claiming any rights or interests under the Plan or any Award from or through any Participant and the Company’s stockholders, except to the extent that the Committee may subsequently modify, or make a further determination or take further action not consistent with its prior determination or action. If not specified in the Plan, the time at which the Committee must or may make any determination or take any action shall be determined by the Committee, and any such determination or action may thereafter be modified by the Committee (subject to Section 8(e)). The express grant of any specific power to the Committee, the making of any determination or the taking of any action by the Committee or the failure to make any determination or take any action shall not be construed as limiting any power or authority of the Committee. Except as provided in Section 7(f), the Committee may delegate to officers or managers of the Company or any Subsidiary authority, subject to such terms and conditions as the Committee shall determine, to perform such functions as the Committee may determine, to the extent permitted under applicable law.      (c)  Limitation of Liability. Each member of the Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants or any executive compensation consultant, legal counsel or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any determination, action or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any officer or employee of the Company acting on its behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such determination, action or interpretation. SECTION 4 STOCK SUBJECT TO THE PLAN AND MAXIMUM AWARDS      (a)  Shares of Stock Reserved. Subject to adjustment as provided in Section 4(c), the total number of shares of Stock that may be subject to Awards, determined immediately after the grant of any Award, shall not exceed 1,000,000. Shares subject to any Award which is canceled, expired, forfeited, settled in cash or otherwise terminated without delivery of shares of Stock to the Participant (or Beneficiary), including, without limitation, shares of Stock withheld or surrendered in payment of any exercise price of an Award or taxes related to an Award, shall again be available for Awards. Notwithstanding the foregoing, the number of shares that may be delivered upon the exercise of ISOs shall not exceed 1,000,000, and the number of shares that may be delivered in the form of Restricted Stock shall not exceed 300,000, in each case subject to adjustment as provided in Section 4(c). Any shares of Stock delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares acquired by the Company.      (b)  Annual Per-Participant Limitations. During any Plan Year, no Participant may be granted Awards relating to more than 200,000 shares of Stock, subject to adjustment as provided in Section 4(c). In addition, with respect to Cash Awards, no Participant may be paid during any Plan Year cash or other property relating to such Awards that exceeds the Fair Market Value of the number of shares of Stock set forth in the preceding sentence, determined either at the date of grant or the date of settlement, whichever is greater. This provision sets forth two separate limitations, so that Awards that may be settled solely by delivery of Stock will not operate to reduce the amount of Cash Awards, and vice versa. Awards that may be settled either in Stock or in cash must not exceed either limitation during the applicable Plan Year.      (c)  Adjustments. In the event that the Committee shall determine that any recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or exchange of Stock or other securities, Stock dividend or other special, large and nonrecurring dividend or distribution (whether in the form of cash, securities or other property), liquidation, dissolution or other similar corporate transaction or event affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock reserved and available for Awards under Section 4(a), including, without limitation, the share limitations for Restricted Stock and ISOs, (ii) the number and kind of shares of Stock specified in the annual per-Participant limitations under Section 4(b), (iii) the number and kind of shares of Stock relating to outstanding Restricted Stock or other Awards in - 5 - --------------------------------------------------------------------------------   connection with which shares have been issued, (iv) the number and kind of shares of Stock that may be issued in respect of any other outstanding Awards and (v) the exercise price, grant price or purchase price relating to any Awards (or, if deemed appropriate, the Committee may make provision for a cash payment with respect to any outstanding Awards). In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including, without limitation, cancellation of unexercised or outstanding Awards, or substitution of Awards using stock of a successor or other entity) in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence and events constituting a Change of Control) affecting the Company or any Subsidiary or the financial statements of the Company or any Subsidiary, or in response to changes in applicable laws, regulations or accounting principles. SECTION 5 ELIGIBILITY      Executive officers and other key employees of the Company or of any Subsidiary, including any member of the Board who is also such an employee, and persons who provide consulting or other services to the Company or any Subsidiary deemed by the Committee to be of substantial value, are eligible to be granted Awards. In addition, persons who have been offered employment by the Company or any Subsidiary, and persons employed by an entity that the Committee reasonably expects to become a Subsidiary, are eligible to be granted Awards. SECTION 6 SPECIFIC TERMS OF AWARDS      (a)  General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose, in connection with any Award, such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including, without limitation, terms requiring forfeiture of Awards in the event of termination of employment or service of the Participant. Except as provided in Section 6(f), 6(h) or 7(a), or to the extent required to comply with requirements of applicable law, only services may be required as consideration for the grant (but not the exercise) of any Award.      (b)  Options. The Committee is authorized to grant options to purchase Stock on the following terms and conditions (“Options”):        (i) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee; provided, however, that except as provided in Section 7(a), the exercise price shall be not less than the Fair Market Value on the date of grant.        (ii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, the methods by which the exercise price may be paid or deemed to be paid, the form of such payment, including, without limitation, cash, Stock, other Awards or other property (including, without limitation, awards granted under other Company plans, notes or other contractual obligations of Participants to make payment on a deferred basis, such as through “cashless exercise” arrangements, to the extent permitted by applicable law) and the methods by which Stock will be delivered or deemed to be delivered to Participants.        (iii) ISOs. The terms and conditions of any ISOs shall comply in all respects with the requirements of Code section 422. Notwithstanding anything to the contrary herein, no term of the Plan or of any Award Agreement relating to ISOs shall be interpreted, amended or altered, nor shall any discretion or authority granted hereunder be exercised, so as to cause the ISOs to fail to qualify as such under Code section 422, unless such result is mutually agreed to by the Company and the Participant.        (iv) Termination of Employment or Service. Unless otherwise determined by the Committee, upon termination of a Participant’s employment or service, as applicable, with the Company and all Subsidiaries, such Participant may exercise any Options during the three-month period following such termination of employment or service, but only to the extent that such Option was exercisable as of such termination of employment or service. Notwithstanding the foregoing, if the Committee determines that such termination is for cause, all Options held by the Participant shall terminate as of the termination of employment or service.      (c)  Stock Appreciation Rights. The Committee is authorized to grant Stock appreciation rights on the following terms and conditions (“SARs”): - 6 - --------------------------------------------------------------------------------          (i) Right to Payment. An SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value on the date of exercise (or, if the Committee shall so determine in the case of any such right other than one related to an ISO, the Fair Market Value at any time during a specified period before or after the date of exercise), over (B) the grant price of the SAR as determined by the Committee as of the date of grant of the SAR, which, except as provided in Section 7(a), shall be not less than the Fair Market Value on the date of grant.        (ii) Other Terms. The Committee shall determine the time or times at which an SAR may be exercised in whole or in part, the method of exercise, method of settlement, form of consideration payable in settlement, method by which Stock will be delivered or deemed to be delivered to Participants, whether or not an SAR shall be in tandem with any other Award, and any other terms and conditions of any SAR.      (d)  Restricted Stock. The Committee is authorized to grant restricted shares of Stock on the following terms and conditions (“Restricted Stock”):        (i) Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments or otherwise, as the Committee may determine. Except to the extent restricted under the terms of the Plan and any Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including, without limitation, the right to vote the Restricted Stock and the right to receive dividends thereon.        (ii) Forfeiture. Except as otherwise determined by the Committee, upon a Participant’s termination of employment or service (as determined under criteria established by the Committee) during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock shall be waived in whole or in part in the event of termination resulting from specified causes.        (iii) Certificates for Stock. Restricted Stock may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, such certificates may bear an appropriate legend referring to the terms, conditions and restrictions applicable to the Restricted Stock, the Company may retain physical possession of the certificates and the Participant may be required to deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.        (iv) Dividends. Dividends paid on Restricted Stock shall be either paid at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the aggregate amount of such dividends, or the payment of such dividends shall be deferred and/or the amount or value thereof automatically reinvested in additional shares of Restricted Stock, other Awards or other property, as the Committee shall determine or permit the Participant to elect. Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed, unless otherwise determined by the Committee.      (e)  Deferred Stock. The Committee is authorized to grant deferred shares of Stock subject to the following terms and conditions (“Deferred Stock”):        (i) Award and Restrictions. Delivery of Deferred Stock shall occur upon expiration of the deferral period specified in the Award by the Committee or, if permitted by the Committee, as elected by the Participant. In addition, Deferred Stock shall be subject to such restrictions as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at other specified times, separately or in combination at such times, under such circumstances, in installments or otherwise, as the Committee may determine.        (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service (as determined under criteria established by the Committee) during the applicable deferral period or portion thereof to which restrictions or forfeiture conditions apply, all Deferred Stock that is at that time subject to such restrictions or forfeiture conditions shall be forfeited; provided, however, that the Committee may provide, by rule or regulation or in any Award Agreement, or may - 7 - --------------------------------------------------------------------------------     determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock shall be waived in whole or in part in the event of termination resulting from specified causes.      (f)  Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company obligations to pay cash or other property, under other plans or compensatory arrangements.      (g)  Dividend Equivalents. The Committee is authorized to grant dividend equivalents entitling the Participant to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock (“Dividend Equivalents”). Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards or other property, and shall be subject to such restrictions on transferability and risks of forfeiture, as the Committee may determine.      (h)  Other Stock-Based or Cash Awards. The Committee is authorized, subject to limitations under applicable law, to grant such other Awards that may be denominated or payable in, valued in whole or in part by reference to or otherwise based on or related to Stock and factors that may influence the value of Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, performance shares, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with a value or payment contingent upon performance of Stock (or any other factors designated by the Committee) and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified Subsidiaries (“Other Stock-Based Awards”). The Committee shall determine the terms and conditions of such Awards. Stock issued pursuant to an Other Stock-Based Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods and in such forms, including, without limitation, cash, Stock, other Awards or other property, as the Committee shall determine. Awards that may be settled in whole or in part in cash or other property (not including Stock) may also be granted pursuant to this Section 6(h) (“Cash Awards”). The Committee shall determine the terms and conditions of such Cash Awards. SECTION 7 CERTAIN PROVISIONS APPLICABLE TO AWARDS      (a)  Stand-Alone, Additional, Tandem and Substitute Awards. Awards may be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company, any business entity to be acquired by the Company or any Subsidiary, or any other right of a Participant to receive payment from the Company or any Subsidiary. Awards granted in addition to or in tandem with other Awards or awards may be granted either as of the same time or as of a different time from the grant of such other Awards or awards.      (b)  Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any ISO or any SAR granted in tandem therewith exceed the period permitted under Code section 422.      (c)  Form of Payment Under Awards. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or any Subsidiary upon the grant, exercise or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments or on a deferred basis. Such payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments denominated in Stock.      (d)  Legal Compliance.        (i) Compliance with Code Section 162(m). It is the intent of the Company that Options, SARs and other Awards designated as such constitute “performance-based compensation” within the meaning of Code section 162(m). Subject to automatic acceleration and payout resulting from a Change of Control under Section 7(g), if any provision of the Plan or of any Award Agreement relating to such an Award does not comply or is inconsistent with the requirements of Code section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee or any other person discretion to increase the amount of compensation otherwise payable in connection with any such Award upon attainment of the performance goals. - 8 - --------------------------------------------------------------------------------          (ii) Section 16 Compliance. With respect to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Company, the Committee shall implement transactions under the Plan and administer the Plan in a manner that will ensure that each transaction by such a Participant is exempt from liability under Rule 16b-3, except that such a Participant may be permitted to engage in a nonexempt transaction under the Plan if written notice has been given to the Participant regarding the nonexempt nature of such transaction. The Committee may authorize the Company to repurchase any Award or shares of Stock resulting from any Award in order to prevent a Participant who is subject to Section 16 of the Exchange Act from incurring liability under Section 16(b). Unless otherwise specified by the Participant, equity securities, including, without limitation, derivative securities, acquired under the Plan which are disposed of by a Participant shall be deemed to be disposed of in the order acquired by the Participant.      (e)  Loan Provisions. With the consent of the Committee, and subject at all times to, and only to the extent, if any, permitted under and in accordance with, laws and regulations and other binding obligations or provisions applicable to the Company, the Company may make, guarantee or arrange for a loan or loans to a Participant with respect to the exercise of any Option or other payment by the Participant in connection with any Award, including, without limitation, the payment by a Participant of any or all federal, state or local income or other taxes due in connection with any Award. Subject to such limitations, the Committee shall have full authority to decide whether to make a loan or loans hereunder and to determine the amount, terms and provisions of any such loan or loans, including, without limitation, the interest rate to be charged in respect of any such loan or loans, whether the loan or loans are to be with or without recourse against the Participant, the terms on which the loan or loans are to be repaid and the conditions, if any, under which the loan or loans may be forgiven.      (f)  Performance-Based Awards. The Committee may designate any Award, the exercisability, vesting, payment or settlement of which is subject to the attainment of one or more preestablished performance goals, as a performance-based Award intended to qualify as “performance-based compensation” within the meaning of Code section 162(m). The performance goals for an Award subject to this Section 7(f) shall consist of one or more business criteria, identified below, and a targeted level or levels of performance with respect to such criteria, as specified by the Committee. Performance goals shall be objective and shall otherwise meet the requirements of Code section 162(m)(4)(C). The following business criteria for the Company, on a consolidated basis, and/or for specified Subsidiaries or business units of the Company, shall be used by the Committee in establishing performance goals for such Awards: (i) earnings; (ii) net income; (iii) net income applicable to Stock; (iv) revenue (v) cash flow; (vi) return on assets; (vii) return on net assets; (viii) return on invested capital; (ix) return on equity; (x) profitability; (xi) economic value added; (xii) operating margins or profit margins; (xiii) income before income taxes; (xiv) income before interest and income taxes; (xv) income before interest, income taxes, depreciation and amortization; (xvi) total return on Common Stock; (xvii) book value; (xviii) expense management; (xix) capital structure and working capital; (xx) strategic business criteria, consisting of one or more objectives based on meeting specified revenue, gross profit, market penetration, geographic business expansion, cost targets or goals relating to acquisitions or divestitures; (xxi) costs; (xxii) employee morale or productivity; (xxiii) customer satisfaction or loyalty; (xxiv) customer service; (xxv) compliance programs; (xxvi) gas delivered; (xxvii) system reliability; (xxviii) adequacy and security of gas supply; and (xxix) safety. The levels of performance required with respect to such business criteria may be expressed in absolute or relative terms, including, without limitation, per share amounts and comparisons to the performance of a published or special index deemed applicable by the Committee, such as the Standard & Poor’s 500 Stock Index or the performance of one or more comparator companies. In establishing the levels of performance to be attained, the Committee may disregard or offset the effect of such factors as extraordinary and/or nonrecurring events as determined by the Company’s independent certified public accountants in accordance with generally accepted accounting principles and changes in or modifications to accounting standards as may be required by the Financial Accounting Standards Board. Achievement of performance goals with respect to such Awards shall be measured over a period of not less than one year nor more than five years, as the Committee may specify. Performance goals may differ for Awards to different Participants. The Committee shall specify the weighting to be given to each business criterion for purposes of determining the final amount payable with respect to any such Award. The Committee may reduce the amount of a payout otherwise to be made in connection with an Award subject to this Section 7(f), but may not exercise its discretion to increase such amount, and the Committee may consider other performance criteria in exercising such negative discretion. All determinations by the Committee as to the attainment of performance goals shall be in writing. The Committee may not delegate any responsibility with respect to an Award that is intended to qualify as “performance-based compensation” within the meaning of Code section 162(m).      (g)  Acceleration and Payout upon a Change of Control. Notwithstanding anything contained herein to the contrary, all conditions and/or restrictions relating to the continued performance of services and/or the achievement of performance goals with respect to the exercisability, vesting, payment or settlement of an Award shall immediately lapse upon a Change of Control, and all Awards shall be immediately paid or settled in Stock; provided, however, (i) that such lapse shall not occur if (A) it is intended that the transaction constituting such Change of Control be accounted for as a pooling of interests under Accounting Principles Board Opinion No. 16 (or any successor thereto), and operation of this Section 7(g) would be the sole reason for the inability to comply with - 9 - --------------------------------------------------------------------------------   Paragraph 47(c) thereof (or any successor thereto), or (B) the Committee determines that such lapse shall not occur, except that the Committee shall not have the discretion granted in this clause (B) if it is intended that the transaction constituting such Change of Control be accounted for as a pooling of interests under Accounting Principles Board Opinion No. 16 (or any successor thereto), and such discretion or the exercise thereof would be the sole reason for the inability to comply with Paragraph 47(c) thereof (or any successor thereto); and, (ii) that obligations under such Awards shall be immediately paid or settled in cash, rather than in Stock, if it is intended that the transaction constituting such Change of Control be accounted for as a pooling of interests under Accounting Principles Board Opinion No. 16 (or any successor thereto), and payment or settlement in Stock would be the sole reason for the inability to comply with Paragraph 47(c) thereof (or any successor thereto). SECTION 8 GENERAL PROVISIONS      (a)  Compliance with Laws and Obligations. The Company shall not be obligated to issue or deliver Stock in connection with any Award or to take any other action under the Plan in a transaction subject to the requirements of any applicable securities law, any requirement under any listing agreement between the Company and any national securities exchange or automated quotation system or any other law, regulation or contractual obligation until the Company is satisfied that such laws, regulations and other obligations have been complied with in full. Certificates representing shares of Stock issued under the Plan may be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations and other obligations, including, without limitation, any requirement that a legend or legends be placed thereon.      (b)  Limitations on Transferability. Awards and other rights or benefits under the Plan shall not be transferable by a Participant except by will or the laws of descent and distribution or to a Beneficiary in the event of the Participant’s death, shall not be pledged, mortgaged, hypothecated or otherwise encumbered, or otherwise be subject to the claims of creditors and, in the case of ISOs and SARs in tandem therewith, shall be exercisable during the lifetime of a Participant only by such Participant or his guardian or legal representative; provided, however, that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more transferees during the lifetime of the Participant to the extent and on such terms and conditions as may then be permitted by the Committee.      (c)  No Right to Continued Employment or Service. Neither the Plan nor any action taken hereunder shall be construed as giving any employee or any person the right to be retained in the employ or service, as applicable, of the Company or any Subsidiary, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate any employee’s employment or any person’s service at any time.      (d)  Taxes. The Company and any Subsidiary is authorized to withhold from any Award granted or exercised, vested, paid or settled any delivery of cash, Stock, other Awards or other property, or from any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and the Participant to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include, without limitation, authority to withhold or receive Stock, other Awards or other property, and to make cash payments in respect thereof, in satisfaction of a Participant’s tax obligations.      (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or terminate the Plan or the Committee’s authority to grant Awards under the Plan without the consent of the Company’s stockholders or Participants, except that any such Board action shall be subject to the approval of the Company’s stockholders at or before the next annual meeting of stockholders for which the record date is after such Board action if such Board action increases the number of shares of Stock subject to the Plan or if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights or benefits of such Participant under any Award theretofore granted to him (as such rights and benefits are set forth in the Plan and the Award Agreement). The Committee may waive any terms or conditions under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award Agreement relating thereto; provided, however, that, without the consent of an affected Participant, no such action may materially impair the rights or benefits of such Participant under such Award (as such rights or benefits are set forth in the Plan and the Award Agreement) except to the extent necessary for a business combination in which the Company is a party to be accounted for under the pooling-of-interests method of accounting. - 10 - --------------------------------------------------------------------------------        (f)  No Rights to Awards; No Stockholder Rights. No Participant, employee or eligible person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants, employees or eligible persons. No Award shall confer on any Participant any of the rights or benefits of a stockholder of the Company unless and until Stock is duly issued or transferred and delivered to the Participant in accordance with the terms of the Award or, in the case of an Option, the Option is duly exercised.      (g)  Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give any such Participant any rights or benefits that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company’s obligations under the Plan to deliver cash, Stock, other Awards or other property pursuant to any Award, which trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of an affected Participant.      (h)  Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the Company’s stockholders for approval shall be construed as creating any limitations on the power of the Board to adopt such other compensatory 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 applicable generally or only in specific cases.      (i)  No Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares, or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.      (j)  Gender; Singular and Plural. All masculine pronouns shall be deemed to include their feminine counterparts. As the context may require, the singular may be read as the plural and vice versa.      (k)  Governing Law. The validity, construction and effect of the Plan or any Award Agreement and any rules and regulations relating to the Plan or any Award Agreement shall be determined in accordance with the laws of the Commonwealth of Virginia, without giving effect to principles of conflicts of laws, and applicable federal law.      (1)  Effective Date; Plan Termination. The Plan shall become effective as of the date of its approval by the Company’s stockholders, and shall continue in effect until terminated by the Board. - 11 -

QuickLinks -- Click here to rapidly navigate through this document [***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. Exhibit 10.63 MANUFACTURING LICENSE AGREEMENT     THIS AGREEMENT DATED THIS 6TH DAY OF MARCH 2001 IS MADE BETWEEN:     HIMACHAL FUTURISTIC COMMUNICATIONS LTD, a company incorporated under the Companies Act, 1956, having its principal office at No. 8, Commercial Complex Masjid Moth, Greater Kailash II, New Delhi 110048, India (hereinafter referred to as "HFCL"), which expression shall unless repugnant to the context or meaning hereof, mean and include its successors and permitted assigns of the one Part; AND     UTStarcom, Inc. a company established under laws of Delaware in the United States of America, having its principal office at 1275 Harbor Bay Parkway, Suite 100, USA (hereinafter referred to as "UTStarcom"), which expression shall unless repugnant to the context or meaning hereof, mean and include its successors and permitted assigns of the other Part.     HFCL and UTStarcom are hereinafter collectively referred to as the "Parties", and individually as a "Party". WHEREAS:     A. UTStarcom designs, develops, manufactures, markets and sells digital loop carriers, including the Product (as hereinafter defined);     B. HFCL is in the business of manufacturing and supplying telecommunications equipment and wishes to manufacture and distribute the Product;     C. For this purpose, HFCL wishes to obtain from UTStarcom a license to manufacture and sell the Product in India;     D. UTStarcom is willing to license to HFCL the right to manufacture the Product in India for sale in India;     E. HFCL has explained to UTStarcom the need to manufacture the Product on a [***] basis in order to be competitive; and     F. The Parties intend that with respect to manufacturing the Product on a [***] basis, HFCL will require to obtain components and material from [***] sources and other [***] sources wherever possible.     For valuable consideration, including the mutual promises contained in this Agreement, the Parties agree to the following terms and conditions:     1.  DEFINITIONS     Unless the context otherwise requires, the following expressions shall have the following respective meanings and terms defined in the text of this Agreement shall have the meanings respectively indicated:     1.1 "Agreement" shall mean this Agreement between HFCL and UTStarcom including any and all appendices attached to this Agreement. --------------------------------------------------------------------------------     1.2 "Effective Date" means:     (a) the date of this Agreement, or     (b) the date on which all consents, licenses, permits and approvals of any relevant governmental or non-governmental agency or body necessary to consummate the transactions contemplated in this Agreement including Secretariat for Industrial Assistance/Reserve Bank of India approval in terms of Article 7, have been obtained, released or issued, as the case may be, whichever is later.     1.3 "Improvements" means:     (a) all information, of a nature similar to the Technical Information, that UTStarcom acquires or puts into use during the term of this Agreement for purposes of manufacturing the Product ("UTStarcom Improvements"); and     (b) all information of a nature similar to the Technical Information that HFCL devises or develops in connection with or for purposes of manufacturing the Product including improvements in terms of Sections 6.9 and 6.10 below ("HFCL Improvements").     1.4 "Product" means the [***] as more fully described in Exhibit A and certain upgrades from time to time in the same product hierarchy.     1.5 "Technical Information" means such designs, drawings, specifications and other information that UTStarcom uses for the purposes of manufacturing the Product, including written documentation and unwritten know-how used by UTStarcom in the assembly, manufacture, testing, sale, use and maintenance of the Product, as more fully described in Exhibit B.     1.6 "Territory" shall mean [***].     2.  TECHNICAL INFORMATION     2.1 UTStarcom shall, on a time scale mutually agreed by the Parties and commensurate with the reasonable requirements of HFCL in that behalf supply to HFCL such Technical Information [***] necessary to enable HFCL to assemble the Product at HFCL's plant(s) in the Territory.     2.2 UTStarcom shall not be obliged to make any alterations to any document, extract or copy which it supplies hereunder as part of the Technical Information or in relation to any UTStarcom Improvement.     2.3 HFCL shall use the Technical Information, know-how and UTStarcom Improvements only for the manufacture of the Product at the manufacturing plant of HFCL in the Territory and shall not use any Technical Information, know-how or UTStarcom Improvements in any manner or for any other purpose not expressly authorized by this Agreement. HFCL shall not part with or dispose of, whether by sale, transfer, gift or other disposition, any Technical Information, know-how or UTStarcom Improvements except as expressly and previously permitted by UTStarcom in writing.     2.4 In the event that any deficiency, inaccuracy, error or other defect shall at any time become apparent in any Technical Information so supplied by UTStarcom, UTStarcom shall, upon receiving a written request from HFCL, promptly use all reasonable endeavors to make and supply the appropriate corrections.     2.5 If, within [***] of executing this Agreement, HFCL does not commence manufacturing the Product; then UTStarcom shall have the right to deem this Agreement terminated, effective upon UTStarcom's giving written notice to HFCL. Upon receiving such notice, HFCL shall, in addition to its obligations and liabilities under Sections 12.3, 12.4 and 12.6 of this Agreement and its obligation to pay the technology license fee in accordance with the terms of this Agreement, 2 -------------------------------------------------------------------------------- cease using and shall have no right to use any of the Technical Information, know-how and UTStarcom Improvements.     2.6 Notwithstanding Section 2.5, UTStarcom may in its absolute discretion allow HFCL a reasonable extension to commence manufacturing the Product of up to [***] term if the failure to start manufacturing the Product arises from a force majeure or is substantially caused by UTStarcom's failure to provide the Technical Information in a timely manner, unless such failure on the part of UTStarcom is attributable to an act or omission of HFCL or is directly caused by any reason substantially attributable to the acts of a third party reasonably within the control of HFCL.     2.7 The Parties acknowledge that except as specifically licensed to HFCL under this Agreement, UTStarcom owns or has licenses to, to the exclusion of HFCL, all rights, title and interest in the Technical Information, know-how, UTStarcom Improvements and the Product, as they exist now and as they may exist in the future, and in all related know-how and all software that may be provided by UTStarcom as part of or in connection with the Technical Information, know how or UTStarcom Improvements for the manufacture of the Product. HFCL warrants that its use of any of the Technical Information, know-how or UTStarcom Improvements for manufacture of the Product shall not directly or indirectly create in or for HFCL any right, title or interest in such Technical Information, know-how or UTStarcom Improvements, except as expressly specified in this Agreement.     3.  IMPROVEMENTS.     3.1 For [***] after the Effective Date, subject to grant of appropriate export licenses in the United Stated of America, UTStarcom shall supply HFCL with Technical Information relating to UTStarcom Improvements including software upgrades that are actually incorporated by UTStarcom into the Product. Upon request [***] of HFCL, UTStarcom shall furnish engineering personnel to provide the know-how to allow HFCL to obtain the benefits of the UTStarcom Improvements, upon terms and conditions related to royalty payments for Improvements to be mutually agreed to in writing. All information contained in UTStarcom Improvements, including the related know-how, when provided pursuant to such mutual agreement, shall become a part of the Technical Information.     3.2 Section 3.1. does not apply to new products. The manufacturing information on certain upgrades—[***] shall be supplied [***] by UTStarcom. UTStarcom expects these designs to be mature by the [***].     4.  TECHNICAL ASSISTANCE; QUALITY CONTROL; VISITS     4.1 UTStarcom shall, at HFCL's request and prepayment of [***] applicable charges and expenses, including but not limited to [***] and such other [***] expenses, and subject to the availability of UTStarcom personnel, take all reasonable steps to arrange for UTStarcom engineers and technicians, as appropriate to work at the plant in India where HFCL will manufacture the Product, to establish and bring into operation the manufacturing processes of the Product and to train HFCL personnel, as may be required by HFCL. UTStarcom shall determine in its sole discretion the number, identity and level of expertise of the personnel required to provide technical assistance to HFCL, and HFCL shall obtain all necessary prior approvals, including all immigration permits and authorizations, from the Government of India for UTStarcom engineers and technicians to visit the plant and shall pay UTStarcom in accordance with UTStarcom's standard charges then in effect for such services.     4.2 For the purpose of familiarizing HFCL's staff with the methods used by UTStarcom in relation to the manufacture of the Product, HFCL shall be entitled during the term of this Agreement, on request, but in each case at a time reasonably convenient to UTStarcom, to send 3 -------------------------------------------------------------------------------- suitably qualified employees of HFCL, not exceeding [***] in number, to UTStarcom's facilities for visits not exceeding in the aggregate [***] per [***]. UTStarcom will also host visits by employees of HFCL's customers on terms and conditions subject to mutual agreement. HFCL shall be responsible for [***] such employees' [***] expenses in connection therewith. HFCL shall [***] UTStarcom from all damages, losses, claims and expenses of any nature whatsoever arising from any deliberate act or omission of HFCL's personnel while with UTStarcom for the purpose of such training. Additionally, HFCL shall cause all such personnel to execute and abide by any and all confidentiality agreements and other requirements that UTStarcom may reasonably request.     4.3 All information communicated by UTStarcom to HFCL pursuant to Sections 4.1 and 4.2 shall constitute Technical Information of UTStarcom and HFCL shall keep all such information confidential as is required by Article 5, whether or not elsewhere described and whether or not summarized in writing and given by UTStarcom to HFCL.     4.4 HFCL shall procure all necessary approvals, licenses, no-objection certificates, sanctions, permits, permissions, waivers, certificates, consents, and other such items from the concerned governmental authorities as are required under law or reasonably recommended by UTStarcom's counsel, including as may be required under the Environmental Protection Act, Factories Act and other such laws, to enable HFCL to manufacture the Product in accordance with this Agreement. In manufacturing the Product, HFCL shall observe all applicable laws in the Territory with respect to manufacturing, labeling and installation of the Product.     4.5 UTStarcom shall have the right, [***] and on reasonable prior notice to HFCL, to inspect HFCL's premises and the premises of any of HFCL's permitted sub-contractors from time to time engaged in assembling or testing of the Product or any parts or components of the Product, for purposes of reviewing the quality of HFCL's manufacturing process and of the end product. If at any time UTStarcom determines that HFCL's process or the end product does not conform to UTStarcom's requirements, it shall so inform HFCL. Upon receiving notice of such non-conformance, HFCL shall take all steps required to cause its processes and the end products to conform to UTStarcom's requirements and provide a written undertaking to UTStarcom of such compliance.     4.6 HFCL undertakes to conform to UTStarcom's quality standards. In order to ensure HFCL's compliance with UTStarcom's quality standards, qualitative specifications, descriptions and directions specified by UTStarcom from time to time, in relation to the manufacture of the Product, HFCL undertakes to manufacture the Product in accordance with the Technical Information provided, the applicable laws of the Territory and as per standards and procedures that are equivalent to that maintained by UTStarcom in its own manufacture of the Product. HFCL shall make no change or alteration in the Product manufactured without the prior written consent of UTStarcom. UTStarcom reserves the right to access into and inspect the premises of HFCL and of any subcontractors in order to ascertain that the quality of the Product meets UTStarcom's quality standards. Upon request of UTStarcom or UTStarcom's designated agents, HFCL shall furnish UTStarcom with information and copies of documents necessary for UTStarcom to obtain assurance that the Product is manufactured using the Technical Information and know-how in accordance with this Agreement and in compliance with applicable laws.     4.7 HFCL shall implement such procedures or regulations as UTStarcom may consider necessary to ensure conformity to UTStarcom's quality standards and to impose corrective actions as deemed necessary.     5.  CONFIDENTIALITY     5.1 UTStarcom discloses the Technical Information, know-how and UTStarcom Improvements (in this Article collectively referred to as "Confidential Information") to HFCL pursuant to this 4 -------------------------------------------------------------------------------- Agreement solely on a confidential basis, conditioned upon HFCL not disclosing any portion of any Confidential Information to any third party, except to the extent such Confidential Information is needed by customers of HFCL for use, maintenance or repair of the Product. Disclosure of any Confidential Information to any officer, director, consultant or employee of HFCL for the manufacture of the Product will be on "as needed basis" and all such Confidential Information shall be subject to the confidentiality requirements of section 5 of this agreement. HFCL shall use the Confidential Information only for the assembly, manufacture, testing, repair, marketing, sale and use of the Product strictly in accordance with the terms of this Agreement and for no other purpose.     5.2 HFCL undertakes that it will keep the Confidential Information communicated to it by UTStarcom confidential.     5.3 The obligations of HFCL with respect to the Confidential Information shall not apply to any information which,     (a) is already in HFCL's possession at the date of first communication by UTStarcom and HFCL can reasonably demonstrate that it was in its rightful possession at the date of first communication by UTStarcom;     (b) is now or, in the future becomes public knowledge otherwise than by reason of any breach of this Agreement by HFCL; or     (c) is received by HFCL from any other person in good faith, and who has no restriction with respect to disclosing such Confidential Information.     5.4 All documents and extracts comprising or containing Technical Information and Improvements, including the copyright therein, shall be and remain the property of UTStarcom, and HFCL shall not in any way reproduce such material.     5.5 The provision of confidentiality shall remain into force for a period of five years after expiration or termination of this Agreement.     5.6 HFCL understands that disclosure of Confidential Information may irreparably harm UTStarcom. In the event of breach or threatened breach of obligations pertaining to Confidential Information, UTStarcom shall be entitled to seek injunctive relief and any other remedy available at law or equity.     6.  LICENSES     In consideration of the performance of the Parties' respective obligations herein:     6.1 UTStarcom hereby grants to HFCL [***] license to use the Technical Information to assemble, manufacture, and test the Product in the Territory.     6.2 UTStarcom hereby grants to HFCL [***] license to use, sell, lease, install, maintain and repair the Product in the Territory.     6.3 UTStarcom hereby grants to HFCL the license to assemble, manufacture, test, use, sell, lease, install, maintain and repair, in accordance with Sections 6.1 and 6.2, the Product under the Patents owned or controlled by UTStarcom and under which UTStarcom has the right to grant such a license.     6.4 UTStarcom hereby grants to HFCL the license to print, copy and distribute Product related user documentation in paper, electronic or CDROM media in the Territory in conjunction with the sale of Product. 5 --------------------------------------------------------------------------------     6.5 To the extent any of the licenses described in Sections 6.1, 6.2 or 6.3 include software of any nature, the right granted with respect to such software shall be a [***] license solely with respect to the object code of such software:     (a) to [***] such software only to customers of HFCL for use with the Product in the Territory; and     (b) to use such software for HFCL's own purposes in operating the Product to the extent provided in this Agreement.     6.6 In granting these licenses to HFCL, UTStarcom does not in any way grant any ownership interest in any of the software referred to in Section 6.4 and does not grant any interest to utilize, discover or in any way obtain the source code or any human perceivable version of any such software. UTStarcom reserves all rights not expressly granted under this Agreement by UTStarcom to HFCL.     6.7 The license and rights granted as above in Sections 6.1, 6.2 and 6.3 shall at all times be subject to the terms and conditions of this Agreement, shall be limited to the sole extent required for the purpose for which they are granted and shall remain in effect only as long as HFCL fully complies with the terms and conditions of this Agreement.     6.8 HFCL shall not, and shall require and ensure that all of its customers and users do not, reverse compile, reverse engineer, reverse assemble or otherwise attempt in any way to obtain or create any source code or other humanly perceivable version of the software. HFCL shall require its customers to enter into such sublicenses with its customers which shall include, among other things, provisions to safeguard and keep secret UTStarcom's Improvements, know-how, Technical Information and all software and which shall contain such of the terms and conditions as may be agreed from time to time by UTStarcom and HFCL. In addition, HFCL shall supply or include UTStarcom's intellectual property notices in all copies made of all of UTStarcom supplied software.     6.9 HFCL shall inform UTStarcom immediately upon the creation of any perceived or actual modification, improvement or other change to the Product or to the Technical Information conceived, developed, modeled or in any way worked on by HFCL or any agent, representative, contractor or employee of HFCL (an "HFCL Improvement").     6.10 HFCL hereby assigns, transfers and coveys to UTStarcom all rights, title and interest in every HFCL Improvement, and UTStarcom hereby grants to HFCL a license, identical in terms to the license that UTStarcom grants to HFCL pursuant to this Agreement with respect to the Technical Information, to all HFCL Improvements. HFCL shall take all such further acts and execute and deliver to UTStarcom all such instruments as may be required, or reasonably recommended by counsel, to perfect, register or enforce UTStarcom's ownership of the rights conveyed under this Section 6.10 or to carry out the intent and purpose of this Agreement.     6.11 Except as specifically permitted by this Agreement or in writing signed by UTStarcom, HFCL shall not, and shall not have the right to, utilize sub-contractors for the purposes of assembling or testing the Product.     6.12 This Agreement does not grant any right to HFCL, and HFCL shall have no right, interest or title to use the trademark "UTStarcom" or any other trademark, trade name, design or logo of UTStarcom, except that HFCL may use the printed and unstylized name, "UTStarcom, Inc." for the limited use required by Section 6.13. Furthermore, HFCL shall not use any trademark, trade name, design or logo that may be confusingly similar to any of the trademarks, trade names, designs or logos of UTStarcom, nor shall HFCL take any action that 6 -------------------------------------------------------------------------------- would in any way be detrimental to UTStarcom's rights and ownership in such trademarks, trade names, designs and logos.     6.13 HFCL shall include written notices in all advertising literature, sales brochures and the like, as well as on the Product, to the affect that the Product "is manufactured under license from UTStarcom, Inc."     6.14 UTStarcom shall decide, in consultation with HFCL, what logo(s) are to be displayed on Product. HFCL shall comply with such a requirement.     6.15 HFCL expects that following will be minimum sale of lines of the product year wise: Year 2001  [***] Year 2002  [***] Year 2003  [***] Year 2004  [***] Year 2005  [***]     UTStarcom reserves the right to review HFCL's sales performance [***] and make this agreement [***] if failure to achieve the sales targets is primarily due to lack of proper effort on HFCL's part.     7.  CONSIDERATION.     7.1 HFCL shall pay UTStarcom a technology license fee in upto [***] instalments, not exceeding [***], to be calculated in terms of para 7.2. The first [***] payment will be due immediately on completion of following activities:     [***]     The first payment shall be due on the last day of first [***] and subsequent payments shall be done in the same manner. The calendar year is to be divided into the following [***]. Subsequent installments will be due on the last day of each of the [***] following the due date of the first payment. The payment shall be made within [***] from the invoice date.     7.2 The amount of each installment payable would be calculated based upon the quantity of Product manufactured and shipped by HFCL in the [***] immediately preceding the date of the payment. The rate at which the technology license fee adjustment is calculated varies with the different types of Product components manufactured and is detailed in Exhibit A.     7.3 This Agreement will automatically terminate upon the occurrence of the earlier of the two events:     (a) The cumulative amount of the license fee payment under this Agreement equaling or exceeding [***]     (b) The completion of [***] installments of [***] payments of license fee.     This agreement may be renewed immediately upon termination with mutual agreement of HFCL and UTStarcom.     7.4 Additionally, HFCL shall     (a) pay UTStarcom a [***] software license fee of [***], payable within [***] of signing of this agreement and     (b) purchase from UTStarcom or a UTStarcom authorized agent, all application specific integrated circuits, (ASIC) or field programmable gate arrays (FPGAs) that HFCL incorporates into a Product, in accordance with the pricing in Exhibit "A" and terms of Exhibit "C." 7 --------------------------------------------------------------------------------     (c) not attempt to manufacture, purchase, or acquire in any other way the components referred to in 7.4(b) from any source other than UTStarcom without the prior written approval of UTStarcom.     7.5 HFCL shall be responsible for applying for and obtaining all approvals required for remitting payments to UTStarcom required under this Agreement, including Secretariat for Industrial Assistance/Reserve Bank of India approval. HFCL shall use all reasonable diligence and expediency to obtain all required approvals for remitting payments to UTStarcom required under this Agreement. If HFCL is unable to obtain any required approval for remitting payments to UTStarcom required under this Agreement within [***] of signing this Agreement, then this Agreement shall terminate in accordance with Section 12.2(f), and the provisions of Sections 12.3, 12.4 and 12.7 shall apply.     7.6 HFCL shall make all payments under this Agreement [***], without recourse to UTStarcom for any reimbursement, contribution or indemnity. Notwithstanding its obligations pursuant to the prior sentence HFCL shall deduct [***] on the amount to be remitted to UTStarcom on account of:     (a) any fee or other amount to be paid by HFCL to UTStarcom; or     (b) UTStarcom with respect to any such fee or     (c) if such tax is required by the Government of India to be paid by UTStarcom or withheld by anyone paying to UTStarcom.     7.7 Whether as a result of any payment under this Agreement or any characterization by the Government of India or any payment due under this Agreement, HFCL shall ensure that the tax is withheld and paid on behalf of UTStarcom and all other parties liable for such tax and shall also provide to UTStarcom, immediately after each such tax payment, an official tax receipt or other evidence of payment issued by the tax authority with respect to such tax. HFCL shall indemnify and hold UTStarcom harmless from any liability with respect to any tax, including all taxes levied on this Agreement, duties, levies or other fees of any kind whatsoever, which become payable as a consequence of this Agreement, inside the Territory other than the withholding tax as proposed in para 7.6.     7.8 [***] shall be responsible for taxes on its net income arising in the United States as a result of its providing the Technical Information and assistance in connection with this Agreement.     7.9 The Parties acknowledge that all payments set forth in this Agreement are not based entirely upon the trade secret nature of the Technical Information or the anticipation of patent protection, but also reflect the value of certain information that is not generally known to the public being available to HFCL for its use to manufacture, test, market and sell the Product.     7.10 All payments from HFCL to UTStarcom shall be in [***].     7.11 HFCL shall keep and maintain all appropriate records including records of every Product manufactured in such form and manner that all payments payable under this Agreement to UTStarcom may be readily and accurately determined. Such records shall include, without limitation, all information necessary for HFCL's auditors to prepare the reports provided for in this section. Beginning with the signing of this Agreement and for up to [***] after either the termination of this Agreement UTStarcom shall have the right, [***] to retain independent auditors to review HFCL's records with respect to every Product manufactured to verify the accuracy of the statements provided and amounts paid pursuant to this Article. If the auditors find an overpayment or an underpayment, the difference shall be accounted for in the subsequent statement of accounting and payment. If the auditor's review verifies an underpayment in excess of [***] of the royalties payable for any [***] period under review, or if the auditors determine that 8 -------------------------------------------------------------------------------- HFCL has not maintained sufficiently appropriate records, HFCL shall pay all costs associated with the auditor's review.     7.12 The Application Specific Integrated Circuit (ASIC) chips listed in Exhibit A may only be procured by HFCL as per procedures approved by UTStarcom. Initially the following procedures are approved:     (a) HFCL may purchase the listed ASICS from UTStarcom. UTStarcom agrees to charge not more than a [***] surcharge on the cost of procurement and programming of these items.     (b) HFCL may purchase the listed ASICS directly from third party vendors and send them to UTStarcom's facility in China for programming. HFCL agrees to pay a [***] programming fee per ASIC chip thus programmed.     In addition, UTStarcom will explore the feasibility of establishing a programming facility in India, either at a third party's premises or in HFCL's premises. Under such a scenario, UTStarcom will invoice HFCL the actual cost of such programming incurred by UTStarcom. UTStarcom reserves the right to modify the list of controlled ASICS in Exhibit A at any time by informing HFCL of the change in writing. UTStarcom will make a good faith effort to reduce the size of the list to the minimum in order to contain administrative and overhead costs.     8.  COLLATERAL SUPPLIES.     To the extent necessary to support HFCL in its manufacturing activity, UTStarcom undertakes, subject to UTStarcom's availability and the parties' agreement on terms, reasonably to supply HFCL with assembly, and testing tools, equipment and parts, as the parties determine separately in writing. Except as may be expressly provided in such other written agreement, UTStarcom shall have no obligation of any nature to supply any part or component to HFCL.     9.  NOVATION; ASSIGNMENT.     This Agreement is personal to HFCL and HFCL shall not have any right to dispose in any way, by lease, transfer, novation or assignment, partially or totally, any license granted to it under this Agreement, to any third person, in form of a sub-license or any other form, unless previously authorized in writing by UTStarcom. Any attempted assignment or delegation in violation of this Article 9 shall be void.     10. PATENTS, MARKING.     10.1 UTStarcom shall not be liable to indemnify HFCL against any loss sustained by it as the result of any claim made, or any action brought by, any third party for infringement of any letters, patent, registered design, or like instrument of privilege by reason of the manufacture, assembly, use or sale by HFCL of the Product using the Technical Information, the Improvements or any other information supplied or to be supplied to HFCL pursuant to this Agreement. If any such claim is brought against HFCL, UTStarcom shall take all reasonable steps to provide HFCL with copies of UTStarcom's documentation to assist HFCL in defending itself under such claim. UTStarcom confirms that all intellectual property rights for proprietary software developed by UTStarcom is held by UTStarcom, except to the extent licensed such as pursuant to this Agreement.     10.2 UTStarcom shall not be bound to take legal proceedings against any third party in respect of any infringement of letters, patent, registered design or like instrument of privilege which may now or at any future time be owned by it.     10.3 HFCL shall indemnify and hold UTStarcom, [***] harmless from and against all losses, costs, expenses and damages, including reasonable attorneys' fees, resulting from or in connection 9 -------------------------------------------------------------------------------- with any breach by HFCL of this Agreement or any claim by third persons resulting from or in connection with HFCL's assembly, manufacture, marketing, sale or use of Product, to the extent such third party claim does not arise from any design, act or omission directly attributable to UTStarcom, subject to UTStarcom having notified HFCL promptly in writing of any such claim, tendered to HFCL the defense or settlement of any such claim at HFCL's expense, and cooperated with HFCL, at HFCL's expense, in defending or settling such claim.     10.4 HFCL shall defend, indemnify and hold UTStarcom harmless from and against all claims, causes of action, lawsuits, loss, expenses, obligations, damages, and liability, including costs of defense and reasonable attorney's fees, whether in contract or tort, including negligence and strict liability, as a result of property damage, personal injuries or death of any persons arising out of, or proximately caused by, in whole or in part, any action or inaction by HFCL or any defect, including any design defect, attributable, to or involving the manufacture, use, lease or sale of any Product.     10.5 HFCL shall reproduce in all copies that it makes or causes to be made of any aspect of the Product all patent, copyright and proprietary notices included by UTStarcom on any publication, software and firmware provided in connection with this Agreement so as to continue to maintain UTStarcom's rights therein. If instructed in writing by UTStarcom, HFCL shall modify such notices in order to comply with all applicable laws.     11. GOVERNING LAW AND ARBITRATION.     11.1 This Agreement shall be governed by and interpreted and construed in accordance with the laws of India. Each Party consents to the -exclusive personal jurisdiction of the courts of India. The Parties specifically [***] the application of the United Nations Convention on the International Sale of Goods.     11.2 The Parties shall seek to resolve all disputes arising out of or in connection with this Agreement, including the construction, validity, performance or breach of this Agreement, without resorting to litigation or arbitration. Prior to either Party utilizing the remedies detailed in Section 11.4, it shall first notify the other Party that the notifying Party wishes to resolve a dispute, controversy or claim that it has with the other Party arising out of or connected to this Agreement (a "Dispute"). As soon as practical and no later than [***] after the other Party receives a notice of Dispute, each Party shall appoint a dispute representative ("Dispute Representative") who shall contact the other Party toward seeking a resolution to the Dispute.     11.3 All discussions, correspondence and negotiations between the Parties pursuant to their seeking a resolution in accordance with Section 11. 1 shall be exempt from discovery and production, and shall not be admissible in any litigation or arbitration with respect to the Dispute, without the written consent of both Parties. Documents identified in or provided with such communication, which are not prepared for purposes of the Dispute resolution in accordance with Section 11.2 shall not be so exempted and may, if otherwise admissible, be admitted in evidence in any such arbitration or litigation.     11.4 If the negotiations taken place pursuant to Section 11.2 do not resolve the Dispute within [***] of the other Party's receipt of the notice of Dispute, either Party may submit the Dispute to binding arbitration to be held in London, England pursuant to the Rules of Conciliation and Arbitration of the International Chamber of Commerce (the "ICC") in accordance with the laws of England, modified as follows:     (a) All proceedings, filings and submissions shall be made solely in English, the matter shall be heard before a single arbitrator who must be selected by the mutual consent of both Parties, failing which by the ICC within [***] of submission of the respondent's answer to the 10 -------------------------------------------------------------------------------- demand for arbitration, and the arbitrator shall be an attorney experienced in international commercial transactions and trained in the common law system.     (b) Each Party shall be entitled to pre-hearing depositions of not more than three percipient witnesses.     (c) Each Party shall identify all witnesses, including experts, and produce copies of all documents to be used at the hearing at least 90 days prior to the hearing.     (d) All experts identified under Section 11.4(c) shall be subject to deposition by the opposing party at any time prior to the discovery cut-off in Section 11.4(e).     (e) All discovery must be completed at least 30 days prior to the hearing.     (f)  The hearing on the matter shall occur within 180 days after selection of the arbitrator.     (g) The arbitrator's decision shall be in accordance with the law of England, except that exemplary damages shall not be awarded.     (h) The arbitrator shall be deemed instructed by this Agreement and the Parties to issue a written decision within 60 days after completion of the hearing.     (i)  The arbitrator may award costs and expenses, including reasonable legal fees, to the prevailing Party.     (j)  Notwithstanding the foregoing procedures in this Section 11.4, the Parties may modify these procedures by written agreement.     11.5 Notwithstanding the provisions set forth above in this Article 11, UTStarcom may initiate litigation for the purpose of seeking an injunction or other relief, or other equitable relief in order to seek enforcement of any equitable remedy referred to in Section 5.6.     11.6 The Parties shall continue to perform the Agreement during the arbitration proceedings, and neither Party shall withhold any payment due or otherwise payable under this Agreement unless any such payment is, or forms a part of, the subject matter of the arbitration proceeding.     11.7 The Parties shall consent to such extension of time as may be necessary for the arbitrators to make their award.     12. TERM AND TERMINATION.     12.1 Subject to the following provisions of this Article, this Agreement and the rights and licenses hereby granted or agreed to, shall continue in force for [***] or until the termination of the Agreement according to the provisions of article 7.3, whichever is earlier.     12.2 Without affecting UTStarcom's rights pursuant to Section 2.5, in the event that HFCL shall at any time during the term of this Agreement:     (a) be in breach of any of its obligations under this Agreement, including the obligations to purchase the ASICS pursuant to Article 7, where such breach is irremediable or, if capable of remedy, is not remedied within [***] of notice from UTStarcom requiring its remedy;     (b) be or become bankrupt or insolvent, unable to pay its debts as they fall due;     (c) admit in writing that it is unable to pay its debts, make any composition with its creditors, have a receiver or manager appointed for the whole or any part of its undertaking or assets or, otherwise than as a solvent company for the purpose of and followed by an amalgamation or reconstruction where-under its successor shall be bound by its obligations 11 -------------------------------------------------------------------------------- hereunder, commence to be wound up or undergo any analogous act or proceeding under the laws of the state in which it is registered;     (d) be acquired or otherwise come under the direct or indirect control of a person or persons other than those controlling it as of the Effective Date;     (e) fail to receive required approvals for remitting payments to UTStarcom as required under this Agreement or failure to make any payment to UTStarcom as and when due pursuant to this Agreement including payments under Article 7; or     (f)  terminate this Agreement for any reason other than the expiration of [***] after the Effective Date if the term of this Agreement has not been previously extended by mutual written agreement, subject to any required regulatory approvals, then, and in any such event, UTStarcom may forthwith by notice in writing terminate this Agreement, and thereupon all rights and licenses hereby granted or agreed to be granted by UTStarcom pursuant to this Agreement shall immediately terminate.     12.3 Upon termination, HFCL shall immediately cease manufacturing the Product using the Technical Information, know-how and any Improvement and shall immediately desist from using the Technical Information, know-how and all Improvements for any purpose whatsoever. HFCL shall promptly, on UTStarcom's request, and return to UTStarcom at HFCL's cost or destroy all copies of all documents and extracts comprising or in any way containing any Technical Information, know-how or Improvements. HFCL shall procure a declaration from its board of directors as well as its legal counsel to be delivered to UTStarcom confirming that all Technical Information, know-how and Improvements, including all designs, drawings, models, samples, plans, documents, specifications and other information supplied to it by UTStarcom and all copies of such information in HFCL's possession have been destroyed or returned. The Parties expressly agree that UTStarcom shall not be liable or responsible to HFCL or to any third party claiming under or through HFCL for any claims, damages, or costs in any way whatsoever, arising in connection with any termination of this Agreement.     12.4 Upon termination of this Agreement, all rights and obligations granted under or imposed by this Agreement shall immediately cease and terminate except for the rights, duties and obligations which by their nature one would reasonably expect to survive, including the rights and obligations covered in such provisions in this Agreement with respect to payments, the sublicensed use of technology, Confidential Information, trademarks, indemnities, warranties, remedies and limitations of liability, independent contractors, export controls, governing law, arbitration and jurisdiction, assignment, severability, publicity, legal expenses, notices, subject headings, waiver and this Agreement being the entire agreement of the Parties.     12.5 UTStarcom shall not be in breach of this Agreement or liable for any damages, losses or expenses whatsoever which occur as the direct or indirect result of any delay or inability to export the Technical Information, any know-how or any UTStarcom Improvement, or any item hereunder, due to the action or inaction of any United States Government Agency.     12.6 If UTStarcom reasonably determines that HFCL has breached in any way any obligation with respect to the disclosure and use of Confidential Information of UTStarcom, including the Technical Information, know-how and UTStarcom Improvements, UTStarcom shall be immediately entitled to exercise all of its rights under this Agreement and under the law without regard to any notice or waiting period or any other provision of this Agreement. Notwithstanding the prior sentence, UTStarcom shall not terminate this Agreement or any of HFCL's rights to the Technical Information under it unless UTStarcom has first made inquiry upon HFCL with respect to such breach and allowed HFCL [***] to respond to such inquiry. Any failure by HFCL to respond to 12 -------------------------------------------------------------------------------- UTStarcom's inquiry within [***] shall constitute sufficient basis for UTStarcom to terminate this Agreement.     12.7 No termination of this Agreement shall prejudice the accrued rights of either Party, and the foregoing remedies are in addition to and shall not affect other remedies available under the governing law of this Agreement.     12.8 The terms of this agreement will apply to all manufacture and sale of the Product, to any customer whatsoever by HFCL, except the sale undertaken to DOT under the terms of the [***]. The sale of the Product to DOT by HFCL as required by the [***] will continue to be governed by the terms of the agreement signed by UTStarcom and HFCL on 6th Day of April 2000.     13. FORCE MAJEURE.     In the event that either party shall be delayed or impeded in the performance of any of its obligations hereunder by industrial disputes, or by any cause beyond its reasonable control, including but not limited to war, hostilities, disorder, embargoes or export restrictions, acts of God, fire, earthquakes, storm, proclamations, regulation, ordinance or any other analogous events, it shall not be liable to other for any failure to carry out or to observe any of the terms, provisions or conditions of this Agreement and be entitled to such extension of time as may be reasonable in all the circumstances.     14. WAIVER.     Failure by either Party to enforce at any time any of the provisions of this Agreement or any delay in exercising any right, power or remedy under this Agreement shall not be construed as a waiver by such Party of any such provisions nor in any way affect the validity of the Agreement or any part thereof.     15. PUBLICITY.     15.1 Publicity or advertising relating to this Agreement may be released by either of the Parties hereto only with the prior written approval of the other Party.     15.2 HFCL shall state in advertisements and publicity relating to the Product that it is manufactured under license from UTStarcom.     16. NOTICES; SERVICE.     All notices, requests, reports and communications of any type given or transferred by a Party to the other in connection with this Agreement shall be given in writing and shall be deemed effective when delivered to the other Party addressed as provided below: If to HFCL: --------------------------------------------------------------------------------   If to UTStarcom: -------------------------------------------------------------------------------- Managing Director HFCL, 8 Commercial Complex, Masjid Moth, Greater Kailash — II New Delhi-110048 India   Director, India Operations, 33 Wood Avenue, South Iselin, NJ 08852 Fax +91-11-6217784 Attention:                           Fax: +1 732 767 5274 Attention: Ruchir Godura     Either Party may change the address at which it wishes to receive notices under this article by giving notice to the other Party of the new address. 13 --------------------------------------------------------------------------------     17. EFFORTS AND QUALITY.     HFCL shall maintain manufacturing standards for the Product to assure that their quality is at least equal to the Product produced by UTStarcom. In order to verify quality of the Product HFCL shall permit UTStarcom's representative to inspect and test any assembled Product at HFCL's facilities prior to shipment.     18. WARRANTY; EXCLUSIONS.     18.1 UTStarcom warrants that:     (a) it has the right to license the Technical Information, the know-how and the UTStarcom Improvements to HFCL as contemplated by this Agreement; and     (b) the Technical Information, know-how and UTStarcom Improvements furnished to HFCL under this Agreement are substantially equivalent to what UTStarcom uses, as of the Effective Date, to manufacture the Product.     18.2 Except as specifically provided in this Article 18, the Technical Information, know-how and UTStarcom Improvements, including such provided software, are provided to HFCL and licensed on an "AS IS" basis WITHOUT ANY WARRANTY WHATSOEVER, AND THE PARTIES EXPRESSLY EXCLUDE ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE TECHNICAL INFORMATION, KNOW-HOW AND UTSTARCOM IMPROVEMENTS, AS WELL AS ANY PRODUCT, AND THE PARTIES EXCLUDE ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE PARTIES ALSO SPECIFICALLY EXCLUDE ALL WARRANTIES OF NON-INFRINGEMENT WITH RESPECT TO THIRD PARTY RIGHTS.     18.3 Except as otherwise specifically provided for in this Agreement, each Party shall be responsible for any and all liability to all third persons based on claims arising out of such Party's own manufacture, use or sale of any Product or any other product, whether or not in conformity with the Technical Information, know-how or UTStarcom Improvements.     18.4 HFCL warrants that:     (a) it shall be fully responsible for providing all support, maintenance and repair for all end users of every Product that it manufactures, distributes or sells and shall take all commercially reasonable efforts to ensure that no such end user contacts UTStarcom for any support or other issue with respect to any Product;     (b) it shall manufacture the Product using only high quality materials and top class workmanship and that the end product will be free from any defect in manufacture, misbranding, merchantable and fit for the intended use. HFCL shall take all reasonable care and skill in manufacturing the Product;     (c) it has the necessary expertise and staffing capabilities to manufacture the Product and to perform its obligations under this Agreement and that the Product manufactured will conform in all respect with the specifications provided by UTStarcom; and     (d) it shall give proper consideration and weight to the interests of UTStarcom in all dealings and abide by all rules, regulations, standards methods, procedures and instructions provided to it by UTStarcom.     19. GOVERNMENT APPROVALS.     19.1 This Agreement is subject to the United States export laws and regulations, and HFCL acknowledges that no technical data or other information to be provided pursuant to this Agreement may be exported until UTStarcom has first obtained all necessary and recommended 14 -------------------------------------------------------------------------------- approvals and licenses, including from the United States Government and any other entity or person that may have regulatory or other authority over this Agreement or any activity contemplated pursuant to this Agreement.     19.2 HFCL shall be responsible for obtaining all approvals of the Government of India and every other regulatory body that may be needed or recommended for entering into this Agreement and performing all of the obligations provided for under this Agreement. Specifically HFCL shall be responsible for obtaining all type approvals and all other authorizations, licenses and permits connected in any way to interconnecting or otherwise utilizing the Product in India and with any existing or future telecommunications system. HFCL shall obtain all such authorizations, licenses and permits on behalf of and for the benefit of UTStarcom and shall in no way utilize any such authorization, license or permit or its rights connected to any of them to block or in any way restrict UTStarcom from enjoying, directly or indirectly, the rights and privileges obtained pursuant to any such authorization, license or permit.     20. RELATIONSHIP OF THE PARTIES.     HFCL and UTStarcom are independent contractors. Neither Party nor its employees, consultants, contractors or agents are agents, employees or joint venturers of the other Party, nor do they have any authority to bind the other Party by contract or otherwise to any obligation. Neither Party shall expressly, implicitly, by appearance or otherwise make any representation contrary to the relationship described in this Article 20. The Parties do not intend for this Agreement or any relationship between them to create any aspect of a franchise in any way or manner.     21. LIMITATION OF LIABILITY.     21.1 EXCEPT FOR LIABILITY ARISING IN CONNECTION WITH A BREACH OF THE OBLIGATIONS PROVIDED IN ARTICLE 5 OF THIS AGREEMENT, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, IN NO CASE SHALL EITHER PARTY, ITS AFFILIATES OR THEIR EMPLOYEES AND AGENTS, BE LIABLE TO THE OTHER PARTY FOR INDIRECT, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR LOSS OF PROFITS OR CAPITAL REVENUE IN CONNECTION WITH THIS AGREEMENT EVEN IF IT HAS BEEN ADVISED AS TO THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS APPLY TO ALL CAUSES OF ACTION AND CLAIMS, INCLUDING WITHOUT LIMITATION, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS. BOTH PARTIES UNDERSTAND AND AGREE THAT THE REMEDIES, EXCLUSIONS AND LIMITATIONS IN THIS AGREEMENT ALLOCATE RISKS BETWEEN THE PARTIES AS ALLOWED BY LAW. THE TERMS AND CONDITIONS IN THIS AGREEMENT REFLECT, AND ARE SET IN RELIANCE UPON, THIS ALLOCATION OF RISKS AND THE EXCLUSION OF CONSEQUENTIAL DAMAGES AND LIMITATIONS OF LIABILITY SET FORTH IN THIS PARAGRAPH.     21.2 IN NO EVENT SHALL UT STARCOM'S LIABILITY TO HFCL OR ANY OTHER PARTY ARISING UNDER THIS AGREEMENT OR IN CONNECTION WITH ANY PRODUCT EXCEED THE [***] OR [***] WHICHEVER IS LESS.     22. SEVERABILITY.     In the event that any one or more provisions of this Agreement shall be declared to be illegal or unenforceable under any law, rule, or regulations of any government having jurisdiction over the Parties hereto, such illegibility or unenforceability shall not affect the validity and enforceability of the other provisions of this Agreement, and the parties shall agree upon a modification to this Agreement with respect to such illegal or unenforceable provisions to eliminate such invalidity or unenforceability. 15 --------------------------------------------------------------------------------     23. NO RIGHTS IN THIRD PARTIES.     This Agreement is made for the benefit of HFCL and UTStarcom and not for the benefit of any third party individual or entity.     24. HEADINGS AND REFERENCES.     The subject headings of the articles of this Agreement are included for the purpose of convenience only and shall not affect the construction or interpretation of any of its provisions.     25. ENTIRE AGREEMENT.     No modification or addition to this Agreement or its enclosures shall be binding on the two Parties unless specifically agreed upon, in writing, by the Parties themselves. This Agreement contains the entire agreement between the Parties and supersedes all agreements, expressions of interest, communications and other representations, understandings, and agreements, oral or written, between the Parties with respect to the subject matter of this Agreement. For purposes of interpretation and performance hereof, the English language version of this Agreement shall be controlling and binding on the Parties.     26. CONSTRUCTION.     This Agreement has been negotiated by the Parties and their respective counsel and shall be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either Party. 16 --------------------------------------------------------------------------------     AS WITNESS the hands of the duly authorized representatives of the Parties hereto, effective as of the day and year first written above. Signed for and on behalf of   Signed for and on behalf of HIMACHAL FUTURISTIC COMMUNICATION Ltd.   UTStarcom, Inc. By:       By:         --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Name:       Name:         --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Title:       Title:         --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Exhibit "A" Product Elements, controlled ASICS, (Page 1)     This Exhibit A lists the defining plug-in modules for the Product. The Product may also consist of associated mechanical, cabling and power subsystems and components that are reasonably required to support the operation of the items in the below list. Item --------------------------------------------------------------------------------   Module Description --------------------------------------------------------------------------------   Technology License Fee($US) -------------------------------------------------------------------------------- 1   [***]   [***] 2.1   [***]   [***] 2.2   [***]   [***] 3   [***]   [***] -------------------------------------------------------------------------------- Exhibit "A" Product Elements, controlled ASICS, (Page 2) Item --------------------------------------------------------------------------------   Module Description --------------------------------------------------------------------------------   Technology License Fee($US) -------------------------------------------------------------------------------- 4   [***]   [***] 5   [***]   [***] 6   [***]   [***] 7   [***]   [***] 8   [***]   [***] 9   [***]   [***] -------------------------------------------------------------------------------- Exhibit "A" Product Elements, Controlled, ASICS (Page 3) Item --------------------------------------------------------------------------------   Module Description --------------------------------------------------------------------------------   Technology License Fee($US) -------------------------------------------------------------------------------- 10   [***]   [***] 11   [***]   [***] 12   [***]   [***] 13   [***]   [***] 14   [***]   [***] 15   [***]   [***] 16   [***]   [***] -------------------------------------------------------------------------------- Exhibit "A" Product Elements, controlled ASICS (Page 4) Item --------------------------------------------------------------------------------   Module Description --------------------------------------------------------------------------------   Technology License Fee($US) -------------------------------------------------------------------------------- 17   [***]   [***] 18   [***]   [***] 19   [***]   [***] 20   [***]   [***] 21   [***]   [***] 22   [***]   [***] 23   [***]   [***] 24   [***]   [***] 25   [***]   [***] -------------------------------------------------------------------------------- Notes: 1)The Technical Information for the [***] will be provided by HFCL 2)The license fee for [***], when used in one to one correspondence with a [***] is [***] 3)The license fee for a [***] when used to deliver [***] as a subscriber service is [***]. License fee for [***] line card will be determined later by UTStarcom -------------------------------------------------------------------------------- Exhibit "A" Product Elements, controlled ASICS, (Page 5)     The following is the list of controlled ASICS: S/N --------------------------------------------------------------------------------   ASIC code --------------------------------------------------------------------------------   UTS Part (top) --------------------------------------------------------------------------------   UTS P/N --------------------------------------------------------------------------------   Base Code -------------------------------------------------------------------------------- [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] [***]   [***]   [***]   [***]   [***] -------------------------------------------------------------------------------- EXHIBIT "B" Technical Information     For each part of the Product to be manufactured by HFCL, UTStarcom will supply the following information: 1)Parts List for each Printed Circuit Board including Procurement specifications, vendor details and order code of vendors 2)Gerber files for each Printed Circuit Board 3)Firmware details and files in object code (excluding FPGA [ASIC] object code). 4)Circuit Diagram 5)Assembly Diagram 6)Mechanical Drawings including manufacturing drawings for each Printed Circuit Board 7)For each Sub-system and for the total system the following Technical Literature in English •System Description •Installation and Operation Manual •Testing Manual which contains test plans and procedure •Maintenance and Repair Manual which also contains Trouble shooting procedures 8)List of any special jigs for manufacturing and testing 9)List of Test instruments required for testing     The above information shall be provided for the Product Elements as in Exhibit "A" -------------------------------------------------------------------------------- EXHIBIT "C" Terms of Payment ASICS and FPGAs     HFCL shall make payments to UTStarcom for ASICs and FPGAs against an [***] to be established by HFCL in favour of UTStarcom with a bank authorized by the Reserve Bank of India to deal in foreign exchange and acceptable to UTStarcom in its sole discretion. HFCL shall open a [***]for each ASIC and/or FPGA at the time it orders them from UTStarcom. UTStarcom may also indicate in writing to HFCL, alternative means of payment and HFCL may choose to use such means. -------------------------------------------------------------------------------- QuickLinks Exhibit 10.63 MANUFACTURING LICENSE AGREEMENT AND Exhibit "A" Product Elements, controlled ASICS, (Page 1) Exhibit "A" Product Elements, controlled ASICS, (Page 2) Exhibit "A" Product Elements, Controlled, ASICS (Page 3) Exhibit "A" Product Elements, controlled ASICS (Page 4) Exhibit "A" Product Elements, controlled ASICS, (Page 5) EXHIBIT "B" Technical Information EXHIBIT "C" Terms of Payment ASICS and FPGAs

EXHIBIT 10.2 Amendment No. 1 to Continental Airlines, Inc. 1998 Stock Incentive Plan, Continental Airlines, Inc. 1997 Stock Incentive Plan and Continental Airlines, Inc. 1994 Incentive Equity Plan as Amended and Restated as of November 20, 1998 This Amendment (this "Amendment") to the Continental Airlines, Inc. 1998 Stock Incentive Plan, the Continental Airlines, Inc. 1997 Stock Incentive Plan and the Continental Airlines, Inc. 1994 Incentive Equity Plan, each as amended and restated as of November 20, 1998 (collectively, the "Plans"), is dated as of May 15, 2001 and has been adopted by the Board of Directors of Continental Airlines, Inc., a Delaware corporation (the "Company"), on May 15, 2001: Pursuant to Section X of the Plans, the Plans are hereby amended as follows: 1. Section IX(c) of the Plans is hereby amended to read in its entirety as follows: "Change in Control. As used in the Plan (except as otherwise provided in an applicable Option Agreement or Restricted Stock Agreement), the term "Change in Control" shall mean: (aa) any person (within the meaning of Section 13(d) or 14(d) under the Exchange Act, including any group (within the meaning of Section 13(d)(3) under the Exchange Act), a "Person") is or becomes the "beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company (such Person being referred to as an "Acquiring Person") representing 25% or more of the combined voting power of the Company's outstanding securities; other than beneficial ownership by (i) the Company or any subsidiary of the Company, (ii) any employee benefit plan of the Company or any Person organized, appointed or established pursuant to the terms of any such employee benefit plan (unless such plan or Person is a party to or is utilized in connection with a transaction led by Outside Persons), (iii) a Person who has a Schedule 13G on file with the Securities and Exchange Commission pursuant to the requirements of Rule 13d-1 under the Exchange Act, with respect to its holdings of the Company's voting securities ("Schedule 13G"), so long as (1) such Person is principally engaged in the business of managing investment funds for unaffiliated securities investors and, as part of such Person's duties as agent for fully managed accounts, holds or exercises voting or dispositive power over voting securities of the Company, (2) such Person acquires beneficial ownership of voting securities of the Company pursuant to trading activities undertaken in the ordinary course of such Person's business and not with the purpose nor the effect, either alone or in concert with any Person, of exercising the power to direct or cause the direction of the management and policies of the Company or of otherwise changing or influencing the control of the Company, nor in connection with or as a participant in any transaction having such purpose or effect, including any transaction subject to Rule 13d-3(b) of the Exchange Act and (3) if such Person is a Person included in Rule 13d-1(b)(1)(ii) of the Exchange Act, such Person is not obligated to, and does not, file a Schedule 13D with respect to the securities of the Company, or (iv) (I) 1992 Air, Inc., (II) any Person who controlled 1992 Air, Inc. as of February 26, 1998, including David Bonderman and James Coulter, or (III) any Person controlled by any such Person (Persons referred to in clauses (i) through (iv) hereof are hereinafter referred to as "Excluded Persons"); or (bb) individuals who constituted the Board as of May 15, 2001 (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to May 15, 2001 whose appointment to fill a vacancy or to fill a new Board position or whose 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 or who was nominated for election by Excluded Persons shall be considered as though such individual were a member of the Incumbent Board; or (cc) the Company merges with or consolidates into or engages in a reorganization or similar transaction with another entity pursuant to a transaction in which the Company is not the "Controlling Corporation"; or (dd) the Company sells or otherwise disposes of all or substantially all of its assets, other than to Excluded Persons. For purposes of clause (aa) above, if at any time there exist securities of different classes entitled to vote separately in the election of directors, the calculation of the proportion of the voting power held by a beneficial owner of the Company's securities shall be determined as follows: first, the proportion of the voting power represented by securities held by such beneficial owner of each separate class or group of classes voting separately in the election of directors shall be determined, provided that securities representing more than 50% of the voting power of securities of any such class or group of classes shall be deemed to represent 100% of such voting power; second, such proportion shall then be multiplied by a fraction, the numerator of which is the number of directors which such class or classes is entitled to elect and the denominator of which is the total number of directors elected to membership on the Board at the time; and third, the product obtained for each such separate class or group of classes shall be added together, which sum shall be the proportion of the combined voting power of the Company's outstanding securities held by such beneficial owner. For purposes of clause (aa) above, the term "Outside Persons" means any Persons other than (I) Persons described in clauses (aa)(i) or (iii) or (iv) above (as to Persons described in clause (aa)(iii) or (iv) above, while they are Excluded Persons) and (II) members of senior management of the Company in office immediately prior to the time the Acquiring Person acquires the beneficial ownership described in clause (aa). For purposes of clause (cc) above, the Company shall be considered to be the Controlling Corporation in any merger, consolidation, reorganization or similar transaction unless either (1) the shareholders of the Company immediately prior to the consummation of the transaction (the "Old Shareholders") would not, immediately after such consummation, beneficially own, directly or indirectly, securities of the resulting entity entitled to elect a majority of the members of the Board of Directors or other governing body of the resulting entity or (2) those persons who were directors of the Company immediately prior to the consummation of the proposed transaction would not, immediately after such consummation, constitute a majority of the directors of the resulting entity, provided that (I) there shall be excluded from the determination of the voting power of the Old Shareholders securities in the resulting entity beneficially owned, directly or indirectly, by the other party to the transaction and any such securities beneficially owned, directly or indirectly, by any Person acting in concert with the other party to the transaction, (II) there shall be excluded from the determination of the voting power of the Old Shareholders securities in the resulting entity acquired in any such transaction other than as a result of the beneficial ownership of Company securities prior to the transaction and (III) persons who are directors of the resulting entity shall be deemed not to have been directors of the Company immediately prior to the consummation of the transaction if they were elected as directors of the Company within 90 days prior to the consummation of the transaction. The exclusion described in clause (aa)(iii) above shall cease to have any force or effect (and the Person described therein shall cease to be an Excluded Person) if that Person becomes an "Acquiring Person" within the meaning of the Amended and Restated Rights Agreement dated as of November 15, 2000 between the Company and Mellon Investor Services LLC, as amended from time to time. The exclusion described in clause (aa)(iv) above shall cease to have any force or effect (and the Persons described therein shall cease to be Excluded Persons) if (A) the Person acquiring beneficial ownership is not controlled by David Bonderman or James Coulter, or (B) the Person acquiring beneficial ownership (together with any Person controlling, controlled by or under common control with such Person) ceases to be after such acquisition, for a period of thirty consecutive calendar days, the beneficial owner, directly or indirectly, of securities of the Company representing at least 25% of the combined voting power of the Company's outstanding securities. Upon the occurrence of a Change in Control, with respect to each recipient of an Award hereunder, (AA) all Options granted to such recipient and outstanding at such time shall immediately vest and become exercisable in full (but subject, however, in the case of Incentive Stock Options, to the aggregate fair market value, determined as of the date the Incentive Stock Options are granted, of the stock with respect to which Incentive Stock Options are exercisable for the first time by such recipient during any calendar year not exceeding $100,000) and, except as required by law, all restrictions on the transfer of shares acquired pursuant to such Options shall terminate and (BB) all restrictions applicable to such recipient=s Restricted Stock shall be deemed to have been satisfied and such Restricted Stock shall vest in full. In addition, except as otherwise provided in the applicable Option Agreement, if a recipient of an Award hereunder becomes entitled to one or more payments (with a "payment" including, without limitation, the vesting of an Award) pursuant to the terms of the Plan (the "Total Payments"), which are or become subject to the tax imposed by section 4999 of the Code (or any similar tax that may hereafter be imposed) (the "Excise Tax"), the Company or subsidiary for whom the recipient is then performing services shall pay to the recipient an additional amount (the "Gross-Up Payment") such that the net amount retained by the recipient, after reduction for any Excise Tax on the Total Payments and any federal, state and local income or employment tax and Excise Tax on the Gross-Up Payment, shall equal the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the recipient shall be deemed (aa) to pay federal income taxes at the highest stated rate of federal income taxation (including surtaxes, if any) for the calendar year in which the Gross-Up Payment is to be made (for 1998, the highest stated rate is 39.6%); and (bb) to pay any applicable state and local income taxes at the highest stated rate of taxation (including surtaxes, if any) for the calendar year in which the Gross-Up Payment is to be made. Any Gross-Up Payment required hereunder shall be made to the recipient at the same time any Total Payment subject to the Excise Tax is paid or deemed received by the recipient." 2. The Plans, as amended by this Amendment, shall apply to all Awards made under the Plans on or after the date hereof. The Plans, as in effect prior to the adoption of this Amendment, shall continue to govern Awards made under the Plans prior to the date hereof except as may otherwise be agreed to by a recipient of an Award. In all other respects, the Plans shall continue in full force and effect with respect to all Awards made thereunder. 3. Capitalized terms used in this Amendment without definition are defined in the Plans and are used in this Amendment with the same meanings as in the respective Plans.   IN WITNESS WHEREOF, the undersigned has executed this Amendment on behalf of the Company as of May 15, 2001. CONTINENTAL AIRLINES, INC.   By:__________________________ Jeffery A. Smisek Executive Vice President - Corporate    

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT -------------------------------------------------------------------------------- HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT     THIS INJECTABLE DRUGS AGREEMENT (the "Agreement", including by this reference any attached Exhibits and Amendments) is made and entered into on the date set forth on the signature page below by and between the parties in Article I of this Agreement.     WHEREAS Health Options, Inc. ("HEALTH OPTIONS") is operating as a state certified health maintenance organization in the state of Florida in accordance with applicable laws; and     WHEREAS HEALTH OPTIONS and HEALTH OPTIONS Affiliates offer certain Members programs for the purchase of injectable drugs (the Program); and     WHEREAS OptionMed, Inc. (referred to as "PHARMACY" herein) is willing to provide services and supplies for the benefit of Members in accordance with the terms of this Agreement;     NOW, THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties agree to the following: I.  PARTIES AND DEFINITIONS     The parties to this Agreement are: Health Options, Inc. 4800 Deerwood Campus Parkway Jacksonville, FL 32246 a Florida corporation, and OptionMed, Inc. 100 Corporate North, Suite 212 Bannockburn, Illinois 60015     Definitions: 1.1Average Wholesale Price (AWP) means the wholesale price of a drug or supply at the time of purchase as defined by the latest edition of the drug file utilized by the Designated Administrator. The price shall be based on the National Drug Code (NDC) number or the container from which the drug or supply was dispensed. Health Options, Inc. will provide PHARMACY with forty-five (45) days notice of any change in Designated Administrator or Average Wholesale Price Drug Source. 1.2Copayment means the amount(s) required to be paid by a Member in accordance with the requirements set out in the applicable Health Services Agreement. 1.3Covered Services means the benefits described and set forth in the Health Services Agreement, including any endorsements and riders thereto, provided that the Member is entitled to receive such benefits. 1.4Designated Administrator means the entity with which, HEALTH OPTIONS or HEALTH OPTIONS Affiliate contracts to perform various services related to the Program. 1.5Health Services Agreement means a HEALTH OPTIONS or HEALTH OPTIONS Affiliate agreement which, by its terms, arranges for the delivery of Covered Services to Members. 1.6HEALTH OPTIONS Affiliate means Blue Cross and Blue Shield of Florida, Inc. and/or any entity certified to operate as an insurance company or as a health maintenance organization that is affiliated with HEALTH OPTIONS or Blue Cross and Blue Cross Blue Shield of 2 -------------------------------------------------------------------------------- Florida, Inc. by or through common ownership or control. (HEALTH OPTIONS shall provide Provider with a current list of all such HEALTH OPTIONS Affiliates upon written request.) 1.7Member means an individual or dependent of an individual who, as determined by HEALTH OPTIONS, is eligible to receive services and supplies which are Covered Services from PHARMACY by virtue of this Agreement and is properly enrolled: (a) under a Health Services Agreement with HEALTH OPTIONS or a HEALTH OPTIONS Affiliate; (b) under a Health Services Agreement with a health plan that is participating in a national network, including Blue Cross and Blue Shield organizations and health maintenance organizations; (c) under a self-insurance agreement with HEALTH OPTIONS or a HEALTH OPTIONS Affiliate; (d) in another health plan which has a reciprocity or other agreement with HEALTH OPTIONS or a HEALTH OPTIONS Affiliate for the provision of health care services to its members, each such member therefore being entitled to receive Covered Services under a Health Services Agreement. 1.8Participating Physician means a physician who is authorized to provide medical services to Members pursuant to a written agreement with HEALTH OPTIONS or HEALTH OPTIONS Affiliate. II.  INDEPENDENT RELATIONSHIP 2.1In the performance of the obligations of this Agreement, regarding any services rendered to, or performed on behalf of, Members by either party or its agents, servants or employees, each party is at all times acting and performing as an independent contractor with respect to the other party, and no party shall have or exercise any control or direction over the method by which the other party shall perform such work or render or perform such services and functions. It is further expressly agreed that no work, act, commission, or omission of any party, its agents, servants or employees, pursuant to the terms and conditions of this Agreement, shall be construed to make or render any party, its agents, servants or employees, an agent, servant, representative, or employee of, or joint venture with, the other party. 2.2PHARMACY hereby expressly acknowledges its understanding that this Agreement constitutes a contract between PHARMACY and HEALTH OPTIONS, that HEALTH OPTIONS is an independent corporation operating under a license with Blue Cross and Blue Shield plans, permitting HEALTH OPTIONS to use the Blue Cross and/or Blue Shield Service Mark in the State of Florida, and that HEALTH OPTIONS is not contracting as an agent of the Association. PHARMACY further acknowledges and agrees that it has not entered into this Agreement based upon representations by any person other than HEALTH OPTIONS and that no person, entity, or organization other than HEALTH OPTIONS shall be held accountable or liable to PHARMACY for any HEALTH OPTIONS' obligations to PHARMACY created under this Agreement. This paragraph shall not create any additional obligations whatsoever on the part of HEALTH OPTIONS other than those obligations created under other provisions of this Agreement. III.  SERVICES AND SUPPLIES 3.1PHARMACY shall be a provider of services and supplies, for the benefit of Members pursuant to the terms of this Agreement, and as specifically set forth in detail in Exhibit "A" titled "Fee For Service Program Description". 3 -------------------------------------------------------------------------------- IV.  PROFESSIONAL JUDGMENT 4.1PHARMACY reserves the right to refuse to compound or dispense any prescription in the exercise of its pharmacists' professional judgment; provided, however, that PHARMACY shall remain solely liable to any and all persons and/or entities resulting therefrom. V.  ON-LINE PROCESSSING 5.1PHARMACY shall submit certain claims for Covered Services for Members provided under this Agreement on-line (i.e. electronic) to the Designated Administrator and the remainder of claims to HEALTH OPTIONS or HEALTH OPTIONS Affiliate, all submissions in conformity with the applicable HEALTH OPTIONS submission protocol then in effect. 5.2PHARMACY shall utilize on-line processing capabilities that are compatible with the Designated Administrator. VI.  REPRESENTATIONS OF PHARMACY     PHARMACY represents and agrees: 6.1That it has and shall, during each term of this Agreement, maintain in full force and effect, all licenses, permits, certifications, and other approvals required under federal, state and/or local law in regard to providing services in accordance with the Agreement. 6.2That all personnel who are employed by PHARMACY, directly or indirectly, to compound, dispense or otherwise provide Covered Services in conformance with this Agreement to Members possesses any and all licenses, permits, certifications and regulatory approvals required by law; that all such personnel shall perform only those services which they are legally authorized and all local, state and federal licensing requirements, as well as national, state and county standards professional ethics and practice as may be applicable. 6.3PHARMACY will promptly notify HEALTH OPTIONS of the loss of, or any material limitation with respect to, any such license, permit, certification, or regulatory approval. VII.  TERM AND TERMINATION 7.1This Agreement shall become effective as of the effective date appearing on the signature page hereof, and shall continue in effect until the date shown on such signature page as the Initial Anniversary Date. Thereafter, this Agreement shall continue in effect from year to year from such initial anniversary date unless terminated by the mutual written agreement of the parties. Notwithstanding the foregoing, and notwithstanding any other provisions of this Agreement, either party may terminate this Agreement at any time by giving at least ninety (90) days prior written notice of such termination to the other party. 7.2Subject to the requirements of Sections 7.4 and 7.5 directly below, HEALTH OPTIONS or PHARMACY may terminate this Agreement immediately at any time if the other party fails to have all applicable licenses or the full amount of insurance coverage required under the provisions of Article XII ("Insurance"). In addition, either party may terminate this Agreement immediately at any time for cause. For purposes of this Agreement, "cause" shall include a material breach of an obligation to be performed hereunder, or a finding that there was fraud, and/or a conviction of a felony, by a party or any individual affiliated with PHARMACY who provides or arranges the provision of services to Members. Further, HEALTH OPTIONS may terminate this Agreement immediately at any time if HEALTH OPTIONS determines that Member dissatisfaction exists with respect to services provided by 4 -------------------------------------------------------------------------------- PHARMACY. Termination shall have no effect upon the rights and obligations of the parties arising out of any transactions occurring prior to the effective date of such termination. 7.3Right of Department of Insurance to Order Cancellation.  As required under Florida Statutes §641.234, the Department of Insurance may order HEALTH OPTIONS to cancel this Agreement, if it determines that the fees to be paid by HEALTH OPTIONS are so unreasonably high as compared with similar contracts entered into by HEALTH OPTIONS or as compared with similar contracts entered into by other health maintenance organizations in similar circumstances, such that this Agreement is detrimental to the subscribers, stockholders, investors, or creditors of HEALTH OPTIONS. This agreement shall be canceled upon issuance of such order by the Department pursuant to this section. 7.4As required under Florida Statutes §641.315, PHARMACY shall provide sixty (60) days advance written notice to HEALTH OPTIONS and the Department of Insurance at the addresses listed in the "notice" section of this Agreement before canceling this Agreement with HEALTH OPTIONS for any reason. Nonpayment for goods or services rendered by the PHARMACY to HEALTH OPTIONS or any of its Members shall not be a valid reason for avoiding such 60-day advance notice of cancellation. Upon receipt by HEALTH OPTIONS of a 60-day cancellation notice, HEALTH OPTIONS may, if requested by the PHARMACY, terminate the contract in less than sixty (60) days if HEALTH OPTIONS is not financially impaired or insolvent. 7.5As required under Florida Statutes §641.315, HEALTH OPTIONS shall provide sixty (60) days' advance written notice to PHARMACY and the Department of Insurance at the addresses listed in the "Notice" section of this Agreement before canceling, without cause, this Agreement with PHARMACY, except in such cases where a Member's health is subject to imminent danger. 7.6HEALTH OPTIONS and PHARMACY hereby acknowledge and agree that the provisions of Sections 7.4 and 7.5 above do not relieve either party of any of its other obligations under this Agreement that are not inconsistent with the foregoing, including without limitation any obligation either party has to provide more than sixty (60) days' notice of cancellation of this Agreement, to the other party. VIII.  PAYMENT TO PHARMACY 8.1HEALTH OPTIONS agrees to pay to PHARMACY the compensation set forth in Exhibit "B" titled Compensation for those services described and set forth in said Exhibit if such services are Covered Services and are provided pursuant to this Agreement. When notification, or action on notification, of cancellation of a Health Services Agreement is received or acted upon by HEALTH OPTIONS after the requested cancellation date, HEALTH OPTIONS will utilize the date so requested for purposes of determining coverage and calculating compensation due under this Agreement. 8.2In the event of any overpayment, duplicate payment or other payment of an amount in excess of that to which PHARMACY is entitled, HEALTH OPTIONS may, in addition to any other remedy, and only to the extent allowed by applicable law, recover the same by way of offsetting the amounts overpaid against current and future amounts due to PHARMACY and/or seeking an immediate refund from PHARMACY of the amount deemed by HEALTH OPTIONS to be an overpayment. 8.3Pursuant to Article V hereof, all claims must be submitted on-line within fourteen (14) days of the date a Covered Service is provided by PHARMACY. Failure to submit claims within fourteen (14) days may result in non-payment by HEALTH OPTIONS for such Covered 5 -------------------------------------------------------------------------------- Services. PHARMACY acknowledges that Member shall not be liable for payment for such claims which are not timely submitted. In the event that claim must be submitted on 1500 claim form, PHARMACY must submit claim within thirty days (30). IX.  COPAYMENTS; OTHER CHARGES 9.1At the time of receipt of Covered Services, a Member may be required, in accordance with applicable Health Services Agreements, to pay PHARMACY a Copayment or other charge(s). The amount of such Copayment or other charge(s) shall be the amount set out in the applicable Health Services Agreement. X.  MEMBER NON-LIABILITY 10.1PHARMACY hereby agrees that in no event including, but not limited to, non-payment by HEALTH OPTIONS, insolvency of HEALTH OPTIONS, or breach of this Agreement, shall PHARMACY bill, charge, collect a deposit from, seek compensation, remuneration or reimbursement from, or have any recourse against any Member or persons other than HEALTH OPTIONS acting on the Member's behalf, for services provided pursuant to this Agreement. This provision shall not prohibit collection of supplemental charges or Copayments in accordance with the terms of the applicable Health Services Agreement. 10.2PHARMACY further agrees that: (1) this provision shall survive the termination of this Agreement regardless of the cause giving rise to termination and shall be construed to be for the benefit of HEALTH OPTIONS' Members; and that, (2) this provision supersedes any oral or written contrary agreement now existing or hereafter entered into between PHARMACY and any Member or persons acting on such Member's behalf. XI.  COORDINATION OF BENEFITS 11.1PHARMACY agrees to cooperate fully with the coordination of benefits procedures of HEALTH OPTIONS then in effect. XII.  INSURANCE 12.1PHARMACY, at its sole cost and expense, shall procure and maintain such policies of general and professional liability insurance and such other insurance as shall be necessary to insure it and its employees against any claim or claims for damages arising out of, or related to, alleged personal injuries or death resulting from the performance or non-performance of services and activities of PHARMACY or its employees, or the use of any facilities, equipment or supplies provided by PHARMACY. Each of such policies shall be in amounts acceptable to HEALTH OPTIONS. PHARMACY has furnished HEALTH OPTIONS with reasonable proof of such insurance prior to execution of this Agreement and shall notify HEALTH OPTIONS in writing at least thirty (30) days prior to the termination or any reduction of such coverage. The failure to give such notice, or the absence of such coverage, is grounds for immediate termination of this Agreement. XIII.  COOPERATION WITH COMPANIES 13.1PHARMACY agrees to cooperate with HEALTH OPTIONS fully in connection with the conducting by HEALTH OPTIONS of its credentialing activities, peer review activities, utilization management programs, drug use evaluation programs, complaint resolution processes, and quality management programs which HEALTH OPTIONS establishes to the extent that such programs relate to Covered Services to be provided in accordance with this Agreement, and in connection with its regular audit activities. In connection therewith, 6 -------------------------------------------------------------------------------- PHARMACY will allow employees, agents, and/or independent contractors retained by HEALTH OPTIONS for the performance of such activities, access to records pertaining to Members at reasonable times, consistent with applicable Florida law. PHARMACY will comply with all reasonable requirements and policies of HEALTH OPTIONS used in administering such activities and/or programs and, further, shall comply with administrative policies and procedures that are used by HEALTH OPTIONS in conducting their business operations. HEALTH OPTIONS shall not be subject to liability to PHARMACY as a result of conducting such activities or programs, provided that HEALTH OPTIONS have acted in good faith. 13.2PHARMACY agrees to comply with the specific Performance Standards set out in Exhibit "C" titled Performance Standards. 13.3PHARMACY and HEALTH OPTIONS agree to make all reasonable efforts, consistent with advice of counsel and the requirements of applicable insurance policies and carriers, to coordinate the defense of all claims in which the other is either a named defendant or has a substantial possibility of being named. XIV.  MEMBER GRIEVANCE RESOLUTION PROCEDURES 14.1PHARMACY acknowledges that HEALTH OPTIONS, in and pursuant to their various agreements with groups and individuals, have established a grievance resolution procedure that provide a meaningful process for hearing and resolving disputes arising thereunder. A copy of the applicable grievance resolution procedure will be made available to PHARMACY upon request. The parties agree that any complaint, grievance or claim asserted pursuant to such grievance resolution procedure shall be resolved in accordance with such grievance resolution procedure and that they will comply with reasonable requests from HEALTH OPTIONS to assist in resolving such disputes and will comply with all final determinations made through the grievance procedure. XV.  DISPUTE RESOLUTION; ARBITRATION 15.1Both parties agree to meet and confer in good faith to resolve any controversy or claim arising out of or relating to this Agreement or the breach thereof; provided, however, that the foregoing shall in no way be construed in a manner that would modify or limit the rights and obligations of the parties under Section VII above with respect to termination of this Agreement. Unless otherwise prohibited by law, any such controversy or claim which cannot be so resolved shall be submitted to binding arbitration. Unless the parties agree in writing to modify the procedure for such arbitration, the following procedure shall be followed: Arbitration may be initiated by either party making a written demand for arbitration on the other party within a reasonable time from the date the claim, dispute, or controversy arose, but in no event later than the date legal proceedings would be barred by the applicable statute of limitations. The party making such demand shall designate a competent and disinterested arbitrator in such written demand. Within thirty (30) days of that demand, the other party shall designate a competent and disinterested arbitrator and give written notice of such designation to the party making the initial demand for arbitration. Within thirty (30) days after such notices have been given, the two arbitrators so designated shall select a third competent and disinterested arbitrator and give notice of the selection to both parties. If the two arbitrators designated by the parties are unable to agree on a third arbitrator within thirty (30) days, then upon request of either party such third arbitrator shall be selected by a Circuit Judge in the county in which arbitration is pending. The arbitrators shall then hear and determine the question or questions in dispute, and the decision in writing of any two arbitrators shall be binding upon the parties. The arbitration shall be held in the State of 7 -------------------------------------------------------------------------------- Florida at a location to be designated by the party not making the initial demand for arbitration. Unless the parties otherwise agree, the arbitration shall be conducted in accordance with the rules governing procedure and admission of evidence in the courts of the State of Florida. Each party shall pay its chosen arbitrator and shall bear equally the expense of the third arbitrator and all other expenses of the arbitration, provided that attorney's fees and expert witness fees are not deemed to be expenses of arbitration but are to be borne by the party incurring them. Except as otherwise provided in this Agreement, arbitration shall be governed by the provisions of the Florida Arbitration Code. XVI.  LISTING, ADVERTISING AND PROMOTION 16.1PHARMACY agrees that HEALTH OPTIONS may identify PHARMACY as a provider of services and also agrees that they may advertise, publicize, and otherwise promote the relationship with PHARMACY to potential and existing Members. HEALTH OPTIONS (and HEALTH OPTIONS Affiliates, if applicable) may list the name, address, telephone number of PHARMACY, and a description of its facilities and services, in directories or other lists of providers of services. Each party further agrees that, except as provided in the foregoing sentence, the name, symbols, trademarks, trade names, and service marks of the other party, whether presently existing or hereafter established, are proprietary; and each party reserves to itself all rights. In addition, except as provided in the first sentence hereof, neither party shall use the other party's name, symbols, trademarks or service marks in advertising or promotional materials or otherwise without the prior written consent of that party and shall cease any such usage immediately upon written notice of the party or upon termination of this Agreement, whichever is sooner. 8 -------------------------------------------------------------------------------- XVII.  MAINTENANCE AND INSPECTION OF RECORDS; CONFIDENTIALITY 17.1PHARMACY agrees to maintain adequate business and medical records in English relating to the provision of Covered Services to Members during the term of this Agreement for a period not less than seven (7) years of the record's creation. 17.2PHARMACY and HEALTH OPTIONS agree that all Member medical records shall be treated as confidential so as to comply with all state and federal laws regarding the confidentiality of patient records. However, HEALTH OPTIONS and any HEALTH OPTIONS Affiliate, subject to applicable laws, shall have access to, and shall have the right upon request to inspect and, at its own expense, copy, at all reasonable times, any accounting, administrative, and medical records maintained by PHARMACY pertaining to HEALTH OPTIONS, or any HEALTH OPTIONS Affiliates, relating to Covered Services provided to Members, and to PHARMACY's participation hereunder. In addition, PHARMACY will allow inspection of books and records related to PHARMACY's dealings with under this Agreement by HEALTH OPTIONS or a HEALTH OPTIONS Affiliate, by authorized state agencies, and by the Department of Health and Human Services and the Comptroller General of the United States or their duly authorized representatives; provided, however, that, whenever feasible, PHARMACY shall notify HEALTH OPTIONS prior to releasing information to any agency or entity other than HEALTH OPTIONS or HEALTH OPTIONS affiliates. 17.3This section shall not be interpreted to place any obligation on PHARMACY that would cause PHARMACY to act or otherwise be in violation of applicable state or federal law. 17.4The parties recognize that they each have certain obligations imposed by state and federal law regarding the use and disclosure of personally identifiable medical information ("PIMI"), including but not limited to health and financial information, provided to them about or collected by them from individuals, including HEALTH OPTIONS members. To the extent that any such information is provided by HEALTH OPTIONS to PHARMACY in order to facilitate PHARMACY'S rendition of Covered Services, PHARMACY agrees to treat such information as confidential information belonging to HEALTH OPTIONS, and to use it only in the manner and for the purpose specifically permitted by HEALTH OPTIONS or as otherwise is required by law. PHARMACY agrees that it is prohibited from using and or disclosing confidential information in a manner other than as permitted or required by this Agreement or required by law. PHARMACY shall use appropriate safeguards to prevent use or disclosure other than as permitted by this Agreement. PHARMACY shall ensure that its agents, employees, representatives, business associates, and contractors comply with all of such PHARMACY'S legal obligations regarding use or disclosure of PIMI of Insureds, including, without limitation, the Health Insurance Portability and Accountability Act and regulations promulgated thereunder ("HIPAA-AS") and the Gramm-Leach-Bliley Financial Services Modernization Act ("GLB") and all applicable regulations (state and federal) promulgated thereunder. Notwithstanding the foregoing, PHARMACY expressly agrees that it will not, nor will it permit, any employee, representative, agent, business associate, or contractor, or any third party whose access to such information is acquired by virtue of this Agreement, and/or PHARMACY'S performance pursuant to this Agreement, to collect or use PIMI of Members except that PHARMACY will be entitled to collect and use such information for the purpose of rendering Covered Services pursuant to this Agreement. PHARMACY shall report to BCBSF any use or disclosures not permitted by this Agreement about which PHARMACY becomes aware. The provisions of this paragraph shall survive termination or expiration of this Agreement. 9 -------------------------------------------------------------------------------- XVIII.  ACCESS TO MEDICAL RECORDS 18.1Until expiration of six (6) years after the furnishing of services pursuant to this Agreement, PHARMACY shall make available, upon written request, to the Secretary of the Department of Health and Human Services, to the Comptroller General, or to any other applicable governmental authority, this Agreement and books, documents and records of PHARMACY that are required by such authorities in order to certify the nature and extent of costs incurred with respect to any services furnished for which payments may be made under the Medicare and Medicaid programs. If PHARMACY carries out any of the duties of this Agreement through a subcontract, having a value or a cost of $10,000 or more over a twelve month period, such subcontract shall incorporate by reference all terms and conditions required of such a clause whereby, until expiration of six (6) years after the furnishing of such services pursuant to such subcontract, the related organization shall make available, upon written request, to the Secretary of the Department of Health and Human Services, to the Comptroller General, or to their duly authorized representatives, the subcontract, and the books, documents and records of such organization that are necessary to verify the nature and extent of costs incurred with respect to any services furnished for which payments may be made under the Medicare or Medicaid programs. Further, PHARMACY specifically acknowledges that, and agrees to inform any subcontractor who performs any of the obligations of PHARMACY under this Agreement that, payments received under this Agreement may, in whole or part, be Federal funds. XIX.  ASSIGNMENT AND DELEGATION 19.1Neither party may assign any rights or delegate any duties or obligations under this Agreement, or transfer this Agreement in any manner, without the express written approval of a duly authorized representative of the other party, and any such attempted assignment, delegation or transfer in violation of this provision shall be void; provided, however, that HEALTH OPTIONS expressly reserves the right to assign any and all of its rights, and to delegate any and all of its duties and obligations hereunder, and to in any manner transfer this Agreement, to a HEALTH OPTIONS Affiliate, provided that HEALTH OPTIONS shall notify PHARMACY of any such assignment, delegation or transfer in writing at least thirty (30) days prior thereto. XX.  GENERAL PROVISIONS 20.1AMENDMENT:  This Agreement or any part of it may be amended at any time during the term of the Agreement (as to Amendments, not Exhibits when the Agreement first entered into) by mutual consent in writing of duly authorized representatives of the parties, provided, however, that any change (including any addition and/or deletion) to any provision or provisions of this Agreement that is required by duly enacted federal or Florida legislation, or by a regulation or rule finally issued by a regulatory agency pursuant to such legislation, rule or regulation, will be deemed to be part of this Agreement without further action required to be taken by either party to amend this Agreement to effect such change or changes, for as long as such legislation, regulation or rule is in effect. 20.2APPLICABLE LAW:  The validity of this Agreement and of any of its terms and provisions, as well as the rights and duties of the parties hereunder, shall be interpreted and enforced pursuant to and in accordance with the laws of the State of Florida. 20.3ATTORNEY FEES: ENFORCEMENT COSTS:  Except in the case of arbitration proceedings referred to above, or if the parties otherwise agree in writing, if any permitted legal action or other proceeding is brought for the enforcement of this Agreement, or 10 -------------------------------------------------------------------------------- because of an alleged dispute, breach, default or misrepresentation in connection with any provision of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorney's fees, court costs, and other reasonable expenses incurred in connection with maintaining or defending such action or proceeding, as the case might be, including any such attorney's fees, costs, or expenses incurred on appeal, in addition to any other relief to which such party or parties may be entitled. 20.4BINDING EFFECT:  This Agreement shall be binding upon and inure to the benefit of the parties, their successors, and their permitted assigns, unless otherwise set forth herein or agreed to by the parties in writing. 20.5CONFIDENTIALITY OF CONTRACT TERMS AND MEMBER LISTINGS:  PHARMACY acknowledges and agrees that the reimbursement rates paid by HEALTH OPTIONS, and other aspects of this Agreement, including, without limitation, any and all membership listings provided to Provider by HEALTH OPTIONS, are competitively sensitive. PHARMACY will not disclose such rates, membership listings, and other aspects of this Agreement, to third parties, except upon the prior written authorization of HEALTH OPTIONS. 20.6ENFORCEABILITY:  In the event any provision of this Agreement is rendered invalid or unenforceable by a valid Act of Congress or of the Florida Legislature or by any regulation duly promulgated by officers of the United States or of the State of Florida acting in accordance with law, or declared null and void by any court of competent jurisdiction, the remainder of the provisions of this Agreement shall remain in full force and effect. 20.7ENTIRE AGREEMENT: SIGNATURES REQUIRED:  This Agreement, which shall be deemed to include all attachments, amendments, exhibits, addenda, and schedules, if any, contains the entire Agreement between the parties. Any prior agreements, promises, negotiations or representations, either oral or written, relating to the subject matter of this Agreement and not expressly set forth in this Agreement are of no force or effect. This Agreement will be effective and binding on the parties only if the duly authorized signatures of the parties are affixed hereto where indicated on the signature page below, and not otherwise. 20.8HEADINGS:  The headings of sections contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 20.9LIMITATIONS ON LIABILITY:  Although this Agreement contemplates services for Members, the parties reserve the right to amend or terminate this Agreement without notice to, or consent of, any such Member. Subject to the provisions of Article X (Member Non-Liability for Payment), no persons or entities except for HEALTH OPTIONS, HEALTH OPTIONS Affiliate and PHARMACY are intended to be or are, in fact, beneficiaries of this Agreement; and its existence shall not in any respect whatsoever increase the rights of any Member or other third party, or create any rights on behalf of any Member or other third party vis-à-vis either of the parties. Neither party shall be responsible for any act, omission, or default of any hospital, physician or other independent contractor, or for any negligence, misfeasance, malfeasance or nonfeasance of any other independent contractor. No provision of this Agreement shall be deemed to constitute an agreement by either party to indemnify or hold harmless any other person or entity, whether or not a party hereto. 11 -------------------------------------------------------------------------------- 20.10   NONDISCRIMINATION:  In carrying out their obligations under this Agreement, Provider shall not discriminate against any Member on a basis of race, color, religion, sex, national origin, age, health status, participation in any governmental program (including Medicare), source of payment, membership in a health maintenance organization, marital status, or physical or mental handicap; nor shall PHARMACY knowingly contract with any person or entity which discriminates against any Member on any such basis. 20.11   NON-EXCLUSIVITY:  The parties hereby acknowledge that this Agreement is not exclusive, and that each party may freely contract with any other person, firm or entity concerning the subject matter hereof. 20.12   SURVIVAL OF PROVISIONS UPON TERMINATION:  Any provision of this Agreement, which requires or reasonably contemplates the performance of obligations by either party after the termination of this Agreement shall survive such termination unless otherwise specifically provided herein. 20.13   WAIVER OF BREACH:  Waiver of a breach of this Agreement shall not be deemed to be a waiver of any other breach and shall not bar any action for subsequent breach thereof. XXI.  NOTICES 21.1Any notice required to be given pursuant to the terms and provisions of this Agreement shall be in writing, postage prepaid, and shall be sent (by certified or registered mail, return receipt requested, or by federal express or other overnight mail delivery for which evidence of delivery is obtained by the sender), to the address or addresses set forth below unless the sender has been otherwise instructed in writing or unless otherwise provided by law. The notice shall be deemed to be effective on the date indicated on the return receipt or, if no date is so indicated, then on the date of the notice. To PHARMACY: OptionMed, Inc. 100 Corporate North Suite 212 Bannockburn, Illinois 60015 To Department of Insurance: Bureau of Allied Lines Room 637, Larson Building 200 East Gaines Street Tallahassee, Florida 32399 To HEALTH OPTIONS: Blue Cross and Blue Cross Blue Shield of Florida, Inc. and Health Options, Inc. Attn: Director of Pharmacy 4800 Deerwood Campus Parkway Jacksonville, Florida 32246 With a copy to: Health Options, Inc. Attn: Legal Affairs 4800 Deerwood Campus Parkway Jacksonville, Florida 32246 12 -------------------------------------------------------------------------------- XXII.  MEDICARE PROGRAM 22.1Exhibit "D" titled "Medicare+Choice Amendment," is hereby made part of this Agreement and the parties hereby agree to be bound by its terms. 13 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, by placing their duly authorized signatures below, the parties hereby execute this Agreement and agree to be bound by its terms. Effective Date:           September 5, 2001          Initial Anniversary Date:           September 4, 2002          PHARMACY (OptionMed, Inc.) Signature:     /s/ Rajat Rai --------------------------------------------------------------------------------     Rajat Rai -------------------------------------------------------------------------------- Name (Printed or Typed)     Chief Executive Officer, OptionMed, Inc. -------------------------------------------------------------------------------- Title     September 5, 2001 -------------------------------------------------------------------------------- Date Signed     HEALTH OPTIONS (Health Options, Inc.)     Signature:     /s/ Robert Forster --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Name (Printed or Typed)     Robert Forster, M. D., V.P. Care and Network Management -------------------------------------------------------------------------------- Title     September 5, 2001 -------------------------------------------------------------------------------- Date Signed     14 -------------------------------------------------------------------------------- A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES ACT OF 1934, AS AMENDED, FOR CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN FIELD WITH THE SECURITIES AND EXCHANGE COMMISSION. THE INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN SOUGHT HS BEEN DELETED FROM THIS EXHIBIT AND THE DELETED TEXT REPLACED BY AN ASTERISK (*). HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT EXHIBIT "A" FEE FOR SERVICE PROGRAM DESCRIPTION     * E–1 -------------------------------------------------------------------------------- A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES ACT OF 1934, AS AMENDED, FOR CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN FIELD WITH THE SECURITIES AND EXCHANGE COMMISSION. THE INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN SOUGHT HS BEEN DELETED FROM THIS EXHIBIT AND THE DELETED TEXT REPLACED BY AN ASTERISK (*). HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT EXHIBIT "B" COMPENSATION I.  Fee for Service Payment Rate.     * E–2 -------------------------------------------------------------------------------- A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES ACT OF 1934, AS AMENDED, FOR CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN FIELD WITH THE SECURITIES AND EXCHANGE COMMISSION. THE INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN SOUGHT HS BEEN DELETED FROM THIS EXHIBIT AND THE DELETED TEXT REPLACED BY AN ASTERISK (*). HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT EXHIBIT "C" PERFORMANCE STANDARDS     * E–3 -------------------------------------------------------------------------------- HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT EXHIBIT "D" 1  MEDICARE+CHOICE AMENDMENT     Pursuant to Section 20.1 of this Agreement, this Medicare+Choice Amendment is entered into between Health Options, Inc. ("HEALTH OPTIONS") and OptionMed, Inc.     WHEREAS, HEALTH OPTIONS is a Medicare+Choice organization offering one or more Medicare+Choice Plans within certain service areas; and     WHEREAS, PHARMACY is willing to offer programs for the purchase of INJECTABLE drugs to HEALTH OPTIONS Medicare+Choice Members under one or more such Plans.     IT IS THEREFORE AGREED AS FOLLOWS: 1.Definitions:  The definition set out in Attachment 1 to this Medicare+Choice Amendment shall apply whenever Covered Services under a Medicare+Choice Plan are provided to a Medicare+Choice Member; 2.Compliance with HEALTH OPTIONS Medicare+Choice Administrative Policies and Procedures:  PHARMACY shall use best efforts to comply with all current HEALTH OPTIONS Medicare+Choice administrative policies and procedures and any new policies or procedures which may be enacted by HEALTH OPTIONS and thereafter furnished to Pharmacy. In the event PHARMACY cannot materially comply with any such new policies or procedures furnished to Pharmacy, PHARMACY shall furnish HEALTH OPTIONS with a written notice describing the specific policies or procedure with which PHARMACY cannot materially comply. HEALTH OPTIONS agrees to then furnish PHARMACY with information intended to, if needed, sufficiently explain any such new policy or procedure and, if after review of such information PHARMACY or HEALTH OPTIONS are unable to determine an acceptable course of action to resolve the inconsistencies of their respective policies and procedures, either party may terminate this Medicare+Choice Amendment after providing at least ninety (90) days prior written notice to the other party. PHARMACY also agrees to fully cooperate in any external review conducted by appropriate Federal or State agencies. PHARMACY specifically agrees that it will require each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to also specifically agree that such entity or individual is also under this duty to so comply with HEALTH OPTIONS Medicare+Choice administrative policies and procedures. 3.a.UR/QI and Encounter Data Programs:  HEALTH OPTIONS shall establish a Medicare+Choice Utilization Review and Quality Assessment and Improvement program ("UR/QI Program") which shall seek to assist in the delivery of quality health care services which are considered medically necessary for Medicare+Choice Members. Further, HEALTH OPTIONS shall establish a Medicare+Choice Encounter Data program ("Encounter Data Program") which shall seek to assist in the efficient and effective collection of data. PHARMACY agrees to cooperate with these UR/QI and Encounter Data Programs (and with any independent organization retained under any such program), to abide by decisions resulting from review under these programs and with other aspects of this program, subject to rights of appeal as provided directly below. b.It is specifically acknowledged that the UR/QI Program will incorporate and meet standards and guidelines outlined in the Quality Improvement System for Managed Care ("QISMC"). E–4 -------------------------------------------------------------------------------- Further, in support of uniform data collection and reporting, the following may also be utilized: The Health Employer Data Information Set ("HEDIS"); Consumer Assessment of Health Plan Satisfaction ("CAHPS") survey; and Health of Seniors ("HOS"); and PHARMACY will submit to HEALTH OPTIONS (in accordance with HEALTH OPTIONS instructions) data required under this program. PHARMACY further specifically agrees that it will require each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to also specifically agree that such entity or individual is also under the duty to so cooperate with these UR/QI and Encounter Data Programs and to so abide by the decisions under these programs and with other aspects of these programs, subject to rights of appeal as provided directly below. c.PHARMACY specifically agrees that it will submit to HEALTH OPTIONS (in accordance with HEALTH OPTIONS instructions under its Encounter Data Program) all data necessary to characterize the context and purpose of each encounter between a Medicare+Choice Member and PHARMACY (e.g. medical records for the validation of encounter data). PHARMACY specifically certifies that all such data submitted to HEALTH OPTIONS will be accurate, complete, and truthful, this certification based on best knowledge, information, and belief. PHARMACY further specifically agrees that it will require each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to also specifically agree that such entity or individual is also under this duty to submit encounter data. 4.Rights of Appeal: (a)Denial of Coverage:  In the event PHARMACY does not agree with a denial of benefit coverage determination made by HOI, an appeal may be filed with HOI, and HEALTH OPTIONS shall review such appeal as to any Medicare+Choice Member in accordance with the appeal procedures then in effect. PHARMACY acknowledges that HEALTH OPTIONS shall have final and binding authority regarding all determinations of Medicare+Choice Member benefit coverage, subject to review by applicable Federal and State regulatory authorities; (b)Grievances and Appeals:  HEALTH OPTIONS has in place procedures for timely hearing and resolution of grievances between Medicare+Choice Members and HEALTH OPTIONS or certain other entities or individuals through which HEALTH OPTIONS arranges for the provision of health care services (e.g. appeal rights applicable to physicians, as described under Section 1861(r) of the Social Security Act). HEALTH OPTIONS specifically agrees that these procedures will meet any guidelines established by CMS, and both HEALTH OPTIONS and PHARMACY agree to cooperate fully toward the investigation and resolution of any such grievance and/or appeal and to abide by decision under these grievance and/or appeal programs. PHARMACY further specifically agrees that it will require each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to also specifically agree that such entity or individual is also under the duty to so fully cooperate toward the investigation and resolution of any such grievance and/or and to so cooperate with these programs and to so abide by the decisions under these programs. 5.Conscience Protection and Medicare+Choice Member Advice:  HEALTH OPTIONS specifically agrees that it will not prohibit or otherwise restrict any provider of medical services or supplies, acting within such provider's lawful scope of practice, from advising, or advocating on behalf of, a Medicare+Choice Member about: E–5 -------------------------------------------------------------------------------- (i)The Medicare+Choice Member's health status, medical care, or treatment options, including the provision of sufficient information to the individual to provide an opportunity to decide among all relevant treatment options; (ii)The risk, benefits, and consequences of treatment and non-treatments; or (iii)The opportunity for the individual to refuse treatment and to express preferences about future treatment decisions. 6.Accountability to CMS:     HEALTH OPTIONS acknowledges: (i)That it is HEALTH OPTIONS duty to oversee, and that it is accountable to CMS for, any functions or responsibilities described in the standards set out in Federal regulations concerning utilization of subcontractors under a Medicare+Choice contract; and that (ii)HEALTH OPTIONS may only delegate activities or functions in a manner consistent with applicable requirements under these Federal regulations. Both HEALTH OPTIONS and PHARMACY acknowledge that any service or other activities performed by a related entity, contractor or subcontractor in accordance with a contract or written agreement will be consistent with and comply with HEALTH OPTIONS contractual obligations to CMS. 7.Prompt Payment/Claims Submission:  HEALTH OPTIONS shall remit payment for claims submitted by PHARMACY for provision of Covered Services to Medicare+Choice Members under this Medicare+Choice Amendment within thirty (30) days of receipt, provided that the applicable claim is complete and accurate, leaving no issues regarding HEALTH OPTIONS responsibility for payment. It is specifically agreed that, to be eligible for compensation for the rendering of Covered Services, PHARMACY must submit claims to HEALTH OPTIONS for such services within sixty (60) days following the date of service, provided, however, that corrections or additions to such claim shall be accepted by HEALTH OPTIONS if made within sixty (60) days from HEALTH OPTIONS receipt of an initial claim. Any claim submitted more than one hundred twenty (120) days following the date of service may be denied, unless the claim was returned by HEALTH OPTIONS for further information. 8.Medicare+Choice Member Financial Protection:  It is specifically acknowledged that PHARMACY and each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement), are prohibited from holding, and as a consequence each will not in any event attempt to hold, any Medicare+Choice Member liable for payment of any fees that are the legal obligations of HEALTH OPTIONS under its Medicare+Choice contract with CMS. 9.Confidentiality and Accuracy of Medicare+Choice Member Records:  For any medical records or other health and enrollment information maintained with respect to Medicare+Choice Members, Pharmacy, and each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement), agree that each has established procedures to: (i)Safeguard the privacy of any information that identifies a particular Medicare+Choice Member. Information from, or copies of, records may be released only to authorized individuals, and each ensures that unauthorized individuals cannot gain access to or alter such records. Original medical records must be released only in accordance with Federal or State laws, court orders, or subpoenas; (ii)Maintain all such records and information in an accurate and timely manner; (iii)Allow timely access by Medicare+Choice Members to the records and information that pertain to them; and E–6 -------------------------------------------------------------------------------- (iv)Abide by all Federal and State laws regarding confidentiality and disclosure for mental health records, medical records, other health information, and Medicare+Choice Member information. 10.Access: PHARMACY agrees that: (i)The Secretary of the Department of Health and Human Services ("HHS"), the Comptroller General, HOI, or their designees have the right to inspect, evaluate, and audit any pertinent contracts, books, documents, papers and records of PHARMACY and/or those entities or individuals with which PHARMACY contracts involving transactions relating to the Medicare+Choice contract between CMS and HOI; and (ii)HHS's, the Comptroller General's, HOI', or their designees' right to inspect, evaluate, and audit any pertinent information for any particular contract period will exist through six (6) years from the final date of the applicable CMS/HEALTH OPTIONS contract period or from the date of completion of any audit, whichever is later. PHARMACY specifically agrees that it will require each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to also specifically agree that such entity or individual is also under this duty to so provide access. 11.Federal Funds:  HOI, since it is receiving Federal payments under its contract with CMS, together with others paid by organizations such as HEALTH OPTIONS to fulfill obligations under such a contract, are subject to certain laws that are applicable to individuals and entities receiving Federal funds. HEALTH OPTIONS is under a duty to inform such payees, and HEALTH OPTIONS hereby informs PHARMACY as such a payee, that payments received from HEALTH OPTIONS are, in whole or in part, from Federal funds. PHARMACY specifically agrees that it will inform, in writing, those entities and/or individuals with which PHARMACY contracts who receive payment as a consequence of this Agreement that such payment is, in whole or part, also from Federal funds. 12.Non-Discrimination:  In carrying out obligations under this Medicare+Choice Amendment, PHARMACY shall not discriminate against any Medicare+Choice Member on a basis of race, color, religion, sex, national origin, age, health status, participation in any government program (including Medicare), source of payment, membership in a health maintenance organization, marital status or physical or mental handicap, nor shall PHARMACY knowingly contract with any person or entity which discriminates against any Medicare+Choice Member on any such basis. PHARMACY specifically agrees that it will require each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to also specifically agree that such entity or individual is also under this duty to not so discriminate. 13.Advance Directives:  In compliance with the Patient Self-determination Act, as amended, to the extent applicable, and other applicable laws, PHARMACY shall, in a prominent place in all applicable Medicare+Choice Member patient records, document the existence of an advance directive. PHARMACY specifically agrees that it will require each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to also specifically agree that such entity or individual is also under this duty to so document the existence of an advanced directive. 14.Professional Standards:  Pharmacy, and each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide E–7 -------------------------------------------------------------------------------- services or other activities in conformity with this Agreement), agree to provide Covered Services to Medicare+Choice Members in a manner consistent with professionally recognized standards of health care. 15.Information Disclosure:  It is acknowledged that either party, together with related entities, contractors, or subcontractors of either party, at the times and in the manner that CMS requires (while safeguarding the confidentiality of the doctor-patient relationship), may be under a duty to develop procedures to compile, evaluate, and report to CMS, to Medicare+Choice Members, and to the general public statistics and certain other information. Each party, related entity, contractor, or subcontractor is hereby specifically authorized to disclose such information. 16.Termination of Medicare Participation: (a)HEALTH OPTIONS:  In the event the Medicare+Choice contract between HEALTH OPTIONS and CMS is terminated or not renewed, this Medicare+Choice Amendment shall be deemed to also terminate upon such date of termination or non-renewal unless CMS and HEALTH OPTIONS agree otherwise. HEALTH OPTIONS will furnish PHARMACY with notice of any such termination and the date any such termination becomes effective within ten (10) days after HEALTH OPTIONS is notified by, or notifies, CMS of such termination or non-renewal; (b)PHARMACY:  Should PHARMACY and/or an entity or individual retained by PHARMACY to provide services or other activities in conformity with this Agreement not comply with any material, applicable Medicare law, regulation, CMS or HEALTH OPTIONS instruction, HEALTH OPTIONS may furnish PHARMACY with notice of such non-compliance and may elect to also terminate this Medicare+Choice Amendment upon such notice. HEALTH OPTIONS will furnish PHARMACY with notice of any such termination and the date any such termination becomes effective. 17.Continuation of Benefits:  Upon the written request of HOI, PHARMACY shall continue, and shall cause each entity or individual with which PHARMACY contracts ( provided that such entity or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement) to continue, to provide services or other activities in conformity with this Agreement to Members of HEALTH OPTIONS who began a course of treatment prior to such termination, subject to all of the terms and provisions of this Agreement, until such course of treatment has been completed or arrangements satisfactory to HEALTH OPTIONS and such Member have been made to have such treatment provided by another appropriate provider; however, such continued treatment shall not be required hereby to exceed ninety (90) days unless the applicable Member is then hospitalized and, in that event, such course of treatment shall continue until the applicable Member is discharged or until HEALTH OPTIONS and the Member have arranged medically appropriate alternative care, whichever is earlier. Payment for services provided pursuant to the forgoing provisions of this section shall be made in accordance with the Fee Schedule of HEALTH OPTIONS in effect on the date that such services were provided or the Medicare Allowable Amount, whichever is lower. 18.Governing Law:  In the event that any provision of this Medicare+Choice Amendment conflicts with the provisions of any statute or regulation applicable to HOI, Pharmacy, or an entity and/or individual with which PHARMACY contracts (provided that such entity or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement), the provisions of the statute or regulation shall have full force and effect. Each such party agrees to comply, and PHARMACY agrees that it will require each of those entities or individuals it retains to so comply, with all Medicare laws, regulations, CMS instructions, and other Federal and State statutes to the extent applicable. E–8 -------------------------------------------------------------------------------- 19.Member List:  To assist HEALTH OPTIONS in fulfilling its duty to make a good faith effort to provide written notice of the termination of a contracted provider within fifteen (15) working days to all Medicare+Choice Members who are patients seen on a regular basis by a provider whose contract is terminating for any reason, PHARMACY agrees that it will also undertake a good faith effort to provide a list of such Medicare+ Choice Members to HEALTH OPTIONS within this fifteen (15) day time-frame specific to PHARMACY and/or any such provider retained by PHARMACY to provide services or other activities in conformity with this Agreement. PHARMACY specifically agrees that it will require each such provider to also so provide such a Medicare+Choice Member listing to either PHARMACY or HEALTH OPTIONS within this fifteen (15) day time-frame. 20.Availability:  PHARMACY shall arrange for the provision of or make available to, and shall cause each entity and/or individual with which PHARMACY contracts (provided that such entity and/or individual is retained by PHARMACY to provide services or other activities in conformity with this Agreement), to arrange for the provision of or make available to, Medicare+Choice Members all services or other activities that is to be provided in conformity with this Medicare+Choice Amendment, and that are Covered Services, on a twenty-four (24) hour basis. If office hours are maintained, each will arrange telephone coverage after regular office hours and will assure that any Medicare+Choice Member who request receipt of such services at any hour obtains appropriate instructions as to how and where to obtain such services from others to assure that the life or safety of any Medicare+Choice Member will not be jeopardized. 21.Medicare+Choice Amendment Interpretation:  It is acknowledged that this Medicare+Choice Amendment shall only apply when "Covered Services" as defined in this Amendment are provided to a "Medicare+Choice Member" as defined in this Amendment on or after January 1, 2000. Medicare+Choice Member as so defined (since this definition only applies to those individuals eligible for benefits from HEALTH OPTIONS under a Medicare+Choice Plan) creates a special membership classification. To the extent of any inconsistency between the terms of this Medicare+Choice Amendment and the terms of the Agreement, the terms of this Medicare+Choice Amendment control, but only to the extent of any such inconsistency. It is further specifically agreed that HEALTH OPTIONS may terminate this Amendment without terminating the underlying Agreement by providing notice in conformity with the termination provisions of the Agreement, provided that any such notice must specifically acknowledge that it only applies to Medicare+Choice Members. In all other respects, the terms and provisions of the Agreement shall remain the same. E–9 -------------------------------------------------------------------------------- ATTACHMENT 1 to MEDICARE+CHOICE AMENDMENT DEFINITIONS     For the purpose of this Amendment (including but not limited to modifications to definitions utilized in the underlying Agreement specific to this Amendment), the term: 1.CMS means the Centers for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration, a Federal agency. 2.Covered Services means the benefits covered under the applicable Medicare+Choice Plan, as described and set forth in the applicable Evidence of Coverage, including any endorsements and riders thereto, provided that the Medicare+Choice Member is entitled to receive such benefits. 3.Emergency Medical Condition means a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that a prudent layperson, with an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to resolve in— (i)Serious jeopardy to the health of the individual or, in the case of a pregnant woman, the health of the woman or her unborn child; (ii)Serious impairment to bodily functions; or (iii)Serious dysfunction of any bodily organ or part. 4.Emergency Services means Covered Services which are either inpatient or outpatient services that are— (i)Furnished by a provider qualified to furnish emergency services; and (ii)Needed to evaluate or stabilize an Emergency Medical Condition 5.Evidence of Coverage means one or more of the documents provided to a Medicare+Choice Member which sets forth a description or summary of certain provisions of the applicable Medicare+Choice Plan. 6.Medicare+Choice Plan means one of the various health care benefit packages offered to enrolled Medicare+Choice Members by HEALTH OPTIONS under which the Medicare+Choice Members have a financial incentive to use Participating Providers. 7.Medicare+Choice Member means an individual eligible for benefits from HEALTH OPTIONS under a Medicare+Choice Plan. 8.Participating Provider means a health professional or entity that has entered into an agreement with HEALTH OPTIONS to be a Medicare+Choice Plan provider network participant within the applicable service area, or as otherwise approved by HEALTH OPTIONS to provide Covered Services to Medicare+Choice Members. 9.Urgently Needed Services means Covered Services provided when a Medicare+Choice Member is temporarily absent from the applicable service (or, if applicable, continuation) area (or, under unusual and extraordinary circumstances, provided when the Medicare+Choice Member is in such service or continuation area but HEALTH OPTIONS provider network is temporarily unavailable or inaccessible) when such services are medically necessary and immediately required— (i)As a result of an unforeseen illness, injury, or condition; and (ii)It was not reasonable given the circumstances to obtain the services through the HEALTH OPTIONS Participating Provider network. E–10 -------------------------------------------------------------------------------- A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES ACT OF 1934, AS AMENDED, FOR CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN FIELD WITH THE SECURITIES AND EXCHANGE COMMISSION. THE INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN SOUGHT HS BEEN DELETED FROM THIS EXHIBIT AND THE DELETED TEXT REPLACED BY AN ASTERISK (*). HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT EXHIBIT "E" DELEGATED ACTIVITIES     In conformity with §20.1 of the Agreement between the parties this EXHIBIT "E" DELEGATED ACTIVITIES, effective from and after September 4, 2001, amends said Agreement as follows: * E–11 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties agree to the foregoing provisions by placing their duly authorized signatures below. PHARMACY     -------------------------------------------------------------------------------- Signature     -------------------------------------------------------------------------------- Name (Printed or Typed)     -------------------------------------------------------------------------------- Title     -------------------------------------------------------------------------------- Date Signed     HEALTH OPTIONS     -------------------------------------------------------------------------------- Signature     -------------------------------------------------------------------------------- Name (Printed or Typed)     -------------------------------------------------------------------------------- Title     -------------------------------------------------------------------------------- Date Signed     E–12 -------------------------------------------------------------------------------- A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES ACT OF 1934, AS AMENDED, FOR CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN FIELD WITH THE SECURITIES AND EXCHANGE COMMISSION. THE INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN SOUGHT HS BEEN DELETED FROM THIS EXHIBIT AND THE DELETED TEXT REPLACED BY AN ASTERISK (*). HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT ATTACHMENT 1 TO EXHIBIT "E" DELEGATED UTILIZATION MANAGEMENT FUNCTIONS     The parties agree that certain utilization management activities are hereby delegated by HEALTH OPTIONS to PHARMACY as may be more specifically set forth and described on the attached Utilization Management Delegation Assessment Matrix. It is specifically agreed that: * E–13 -------------------------------------------------------------------------------- A CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24b-2 UNDER THE SECURITIES ACT OF 1934, AS AMENDED, FOR CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN FIELD WITH THE SECURITIES AND EXCHANGE COMMISSION. THE INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN SOUGHT HS BEEN DELETED FROM THIS EXHIBIT AND THE DELETED TEXT REPLACED BY AN ASTERISK (*). HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT ATTACHMENT 2 TO EXHIBIT "E" DELEGATED UTILIZATION MANAGEMENT FUNCTIONS     OptionMed, Inc. UTILIZATION MANAGEMENT DELEGATED ASSESSMENT MATRIX * E–14 -------------------------------------------------------------------------------- QuickLinks HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT EXHIBIT "A" FEE FOR SERVICE PROGRAM DESCRIPTION EXHIBIT "B" COMPENSATION EXHIBIT "C" PERFORMANCE STANDARDS EXHIBIT "D" 1 MEDICARE+CHOICE AMENDMENT ATTACHMENT 1 to MEDICARE+CHOICE AMENDMENT DEFINITIONS EXHIBIT "E" DELEGATED ACTIVITIES HEALTH OPTIONS, INC. INJECTABLE DRUGS AGREEMENT ATTACHMENT 1 TO EXHIBIT "E" DELEGATED UTILIZATION MANAGEMENT FUNCTIONS ATTACHMENT 2 TO EXHIBIT "E" DELEGATED UTILIZATION MANAGEMENT FUNCTIONS

QuickLinks -- Click here to rapidly navigate through this document AMENDMENT NO. 1 TO BUSINESS LOAN AGREEMENT     This Amendment No. 1 to Business Loan Agreement (this "Amendment") is entered into as of February 16, 2001, between Tully's Coffee Corporation ("Borrower") and Bank of America, N.A. ("Lender") with reference to the following: RECITALS     A.  Borrower and Lender are parties to that certain Business Loan Agreement dated as of June 28, 2000 ("the Loan Agreement").     B.  The parties hereto now desire to amend the Loan Agreement on the terms and conditions set forth below: AGREEMENT     NOW, THEREFORE, the parties hereto agree as follows:     1.  Definitions.  Capitalized terms used but not defined in this Amendment shall have the meanings ascribed to them in the Loan Agreement.     2.  Amendments.  The Loan Agreement shall be amended as follows: 2.1Section 1(b) of Exhibit A to the Loan Agreement is amended in full to read as follows: "(b) Commitment: 'Commitment Amount' shall mean $6,000,000.00; provided, however, that the Commitment Amount shall automatically reduce by $500,000.00 on each of the following dates: March 1, 2001; April 2, 2001; May 1, 2001, and June 1, 2001. If the principal amount of loans outstanding at any time exceeds the Commitment Amount, as reduced, the Borrower will immediately pay to Lender the amount of such excess." 2.2Section 4.2 of Exhibit A of the Loan Agreement is deleted in its entirety. 2.3Section 4.5 of Exhibit A of the Loan Agreement is deleted in its entirety.     3.  Representations and Warranties.  Borrower represents and warrants to Lender that: (i) after giving effect to the waiver being issued by Lender to Borrower concurrently with this Amendment, no Event of Default under the Loan Agreement and no event which, with notice or lapse of time or both, would become an Event of Default, has occurred and is continuing; (ii) after giving effect to the waiver being issued by Lender to Borrower concurrently with this Amendment, Borrower's representations and warranties made under the Loan Agreement are true as of the date hereof; (iii) the making and performance by Borrower of this Amendment have been duly authorized by all necessary corporate action; and (iv) no consent, approval, authorization, permit, or license is required in connection with the making or performance of this Amendment.     IN WITNESS THEREOF, the parties hereto have executed this Amendment as of the date first above written. BANK OF AMERICA, N.A.   TULLY'S COFFEE CORPORATION By:   /s/ NANCY NUERENBERG    -------------------------------------------------------------------------------- Nancy Nuerenberg Senior Vice President   By:   /s/ RANDY HALTER    -------------------------------------------------------------------------------- Name: Randy Halter Title:  SVP &CFO 1 -------------------------------------------------------------------------------- QuickLinks AMENDMENT NO. 1 TO BUSINESS LOAN AGREEMENT

    EXHIBIT 10(a) NASD REGULATION An NASD Company June 12, 2001 Ms. Debbie Potash - Turner SunAmerica Capital Services, Inc. 733 Third Avenue, 3rd Floor New York, New York 10017-3204   Re: Subordinated Loan Agreement   Extension of Maturity Date Type: Equity Control #: 10-E-SLA-10749 Lender: SunAmerica Inc. Current Maturity Date: June 30, 2002   Dear Ms. Potash - Turner: The amendment extending the maturity date of the above referenced agreement from June 30, 2002 to June 30, 2003 is accepted by the National Association of Securities Dealers, Inc. It is important to note that the limitations required by paragraph V, which covers Permissive Prepayments, will run from the effective date of the original agreement, not from the date of this amendment. If you have any questions regarding this Agreement or our acceptance thereof, please contact this office. Very truly yours, /s/ Gerald Dougherty Gerald Dougherty Assistant Director GD: jr Cc: Patricia MacGeorge   NASD Regulation, Inc.  District 10, One Liberty Plaza,  New York, NY 10006  212 858 4000   --------------------------------------------------------------------------------   NASD SUBORDINATED AGREEMENT AMENDMENT EXTENDING MATURITY DATE SL-A AGREEMENT BETWEEN:   Lender: SunAmerica Inc. 1 SunAmerica Center, 1999 Avenue of the Stars, 38th Floor (Street Address) Los Angeles                  California                90067-6002 (City)                         (State)                      (Zip) AND Broker-Dealer: SunAmerica Capital Services, Inc. 733 Third Avenue, 3rd Floor (Street Address) New York                 New York                    10017    (City)                        (State)                       (Zip)   NASD ID Number: 13158 DATE FILED: May 21, 2001   -1- --------------------------------------------------------------------------------   SUBORDINATED LOAN AGREEMENT AMENDMENT EXTENDING THE MATURITY DATE           This Amendment No. 2 of that certain NASD Subordinated Loan Agreement for Equity Capital SL-5 by and between SunAmerica Inc. (the "Lender") and SunAmerica Capital Services, Inc. (the "Broker-Dealer") effective as of May 28, 1998 ("Subordinated Loan Agreement") and amendment thereto dated as of May 22, 2000 ("Amendment No. 1") is dated as of April 30, 2001 ("Amendment No. 2").           In consideration of the sum of $3,500,000 (the unpaid principal amount) and subject to the terms and conditions set forth in the Subordinated Loan Agreement approved by the National Association of Securities Dealers, Inc. ("NASD"), as amended by Amendment No. 1, scheduled to mature on June 30, 2002 bearing  Loan Number 10-E-SLA-10749, the Broker-Dealer and the Lender agree to extend the maturity date until July 30, 2003. This Amendment No. 2 shall not become effective unless and until the NASD has found Amendment No. 2 acceptable.           The interest rate set forth in the Subordinated Loan Agreement, as amended by Amendment No. 1, is changed from 9.5% to 7.5% per annum effective as of July 1, 2002.     (The signature page follows.)     -2- --------------------------------------------------------------------------------             IN WITNESS WHEREOF the parties have set their hands and seal this 30th day of April, 2001.   BROKER-DEALER:                                                                                           SUNAMERICA CAPITAL SERVICES, INC. [Seal]                                                                                                                                                                                                                                                                                                                 By: /s/ Debbie Potash Turner                                                                                                                                      Name: Debbie Potash Turner                                                                                                                                      Title: Chief Financial Officer      LENDER:                                                                                                              SUNAMERICA INC. [Seal]                                                                                                                                                                                                                                                                                   By: /s/ James R. Belardi                                                                                                                                       Name: James R. Belardi                                                                                                                                       Title: Executive Vice President                                                                                                FOR NASD USE ONLY                                                                                                                                                                                             ACCEPTED BY:      /s/ Gerald Dougherty                                                                                                                                               (Name)                                                                                                                                 Assistant Director                                                                                                                                               (Title)                                                                                                  EFFECTIVE DATE:  JUN 30 2002                                                                                                  LOAN NUMBER:  10-E-SLA-10749   -3- --------------------------------------------------------------------------------   SUBORDINATED LOAN AGREEMENT LENDER'S ATTESTATION                 It is recommended that you discuss the merits of this investment with an attorney, accountant or some other person who has knowledge and experience in financial and business matters prior to executing this Agreement.     1.  I have received and reviewed a copy of Appendix D of 17 CFR 240.15c3-l, and am familiar with its provisions.   2. I am aware that the funds or securities subject to this Agreement are not covered by the Securities Investor Protection Act of 1970.   3. I understand that I will be furnished financial statements pursuant to SEC Rule 17a-5(c).   4. On the date this Agreement was entered into, the broker-dealer carried funds or securities for my account. (State Yes or No): No.   5. Lender's business relationship to the broker-dealer is: Lender is an intermediate holding company of Broker-Dealer and continuously monitors fiscal status and reports of Broker-Dealer.   6. If the partner or stockholder is not actively engaged in the business of the broker-dealer, acknowledge receipt of the following:     a. Certified audit and accountant's certificate dated ___________.     b.  Disclosure of financial and/or operational problems since the last  certified audit which required reporting pursuant to SEC Rule 17a-11.  (If no such reporting was required, state "none") _______________________.     c. Balance sheet and statement of ownership equity dated _____________.     d.  Most recent computation of net capital and aggregate indebtedness or aggregate debit items dated ______________ reflecting a net capital of  $___________ and ratio of ___________.     e.  Debt/equity as of _____________ of ____________.           -1- --------------------------------------------------------------------------------       f.  Other disclosures:  ______________________ .           Dated: April 30, 2001                                                                                          SUNAMERICA INC.  (Lender)            [Seal]                                                                                                                               By: /s/ James R. Belardi                                                                                                                                                                                                                 Name: James R. Belardi                                                                                                                                      Title: Executive Vice President   -2- --------------------------------------------------------------------------------   OFFICER'S CERTIFICATE            I, James R. Belardi, Executive Vice President of SunAmerica Inc., a Delaware corporation (this "Corporation"), do hereby certify that the $3,500,000 subordinated loan made by this Corporation to SunAmerica Capital Services, Inc., amended to mature on June 30, 2003, does not cause the aggregate principal amount of all outstanding loans made by this Corporation to its broker-dealer subsidiaries to exceed $75 million.   Dated: April 30, 2001                                                                                           /s/ James R. Belardi                                                                                                                                James R. Belardi, Executive Vice President                          [Seal]                                                                                                   --------------------------------------------------------------------------------   SUNAMERICA INC. CERTIFICATE OF ASSISTANT SECRETARY       I, the undersigned, the duly elected, qualified and acting Assistant Secretary of SunAmerica Inc., a Delaware corporation (the "Corporation"), do hereby certify that the following resolutions were adopted by unanimous written consent by the Executive Committee of the Board of Directors of the Corporation on the 7th day of May 2001, and that said resolutions are in full force and effect as of the date hereof:  Blanket Authorization of Subordinated Loan Agreements for Equity Capital           WHEREAS, this Corporation, from time to time, reviews the net capital infusion needs of its wholly-owned broker-dealer subsidiaries, registered with the Securities and Exchange Commission and members of the National Association of Securities Dealers, Inc., which include, but not limited to, SunAmerica Capital Services, Inc., Advantage Capital Corporation, SunAmerica Securities, Inc., Royal Alliance Associates, Inc., Sentra Securities Corporation, Spelman & Co., Inc. and FSC Securities Corporation, and in conjunction with such review intends to provide subordinated loans to such subsidiaries pursuant to Subordinated Loan Agreements for Equity Capital;            WHEREAS, it is in the best interests of this Corporation to provide blanket authorization for such subordinated loan transactions, which authorization shall supercede any prior authorization;            NOW, THEREFORE, BE IT RESOLVED that the Chairman, any Vice Chairman, any Executive Vice President, or the Treasurer (the "Designated Officers"), acting alone, be, and each hereby is authorized to effect subordinated loans to the wholly-owned broker-dealer subsidiaries of the Corporation, in an aggregate principal amount not to exceed Seventy-five Million Dollars ($75,000,000), and such authority shall supercede any prior authorization; and to make, execute and deliver such loan agreements and other documents evidencing such loans, including any Subordinated Loan Agreement for Equity Capital, as deemed necessary or appropriate;            RESOLVED FURTHER that each of the Designated Officers are hereby authorized to make such changes in the terms and conditions of such Subordinated Loan Agreements as may be necessary to conform to the requirements of Title 17 CFR §240.15c 3-1d and the rules of the National Association of Securities Dealers; and      --------------------------------------------------------------------------------             RESOLVED FURTHER that the Executive Committee hereby ratifies any and all action that may have been taken by the officers of this Corporation in connection with the foregoing resolutions and authorizes the officers of this Corporation to take any and all such further actions as may be deemed appropriate to reflect these resolutions and to carry out their tenor, effect and intent.            IN WITNESS WHEREOF, the undersigned has executed this Certificate and affixed the seal of the Corporation this 7th day of May, 2001.                                                                                                                /s/ Lawrence M. Goldman                                                                                                               Lawrence M. Goldman                                                                                                               Assistant Secretary   (Corporate Seal)     --------------------------------------------------------------------------------  

EXHIBIT 10.27 SECURED PROMISSORY NOTE $73,928 April 6, 2001      FOR VALUE RECEIVED, Timothy J. Dalton (the “Maker”), promises to pay to Network Engines, Inc., a Delaware corporation (the “Company”), or order, at its principal executive offices, the principal sum of Seventy-Three Thousand and Nine Hundred and Twenty-Eight Dollars and No Cents ($73,928.00), together with interest on the unpaid principal balance of this Note from time to time outstanding at the rate of 4.63% per annum, compounded annually, until paid in full. Principal and accrued interest on this Note shall be paid in full on April 6, 2002. Interest on this Note shall be computed on the basis of a year of 365 days for the actual number of days elapsed.      Notwithstanding the foregoing, payment of this Note shall be required in full, together with interest on the unpaid principal balance hereof at the rate of 4.63% per annum, upon the date which is 30 days after the date of the Maker's termination of employment with the Company, unless such termination is involuntary and without Cause. For purposes of this Note, "Cause" shall mean willful misconduct by the Maker or willful failure by the Maker to perform his responsibilities to the Company (including, without limitation, breach by the Maker of any provision of any employment, consulting, advisory, nondisclosure, nonsolicitation, non-competition or other similar agreement between the Maker and the Company), as determined by the Company, which determination shall be conclusive.      Payment of this Note is secured by a security interest in shares of Common Stock of the Company owned or hereafter acquired by the Maker, pursuant to a pledge agreement of even date herewith between the Maker and the Company (the “Pledge Agreement”).      The Company shall have (i) full recourse against the Pledged Collateral under the Pledge Agreement in connection with the repayment of the principal of the Note and accrued interest thereon, (ii) recourse up to the Recourse Amount (as hereinafter defined) against any other personal assets of the Maker and (iii) recourse up to the Recourse Amount against any compensation or other amounts due the Maker resulting from his/her employment by the Company, and a right to immediate set off against such compensation or other amounts to the full extent permitted by law. The Recourse Amount as of any time shall mean the sum of (i) 100% of the principal amount hereof and (ii) the full amount of accrued interest under this Note.      The Maker may prepay, in whole or in part, without premium or penalty, any of the principal balance hereof or accrued interest thereon.      This Note shall become immediately due and payable without notice or demand upon the occurrence at any time of any of the following events of default (individually, “an Event of Default” and collectively, “Events of Default”): > 1.  default in the payment when due of any principal or interest under this > Note; > > 2.  the occurrence of any Event of Default under the Pledge Agreement; > > 3.  the institution by or against the Maker of any proceedings under the > United States Bankruptcy Code or any other federal or state bankruptcy, > reorganization, receivership, insolvency or other similar law affecting the > rights of creditors   generally or the making by the Maker of a composition or an assignment or trust mortgage for the benefit of creditors; or       4. the Maker violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Maker and the Company.      Upon the occurrence of an Event of Default, the holder shall have then, or at any time thereafter, all of the rights and remedies afforded a secured creditor by the Uniform Commercial Code as from time to time in effect in the Commonwealth of Massachusetts or afforded by other applicable law.      Maker agrees to pay on demand all costs of collection, including, but not limited to, reasonable attorney's fees, incurred by the holder in connection with any action taken to enforce the terms of this Note.      No delay or omission on the part of the holder in exercising any right under this Note or the Pledge Agreement shall operate as a waiver of such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The Maker regardless of the time, order or place of signing waives presentment, demand, protest and notices of every kind.      If any amounts under this Note become due and payable on a Saturday or Sunday or a day on which banks in the Commonwealth of Massachusetts are authorized by law to remain closed, such amounts shall be paid on the next succeeding day that such banks shall be open for business.      Payments of principal and interest shall be made to the holder hereof, or its designee, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, at the offices of Network Engines, Inc., 25 Dan Road, Canton, Massachusetts 02021.      All rights and obligations hereunder shall be governed by the laws of the Commonwealth of Massachusetts and this Note is executed as an instrument under seal. The Maker hereby submits to the jurisdiction of the United States District Court for the District of Massachusetts and of any Massachusetts state court, with respect to any action, suit or proceeding brought against it arising out of or relating to this Note and the transactions contemplated hereby. The Maker hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such action, suit or proceeding brought in such a court and any claim that any such action, suit or proceeding brought in such a court has been brought in an inconvenient forum.   /s/ Timothy J. Dalton______ Signature Timothy J. Dalton________ Print Name

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.15     October 8, 2001 Mr. Keith G. Baxter President and Chief Executive Officer CornerStone Propane GP, Inc. 432 Westridge Drive Watsonville, CA 95076 Dear Keith:     This letter agreement (the "Agreement") will confirm the understanding between NorthWestern Corporation ("NorthWestern") and CornerStone Propane GP, Inc. (the "GP"), in reference to that certain Refunding Credit Agreement, dated as of November 20, 1998, as amended June 30, 2000, among CornerStone Propane, L.P., a Delaware limited partnership (the "Borrower"), Bank of America, N.A. as Agent (the "Agent"), and the financial institutions ("Lenders") signatory thereto (the "Credit Agreement), and that certain Guaranty Agreement, dated as of June 30, 2000, as amended, by NorthWestern in favor of the Agent on behalf of the Lenders (the "Guaranty"). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Guaranty.     It is our understanding that the Credit Agreement expires as of November 30, 2001 (the "Maturity Date"). Pursuant to the Guaranty, NorthWestern has agreed to guaranty to the Agent and the Lenders the timely payment in full when due of the Guarantied Obligations under the Credit Agreement up to but not exceeding the Guarantied Amount. The Guarantied Amount is currently limited to $70,000,000, together with interest thereon and certain expenses and other amounts. In order to satisfy a demand under the Guaranty, in addition to direct payment, NorthWestern also has the right to elect to purchase, without recourse, all of the Loans ratably from the Lenders at a price equal to 100% of the principal amount thereof plus accrued fees and interest to the date of purchase, and to succeed to the interests of the Lenders under the Credit Agreement, the Intercreditor Agreement, the proceeds of Collateral and the other Loan Documents. The foregoing guaranty obligation and loan purchase election are referred to collectively herein as the "Credit Support."     In the event that the Borrower is unable to extend or replace the Credit Agreement on or before the Maturity Date, in order to enable the Borrower to obtain a replacement facility, NorthWestern agrees to provide the Borrower with continuing credit support substantially similar to the current Credit Support. The foregoing commitment by NorthWestern is conditioned upon the negotiation and execution of definitive lending documents acceptable to the Borrower and NorthWestern, the written agreement of the Borrower to pay NorthWestern a financial accommodation fee and related expenses and to provide customary lender indemnification on substantially similar terms to those agreed to in connection with the current Credit Support.     The total liability of NorthWestern under this Agreement shall at no time exceed the Guarantied Amount; provided, further, that each payment made by NorthWestern pursuant hereto shall reduce the then remaining maximum liability of NorthWestern under this Agreement by the amount of such payment, and shall create a liability of the Borrower to NorthWestern with respect to such amount. The Borrower covenants and agrees to use its best efforts on a continuing basis to obtain a credit facility or other financing not dependent on continued credit support from NorthWestern.     This Agreement is not, and nothing herein contained and nothing done pursuant hereto by NorthWestern shall be deemed to constitute, a guarantee, direct or indirect, by NorthWestern of any debt, liability or obligation arising out of a borrowing of money or a trade payable, or any other debt, liability or obligation, of any kind or character whatsoever, of the Borrower. 1 --------------------------------------------------------------------------------     This letter shall not be construed as an amendment, waiver or modification of the Guaranty or any related fee arrangement.     This Agreement and the obligations of NorthWestern hereunder shall terminate on the earliest of (i) July 1, 2002, (ii) the Borrower obtains a comparable credit facility that does not require as a condition to its effectiveness the continuation of NorthWestern's Credit Support, (iii) the date on and as of which all amounts payable by the Borrower under the Credit Agreement (including any extension or replacement thereof) have been paid in full, and the Lenders have no further obligation to extend credit or make financial accommodations to the Borrower thereunder, (iv) upon a merger, combination or sale of the Borrower or a disposition of all or a substantial portion of the Borrower's assets, a change of control involving the Borrower, the GP or NorthWestern, or (v) the breach by the Borrower of any material obligation with respect to the arrangements hereunder.     This Agreement incorporates the entire understanding of the parties and supersedes all previous agreements and shall be governed by, and construed in accordance with, the laws of the State of Delaware as applied to contracts made and performed in such State, without regard to principles of conflict of laws. All actions and proceedings arising out of or relating to this letter agreement shall be heard and determined exclusively in any Delaware state or federal court, to whose jurisdiction the parties hereby irrevocably submit. This Agreement may be modified or amended only by the written agreement of NorthWestern and the GP acting on behalf of the Borrower. This Agreement may be executed simultaneously in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. This Agreement has been and is made solely for the benefit of the Borrower and NorthWestern, and no other person shall acquire or have any right under or by virtue of this Agreement. The rights of the parties hereunder may not be assigned.     If the foregoing terms correctly set forth our agreement, please confirm this by signing and returning the duplicate copy of this letter. Thereupon this letter, as signed in counterpart, shall constitute our agreement on the subject matter herein.       NORTHWESTERN CORPORATION       By:    -------------------------------------------------------------------------------- Name: Kipp D. Orme Title: VP Finance & Chief Financial Officer Accepted and agreed to as of the date first written above: CORNERSTONE PROPANE GP, INC., As general partner of the Borrower By:    -------------------------------------------------------------------------------- Name: Keith G. Baxter Title: President and Chief Executive Officer       2 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.15

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT OF JEFFREY D. GASH         AMENDMENT NO. 1, effective as of July 1, 2001 (“Amendment”), to that certain Employment Agreement, dated effective as of July 1, 1998 (the “Employment Agreement”), between Jaco Electronics, Inc., a New York corporation (“Jaco”), and Jeffrey D. Gash (hereinafter referred to as “Gash”), pursuant to which Gash has been employed as Vice President of Finance of Jaco. Terms not defined in this Amendment shall have such meanings otherwise ascribed to them in the Employment Agreement.         WHEREBY, Jaco and Gash desire to amend the Employment Agreement to properly reflect the intention of the parties.         NOW, THEREFORE, in consideration of the premises hereinafter set forth, the parties, intending to be legally bound, agree as follows:                     1.             Section 9 of the Employment Agreement entitled, “Consolidation; Merger; Change of Control”, is hereby deleted and replaced in its entirety by the following:                                     9.1             In the event of any consolidation or merger of Jaco into or with another corporation during the Employment Period, and Jaco is not the surviving entity, or the sale of all or substantially all of the assets of Jaco to another corporation during the Employment Period, or in the event that fifty (50%) percent or more of the voting common stock of Jaco shall be owned by one or more individuals or entities, who are acting in concert or as part of an affiliated group (other than a group one of the members of which is Gash) at any time during the Employment Period, (the occurrence of any of the foregoing, a "Change of Control"), then (i) within thirty (30) days of the occurrence of such event, Jaco shall pay or cause to be paid to Gash a certified or cashier's check in an amount equal to two hundred percent (200%) of the average of Gash's Base Salary plus Cash Bonus for the previous five (5) years, and (ii) this Employment Agreement may be assigned by Jaco or any such successor or surviving corporation with the prior written consent of Gash.                                     9.2            Notwithstanding the provisions of Section 9.1 above, any such payments shall be made only in an amount which, when taken together with the present value of all other payments to Gash that are contingent on a Change of Control of Jaco, computed in accordance with the provisions of Section 280G(d)(4) of the Internal Revenue Code of 1986 (the "Code"), does not equal or exceed three times Gash's "Base Amount", as computed in accordance with Code Section 280G(b)(3)."                     2.             Notwithstanding the foregoing restatement of Section 9 of the Employment Agreement, all other provisions of the Employment Agreement shall continue in full force and effect.                                     IN WITNESS WHEREOF, the undersigned have each caused this Amendment to be executed by its duly authorized representative, effective as of the date first written above.                                                  JACO ELECTRONICS, INC.                                                 By: /s/ Joel Girsky                                                 Name:Joel Girsky                                                 Title:President                                                 /s/ Jeffrey D. Gash                                                    Jeffrey D. Gash

WILD OATS MARKETS, INC. STEPHEN KACZYNSKI EQUITY INCENTIVE PLAN 1.      PURPOSES (a)     The purpose of the Plan is to induce Stephen Kaczynski ("Executive" or "Optionee") to enter into an employment arrangement with Wild Oats Markets, Inc. as Senior Vice President of Merchandising, and pursuant to which the Executive may be given an opportunity to benefit from increases in value of the common stock of the Company ("Common Stock") through the granting of Incentive and Nonstatutory Stock Options. (b)     All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and in such form as issued pursuant to Section 6, and a separate certificate or certificates will be issued for shares purchased on exercise of each type of Option. 2.     DEFINITIONS (a)     "AFFILIATE" means any parent corporation or subsidiary corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively, of the Code. (b)     "BOARD" means the Board of Directors of the Company. (c)     "CODE" means the Internal Revenue Code of 1986, as amended. (d)     "COMMITTEE" means a Committee appointed by the Board in accordance with subsection 3(c) of the Plan. (e)     "COMPANY" means Wild Oats Markets, Inc. a Delaware corporation. (f)     "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the employment or relationship as a Director or Consultant is not interrupted or terminated. The Board, in its sole discretion, may determine whether Continuous Status as an Employee, Director or Consultant shall be considered interrupted in the case of: (i) any leave of absence approved by the Board, including sick leave, military leave, or any other personal leave; or (ii) transfers between locations of the Company or between the Company, Affiliates or their successors. (g)     "DIRECTOR" means a member of the Board. (h)     "EMPLOYEE" means any person, including Officers and Directors, employed by the Company or any Affiliate of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (i)     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (j)     "FAIR MARKET VALUE" means, as of any date, the value of the Common Stock of the Company determined as follows: (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 Common Stock) on the last market trading day prior to the day of determination, 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. (k)      "INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (l)     "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option. (m)     "OFFICER" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (n)     "OPTION" means a stock option granted pursuant to the Plan. (o)     "OPTION AGREEMENT" means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. (p)     "OPTIONEE" means a person to whom an Option is granted pursuant to the Plan. (q)     "PLAN" means this Wild Oats Markets, Inc. 1996 Equity Incentive Plan. (r)     "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (s)     "STOCK AWARD" means any right granted under the Plan, including any Option. (t)     "STOCK AWARD AGREEMENT" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 3.     ADMINISTRATION (a)     The Plan shall be administered by the Board unless and until the Board delegates administration to a Committee, as provided in subsection 3(c). (b)     The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (1)     To determine when and how each Stock Award shall be granted; whether a Stock Award will be an Incentive Stock Option or a Nonstatutory Stock Option. (2)     To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (3)     To amend the Plan or a Stock Award as provided in Section 13. (4)     Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan. (c)     The Board may delegate administration of the Plan to a committee or committees ("Committee") of one or more members of the Board. In the discretion of the Board, a Committee may consist solely of two or more Outside Directors, in accordance with Code Section 162(m), or solely of two or more Non-Employee Directors, in accordance with Rule 16(b)-3. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references in this Plan to the Board shall thereafter be to the Committee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 4.     SHARES SUBJECT TO THE PLAN (a)     Subject to the provisions of Section 12 relating to adjustments upon changes in stock, the stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate 50,000 shares of the Common Stock. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full (or vested in the case of Restricted Stock), the stock not acquired under such Stock Award shall cease to be subject to the Plan. (b)     The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 5.     ELIGIBILITY (a)     Incentive Stock Options may be granted only to Employees. Stock Awards other than Incentive Stock Options may be granted only to Employees, Directors or Consultants. (b)     No person shall be eligible for the grant of an Incentive Stock Option if, at the time of grant, such person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of such stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant. (c)     Subject to the provisions of Section 12 relating to adjustments upon changes in stock, no person shall be eligible to be granted Options covering more than one hundred thousand (100,000) shares of the Common Stock in any calendar year. This subsection 5(c) shall not apply until (i) the earliest of: (A) the first material modification of the Plan (including any increase to the number of shares reserved for issuance under the Plan in accordance with Section 4); (B) the issuance of all of the shares of Common Stock reserved for issuance under the Plan; (C) the expiration of the Plan; or (ii) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder. 6.     OPTION PROVISIONS Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions: (a)     TERM. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted. (b)     PRICE. The exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted and the exercise price of each Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code. (c)     CONSIDERATION. The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, or (ii) at the discretion of the Board or the Committee, at the time of the grant of the Option, (A) by delivery to the Company of other Common Stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other Common Stock of the Company) with the person to whom the Option is granted or to whom the Option is transferred pursuant to subsection 6(d), or (C) in any other form of legal consideration that may be acceptable to the Board. In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. (d)     TRANSFERABILITY. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the Incentive Stock Option is granted only by such person. A Nonstatutory Stock Option may be transferred to the extent provided in the Option Agreement; provided that if the Option Agreement does not expressly permit the transfer of a Nonstatutory Stock Option, the Nonstatutory Stock Option shall not be transferable except by will, by the laws of descent and distribution or pursuant to a domestic relations order satisfying the requirements of Rule 16b-3 and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person or any transferee pursuant to a domestic relations order. Notwithstanding the foregoing, the person to whom the Option is granted may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionee, shall thereafter be entitled to exercise the Option. (e)     VESTING. The total number of shares of stock subject to an Option may, but need not, be allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that from time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the Option became vested but was not fully exercised. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The provisions of this subsection 6(e) are subject to any Option provisions governing the minimum number of shares as to which an Option may be exercised. (f)     TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT. In the event an Optionee's Continuous Status as an Employee, Director or Consultant terminates (other than upon the Optionee's death or disability), the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination) but only within such period of time ending on the earlier of (i) the date thirty (30) days after the termination of the Optionee's Continuous Status as an Employee, Director or Consultant (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionee does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan. An Optionee's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionee's Continuous Status as an Employee, Director, or Consultant (other than upon the Optionee's death or disability) would result in liability under Section 16(b) of the Exchange Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day after the last date on which such exercise would result in such liability under Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionee's Continuous Status as an Employee, Director or Consultant (other than upon the Optionee's death or disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the first paragraph of this subsection 6(f), or (ii) the expiration of a period of thirty (30) days after the termination of the Optionee's Continuous Status as an Employee, Director or Consultant during which the exercise of the Option would not be in violation of such registration requirements. (g)     DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as an Employee, Director or Consultant terminates as a result of the Optionee's disability, the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination), but only within such period of time ending on the earlier of (i) the date six (6) months following such termination (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, at the date of termination, the Optionee is not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan. (h)     DEATH OF OPTIONEE. In the event of the death of an Optionee during, or within a period specified in the Option after the termination of, the Optionee's Continuous Status as an Employee, Director or Consultant, the Option may be exercised (to the extent the Optionee was entitled to exercise the Option at the date of death) by the Optionee's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionee's death pursuant to subsection 6(d), but only within the period ending on the earlier of (i) the date twelve (12) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, at the time of death, the Optionee was not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan. (i)     EARLY EXERCISE. The Option may, but need not, include a provision whereby the Optionee may elect at any time while an Employee, Director or Consultant to exercise the Option as to any part or all of the shares subject to the Option prior to the full vesting of the Option. Any unvested shares so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate. (j)     RE-LOAD OPTIONS. Without in any way limiting the authority of the Board or Committee to make or not to make grants of Options hereunder, the Board or Committee shall have the authority (but not an obligation) to include as part of any Option Agreement a provision entitling the Optionee to a further Option (a "Re-Load Option") in the event the Optionee exercises the Option evidenced by the Option agreement, in whole or in part, by surrendering other shares of Common Stock in accordance with this Plan and the terms and conditions of the Option Agreement. Any such Re-Load Option (i) shall be for a number of shares equal to the number of shares surrendered as part or all of the exercise price of such Option; (ii) shall have an expiration date which is the same as the expiration date of the Option the exercise of which gave rise to such Re-Load Option; and (iii) shall have an exercise price which is equal to one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Re-Load Option on the date of exercise of the original Option.Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock Option and which is granted to a 10% stockholder (as described in subsection 5(c)), shall have an exercise price which is equal to one hundred ten percent (110%) of the Fair Market Value of the stock subject to the Re-Load Option on the date of exercise of the original Option and shall have a term which is no longer than five (5) years. Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory Stock Option, as the Board or Committee may designate at the time of the grant of the original Option; provided, however, that the designation of any Re-Load Option as an Incentive Stock Option shall be subject to the one hundred thousand dollars ($100,000) annual limitation on exercisability of Incentive Stock Options described in subsection 11(d) of the Plan and in Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall be subject to the availability of sufficient shares under subsection 4(a) and shall be subject to such other terms and conditions as the Board or Committee may determine which are not inconsistent with the express provisions of the Plan regarding the terms of Options. 7.     RESERVED 8.     CANCELLATION AND RE-GRANT OF OPTIONS (a)     The Board or the Committee shall have the authority to effect, at any time and from time to time, (i) the repricing of any outstanding Options under the Plan and/or (ii) with the consent of any adversely affected holders of Options, the cancellation of any outstanding Options under the Plan and the grant in substitution therefor of new Options under the Plan covering the same or different numbers of shares of stock, but having an exercise price per share not less than eighty-five percent (85%) of the Fair Market Value for a Nonstatutory Stock Option, one hundred percent (100%) of the Fair Market Value for an Incentive Stock Option or, in the case of an Incentive Stock Option held by a 10% stockholder (as described in subsection 5(c)), not less than one hundred ten percent (110%) of the Fair Market Value per share of stock on the new grant date. Notwithstanding the foregoing, the Board or the Committee may grant an Option with an exercise price lower than that set forth above if such Option is granted as part of a transaction to which section 424(a) of the Code applies. (b)     Shares subject to an Option canceled under this Section 8 shall continue to be counted against the maximum award of Options permitted to be granted pursuant to subsection 5(c) of the Plan. The repricing of an Option under this Section 7, resulting in a reduction of the exercise price, shall be deemed to be a cancellation of the original Option and the grant of a substitute Option; in the event of such repricing, both the original and the substituted Options shall be counted against the maximum awards of Options permitted to be granted pursuant to subsection 5(c) of the Plan. The provisions of this subsection 8(b) shall be applicable only to the extent required by Section 162(m) of the Code. 9.     COVENANTS OF THE COMPANY (a)     During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of stock required to satisfy such Stock Awards. (b)     The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares under Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or any stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Stock Awards unless and until such authority is obtained. 10.     USE OF PROCEEDS FROM STOCK Proceeds from the sale of stock pursuant to Stock Awards shall constitute general funds of the Company. 11.     MISCELLANEOUS (a)     The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest. (b)     Neither an Employee, Director nor a Consultant nor any person to whom a Stock Award is transferred in accordance with the Plan shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Stock Award unless and until such person has satisfied all requirements for exercise of the Stock Award pursuant to its terms. (c)     Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Employee, Consultant or other holder of Stock Awards any right to continue in the employ of the Company or any Affiliate or to continue serving as a Consultant and Director, or shall affect the right of the Company or any Affiliate to terminate the employment of any Employee with or without notice and with or without cause, or the right to terminate the relationship of any Consultant pursuant to the terms of such Consultant's agreement with the Company or Affiliate or service as a Director pursuant to the Company's By-laws. (d)     To the extent that the aggregate Fair Market Value (determined at the time of grant) of stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year under all plans of the Company and its Affiliates exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options. (e)     The Company may require any person to whom a Stock Award is granted, or any person to whom a Stock Award is transferred in accordance with the Plan, as a condition of exercising or acquiring stock under any Stock Award, (1) to give written assurances satisfactory to the Company as to such person's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the Stock Award for such person's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise or acquisition of stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock. (f)     To the extent provided by the terms of a Stock Award Agreement, the person to whom a Stock Award is granted may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under a Stock Award by any of the following means or by a combination of such means: (1) tendering a cash payment; (2) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the participant as a result of the exercise or acquisition of stock under the Stock Award; or (3) delivering to the Company owned and unencumbered shares of the Common Stock of the Company. 12. ADJUSTMENTS UPON CHANGES IN STOCK (a)     If any change is made in the stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan pursuant to subsection 4(a) and the maximum number of shares subject to award to any person during any calendar year pursuant to subsection 5(d), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of shares and price per share of stock subject to such outstanding Stock Awards. Such adjustments shall be made by the Board or the Committee, the determination of which shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a "transaction not involving the receipt of consideration by the Company".) (b)     In the event of: (1) a dissolution, liquidation or sale of substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; or (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's 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, then to the extent permitted by applicable law: (i) any surviving corporation or an Affiliate of such surviving corporation shall assume any Stock Awards outstanding under the Plan or shall substitute similar Stock Awards for those outstanding under the Plan, or (ii) such Stock Awards shall continue in full force and effect. In the event any surviving corporation and its Affiliates refuse to assume or continue such Stock Awards, or to substitute similar options for those outstanding under the Plan, then, with respect to Stock Awards held by persons then performing services as Employees, Directors or Consultants, the time during which such Stock Awards may be exercised shall be accelerated and the Stock Awards terminated if not exercised prior to such event. 13.     AMENDMENT OF THE PLAN AND STOCK AWARDS (a)     The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 12 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary for the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements. (b)     The Board may in its sole discretion submit any other amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers. (c)     It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide the Executive with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith. (d)     Rights and obligations under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. (e)     The Board at any time, and from time to time, may amend the terms of any one or more Stock Award; provided, however, that the rights and obligations under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. 14.     TERMINATION OR SUSPENSION OF THE PLAN (a)     The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate ten (10) years from the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. (b)     Rights and obligations under any Stock Award granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan, except with the consent of the person to whom the Stock Award was granted. 15. EFFECTIVE DATE OF PLAN. This Plan shall become effective on the date of hire of the Executive.     WILD OATS MARKETS, INC. INCENTIVE STOCK OPTION STEPHEN KACZYNSKI, Optionee:   Wild Oats Markets, Inc. (the "Company"), pursuant to the Stephen Kaczynski (the "Plan"), has this day granted to you, the optionee named above, an option to purchase shares of the common stock of the Company ("Common Stock"). This option is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The details of your option are as follows: 1.     (a)     THE TOTAL NUMBER OF SHARES OF COMMON STOCK SUBJECT TO THIS OPTION IS __________________________. (a)     Subject to the conditions stated herein, this option shall be exercisable with respect to each installment shown below on or after the date of vesting applicable to such installment; provided, however, that should Optionee's employment terminate for "cause" this option shall be terminated and canceled immediately and shall not be exercisable for any number of shares. For purposes of this option, "cause" shall mean misconduct including, but not limited to, criminal acts involving moral turpitude or dishonesty. NUMBER OF SHARES (INSTALLMENT) DATE OF EARLIEST EXERCISE (VESTING) 2.     (a)     The exercise price of this option is $_____________ per share, being not less than one hundred percent (100%) of the fair market value of the Common Stock on the date of grant of this option. (a)     Payment of the exercise price per share is due in full in cash (including check) upon exercise of all or any part of each installment which has become exercisable by you. (b)     Notwithstanding the foregoing, this option may be exercised pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which results in the receipt of cash (or check) by the Company prior to the issuance of Common Stock. 3.     This option may not be exercised for any number of shares which would require the issuance of anything other than whole shares. 4.     Notwithstanding anything to the contrary contained herein, this option may not be exercised unless the shares issuable upon exercise of this option are then registered under the Act or, if such shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Act. 5.     The term of this option commences on the date hereof and, unless sooner terminated as set forth below or in the Plan, terminates ten (10) years from the date of grant. In no event may this option be exercised on or after the date on which it terminates. This option shall terminate prior to the expiration of its term as follows: Thirty (30) days after the termination of your employment with the Company or an affiliate of the Company (as defined in the Plan) for any reason or for no reason unless; (a)     such termination of employment is due to your permanent and total disability (within the meaning of Section 422(c)(6) of the Code), in which event the option shall terminate on the earlier of the termination date set forth above or six (6) months following such termination of employment; or (b)     such termination of employment is due to your death, in which event the option shall terminate on the earlier of the termination date set forth above or twelve (12) months after your death; or (c)     during any part of such thirty (30) days period the option is not exercisable solely because of the condition set forth in paragraph 4 above, in which event the option shall not terminate until the earlier of the termination date set forth above or until it shall have been exercisable for an aggregate period of thirty (30) days after the termination of employment. However, this option may be exercised on or after the termination of employment only as to that number of vested shares as to which it was exercisable on the date of termination of employment under the provisions of paragraphs 1 and 3 of this option; provided however, that if your employment is terminated prior to the First Exercise Date (as defined in subparagraph 3(a) hereof), subject to paragraph 1 hereof, the date of your termination of employment shall be deemed the First Exercise Date. 6.     (a)     This option may be exercised, to the extent specified above, by delivering a notice of exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require pursuant to the Plan. (b)     By exercising this option you agree that: (i)     the Company may require you to enter an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of this option; (2) the lapse of any substantial risk of forfeiture to which the shares are subject at the time of exercise; or (3) the disposition of shares acquired upon such exercise; and (ii)     you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of this option that occurs within two (2) years after the date of this option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of this option. 7.     This option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. 8.     Any notices provided for in this option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the address specified below or at such other address as you hereafter designate by written notice to the Company. 9.     This option is subject to all the provisions of the Plan, a copy of which is attached hereto and its provisions are hereby made a part of this option, including without limitation the provisions of the Plan relating to option provisions, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this option and those of the Plan, the provisions of the Plan shall control. Dated the _________ day of ____________, 2001. Very truly yours, WILD OATS MARKETS, INC.   By______________________________________ Duly authorized on behalf of the Board of Directors The undersigned: (a)     Acknowledges receipt of the foregoing option and the attachments referenced therein and understands that all rights and liabilities with respect to this option are set forth in the option and the Plan; and (b)     Acknowledges that as of the date of grant of this option, it sets forth the entire understanding between the undersigned optionee and the Company and its affiliates regarding the acquisition of stock in the Company and supersedes all prior oral and written agreements on that subject with the exception of the following agreements only: NONE     __________________________ (Initial) OTHER     ______________________________________________________________ ______________________________________________________________ ______________________________________________________________       __________________________________________________ Optionee Address: ___________________________________________ ___________________________________________       WILD OATS MARKETS, INC. NON-QUALIFIED STOCK OPTION STEPHEN KACZYNSKI,Optionee:   Wild Oats Markets, Inc. (the "Company"), pursuant to the Stephen Kaczynski Equity Incentive Plan (the "Plan"), has this day granted to you, the optionee named above, an option to purchase shares of the common stock of the Company ("Common Stock"). This option is not intended to qualify and will not be treated as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The details of your option are as follows: 1.     (a)     The total number of shares of Common Stock subject to this option is ____________________________ (a)     Subject to the conditions stated herein, this option shall be exercisable with respect to each installment shown below on or after the date of vesting applicable to such installment; provided, however, that should Optionee's employment terminate for "cause" this option shall be terminated and canceled immediately and shall not be exercisable for any number of shares. For purposes of this option, "cause" shall mean misconduct including, but not limited to, criminal acts involving moral turpitude or dishonesty. NUMBER OF SHARES (INSTALLMENT) DATE OF EARLIEST EXERCISE (VESTING) 2.     (a)     The exercise price of this option is ___________________ ($_______) per share, being not less than eighty five percent (85%) of the fair market value of the Common Stock on the date of grant of this option. (a)     Payment of the exercise price per share is due in full in cash (including check) upon exercise of all or any part of each installment which has become exercisable by you. (b)     Notwithstanding the foregoing, this option may be exercised pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which results in the receipt of cash (or check) by the Company prior to the issuance of Common Stock. 3.     This option may not be exercised for any number of shares which would require the issuance of anything other than whole shares. 4.     Notwithstanding anything to the contrary contained herein, this option may not be exercised unless the shares issuable upon exercise of this option are then registered under the Act or, if such shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Act. 5.     The term of this option commences on the date hereof and, unless sooner terminated as set forth below or in the Plan, terminates ten (10) years from the date of grant. In no event may this option be exercised on or after the date on which it terminates. This option shall terminate prior to the expiration of its term as follows: Thirty (30) days after the termination of your employment with the Company for any reason or for no reason unless; (a)     such termination of employment is due to your permanent and total disability (within the meaning of Section 422(c)(6) of the Code), in which event the option shall terminate on the earlier of the termination date set forth above or six (6) months following such termination of employment; or (b)     such termination of employment is due to your death, in which event the option shall terminate on the earlier of the termination date set forth above or twelve (12) months after your death; or (c)     during any part of such thirty (30) days period the option is not exercisable solely because of the condition set forth in paragraph 4 above, in which event the option shall not terminate until the earlier of the termination date set forth above or until it shall have been exercisable for an aggregate period of thirty (30) days after the termination of employment. However, this option may be exercised on or after the termination of employment only as to that number of vested shares as to which it was exercisable on the date of termination of employment under the provisions of paragraphs 1 and 3 of this option; provided however, that if your employment is terminated prior to the First Exercise Date (as defined in subparagraph 3(a) hereof), subject to paragraph 1 hereof, the date of your termination of employment shall be deemed the First Exercise Date. 6.     (a)     This option may be exercised, to the extent specified above, by delivering a notice of exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require pursuant to the Plan. (i)     By exercising this option you agree that the Company may require you to enter an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of this option; (2) the lapse of any substantial risk of forfeiture to which the shares are subject at the time of exercise; or (3) the disposition of shares acquired upon such exercise. 7.     This option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. 8.     Any notices provided for in this option shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the address specified below or at such other address as you hereafter designate by written notice to the Company. 9.     If the partners hereto shall have any conflict regarding the terms of this option, the interpretation of the Company's Compensation Committee shall prevail. Dated the ______ day of _________________, 199___. Very truly yours, WILD OATS MARKETS, INC.   By ___________________________________ Duly authorized on behalf of the Board of Directors The undersigned: (a)     Acknowledges receipt of the foregoing option and the attachments referenced therein and understands that all rights and liabilities with respect to this option are set forth in the option and the Plan; and (b)     Acknowledges that as of the date of grant of this option, it sets forth the entire understanding between the undersigned optionee and the Company and its affiliates regarding the acquisition of stock in the Company and supersedes all prior oral and written agreements on that subject with the exception of the following agreements only: NONE     _____________________ (Initial) OTHER     __________________________________________________________ __________________________________________________________ __________________________________________________________   ___________________________________________________ Optionee   Address:     ___________________________________________ ___________________________________________     NOTICE OF EXERCISE   Date of Exercise Wild Oats Markets, Inc. 3375 Mitchell Lane Boulder, CO 80301 Ladies and Gentlemen: This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.     Type of option (check one) Incentive Nonstatutory Stock option dated: Number of shares as to which option is exercised: Certificates to be issued in name of: _____________________ Total exercise price:          $ Cash payment delivered herewith:     $ By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Stephen Kaczynski Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise related to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such shares of Common Stock are issued upon exercise of this option. I hereby make the following certifications and representations with respect to the number of shares of Common Stock of the Company listed above (the "Shares"), which are being acquired by me for my own account upon exercise of the Option as set forth above: I further acknowledge that I will not be able to resell the Shares for at least ninety days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144. I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or applicable securities laws. I further agree that, if required by the Company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Act, I will not sell or otherwise transfer or dispose of my shares of Common Stock or other securities of the Company during such period (not to exceed two hundred seventy (270) days) following the effective date of the registration statement of the Company filed under the Act (the "Effective Date") as may be requested by the Company or the representative of the underwriters. For purposes of this restriction I will be deemed to own securities that (i) are owned directly or indirectly by me, including securities held for my benefit by nominees, custodians, brokers or pledges; (ii) may be acquired by me within sixty (60) days of the Effective Date; (iii) are owned directly or indirectly, by or for my brothers or sisters (whether by whole or half blood), spouse, ancestors and lineal descendants; or (iv) are owned, directly or indirectly, by or for a corporation, partnership, estate or trust of which I am a shareholder, partner or beneficiary, but only to the extent of my proportionate interest therein as a shareholder, partner or beneficiary thereof. I further agree that the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period. Very truly yours, _________________________________

Exhibit 10.18     May 18, 1999 [name and address of director] Dear [first name]: At its November 2, 1995 meeting, the Board of Directors of Continental Airlines, Inc. (the "Company"), pursuant to the recommendation of the Human Resources Committee of the Board of Directors and resolutions duly adopted by the Board, granted certain lifetime flight benefits to the non-employee members of the Board of Directors of the Company. At its May 18, 1999 meeting, the Board, pursuant to the recommendation of the Human Resources Committee and resolutions duly adopted by the Board, authorized the amendment of such flight benefits. The purpose of this letter agreement, as contemplated and authorized by such resolutions, is to set forth the contractual obligations of the parties with respect to such flight benefits. This letter agreement amends in its entirety and replaces any prior agreements between you and the Company relating to your flight benefits. Pursuant to such resolutions, you are hereby granted Flight Benefits for your lifetime. As used herein, "Flight Benefits" means flight benefits on each airline operated by the Company or any of its affiliates or any successor or successors thereto (the "CO system"), consisting of the highest priority space available flight passes for you and your eligible family members (as such eligibility is in effect on the date hereof), a Universal Air Travel Plan (UATP) card (or, in the event of discontinuance of the UATP program, a similar charge card permitting the purchase of air travel through direct billing to the Company or any successor or successors thereto (a "Similar Card")) in your name for charging on an annual basis up to the applicable Annual Travel Limit (as hereinafter defined) with respect to such year in value (valued identically to the calculation of imputed income resulting from such flight benefits described below) of flights (in any fare class) on the CO system for you, your spouse, your family and significant others as determined by you, a Platinum Elite OnePass Card (or similar highest category successor frequent flyer card) in your name for use on the CO system, a membership for you and your spouse in the Company's President's Club (or any successor program maintained in the CO system) and payment by the Company to you while a member of the Board of Directors of the Company (and if you shall have five or more years of service on the Board of Directors of the Company, or retire from the Board after age 70, after your service as a Board member during your lifetime) of an annual amount (not to exceed in any year the applicable Annual Gross Up Limit (as hereinafter defined) with respect to such year) sufficient to pay, on an after tax basis (i.e., after the payment by you of all taxes on such amount), the U.S. federal, state and local income taxes (or, if you are not subject to U.S. income tax, the national, provincial, local and other income taxes to which you are subject) on imputed income resulting from such flights (such imputed income to be calculated during the term of such Flight Benefits at the lowest published fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare, or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law) or resulting from any other flight benefits extended to you as a result of your service as a member of the Board of Directors of the Company. As used herein, with respect to any year, the term "Annual Travel Limit" shall mean an amount (initially $50,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Company's average fare per revenue passenger for its jet operations (excluding regional jets) with respect to the applicable year as reported in its Annual Report on Form 10-K (or, if not so reported, as determined by the Company's independent auditors) (the "Average Fare") for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company on the date hereof), so as to preserve the benefit of $50,000 annually (adjusted in accordance with clauses (i) and (ii) above) of flights relative to current valuation methodology (e.g., if a change in the valuation methodology results, on average, in such flights being valued 15% higher than current valuation, then the Annual Travel Limit would be increased by 15% to $57,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to you upon your request. The Company will promptly notify you in writing of any adjustments to the Annual Travel Limit described in this paragraph. As used herein, with respect to any year, the term "Annual Gross Up Limit" shall mean an amount (initially $10,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Average Fare for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company on the date hereof), so as to preserve the benefit of $10,000 annually (adjusted in accordance with clauses (i) and (ii) above) of tax gross up relative to current valuation methodology (e.g., if a change in the valuation methodology results, on average, in flights being valued 15% higher than current valuation, then the Annual Gross Up Limit would be increased by 15% to $11,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to you upon your request. The Company will promptly notify you in writing of any adjustments to the Annual Gross Up Limit described in this paragraph. As used herein, a year may consist of twelve consecutive months other than a calendar year, it being the Company's current practice for purposes of Flight Benefits for a year to commence on December 1 and end on the following November 30 (for example, the twelve-month period from December 1, 1998 to November 30, 1999 is considered the year 1999 for purposes of Flight Benefits); provided that all calculations for purposes of clause (i) in the prior two paragraphs shall be with respect to fiscal years of the Company. As used herein, the term "affiliates" of the Company means any entity controlled by, controlling, or under common control with the Company, it being understood that control of an entity shall require the direct or indirect ownership of a majority of the outstanding capital stock of such entity. No tickets issued on the CO system in connection with the Flight Benefits may be purchased other than directly from the Company or its successor or successors (i.e., no travel agent or other fee or commission based distributor may be used), nor may any such tickets be sold or transferred by you or any other person, nor may any such tickets be used by any person other than the person in whose name the ticket is issued. You agree that, after receipt of an invoice or other accounting statement therefor, you will promptly (and in any event within 45 days after receipt of such invoice or other accounting statement) reimburse the Company for all charges on your UATP card (or Similar Card) which are not for flights on the CO system and which are not otherwise reimbursable to you under the existing policies of the Company for reimbursement of business expenses of members of the Board of Directors, or which are for tickets in excess of the applicable Annual Travel Limit. You agree that the credit availability under your UATP card (or Similar Card) may be suspended if you do not timely reimburse the Company as described in the foregoing sentence or if you exceed the applicable Annual Travel Limit with respect to a year; provided, that, immediately upon the Company's receipt of your reimbursement in full (or, in the case of exceeding the applicable Annual Travel Limit, beginning the next following year and after such reimbursement), the credit availability under your UATP card (or Similar Card) will be restored. The sole cost to you of flights on the CO system pursuant to use of your Flight Benefits will be the imputed income with respect to flights on the CO system charged on your UATP card (or Similar Card), calculated throughout the term of your Flight Benefits at the lowest published fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law, and reported to you as required by applicable law. With respect to any period for which the Company is obligated to provide the tax gross up described above, you will provide to the Company, upon request, a calculation or other evidence of your marginal tax rate sufficient to permit the Company to calculate accurately the amount to be paid to you. You will be issued a UATP card (or Similar Card), a Platinum Elite OnePass Card (or similar highest category successor frequent flyer card), a membership card in the Company's Presidents Club (or any successor program maintained in the CO system) for you and your spouse, and an appropriate flight pass identification card, each valid at all times during the term of your Flight Benefits. This letter agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including without limitation any person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Company by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. This letter agreement and the benefits or obligations hereunder may not be assigned by you. If you are in agreement with the terms of this letter agreement, please execute the enclosed copy hereof and return it to the Company at the above address, whereupon this letter agreement will become a binding obligation of the parties hereto.     Sincerely, CONTINENTAL AIRLINES, INC.     By:_________________________________   ACCEPTED AND AGREED as of the date first above written:   ____________________________________ [name of director]      

AMENDMENT NO. 2 TO FINANCING AGREEMENT                            This AMENDMENT NO. 2 TO FINANCING AGREEMENT (this “Amendment”), made as of June 30, 2001, between FIRSTAR BANK, NATIONAL ASSOCIATION, a national banking association (“Bank”) and VARI-LITE, INC., a Delaware corporation (“Borrower”), WITNESSETH:                            WHEREAS, Borrower and Bank have entered into that certain Financing Agreement, dated as of December 29, 2000, as amended by that certain Amendment No. 1 to Financing Agreement, dated as of March 30, 2001 (as so amended, the “Financing Agreement”), pursuant to which Bank has made certain loans and financial accommodations available to Borrower; and                            WHEREAS, Borrower and Bank desire to further amend the Financing Agreement as hereinafter set forth;                            NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Bank and Borrower agree as follows: 1.  DEFINED TERMS.                            Each defined term used herein and not otherwise defined herein has the meaning ascribed to such term in the Financing Agreement. 2.  AMENDMENT TO FINANCING AGREEMENT.                            The Financing Agreement is amended, effective as of the date of this Agreement, as follows:              Amendment to Exhibit J. Exhibit J to the Financing Agreement is amended in its entirety to read as set forth on Exhibit J attached hereto and by reference made a part hereof. 3.  REPRESENTATIONS AND WARRANTIES.                            Borrower represents and warrants to Bank as follows:              3.1        The Amendment.  This Amendment has been duly and validly executed by an authorized executive officer of Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms.              3.2        Financing Agreement.  The Financing Agreement as amended by this Amendment remains in full force and effect and remains the valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms.  Borrower hereby ratifies and confirms the Financing Agreement as amended by this Amendment.              3.3        Nonwaiver. Neither the execution, delivery, performance or effectiveness of this Amendment shall operate nor be deemed to be nor construed as a waiver (i) of any right, power or remedy of Bank under the Financing Agreement, nor (ii) of any term, provision, representation, warranty or covenant contained in the Financing Agreement or any other documentation executed in connection therewith.  Further, none of the provisions of this Amendment shall constitute, or be deemed to be or construed as, a waiver of any Event of Default under the Financing Agreement as amended by this Amendment.              3.4        Reference to and Effect on the Financing Agreement.  Upon the effectiveness of this Amendment, each reference in the Financing Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import shall mean and be a reference to the Financing Agreement as amended hereby, and each reference to the Financing Agreement in any other document, instrument or agreement executed and/or delivered in connection with the Financing Agreement shall mean and be a reference to the Financing Agreement as amended hereby.              3.5        Claims and Defenses.  As of the date of this Amendment, Borrower has no defenses, claims, counterclaims or setoffs with respect to the Financing Agreement or its Obligations thereunder or with respect to any actions of the Bank or any of its officers, directors, shareholders, employees, agents or attorneys, and Borrower irrevocably and absolutely waives any such defenses, claims, counterclaims and setoffs and releases the Bank and each of its officers, directors, shareholders, employees, agents and attorneys from the same. 4.  CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 2.              In addition to all of the other conditions and agreements set forth herein, the effectiveness of this Amendment is subject to the each of the following conditions precedent:              4.1        Amendment No. 2 to Financing Agreement.  Bank shall have received an original counterpart of this Amendment No. 2 to Financing Agreement, executed and delivered by a duly authorized officer of Borrower.              4.2        Acknowledgment of Guarantor.  Bank shall have received an original of the attached Acknowledgment of Vari-Lite International, Inc., a Delaware corporation, executed and delivered by a duly authorized officer of Vari-Lite International, Inc..              4.3        No Material Adverse Change.  There shall have occurred no material and adverse change in the Borrower’s assets, liabilities or financial condition since the date of the last Financials delivered by Borrower to Bank nor shall there have been any material damage to or loss of any of Borrower’s assets or properties since such date.              4.4        Amendment Fee.  Borrower shall have paid Bank an amendment fee in an amount of Twenty Thousand Dollars ($20,000.00). 5.  SECTION   MISCELLANEOUS.              5.1        Governing Law.  This Amendment has been delivered and accepted at and shall be deemed to have been made at Cleveland, Ohio.  This Amendment shall be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of Ohio, without regard to principles of conflict of law, and all other laws of mandatory application.              5.2        Severability.  Each provision of this Amendment shall be interpreted in such manner as to be valid under applicable law, but if any provision hereof shall be invalid under applicable law, such provision shall be ineffective to the extent of such invalidity, without invalidating the remainder of such provision or the remaining provisions hereof.              5.3        Counterparts.  This Amendment may be executed in one or more counterparts, each of which, when taken together, shall constitute but one and the same agreement. [REMAINDER OF PAGE INTENTIONALLY BLANK]                            IN WITNESS WHEREOF, Borrower has caused this Amendment No. 2 to Financing Agreement to be duly executed and delivered by its duly authorized officer as of the date first above written. Signed and acknowledged VARI-LITE, INC. in the presence of:       _________________________ By:___________________________ Name:____________________     Its:__________________________ _________________________   Name:____________________         STATE OF )   ) ss: COUNTY OF )                The foregoing instrument was acknowledged before me this ___ day of August, 2001, by _______________, the ___________________ of Vari-Lite, Inc., a Delaware corporation, on behalf of the corporation.   --------------------------------------------------------------------------------   Notary Public         Accepted at Cleveland, Ohio,   Effective as of June 30, 2001.       FIRSTAR BANK, NATIONAL ASSOCIATION       By:       --------------------------------------------------------------------------------   Its:       --------------------------------------------------------------------------------                                                                       ACKNOWLEDGMENT OF GUARANTOR                            The undersigned, Vari-Lite International, Inc., a Delaware corporation, having guaranteed all of the obligations of Vari-Lite, Inc. to Firstar Bank, National Association (“Bank”), hereby acknowledges and agrees, effective as of June 30, 2001, to the terms of the foregoing Amendment No. 2 to Financing Agreement.  The undersigned represents and warrants to Bank that the Guaranty executed and delivered by the undersigned to Bank, dated as of December 29, 2000, remains the valid and binding obligation of the undersigned, enforceable against it in accordance with its terms.   VARI-LITE INTERNATIONAL, INC.   By:     -------------------------------------------------------------------------------- Its:     --------------------------------------------------------------------------------   STATE OF         -------------------------------------------------------------------------------- )               )ss:   COUNTY OF         -------------------------------------------------------------------------------- )                              The foregoing instrument was acknowledged before me this ___ day of August, 2001, by ___________________, the ________________ of VARI-LITE INTERNATIONAL, INC., a Delaware corporation, on behalf of the company.           --------------------------------------------------------------------------------     Notary Public   Exhibit J Financial Covenants Financial Covenants.  Borrower agrees that it shall: (A) Net Capital Expenditures.  Not make nor permit International to make  Net Capital Expenditures in an aggregate amount exceeding $9,000,000 for any fiscal year.     (B) Earnings Before Interest, Taxes, Depreciation and Amortization.  Not permit International’s Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") to be less than the following amounts for the following periods:   EBIDTA   Period --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- $ 2,931,000   10/01/00 - 12/31/00 $ 6,234,000   10/01/00 - 03/31/01 $ 7,460,000   10/01/00 - 06/30/01 $ 9,491,000   10/01/00 - 09/30/01 $ 16,123,000   01/01/01 - 12/31/01 $ 16,272,000   04/01/01 - 03/31/02 $ 15,834,000   07/01/01 - 06/30/02 $ 15,447,000   10/01/01 - 09/30/02 $ 16,314,000   01/01/02 - 12/31/02 $ 16,882,000   04/01/02 - 03/31/03 $ 17,385,000   07/01/02 - 06/30/03 $ 18,123,000   10/01/02 - 09/30/03       (C)        Net Worth.  Not permit International’s Net Worth to be less than the following amounts as of the following dates: Net Date   Period --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- $ 45,000,000   12/31/00 $ 45,000,000   03/31/01 $ 45,000,000   06/30/01 $ 44,600,000   09/30/01 $ 46,000,000   12/31/01 $ 46,000,000   03/31/02 $ 46,000,000   06/30/02 $ 46,000,000   09/30/02 $ 47,750,000   12/31/02 $ 47,750,000   03/31/03 $ 47,750,000   06/30/03 $ 47,750,000   09/30/03 (D)        Maximum Debt.  Not permit International’s Total Funded Indebtedness to exceed the following amounts at any time during the following periods: Total Funded Indebtedness   Period --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- $ 29,000,000   01/01/01 - 06/30/01 $ 27,000,000   07/01/01 - 09/30/01 $ 25,000,000   10/01/01 - 12/31/01 $ 25,000,000   01/01/02 - 03/31/02 $ 25,000,000   04/01/02 - 06/30/02 $ 25,000,000   07/01/02 - 09/30/02 $ 25,000,000   10/01/02 - 12/31/02 $ 27,000,000   01/01/03 - 03/31/03 $ 27,000,000   04/01/03 - 06/30/03 $ 27,000,000   07/01/03 - 09/30/03 $ 27,000,000   at any time thereafter   (E)        Leverage Ratio.  Not permit International’s Leverage Ratio to exceed the following ratios as of the following dates: Leverage Ratio Date -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4.65 to 1 03/31/01 3.23 to 1 06/30/01 2.56 to 1 09/30/01 2.25 to 1 12/31/01 2.25 to 1 03/31/02 2.00 to 1 06/30/02 2.00 to 1 09/30/02 1.80 to 1 12/31/02 1.75 to 1 03/31/03 1.65 to 1 06/30/03 1.65 to 1 09/30/03     (F)        Total Debt Service Ratio.  Not permit International’s Total Debt Service Ratio to be less than the following ratios as of the following dates: Total Debt Service Ratio   Date --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- 0.61 to 1   09/30/01 1.10 to 1   12/31/01 1.10 to 1   03/31/02 1.10 to 1   06/30/02 1.10 to 1   09/30/02 1.20 to 1   12/31/02 1.20 to 1   03/31/03 1.20 to 1   06/30/03 1.20 to 1   09/30/03       II.          Definitions   (A) The term "Net Capital Expenditures" for purposes of this Exhibit J shall mean the sum of  (a) International’s consolidated capital expenditures (including, but not by way of limitation, expenditures for fixed assets or leases capitalized or required to be capitalized on International’s consolidated books by purchase, lease-purchase agreement, option or otherwise), minus  (b) the net book value of capital assets previously sold and replaced by such capital expenditures.         (B) The term "Earnings Before Interest, Taxes, Depreciation, and Amortization" or "EBITDA"for purposes of this Exhibit J shall mean International’s consolidated earnings from operations before income taxes and interest income or expense plus depreciation, plus amortization of all non-cash charges, all as determined in accordance with generally accepted accounting principles, and shall not include any gains or losses from the sale of assets outside the normal course of business or any other extraordinary accounting adjustments or non-recurring items of income or loss.         (C) The term "Net Worth" for purposes of this Exhibit J shall mean the total of International’s consolidated shareholders equity, as determined in accordance with generally accepted accounting principles, consistently applied.         (D) The term "Total Funded Indebtedness" for purposes of this Exhibit J shall have the meaning and be determined in accordance with generally accepted accounting principles consistently applied by International on a consolidated basis in accordance with past practices.   (E) The term "Leverage Ratio" for purposes of this Exhibit J shall mean:           1.          As of 03/31/01,  the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 03/31/01;           2.          As of 06/30/01, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 06/30/01;           3.          As of 09/30/01, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured from 10/01/00 to 09/30/01; and           4.          As of 12/31/01 and as of the last day of any fiscal quarter thereafter, the ratio of Total Funded Indebtedness as of such date to EBITDA as measured on a four quarter trailing basis.         (F) The term “Unfunded Capital Expenditure Payments” for purposes of this Exhibit J shall mean the amount of consolidated capital expenditures of International which are not financed under the CapEx Facility nor any other financing arrangement with any other person.         (G) The term "Total Debt Service Ratio" for purposes of this Exhibit J shall mean:           1.          For the period commencing on the 07/01/01 and ending on 09/30/01, the ratio of (a) EBITDA as measured from 01/01/01 to 09/30/01 to (b) the sum of  (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for the period 01/01/01 to 09/30/01,  plus  (ii) Unfunded Capital Expenditure Payments for the period 01/01/01 to 09/30/01, minus (iii) the US $1,000,000 Japanese principal payment paid by Vari-Lite Asia, Inc. in March, 2001;           2.          For the period commencing on the 10/01/01 and ending on 12/31/01, the ratio of (a) EBITDA as measured on a four quarter trailing basis to (b) the sum of  (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for such four quarter trailing period,  plus (ii) Unfunded Capital Expenditure Payments for such four quarter trailing period,  minus  (iii) the US $1,000,000 Japanese principal payment paid by Vari-Lite Asia, Inc. in March, 2001, plus (iv) the amount of taxes paid by International on a consolidated basis during such four quarter trailing period, minus (v) the amount of Japanese taxes paid by Vari-Lite Asia, Inc. in February, 2001; and           3.          For all periods after 12/31/01, the ratio of (a) EBITDA as measured on a four quarter trailing basis to (b) the sum of  (i) the total consolidated and regularly scheduled principal and interest payments of Total Funded Indebtedness for such four quarter trailing period,  plus (ii) Unfunded Capital Expenditure Payments for such four quarter trailing period, plus (iii) the amount of taxes paid by International on a consolidated basis during such four quarter trailing period.  

Exhibit 10.3 ZORAN CORPORATION AMENDED AND RESTATED 1995 EMPLOYEE STOCK PURCHASE PLAN (As Amended Through June 29, 2001)              1.          Establishment, Purpose and Term of Plan.                            1.1        Establishment.  The Zoran Corporation 1995 Employee Stock Purchase Plan was initially established effective December 14, 1995 (the “Effective Date”), the effective date of the initial registration by the Company of its Stock under Section 12 of the Exchange Act (the “Initial Plan”).  The Initial Plan was amended and restated in its entirety as the Zoran Corporation Amended and Restated 1995 Employee Stock Purchase Plan (the “Plan”) effective as of the date of commencement of the first Offering under the Plan following approval of the Plan by the stockholders of the Company on June 6, 1996.                            1.2        Purpose.  The purpose of the Plan to provide Eligible Employees of the Participating Company Group with an opportunity to acquire a proprietary interest in the Company through the purchase of Stock.  The Company intends that the Plan shall qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments or replacements of such section), and the Plan shall be so construed.                            1.3        Term of Plan.  The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued.              2.          Definitions and Construction.                            2.1        Definitions.  Any term not expressly defined in the Plan but defined for purposes of Section 423 of the Code shall have the same definition herein.  Whenever used herein, the following terms shall have their respective meanings set forth below:                                         (a)         “Board” means the Board of Directors of the Company.  If one or more Committees have been appointed by the Board to administer the Plan, “Board” also means such Committee(s).                                         (b)        “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.                                         (c)         “Committee” means a committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board.  Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.                                         (d)        “Company” means Zoran Corporation, a Delaware corporation, or any successor corporation thereto.                                         (e)         “Compensation” means, with respect to an Offering Period under the Plan, all amounts paid in cash in the form of base salary during such Offering Period before deduction for any contributions to any plan maintained by a Participating Company and described in Section 401(k) or Section 125 of the Code.  Compensation shall not include commissions, overtime, bonuses, annual awards, other incentive payments, shift premiums, reimbursements of expenses, allowances, long-term disability, workers’ compensation or any amount deemed received without the actual transfer of cash or any amounts directly or indirectly paid pursuant to the Plan or any other stock purchase or stock option plan.                                         (f)         “Eligible Employee” means an Employee who meets the requirements set forth in Section 5 for eligibility to participate in the Plan.                                         (g)        “Employee” means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company and for purposes of Section 423 of the Code; provided, however, that neither service as a Director nor payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan.                                         (h)        “Exchange Act” means the Securities Exchange Act of 1934, as amended.                                         (i)          “Fair Market Value” means, as of any date, if there is then a public market for the Stock, the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so reported instead) as reported on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) System, the NASDAQ National Market System or such other national or regional securities exchange or market system constituting the primary market for the Stock.  If the relevant date does not fall on a day on which the Stock is trading on NASDAQ, the NASDAQ National Market System or other national or regional securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its sole discretion.  If there is then no public market for the Stock, the Fair Market Value on any relevant date shall be as determined by the Board without regard to any restriction other than a restriction which, by its terms, will never lapse.  Notwithstanding the foregoing, the Fair Market Value per share of Stock on the Effective Date shall be deemed to be the public offering price set forth in the final prospectus filed with the Securities and Exchange Commission in connection with the initial public offering of the Stock.                                         (j)          “Offering” means an offering of Stock as provided in Section 6.                                         (k)         “Offering Date” means, for any Offering Period, the first day of such Offering Period.                                         (l)          “Offering Period” means a period determined in accordance with Section 6.1.                                         (m)        “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.                                         (n)        “Participant” means an Eligible Employee participating in the Plan.                                         (o)        “Participating Company” means the Company or any Parent Corporation or Subsidiary Corporation which the Board determines should be included in the Plan.  The Board shall have the sole and absolute discretion to determine from time to time what Parent Corporations or Subsidiary Corporations shall be Participating Companies.                                         (p)        “Participating Company Group” means, at any point in time, the Company and all other corporations collectively which are then Participating Companies.                                         (q)        “Purchase Date” means, for any Purchase Period, the last day of such Purchase Period.                                         (r)         “Purchase Period” means a period determined in accordance with Section 6.2.                                         (s)         “Purchase Price” means the price at which a share of Stock may be purchased pursuant to the Plan, as determined in accordance with Section 9.                                         (t)         “Purchase Right”  means an option pursuant to the Plan to purchase such shares of Stock as provided in Section 8 which may or may not be exercised during an Offering Period.  Such option arises from the right of a Participant to withdraw such Participant’s accumulated payroll deductions not previously applied to the purchase of Stock under the Plan (if any) and terminate participation in the Plan or any Offering therein at any time during an Offering Period.                                         (u)        “Stock” means the common stock, par value $0.001, of the Company, as adjusted from time to time in accordance with Section 4.2.                                         (v)        “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.                            2.2        Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the context, the singular shall include the plural, the plural shall include the singular, and use of the term “or” shall include the conjunctive as well as the disjunctive.              3.          Administration.  The Plan shall be administered by the Board, including any duly appointed Committee of the Board.  All questions of interpretation of the Plan or of any Purchase Right shall be determined by the Board and shall be final and binding upon all persons having an interest in the Plan or such Purchase Right.  Subject to the provisions of the Plan, the Board shall determine all of the relevant terms and conditions of Purchase Rights granted pursuant to the Plan; provided, however, that all Participants granted Purchase Rights pursuant to the Plan shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code.  All expenses incurred in connection with the administration of the Plan shall be paid by the Company.              4.          Shares Subject to Plan.                            4.1        Maximum Number of Shares Issuable.  Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be five hundred fifty thousand (550,000) and shall consist of authorized but unissued or reacquired shares of the Stock, or any combination thereof.  If an outstanding Purchase Right for any reason expires or is terminated or canceled, the shares of Stock allocable to the unexercised portion of such Purchase Right shall again be available for issuance under the Plan.                            4.2        Adjustments for Changes in Capital Structure.  In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, or in the event of any merger (including a merger effected for the purpose of changing the Company’s domicile), sale of assets or other reorganization in which the Company is a party, appropriate adjustments shall be made in the number and class of shares subject to the Plan, to the Offering Share Limit set forth in Section 8.1 and to each Purchase Right and in the Purchase Price.              5.          Eligibility.                            5.1        Employees Eligible to Participate.  Any Employee of a Participating Company is eligible to participate in the Plan except the following:                                         (a)         Employees who are customarily employed by the Participating Company Group for twenty (20) hours or less per week;                                         (b)        Employees who are customarily employed by the Participating Company Group for not more than five (5) months in any calendar year; and                                         (c)         Employees who own or hold options to purchase or who, as a result of participation in the Plan, would own or hold options to purchase, stock of the Company or of any Parent Corporation or Subsidiary Corporation possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of such corporation within the meaning of Section 423(b)(3) of the Code.                            5.2        Leased Employees Excluded.  Notwithstanding anything herein to the contrary, any individual performing services for a Participating Company solely through a leasing agency or employment agency shall not be deemed an “Employee” of such Participating Company.              6.          Offerings.                            6.1        Offering Periods.  Except as otherwise set forth below, the Plan shall be implemented by sequential Offerings of approximately twenty-four (24) months duration (an “Offering Period”); provided, however that the first Offering Period shall commence on the Effective Date and end on October 31, 1997 (the “Initial Offering Period”).  Subsequent Offerings shall commence on the first days of May and November of each year and end on the last days of the second April and October, respectively, occurring thereafter.  Notwithstanding the foregoing, the Board may establish a different term for one or more Offerings or different commencing or ending dates for such Offerings; provided, however, that no Offering may exceed a term of twenty-seven (27) months.  An Employee who becomes an Eligible Employee after an Offering Period has commenced shall not be eligible to participate in such Offering but may participate in any subsequent Offering provided such Employee is still an Eligible Employee as of the commencement of any such subsequent Offering.  Eligible Employees may not participate in more than one Offering at a time.  In the event the first or last day of an Offering Period is not a business day, the Company shall specify the business day that will be deemed the first or last day, as the case may be, of the Offering Period.                            6.2        Purchase Periods.  Each Offering Period shall consist of four (4) consecutive purchase periods of approximately six (6) months duration (individually, a “Purchase Period”).  The Purchase Period commencing on the Offering Date of the Initial Offering Period shall end on April 30, 1996.  A Purchase Period commencing on the first day of May shall end on the last day of the next following October.  A Purchase Period commencing on the first day of November shall end on the last day of the next following April.  Notwithstanding the foregoing, the Board may establish a different term for one or more Purchase Periods or different commencing or ending dates for such Purchase Periods.  In the event the first or last day of a Purchase Period is not a business day, the Company shall specify the business day that will be deemed the first or last day, as the case may be, of the Purchase Period.                            6.3        Governmental Approval; Stockholder Approval.  Notwithstanding any other provision of the Plan to the contrary, any Purchase Right granted pursuant to the Plan shall be subject to (a) obtaining all necessary governmental approvals or qualifications of the sale or issuance of the Purchase Rights or the shares of Stock and (b) obtaining stockholder approval of the Plan.  Notwithstanding the foregoing, stockholder approval shall not be necessary in order to grant any Purchase Right granted in the Plan’s Initial Offering Period; provided, however, that the exercise of any such Purchase Right shall be subject to obtaining stockholder approval of the Plan.              7.          Participation in the Plan.                            7.1        Initial Participation.  An Eligible Employee shall become a Participant on the first Offering Date after satisfying the eligibility requirements of Section 5 and delivering to the Company’s payroll office or other office designated by the Company not later than the close of business for such office on the last business day before such Offering Date (the “Subscription Date”) a subscription agreement indicating the Employee’s election to participate in the Plan and authorizing payroll deductions.  An Eligible Employee who does not deliver a subscription agreement to the Company’s payroll or other designated office on or before the Subscription Date shall not participate in the Plan for that Offering Period or for any subsequent Offering Period unless such Employee subsequently enrolls in the Plan by filing a subscription agreement with the Company by the Subscription Date for such subsequent Offering Period.  The Company may, from time to time, change the Subscription Date as deemed advisable by the Company in its sole discretion for proper administration of the Plan.                            7.2        Continued Participation.  A Participant shall automatically participate in the Offering Period commencing immediately after the final Purchase Date of each Offering Period in which the Participant participates until such time as such Participant (a) ceases to be an Eligible Employee, (b) withdraws from the Plan pursuant to Section 13.2 or (c) terminates employment as provided in Section 14.  If a Participant automatically may participate in a subsequent Offering Period pursuant to this Section 7.2, then the Participant is not required to file any additional subscription agreement for such subsequent Offering Period in order to continue participation in the Plan.   However, a Participant may file a subscription agreement with respect to a subsequent Offering Period if the Participant desires to change any of the Participant’s elections contained in the Participant’s then effective subscription agreement.              8.          Right to Purchase Shares.                            8.1        Purchase Right.  Except as set forth below, during an Offering Period each Participant in such Offering Period shall have a Purchase Right consisting of the right to purchase that number of whole shares of Stock arrived at by dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value of a share of Stock on the Offering Date of such Offering Period; provided, however, that such number shall not exceed 5,000 shares (the “Offering Share Limit”).  Shares of Stock may only be purchased through a Participant’s payroll deductions pursuant to Section 10.                            8.2        Pro Rata Adjustment of Purchase Right.  Notwithstanding the foregoing, if the Board shall establish an Offering Period of less than twenty-three and one-half (23½) months in duration or more than twenty-four and one-half (24½) months in duration, (a) the dollar amount in Section 8.1 shall be determined by multiplying $2,083.33 by the number of months in the Offering Period and rounding to the nearest whole dollar, and (b) the Offering Share Limit shall be determined by multiplying 208.33 shares by the number of months in the Offering Period and rounding to the nearest whole share.  For purposes of the preceding sentence, fractional months shall be rounded to the nearest whole month.              9.          Purchase Price.  The Purchase Price at which each share of Stock may be acquired in a given Offering Period pursuant to the exercise of all or any portion of a Purchase Right granted under the Plan shall be set by the Board; provided, however, that the Purchase Price shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on the Purchase Date of the Offering Period.  Unless otherwise provided by the Board prior to the commencement of an Offering Period, the Purchase Price for that Offering Period shall be eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on the Purchase Date of the Offering Period.              10.        Accumulation of Purchase Price through Payroll Deduction.  Shares of Stock which are acquired pursuant to the exercise of all or any portion of a Purchase Right for an Offering Period may be paid for only by means of payroll deductions from the Participant’s Compensation accumulated during the Offering Period.  Except as set forth below, the amount of Compensation to be deducted from a Participant’s Compensation during each pay period shall be determined by the Participant’s subscription agreement.                            10.1      Commencement of Payroll Deductions.  Payroll deductions shall commence on the first payday following the Offering Date and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in the Plan.                            10.2      Limitations on Payroll Deductions.  The amount of payroll deductions with respect to the Plan for any Participant during any pay period shall be in one percent (1%) increments not to exceed ten percent (10%) of the Participant’s Compensation for such pay period.  Notwithstanding the foregoing, the Board may change the limits on payroll deductions effective as of a future Offering Date, as determined by the Board.  Amounts deducted from Compensation shall be reduced by any amounts contributed by the Participant and applied to the purchase of Company stock pursuant to any other employee stock purchase plan qualifying under Section 423 of the Code.                            10.3      Election to Change or Stop Payroll Deductions.  During an Offering Period, a Participant may elect to increase or decrease the amount deducted or stop deductions from his or her Compensation by filing an amended subscription agreement with the Company on or before the “Change Notice Date.”  The “Change Notice Date” shall initially be the seventh (7th) day prior to the end of the first pay period for which such election is to be effective; however, the Company may change such Change Notice Date from time to time.  A Participant who elects to decrease the rate of his or her payroll deductions to zero percent (0%) shall nevertheless remain a Participant in the current Offering Period unless such Participant subsequently withdraws from the Offering or the Plan as provided in Sections 13.1 and 13.2, respectively, or is automatically withdrawn from the Offering as provided in Section 13.4.                            10.4      Participant Accounts.  Individual Plan accounts shall be maintained for each Participant.  All payroll deductions from a Participant’s Compensation shall be credited to such account and shall be deposited with the general funds of the Company.  All payroll deductions received or held by the Company may be used by the Company for any corporate purpose.                            10.5      No Interest Paid.  Interest shall not be paid on sums deducted from a Participant’s Compensation pursuant to the Plan.                            10.6      Company Established Procedures.  The Company may, from time to time, establish or change (a) a minimum required payroll deduction amount for participation in an Offering, (a) limitations on the frequency or number of changes in the rate of payroll deduction during an Offering, (c) an exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, (d) payroll deduction in excess of or less than the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of subscription agreements, (e) the date(s) and manner by which the Fair Market Value of a share of Stock is determined for purposes of administration of the Plan, or (vi) such other limitations or procedures as deemed advisable by the Company in the Company’s sole discretion which are consistent with the Plan and in accordance with the requirements of Section 423 of the Code.              11.        Purchase of Shares.                            11.1      Exercise of Purchase Right.  On each Purchase Date of an Offering Period, each Participant who has not withdrawn from the Offering or whose participation in the Offering has not terminated on or before such Purchase Date shall automatically acquire pursuant to the exercise of the Participant’s Purchase Right the number of whole shares of Stock arrived at by dividing the total amount of the Participant’s accumulated payroll deductions for the Purchase Period by the Purchase Price; provided, however, in no event shall the number of shares purchased by the Participant during an Offering Period exceed the number of shares subject to the Participant’s Purchase Right.  No shares of Stock shall be purchased on a Purchase Date on behalf of a Participant whose participation in the Offering or the Plan has terminated on or before such Purchase Date.                            11.2      Return of Cash Balance.  Any cash balance remaining in the Participant’s Plan account shall be refunded to the Participant as soon as practicable after the Purchase Date.  In the event the cash to be returned to a Participant pursuant to the preceding sentence is an amount less than the amount necessary to purchase a whole share of Stock, the Company may establish procedures whereby such cash is maintained in the Participant’s Plan account and applied toward the purchase of shares of Stock in the subsequent Purchase Period or Offering Period.                            11.3      Tax Withholding.  At the time a Participant’s Purchase Right is exercised, in whole or in part, or at the time a Participant disposes of some or all of the shares of Stock he or she acquires under the Plan, the Participant shall make adequate provision for the foreign, federal, state and local tax withholding obligations of the Participating Company Group, if any, which arise upon exercise of the Purchase Right or upon such disposition of shares, respectively.  The Participating Company Group may, but shall not be obligated to, withhold from the Participant’s compensation the amount necessary to meet such withholding obligations.                            11.4      Expiration of Purchase Right.  Any portion of a Participant’s Purchase Right remaining unexercised after the end of the Offering Period to which such Purchase Right relates shall expire immediately upon the end of such Offering Period.              12.        Limitations on Purchase of Shares; Rights as a Stockholder.                            12.1      Fair Market Value Limitation.  Notwithstanding any other provision of the Plan, no Participant shall be entitled to purchase shares of Stock under the Plan (or any other employee stock purchase plan which is intended to meet the requirements of Section 423 of the Code sponsored by the Company or a Parent Corporation or Subsidiary Corporation) at a rate which exceeds $25,000 in Fair Market Value, which Fair Market Value is determined for shares purchased during a given Offering Period as of the Offering Date for such Offering Period (or such other limit as may be imposed by the Code), for each calendar year in which the Participant participates in the Plan (or any other employee stock purchase plan described in this sentence).                            12.2      Pro Rata Allocation.  In the event the number of shares of Stock which might be purchased by all Participants in the Plan exceeds the number of shares of Stock available in the Plan, the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be practicable and as the Company shall determine to be equitable.                            12.3      Rights as a Stockholder and Employee.  A Participant shall have no rights as a stockholder by virtue of the Participant’s participation in the Plan until the date of the issuance of a stock certificate for the shares of Stock being purchased pursuant to the exercise of the Participant’s Purchase Right.  No adjustment shall be made for cash dividends or distributions or other rights for which the record date is prior to the date such stock certificate is issued.  Nothing herein shall confer upon a Participant any right to continue in the employ of the Participating Company Group or interfere in any way with any right of the Participating Company Group to terminate the Participant’s employment at any time.              13.        Withdrawal.                            13.1      Withdrawal From an Offering.  A Participant may withdraw from an Offering by signing and delivering to the Company’s payroll or other designated office a written notice of withdrawal on a form provided by the Company for such purpose.  Such withdrawal may be elected at any time prior to the end of an Offering Period; provided, however, if a Participant withdraws after a Purchase Date, the withdrawal shall not affect shares of Stock acquired by the Participant on such Purchase Date.  Unless otherwise indicated, withdrawal from an Offering shall not result in a withdrawal from the Plan or any succeeding Offering therein.  By withdrawing from an Offering effective as of the close of a given Purchase Date, a Participant may have shares of Stock purchased on such Purchase Date and immediately commence participation in the new Offering commencing immediately after such Purchase Date.  A Participant is prohibited from again participating in an Offering at any time following withdrawal from such Offering.  The Company may impose, from time to time, a requirement that the notice of withdrawal be on file with the Company’s payroll office or other designated office for a reasonable period prior to the effectiveness of the Participant’s withdrawal from an Offering.                            13.2      Withdrawal from the Plan.  A Participant may withdraw from the Plan by signing and delivering to the Company’s payroll office or other designated office a written notice of withdrawal on a form provided by the Company for such purpose.  Withdrawals made after a Purchase Date shall not affect shares of Stock acquired by the Participant on such Purchase Date.  In the event a Participant voluntarily elects to withdraw from the Plan, the Participant may not resume participation in the Plan during the same Offering Period, but may participate in any subsequent Offering under the Plan by again satisfying the requirements of Sections 5 and 7.1.  The Company may impose, from time to time, a requirement that the notice of withdrawal be on file with the Company’s payroll office or other designated office for a reasonable period prior to the effectiveness of the Participant’s withdrawal from the Plan.                            13.3      Return of Payroll Deductions.  Upon a Participant’s withdrawal from an Offering or the Plan pursuant to Sections 13.1 or 13.2, respectively, the Participant’s accumulated payroll deductions which have not been applied toward the purchase of shares of Stock shall be returned as soon as practicable after the withdrawal, without the payment of any interest, to the Participant, and the Participant’s interest in the Offering or the Plan, as applicable, shall terminate.  Such accumulated payroll deductions may not be applied to any other Offering under the Plan.                            13.4      Automatic Withdrawal From an Offering.  If the Fair Market Value of a share of Stock on a Purchase Date of an Offering (other than the final Purchase Date of such Offering) is less than the Fair Market Value of a share of Stock on the Offering Date for such Offering, then every Participant shall automatically (a) be withdrawn from such Offering at the close of such Purchase Date and after the acquisition of shares of Stock for such Purchase Period and (b) be enrolled in the Offering commencing on the first business day subsequent to such Purchase Period.  A Participant may elect not to be automatically withdrawn from an Offering Period pursuant to this Section 13.4 by delivering to the Company not later than the close of business on the last day before the Purchase Date a written notice indicating such election.                            13.5      Waiver of Withdrawal Right.  The Company may, from time to time, establish a procedure pursuant to which a Participant may elect, at least six (6) months prior to a Purchase Date, to have all payroll deductions accumulated in his or her Plan account as of such Purchase Date applied to purchase shares of Stock under the Plan, and (a) to waive his or her right to withdraw from the Offering or the Plan and (b) to waive his or her right to increase, decrease, or cease payroll deductions under the Plan from his or her Compensation during the Purchase Period ending on such Purchase Date.  Such election shall be made in writing on a form provided by the Company for such purpose and must be delivered to the Company not later than the close of business on the day preceding the date which is six (6) months before the Purchase Date for which such election is to first be effective.              14.        Termination of Employment or Eligibility.  Termination of a Participant’s employment with the Company for any reason, including retirement, disability or death or the failure of a Participant to remain an Eligible Employee, shall terminate the Participant’s participation in the Plan immediately.  In such event, the payroll deductions credited to the Participant’s Plan account since the last Purchase Date shall, as soon as practicable, be returned to the Participant or, in the case of the Participant’s death, to the Participant’s legal representative, and all of the Participant’s rights under the Plan shall terminate.  Interest shall not be paid on sums returned to a Participant pursuant to this Section 14.  A Participant whose participation has been so terminated may again become eligible to participate in the Plan by again satisfying the requirements of Sections 5 and 7.1.              15.        Transfer of Control.                            15.1      Definitions.                                         (a)         An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company:  (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.                                         (b)        A “Transfer of Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be.  For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations.  The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.                            15.2      Effect of Transfer of Control on Purchase Rights.  In the event of a Transfer of Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may assume the Company’s rights and obligations under the Plan or substitute substantially equivalent Purchase Rights for stock of the Acquiring Corporation.  If the Acquiring Corporation elects not to assume or substitute for the outstanding Purchase Rights, the Board may, in its sole discretion and notwithstanding any other provision herein to the contrary, adjust the Purchase Date of the then current Purchase Period to a date on or before the date of the Transfer of Control, but shall not adjust the number of shares of Stock subject to any Purchase Right.  All Purchase Rights which are neither assumed or substituted for by the Acquiring Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer of Control shall terminate and cease to be outstanding effective as of the date of the Transfer of Control.  Notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding Purchase Rights immediately prior to an Ownership Change Event described in Section 15.1(a)(i) constituting a Transfer of Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Purchase Rights shall not terminate unless the Board otherwise provides in its sole discretion.              16.        Nontransferability of Purchase Rights.  A Purchase Right may not be transferred in any manner otherwise than by will or the laws of descent and distribution and shall be exercisable during the lifetime of the Participant only by the Participant.  The Company, in its absolute discretion, may impose such restrictions on the transferability of the shares purchasable upon the exercise of a Purchase Right as it deems appropriate and any such restriction shall be set forth in the respective subscription agreement and may be referred to on the certificates evidencing such shares.              17.        Reports.  Each Participant who exercised all or part of his or her Purchase Right for a Purchase Period shall receive, as soon as practicable after the Purchase Date of such Purchase Period, a report of such Participant’s Plan account setting forth the total payroll deductions accumulated, the number of shares of Stock purchased, the Purchase Price for such shares, the date of purchase and the remaining cash balance to be refunded or retained in the Participant’s Plan account pursuant to Section 11.2, if any.  Each Participant shall be provided information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.              18.        Restriction on Issuance of Shares.  The issuance of shares under the Plan shall be subject to compliance with all applicable requirements of foreign, federal or state law with respect to such securities.  A Purchase Right may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable foreign, federal or state securities laws or other law or regulations.  In addition, no Purchase Right may be exercised unless (a) a registration statement under the Securities Act of 1933, as amended, shall at the time of exercise of the Purchase Right be in effect with respect to the shares issuable upon exercise of the Purchase Right, or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Purchase Right may be issued in accordance with the terms of an applicable exemption from the registration requirements of said Act.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.  As a condition to the exercise of a Purchase Right, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation, and to make any representation or warranty with respect thereto as may be requested by the Company.              19.        Legends.  The Company may at any time place legends or other identifying symbols referencing any applicable foreign, federal or state securities law restrictions or any provision convenient in the administration of the Plan on some or all of the certificates representing shares of Stock issued under the Plan.  The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to a Purchase Right in the possession of the Participant in order to carry out the provisions of this Section.  Unless otherwise specified by the Company, legends placed on such certificates may include but shall not be limited to the following:              “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.  THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF MADE ON OR BEFORE               , 19  .  THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE.”              20.        Notification of Sale of Shares.  The Company may require the Participant to give the Company prompt notice of any disposition of shares acquired by exercise of a Purchase Right within two years from the date of granting such Purchase Right or one year from the date of exercise of such Purchase Right.  The Company may require that until such time as a Participant disposes of shares acquired upon exercise of a Purchase Right, the Participant shall hold all such shares in the Participant’s name (and not in the name of any nominee) until the lapse of the time periods with respect to such Purchase Right referred to in the preceding sentence.  The Company may direct that the certificates evidencing shares acquired by exercise of a Purchase Right refer to such requirement to give prompt notice of disposition.              21.        Amendment or Termination of the Plan.  The Board may at any time amend or terminate the Plan, except that (a) such termination shall not affect Purchase Rights previously granted under the Plan, except as permitted under the Plan, and (b) no amendment may adversely affect a Purchase Right previously granted under the Plan (except to the extent permitted by the Plan or as may be necessary to qualify the Plan as an employee stock purchase plan pursuant to Section 423 of the Code or to obtain qualification or registration of the shares of Stock under applicable foreign, federal or state securities laws).  In addition, an amendment to the Plan must be approved by the stockholders of the Company within twelve (12) months of the adoption of such amendment if such amendment would authorize the sale of more shares than are authorized for issuance under the Plan or would change the definition of the corporations that may be designated by the Board as Participating Companies.              22.        Continuation of Initial Plan as to Outstanding Purchase Rights.  Any other provision of the Plan to the contrary notwithstanding, the terms of the Initial Plan shall remain in effect and apply to all Purchase Rights granted pursuant to the Initial Plan.              IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the Zoran Corporation Amended and Restated 1995 Employee Stock Purchase Plan as duly adopted by the Board of Directors of the Company on January 24, 1996 and amended through April 17, 2001.                                                                                                                                                                                                                                                                Secretary PLAN HISTORY October 13, 1995 Board adopts Initial Plan, with an initial reserve of 150,000 shares (post the 1:3 reverse stock split on 12/14/95). December 14, 1995 Effective date of stockholder action by consent without meeting, approving Initial Plan, with an initial reserve of 150,000 shares (post the 1:3 reverse stock split on 12/14/95). December 14, 1995 The Plan initially was effective December 14, 1995, the effective date of the initial registration by the Company of its Stock under Section 12 of the Exchange Act. January 24, 1996 Subject to stockholder approval, Board amends and restates the Plan to increase the number of shares subject to a purchase right and to eliminate a limit on the number of shares purchasable in a calendar year less than the calendar year limit imposed by Section 423 of the Code.  The amended and restated Plan will be effective as of the date of commencement of the first offering under the Plan following approval by the stockholders. May 23, 1996 Stockholders approve Plan, as amended January 24, 1996. April 23, 1997 Board amends Plan to increase share reserve by 150,000 shares to 300,000 shares and to permit increases in the rate of payroll deductions. June 6, 1997 Stockholders approve amendment increasing share reserve to 300,000 shares. __________, 1999 Board amends Plan to increase share reserve by 100,000 shares to 400,000 shares. July 16, 1999 Stockholders approve amendment increasing share reserve to 400,000 shares. June 18, 2000 Board amends Plan to increase share reserve by 100,000 shares to 500,000 shares. July ___, 2000 Stockholders approve amendment increasing share reserve to 500,000 shares. April 17, 2001 Board amends Plan to increase share reserve by 50,000 shares to 550,000 shares. June 29, 2001 Stockholders approve amendment increasing share reserve to 550,000 shares. ZORAN CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT o         Original Application for participation commencing with the Offering Period beginning _________________________, 200__. o         Change in Percentage of Payroll Deductions effective with the pay period ending _________________________, 200__.              I hereby elect to participate in the 1995 Employee Stock Purchase Plan (the “Plan”) of Zoran Corporation (the “Company”) and subscribe to purchase shares of the Company’s common stock as determined in accordance with the terms of the Plan.              I hereby authorize payroll deductions in the amount of                percent (in 1% increments not to exceed 10%) of my “Compensation” (as defined in the Plan) from each paycheck throughout the “Offering Period” (as defined in the Plan) in accordance with the terms of the Plan.  I understand that these payroll deductions will be accumulated for the purchase of shares of common stock of the Company at the applicable purchase price determined in accordance with the Plan.  I further understand that, except as otherwise set forth in the Plan, shares will be purchased for me automatically on the last day of each Purchase Period unless I withdraw from the Plan or from the Offering by giving written notice to the Company or unless I terminate employment.              I further understand that I will automatically participate in each subsequent Offering which commences immediately after the last day of an Offering in which I am participating under the Plan until such time as I file with the Company a notice of withdrawal from the Plan on such form as may be established from time to time by the Company or I terminate employment.              Shares purchased for me under the Plan should be issued in the name set forth below.  (I understand that shares may be issued either in my name alone or together with my spouse as community property or in joint tenancy.) NAME: -------------------------------------------------------------------------------- ADDRESS: --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- MY SOCIAL SECURITY NUMBER: --------------------------------------------------------------------------------                I hereby authorize withholding from my compensation in order to satisfy the foreign, federal, state and local tax withholding obligations, if any, which may arise upon my purchase of shares under the Plan and/or upon my disposition of shares I acquired under the Plan.  I hereby agree that until I dispose of the shares, unless otherwise permitted by the Company, I will hold all shares I acquire under the Plan in the name entered above (and not in the name of any nominee) for at least two (2) years from the first day of the Offering Period in which, and at least one (1) year from the Purchase Date on which, I acquired such shares.  I further agree that I will promptly notify the Chief Financial Officer of the Company in writing of any transfer of such shares prior to the end of the periods referred to in the preceding sentence.              I am familiar with the provisions of the Plan and hereby agree to participate in the Plan subject to all of the provisions thereof.  I understand that the Board of Directors of the Company reserves the right to amend the Plan and my right to purchase stock under the Plan as may be necessary to qualify the Plan as an employee stock purchase plan as defined in Section 423 of the Internal Revenue Code of 1986, as amended, or to obtain qualification or registration of the Company’s common stock to be issued out of the Plan under applicable foreign, federal and state securities laws.  I understand that the effectiveness of this subscription agreement is dependent upon my eligibility to participate in the Plan. Date: ________________________ Signature: ______________________________________________       Name Printed ___________________________________________ ZORAN CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN NOTICE OF WITHDRAWAL              I hereby elect to withdraw from the offering of the common stock of Zoran Corporation (the “Company”) under the Company’s 1995 Employee Stock Purchase Plan (the “Plan”) which began on _________________________, 200__ and in which I am currently participating (the “Current Offering”).              Make one election under section A and one election under section B: A.         Current Offering.  As to my participation in the current purchase period (the “Current Purchase Period”) of the Current Offering under the Plan, I elect as follows (check one): o         1.          I elect to terminate my participation in the Current Purchase Period immediately.              I hereby request that all payroll deductions credited to my account under the Plan (if any) not previously used to purchase shares under the Plan shall not be used to purchase shares on the last day of the Current Purchase Period.  Instead, I request that all such amounts be paid to me as soon as practicable.  I understand that this election immediately terminates my interest in the Current Offering. o         2.          I elect to terminate my participation in the Current Offering following my purchase of shares on the last day of the Current Purchase Period.              I hereby request that all payroll deductions credited to my account under the Plan (if any) not previously used to purchase shares under the Plan shall be used to purchase shares on the last day of the Current Purchase Period.  I understand that this election will terminate my interest in the Current Offering immediately following such purchase.  I request that any cash balance remaining in my account under the Plan after my purchase of shares be returned to me as soon as practicable.              I understand that if no election is made as to participation in the Current Offering under the Plan, I will be deemed to have elected to participate in the Current Offering. B.          Future Offerings.  As to my participation in future offerings of common stock under the Plan, I elect as follows (check one): o         1.          I elect to participate in future offerings under the Plan.              I understand that by making this election I will participate in the next offering under the Plan commencing subsequent to the Current Offering, and in each subsequent offering commencing immediately after the last day of an offering in which I participate, until such time as I elect to withdraw from the Plan or from any such subsequent offering. o         2.          I elect not to participate in future offerings under the Plan.              I understand that by making this election I terminate my interest in the Plan and that no further payroll deductions will be made unless I elect in accordance with the Plan to become a participant in another offering under the Plan.              I understand that if no election is made as to participation in future offerings under the Plan, I will be deemed to have elected to participate in such future offerings. Date:                                                                      Signature:                                                                                                                                                                                          Name Printed:                                                                                                     

Exhibit 10.27   Schnitzer Steel Industries. Inc.   ECONOMIC VALUE ADDED (“EVA”) Bonus Plan   Effective Date: September 1, 2000   The following are the terms of the Schnitzer Steel Industries, Inc. (“The Company” or “Schnitzer Steel”) EVA (Economic Value Added) Bonus Plan (the “Plan”) for the eligible employees of the Company and its wholly-owned subsidiaries (collectively, the “Employees” or “Participants”).  References to the “Company” or “Schnitzer Steel” shall be deemed to refer instead to a wholly owned subsidiary as the context requires for a particular employee, employed by such subsidiary.   A. 1. Purpose and Description of the Bonus Plan   In order to align employee incentives with shareholder and lender interests, incentive compensation will reward the creation of value.  This Plan will tie incentive compensation or bonuses to Economic Value Added (“EVA”) and, thereby, reward value creation, but also “feel” the effect for declines in value. EVA is mathematically defined as net operating profit after taxes (NOPAT), minus a Capital Charge.   More simply put, NOPAT is the sum of taking the sales of a business, less all of the costs and expenses incurred to manufacture the products and generate the sales, including taxes.  Excluded from NOPAT are the costs incurred to finance the business (e.g., interest costs on borrowings, dividends, etc.).  The Capital Charge is one additional cost that is considered in the computation of EVA.  The Capital Charge is a concept that considers the cost or the required returns of the business’ lenders (e.g., banks, mortgage holders, etc.) and owners/shareholders.  The size of the Capital Charge is primarily based upon the amount of money invested in the business.  The more inventory, customer receivables, equipment, etc., invested in the business the higher the Capital Charge. Thus, a Participant will be motivated to minimize as well as optimize the investment level in the business to maximize EVA. The following is the EVA equation:   EVA =  Net Operating Profit After Taxes (NOPAT) – Capital Charge   In addition, the Plan’s “banking” feature, discussed in more detail below, is designed to motivate Employees to make decisions that are not only beneficial to the Company in the short-term, but also have lasting benefits that will endure into the future.     2. Eligibility   The Human Resources Department of the Company will determine eligibility. In general, an employee of the Company and its wholly owned subsidiaries are eligible so long as they are regular full time employees or part time employees who are scheduled to work at least 24 hours or more per week on a regular basis and have been employed as a regular employee for a minimum of 90 days, exclusive of the employees subject to a collective bargaining agreement, unless such agreement expressly provides otherwise.  Newly hired regular employees who meet the criteria for participation are eligible to earn a prorated bonus based upon the number of days employed in the fiscal year in which they are hired.   3. Bonus Calculation   A Participant will earn an EVA Bonus based upon the actual EVA achieved by his or her EVA Center(s) during the fiscal year as compared to a target (discussed in more detail below).   Each year, a Participant’s declared bonus will be computed as follows:   EVA     Target         Bonus = Base x Bonus x Bonus Declaration Salary   Percentage   Multiple   To better understand how an EVA Bonus will be declared, see the example below.   BONUS MULTIPLE   The Bonus Multiple is determined by the EVA achieved for the fiscal year compared to the EVA objective for that year. The Bonus Multiple is mathematically determined as follows:   Bonus Multiple =  1 + Actual EVA - Target EVA                                         EVA Leverage Amount                                               (the “Interval”)     Target EVA is the required EVA needed for a Participant to earn a full Target Bonus or 1.0 times the Target Bonus.  Beginning in fiscal years 2002 and each fiscal year after, the EVA Target for each EVA Center will be objectively determined by starting with last year’s EVA plus an improvement factor (“Expected Improvement”).   The EVA Leverage Amount (also called the Interval) is the change in EVA over and above the Target EVA required to double a Participant’s bonus (i.e., change from a 1.0 to a 2.0 times Bonus Multiple) or the shortfall below Target EVA needed to change from a 1.0 to a 0.0 times Bonus Multiple.  The EVA Leverage Amount varies by EVA Center, based on the expected volatility of the operating results.   The Expected Improvement and EVA Leverage Amount were determined by independent financial analysis at the inception of the Plan and will remain unchanged for the first two full fiscal years of the Plan, except in the event of a material change in the Company’s businesses or capital structure.  The Company’s Chief Financial Officer maintains a list of the Expected Improvements and EVA Leverage Amount for each EVA Center.   EVA TARGET BONUS   Eligible Participants will have a Target Bonus expressed as a percentage of their base salary (the “Target Bonus Percentage”).  The Target Bonus Percentage varies by level of responsibilities within the Company.  Human Resources maintains the list of Participants and their Target Bonus Percentages.   The Target Bonus for each Participant is determined by multiplying the Participant’s Base Salary, as defined below, paid during the fiscal year by the Target Bonus Percentage.   Base Salary   Base Salary includes overtime (if applicable) and paid time off (PTO) as defined by the Human Resources Department, but excludes commissions, relocation payments, auto allowances, severance benefits, disability benefits, other fringe benefits and extraordinary payments.  See additional discussion on Individual Awards below. The following is an example of an EVA Bonus Declaration for a fictitious “Participant A”:   Base Salary  = $35,000 EVA Target Bonus = 10% of Base Salary or $3,500 EVA Leverage Amount or Interval = $2,000,000 Target EVA for fiscal 200X = $500,000 Actual EVA for fiscal 200X = $650,000 Bonus Multiple =                                                 1 + (650,000 – 500,000)                                                                 2,000,000                    = 1.075   EVA Bonus Declaration = Base Salary x Target Bonus Percentage x Bonus Multiple   = $35,000 x 10% x 1.075   = $3,763           4. Performance Versus Target   The Plan has significant upside, as well as downside performance potential.  As note above, the Bonus Multiple is based on EVA improvement of the Participants’ assigned EVA Center(s).  If the EVA Center achieves its Target EVA, the Participant will achieve his or her Target Bonus Percentage or 1.0 times his or her Bonus Multiple.  If the EVA Center exceeds its Target EVA, the Participant will earn a multiple greater then 1.0.  Conversely if the EVA Center falls below its EVA Target, the Participant will earn a multiple that is less then 1.0.   EVA performance and incentive earnings are directly linked; the better the performance of a Participants’ EVA Centers, the more the Participant will earn.   Does this mean that base pay can be taken away from you?  No.  It does mean, however, that it is possible to earn a “negative bonus”.  A negative bonus will occur if the actual EVA in any year falls dramatically short of the EVA Target.  In this case, the negative bonus would be applied to the EVA Bonus Bank, if applicable.  (See the discussion below regarding the EVA Bonus Bank.)   Participants, Grades 1 to 8, including eligible hourly Participants, will not participate in the EVA Bonus Bank and therefore, will not be subject to a negative bonus.  In exchange, their Bonus Multiple for these Participants will not exceed 2.0.     5. Payment of Bonus and EVA Bonus Bank (Grades 9 and Above)   The amount of any positive bonus shall be paid in cash (net of withholdings) to the Participant, subject to a banking system of two thirds of the amount in excess of the annual EVA Target Bonus.  The total bonus payment for each Plan year will be determined as follows:                   Beginning Bank Balance +              Bonus Declared =              Available Bank Balance   -               Bank Payout to Participant [Up to Target Bonus plus 33 1/3% of any remaining amount in the Bank]   =              Ending Bank Balance   The banking system serves to smooth bonus payouts over the business cycle.  This banking system also ensures that performance is sustained by making the payout of bank balances contingent on sustained performance, through the formula outlined above. As described above, it is possible to earn a negative bonus.  As such, it is also possible for a Participant’s Bonus Bank balance to be negative.  In the event a Participant’s Bonus Bank is negative going into a new plan year and during that year a positive EVA Bonus is declared for a Participant’s EVA Center, 50% of the declared Bonus (to the extent the Bonus Bank is negative) will be used to reduce the negative Bonus Bank.  The remaining declared bonus would be paid to the Participant during the current year.   For example, lets assume a Participant has a negative Bonus Bank of $1,000 beginning the year.  During the year, a $1,500 bonus is declared.  Under these circumstances $750 would be paid in the current year (50% of the $1,500) and the Participant’s Bonus Bank would enter the following year with a balance of a negative $250 (-$1,000 beginning Bonus Bank + $750 or 50% of the current year’s Declared Bonus).   The payment will be made (net of withholding) shortly after the Company’s fourth quarter earnings release.   The Bonus Bank balance, if any, is not separately funded or set aside like a 401(K) or pension plan and remains an asset of the Company, subject to the rights of general creditors.  Further, it is not adjusted for interest or gains and losses.   B. 1. Administration and Guidelines of the Plan   The Finance and Human Resources Departments will administer the Plan.  Guidelines for EVA adjustments and the “capitalization” of certain items will be maintained by the Company’s Chief Financial Officer and may be reviewed upon request.     2. Duration of the Current Plan Provisions   It is anticipated that the EVA Bonus Plan will endure long into the future. However, the current provisions in the Plan have been set and will not change, except in the circumstances noted below, until August 31, 2003.  After that date, the Plan’s provisions will be reviewed and key factors may be recalibrated.   A key factor subject to recalibration is the Company’s estimated Cost of Capital used in the determination of the EVA Capital Charge.  After extensive independent financial analysis we have estimated the Company’s average Cost of Capital to be 10%.  This amount will not change through August 31, 2002.  However, beginning in September 2002, the Cost of Capital will be reviewed annually by the Company’s Chief Financial Officer to verify that the Cost of Capital being used is a reasonable approximation of the actual cost to the Company.  The Cost of Capital will only change if there is a greater than 1 percent increase or decrease in the estimated Cost of Capital from the prior year.   In addition, if during the two fiscal years following the Plan’s adoption, the Company materially changes in either its form, lines of business or capital structure, the President of the Company and the Compensation Committee each reserve the right to make any changes to the EVA Bonus Plan as they deem appropriate.   The President of the Company and the Compensation Committee each have the right to discontinue the EVA Bonus Plan at any time after August 31, 2003, upon not less than thirty days advance notice.     3. Individual Awards   Individual Awards for Participants shall be based on the Base Salary (as defined above) actually paid to the Participant during the fiscal year.   The Individual Awards for Shared Service Participants of the Company will be based upon an analysis of the amount of time the Participant charged to Schnitzer Steel in the prior fiscal year.  That amount of time will be rounded to the nearest 25%. In the case of a new Participant, the Individual Award will be based upon the time charged to Schnitzer Steel during the fiscal year, again rounded to the nearest 25%.   For example, Participant A charged 1,350 hours to Schnitzer Steel in the prior year, which would equate to 65% (1,350/2,080) of his or her time employed by the Schnitzer Group of companies.  This amount would be rounded up to 75%. Since the amount was based upon the prior fiscal year, if that allocation is not a reasonable indicator of time (greater than 25% variance) for the then current year, the Individual Award would be adjusted accordingly.  The remaining potential bonus if any (in the example above, 25%), would be paid at the sole discretion of the Office of the President and would be paid when bonuses are paid by the other Schnitzer Group companies.     4. Determination of Bonus Awards   The Company’s Chief Financial Officer will compute each EVA Center’s Actual EVA for the applicable plan year and present it for approval by the President. As soon as reasonably practical after the Company’s fourth quarter press release, the bonus payments will be made to the Participants.     5. New Hires/Promotions   An individual who is hired/promoted into a position that participates in the Bonus Plan may be eligible for an Individual Award on a pro-rata basis for that year so long as he/she has been employed full time for 90 consecutive calendar days.  The pro-rata basis will be determined by the number of days the Participant holds his or her respective position(s) for the respective fiscal year.  For example, a Participant is hired into a bonus eligible position on November 17th.  He or she would be eligible to earn 288/365ths of his or her Target Bonus for the year.   Mid-year promotions that change the Participant’s Target Bonus and/or EVA Center will be prorated based upon the number of days employed in each position and/or EVA Center during the fiscal year.     6. Transfers   A Participant who transfers his or her employment from one EVA Center to another shall have his or her EVA Bonus Bank transferred to the new EVA Center.  For the year including the transfer, the Participant will have his or her bonus award based on time spent in each particular EVA Center on a pro-rata basis for the portion of year the individual was employed by each EVA Center (adjusted by the number of days employed in the EVA Center during the fiscal year).  The Participant’s pro-rata share will be based on the EVA Center’s full year EVA performance.     7. Death or Disability   A Participant who dies or becomes permanently disabled, as defined by the Company’s disability policy, while in the employment of Schnitzer Steel shall receive full payment of his or her Bonus Bank Balance after the impact of a pro-rata bonus (based upon the number of days employed) for the fiscal year in which he or she dies or becomes permanently disabled.  In the event of death, the payment will be made to the Participant’s estate. Such payment shall be made at the regular time for making bonus payments in respect to the year of such death or disability.     8. Retirement   A Participant who retires from the Company shall receive full payment of his or her Bonus Bank balance and will be eligible for a pro-rata bonus (based upon the number of days employed) for the fiscal year in which he or she retires.  Such payment shall be made in a lump sum at the regular time of making bonus payments. For the purposes of this paragraph 8, a person who is at least age 55 is deemed to be “retired” when he or she would receive retirement benefits under his or her retirement pension plan, if any.     9. Involuntary Termination without Cause   A Participant who is involuntarily terminated without cause shall receive full payment of his or her Bonus Bank balance and will be eligible for a pro-rata bonus (based upon the number of days employed) for the fiscal year in which he or she was involuntarily terminated without cause. Such payment shall be made in a lump sum at the regular time of making bonus payments.     10. Voluntary Resignation or Termination with Cause   Voluntary termination of employment (except in the event of Retirement) or termination with cause (consistent with Company policy) shall result in forfeiture of the Participant’s Bonus Bank balance and pro-rata bonus for the year of voluntary resignation or termination with cause.   Further, an employee must still be employed by the Company on the payment date in order to be paid for the prior year bonus.   For example: A Participant was employed for the entire fiscal year ended August 31, 2001 and his or her EVA Center earned a Bonus Multiple for the year then ended.  However, the Participant terminates his or her employment on September 30, 2001.  The bonus payments for fiscal 2001 were paid on October 1, 2001.  In this case, the Participant would forfeit his or her entire fiscal 2001 bonus and Bonus Bank, if any.     11. Negative Bonus Bank Balances Upon Termination   Negative ending Bonus Bank balances are waived upon a Participant’s termination of employment.      12. General Provisions           a) Withholding of Taxes               The Company shall have the right to withhold the amount of taxes, which in the determination of the Company are required to be withheld under law with respect to any amount due or paid under the Plan.             b) Expenses               All expenses and costs in connection with the adoption and administration of the Plan shall be borne by the Company.             c) No Prior Right or Offer               Except and until expressly granted pursuant to the Plan, nothing in the Plan shall be deemed to give any Participant any contractual or other right to participate in the benefits of the Plan.  No award to any such Participant in any fiscal year shall be deemed to create a right to receive any award or to participate in the benefits of the Plan in any subsequent fiscal year.       13. Limitations           a) No Continued Employment               Neither the establishment of the Plan or the grant of an award thereunder shall be deemed to constitute an express or implied contract of employment with any Participant for any period of time, or change a Participant’s “at will” status, or in any way abridge the rights of the Company to determine the terms and conditions of employment or to terminate the employment of any Participant with or without cause, at any time.             b) Not Part of Other Benefits               The benefits provided in this Plan shall not be deemed a part of any other benefit provided by the Company to its employees.  The Company does not assume and shall have no obligation to Participants, except as expressly provided in this Plan.             c) Other Incentive or Benefits               Nothing contained herein shall limit the Company’s power to grant bonuses to employees of the Company, whether or not they are Participants in this Plan.  

QuickLinks -- Click here to rapidly navigate through this document SETTLEMENT AGREEMENT AND MUTUAL RELEASE     This Settlement Agreement and Mutual Release ("Agreement") is entered into effective October 27, 2000 by and between STAAR Surgical Company, a Delaware corporation, the definition of which includes STAAR Surgical Company, its subsidiaries and affiliates (the "Company") and Vladimir Feingold, the definition of whom includes himself as an individual as well as any person or entity that Feingold directly or indirectly, through one or more intermediaries, controls, including, without limitation, Bionica Pty Ltd., ("Feingold"), all of whom are sometimes hereinafter referred to collectively as the "Parties" or individually as a "Party," with reference to the following facts. RECITALS     WHEREAS, there is now pending in the Superior Court of the State of California, County of Los Angeles, a lawsuit between the Parties entitled Vladimir Feingold v. STAAR Surgical Company, et al., and its related cross-complaint, numbered BC 216184 (the "Action") concerning the terms of Feingold's employment agreement (the "Employment Agreement") with the Company, and any modifications that may exist relating to said Employment Agreement, and also concerning Feingold's participation on the Canon-STAAR Board of Directors. There is also pending in the Superior Court of the State of California, County of Los Angeles, a lawsuit between the Parties entitled STAAR Surgical Company v. Bionica Pty Ltd., et al., numbered GC 024218 concerning the terms of an Overseas Manufacturer's Distributor Agreement (the "OMD Action"). There exist other controversies between the Parties relating to Feingold's claim of interest, vis a vis the Company, of certain microkeratome technology and the obligations under that certain Right of First Refusal Agreement dated October 1, 1996 between Bionica Pty Ltd. and the Company (the "Right of First Refusal"). All of the above-stated controversies and disputes, including the Action and the OMD Action, are hereafter described as the "Disputed Matters".     WHEREAS, both Feingold and the Company wish to resolve their differences and to settle and terminate the Disputed Matters which now exist between them or for their benefit. By this Agreement, the Parties to this Agreement intend to fully and completely resolve any and all differences between them, or for their benefit, including any and all claims known and unknown, which may exist between them relating to the Disputed Matters. Each Party will take appropriate steps to effectuate the spirit of this Agreement.     NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and Feingold agree as follows: AGREEMENT     1.  Incorporation of Recitals.  The recitals to this Agreement are an integral part of this Agreement and are hereby incorporated as a part of this Agreement as if set forth in it.     2.  Termination of Employment Agreement, Overseas Manufacturer's Distributor Agreement and Right of First Refusal.  Upon execution of this Agreement, the Employment Agreement, and any and all amendments to it, shall be deemed to have been terminated in its entirety and to be of no further force and effect as of September 2, 1999. Upon execution of this Agreement, the Right of First Refusal and the Overseas Manufacturer's Distributor Agreement shall be deemed to be terminated in their entirety and be of no further force and effect as of the date hereof.     3.  Consideration from the Company.  In exchange for Feingold's release of the Company from any past, present, and future obligations, whether monetary or otherwise, owed by the Company to Feingold, including any such past, present or future obligations owed by the Company to Feingold relating to the Disputed Matters, the Company shall pay to Feingold or provide for Feingold the following:     (a)  Lump Sum Payment.  The Company shall pay to Feingold the sum of six hundred thousand dollars ($600,000), which payment shall be transferred electronically by the Company to -------------------------------------------------------------------------------- the "Green & Adams, LLP, Attorney Client Trust Account", account number 0207545801, at First Security Bank (formerly Marine National Bank) located at 18401 Von Karman Avenue, Irvine, California 92612, routing number 1222237683 ("Wire Transfer") on or before the close of business on October 27, 2000.     (b)  Issuance of Stock.  Upon receipt of the sum of one hundred forty five thousand eight hundred thirty-one dollars and twenty-five cents ($145,831.25) from Feingold (the "Exercise Price"), the Company shall deliver to the Escrow Agent a certificate for twenty-three thousand three hundred thirty-three (23,333) shares of the Company's fully registered, non-restricted, free-trading common stock (the "Stock"), pursuant to that certain Escrow Agreement attached hereto as Exhibit A (the "Escrow Agreement").     (c)  Delivery of Documents.  The Company shall deliver to Feingold, c/o Mark S. Adams, Esq., an executed copy of this Agreement and the Escrow Agreement. The Company shall transmit via facsimile an executed copy of the Escrow Agreement to the Escrow Agent. Upon receipt of written confirmation from the Escrow Agent that the Exercise Price is immediately available in good funds, the Company shall transmit, via facsimile, the "Joint Escrow Instructions" attached to the Escrow Agreement as Exhibit 1.     (d)  Agreement Not to Divulge Trade Secrets.  The Company acknowledges that, during the past several years, Feingold has designed and developed an ophthalmic knife, or microkeratome, the methods and intellectual property regarding same (the "Microkeratome Technology"). During such time, the Company had, or may have had, access to certain materials relating to the Microkeratome Technology. The Company acknowledges that the Microkeratome Technology belongs to Feingold and not the Company. The Company expressly disclaims any right, title and interest in the Microkeratome Technology. The Company agrees that the Microkeratome Technology is a part of Feingold's trade secrets as defined in California Civil Code Section 3426 et seq. The Company agrees that it is subject to the laws of the State of California that protect Feingold's trade secrets and the Company promises and agrees that it will always act in compliance with those laws as they relate to Feingold's trade secrets. The Company agrees that a violation of the laws of the State of California that protect Feingold's trade secrets constitutes unfair competition.     (e)  Non-Disparagement.  The Company agrees not to criticize, denigrate, or otherwise disparage Feingold.     (f)  Request for Dismissal.  The Parties will promptly execute and the Company's counsel will promptly file a Request for Dismissal with Prejudice of the Action and the OMD Action and will serve a conformed copy of the Request for Dismissal with Prejudice on Feingold's counsel.     4.  Waiver of All Other Claims.  Feingold agrees that Feingold is not entitled to receive, will not claim and expressly waives any entitlement to rights, benefits, reimbursement, indemnification, or compensation from the Company, whether or not such entitlements are claimed through the Employment Agreement or not, other than as expressly set forth in this Agreement.     5.  Complete Release by Feingold.       (a)  Release.  Feingold irrevocably and unconditionally releases all of the claims described in subparagraph 5(b) that Feingold may now have, or has ever had, against the following persons or entities (the "Releasees"): The Company (including its subsidiaries and affiliates), all related companies and all of the Company's (its subsidiaries' and affiliates') or such related companies' predecessors and successors; and, with respect to each such entity, all of its past and present employees, officers, directors, stockholders, owners, representatives, assigns, attorneys, agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries and insurers of such programs) and any other persons acting by, through, under or in concert with any of the persons or entities listed in this subparagraph. --------------------------------------------------------------------------------     (b)  Claims Released.  The claims released include all claims, promises, obligations, debts, causes of action or similar rights of any type or nature Feingold has or had which in any way relate to (1) Feingold's employment with the Company as an officer and/or director, or the termination of that employment, such as claims for compensation, bonuses, commissions, lost wages or unused accrued vacation or sick pay, (2) the design or administration of any employee benefit program or Feingold's entitlement to benefits under any such program, (3) any claims to attorneys' fees and/or other legal costs, (4) the Action and the OMD Action, (5) the Disputed Matters, and (6) any other claims or demands Feingold may have on any basis whatsoever. The claims released include, but are not limited to, claims arising under any of the following statutes or common law doctrines:     (1)  Anti-Discrimination Statutes,  such as the Age Discrimination in Employment Act (ADEA), which prohibits age discrimination in employment; the Civil Rights Act of 1991, Title VII of the Civil Rights Act of 1964, and §1981 of the Civil Rights Act of 1866, which prohibit discrimination based on race, color, national origin, religion or sex; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the Americans With Disabilities Act (ADA), which prohibits discrimination against the disabled; the California Fair Employment and Housing Act (FEHA), which prohibits discrimination in employment based upon race, color, national origin, ancestry, physical or mental disability, medical condition, martial status, sex, or age; and any other federal, state or local laws or regulations prohibiting employment discrimination.     (2)  Federal Employment Statutes,  such as the Employee Retirement Income Security Act of 1974, which, among other things, protects pension or health plan benefits; and the Fair Labor Standards Act of 1938, which regulates wage and hour matters.     (3)  Other Laws,  such as any federal, state or local laws restricting an employer's right to terminate employees or otherwise regulating employment; any federal, state or local law relating to wages, or enforcing express or implied employment contracts or requiring an employer to deal with employees fairly or in good faith; and any other federal, state or local statutory or common laws providing recourse for alleged wrongful discharge, physical or personal injury, emotional distress, fraud, negligent misrepresentation, libel, slander, defamation and similar or related claims. The laws referred to in this paragraph include statutes, regulations, other administrative guidance and common law doctrines.     (4)  Federal and State Securities Laws,  such as the Securities Act of 1933, the Securities Exchange Act of 1934 and the California Corporations Code and the rules and regulations promulgated thereto.     (5)  Federal and State Unfair Competition Laws,  such as California Business and Professions Code section 17200, et seq and the Lanham Act.     (c)  Release Extends to Both Known and Unknown Claims.  This release covers both claims that Feingold knows about and those Feingold does not know about. Feingold understands the significance of his release of unknown claims and his waiver of any statutory protection against a release of unknown claims. Feingold expressly waives the protection of any such governmental statutes or regulations.     More particularly, and without limitation, Feingold acknowledges that Feingold has read and is familiar with and understands the provisions of Section 1542 of the California Civil Code, which provides: "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 TO HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."     (d)  Ownership of Claims.  Feingold represents that Feingold has not assigned or transferred, or purported to assign or transfer, all or any part of any claim released by this Agreement. --------------------------------------------------------------------------------     6.  No Pursuit of Released Claims.  Feingold promises never to file or prosecute a lawsuit, administrative complaint or charge, or other complaint or charge asserting any claims that are released by the Agreement. Feingold represents that Feingold has not filed or caused to be filed any lawsuit, complaint or charge with respect to any claim this Agreement releases, except for the Action and the cross-complaint in the OMD Action. Feingold further agrees to request any government agency or other body assuming jurisdiction of any complaint or charge relating to a released claim to withdraw from the matter or dismiss the matter with prejudice.     7.  Consideration from Feingold.  In exchange for the Company's release of Feingold from any past, present, and future obligations, whether monetary or otherwise, owed by Feingold to the Company, including any such past, present or future obligations owed by Feingold to the Company relating to the Disputed Matters, Feingold agrees to the following:     (a)  Delivery of Agreement.  Feingold shall deliver to the Company, c/o Robert C. Woodbury, Esq., an executed copy of this Agreement and the Escrow Agreement. Feingold shall deliver an executed copy of the Escrow Agreement to the Escrow Agent. Upon receipt of written confirmation from the Escrow Agent that the Exercise Price is immediately available in good funds, Feingold shall transmit, via facsimile, the "Joint Escrow Instructions" attached to the Escrow Agreement as Exhibit 1.     (b)  Payment of the Exercise Price.  Feingold shall re-deliver that certain check number 5270 made payable to the Company, dated September 24, 1999, in the amount of the Exercise Price, as payment for the exercise of that certain stock option dated September 4, 1998.     (c)  Agreement Not to Sell Stock.  Feingold represents, promises, and agrees that he shall not sell the Stock until January 1, 2001. Feingold agrees that this promise constitutes a material inducement to the Company to enter into this Agreement. Feingold agrees that a breach of this promise will result in a failure of consideration that will permit the Company to rescind this Agreement and seek monetary damages from Feingold as well as injunctive relief.     (d)  Payment of Cash and Return of Property.  Feingold shall deliver to the Company, c/o Robert C. Woodbury, Esq., immediately available funds in the amount of fifteen thousand dollars ($15,000). This payment shall be by money order or cashier's check made payable to "STAAR Surgical Company and Pollet & Richardson." Furthermore, within ninety (90) days of the execution of this Agreement, Feingold shall return to the Company, c/o Robert C. Woodbury, any of the Company's unused goods and products in Feingold's possession or custody. Feingold represents and warrants that the goods and products returned by Feingold are all of the goods and products in Feingold's possession or custody.     (e)  Agreement Not to Compete.  Feingold covenants and agrees that, for a period of two (2) years from the date of this Agreement, Feingold shall not:      (i) directly or indirectly (whether as principal, agent, independent contractor, partner or otherwise) own, manage, operate, control, participate in, perform services for, or otherwise carry on, a business similar to or competitive with the business of the Company or any of its subsidiaries or affiliates anywhere in the world; or     (ii) induce or attempt to persuade any employee of the Company to terminate such employment relationship in order to enter into any such relationship on behalf of Feingold or any other business organization in competition with the Company. For purposes of this paragraph, the covenants set forth above shall be referred to as the "Non-Compete Covenants". The term "a business similar to or competitive with the business of the Company or any of its subsidiaries or affiliates" shall refer to any business that manufactures, sells or distributes the following lines of products (the "Products"):      (i) monofocal posterior chamber intraocular lenses made from the Company's proprietary silicone RMX3; --------------------------------------------------------------------------------     (ii) monofocal posterior chamber intraocular lenses made from the Company's proprietary collamer material;     (iii) monofocal posterior chamber implantable contact lenses made from the Company's proprietary collamer material;     (iv) collagen glaucoma drains made from the Company's proprietary cross-linked pure collagen material; and     (v) phacoemulsification machines. This Agreement does not restrict Feingold from working for or with any other companies that currently or in the future may develop, design, manufacture, sell or distribute the Products pursuant to a licensing agreement or similar type of arrangement with the Company. Feingold understands and agrees that the Non-Competition Covenants represent a material inducement to the Company to enter into this Agreement and to pay the consideration it has agreed to pay. Therefore, Feingold agrees that if Feingold breaches the Non-Competition Covenants, Feingold will immediately pay to the Company the amount of money representing the difference between the Exercise Price paid to the Company for the Stock and the sale price or prices of the Stock (the "Spread"), pro-rata, based upon the number of months remaining in the two (2) year period during which the Non-Competition Covenants are in force. For example, in the event that Feingold were to breach the Non-Competition Covenants during the seventh (7th) month of the two (2) year period, Feingold would pay to the Company an amount equal to 17/24 of the Spread. The Non-Competition Covenants shall become immediately null and void and of no further force or effect upon: (i) the dissolution or liquidation of the Company; (ii) the Company's filing of a petition in bankruptcy; or, (iii) if Feingold becomes an employee, consultant or agent of any of the following: (A) any company to which the Company sells or transfers substantially all of its business or assets; (B) any company who is the purchaser of a controlling interest in the Company by way of a purchase of the Company's capital stock (so long as such company is unrelated to the Company); or (C) the surviving entity of any merger or consolidation of the Company with another company as part of a sale or transfer of a controlling interest in the Company to an unrelated third party.     (e)  Agreement Not to Divulge Trade Secrets.  Feingold agrees that during the term of his business relationship with the Company, Feingold had access to and became acquainted with the Company's trade secrets, as defined in California Civil Code, section 3426, et seq., which are owned by the Company and are regularly used in the operation of the Company's business. Feingold agrees that he is subject to the laws of the State of California that protect the Company's trade secrets, and Feingold promises and agrees that he will always act in compliance with those laws as they relate to the Company's trade secrets. Feingold agrees that a violation of the laws of the State of California that protect the Company's trade secrets constitutes unfair competition.     (f)  Non-Disparagement.  Feingold agree not to criticize, denigrate, or otherwise disparage the Company or any other Releasee.     (g)  Provisions Relating to Canon-STAAR.  Feingold agrees that the execution of this Agreement shall constitute his resignation from the Board of Directors of Canon-STAAR Co., Inc. Feingold agrees that Feingold will not seek, nor will Feingold accept, for a period of two (2) years from the execution of this Agreement, a position with Canon-STAAR Co., Inc. as a director, officer, employee or consultant. Feingold shall execute a letter of resignation resigning as a director of Canon-STAAR Co., Inc., a copy of which resignation letter is attached hereto as Exhibit B, and shall deliver said letter to the Company, c/o Robert C. Woodbury, Esq., along with the executed copy of this Agreement. Feingold agrees that, upon the request of the Company, but at no expense to Feingold, Feingold will cooperate with the Company in prosecuting or defending any action or proceeding, including any arbitration proceeding, involving Canon-STAAR Co., Inc., Canon Sales Company, Inc. or Canon, Inc. (or any subsidiary or affiliate of any such parties) and to perform any lawful acts, including, but not limited to, executing papers and oaths, giving -------------------------------------------------------------------------------- testimony, or producing information or documents, that in the opinion of the Company, its successors or assigns, may be necessary or desirable.     (h)  Request for Dismissal.  The Parties will promptly execute and the Company's counsel will promptly file a Request for Dismissal with Prejudice of the Action and the OMD Action and will serve a conformed copy of the Request for Dismissal with Prejudice on Feingold's counsel.     8.  Complete Release by the Company.       (a)  Release.  The Company irrevocably and unconditionally releases all of the claims described in subparagraph 8(b) that the Company may now have, or has ever had, against Feingold, or any of Feingold's past and present employees, officers, directors, stockholders, owners, representatives, assigns, attorneys, agents, insurers, or any other persons or entities acting by, through, or under or in concert with any of the persons or entitles listed in this subparagraph.     (b)  Claims Released.  The claims released include all claims, promises, debts, causes of action or similar rights of any type or nature the Company has or had which in any way relate to: (1) Feingold's employment with the Company; (2) the Action and the OMD Action; (3) the Disputed Matters; (4) any claims to attorneys' fees and/or other legal costs; and (5) any other claims or demands the Company may on any basis have.     (c)  Release Extends to Both Known and Unknown Claims.  This release covers both claims that the Company knows about and those the Company does not know about. The Company understands the significance of this release of unknown claims and this waiver of any statutory protection against a release of unknown claims. The Company expressly waives the protection of any such governmental statutes or regulations.     More particularly, and without limitation, the Company acknowledges that the Company has read and is familiar with and understands the provisions of Section 1542 of the California Civil Code, which provides: "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 TO HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."     (d)  Ownership of Claims.  The Company represents that the Company has not assigned or transferred, or purported to assign or transfer, all or any part of any claim released by this Agreement.     9.  No Pursuit of Released Claims.  The Company promises never to file or prosecute a lawsuit, administrative complaint or charge, or other complaint or charge asserting any claims that are released by the Agreement. The Company represents that the Company has not filed or caused to be filed any lawsuit, complaint or charge with respect to any claim this Agreement releases, except for the OMD Action and the cross-complaint in the Action. The Company further agrees to request any government agency or other body assuming jurisdiction of any complaint or charge relating to a released claim to withdraw from the matter or dismiss the matter with prejudice.     10.  Confidentiality Provisions.  The Parties agree that neither Party will issue a press release or otherwise communicate (orally or in writing) with the media (print or electronic) regarding the existence or terms of the Agreement nor will either Party provide the media (print or electronic) with a copy of the Agreement or any portion thereof. Further, subject to the conditions herein, the Parties agree that neither Party will communicate (orally or in writing) with any third party regarding the terms or existence of the Agreement nor will either Party provide any third party with a copy of the whole or any portion of the Agreement; provided however that the Parties will be entitled to disclose the existence of the Agreement and the terms hereof to their respect financial and legal advisers, Feingold will be entitled to disclose the existence and terms of the Agreement to his spouse and employers (including potential employers), and Feingold and the Company will be entitled to disclose the existence and terms of the Agreement to its investors and any acquirers (including potential investors and potential acquirers) as well as to the United States Securities and Exchange Commission and any -------------------------------------------------------------------------------- other local, state, federal or international governmental agencies to which either Party should or must disclose the existence and terms of the Agreement and/or the terms thereof. If a Party receives a lawfully issued subpoena or court order requiring that Party to produce the Agreement or to testify about the existence or contents of the Agreement, then that Party will give the other Party immediate written notice of the subpoena or court order together with a copy of the subpoena or court order and any correspondence related thereto in accordance with Section 16 of the Agreement so that the other Party may timely object to the production of the Agreement and/or to the dissemination of any information about the terms of the Agreement.     11.  Consulting with Attorney.  Feingold and the Company acknowledge that each has discussed this Agreement with an attorney of his or its own choosing before signing it.     12.  Severability.  If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be determined to be invalid, illegal or unenforceable under present or future laws effective during the term of this Agreement, then and, in that event: (i) the performance of the offending term or provision (but only to the extent its application is invalid, illegal or unenforceable) shall be excused as if it had never been incorporated into this Agreement, and, in lieu of such excused provision, there shall be added a provision as similar in terms and amount to such excused provision as may be possible and be legal, valid and enforceable, and (ii) the remaining part of this Agreement (including the application of the offending term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable) shall not be affected thereby and shall continue in full force and effect to the fullest extent provided by law. The provisions of this Agreement are severable.     13.  Choice of Laws/Waiver of Jury Trial.  This Agreement shall be governed by the laws of the State of California, and the Courts of the County of Los Angeles, California and the Parties specifically waive any right to a jury trial.     14.  Authorization and Validity of Agreement.  The execution and delivery of this Agreement by the Parties, and the performance of the transactions herein contemplated, have been duly authorized by the appropriate governing authorities and no further corporate or other action on the part of either Party is necessary to authorize this Agreement or the performance of such transactions. This Agreement has been duly and validly executed and delivered by each Party and is valid and binding upon each Party in accordance with its terms, except as limited by: (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors rights generally, and (ii) general principles of equity.     15.  Nature, Effect and Interpretation of this Agreement.       (a)  Entire Agreement.  This Agreement is the entire agreement between Feingold and the Company relating to the subject matter herein; it may not be modified or cancelled in any manner except by a writing signed by both the Company and Feingold. The Parties have made no promises or representations to each other, other than those in this Agreement.     (b)  Successors and Assigns.  This Agreement shall bind the Parties heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of all Releasees and their respective heirs, administrators, representatives, executors, successors and assigns.     (c)  Interpretation.  This Agreement shall be construed as a whole according to its fair meaning, and not strictly for or against any of the Parties. Unless the context indicates otherwise, the term "or" shall be deemed to include the term "and" and the singular or plural number shall be deemed to include the other. Paragraph headings used in this Agreement are intended solely for convenience of reference and shall not be used in the interpretation of any of this Agreement. It is acknowledged that neither Party shall be construed to be solely responsible for the drafting hereof, and therefore any ambiguity shall not be construed against either Party as the alleged draftsman of this Agreement. --------------------------------------------------------------------------------     (d)  Counterparts and Facsimiles.  For the convenience of the Parties, this document may be executed by facsimile signatures and in counterparts which shall together constitute the agreement of the parties as one and the same instrument.     (e)  No Waiver.  The failure to enforce any provision of this Agreement shall not be construed as a waiver of any such provision, nor prevent a Party from enforcing the provision or any other provision of this Agreement. The rights granted the Parties are cumulative, and the election of one shall not constitute a waiver of such Party's right to assert all other legal and equitable remedies available under the circumstances.     (f)  Implementation.  The Company and Feingold both agree that, without the receipt of further consideration, they will sign and deliver any documents and do anything else that is necessary in the future to make the provisions of this Agreement effective.     16.  Notices.  Unless otherwise specifically provided in this Agreement, all notices, demands, requests, consents, approvals or other communications (collectively and severally called "Notices") required or permitted to be given hereunder, or which are given with respect to this Agreement, shall be in writing, and shall be given by: (1) personal delivery (which form of Notice shall be deemed to have been given upon delivery), (2) by telegraph or by private airborne/overnight delivery service (which forms of Notice shall be deemed to have been given upon confirmed delivery by the delivery agency), (3) by electronic or facsimile or telephonic transmission, provided the receiving party has a compatible device or confirms receipt thereof (which forms of Notice shall be deemed delivered upon confirmed transmission or confirmation of receipt), or (4) by mailing in the United States mail by registered or certified mail, return receipt requested, postage prepaid (which forms of Notice shall be deemed to have been given upon the fifth {5th} business day following the date mailed). Notices shall be addressed to the parties as follows: Executive:   Vladimir Feingold 31732 Isle Vista Laguna Niguel, California 92677 With copy to:   Mark Adams, Esq. c/o Green & Adams, LLP 8 Corporate Park, Suite 200 Irvine, California 92606 Company:   STAAR Surgical Company 1911 Walker Avenue Monrovia, California 91016 Attn: Mr. Andrew F. Pollet With copy to:   Pollet & Richardson 10900 Wilshire Boulevard, Suite 500 Los Angeles, California 90024 Attention: Andrew F. Pollet, Esq.     17.  Denial of Liability.  It is understood and agreed that nothing herein shall be construed as an admission of any liability of any kind and each Party acknowledges that the other Parties have expressly denied that they are in any way liable or obligated for damages arising from matters set forth herein.     18.  Attorneys' Fees.  If any Party institutes or should the Parties otherwise become a party to any action or proceeding based upon or arising out of this Agreement including, without limitation, to enforce or interpret this Agreement or any provision hereof, the prevailing party in any such action or proceeding shall be entitled to receive reasonable attorneys' fees. --------------------------------------------------------------------------------     PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.     Executed at Orange County, California this 26th day of October, 2000.     "FEINGOLD"     /s/ VLADIMIR FEINGOLD    -------------------------------------------------------------------------------- VLADIMIR FEINGOLD     Executed at Los Angeles County, California, this 26th day of October, 2000.     "COMPANY"     STAAR SURGICAL COMPANY     By:   /s/ ANDREW F. POLLET    -------------------------------------------------------------------------------- ANDREW F. POLLET, Chief Executive Officer -------------------------------------------------------------------------------- CERTIFICATION OF ATTORNEY     The undersigned hereby certifies that he is an Attorney at Law, duly licensed and admitted to practice in the State of California, and has been retained by Mr. Vladimir Feingold in this matter, and that he has advised Mr. Feingold with respect to this Agreement, and explained to him the meaning and effect of it, and that Mr. Feingold has acknowledged his full and complete understanding of this Agreement, and its legal consequences, and has freely and voluntarily executed the same.     Executed at Orange County, California on the 26th day of October, 2000.     GREEN & ADAMS, LLP     By:   /s/ MARK S. ADAMS    -------------------------------------------------------------------------------- MARK S. ADAMS -------------------------------------------------------------------------------- EXHIBIT A ESCROW AGREEMENT -------------------------------------------------------------------------------- October 25, 2000 ESCROW AGREEMENT To: Joseph M. Galosic, Esq.     Re: Escrow for $145,831.25, and 23,333 Shares of Staar Surgical Company Stock Dear Mr. Galosic:     Reference is made to that certain Settlement Agreement and Mutual Release (the "Agreement") between VLADIMIR FEINGOLD, et al. ("Feingold") and STAAR SURGICAL COMPANY, a Delaware corporation, et al. ("Staar"). You have agreed to act as an independent escrow agent ("Escrow Agent") pursuant to the following: A.  Deposit of Funds and Delivery of Certificates.     1.  On or before October 25, 2000, Feingold will deliver to Staar that certain Check No. 5270 made payable to the order of "Staar Surgical Co." dated September 24, 1999, in the amount of One Hundred Forty Five Thousand Eight Hundred Thirty One Dollars and Twenty Five Cents ($145,831.25), as payment for the Twenty Three Thousand Three Hundred Thirty Three (23,333) shares (the "Check"). Staar will endorse the Check to the "Joseph M. Galosic Attorney Client Trust Account," a non-interest bearing account, and deliver said Check to you on or before 1:00 p.m. on October 26, 2000. You will deposit said Check into your attorney-client trust account (the "Escrow Deposit"). You will hold the proceeds from said Check in trust, until directed to release such funds as instructed herein.     2.  On or before October 26, 2000, Staar will deliver to you a Certificate of Stock for Twenty Three Thousand Three Hundred Thirty Three (23,333) shares of fully registered, non-restricted, free trading Staar common stock (the "Stock Certificate").     3.  You have agreed to hold the Escrow Deposit and the Stock Certificate, in trust, on the following terms:     (a) Upon receipt of confirmation that the Escrow Deposit is immediately available in good funds, you shall transmit this information, via facsimile to Staar, c/o Mary Ann Sapone, Esq., at (310) 208-1154 and to Feingold, c/o Mark S. Adams, Esq.     (b) If you receive written joint instructions signed by Feingold and Staar regarding disposition of the Escrow Deposit and Stock Certificate in the form attached hereto as Exhibit "1," then you shall immediately (which term, as used herein shall mean within two business days) deliver the Stock Certificate to Feingold, and deliver to Staar a cashier's check, drawn on your attorney-client trust account, in the amount of One Hundred Forty Five Thousand Eight Hundred Thirty One Dollars and Twenty Five Cents ($145,831.25) made payable to "Staar Surgical Company."     (c) If you do not receive the joint instruction in (a) above, but rather you receive written joint instructions signed by Feingold and Staar in the form attached hereto as Exhibit "2," or written individual instructions signed by either of them in the form attached hereto as Exhibit "3" or Exhibit "4," to cancel this Escrow, you shall deliver to Feingold a cashier's check, drawn on your attorney-client trust account, in the amount of One Hundred Forty Five Thousand Eight Hundred Thirty One Dollars and Twenty Five Cents ($145,831.25) made payable to "Vladimir Feingold," and deliver the Stock Certificate to Staar. 1 -------------------------------------------------------------------------------- B.  General Provisions.     1.  You shall hold and dispose of the Escrow Deposit and Stock Certificate in the manner set forth above and shall have no other duties as escrow agent; your duties shall be determined only with reference to this Escrow Agreement and applicable law. If there should be a conflict between the provisions of this Escrow Agreement and applicable law, the terms of the Escrow Agreement shall control to the extent permissible and this Escrow Agreement shall be reformed only to the extent necessary to conform to applicable law. You are not charged with knowledge of, or any duties or responsibilities under, any other document or agreement. You may rely upon and shall be protected in acting or refraining from acting upon any written notice, instruction or request furnished to you under this Escrow Agreement and believed by you to be genuine and to have been signed or presented by Feingold and Staar. You shall be under no duty to inquire into or investigate the validity, accuracy or content of any such notice, instruction or request. You shall not be liable to Feingold or Staar for any actions taken or omitted by you in connection with the performance of your duties under this Escrow Agreement, except for actions or omissions arising from your own gross negligence or willful misconduct.     2.  In the event you should at any time be confronted with inconsistent claims or demands by Feingold and Staar, you shall have the right to seek ex parte relief before Judge Paul Gutman at the Superior Court of California, County of Los Angeles, in connection with that certain case entitled Vladimir Feingold v. Staar Surgical Company, et al., and numbered BC216184 in the files of that Court, interplead the parties, and request that the court determine the respective rights of the parties with respect to this Escrow Agreement. You shall be indemnified and held harmless by Feingold and Staar, jointly and severally, as a consequence of your interpretation of the rights of the parties hereunder and you shall automatically shall be released from any obligation or liability as a consequence of any such claims or demands, except with respect to your own gross negligence or willful misconduct. Feingold and Staar further agree that you shall be under no duty whatsoever to institute or defend any proceedings involving any conflict or claims of any nature whatsoever between Feingold and Staar.     3.  This Escrow Agreement cannot be changed or terminated orally and may be changed only with your written consent and the written consent of Feingold and Staar. This Escrow Agreement and your duties hereunder shall terminate when all amounts of the Escrow Deposit and Stock Certificate have been delivered to Feingold and Staar in accordance with this Escrow Agreement.     4.  Any notice or other communication under this Escrow Agreement shall be in writing and shall be considered given when delivered personally or four days after being mailed by registered mail, return receipt requested, or on the date of transmission if delivered by confirmed telecopy, to the parties at the following addresses or facsimile numbers (or at such other address as a party may specify by notice to the other):     (a) If to the Escrow Agent, to him at: Joseph M. Galosic, Esq. 8 Corporate Park, Suite 200 Irvine, California 92606 Telephone: (949) 476-0500 Fax: (949) 476-5059     (b) If to Feingold, to him at: Vladimir Feingold 31732 Isle Vista Laguna Niguel, California 92677 2 -------------------------------------------------------------------------------- With copy to: Mark S. Adams, Esq. Green & Adams, LLP 8 Corporate Park, Suite 200 Irvine, California 92606 Telephone: (949) 862-1030 Fax: (949) 862-1031     (c) If to Staar, to it at: Andrew F. Pollet President Staar Surgical Company 1911 Walker Avenue, Suite 500 Monrovia, California 91016 With copy to: Robert C. Woodbury, Esq. Pollet & Woodbury 10900 Wilshire Blvd., Ste. 500 Los Angeles, California 90024 Telephone: (310) 208-1182 Fax: (310) 208-1154     5.  This Escrow Agreement shall be governed by and construed in accordance with the law of the State of California applicable to agreements made and to be performed in California. All parties hereto agree that any controversy that may arise between the parties shall be adjudicated before Judge Paul Gutman in the Superior Court of California, County of Los Angeles. In the event of any dispute that may arise between the parties as to their respective rights, duties and obligations hereunder, the prevailing party in such dispute shall be entitled to recover its costs and expenses (including reasonable attorney fees) incurred by such party in connection with such dispute.     6.  This Escrow Agreement shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto.     7.  This Escrow Agreement and any instructions referenced herein may be executed in one or more counterparts, but all such counterparts shall constitute but one and the same instrument.     * * * *     IN WITNESS WHEREOF, the parties hereto agree that this Escrow Agreement shall be effective on the date that the Escrow Agent executes this Escrow Agreement.     "FEINGOLD"     VLADIMIR FEINGOLD     By:   --------------------------------------------------------------------------------     Name/Title: Vladimir Feingold     Date:   -------------------------------------------------------------------------------- 3 --------------------------------------------------------------------------------     "STAAR"     STAAR SURGICAL COMPANY a Delaware corporation     By:   --------------------------------------------------------------------------------     Name/Title: Andrew Pollet, President     Date:   --------------------------------------------------------------------------------     The undersigned agrees to act as escrow agent in accordance with the terms set forth above.     By:   --------------------------------------------------------------------------------     Name/Title: Joseph M. Galosic, Esq.     Date:   -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- EXHIBIT "1" October   , 2000 JOINT ESCROW INSTRUCTIONS For Delivery of Check and Stock Certificate To: Joseph M. Galosic, Esq.     Re: Escrow for $145,831.25, and 23,333 Shares of Staar Surgical Company Stock Dear Mr. Galosic:     You are hereby jointly instructed by Vladimir Feingold ("Feingold") and Staar Surgical Company, a Delaware corporation ("Staar") to:     1.  Immediately (the term "immediately" as used herein shall mean within two business days) deliver the Stock Certificate (the term "Stock Certificate" shall mean a Certificate of Stock for Twenty Three Thousand Three Hundred Thirty Three (23,333) shares of fully registered, non-restricted, free trading Staar common stock) to Feingold, c/o Mark S. Adams, Esq., Green & Adams, LLP, at 8 Corporate Park, Suite 200, Irvine, California 92606; and     2.  Immediately deliver to Staar, c/o Robert C. Woodbury, Esq., Pollet & Woodbury, at 10900 Wilshire Blvd., Ste. 500, Los Angeles, California 90024, a cashier's check drawn from your attorney-client trust account in the amount of One Hundred Forty Five Thousand Eight Hundred Thirty One Dollars and Twenty Five Cents ($145,831.25) made payable to "Staar Surgical Company."     After completion of the items above, escrow shall be closed and you shall be discharged of any and all duties under the Escrow Agreement and Instructions.     VLADIMIR FEINGOLD     By:   --------------------------------------------------------------------------------     Name/Title: Vladimir Feingold     Date:   --------------------------------------------------------------------------------     STAAR SURGICAL COMPANY     a Delaware corporation     By:   --------------------------------------------------------------------------------     Name/Title: Andrew Pollet, President     Date:   -------------------------------------------------------------------------------- 5 -------------------------------------------------------------------------------- EXHIBIT "2" October   , 2000 JOINT ESCROW INSTRUCTIONS For Cancellation of Escrow and Delivery of Check and Stock Certificate To: Joseph M. Galosic, Esq.     Re: Escrow for $145,831.25, and 23,333 Shares of Staar Surgical Company Stock Dear Mr. Galosic:     You are hereby jointly instructed by Vladimir Feingold ("Feingold") and Staar Surgical Company, a Delaware corporation ("Staar") to:     1.  Immediately (the term "immediately" as used herein shall mean within two business days) deliver the Stock Certificate (the term "Stock Certificate" shall mean a Certificate of Stock for Twenty Three Thousand Three Hundred Thirty Three (23,333) shares of fully registered, non-restricted, free trading Staar common stock) to Staar, c/o Robert C. Woodbury, Esq., Pollet & Woodbury, at 10900 Wilshire Blvd., Ste. 500, Los Angeles, California 90024; and     2.  Immediately deliver to Feingold, c/o Mark S. Adams, Esq., Green & Adams, LLP, at 8 Corporate Park, Suite 200, Irvine, California 92606, a cashier's check drawn from your attorney-client trust account in the amount of One Hundred Forty Five Thousand Eight Hundred Thirty One Dollars and Twenty Five Cents ($145,831.25) made payable to "Vladimir Feingold."     After completion of the items above, escrow shall be closed and you shall be discharged of any and all duties under the Escrow Agreement and Instructions.     VLADIMIR FEINGOLD     By:   --------------------------------------------------------------------------------     Name/Title: Vladimir Feingold     Date:   --------------------------------------------------------------------------------     STAAR SURGICAL COMPANY     a Delaware corporation     By:   --------------------------------------------------------------------------------     Name/Title: Andrew Pollet, President     Date:   -------------------------------------------------------------------------------- 6 -------------------------------------------------------------------------------- EXHIBIT "3" October   , 2000 ESCROW INSTRUCTION BY STAAR For Cancellation of Escrow and Delivery of Stock Certificate To: Joseph M. Galosic, Esq.     Re: Escrow for $145,831.25, and 23,333 Shares of Staar Surgical Company Stock Dear Mr. Galosic:     You are hereby instructed by Staar Surgical Company, a Delaware corporation ("Staar") to:     Immediately (the term "immediately" as used herein shall mean within two business days) deliver the Stock Certificate (the term "Stock Certificate" shall mean a Certificate of Stock for Twenty Three Thousand Three Hundred Thirty Three (23,333) shares of fully registered, non-restricted, free trading Staar common stock) to Staar, c/o Robert C. Woodbury, Esq., Pollet & Woodbury, at 10900 Wilshire Blvd., Ste. 500, Los Angeles, California 90024.     STAAR SURGICAL COMPANY     a Delaware corporation     By:   --------------------------------------------------------------------------------     Name/Title: Andrew Pollet, President     Date:   -------------------------------------------------------------------------------- 7 -------------------------------------------------------------------------------- EXHIBIT "4" October   , 2000 ESCROW INSTRUCTION BY FEINGOLD Cancellation of Escrow and Delivery of Check To: Joseph M. Galosic, Esq.     Re: Escrow for $145,831.25, and 23,333 Shares of Staar Surgical Company Stock Dear Mr. Galosic:     You are hereby instructed by Vladimir Feingold ("Feingold") to:     Immediately deliver to Feingold, c/o Mark S. Adams, Esq., Green & Adams, LLP, at 8 Corporate Park, Suite 200, Irvine, California 92606, a cashier's check drawn from your attorney-client trust account in the amount of One Hundred Forty Five Thousand Eight Hundred Thirty One Dollars and Twenty Five Cents ($145,831.25) made payable to "Vladimir Feingold."     VLADIMIR FEINGOLD     By:   --------------------------------------------------------------------------------     Name/Title: Vladimir Feingold     Date:   -------------------------------------------------------------------------------- 8 -------------------------------------------------------------------------------- EXHIBIT B VLADIMIR FEINGOLD 31732 Isle Vista Laguna Niguel, California 92677 VIA HAND DELIVERY Board of Directors Canon-STAAR Co., Inc. c/o STAAR Surgical Company 1911 Walker Avenue Monrovia, California 91016 Gentlemen:     The undersigned, Vladimir Feingold, hereby resigns from any position he holds with Canon-STAAR Co., Inc., including as a director. This resignation shall be effective immediately. Dated: October 27, 2000 /s/ VLADIMIR FEINGOLD   -------------------------------------------------------------------------------- Vladimir Feingold -------------------------------------------------------------------------------- QuickLinks SETTLEMENT AGREEMENT AND MUTUAL RELEASE RECITALS AGREEMENT CERTIFICATION OF ATTORNEY EXHIBIT A ESCROW AGREEMENT ESCROW AGREEMENT

Exhibit 10.iii.A.1 UNITED TECHNOLOGIES CORPORATION AND SUBSIDIARIES NONEMPLOYEE DIRECTOR STOCK OPTION PLAN Amendment 2 Whereas , the United Technologies Corporation Nonemployee Director Stock Option Plan (the "Plan") provides for an annual grant of non-qualified stock options with a value of $70,000, as determined by the Black Scholes Valuation Model; and Whereas the Board of Directors has determined that the number of stock options shall be subject to further adjustment based on an assessment of relevant benchmark data concerning compensation for nonemployee directors in a manner similar to the utilization of benchmark data for calculating the number of options to be awarded under the Corporation's Long Term Incentive Plan; Now therefore, the Plan is hereby amended effective April 27, 2001 as follows: 1.    Section 5(a) of the Plan is amended and restated as follows: 5.    Grant of Stock Options > (a)    On the date of the Corporation’s annual meeting of shareowners in each > year for so long as the Plan remains in effect (the "Grant Date"), each > nonemployee who is elected a director at such meeting, or whose term of office > shall continue after the date of such meeting, automatically shall be granted > options to purchase a number of shares of Common Stock (an "Option"). The > number of Options so awarded shall be equal in value to $70,000, as determined > by the Black Scholes Valuation Model, utilizing the same assumptions then > employed by the Corporation for the valuation of stock options under its other > long-term incentive plans. The valuation shall be calculated immediately prior > to the annual meeting on a date determined by the Committee. The number of > Options so determined, shall be subject to further adjustment by the Committee > based on its evaluation of relevant benchmark data concerning nonemployee > directors compensation, if the Committee determines that: (i) an adjustment is > appropriate on the basis of the benchmark data; and (ii) any such adjustment > is consistent with the manner that benchmark data relative to executive > compensation is utilized in determining the number of stock options granted > under the United Technologies Corporation Long Term Incentive Plan. The number > of Options to be granted annually shall no longer be subject to adjustment > pursuant to Section 8 of the Plan, provided however, that once granted, > Options shall continue to be adjusted automatically without further action by > the Committee or the Board in accordance with Section 8 of the Plan to prevent > the dilution or enlargement of the rights of Participants. --------------------------------------------------------------------------------  UNITED TECHNOLOGIES CORPORATION   UNITED TECHNOLOGIES CORPORATION By: /s/ William L. Bucknall, Jr. William L. Bucknall, Jr. Senior Vice President, Human Resources and Organization ATTEST:   /s/ Richard M. Kaplan        Richard M. Kaplan Date: July 26, 2001 --------------------------------------------------------------------------------

Exhibit 10.19 Subordination and Intercreditor Agreement This SUBORDINATION AND INTERCREDITOR AGREEMENT ("Agreement") is made effective as of July 12, 2001, by and between Bank One, N.A., a national banking association with principal offices in Columbus, Ohio ("Bank" or "Senior Lender") and Christian Larsen ("Larsen") and The Charles Schwab Corporation, a Delaware corporation ("Schwab") (collectively, Larsen and Schwab shall be referred to as the "Subordinated Lenders"). Larsen, Schwab and the Bank or Senior Lender are hereinafter sometimes referred to individually as a "Lender" and collectively as "Lenders". BACKGROUND A. Obligations to the Senior Lender To provide financing to E-Loan, Inc., a Delaware corporation ("Debtor"), the Senior Lender entered into a Loan Agreement dated as of April 2, 2001 (the "Loan Agreement") together with other transaction documents (collectively, the Loan Agreement and such other transaction documents related thereto shall be referred to as the "Bank Credit Agreement"). Under the Bank Credit Agreement, the Senior Lender agreed to lend to the Debtor up to the aggregate principal amount of Twenty-five Million and 00/100 Dollars ($25,000,000) from time to time outstanding on a revolving credit basis. The obligations of the Debtor to the Senior Lender under the Bank Credit Agreement are secured by the grant by the Debtor of the first priority security interest in and assignment of property of the Debtor as described on Exhibit A hereto (the "Senior Lender's Collateral"). (The obligations of the Debtor under the Bank Credit Agreement and any and all other obligations of the Debtor to the Senior Lender, now existing or hereafter arising, shall be referred to as the "Senior Obligations").   B. Obligations to Larsen To provide additional financing to the Debtor, Larsen is entering into an Amended and Restated Loan Agreement dated as of July 12, 2001 (the "Larsen Loan Agreement") together with other transaction documents (collectively, the Larsen Loan Agreement and such other transaction documents shall be referred to as the "Larsen Credit Agreement"). Under the Larsen Credit Agreement, Larsen is agreeing to lend to the Debtor up to the aggregate principal amount of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000) from time to time outstanding on a revolving credit basis. The obligations of the Debtor to Larsen under the Larsen Credit Agreement are secured by a grant by the Debtor of a second priority security interest in and assignment of property of the Debtor as described on Exhibit B hereto (the "Larsen Collateral"). (The obligations of the Debtor under the Larsen Credit Agreement and any and all other obligations of the Debtor to Larsen, now existing or hereafter arising, shall be referred to as the "Larsen Obligations".) C. Obligations to Schwab To provide additional financing to the Debtor, the Debtor issued to Schwab its eight percent (8%) convertible note due on January 19, 2003, in the aggregate principal amount of Five Million and 00/100 Dollars ($5,000,000) (the "Note"), which Note was purchased by Schwab pursuant to the terms and conditions of that certain Note Purchase Agreement dated as of July 12, 2001 (the "Purchase Agreement") and which Note is convertible at the option of holders into shares of the Debtor's common stock, $0.001 par value pursuant to the terms and conditions of the agreements between the Debtor and Schwab. (The Note, Purchase Agreement, Security Agreement, and other transaction documents relating thereto or arising therefrom shall be referred to as the "Schwab Credit Agreement"; the obligations of the Debtor under the Schwab Credit Agreement and any and all other obligations of the Debtor to Schwab, now existing or hereafter arising, shall be referred to as the "Schwab Obligations".) Those Schwab Obligations that arise under the Note or Security Agreement are secured by a grant by the Debtor of a security interest in and assignment of property of the Debtor as described on Exhibit C hereto (the "Schwab Collateral"). (Collectively, the Larsen Obligations and the Schwab Obligations shall be referred to as the "Subordinated Obligations"; collectively, the Larsen Credit Agreement and the Schwab Credit Agreement shall be referred to as the "Subordinated Credit Agreements"; and, collectively, the Larsen Collateral and the Schwab Collateral shall be referred to as the "Subordinated Lenders' Collateral".) D. Identification of Collateral The Senior Lender's Collateral is comprised of the identical assets of the Debtor as is the Subordinated Lenders' Collateral. Schwab and Larsen have entered into an Intercreditor Agreement effective as of ___________, 2001 to provide for the relationship of the Larsen Obligations to the Schwab Obligations and to provide for the allocation of the collateral interests as between Schwab and Larsen ("Schwab-Larsen Intercreditor Agreement"). This Agreement is unaffected by the Schwab-Larsen Intercreditor Agreement. (Collectively, the Senior Lender's Collateral, the Larsen Collateral and the Schwab Collateral shall be referred to as the "Collateral".) E. Debt Prohibitions The Bank Credit Agreement prohibits, inter alia, the Debtor from incurring debt which is not subordinated to the Senior Obligations and prohibits any other liens on the Senior Lender's Collateral. The purpose of this Agreement is to provide for the subordination of the Subordinated Obligations to the Senior Obligations and to provide for subordination of the interests of Larsen and Schwab in the Collateral to those of the Senior Lender. The Debtor has requested that the Senior Lender consent to the Subordinated Obligations and the grants to the Subordinated Lenders of the Subordinated Lenders' Collateral. The Senior Lender has consented to this request subject to the provisions of this Agreement.   STATEMENT OF AGREEMENT Section 1. Priority of Security Interests. Notwithstanding the time or the order of perfection of their respective security interests, any provision in the Subordinated Credit Agreements, any provision of the federal bankruptcy code, or any other applicable law, as between themselves, the Senior Lender and the Subordinated Lenders agree as follows: (a) The Senior Lender shall have, claim and maintain a first priority lien on and first priority security interest in the Collateral. (b) The Subordinated Lenders shall have, claim and maintain a second priority lien on and second priority security interest in the Collateral as the interests in the Collateral of the Subordinated Lenders may be adjusted between them pursuant to the Schwab-Larsen Intercreditor Agreement, fully subordinated to all interests in the Collateral of the Senior Lender. (c) The parties hereto will execute and deliver all further agreements and documents which may be reasonably required to implement or evidence the foregoing interests in favor of each such party. Section 2. Subordination by the Subordinated Lenders. Each of the Subordinated Lenders shall, and hereby does, subordinate the Subordinated Obligations in favor of the Senior Obligations. Each Subordinated Lender may accept regularly scheduled payments of principal and/or interest under their respective Credit Agreements so long as no event of default has occurred and is continuing under the Bank Credit Agreement or so long as such payment would not cause an event of default under the Bank Credit Agreement. Upon the occurrence of an event of default under the Bank Credit Agreement, no Subordinated Lender may accept any payments whatsoever on the Subordinated Obligations, from any source whatsoever, including, without limitation, payments from the Debtor or arising from or related to the Collateral. Each Subordinated Lender acknowledges that the occurrence of an event of default under either the Larsen Credit Agreement or the Schwab Credit Agreement constitutes an event of default under the Bank Credit Agreement. Upon the occurrence of an event of default under the Bank Credit Agreement, except events of default which are precipitated by default by the Debtor under either the Larsen Credit Agreement or the Schwab Credit Agreement, the Senior Lender shall give written notice to each of the Subordinated Lenders of such event of default under the Bank Credit Agreement (the "Default Notice"); provided, however, irrespective of the date of receipt of a Default Notice by a Subordinated Lender, the operative date for all relevant purposes under this Agreement shall be that date on which such event of default actually occurred under the Bank Credit Agreement (the "Default Date"). After a Default Date, all payments on account of the Subordinated Obligations accepted by any Subordinated Lender from whatever source, including, but not limited to, offsets, shall be received by such Subordinated Lender in trust for the benefit of the Senior Lender, shall at all times be and remain the property of the Senior Lender and shall be promptly paid over by such Subordinated Lender to the Senior Lender in exactly the form received with appropriate endorsement at the direction of the Senior Lender. Section 3. Additional Terms Regarding Subordination. (a) The Senior Lender may amend, revise, renew, substitute or replace or otherwise modify any term under the Bank Credit Agreement, or any of the obligations owed to it by the Debtor; extend the maturity therefore or agree to forbearance thereon without notice to any Subordinated Lender and without such affecting the obligations, undertakings and agreements of each Subordinated Lender under this Agreement; and may extend additional loans to the Debtor without the prior consent of the Subordinated Lenders. (b) After a Default Date, each Subordinated Lender agrees not to ask, demand, sue for, take or receive from the Debtor, directly or indirectly, by offset, in any other name, the whole or any part of the Subordinated Obligations unless and until the Senior Obligations have been fully and indefeasibly satisfied and the Senior Lender has no further commitment to make loans to the Debtor under the Bank Credit Agreement. (c) No Subordinated Lender shall have any right to possession of the Collateral or any part thereof or to foreclose upon any Collateral or any part thereof, to collect or enforce the Subordinated Obligation owed to it by the Debtor, whether by judicial action or otherwise, unless and until the Senior Obligations have been fully and indefeasibly satisfied and the Senior Lender has no further commitment to make loans to the Debtor under the Bank Credit Agreement. (d) No Subordinated Lender shall commence or join with any creditor of the Debtor other than the Senior Lender in commencing any proceeding to collect or enforce the Subordinated Obligations owed to him or it or to file an involuntary petition in bankruptcy against the Debtor. (e) In the event of any distribution of the assets or readjustments of the debt of the Debtor, whether by liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other similar action or proceeding, or the application of the assets to the payment or liquidation thereof, the Senior Lender shall be entitled to receive payment in full in cash of the Senior Obligations prior to any payment to any Subordinated Lender. In the event of any distribution to any Subordinated Lender contrary to the provisions of this subsection, such distribution shall be deemed to be held by such Subordinated Lender in trust for the benefit of the Senior Lender, shall at all times be and remain the property of the Senior Lender and shall be promptly paid over by such Subordinated Lender to the Senior Lender in exactly the form received with appropriate endorsement at the direction of the Senior Lender. (f) The Senior Lender may release, exchange, sell or otherwise deal with the Collateral without impairing or affecting any of its rights under this Agreement. (g) The Senior Lender may continue, at any time and without notice to the Subordinated Lenders, to extend credit or other financial accommodations or benefits and loan monies to or for the account of the Debtor and such extensions of credit, financial accommodations or benefits and loans to or for the account of the Debtor shall be subject to the benefits and entitlements afforded the Senior Lender under this Agreement. (h) This is a continuing agreement of subordination and shall continue in effect until the Senior Obligations have been fully and indefeasibly satisfied and the Senior Lender has no further commitment to make loans to the Debtor under the Bank Credit Agreement. (i) Each party hereto represents and warrants that it has not previously assigned any interest in the obligations owed to it or him by the Debtor, that no other party owns an interest in such obligations (whether as joint holders, participants or otherwise). (j) Each Subordinated Lender hereby expressly waives any right that it may otherwise have to require the Senior Lender to marshall assets or to resort to Collateral in any particular order or manner, whether provided for by common law or statute. (k) In the event that the Senior Lender shall be required by the Uniform Commercial Code or any other applicable law to give notice to either of the Subordinated Lenders, such notice shall be given in accordance with Section 5 hereof and of their respective interests in the Collateral in seven (7) business days' notice shall be deemed to be commercially reasonable. (l) After a Default Date under the Bank Credit Agreement, each Subordinated Lender will cooperate with the Senior Lender's efforts to collect, sell or otherwise dispose of the Collateral and shall provide to the Senior Lender, upon request, appropriate releases of their respective interests in the Collateral to permit such collection, sale or other disposition of the Collateral by the Senior Lender, free and clear of any Subordinated Lender's interest in the Collateral. (m) For the limited purpose of perfection of the respective security interests of the Lenders in those types or items of Collateral in which a security interest may be perfected by possession, each Lender hereby appoints the other as its agent for the limited purpose of possessing on its behalf any such Collateral that may come into the possession of such other Lender from time to time, and each Lender agrees to act as the other's agent for such limited purpose of perfecting the other's security interest by possession through an agent, provided that neither Lender shall incur any liability to the other Lender by virtue of acting as the other's agent hereunder, and either Lender may relinquish possession of Collateral in its possession without the consent of the other Lender, and without incurring liability to the other Lender, unless there is an express written agreement to the contrary in effect between the Lenders. Section 5. Notices. Any and all notices required or permitted under this Agreement shall be effective upon receipt (unless otherwise specified herein) and shall be given by telecopy or courier to the following addresses unless such addresses are changed by notice given as provided herein. If to the Bank: Bank One, NA-OH1-1009 1111 Polaris Parkway, #3J Columbus, OH 43240 ATTENTION: Craig Larson Telephone: (614) 248-7704 Telefax: (614) 248-0156 With a copy to: Arter & Hadden, LLP 10 West Broad Street Columbus, Ohio 43215 ATTENTION: Yvette A. Cox Telephone: (614) 221-3155 Telefax: (614) 221-0479 If to Larsen: Christian Larsen c/o E-Loan, Inc. 5875 Arnold Road, Suite 100 Dublin, CA 94568 Telephone: (925) 241-2400 Telefax: (925) 803-3503 With a copy to: Watson & Lanctot 44 Montgomery Street, Suite 3585 San Francisco, CA 94104 Attention: Lawrence Lanctot Telephone: (415) 362-0900 Telefax: (415) 362-2744 If to Schwab: The Charles Schwab Corporation 101 Montgomery Street San Francisco, CA 94104 Attention: Christopher V. Dodds Telephone: (415) 636-5415 Telefax: (415) 636-5877 With a Copy to: Howard, Rice, Nemerovski, Canady, Falk & Rabkin Three Embarcadero Center, Seventy Floor San Francisco, CA 94111 Attention: Lawrence B. Rabkin Telephone: (415) 434-1600 Telefax: (415) 217-5910 Section 6. No Third Party Beneficiary. The parties agree that this Agreement is solely for the benefit of the parties hereto and their successors and assigns, and not for the benefit of any third party. Further, this Agreement does not create any joint venture between or among the parties. Section 7. Effective Date and Continuing Nature of the Agreement. This Agreement is executed and delivered to each party as of the date of the earlier of the Subordinated Obligations and shall be effective as of such date. Except to the extent specifically provided herein, this Agreement shall continue to be effective until the Senior Obligations have been fully and indefeasibly satisfied and the Senior Lender has no further commitment to make loans to the Debtor under the Bank Credit Agreement. Section 8. No Contest of Security Interest. The parties agree that none of them will contest the security interest or lien of the other granted by the Debtor, or the perfection thereof, in any proceeding or for any reason. This covenant shall be specifically enforceable against any party hereto. Section 9. Financial Information. Each party hereby assumes responsibility for keeping itself informed of the financial condition of the Debtor and of all other circumstances bearing upon risk of non-payment of any indebtedness that diligent inquiry would reveal. Section 10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the legal representatives, successors and assigns of the respective parties hereto. This Agreement shall be applicable both before and after the filing of any petition by or against the Debtor under the federal bankruptcy code, and all allocations of payments between the parties hereto shall continue to be made after the filing thereof on the same basis that payments were to be applied prior to the date of filing the petition. Section 11. Dispute Resolution/Jury Waiver. (a) Each party to this Agreement hereby voluntarily, irrevocably and unconditionally waives any right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise, arising out of, in connection with, related to, or incidental to this Agreement or the transactions related hereto. This provision is a material inducement to both the Senior Lender and the Subordinated Lenders to enter into this Agreement. (b) This Agreement shall in all respects, be construed in accordance with and governed by the laws of the State of Ohio, without regard to provisions for conflicts of law; and, venue for any action arising of, in connection, related to or incidental to this Agreement shall be in Franklin County, Ohio. (c) This Agreement constitutes the only agreement and understanding between the Senior Lender and the Subordinated Lenders and supersedes any all prior agreements and understandings, oral or written, relating to the subject matter hereof. Each party acknowledges that he or it has not relied on any oral promises or representations from the other. No change in the terms, modification or waiver of any provision of this Agreement shall be effective unless the same is in writing and signed by the Senior Lender and the affected Subordinated Lender. If the Senior Lender and one (but not both) Subordinated Lender agree in a change in the term, amendment, modification or waiver of a provision of this Agreement, such shall be effective as to the parties so agreeing and such shall not affect, limit or discharge the rights or the obligations of any Subordinated Lender under this Agreement who or which may not be a party to any such change in the terms, amendment, modification or waiver of such provision of this Agreement. Section 12. General. The section titles contained in this Agreement are and shall be without substance or meaning or content of any kind whatsoever, and are not a part of the agreement between the parties. This Agreement contains the entire agreement between the parties with respect to the matters set forth herein and may not be altered, modified or amended in any respect, nor may any right, power or privilege of any party hereunder be waived, released or discharged except upon execution by all parties of a written instrument so providing. If any provision of this Agreement or the application thereof to any person or circumstances is held invalid or unenforceable, the remainder of this Agreement will not be affected thereby and such provision of this Agreement shall be severable in any such instance. This Agreement may be executed in separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. In the event of any dispute concerning the meaning or interpretation of this Agreement that results in litigation, or in the event of any litigation by a party to enforce the provisions hereof, each party shall be responsible for its own attorneys' fees and disbursements, and any actual costs incurred.   In Witness Whereof, the parties have caused this Agreement to be executed as of the day and year first above written.         [Balance of Page Intentionally Blank]   BANK ONE, NA     By:/s/ Craig M. Larson Its:     /s/ Christian Larsen Christian Larsen   THE CHARLES SCHWAB CORPORATION By: /s/ Christopher V. Dodds Its: EVP, CFO     Acknowledgment and Consent E-Loan, Inc., a Delaware corporation, acknowledges that it has received and reviewed a copy of the foregoing Subordination and Intercreditor Agreement and hereby consents to the provisions of such agreement as it may be renewed, amended or otherwise modified by and between those parties; agrees to comply with its terms; and acknowledges that such agreement is a Loan Document as defined in the Bank Credit Agreement.   E-LOAN, INC.   By: /s/ Joseph J. Kennedy Its: President and COO --------------------------------------------------------------------------------

Exhibit 10.11 AGREEMENT   Between CHART STORAGE SYSTEMS Plaistow, New Hampshire member of Chart Industries Cryogenic Storage Systems Division   and the   International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers Local Lodge No. 752 of the AFL-CIO Plaistow, New Hampshire   Effective date: August 30, 1999 through August 30, 2002 ARTICLE.INDEX                           PAGE           I.   Union Recognition 1   II.   Function of Management 1   III.   Relationship 2   IV.   Definitions 2   V.   Non-Discrimination 2   VI. New - Temporary Employees 3   VII.   Union Security 4   VIII.   Payroll Deduction of Union Dues 4   IX.   Work Schedules 5   X.   Job Openings 6   XI.   Shift Operations 7   XII.   Wages 8   XIII.   Overtime 10   XIV.   Holidays 11   XV.   Vacation 13   XVI.   Hospitalization, Medical and Dental 15   XVII.   Pension 17   XVIII.   Safety and Sanitation - First Aid 18   XIX.   Seniority, Lay-Off 20   XX.   Attendance 21   XXI.   Disciplinary Action 23   XXII.   Grievance Procedure 24   XXIII.   Arbitration 25   XXIV.   Union Representatives 25   XXV.   Sub-Contracting 27   XXVI.   Maintenance of Work Operations 27   XXVII.   Information to Union 28   XXVIII.   401 (k) Savings and Investment Program 29   XXIX.   Profit Sharing 29   XXX.   Severance Pay 31   XXXI.   Contract Limitations 32   Appendix A.          Training Program 34   Schedule A.          Notes 36   Schedule B.          Wage Rates 37     ARTICLE INDEX by TOPIC             PAGE         401(k) Savings and Investment Program Article XXVIII 29         A Arbitration Article XXIII 25   Attendance Article XX 21-23                 B         Bereavement Benefit Article VII, (Sec 9) 9         C Contract Limitations Article XXXI 32                 D Definitions Article IV 2   Dental, Medical and Hospitalization Article XVI 15-17   Disciplinary Action Article XXI 23                 E         Employees, New and Temporary Article VI 3-4                 F         First Aid - Safety and Sanitation Article XVIII 18-20   Function of Management Article II 1                 G Grievance Procedure Article XXII 24                 H Holidays Article XIV 11-12           ARTICLE INDEX by TOPIC    PAGE           Hospitalization, Medical and Dental Article XVI 15-17                 I Information to the Union Article XXVII 28                 J Job Classifications Article X 7   Job Openings Article X 6-7                 L Layoff - Seniority Article XIX 20-21                 M Maintaining of Work Operations Article XXVI 27   Management, Function of Article II 1   Medical, Hospitalization and Dental Article XVI 15-17                 N         New and Temporary Employees Article VI 3-4   Non-discrimination Article V 2   Notes Schedule "A" 36                 O         Overtime Article XIII 10-11                 P Payroll Deductions of Union Dues Article VIII 4-5   Pension Article XVII 17   Premium Machines Schedule "A" 39   Profit Sharing Article XXIX 29-30   ARTICLE INDEX by TOPIC    PAGE         R Relationship Article III 1   Representatives, Union Article XXIV 25-27                 S Safety and Sanitation - First Aid Article XVIII 18-20   Security, Union Article VII 4   Seniority - Layoff Article XIX 20-21   Severance Pay Article XXX 31   Shift Operations Article XI 7   Signature Page   33   Sub-contracting Article XXV 27                 T Table of Contents   I   Training Program Appendix A 34-35                 U Union Recognition Article I 1   Union, Information to Article XXVII 28   Union - Representatives Article XXIV 25-27   Union Security Article VII 4   Union Dues, Payroll Deductions of Article VIII 4-5                 V Vacation Article XV 13-15                 W Wages Article XII 8-10   Wage Rates, Union Schedule "B" 37   Work Schedules Article IX 5-6   Work Operations, Maintaining of Article XXVI 27                   ARTICLE I UNION RECOGNITION   Section 1. The Employer recognizes the Union as the sole collective bargaining agency for all employees coming within the category of the appropriate unit with such respect to wages, hours and working conditions. Such appropriate unit is as follows: All production and maintenance Employees including Working Leadmen, Truck Drivers, but excluding Draftsmen, Technical Engineers, Foremen, Assistant Foremen, Supervisory Employees having the right to hire and fire, and Office and Clerical Employees. Section 2. The Employer agrees to employ only Employees in the classifications set forth in Schedule "B" in the performance of the work included within the scope of this agreement. Section 3. No Foremen or Assistant Foremen shall work with the tools except for the purpose of instructing or correcting Employees. The following Supervisors are exempt from this requirement: Test Supervisor to operate Mass Spectrometer only; Maintenance Supervisor and Assistant Supervisor for breakdown, repair and installation of new equipment. ARTICLE II FUNCTION OF MANAGEMENT Section 1. The Union agrees that the function of Management rests solely with the Company, and further agrees that it will not interfere with the Company's free exercise of this right except where the Company specifically is limited in the Articles or Sections of this Contract. Section 2. Foremen, Assistant Foremen, Supervisors, Coaches, Lead persons, Group Leaders, and Team leaders in all departments shall be selected by the Employer. ARTICLE III RELATIONSHIP Section 1. The parties of the Agreement recognize that stability in wages and working conditions and competency of workers are essential to the best interest of the industry and public, and agree to strive to eliminate all factors which tend toward unstabilizing these conditions. The parties further agree to cooperate fully in carrying out the intent of this Section. Section 2. It is hereby agreed that a Committee consisting of two (2) representatives of the Company, the Plant Manager and two (2) representatives of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers of America, AFL-CIO, Local 752, and Employees of the Company to be known as the Labor Management Production Committee, shall be established and meet to discuss and devise ways and means to effectuate maximum production which is mutually desired. A meeting shall be called by the Plant Manager at least once a quarter and he shall preside as Chairman. > ARTICLE IV DEFINITIONS Section 1. As used in the Agreement, the term "Employee" means an Employee who is included in the appropriate unit as above defined and the term "Employees" means two (2) or more such employees. ARTICLE V NON-DISCRIMINATION Section 1. The Company or the Union shall not discriminate against employees because of color, race, sex, religious affiliation, nationality, age, sexual orientation, handicap or status as a disabled veteran or Vietnam era veteran, as prescribed by applicable state or federal law. Pronouns in the male gender appearing in this Agreement are intended to include the female gender. > ARTICLE VI NEW AND TEMPORARY EMPLOYEES Section 1. The Company agrees that all new Employees shall be given a copy of this Agreement. Section 2. All new employees shall complete their first ninety (90) days of work as Probationary Employees and shall be subject to discharge within that period at the discretion of the Employer without recourse to the grievance procedure of the Agreement. Section 3. New Employees are not eligible for a paid holiday until completing thirty (30) days of work. Section 4. New Employees may be retained on the first shift for a period of thirty (30) days of work. Thereafter they shall be subject to the seniority rules. No Employee shall be transferred to another shift to accommodate any new hire. Section 5. New Employees become covered for benefits on the first of the month following completion of forty-five (45) days of work. Section 6. Temporary employees shall be defined as employees who are hired to fill short term production work not to exceed (6) six calendar months. This process is not meant to replace the regular hiring process. Temporary employees may become full time employees if a need exists beyond (6) six calendar months. Temporary employees will be hired under the following conditions: 1. Where a need exists within a classification, temporary employees may be hired to fill the need provided no employees within the classification are on layoff, and there are no qualified employees within the other classifications working or on lay-off.     2. The probationary period for temporary employees will be no longer than 6 calendar months.     3. Temporary employees will not be subject to Union dues in the first 30 days and shall not participate in the following specific contractual benefits, namely: Holiday pay, vacation pay, pension benefits, insurance benefits, sickness and accident coverages (except statutory Worker's Compensation) and hospitalization coverage.     4. All qualified employees will be given the opportunity to work overtime before temporary employees are asked to work overtime.     5. Temporary employees may be assigned to first shift for up to 30 days for orientation. Thereafter, they will be assigned to another shift as production needs dictate. No full time employee will be displaced from their regular shift by a temporary employee. ARTICLE VII UNION SECURITY Section 1. As a condition of employment, all present Employees must become and remain members of the Union thirty (30) days after the signing of this Agreement, and all future Employees hired by the Company. ARTICLE VIII PAYROLL DEDUCTIONS OF UNION DUES Section 1. The Company shall, upon the written order signed by any Employee directing the Company to do so, deduct from the second pay of such Employees for each month, the amount of dues payable by such Employee to the Union for the succeeding months. This written order, being signed voluntarily, shall be irrevocable unless such rights be waived by the Union concerned, for a term of this Agreement, and is in compliance with the applicable laws. The amount of the Union's dues will be set forth under the Seal of The Union and presented to the Company immediately subsequent to the signing of this agreement. The Company shall, on or before the first day of each succeeding month, remit the amount thereof to the proper officers of the Union. The Union shall, from time to time, furnish the Company a certificate of the president or other qualified officers of the Union to whom such amounts shall be remitted. Section 2. In the application of Section 1 above, when the Employer is notified by the Union in writing that an Employee is delinquent in the payment of Union dues, reinstatement fee, or has failed to make proper application or pay the initiation fee required, the Employer shall, upon notice from the local Union, terminate such Employee. Section 3. The Union shall hold the Company harmless from any and all liability resulting from the Company's discharge of any Employee at the request of the Union as defined in Section 2, Article VIII above. ARTICLE IX WORK SCHEDULES Section 1. Employees must be at their regular work station at the start of the shift. Section 2. The normal work week shall consist of five (5) days: Monday through Friday inclusive for the first and second shift; and Sunday through Thursday inclusive for the third shift. It is understood that all hours and days of work shall be consecutive. Section 3. Shift work will be permitted in all classifications. A 10% premium over and above the hourly rate shall be allowed for second and third shifts. The shifts may consist of one day and two night shifts. The regular working hours are as follows: > 1st Shift . . . . . . . . . . . . . . . . .6:30 a.m. - 3:00 p.m. > > 2nd Shift . . . . . . . . . . . . . . . . 3:00 p.m. - 11:30 p.m. > > 3rd Shift . . . . . . . . . . . . . . . 10:30 p.m. - 7:00 a.m. Unpaid lunch periods: > 1st Shift . . . . . . . . . . . . . . . 12:00 noon - 12:30 p.m. > > 2nd Shift . . . . . . . . . . . . . . . .8:00 p.m. - 8:30 p.m. > > 3rd Shift . . . . . . . . . . . . . . . . 2:30 a.m. - 3:00 a.m. If more than 120 employees are on a shift, the employer may stagger lunch periods. Section 4. A 10-minute coffee break will be allowed during the first half of each shift. Section 5. Employees shall be permitted five (5) minutes to put away their tools and wash up at the end of each shift. ARTICLE X JOB OPENINGS Section 1. The Company shall post all job openings except in the General Helper's classification for a period of one (1) week. All bids shall be closed at the end of this week. The senior employee shall have preference for these jobs providing he/she has the qualifications to do the job with a minimum amount of in-house training by the Company. Job bids must be submitted in duplicate by the Employee to the Personnel Manager with the Shop Steward retaining a copy. In the event the successful job bidder cannot perform the job with a minimum amount of in-house training by the Company, (not less than three (3) weeks) he/she shall then be returned to the classification and area he/she came from. A successful job bidder shall retain his/her seniority in his/her old classification for one (1) year before his/her past seniority is applicable to his/her new classification. An employee must have one (1) year or more of service in his/her classification to exercise a job bid. If an Employee's qualifications are in dispute, the Company will then resolve this matter with the Shop Committee. This Section is not intended, and shall not be construed to deny the Company the right to hire qualified employees for job openings if, in the opinion of the Company, no qualified Employee exists within its employ. In the event the Company hires from the outside to fill a job bid where no qualified Employee was available, the Company shall show the new hire's record and qualifications to the Shop Committee for their verification prior to the new hire reporting for work. JOB CLASSIFICATIONS Section 1. Although all employees have specific job classifications, any employee may be assigned to any job and will be paid at their regular rate. ARTICLE XI SHIFT OPERATIONS Section 1. When an Employee has his/her shift changed during the work week he/she shall receive time and one-half for the first day of the new shift. When he/she returns to his/her original shift he/she receives only straight time. There shall be no time and one-half for any shift change occurring over the weekend. Shift assignment shall be by seniority in a classification. The Company shall give forty-eight (48) hours' notice to any Employee who is being   transferred to another shift. Employees may exercise shift preference every twelve (12) months if so desired. Transfer must be made within a two (2) week period. An employee must have been employed one (1) year before exercising shift preference. Employees who will be so assigned by management to a different shift because of a need for skills and efficiency of the operation will do so for no more than 120 calendar days. ARTICLE XII WAGES Section 1. The first term of the Agreement effective August 30, 1999 through August 27, 2000, base wages will be increased 3%/hr. across the board. The second term of the Agreement effective August 28, 2000 through August 26, 2001, base wages will be increased 3%/hr. across the board. The third term of the Agreement effective August 27, 2001 through September 1, 2002, base wages will be increased 3%/hr. across the board. Section 2. The Employer agrees to pay to its Employees, and the Union agrees that it will accept, the wage scale for the various classifications set forth and contained in the Schedule of Wages in Schedule "B" attached hereto. Section 3. There shall be no reduction in wages during the life of this agreement. Section 4. All Union requests for Wage Increases will be submitted by the Union and administered by the Company as to approval or disapproval within two (2) weeks after being submitted. Section 5. Employees properly reporting for work shall receive a minimum of four (4) hours' pay. This Section shall not apply where Employees are not put to work by reason of an Act of God or on occasions when the Company has acted promptly to proceed with the necessary repairs to factory buildings and/or equipment. The foregoing requirements shall not be applicable where the Employee voluntarily quits, is discharged, goes home sick, or is excused from work for personal reasons, in which event he/she shall be paid only for actual hours worked. Section 6. All work performed away from the plant requiring overnight stays will be paid at the rate of $1.00/hour above the applicable shop rate. Work performed away from the plant during day trips will be paid at the rate of $.50/hour above the applicable shop rate. Mileage, if an employee's car is used, will be paid at the rate allowed by the IRS per mile [current rate (9/99) is $0.31/mile]. Section 7. Management will review the wages of each Employee under the maximum of their classification for each six (6) months period in which the Employee has not had a wage increase. Should an Employee not demonstrate, during the six (6) month review period, sufficient improvement over his/her last review to justify an increase he/she shall be reviewed again in ninety (90) days. The minimum increase, if granted, shall be fifteen cents ($0.15) per   hour. Shop Stewards, when requesting a Review, must make the request two (2) weeks in advance of the requested effective date. The increase, if granted, shall be retroactive to the requested effective date. Each Employee has a right to challenge his/her review with his/her Supervisor or Coach. In order to ensure the orderly progression of new employees through the Job classification apprentice training process, the actions in Appendix A will be taken. Section 8. When an Employee is called to Jury Duty the Company shall make up the difference in pay at the Employee's regular rate. A day of Jury Duty is defined as any day for which the Employee is required to appear, regardless of having served, certified by a written statement from the Court. Section 9. An employee beyond the probationary period, who is working at the time, will be granted three (3) regular working days off with pay in the event of a death in the employee's immediate family. Immediate family is defined as the employee's wife, husband, father, mother, son, daughter, brother, sister, foster parents, father-in-law or mother-in-law. An employee may take the time off with pay later than the day of death or funeral if circumstances warrant and are a direct result of the death. An employee beyond the probationary period, who is working at the time, will be granted one (1) regular work day off with pay to attend the funeral of a grandparent or grandchild of the employee. An absence for the purpose of attending the funeral of a relative, when evidence is acceptable to Personnel, shall be excused. Section 11. Employees who have given long and faithful service and have become unable to handle heavy work due to age shall be given preference in such light work as they may be able to perform at a rate of pay commensurate with the classification in which they will be employed. ARTICLE XIII OVERTIME Section 1. All work in excess of eight (8) hours in any one work day, forty (40) hours in any one week, or on Saturday shall be paid at the rate of time and one-half; all work performed on Sundays shall be paid at the rate of double time; on a paid holiday, time and one-half extra if worked. No Employee shall be paid both daily and weekly overtime for the same hours worked. Section 2. Should an Employee be required to work over ten (10) hours in any one day he/she will be allowed one-half (1/2) hour paid lunch period. Section 3. The Company will attempt to distribute all overtime work as equally as possible among the Employees in their respective shifts. All overtime shall be worked on a voluntary basis. Where there are no qualified Employees available to perform the work the Company will authorize other means to get the work done. Before taking action, the Company will consult with the Chief Steward or in his/her absence, an available Steward who, with the Company, will mutually attempt to make available the qualified Employee(s) necessary to perform the work. It is agreed that any Employee who has agreed to report for overtime work after having been asked, but does not report for work as agreed to, shall forfeit his/her right to overtime work for one (1) month unless he/she can offer an acceptable, reasonable excuse to the Company. Any Employee who refuses overtime work when requested shall be considered as having worked, for the purpose of overtime distribution. Section 4. If there is overtime work on a job that an Employee or Employees have been working straight time on, these Employees will continue on the job and receive the overtime, including Saturday and Sunday. The Chief Steward or Business Manager shall receive a complete list of all Employees scheduled to work on Saturday, Sunday and holidays. Section 5. There shall be one (1) Steward for each twenty (20) employees working a Saturday, Sunday or holiday. If a Steward within the group refuses the work, any Union Official within the group may be counted towards meeting the above requirements, or the Union may designate an Acting Steward from among those Union Employees at work. In no event shall the total number of Stewards working exceed the number of Stewards in the Shop. When Employees are asked to work overtime and there are no Stewards working the Shift they are held over to, the provisions above for Saturday, Sunday and holiday work shall apply. Section 6. Any Employee called to work at any other time than his/her regular shift shall be paid time and one-half for work. Section 7. Employees shall not be required to take time off because of overtime work unless required to do so by state or federal regulations. When an Employee, due to lack of work, is temporarily assigned to another classification carrying a lower rate, his/her wage rate shall not be reduced for a period of thirty (30) days of work. At the expiration of this period the Employee shall have the option to accept the lower rate of pay or take a lay-off due to lack of work in his/her classification. Temporary assignment to lower paying jobs shall be by seniority only. Section 8. When overtime is requested, the Employee shall be given three (3) hours' notice except in case of emergency or where it was impossible to inform the Employee within the time limit. ARTICLE XIV HOLIDAYS Section 1. The following shall be recognized holidays with pay. -------------------------------------------------------------------------------- HOLIDAY 1999 2000 2001 2002 New Year's Day --- Dec.31 Jan. 1 Jan. 1 Washington's Birthday --- Feb. 21 Feb. 19 Feb.18 Memorial Day --- May 29 May 28 May 27 Independence Day --- July 4 July 4 July 4 Labor Day Sept. 6 Sept. 4 Sept. 3 --- Columbus Day Oct. 11 Oct. 9 Oct. 8 --- Veterans' Day Nov. 11 Nov. 10 Nov. 12 --- Thanksgiving Day Nov. 25 Nov. 23 Nov. 22 --- Day After Thanksgiving Nov. 26 Nov. 24 Nov. 23 --- Day Before (or after) Christmas Dec. 27 Dec. 26 Dec. 24 --- Christmas Day Dec. 24 Dec. 25 Dec. 25 --- Floating Holiday --- --- ---   -------------------------------------------------------------------------------- All holidays shall be observed on the nationally recognized day of celebration (Federal Statute). Agreed upon holidays under the terms of this Contract when occurring on a Saturday shall be observed on the Friday immediately preceding; when occurring on a Sunday shall be observed on the Monday immediately following. Employees must work their last scheduled work day before and their first scheduled work day after any paid holiday to be eligible to receive pay for that holiday unless just cause is shown proving his/her absence. If an Employee is absent for one (1) week or more for any cause, he/she will not receive pay for the holiday. The floating holiday is to be taken at a time selected by the individual employee. When scheduling a floating holiday, 24 hours notice is required, and, where multiple requests for the same day will adversely affect production, seniority rules will apply. ARTICLE XV VACATION Section 1. Subject to the following conditions, every Employee eligible therefore under the following schedule shall, each year, receive paid vacation in accordance with such schedule, provided the Employee's service is continuous on July 1. The vacation "year" is July 1 through June 30. ADDENDUM: Section 1(a) & 1(b) effective 8/30/99: (a) New Hires will begin accruing .769 vacation hours per week as of their date of hire for a total of a 40 vacation hours by their first employment anniversary.     (b) Upon their first employment anniversary, Employees will start accruing 1.538 hrs vacation per week for a total of 80 vacation hours by their second employment anniversary. Thereafter one's eligibility for additional vacation days will be based upon their seniority as of July 1st as outlined below in   Section 1 (c) and Table II.     (c) Employees who will have accrued seniority of six (6) years on July 1 will receive vacation in accordance with the following Table. Employees with a greater length of service or seniority will be given preference whenever possible. Employees hired prior to August 27, 1993 will achieve a maximum accrued vacation of 25 days per Table I.     (d) Vacation may be taken in 1/2 day increments with 24 hour notice except for extreme circumstances.     (e) Employees may carry a vacation balance equal to twice their current annual allotment. Accrued vacation time in excess of this maximum must be used prior to the next vacation period or it will be forfeited. TABLE I Seniority (Years) Number of as of July 1       Vacation Days 6 11 7 12 8 13 9 14 10 15 16 16 17 17 18 18 19 19 20 20 26 21 27 22 28 23 29 24 30 25 (f) Employees hired after August 27, 1993 will achieve a maximum accrued vacation of 20 days per Table II: TABLE II Seniority (Years) Number of as of July 1       Vacation days 6 11 7 12 8 13 9 14 10 15 16 16 17 17 18 18 19 19 20 20 (g) Should the need for a plant shutdown exist (one (1) or two (2) weeks) for reasons other than reduced business conditions during the month of July or August, the Company will notify the Union ninety (90) days in advance of such a need. Employees will take additional earned vacation time consecutively unless otherwise mutually agreed to by the employee and the Company. If an Employee is off from work for more than thirty (30) days on an excused absence for any reason other than industrial injury or regular S & A coverage, he/she shall cease to accrue vacation time until he/she returns to work and when he/she does, the vacation he/she would otherwise have been entitled to for that year shall be reduced in proportion to the number of days of excused absence in excess of thirty days. Employees who have less than two (2) weeks vacation eligibility may, at the convenience of the Company, be requested to work for the balance of the shutdown when work is available. When an Employee is asked to work his/her vacation weeks, it shall then be the Employee's and the Company's mutual decision as to when he/she will take his/her vacation. In the absence of a mutual agreement, the Employee shall not be required to work. VACATION ELIGIBILITY IN EXCESS OF 10 DAYS MAY BE TAKEN ONE DAY AT A TIME. (CAN BE USED IN LIEU OF SICK DAYS IF EMPLOYEE DESIRES). In such cases where the number of employees selecting a given day(s) as a vacation day(s) would seriously affect the continuity of production, the Company will follow seniority with respect to those that will be allowed to take that day(s) as Vacation. If an Employee dies without receiving his/her vacation or compensation in lieu thereof, the amount shall immediately be paid to his/her beneficiary or estate upon proper proof. (h) The eligible accrued, unused vacation balance will be paid out to any employee who has been laid off, discharged or resigned. ARTICLE XVI HOSPITALIZATION, MEDICAL AND DENTAL Section 1. The Company shall provide a health care program covering hospital and surgical expenses for all employees and their qualifying dependents. If an employee elects not to utilize the Company health care program, he shall not pay any monthly premiums for the same. Employees electing health insurance will pay 10% of the Chart Basic Plan Premium. Employees who enroll in the more generous health plans (ie. Chart Plus or the HMO) will pay the 10% as stated above plus 100% of the cost above the Chart Basic Plan. The Company will make available to Employees a Dental Insurance Program. If an Employee elects not to utilize the Company Dental Plan, he shall not pay any monthly premiums for the same. Employees who elect Dental coverage will pay monthly; $9.30 for Single, $18.60 for Two person, and $27.90 for Family coverage plus 100% of any Dental premium increases. The employee may decline or "opt-out" of any of Chart's medical plans (HMO included) if the employee has coverage through another group medical plan. This does not apply to the dental plan. If the employee chooses to opt-out of medical coverage, he/she will receive a payment of $1,000. The opt out bonus will be paid weekly through the Company payroll system. The Company and the Union agree to discuss any type of National Health Care legislation that is enacted during the term of this contract with the goal of providing similar levels of benefits (coverage) to employees at a lower cost to both the Company and its employees. Employees who retire from the Company at age 62 years or over who accumulated a term of employment of twenty (20) years at the time of retirement shall be covered by a $4,000.00 Life Insurance Benefit. An Employee shall be deemed as retired if he/she is eligible and is participating in the Boilermakers' Pension Plan. At the time of retirement, an employee may choose to continue as a member of the Company's group Hospital/Medical Plan in accordance with the following conditions: He/she is at least 62 years old but less than 65. Such membership terminates at the end of the month in which the former employee reaches 65 and is, therefore, eligible for Medicare. A payment equivalent to 100% of the Company's established premium must be paid to Chart Storage Systems, by the first of each month. Failure to make such monthly payment in a given month removes the former employee from the Group. The Company shall continue to cooperate in expediting settlement of accident and health insurance claims. LIFE INSURANCE. Effective August 28, 1993, increase to one times the employee's annual base wage. *. *(Base Wage = Rate/hr. X 2080 hrs.) MAJOR MEDICAL. - $1,000,000.00 SICKNESS & ACCIDENT. The Company shall provide Sickness and Accident coverage at the rate of 50% of the base wage with a minimum of $180/week and a maximum of $300/week for the life of this Agreement. The parties will continue to apply the use of the Section 125 Plan where beneficial to the employees. The negotiated Health and Accident coverage shall apply regardless of the State in which the Employee resides. 12   ARTICLE XVII PENSION The Company will contribute per hour per employee to the Boilermakers Pension Fund as follows: $.50/hr for year 2000 $.60/hr for year 2001 $.65/hr for year 2002 Contributions shall be made for hours worked inclusive of vacation and holidays and shall not exceed forty (40) hours per week. ARTICLE XVIII SAFETY AND SANITATION -- FIRST AID Section 1. The Company and the Union agree to work within, and to cooperate in compliance with the "Federal Occupational Safety and Health Act of 1970" as amended. Section 2. The Company agrees to provide and maintain such safety and sanitary needs as are necessary to protect and preserve the health and welfare of all employees. Section 3. The Company shall install bells, gongs or other warning devices on the overhead cranes which shall be actuated when the crane is in motion. Section 4. The Company shall retain in a tool crib the welding sleeves for those welders who wish to use them. Section 5. The Company shall reimburse each Employee up to one hundred fifty ($150.00) Dollars every two years for the purchase of Safety Shoes upon proof of purchase. To be eligible an Employee must have completed his/her forty-five (45) work day period. All weather gear shall be furnished by the Company to those Employees who are required to work outside the plant during inclement weather. Section 6. The Company agrees to provide Safety Glasses including prescription lenses to Employees. If lenses or frames are damaged at work they will be replaced at no cost to the Employee. Lenses will be replaced if prescription is changed by a physician. Lenses and frames will be furnished from a Company selected grouping. For selection of lenses and frame different than those provided by the Company the Employee will pay the difference. 13 Section 7. The Company will make inspections of the toilets and washrooms with an union official to make changes to conform with this section. All toilets and washrooms shall be kept clean and in a sanitary condition, properly heated and ventilated, and suitable quarters with heat shall be provided for employees to change clothes and eat their lunch. All stagings, walks, ladders, and safety appliances shall be constructed and installed in a safe and proper manner. In case of spray painting, the Employer shall provide proper protection against fumes caused by paint spray. Section 8. The Company will train a minimum of two (2) volunteers in First-Aid for each shift. The Company will pay for tuition, books required by the school, and mileage to and from classes. Section 9. Prompt ambulance service and first-aid to sick or injured employees shall be provided at Company expense on all shifts. Ambulance service will be complimented by a taxi service to insure prompt delivery of injured Employee to the hospital. In the event a taxi specified by the Company is not immediately available, the First-Aid Person or another designated Employee shall take the injured Employee to the hospital and return immediately. It is noted here that First-Aid Person is not a classification. Section 10. The Company shall post notices to the effect that it is the duty of Employees to immediately report to his/her Foreman, Supervisor and/or Coach, anything that in their opinion is dangerous to the safety of the Employees. Any one of those named who receive such reports shall immediately investigate, or cause to be investigated, the complaint of the Employee. Not reporting unsafe events, observances or conditions immediately to one's Supervisor or Coach is grounds for disciplinary action up to and including discharge. Any Employee who is injured at work shall report the injury to his/her Foreman, Supervisor, or Coach immediately and complete, at the earliest opportunity, a "Notice of Accidental Injury or Occupational Disease," provided by the Company and forward to the Personnel Department. Section 11. Any Employee working inside a vessel with only a manway as a means of entrance or exit shall have an Employee stationed at the manway whose sole purpose will be to insure the well-being of the Employee inside, the only exception being when the employee inside is in communication with the Employee outside via a communication medium. No Employee shall be compelled to work where injurious fumes or unsafe conditions prevail. Section 12. Any Employees who are injured during the hours of work and who are to receive treatment for said injury after the day of the accident shall receive all necessary medical treatment without loss of time. Section 13. In case any Employee is injured at work and is compelled by the seriousness of such injury to lose time, he/she shall be paid for the full eight (8) hours shift on which he/she was injured, plus any premium that might be due from his/her shift. Section 14. For electric arc flashes during the working hours, the Employees shall receive treatment at the Plant by the First-Aid person. In cases where the Employees feel no effect until their return home after working hours, it is mutually agreed that if their eyes are inflamed the following day and they are suffering, they shall be given immediate treatment by the First-Aid person at the Plant. The First-Aid person and the Employee's immediate Foreman, Supervisor and/or Coach, shall jointly decide whether the Employee should go home. In the case of dispute, the Employee shall be sent to the hospital and returned home at his/her own expense without loss of time for that day only. . ARTICLE XIX 14 SENIORITY - LAY-OFF Section 1. Seniority within job classification shall be the determining factor for lay-offs. Seniority, relative skill, and ability within job classifications will be the determining factors for recalls. Section 2. For the purpose of this Article the length of service of any Employee of the Company shall be computed from the date on which he/she first began to work in the shop, except that the length of service record of any Employee in the Company shall be broken, and no prior period of his/her employment shall be counted if: (a) Such Employee quits his/her employment. (b) The Employee is discharged. (c) The Employee is laid off for period exceeding eighteen (18) months. (d) The Employee is laid off and re-called for work and fails to report for work within five (5) work days after receipt of such notification by Registered Mail, Return Receipt Requested. Loss of time due to sickness or lay-off, not to exceed eighteen (18) months, shall not be construed as to interfere with the Employee's seniority. Employees suffering accident or injury while engaged in their employment in the shop and being unable to work because of said accident or injury shall maintain and accumulate their seniority up to maximum of twenty-four (24) months. An active employee whose S & A benefits have expired will continue to be eligible for health insurance for a period not exceeding twelve (12) months from the start of their S & A benefit. Those employees on Workers Compensation leave will continue to be covered by the group health insurance for up to the earlier of twenty-four (24) months or until such time as they reach their maximum medical improvement (MMI) provided that they continue to make timely payments of their portion of the health insurance premiums. MMI must be determined by their attending physician or physician performing a medical exam at the request of the Company or it's insurer. Should an employee not return to work after MMI has been determined, employment will cease. Company provided group and health insurance will be discontinued and the former employee may apply for benefits under COBRA law. Employees on lay-off shall accumulate seniority during any period of lay-off but shall not be eligible for fringe benefits accorded to Employees currently active on the Company's roll. Employees to be laid off shall be given a three (3) day notice except in cases of emergency. The day that the Notice of Lay-off is issued shall be considered the first day of notice of lay-off. Section 3. Employees accepting Managerial positions shall have their shop seniority frozen on the date they accept such position. ARTICLE XX ATTENDANCE Section 1. The Company shall grant a leave of absence, not to exceed thirty (30) days, to any Employee who has serious and compelling personal reasons to require such leave, provided the reasons are verified and are acceptable to the Company. The Company's approval shall not be unreasonably withheld. Section 2a. To maintain efficient production schedules, the parties of the Agreement will insist on regular and punctual attendance of all Union Employees. Section 2b. Excessive Absenteeism. Each two (2) days of absence in a single month of a rolling 12 month period shall be considered an offense and shall subject the offending Employee to the disciplinary action below, on a progressive basis. Illness absences on consecutive days shall be considered a single day's absence. Being absent from work due to Union business, hospitalization, jury duty, military duty, industrial accident, funerals covered in the Bereavement Clause, leave of absence (personal, medical or sickness and accident) or illness absences of two (2) or more consecutive days verifiable to the Personnel Department on the first day of return to work, shall not be considered as chargeable absences. In each month, lost time due to leaving the plant early shall be additive and for each twelve (12) hours of such lost time the Employee shall be charged with one (1) day's absence for that month. Excessive Tardiness: For each tardiness occurrence in excess of five (5) in one (1) month of rolling 12 month period, the offending Employee shall be subject to the below disciplinary action(s) on a progressive basis: Violations in absenteeism and tardiness as provided for hereinabove shall subject the offending Employee to discipline as follows: > Step 1: Verbal warning in the presence of the Shop Steward. > Step 2: Written warning with a copy to the Steward. > Step 3: One (1) week's suspension without pay. > Step 4: Discharge. The above-mentioned criteria on absences and shall not limit the Company's right to administer disciplinary action where an Employee is absent prolonged or frequent periods of time, yet not in violation of such criteria. Before the Company exercises this right, a joint meeting of the Shop Committee, the Employee involved and the Company shall be convened to lay out the Employee's record and ways and means to correct. No disciplinary action shall be taken at this meeting. A continued pattern by the Employee in the future of absenteeism shall subject him/her to disciplinary action. An absence during which an Employee is admitted as an "inpatient" to a hospital, or under a doctor's care for a condition which he/she was previously hospitalized, shall not be counted in the disciplinary process. The above-mentioned provisions on absenteeism and tardiness shall become applicable on the effective date of this agreement and all records shall be continuous thereafter. Section 2c. This section in its entirety will in no way prevent the Company from disciplining an Employee for other breaches of conduct. NOTE: Any time an Employee has an unscheduled absence he/she is required to call the Company and notify the Personnel Department (603-382-6551, Ext. 2212) within one (1) hour of the start of the shift. ARTICLE XXI DISCIPLINARY ACTION Section 1. Disciplinary action, suspensions and discharges will be taken only for just cause. All suspensions and discharges shall be reviewed with the Shop Committee as to just cause, before being awarded. Employee shall be notified within one scheduled work week of the occurrence of any violations. This in no way, however, abridges the Company's right to send an Employee home for the remainder of his/her shift pending a hearing with the Shop Committee the following work day. All Employees may be present at their hearing with the Shop Committee. Section 2. It is further agreed that any Employee found guilty, after a fair hearing conducted by the Employer and the Shop Committee, of instigating, fomenting or actively supporting or giving leadership to any action which will create dissension or impair the morale of other Employees, thus curtailing production, or which violate, disturb or attempt to disturb the relations or terms of this Agreement, shall be dismissed from the service of the Employer. ARTICLE XXII GRIEVANCE PROCEDURE Section 1. A Grievance is any difference of opinion or dispute between the Employer and an Employee or Union Representative regarding the interpretation or operation of any provision of this Agreement and shall be dealt with as follows: Section 1. The Steward, with the Employee(s), shall present the grievance in writing on forms supplied by the Union to the immediate Foreman/Department Head in the Department of the grieving Employee(s) within three (3) work days of its occurrence of/or first knowledge; otherwise, it shall be deemed waived. Section 2. If the grievance is not settled in Step 1 within three (3) work days, then it shall be submitted to the General Foreman. The General Foreman and Chief Steward shall meet to attempt to resolve the grievance. The aggrieved may be present if he/she so desires. If not satisfactorily resolved within three (3) work days, it shall be referred to Step 3. Section 3. If not settled within three (3) work days, the grievance shall be referred to the bargaining agent of the Company and the International Representative of the Union for their consideration in conference with the Shop Committee and Chief Steward. This conference shall be held as expeditiously as possible but in no event later than ten (10) work days. NOTE: The Grievance procedure is a four step procedure. 1. Supervisor or Coach 2. Designee of President 3. Bargaining Agent of the Company and International Representative 4. Arbitration All grievance shall be deemed settled unless, within ten (10) work days of the conference between the above parties, either party requests in writing that the dispute be referred to arbitration. ARTICLE XXIII ARBITRATION Section 1. Grievance involving the interpretation or application of the provisions of this Agreement, if not resolved by the parties through the foregoing steps, may be submitted to Arbitration for final and binding determination. The Arbitrator shall have no power to add to, subtract from, change or modify any of the provisions of this Agreement, but his authority shall be limited solely to the interpretation or application of the provisions of this Agreement. The decision of the Arbitrator shall be final and binding on all parties. Section 2. After proper notice of desire to Arbitrate, either party may request the American Arbitration Association to submit a list of names from which an Arbitrator shall be selected. If the parties fail to select an Arbitrator within ten (10) days after receipt of list, either party may request the American Arbitration Association to appoint an Arbitrator. The Company and the Union shall share equally the fee and expenses of the Arbitrator. Section 3. In the event a discharged or suspended Employee is reinstated through an arbitration award, the reinstated Employee shall receive back pay as determined by the Arbitrator. In no case, however, will back pay be awarded for the period of time where the Union requests a postponement in the arbitration hearing date. Back pay shall be paid within one (1) work week of return to work or within one (1) work week of receipt of the Arbitrator's ruling as appropriate. ARTICLE XXIV UNION REPRESENTATIVES Section 1. It is agreed that Stewards will be Employees of the Employer and that the Union will notify the Employer in writing of the Officers and Stewards authorized to act on behalf of the Union. Section 2. The Business Manager and two (2) members of the Negotiating Committee shall make up the Shop Committee. Section 3. The loss of time by authorized Union Officials during the regular work day in Contract negotiations thirty (30) days prior to the expiration of the contract and time spent on the three (3) steps of the Grievance Procedure shall be paid for by the Employer at the day rate of their job. The Business Manager and Chief Steward shall work on the first shift only. Section 4. The Company shall allow the Business Manager, President, Chief Steward and Stewards to meet once a week to evaluate grievances and related grievance matters. The meeting shall be held each Thursday starting at 12:30 p.m. and ending when the related grievance matters are resolved or 2:00 p.m. whichever is earlier. When an Employee attending the meeting is holding up production by his/her absence from work, he/she may be called out of the meeting by the Plant Manager. For the time lost in the above meetings the Company shall compensate all Employees involved at their regular rate of pay. Section 5. Any member of the Union selected as an Officer or Delegate shall, upon request, be granted a leave of absence without pay but without loss of cumulative seniority while on Union business. Section 6. Bulletin boards will be provided by the Company for use by the Union. All notices to be posted thereon shall be limited to official Union business and shall be cleared through the Business Manager and posted by him. This provision in no way limits the Company from removing any notice it deems inappropriate after notifying the Business Manager of its intent. Section 7. It is further understood and agreed that Local Union 752 shall designate the local representatives who is duly authorized and will be consulted in all matters pertaining to the application of this Agreement. It being specifically understood that the International Union will only be liable for the acts of said agent when such acts have been approved in writing by the International President's office. Section 8. Under no circumstances shall the Shop Committee or any employee make arrangements with Foremen or Management that will change or conflict in any way with any Section or terms of this Agreement. Section 9. Nothing contained herein shall be construed as limiting or abridging the right of the International Union to assign an International Representative to work with or assist any local Union Agent or Employee in the negotiation or grievance procedure or application of terms and conditions of this Agreement. Section 10. The International Officers and Business Representatives of the Union represented shall have access to the Employees of the Shop by applying for permission through the office, provided they do not interfere or cause workmen to neglect their work. ARTICLE XXV SUB-CONTRACTING Section 1. The Company shall not sub-contract work out normally performed by the bargaining unit when men and machines are available to do the work. ARTICLE XXVI MAINTENANCE OF WORK OPERATIONS Section 1. During the life of this Agreement neither Local 752 nor the International Union will authorize or ratify a strike, work slow-down, or work stoppage except because of violation of this Agreement by the Employer, and then only after strict compliance with Article XI of the Subordinate Lodge Constitution. Section 2. Any Employee entering into an unauthorized and unratified work stoppage will be discharged and not subject to the Grievance Procedure provided for herein. Section 3. The Employer agrees that there will be no lockout for any cause during the life of this Agreement except for violation of this Agreement by Local 752 or the International Union. Discharge of any Employee for infraction of Company rules shall not be considered as a lockout for such Employee. Section 4. It is further agreed that the Employer will not claim damage against Local Union 752 of the International Union because of any strike which was not ratified in accordance with the provisions of Section 1 of this Article. ARTICLE XXVII INFORMATION TO THE UNION Section 1. A card bearing the name, number, classification and rate of all new Employees shall be given the Chief Steward within one (1) week of date of hire. Section 2. Death notices received by the Company shall be forwarded immediately to the Chief Steward or Business Manager. If the deceased is a member of the Employee's immediate family, a Union Representative shall attend the funeral and receive straight-time pay. Section 3. During the term of this Agreement the Employer shall immediately advise the Union of all changes of status of Employees in the bargaining unit including, but not limited to, promotions, demotions, re-classifications, transfer, leave of absence and retirement. Section 4. On request of the Union, the Employer will, as soon as possible, supply all data relating to wage rates, pension data and group insurance data and other data essential to policing this Agreement once in each year of the Contract. Section 5. Three (3) months prior to the termination of the Agreement or the reopening provision, the Employer will provide the Union with the following data: 1. Name, individual wage rate, date of employment, seniority standing for each employee in the bargaining unit, including a seniority list for purposes of re-call of laid off employees. 2. Job classification, including the number of Employees in each classification. 3. The average straight-time hourly earnings of the bargaining unit for the preceding year, including shift premiums or other pay premiums except overtime premiums. 4. The average hourly cost for each fringe benefit item and other Employer-paid benefits; i.e., unemployment compensation, etc.   ARTICLE XXVIII 401(k) SAVINGS AND INVESTMENT PROGRAM A 401(k) Savings and Ivestment Program will be established effective January 1, 1994. A match to the 401(k) Savings and Investment Program will be made effective September 1, 1994. The match will be made on a maximum of 6% of the base wage saved in the 401(k) Plan during a given year. The match will be 25% of the % of base payments made by hourly employees to the hourly 401(k) Plan. The match will be in the form of Chart Industries stock. The Company must have a minimum EBIT of $500,000 before the match will occur (EBIT=Earnings Before Interest and Taxes). ARTICLE XXIX PROFIT SHARING Profit Sharing will be implemented for the hourly personnel on the following basis: 1. Minimum Company EBIT - The activation level of Chart SSD profit sharing is a minimum EBIT of $500,000 for the full fiscal (calendar) year. Once minimum EBIT is achieved, profit sharing will be paid on profit dollars, including the first $500,000. 2. Ebit Pool Multipliers - Once the EBIT profit level is achieved, the EBIT will be used as follows to develop the profit sharing pool:   EBIT % Profit Sharing   After EBIT is met [_] 0-2,500,000 8%   >2,500,000 10% 3. Distribution of EBIT Hourly Profit Sharing Pool:   a. The profit sharing will be made as a % of individual annual base wages except for exclusions (1) noted below.         The base wage distribution % is determined as follows:         Base Wage Profit Sharing % =           EBIT Pool $                                                          Total Chart SSD Annual   21           Base Wage Payroll(1)                                      (1)   Excluded from base wage are overtime, service trip premium, sick pay. Also, officers salaries will not be included as those individuals will not share in this pool.                   EBIT pool shall include all Chart SSD employees except excluded above.                 b.   Profit sharing will be distributed annually within 45 days of the end of the fiscal year.                   For example, 1999 profit sharing would be paid on or before February 15, 2000.                   At management discretion, partial payment could be made earlier in the year.             4.   Eligibility for Profit Sharing                 Employees are eligible to receive profit sharing if:                 a)   they are still employed on 12/31         or       b)   they have retired from employment during the year. ARTICLE XXX SEVERANCE PAY Should the Company cease operations completely in Plaistow, New Hampshire, or move operations to a location more than fifty (50) miles from the present location, severance pay shall be paid at the following rate:   1 week's wages for a full five (5) years' seniority         2 week's wages for a full ten (10) years' seniority     3 week's wages for a full fifteen (15) years' seniority   22    4 week's wage for a full twenty (20) years or more to employees currently employed at the time such action is taken. In the case of a move, this allowance shall apply only to those employees who find it inconvenient to continue employment because of the move. ARTICLE XXXI CONTRACT LIMITATIONS Section 1.  The Employer and Union expressly agree that no prior understandings or agreements and no subsequent agreements or understanding shall modify the provisions of this Agreement unless reduced in writing, signed by the parties hereto, and made an express amendment to this Agreement. Section 2.  The officials executing this Agreement in behalf of the Union hereby warrant and guarantee that they have the authority to act for, bind, and collectively bargain in behalf of the organization which they represent, and members of such organizations, upon approval of the International president. Section 3.  Should any part hereof or any provisions herein contained be rendered or declared invalid by reason of: 1.    Any existing or subsequently enacted legislation, or 23 2.    Any decree of a court of competent jurisdiction, or 3.    Any ruling of any governmental agency having jurisdiction. such invalidation of such part or portion of this Agreement shall not invalidate the remaining portions hereof, and they shall remain in full force and effect. Section 4.  Contract proposals will be exchanged between the Company and the Union at a meeting no later than thirty (30) days prior to the end of the Contract. The terms and provisions of this agreement shall become effective as of the 30th day of August, 1999, and continue in effect through August 30, 2002, and from year to year thereafter, unless sixty (60) days' written notice is given by either party prior to the expiration of any such year that changes, amendments or revisions are desired. 24 NOTE:  The expiration for this Agreement and future agreements is the last Friday in August. AGREED TO THIS 26th DAY OF August, 1999. CHART STORAGE SYSTEMS DIVISION - PLAISTOW BOILERMAKER'S INTERNATIONAL LOCAL LODGE NO. 752 25 APPENDIX A TRAINING PROGRAM All new employees will be hired as general helpers, unless skill requirements and actual qualifications dictate otherwise. Within two (2) weeks after the probationary period, the foreman and employee will discuss the employee's job classification preference. (Example: machinist, welder, welder/fitter, radiographic technician, test technician, etc.) If a need exists, the employee were to indicate a preference for welding, such employee would be assigned as a general helper/welder with work assignments in this job classification whenever possible. All new employees in the apprentice training program will be reviewed every three (3) months as to progress of their training. Progress will be evaluated on the basis of specific job skills developed since the last review. The foreman will conduct the review as to progress and deficiencies in development of job skills using input from other trainers. Such employees will be paid increases per review if progress is satisfactory. An employee can advance in job classification skill level by on-the-job training and job-related classroom instruction (example: blueprint reading, math, etc.) There is no prescribed or minimum time for an employee to advance to a job classification skill level. If the employee does not obtain the skills to perform the job classification requirements within a two (2) year period after probation, such employee will be re-classified as a general helper. When an employee completes the training for a job classification, such employee will be paid the rate for that classification provided a need exists for work in that classification. 26 Specific criteria for evaluation of progress within a specific job classification will be developed. Employees will be advised of the basis for review and progression within a job classification at the start of the training cycle. The Company will lay off in accordance with the present agreement dated August 26, 1999, on the basis of job classification. It is the intent of the Company to retain the most senior employee in the job classification in preference to retaining a shorter service employee in the general helper classification. 27 SCHEDULE "A" NOTES: Combination Welder must weld three (3) or more metals by three (3) or more processes. Leadman receive Fifty cents ($0.50) per hour above the highest Contract rate for the classification. Team Leader: Employees qualified in the craft of "Team" leadership may receive up to Fifty cents ($0.50) above their regular rate. Group Leaders receive Thirty cents ($0.30) per hour above the highest rate for the classification. Carbon Arcing, when performed in a confined space, shall carry a Twenty-five cents ($0.25) per hour premium while Employee is so engaged. When a Pipefitter/Welder receives a welder certification stamp and has passed the proper tests, he/she will receive the Welder/Fitter rate. New Hampshire Radiation Safety Officer: Employees qualified and practicing the craft of RSO will receive Fifty cents ($0.50) above their regular rate. ASME Level III Radiographer: Employees qualified and practicing the craft of Level III Radiography will be paid Fifty cents ($0.50) above their regular rate. PREMIUM MACHINES: Vertical Boring Mill - Twenty-Five Cents ($0.50) per hour. These premiums are to be added after night differential or overtime has been figured. 28 SCHEDULE "B" UNION WAGES AUGUST 30, 1999 MIN.               MAX. AUGUST 31, 2000 MIN.               MAX. AUGUST 30, 2001 MIN.                MAX. ALL AROUND FILL-IN MACHINIST 13.47 15.75 13.88 16.22 14.29 16.71 MACHINE OPERATOR MS 12.15 14.12 12.52 14.54 12.89 14.98 ALL AROUND MACHINIST 12.77 15.19 13.16 15.65 13.55 16.12 FITTER/MECHANIC 12.77 15.19 13.16 15.65 13.55 16.12 COMBINATION WELDER 12.77 15.19 13.16 15.65 13.55 16.12 WELDER 12.40 14.86 12.77 15.31 13.16 15.77 GENERAL HELPER   7.56 13.51   7.79 13.92   8.02 14.34 MACHINE OPERATOR - OTHER 12.77 15.19 13.16 15.65 13.55 16.12 MACHINE OPERATIOR - BR&S 12.40 14.86 12.77 15.31 13.16 15.77 PAINTER 12.40 14.86 12.77 15.31 13.16 15.77 PIPEFITTER/WELDER 12.77 15.19 13.16 15.65 13.55 16.12 SANDBLASTER 12.40 14.86 12.77 15.31 13.16 15.77 WELDER/FITTER 13.03 15.44 13.42 15.90 13.82 16.38 CHIEF STOREKEEPER 12.34 14.86 12.71 15.31 13.09 15.77 STOREKEEPER 12.15 14.12 12.52 14.54 12.89 14.98 MAINTENANCE MECHANIC 12.77 15.19 13.16 15.65 13.55 16.12 MAINTENANCE ELECTRICIAN 12.77 15.19 13.16 15.65 13.55 16.12 29 MATERIAL HANDLER 12.34 14.12 12.71 15.54 13.09 14.98 INSPECTOR 12.34 15.19 12.71 15.65 13.09 16.12 RADIOGRAPHIC TECHNICIAN 12.34 15.19 12.71 15.65 13.09 16.12 TEST TECHNIAN 12.34 15.19 12.71 15.65 13.09 16.12 TRUCK DRIVER 12.34 14.12 12.71 14.54 13.09 14.98 30

Exhibit 10.4 ASSET PURCHASE AGREEMENT   BETWEEN   GENENDER INTERNATIONAL, INC.   AND   FOSSIL, INC.   August 27, 2001   ASSET PURCHASE AGREEMENT   THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of August __, 2001 is made by and between Genender International, Inc., an Illinois corporation (“Seller”), and Fossil, Inc., a Delaware corporation (“Purchaser”).   W I T N E S S E T H:   WHEREAS, Seller is in the business of distributing “ZODIAC” brand watches in the United States and throughout the world (the “Business”); and   WHEREAS, Seller desires to sell, and Purchaser desires to purchase, certain of Seller’s intellectual property and inventory relating to the Business, on the terms and subject to the conditions and limitations set forth herein.   WHEREAS, Purchaser desires to retain Montres Consulting, L.L.C. to perform certain Services for Purchaser related to the Business as set forth herein.   NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants contained in this Agreement, and on the terms and subject to the conditions herein set forth, the parties hereto agree as follows:   DEFINITIONS                   “Affiliate” shall have the meaning given to it in the United States Securities and Exchange Act of 1934, as amended.                   “Articles” shall mean products bearing the Mark.                   “Assets” shall mean, collectively, the Intellectual Property, the Inventory and the Memorabilia.                   “Closing” shall mean the consummation of the transactions contemplated by this Agreement.                   “Closing Date” shall mean the date of Closing, which shall be no later than ten (10) business days from the date this Agreement is signed or such other date as mutually agreeable to the Parties;                   “Consulting Agreement” shall mean the Consulting Agreement between Fossil Partners, L.P.and Montres Consulting, L.L.C., an Illinois limited liability company in the form attached hereto as Exhibit A.                   “Encumbrance” shall mean any lien, pledge, security interest, claim, injunction, easement, limitation, right of first refusal, purchase option, restriction or encumbrance of any kind or nature whatsoever.                   “Escrow Account” shall mean the escrow account established pursuant to the provisions of paragraph 1.4 and the Escrow Agreement.                   “Escrow Agent” shall mean The Chicago Trust Company, 171 North Clark Street, Chicago, Illinois.                   “Escrow Agreement” shall mean the agreement between Seller, Purchaser and the Escrow Agent related to the Escrow Account in the form attached hereto as Exhibit B.                   “Initial Escrow Amount” shall mean the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00).                   “Intellectual Property” shall mean, (i) all trademarks, tradenames, service marks, and any applications, filings (whether prepared, submitted, withdrawn, accepted or rejected) and renewals for any of the foregoing, as well as all common law rights to the foregoing associated with the Mark including any derivations thereof and registered designs, applications and rights to apply for any of those rights, trade, business, domain and company names incorporating the Mark, unregistered trade marks and service marks, copyrights, rights in designs and inventions related to the Mark; and (ii) all goodwill associated therewith.                   “Intellectual Property Rights” shall mean Seller’s entire right, title and interest in the Intellectual Property, including, without limitation, Seller’s legal and beneficial ownership of the Intellectual Property.                   “International Registrations” shall mean the International Trademark Registrations No. R262 818, No. R284,064, No. 644,363, No. R394 019, No. R256 389, No. R256 831, No. 466 002, No. 271 305 and No. 375 410.                   “Inventory” shall mean all watch inventory of Seller bearing the Mark (including associated packaging and displays).                   “KNOWLEDGE” SHALL MEAN, WITH RESPECT TO A PARTY, THE ACTUAL STATE OF KNOWLEDGE OR AWARENESS OF SUCH PARTY UPON REASONABLE INQUIRY.                   “Mark” shall mean the trademarks and names “ZODIAC”, “ZODIAC ASTROGRAPHIC”, “ZODIAC CORSAIR”, “ZODIAC OLYMPOS”, “KING LINE”, “ARISTE CALAME” and “SEA WOLF” as listed on Schedule 1.                   “Memorabilia” shall include all memorabilia, catalogs, ads, watch samples bearing the Mark excluding a collection of five (5) gold and diamond watches bearing the Mark referred to as collection number 4.                   “Nouvelle Marks” shall mean any and all Marks held by Nouvelle Montres Zodiac S.A. on behalf of Seller.                   “Person” shall mean any individual, firm, company, corporation or other body corporate, government, state or agency of a state or any joint venture, association or partnership.                   “Recordal Action Notice” shall mean written notice from Purchaser to Seller delivered pursuant to the provisions of paragraph 2.2.6 hereof.                   “Services” shall mean the services provided by Montres Consulting, L.L.C. pursuant to the Consulting Agreement.   ARTICLE 1 Purchase and Sale   1.1          Sale and Purchase of Assets.  Subject to and upon the terms and conditions contained herein, at the Closing, Seller shall sell, transfer, assign, convey and deliver to Purchaser, and Purchaser shall purchase, accept and acquire from Seller, the Intellectual Property, the Memorabilia and Inventory free and clear of any Encumbrance as they exist as of the Closing Date.   1.2          Closing.  Unless this Agreement shall have been terminated and the transactions contemplated herein shall have been abandoned pursuant to Article 10, and subject to the satisfaction or waiver of the conditions set forth in Articles 7and8, the Closing shall take place on the Closing Date, unless another such date is agreed upon in writing by the parties hereto. The Closing shall take place on the Closing Date at the offices of Fossil, Inc. at 2280 N. Greenville Ave., Richardson, Texas or at such other place as shall be mutually agreed to by the parties.   1.3          Purchase Price.  Subject to the provisions of paragraphs 10.1, 10.2, and 10.3, the total purchase price for the Assets (the “Purchase Price”) shall be as follows:   (a)           Intellectual Property and Memorabilia  - $4,000,000;   (b)           Inventory - Purchaser shall acquire the Inventory as of the Closing Date at Seller’s cost as shown on Schedule 2.   The Purchase Price, less the Initial Escrow Amount, shall be paid to Seller at the Closing by cashier’s check or wire transfer in accordance with written instructions to be issued from Seller to Purchaser at least three (3) business days prior to Closing.                   1.4          Escrow Account.   1.4.1        At or prior to Closing, the parties shall execute the Escrow Agreement and the Initial Escrow Amount shall be deposited into the Escrow Account which account shall be utilized for the purpose of:  (i) funding all fees and expenses associated with the recordation of the assignment of the Marks to Seller as set forth in Paragraph 2.2 hereof (ii) funding all fees and expenses which may be associated with any new applications or opposition or cancellation proceedings that may be required as hereinafter provided in paragraph 2.2.7 (the “New Filings”); (iii) funding any penalties as hereinafter provided in paragraph 2.2.4; (iv) funding any Inventory shortfall as hereinafter provided in paragraph 6.1; (v) funding of all fees and expenses associated with the French Litigation and the French Dispute and (vi) funding, to the extent available at the time of Purchaser’s demand therefor in accordance with the requirements of paragraph 9.2 amounts as a set-off to payments otherwise due and payable towards an established Indemnified Obligation as may hereinafter arise pursuant to paragraph 9.4. In the event that the Initial Escrow Amount is insufficient to cover those fees and expenses associated with each Recordation (as hereinafter defined), New Filings, the French Litigation,  the French Dispute or Escrow Agent Fees, then Seller shall from time to time deposit additional funds into the Escrow Account in such amounts reasonably estimated by Seller, and agreed upon by Purchaser, as sufficient to cover such fees and expenses. At Closing, the Initial Escrow Amount shall be deducted from the Purchase Price and delivered to the Escrow Agent by Purchaser by cashier’s check or wire transfer for deposit in accordance with the provisions of this Agreement and the Escrow Agreement.                   1.4.2        The Escrow Funds are to be retained in the Escrow Account and shall only be released  by the Escrow Agent:   a.     To Seller, upon presentment of valid fee statements, including any penalties, from Seller’s intellectual property counsel or its associates and agents related to the Recordation (as hereinafter defined), the French Dispute or the French Litigation; b.     To Purchaser following the expiration of a Recordal Action Notice, upon presentment of valid fee statements from Purchaser’s intellectual property counsel or its associates and agents related to the Recordation (as hereinafter defined); c.     To Purchaser, upon presentment of valid fee statements from Purchaser’s intellectual property counsel or its associates and agents related to the New Filings, the French Dispute, or  the French Litigation; d.     To Purchaser, upon presentment of a certification of any Inventory shortfall in accordance with paragraph 6.1; e.     To Purchaser, upon demand for an established Indemnified Obligation pursuant to the provisions of paragraph 9.1; f.      To Seller or Purchaser, as applicable, in accordance with the provisions of the Escrow Agreement; or g.     To Seller in accordance with paragraph 2.2.9.                   1.4.3        If the Seller or the Purchaser are entitled to money from the Escrow Account in accordance with this Agreement, the Seller and the Purchaser shall within five (5) Business Days starting on the day after the date the entitlement arises jointly instruct the Escrow Agent in writing to release the money to the Seller or the Purchaser, as the case may be.                    1.4.4        Interest accruing from time to time on the balance of money standing to the credit of the Escrow Account shall be added to the money standing to the credit of the Escrow Account and shall form part of it for the purposes of this Agreement.                   1.4.5        The Seller shall be responsible for all fees, expenses and Escrow Agent's costs in respect of any work done pursuant to this Agreement or the Escrow Agreement (the “Escrow Agent Fees”).                   1.5          Assumption of Liabilities.   Purchaser shall not assume or agree to pay, perform or discharge any liabilities or obligations of Seller, of the Assets or the Business, whether accrued, absolute, contingent or otherwise, including without limitation, liabilities based on or arising out of or in connection with (a) any defects in products manufactured or sold by Seller, or (b) any implied or express warranties relating to such products.   1.6          Seller’s Instruments of Transfer; Further Assurances.  In order to consummate the transactions contemplated by this Agreement, Seller shall deliver to Purchaser, and shall cause its Affiliates to deliver to Purchaser, as applicable, the following documents at Closing:   (a)           a Bill of Sale covering the Assets in the form attached hereto as Exhibit C;   (b)           an Assignment of the Intellectual Property in the form attached hereto as Exhibit D and an assignment of the domain name “zodiacwatches.com” and any other domain name which includes the word “Zodiac” owned or controlled by Seller and its Affiliates in a form satisfactory to Purchaser;   (c)           written instruments evidencing all consents necessary for Seller or its Affiliates to consummate the transaction contemplated hereby, including consents relating to the assignment of the Intellectual Property;   (d)           a certificate duly executed by the President of Seller that certifies (i) the due adoption by the Board of Directors of Seller of corporate resolutions, and the due adoption by the shareholders of Seller of shareholder resolutions, each of which shall be attached to such certificate, and each of which shall be authorizing the transactions and the execution and delivery of this Agreement and the other agreements and documents contemplated hereby and the taking of all actions contemplated by this Agreement and such other agreement and documents; and (ii) that Seller’s representations and warranties set forth in Article 4 are true and correct as of the Closing Date.   (e)           all of Seller’s and/or its Affiliate’s business records to the extent such records constitute a part of the Assets;   (f)            possession of the Assets;   (g)           written consent from LaSalle Bank, N.A., together with copies of necessary UCC-3 termination statements and other releases for liens and Encumbrances affecting the Assets, executed by the lien holders thereof and otherwise in a form acceptable for filing;   (h)           a counter-signed original of the Escrow Agreement;   (i)            a counter-signed original of the Consulting Agreement; and   (j)            such other documents as Purchaser may reasonably request.                   At the Closing, and at all times thereafter as may be necessary, Seller shall execute and deliver to Purchaser, and shall cause its Affiliates to execute and deliver, such other instruments of transfer as shall be reasonably necessary or appropriate to vest in Purchaser good and indefeasible title to the Assets and to comply with the purposes and intent of this Agreement.   1.7          Purchaser’s Instruments of Transfer; Further Assurances.   In order to consummate the transactions contemplated by this Agreement, the following shall be delivered by Purchaser to Seller at the Closing:   (a)           except as otherwise provided in paragraph 1.3, the Purchase Price by wire transfer of immediately available funds; and   (b)           a certificate duly executed by an authorized officer of Purchaser that certifies the due adoption by the Board of Directors of Purchaser of corporate resolutions, which shall be attached to such certificate, authorizing the transactions and the execution and delivery of this Agreement and the other agreements and documents contemplated hereby and the taking of all actions contemplated by this Agreement and such other agreements and documents.                   (c)           a counter-signed original of the Consulting Agreement; and                   (d)           a counter-signed original of the Escrow Agreement.   At the Closing, and at all times thereafter as may be reasonably necessary, Purchaser shall execute and deliver to Seller such other instruments as shall be reasonably necessary or appropriate to comply with the purposes and intent of this Agreement.   ARTICLE 2 Additional Undertakings   2.1          Pre-Closing Undertakings:  The Parties agrees to take the following actions at, or prior to, Closing:                                   2.1.1            Seller shall pay, at its sole cost and expenses, any and all renewal and maintenance fees and taxes due in respect of jurisdictions in which the Marks are registered as may be necessary to maintain the Marks.   2.1.2            Seller shall discontinue sales of the Articles as of the date hereof .   2.1.3          Seller shall refrain, and shall direct and instruct its intellectual property counsel to refrain, from taking any action with respect to the Marks and the Intellectual Property Rights that would hinder Purchaser’s ability to effect the assignment of the Intellectual Property Rights of Seller acquired hereunder, including, but not limited to, filing any assignment documents with the trademark offices in any jurisdiction, without the prior consent of Purchaser and its counsel.                   2.2          Post-Closing Undertakings. The Parties agree to take the following actions following Closing:   2.2.1        Upon written instructions by Purchaser to Seller, Seller agrees to instruct Equity Management Systems, S.A. to assign the International Registrations to any entity requested by Purchaser and to instruct Nouvelle Montres Zodiac S.A. to assign the Nouvelle Marks to any entity requested by Purchaser.   2.2.2        Purchaser acknowledges that the only registrations for the Marks to be assigned by the Seller or its fiduciary agent or an Affiliate at the time of Closing to Purchaser or its designee are with respect to those identified in the specific countries listed on Schedule1.  The Seller acknowledges that the chain of record ownership reflecting the assignments to the Seller have not been recorded with the assignment office of the country in which the Mark is registered.  Seller undertakes to instruct its agents and representatives to ensure that the assignments from the current record owner of the Mark with respect to those registrations to Seller or its fiduciary agent or an Affiliate are recorded to enable Purchaser to record the assignment of those registrations from the Seller or its fiduciary agent or Affiliate to reflect its ownership of the Marks as a result of the transaction contemplated by this Agreement (with the recordation of each such assignment in each of such countries hereinafter referred to as a “Recordation”).  All costs, expenses, attorneys fees, agent fees and penalties associated with the Recordation of the assignments to the Seller shall be paid from the Escrow Account in accordance with paragraph 1.4.1 hereof and the Escrow Agreement.   2.2.3        Seller agrees to notify Purchaser within five (5) business days upon the completion of the assignment of such registrations of the Marks in each such country.                                   2.2.4        Seller agrees that in the event any country requires the payment of a penalty of any kind in connection with the assignment recordation, Seller shall pay such penalty out of the Escrow Account and will notify Purchaser promptly if any assignment is refused and  Seller hereby indemnifies and holds Purchaser harmless from all costs, expenses, fees and penalties associated with the recordation of any assignment to Seller.   2.2.5        Once the assignment of the registrations for any Mark to Seller or its agent or Affiliate has been successfully recorded in any country, Purchaser shall be responsible for the recordation of the assignment of such Mark to Purchaser and Purchaser shall be responsible for all fees, including any attorneys’ fees, costs and expenses associated therewith.                                   2.2.6        In the event that Seller fails to diligently pursue all steps reasonably necessary to effect the Recordation for any country on Schedule 1, the Purchaser may give Seller written notice of Purchaser’s intent to effect the recordal (a “Recordal Action Notice”) and Seller shall have ten (10) days from the date of such notice to use its best efforts to effect such recordal.  In the event that Seller fails to effect the recordal within such ten (10) day period, Seller irrevocably grants Purchaser the authority to undertake such recordal through its own agents and to draw on the Escrow Account as reimbursement for the costs and expenses associated with such recordal.                                   2.2.7        In the event that the assignment of any Mark in Schedule 1 cannot be recorded in any country within twelve (12) months following the date of the Closing, Seller shall give Purchaser written notice of same and Purchaser shall have the option, without prejudice to Purchaser’s other remedies hereunder, to refile for registration of the Mark in that country.  All fees and expenses associated with the New Filings, including but not limited to any fees and expenses for institution of any opposition or cancellation proceedings required to enable Purchaser to register the Mark, shall be drawn from the Escrow Account as set forth in paragraph 1.4.1 hereof and in the Escrow Agreement.   2.2.8        Seller agrees to promptly change the corporate name of Nouvelle Montres Zodiac S.A. and any other corporation or entity in its control to remove all references to the word “Zodiac”.                                   2.2.9        In connection with the French Dispute, Seller will promptly obtain Zodiac France S.A.’s voluntary cancellation or partial cancellation of all trademark registrations in International Class 14 for any mark in any country containing the word “Zodiac” for jewelry, watches, clocks, other horological instruments, watchcases, watch bands, and watch and timepiece making equipment.  In the event Seller is unable to obtain such voluntary cancellation or partial cancellation within forty five (45) days of the date of this Agreement, Seller shall immediately file a legal action in France to obtain such cancellation (the “French Litigation”).  Seller and Purchaser shall cooperate with each other in the French Litigation and Seller agrees that Purchaser shall have the right to participate in the prosecution of the French Litigation, including the right to participate in any settlement discussions.  No settlement of either the French Dispute or the French Litigation shall be reached without Purchaser’s express written consent.  All fees and expenses associated with the French Dispute and the French Litigation shall be paid from the Escrow Account. It is understood that $100,000 of the $250,000 Initial Escrow Amount is allocated for fees and expenses associated with the French Dispute and the French Litigation.  When the French Dispute and/or the French Litigation has been concluded by (i) a voluntary cancellation or partial cancellation of all trademark registrations in International Class 14 in connection with jewelry, watches, clocks, other horological instruments, watchcases, watch bands, and watch and timepiece making equipment; or (ii) a settlement that includes a prohibition on Zodiac France S.A. from using the mark “Zodiac” in connection with jewelry, watches, clocks, other horological instruments, watchcases, watch bands, and watch and timepiece making equipment which settlement has been entered into with Purchaser’s consent; or (iii) a final judgment or decree has been entered from a Court in France with competent jurisdiction from which no further appeals are available that includes a Court ordered prohibition placed upon Zodiac France, S.A. from using the mark “Zodiac” in connection with jewelry, watches, clocks, other horological instruments, watchcases, watch bands, and watch and timepiece making equipment, then any funds remaining of that $100,000 after payment of fees and expenses associated with the French Dispute and/or the French Litigation shall be released to the Seller.   ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER   Purchaser represents and warrants that the following are true and correct as of the date of this Agreement and will be true and correct through the Closing Date as if made on that date:   3.1          Incorporation and Good Standing.  Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to carry on the business in which it is engaged, to own the properties it owns and to execute and deliver this Agreement and to consummate the transactions contemplated hereby.   3.2          Authorization and Validity.  The execution, delivery and performance of this Agreement and the other agreements contemplated hereby by Purchaser, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by Purchaser.  This Agreement has been and each other agreement contemplated hereby will be prior to Closing duly executed and delivered by Purchaser and this Agreement constitutes and each agreement contemplated hereby will constitute legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms.   3.3          No Violation.  Neither the execution and performance of this Agreement or the other agreements contemplated hereby, nor the consummation of the transactions contemplated hereby or thereby, will (a) conflict with, or result in a breach of the terms, conditions and provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws of Purchaser or any agreement or other instrument under which Purchaser is bound, or (b) violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over Purchaser or the properties or assets of Purchaser.   3.4          Consents and Regulatory Compliance.  No authorization, consent, approval, permit or license of, or filing with, any governmental or public body or authority, any lender or lessor or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of Purchaser.   3.5          Finder’s Fee.  Purchaser has not incurred any obligation for any finder’s, broker’s or agent’s fee in connection with the transactions contemplated hereby in a manner that will result in liability on the part of Seller.   ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER   Seller represents and warrants that the following are true and correct as of the date of this Agreement and will be true and correct through the Closing Date as if made on that date:   4.1          Incorporation and Good Standing.  Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Illinois, with all requisite power and authority to carry on the business in which it is engaged, to own the properties it owns and to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  Seller is duly qualified and licensed to do business and is in good standing in all jurisdictions where the nature of its business makes such qualification necessary or where failure to so qualify does not have a material adverse effect on Seller’s business.   Montres Consulting, L.L.C. is a limited liability company duly established, validly existing and in good standing under the laws of the State of Illinois, with all requisite power and authority to carry on the business in which it is engaged, to own the properties it owns and to execute and deliver the Consulting Agreement and to consummate the transactions contemplated hereby.   Nouvelle Montres Zodiac, SA is a corporation duly incorporated, validly existing and in good standing under the laws of Switzerland, with all requisite power and authority to carry on the business in which it is engaged, to own the properties it owns and to consummate the transactions contemplated hereby.   4.2          Vote Required.  The approval of this Agreement, and the transactions contemplated hereby, by the holders of all outstanding shares of Seller’s common stock is the only vote of holders of any class or series of the capital stock of Seller required to approve this Agreement, the sale of the Assets and the other transactions contemplated hereby.   4.3          Authorization and Validity.  The execution, delivery and performance of this Agreement and the other agreements contemplated hereby by Seller, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by Seller.  This Agreement has been and each other agreement contemplated hereby will be prior to Closing duly executed and delivered by Seller and this Agreement constitutes and each other agreement contemplated hereby will constitute legal, valid and binding obligations of Seller, enforceable against each of them in accordance with their respective terms.   4.4          Inventory.  Except with respect to the blanket lien from Seller’s commercial lender, LaSalle Bank, N.A. that will be released at the time of Closing, Seller owns the Inventory and Memorabilia free and clear of all Encumbrances.  Upon consummation of the transactions contemplated hereby and receipt of the required consents, Purchaser shall receive good, valid and marketable title to the Inventory and Memorabilia.  The information on Schedule 2 hereto, is true, correct and complete and fairly reflects the on-hand inventory, overseas inventory commitments and open customer purchase orders as of the dates and for the periods indicated in all material respects.   4.5          Insurance.  The Inventory and Memorabilia is insured under valid and enforceable policies, issued by insurers of recognized responsibility in amounts and against such risks and losses as is customary in Seller’s industry.  True, complete and correct copies of all such policies as they relate thereto have been made available to Purchaser prior to the date hereof.  Seller will maintain such insurance until the Closing Date.   4.6          No Violation.  Neither the execution and performance of this Agreement or the agreements contemplated hereby nor the consummation of the transactions contemplated hereby or thereby will (a) materially conflict with, or result in a breach of the terms, conditions and provisions of, or constitute a default under, the Articles of Incorporation or Bylaws of Seller or any agreement or other instrument under which Seller is bound or to which any of the Assets are subject or result in the creation of imposition of any lien, charge or encumbrance upon any of the Assets, or (b) materially violate or conflict with any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over Seller or the properties or assets of Seller or the Business.   4.7          Consents. Except for the consent from LaSalle Bank N.A. and the release of the blanket lien covering the Assets, to be delivered at Closing, no authorization, consent, approval, permit or license of, or filing with, any governmental or public body or authority, any lender or lessor or any other person or entity is required to authorize, or is required in connection with, the execution, delivery and performance of this Agreement or the agreements contemplated hereby on the part of Seller other than the performance of undertakings related to filings in connection with the Recordations described above.   4.8          Compliance with Laws; Regulatory Compliance.  There are no existing violations by Seller of any applicable federal, state or local law or regulation that could materially adversely affect the Assets or the Business.  Seller has complied in all material respects with all applicable laws, regulations and licensing requirements, and has filed with the proper authorities, all necessary statements and reports relating to the Business.  Seller possesses all necessary licenses, franchises, permits and governmental authorizations to own the Assets and conduct the Business as now conducted.   4.9          Finder’s Fees.  Seller has not incurred any obligation for any finder’s, broker’s or agent’s fee in connection with the transactions contemplated hereby in a manner that will result in liability on the part of Purchaser.   4.10        Litigation.  Except with respect to certain proceedings and demands against Zodiac France, S.A. (the “French Dispute”), the status of such proceedings being described on Exhibit J, Seller has not had any legal action or administrative proceeding or investigation instituted or, to the best knowledge of Seller, threatened against or affecting, or that could affect, any of the Assets or the Business.  Seller is not subject to any continuing court or administrative order, writ, injunction or decree applicable to Seller or to the Assets or the Business.  Seller knows of no basis for any such action, proceeding or investigation.   4.11        Accuracy of Information Furnished.  All information furnished to Purchaser by Seller in this Agreement or in any exhibit, schedule or certificate related to this Agreement is true, correct and complete in all material respects.  Such information states all material facts required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements are made, true, correct and complete in all material respects.   4.12        Customers.  Seller has provided Purchaser with a complete and accurate list of Seller’s customers and suppliers relating to the Business, which is attached hereto as Schedule 3.   4.13        Pricing.  Seller has provided Purchaser with a complete and accurate list of Seller’s standard prices which is attached hereto as Schedule 4.   4.14        Intellectual Property Rights.                     (a)           Each of the Intellectual Property Rights is legally or beneficially owned by Seller, free and clear of any license or Encumbrance;                   (b)           Seller has not received notice that any Intellectual Property Rights:   (i)            are the subject of a claim or opposition from a person as to title, validity, enforceability, entitlement or otherwise except  the opposition proceedings to defeat a claim to the Mark “Zodiac” by Zodiac France S.A. as described in Exhibit J; or   (ii)           infringe the intellectual property rights of any third party.   (c)           All renewal and maintenance fees and taxes due in respect of jurisdictions in which the Marks are used or registered, and payable prior to Closing in respect of each of the Intellectual Property Rights have been paid in full.   (d)           To the best of Seller’s knowledge, the Seller has the right to use all Intellectual Property which is necessary for the effective operation of the Business as operated immediately prior to the date of this Agreement.   (e)           To the best of Seller’s knowledge, information and belief, there is not any infringement or unauthorized use of any of the Intellectual Property Rights.   (f)            The International Registrations are being held by Equity Management Systems, S.A. for the account of Seller and Seller has the valid and enforceable right to assign the International Registrations to Purchaser.  The Nouvelle Marks are being held by Nouvelle Montres Zodiac S.A. for the account of Seller and Seller has the valid and enforceable right to assign the Nouvelle Marks to Purchaser.                    (g)          Seller represents and warrants that the record owner of the Marks is that shown as “Applicant” on Schedule 1 attached hereto and further represents and warrants that the nine (9) international registrations listed on Schedule 1 cover the countries listed for each such registration on Schedule 1 and the information otherwise contained thereon is true and correct in all material respects. Seller further represents and warrants that Schedule 1 lists all Intellectual Property Rights owned by Seller, its Affiliates and Fiduciaries related to the “Zodiac” brand including all variations and derivations thereof.                    4.15       Documents Evidencing Ownership of Intellectual Property.  Seller represents and warrants that it is the owner of the Intellectual Property and has the right to enter into this Agreement and to assign its ownership in the Marks to Purchaser. Seller further represents and warrants that the following documents attached hereto are true and correct, validly executed and enforceable by Seller:   (a)           Sales Contract between Genender International, Inc. and Zodiac S.A.’s Bankrupt’s Estate dated January 30, 1998 attached hereto as Exhibit E;   (b)           Agreement between Montres Zodiac S.A., bankrupt and Zenith International S.A. on the one hand and Gad Willy Monnier on the other dated June 9, 1999 attached hereto as Exhibit F;   (c)           Declaration of Transfer transferring Swiss Registration No. 397,551 and International Registration No. 644.363 from Gad Willy Monnier to Genender International, Inc. dated June 14, 1999 attached hereto as Exhibit G;   (d)           Agreement from Zenith International S.A.  to execute any documents required relating to the transfer of the Zodiac trademarks dated January 27, 1998 attached hereto as Exhibit H; and   (e)           Agreement between Genender International, Inc. and Equity Management Systems S.A. relating to the International Registrations referenced in paragraph 2.2 herein dated July 4, 2001 attached hereto as Exhibit I.   (f)            Agreement between Genender International, Inc. and Nouvelle Montres Zodiac relating to the Nouvelle Marks referenced in paragraph 2.2 herein dated August10, 2001 attached hereto as Exhibit K.   ARTICLE 5 (intentionally omitted)   ARTICLE 6 SELLER’S COVENANTS   Seller agrees that on or prior to the Closing:   6.1          Delivery of Assets.  At the Closing, Seller shall deliver to Purchaser a Bill of Sale, or other appropriate documents, conveying title to the Assets, free and clear of all Encumbrances and the Assignment of the Intellectual Property and shall make the Inventory and Memorabilia available for delivery to the Purchaser F.O.B. Wheeling, Illinois.  In the event that there is any shortfall in the Inventory described on Schedule 2, Purchaser shall have the right to request the value of the shortfall from the Escrow Account.   6.2          Business Operations.  Seller shall operate the Business only in the ordinary course, will not introduce any new method of management or operation and will cause the consummation of the transactions contemplated by this Agreement in accordance with its terms and conditions.  Seller shall not take any action that might reasonably be expected to impair the Assets or the Business as currently being conducted by the Seller without the prior written consent of Purchaser or take or fail to take any action that would cause or permit the representations made in Article 4 hereof to be inaccurate at the time of Closing or preclude Seller from making such representations and warranties at the Closing.   6.3          Access.  Seller shall permit Purchaser and its authorized representatives full access to, and make available for inspection, all of the Assets and the Business and furnish Purchaser all relevant documents, records and information with respect to the affairs of Seller as Purchaser and its representatives may reasonably request, all for the sole purpose of permitting Purchaser to become familiar with the Assets and the Business.   6.4          Shareholder Approval.  Seller will, as soon as practicable following the execution of this Agreement, duly call, give notice of, convene and hold a meeting of shareholders for the purpose of approving this Agreement and the transactions contemplated hereby.   6.5          Material Change.  Prior to the Closing, Seller shall promptly inform Purchaser in writing of any material adverse change in the condition of the Assets or the Business or any event that renders the representations and warranties made in Article 4 to be inaccurate, to the extent such change or event is known to Seller or should reasonably be known to Seller in the ordinary course of its operation of the Assets or the Business.  Any such disclosure shall not be deemed a waiver by Purchaser of any representation or warranty of Seller contained in this Agreement.   6.6          Approvals of Third Parties.  As soon as practicable after the execution of this Agreement, but in any event prior to the Closing Date, Seller and its Affiliates, as applicable, will secure all necessary approvals, assignments, releases and consents of all third parties and governmental authorities required on the part of Seller or its Affiliates for the consummation of and contemplated by this Agreement.   6.7          Mortgages, Liens.  Except with Purchaser’s prior written consent, Seller and its Affiliates will not enter into or assume any mortgage, pledge, conditional sale or other title retention agreement, permit any Encumbrance or claim of any kind to attach to the Assets, whether now owned or hereafter acquired, except for transactions in the usual and ordinary course of business.   6.8          Changes in Inventory.  Seller will not alter the physical contents or character of any of the Inventory as listed on Schedule 2 so as to affect the nature of the Business or result in a change in the total dollar valuation thereof other than normal year-end adjustments in accordance with generally accepted accounting principles and other than as a result of transactions in the ordinary course of business.   6.9          No Disclosure or Negotiation with Others.  Seller will abide, and shall procure that its Affiliates abide, by the terms and provisions hereinafter set forth concerning confidentiality and shall not disclose any of the terms or conditions of this Agreement to any other person, other than to its employees, commercial lender, legal counsel and accountants, or as otherwise required by law or court order. Additionally, neither Seller or its Affiliates shall, directly or indirectly, through representatives or otherwise, hereafter solicit, entertain, or negotiate with respect to, or in any manner encourage, discuss or consider any offer or proposal to sell the Business, in whole or in part, to any person or entity other than Purchaser or its affiliates, whether directly or indirectly, through purchase, merger, consolidation or otherwise and neither Seller, its Affiliates, nor any representative of Seller or its Affiliates shall provide information relating to the Business to any other person or entity in connection with a possible transaction involving the Business.  The foregoing restrictions shall continue only until the Closing. Seller agrees to immediately notify Purchaser in the event of any known contact among Seller and its Affiliates or Seller’s or its Affiliate’s representative and any other person or entity regarding any such offer or proposal or any related inquiry.   ARTICLE 7 PURCHASER’S CONDITIONS PRECEDENT   Except as may be waived in writing by Purchaser, the obligations of Purchaser hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions:   7.1          Representations and Warranties.  The representations and warranties of Seller contained herein shall be true and correct as of the Closing, and Purchaser shall not have discovered any error, misstatement or omission therein.   7.2          Covenants.  Seller shall have performed and complied with all covenants and conditions required by this Agreement to be performed and complied with by it prior to the Closing.   7.3          Officer’s Certificate.  Seller shall have delivered to Purchaser a certificate duly executed by Seller’s President certifying as to the statements contained in Section 7.1 and Section 7.2 to this Agreement.   7.4          Proceedings.  No action, proceeding or order by any court or governmental body or agency or third party shall have been threatened in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated by this Agreement or which would materially affect the ability of the Purchaser to consummate the transactions contemplated by this Agreement.   7.5          Shareholder Approval and Other Approval. The execution and delivery of this Agreement by Seller, and the performance of its covenants and obligations hereunder, shall have been duly authorized by all necessary corporate and shareholder action, and Purchaser shall have received copies of all resolutions pertaining to that authorization, certified by the secretary of Seller.   7.6          No Material Adverse Change.  No material, adverse change in the Assets or the Business shall have occurred after the date hereof and prior to the Closing.                   7.7         Due Diligence.  Purchaser, acting through its own advisers, agents, consultants, personnel, counsel, accountants or other representatives designated by Purchaser, shall have been afforded full and complete opportunity to inspect and/or examine the Assets, the Business and the books and records, titles and leases to properties, loans and other agreements, any pending or threatened litigation, and other matters pertaining to the legal structure, regulatory compliance, assets and obligations of Seller.  The conclusion of any such inspection and/or examination shall be satisfactory, in the opinion of Purchaser and its advisors.   7.8          Instruments of Transfer.  Seller shall have delivered to Purchaser each of those documents enumerated in Section 1.6 hereto.   7.9          Third Party Consents.  All necessary agreements and consents of any parties to the consummation of the transactions contemplated by this Agreement, or otherwise pertaining to the matters covered by it, shall have been obtained by Seller and delivered to Purchaser   7.10        Satisfaction of Pre-Closing Conditions.  The Pre-Closing conditions in paragraph 2.1 shall have occurred.   7.11        Escrow Deposit.  The Initial Escrow Amount in the Escrow Account shall have been deposited in accordance with paragraph 1.4.   ARTICLE 8 SELLER’S CONDITIONS PRECEDENT   Except as may be waived in writing by Seller, the obligations of Seller hereunder are subject to the fulfillment at or prior to the Closing of each of the following conditions:   8.1          Representations and Warranties.  The representations and warranties of Purchaser contained herein shall be true and correct as of the Closing, subject to any changes contemplated by this Agreement, and Seller shall not have discovered any error, misstatement or omission therein.   8.2          Covenants.  Purchaser shall have performed and complied in all material respects with all covenants or conditions required by this Agreement to be performed and complied with by it prior to the Closing.   8.3          Corporate Approval. The execution and delivery of this Agreement by Purchaser, and the performance of its covenants and obligations hereunder, shall have been duly authorized by all necessary corporate and shareholder action, and Purchaser shall have received copies of all resolutions pertaining to that authorization, certified by the secretary of Purchaser.   8.4          Officer’s Certificate.  Purchaser shall have delivered to Seller a certificate duly executed by an officer of Purchaser certifying as to the statements contained in Section 8.1 and Section 8.2of this Agreement.   8.5          Proceedings.  No action, proceeding or order by any court or governmental body or agency or third party shall have been threatened in writing, asserted, instituted or entered to restrain or prohibit the carrying out of the transactions contemplated by this Agreement or which would materially affect the ability of Seller to consummate the transactions contemplated by this Agreement.   8.6          Instruments of Transfer.  Purchaser shall have delivered to Seller each of those items enumerated in Section 1.7 of this Agreement.   ARTICLE 9 INDEMNIFICATION   9.1          Seller’s Indemnity.  Subject to the terms and conditions of this Article 9, Seller agrees to indemnify, defend and hold Purchaser and its shareholders, officers, directors, agents, attorneys and affiliates harmless from and against all losses, claims, obligations, demands, assessments, penalties, liability, costs, damages, reasonable attorneys’ fees and expenses (collectively, “Damages”), asserted against or incurred by Purchaser by reason of or resulting from any of the following:   (a)           A breach by Seller of any representation, warranty or covenant contained herein or in any agreement executed pursuant hereto;   (b)           Any product liability claims relating to products sold by Seller, and all general liability claims arising out of or relating to occurrences of any nature relating to the Assets or the Business prior to the Closing, whether any such claims are asserted prior to or after the Closing (collectively, the “Indemnified Obligations”);   9.2          Purchaser’s Indemnity.  Subject to the terms and conditions of this Article 9, Purchaser agrees to indemnify, defend and hold Seller and its officers, directors, agents, attorneys and affiliates harmless from and against all Damages asserted against or incurred by Seller by reason of or resulting from any of the following:    (a)          A breach by Purchaser of any representation, warranty or covenant contained herein or in any agreement executed pursuant hereto;    (b)          Any product liability or breach of warranty claims relating to products sold by Purchaser, and all general liability claims arising out of or relating to occurrences of any nature relating to the Assets or the Business after the Closing;   9.3          Conditions of Indemnification.  The respective obligations and liabilities of Seller and Purchaser (the “indemnifying party”) to the other (the “party to be indemnified”) under Sections 9.1 and 9.2, respectively, hereof with respect to claims resulting from the assertion of liability by third parties shall be subject to the following terms and conditions:   (a)           Within 20 days (or such earlier time as might be required to avoid prejudicing the indemnifying party’s position) after receipt of notice of commencement of any action evidenced by service of process or other legal pleading, or with reasonable promptness after the assertion in writing of any claim by a third party, the party to be indemnified shall give the indemnifying party written notice thereof together with a copy of such claim, process or other legal pleading, and the indemnifying party shall have the right to undertake the defense thereof by representatives of its own choosing and at its own expense; provided, however, that the party to be indemnified may participate in the defense with counsel of its own choice and at its own expense.   (b)           In the event that the indemnifying party, by the 30th day after receipt of notice of any such claim (or, if earlier, by the 10th day preceding the day on which an answer or other pleading must be served in order to prevent judgment by default in favor of the person asserting such claim), does not elect to defend against such claim, the party to be indemnified will (upon further notice to the indemnifying party) have the right to undertake the defense, compromise or settlement of such claim on behalf of and for the account and risk of the indemnifying party and at the indemnifying party’s expense, subject to the right of the indemnifying party to assume the defense of such claims at any time prior to settlement, compromise or final determination thereof.   (c)           Anything in this Section 9.3 to the contrary notwithstanding, the indemnifying party shall not settle any claim without the consent of the party to be indemnified unless such settlement involves only the payment of money and the claimant provides to the party to be indemnified a release from all liability in respect of such claim.  If the settlement of the claim involves more than the payment of money, the indemnifying party shall not settle the claim without the prior consent of the party to be indemnified.   (d)           The party to be indemnified and the indemnifying party will each cooperate with all reasonable requests of the other.   9.4          Indemnification Limitation.  To the extent that a party seeks indemnification for Damages under this Article 9 following the Closing, the indemnified party’s remedy will at all times be limited to the amount of the Purchase Price.  The indemnification provided for in this Article 9 will not apply unless and until the aggregate amount of the Damages for which the indemnified party seeking indemnification exceeds $25,000 in the aggregate, in which event the indemnification provided for will include all Damages up to the Purchase Price.  The parties seeking indemnification pursuant to this Article 9shall only be entitled to be reimbursed for the actual indemnified expenditures or Damages incurred by them for the above described losses.  To the extent any indemnified expenditures or Damages are established pursuant to this Section 9, the Purchaser may offset such amounts first against the funds held in the Escrow.   9.5          Remedies Not Exclusive.  The remedies provided in this Article 9 shall not be exclusive of any other rights or remedies available by one party against the other, either at law or in equity.   9.6          Survival.  Notwithstanding Section 11.9, this Article 9 shall survive the termination of this Agreement for the longer of: (i)  a period of one year following Closing, or (ii) a period of time ending with the date on which the latest of the following events occurs: (a) Seller has obtained Recordation in its name or in the name of one of its agents or affiliates for each of the registrations of the Marks in the countries on Schedule 1; or (b) the new registration of  the Marks has been achieved as a result of a New Filing in the last of the countries on Schedule 1 where required.   ARTICLE 10 TERMINATION, BREACH AND REMEDIES   10.1        Events Permitting Termination by Purchaser.  Purchaser may terminate this Agreement by written notice to Seller prior to Closing if any of the conditions precedent to its obligation to close stated in Article 7 have not been fulfilled prior to the Closing Date, or if in Purchaser’s reasonable opinion Seller has materially failed to comply with any term or condition of this Agreement, or Seller or any of Seller’s officers or other representatives has provided Purchaser with materially inaccurate information or has failed to disclose fully to Purchaser any materially unfavorable information about the Business or the Assets, or there has been a materially adverse change in the Assets or the Business or in the ability of Seller to carry out any obligation under this Agreement; or for any reason other than a default by Purchaser if the Closing has not occurred on or before the Closing Date.   10.2        Failure to Effect Recordation.  In the event (i) that Seller fails or is unable to effect the Recordation of any of the Marks shown in Schedule 1 within one (1) year following the date of the Closing, or (ii) Seller is in breach of paragraph 2.2.9 or (iii) the French Litigation is unsuccessful, then Seller shall be deemed to have materially breached the Agreement and Purchaser shall have the right to recover from Seller any damages suffered by Buyer as a result of such breach, in addition to any other remedies resulting from such breach including, but not limited to, Purchaser’s rights pursuant to paragraph 2.2.7.   10.3        Termination by Seller.  Seller may terminate this Agreement by written notice to Purchaser prior to Closing if any of the conditions precedent to its obligations to close stated in Article 7 have not been fulfilled prior to the Closing Date, or if in Seller’s reasonable opinion Purchaser has materially failed to comply with any term or condition of this Agreement, or Purchaser or any of Purchaser’s officers or other representatives has provided Seller with materially inaccurate information; or for any reason other than a default by Seller, if the Closing has not occurred on or before the Closing Date.   ARTICLE 11 MISCELLANEOUS   11.1        Amendment.  This Agreement may be amended, modified or supplemented only by an instrument in writing executed by each of the parties hereto.   11.2        Assignment and Denial of Third Party Rights.  Except as otherwise provided in this Section 11.2, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof nor any of the documents executed in connection herewith may be assigned or delegated by any party without the written consent of the other parties.  Any attempted assignment or delegation of such rights in violation of this Section 11.2 will be null and void and of no force and effect.  Nothing contained herein, express or implied, is intended to confer upon any person or entity (including minority shareholders or stockholders of the parties hereto) other than the parties indemnified under Article 9 and parties hereto and their successors in interest and permitted assignees any rights or remedies under or by reason of this Agreement unless so stated herein to the contrary.   11.3        Notice.  Any notice or communication must be in writing and given by depositing the same in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, or by delivering the same in person.  Such notice shall be deemed received on the date on which it is hand-delivered or on the third business day following the date on which it is so mailed.  For purposes of notice, the addresses of the parties shall be:                   If to Seller:                                                             Genender International, Inc.                                                                                                 44 Century Drive                                                                                                 Wheeling, IL 60090                                                                                                 Attn:  Ken Genender, President                                                                                                 Telephone: 847-279-2010                                                                                                 Facsimile:  847-279-2110                                                       Copy to:                             Fredric Prohov, Esq.                                                                                                 Hochman, Dolgin, Delott,  & Prohov, P.C.                                                                                                 30 North LaSalle Street                                                                                                 Suite 4300                                                                                                 Chicago, IL 60602                                                                                                 Telephone: 312-705-2000                                                                                                 Facsimile:   312-705-2001                   If to Purchaser:                                                     Fossil, Inc.                                                                                                 2280 N. Greenville Ave.                                                                                                 Richardson, Texas                                                                                                 Attn:  T.R. Tunnell, Executive Vice President                                                                                                 Telephone: 972-699-2139                                                                                                 Facsimile: 972-498-9639                                                       Copy to:                             Molly Richard, Esq.                                                                                                 Strasburger & Price, L.L.P.                                                                                                 901 Main Street, Suite 4300                                                                                                 Dallas, Texas 75202                                                                                                 Telephone:  214-651-4720                                                                                                 Facsimile:    214-659-4052   Any party may change its address for notice by written notice given to the other parties.   11.4        Confidentiality.  The parties shall keep this Agreement and its terms confidential, but any party may make such disclosures after the Closing as it reasonably considers are required by law, but each party will notify the other party in advance of any such disclosure.  In the event that the transactions contemplated by this Agreement are not consummated for any reason, the parties agree not to disclose or use any confidential information they may have concerning the affairs of the other parties, except for information which is required by law to be disclosed.  Confidential information includes, but is not limited to: customer lists and files, prices and costs, business and financial records, surveys, reports, plans, proposals, financial information, information relating to personnel contracts, stock ownership, liabilities and litigation.  Should the transactions contemplated hereby not be consummated, nothing contained in this Section 11.4 shall be construed to prohibit the parties from operating a business in competition with each other, provided that such party does not use the confidential information of the other party to operate such business and all such confidential information as well as materials or samples of the Assets shall be returned to the party to whom it belongs.  After the Closing Date, neither party hereto shall use in any way or disclose any of such confidential information, directly or indirectly, except as required by law or court order.  After the Closing, all files, records, documents, information, data and similar items relating to the Business shall remain the exclusive property of Purchaser.   11.5        Entire Agreement.  Except as set forth in Section 11.4 above, this Agreement and the schedules hereto supersede all prior agreements and understandings relating to the subject matter hereof, except that the obligations of any party under any agreement executed pursuant to this Agreement shall not be affected by this Section 11.5.   11.6        Costs, Expenses and Legal Fees.  Except as otherwise provided in paragraph 1.4, whether or not the transactions contemplated hereby are consummated, each party shall bear its own costs and expenses (including attorney’s fees) of preparation, negotiation and consummation of this Agreement and the transactions contemplated hereby.   11.7        Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.  Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement, a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.   11.8        Specific Performance.  Seller acknowledges that a refusal by Seller to consummate the transactions contemplated hereby, or a breach by Seller of the provisions of this Agreement, will cause irrevocable harm to Purchaser, for which there may be no adequate remedy at law and for which the ascertainment of damages would be difficult.  Therefore, Purchaser shall be entitled, in addition to, and without having to prove the inadequacy of, other remedies at law, to specific performance of this Agreement, as well as injunctive relief (without being required to post bond or other security).   11.9        Survival of Representations, Warranties and Covenants.  Notwithstanding any investigation by any party, the representations, warranties, covenants and other agreements contained herein shall survive the Closing for a period (such period being referred to as the “Survival Period”) ending on the expiration of twenty-four (24) calendar months following the month in which the Closing shall occur, and all statements contained in any certificate, exhibit or other instrument delivered by or on behalf of Seller or Purchaser pursuant to this Agreement shall be deemed to have been representations and warranties by Seller or Purchaser, as the case may be, and shall survive the Closing and any investigation made by any party or on its behalf for a period expiring upon completion of the Survival Period; provided, however, that all such representations and warranties shall survive indefinitely for all claims which are asserted on or before the expiration of the Survival Period.   11.10      Governing Law.  This Agreement and the rights and obligations of the parties shall be governed, construed and enforced in accordance with the laws of the State of Texas.   11.11      Captions.  The captions in this Agreement are for convenience of reference only and shall not limit or otherwise affect any of the terms or provisions hereof.   11.12      Counterparts; Facsimile Execution.  This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.  A telecopy or facsimile transmission of a signed counterpart of this Agreement shall be sufficient to bind the party or parties whose signature(s) appear(s) thereon.   11.13      Taxes.  Each party shall be responsible for all sales, use, transfer or other taxes applicable to such party resulting from the transactions contemplated hereby.   11.14      Public Announcements.  Seller and Purchaser shall cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement or any of the transactions contemplated hereby and shall not issue any public announcement or statement with respect thereto prior to consultation with the other party. The parties agree that the initial press release or releases to be issued in connection with the execution of this Agreement shall be mutually agreed upon prior to the issuance thereof.   11.15      Arbitration.  The parties will submit any and all disputed issues to final and binding arbitration.  A disputed issue means any disagreement in regard to any of the terms and conditions of this Agreement.  Any such dispute will not be subject to appeal to any court except to permit a party to seek court enforcement of any arbitration award rendered hereunder.  If the parties agree to the appointment of a single arbitrator, then the single arbi­trator will determine and decide any dispute arising here­under.  If the parties cannot agree to the selection of a single arbitrator, then each party will designate an attorney to serve as an arbitrator, and the selected attorneys will select a third arbitrator.  The arbitrator(s) will establish rules for the conduct of the arbitration consistent with the rules of the American Arbitra­tion Association.  The arbitrator(s) will be impartial and will have no prior or present relationship with any of the parties.  The arbitrator(s) will be empowered to hear, conclusively determine and resolve all claims and disputes between the parties.  The costs of the arbitration shall be shared equally by the parties, provided that the fees, costs, and expenses of the prevailing party (as reasonably determined by the arbitra­tor(s)), including arbitrators’ and reasonable attorney fees incurred in connection with any such arbitration, shall be paid by the losing party in the event the arbitrator(s) determine the proceeding was brought or defended in bad faith by the losing party.  The costs and expenses of the prevailing party in collecting any such award shall be paid by the non-prevailing party.   In such arbitration proceedings, each of the parties shall submit to the arbitrator(s) in writing their respec­tive posi­tions with respect to the dispute for which arbitration proceedings have been commenced, together with such supporting documentation as such party deems necessary or as such arbi­trator(s) request.  Such arbitra­tor(s) shall, as soon as practica­ble after receiving the written positions of both parties and all subsequent supporting documentation requested by such arbitrator(s), and after having heard such testimony as they may deem appropriate, render their decisions as to such dispute, which decision shall be in writing and final and binding on, and nonappealable by (except as provided by law), the parties.  The arbitrator(s) shall issue any injunctive or similar order they deem appropriate.  Arbitration proceedings shall be held in Dallas, Texas or Chicago, Illinois and the selection of the jurisdiction shall be made by the party against whom the proceedings are brought.  The arbitrator(s) shall be bound by the laws of the United States of America, and shall be bound by the obligation to retain confidential information in confidence in perpetuity, and not to disclose any confidential information of either Purchaser or Seller.  With respect to any other provision in this Agreement to the contrary notwithstanding, including the arbitration clause set forth in this Section 11.15, courts shall retain their injunctive powers, and either party’s resort to injunctive relief or arbitration shall not be deemed as an election not to proceed with any other remedy.  Further (i) the arbitrator(s) shall expedite the proceedings to reach a final decision within 90 days of the demand; (ii) the arbitrator(s) shall be bound in their deliberations and their decision by the terms of the Agreement and applicable law; (iii) the arbitrator(s) must permit the parties to make reasonable discovery on an expedited basis; and (iv) the arbitrator(s) must render a reasoned decision, identifying their conclusions of fact and law.   IN WITNESS WHEREOF, the undersigned parties have hereunto duly executed this Agreement as of the date first written above.     PURCHASER:       FOSSIL, INC.           By:     Name:     Title:             SELLER:       GENENDER INTERNATIONAL, INC.       By:     Name:     Title:         Exhibit A Consulting Agreement Exhibit B Escrow Agreement Exhibit C Bill of Sale Exhibit D Assignment of Intellectual Property Exhibit E Sales Contract between Genender International, Inc. and Zodiac S.A.’s Bankrupt’s Estate Exhibit F Agreement between Montres Zodiac S.A., and Zenith International S.A. and Gad Willy Monnier Exhibit G Declaration of Transfer transferring Swiss Registration No. 397,551 and International Registration No. 644.363 from Gad Willy Monnier to Genender International, Inc. Exhibit H Agreement from Zenith International S.A. Exhibit I Agreement between Genender International, Inc. and Equity Management Systems S.A. Exhibit J Status of Proceedings against Zodiac France, S.A. Exhibit K Agreement between Genender International, Inc. and Nouvelle Montres Zodiac S.A. Schedule 1 List of Marks Schedule 2 On-hand Inventory, Overseas Inventory Commitments and Open Customer Purchase Orders Schedule 3 List of Seller’s Customers Schedule 4 Standard Wholesale Prices of Articles  

CERTIFICATE OF DESIGNATIONS OF SERIES A CONVERTIBLE PREFERRED STOCK OF UNITED ARTISTS THEATRE COMPANY (Pursuant to Section 151 of the Delaware General Corporation Law)           United Artists Theatre Company, a Delaware corporation (the "Corporation"), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation:           RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation by Article Fourth of the Corporation's Restated Certificate of Incorporation, a series of preferred stock of the Corporation be, and it hereby is, created out of the authorized but unissued shares of the capital stock of the Corporation, such series to be designated Series A Convertible Preferred Stock (the "Preferred Stock"), to consist of 9,120,000 shares, par value $0.01 per share, of which the preferences and relative and other rights, and the qualifications, limitations or restrictions thereof, shall be (in addition to those set forth in the Corporation's Certificate of Incorporation, as amended) as follows:      Section 1   Certain Definitions.  Unless the context otherwise requires, the terms defined in this paragraph 1 shall have, for all purposes of this resolution, the meanings herein specified.      "Common Stock" shall mean all shares now or hereafter authorized of any class of Common Stock of the Corporation and any other stock of the Corporation, howsoever designated, authorized after the Issue Date, which has the right (subject always to prior rights of any class or series of preferred stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount.      "Conversion Date" shall have the meaning set forth in subparagraph 4(d) below.      "Conversion Price" shall mean the price per share of Common Stock used to determine the number of shares of Common Stock deliverable upon conversion of a share of the Preferred Stock, which price shall initially be $6.25 per share, subject to adjustment in accordance with the provisions of paragraph 4 below.      "Current Market Price" shall have the meaning set forth in subparagraph 4(g) below.      "Issue Date" shall mean the date that shares of Preferred Stock are first issued by the Corporation.      "Junior Stock" shall mean, for purposes of paragraphs 3 and 6 below, any class or series of stock of the Corporation issued after the Issue Date not entitled to receive any assets upon the liquidation, dissolution or winding up of the affairs of the Corporation until the Preferred Stock shall have received the entire amount to which such stock is entitled upon such liquidation, dissolution or winding up.      "Parity Stock" shall mean, for purposes of paragraphs 3 and 6 below, any other class or series of stock of the Corporation issued after the Issue Date entitled to receive assets upon the liquidation, dissolution or winding up of the affairs of the Corporation on a parity with the Preferred Stock.      "Senior Stock" shall mean, for purposes of paragraphs 3 and 6 below, any class or series of stock of the Corporation issued after the Issue Date ranking senior to the Preferred Stock in respect of the right to receive assets upon the liquidation, dissolution or winding up of the affairs of the Corporation.      "Subsidiary" shall mean any corporation of which shares of stock possessing at least a majority of the general voting power in electing the board of directors are, at the time as of which any determination in being made, owned by the Corporation, whether directly or indirectly through one or more Subsidiaries.      Section 2   Dividends.  The holders of Preferred Stock shall not be entitled to receive cash dividends.      Section 3   Distributions Upon Liquidation, Dissolution or Winding Up.  In the event of any voluntary or involuntary liquidation, dissolution or other winding up of the affairs of the Corporation, subject to the prior preferences and other rights of any Senior Stock, but before any distribution or payment shall be made to the holders of Junior Stock, the holders of the Preferred Stock shall be entitled to be paid an amount equal to $6.25 (as adjusted for any recapitalizations, stock combinations, stock dividends, stock splits and the like) in respect of all outstanding shares of Preferred Stock as of the date of such liquidation or dissolution or such other winding up and no more, in cash, or if the net assets of the Corporation distributable among the holders of all outstanding shares of the Preferred Stock and of any Parity Stock shall be insufficient to permit the payment in full to such holders of the preferential amounts to which they are entitled in cash, in property taken at its fair value as determined by an appraisal conducted by an independent appraisal firm of recognized national standing selected by the Board of Directors, or in cash and property, at the election of the Board of Directors.  If such payment shall have been made in full to the holders of the Preferred Stock, and if payment shall have been made in full to the holders of any Senior Stock and Parity Stock of all amounts to which such holders shall be entitled, the remaining assets and funds of the Corporation shall be distributed among the holders of Junior Stock, according to their respective shares and priorities.  If, upon any such liquidation, dissolution or other winding up of the affairs of the Corporation, the net assets of the Corporation distributable among the holders of all outstanding shares of the Preferred Stock and of any Parity Stock shall be insufficient to permit the payment in full to such holders of the preferential amounts to which they are entitled, then the entire net assets of the Corporation remaining after the distributions to holders of any Senior Stock of the full amounts to which they may be entitled shall be distributed among the holders of the Preferred Stock and of any Parity Stock ratably in proportion to the full amounts to which they would otherwise be respectively entitled.  Neither the consolidation or merger of the Corporation into or with another corporation or corporations, or other business entity, nor the sale of all or substantially all of the assets of the Corporation to another corporation or corporations, or other business entity, shall be deemed a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this paragraph 3.      Section 4   Conversion Rights.  The Preferred Stock shall be convertible into Common Stock as follows: a.      Optional Conversion.  Subject to and upon compliance with the provisions of this paragraph 4, the holder of any shares of Preferred Stock shall have the right at such holder's option, at any time or from time to time, to convert any of such shares of Preferred Stock into fully paid and nonassessable shares of Common Stock at the Conversion Price (as hereinafter defined) in effect on the Conversion Date (as hereinafter defined) upon the terms hereinafter set forth. b.      Automatic Conversion.  Each outstanding share of Preferred Stock shall automatically be converted, without any further act of the Corporation or its stockholders, into fully paid and nonassessable shares of Common Stock at the Conversion Price then in effect upon the closing of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offering and sale of the Common Stock for the account of the Corporation in which the aggregate gross proceeds received by the Corporation equals or exceeds $20,000,000 and in which the public offering price per share equals or exceeds the Conversion Price in effect immediately prior to the closing of such public offering. c.      Conversion Price.  Each share of Preferred Stock shall be converted into a number of shares of Common Stock determined by dividing (i) $6.25, by (ii) the Conversion Price in effect on the Conversion Date.  The Conversion Price at which shares of Common Stock shall initially be issuable upon conversion of the shares of Preferred Stock shall be $6.25.  The Conversion Price shall be subject to adjustment as set forth in subparagraph 4(f).  No payment or adjustment shall be made for any dividends on the Common Stock issuable upon such conversion. d.      Mechanics of Conversion.  The holder of any shares of Preferred Stock may exercise the conversion right specified in subparagraph 4(a) by surrendering to the Corporation or any transfer agent of the Corporation the certificate or certificates for the shares to be converted, accompanied by written notice specifying the number of shares to be converted.  Upon the occurrence of the event specified in subparagraph (b), the outstanding shares of Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent; provided that the Corporation shall not be obligated to issue to any such holder certificates evidencing the shares of Common Stock issuable upon such conversion unless certificates evidencing the shares of Preferred Stock are either delivered to the Corporation or any transfer agent of the Corporation.  Conversion shall be deemed to have been effected on the date when delivery of notice of an election to convert and certificates for shares is made or on the date of the occurrence of the event specified in subparagraph 4(b), as the case may be, and such date is referred to herein as the "Conversion Date."  Subject to the provisions of subparagraph 4(f)(vii), as promptly as practicable thereafter (and after surrender of the certificate or certificates representing shares of Preferred Stock to the Corporation or any transfer agent of the Corporation in the case of conversions pursuant to subparagraph 4(b)) the Corporation shall issue and deliver to or upon the written order of such holder a certificate or certificates for the number of full shares of Common Stock to which such holder is entitled and a check or cash with respect to any fractional interest in a share of Common Stock as provided in subparagraph 4(e).  Subject to the provisions of subparagraph 4(f)(vii), the person in whose name the certificate or certificates for Common Stock are to be issued shall be deemed to have become a holder of record of such Common Stock on the applicable Conversion Date.  Upon conversion of only a portion of the number of shares covered by a certificate representing shares of Preferred Stock surrendered for conversion (in the case of conversion pursuant to subparagraph 4(a)), the Corporation shall issue and deliver to or upon the written order of the holder of the certificate so surrendered for conversion, at the expense of the Corporation, a new certificate covering the number of shares of Preferred Stock representing the unconverted portion of the certificate so surrendered. e.      Fractional Shares.  No fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Preferred Stock.  If more than one share of Preferred Stock shall be surrendered for conversion at any one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Preferred Stock so surrendered.  Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of any shares of Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fractional interest in an amount equal to that fractional interest of the then Current Market Price. f.      Conversion Price Adjustments.  The Conversion Price shall be subject to adjustment from time to time as follows: Common Stock Issued at Less Than the Conversion Price .  If the Corporation shall issue any Common Stock other than Excluded Stock (as hereinafter defined) without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issuance, the Conversion Price in effect immediately prior to each such issuance shall immediately (except as provided below) be reduced to the price determined by dividing (1) an amount equal to the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the Conversion Price in effect immediately prior to such issuance and (B) the consideration, if any, received by the Corporation upon such issuance, by (2) the total number of shares of Common Stock outstanding immediately after such issuance. i.      For the purposes of any adjustment of the Conversion Price pursuant to clause (i), the following provisions shall be applicable: (A)     Cash.  In the case of the issuance of Common Stock for cash, the amount of the consideration received by the Corporation shall be deemed to be the amount of the cash proceeds received by the Corporation for such Common Stock before deducting therefrom any discounts, commissions, fees, taxes or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with the issuance and sale thereof. (B)     Consideration Other Than Cash.  In the case of the issuance of Common Stock (otherwise than upon the conversion of shares of capital stock or other securities of the Corporation) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by an appraisal conducted by an independent appraisal firm of recognized national standing selected by the Board of Directors, irrespective of any accounting treatment; provided that such fair value as determined by such appraisal firm shall not, for purposes hereof, exceed the aggregate Current Market Price of the shares of Common Stock being issued as of the date the Board of Directors authorizes the issuance of such shares. (C)     Options and Convertible Securities.  In the case of the issuance of (i) options, warrants or other rights to purchase or acquire Common Stock (whether or not at the time exercisable), (ii) securities by their terms convertible into or exchangeable for Common Stock (whether or not at the time so convertible or exchangeable) or options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable): (1)     the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options, warrants or other rights to purchase or acquire Common Stock shall be deemed to have been issued at the time such options, warrants or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subclauses (A) and (B) above), if any, received by the Corporation upon the issuance of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the Common Stock covered thereby; 1.      the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (determined in the manner provided in sub-clauses (A) and (B) above), if any, to be received by the Corporation upon the conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof; (3)     on any change in the number of shares of Common Stock deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Corporation upon such exercise, conversion or exchange, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price as then in effect shall forthwith be readjusted to such Conversion Price as would have been obtained had an adjustment been made upon the issuance of such options, warrants or rights not exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change; (4)     on the expiration or cancellation of any such options, warrants or rights, or the termination of the right to convert or exchange such convertible or exchangeable securities, if the Conversion Price shall have been adjusted upon the issuance thereof, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have been obtained had an adjustment been made upon the issuance of such options, warrants, rights or such convertible or exchangeable securities on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights, or upon the conversion or exchange of such convertible or exchangeable securities; and (5)     if the Conversion Price shall have been adjusted upon the issuance of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Conversion Price shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof; provided, however, that no increase in the Conversion Price shall be made pursuant to subclauses (1) or (2) of this subclause (C). Excluded Stock . "Excluded Stock" shall mean shares of Common Stock issued (or, pursuant to 4(f)(i)(C), deemed to be issued) (i) upon conversion of shares of Preferred Stock; (ii) to employees, consultants or directors pursuant to stock option, stock grant, stock purchase or similar plans or arrangements approved by the Board of Directors, including without limitation upon the exercise of options; or (iii) as a dividend or other distribution in connection with which an adjustment to the Conversion Price is made pursuant to Section 4(f)(iii). Stock Dividends, Subdivisions, Reclassifications or Combinations . If the Corporation shall (i) declare a dividend or make a distribution on its Common Stock in shares of its Common Stock, (ii) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify the outstanding Common Stock into a smaller number of shares, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the holder of any shares of Preferred Stock surrendered for conversion after such date shall be entitled to receive the number of shares of Common Stock which he, she or it would have owned or been entitled to receive had such Preferred Stock been converted immediately prior to such date.  Successive adjustments in the Conversion Price shall be made whenever any event specified above shall occur. Other Distributions .  In case the Corporation shall fix a record date for the making of a distribution to all holders of shares of its Common Stock (i) of shares of any class other than its Common Stock or (ii) of evidence of indebtedness of the Corporations or any Subsidiary or (iii) of assets (excluding cash dividends or distributions, and dividends or distributions referred to in subparagraph 4(f)(iii) above), or (iv) of rights or warrants (excluding those referred to in subparagraph 4(f)(i) above), then and in each such case, the holders of Preferred Stock shall receive, at the time of distribution, the same distribution that they would have received had their Preferred Stock been converted into Common Stock immediately prior to the date of such event. Consolidation, Merger, Sale, Lease or Conveyance .  In case of any consolidation with or merger of the Corporation with or into another corporation, or in case of any sale, lease or conveyance to another corporation of the assets of the Corporation as an entirety or substantially as an entirety, each share of Preferred Stock shall after the date of such consolidation, merger, sale, lease or conveyance be convertible into the number of shares of stock or other securities or property (including cash) to which the Common Stock issuable (at the time of such consolidation, merger, sale, lease or conveyance) upon conversion of such share of Preferred Stock would have been entitled upon such consolidation, merger, sale, lease or conveyance; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the holders of the shares of Preferred Stock shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable on the conversion of the shares of Preferred Stock. Rounding of Calculations; Minimum Adjustment .  All calculations under this subparagraph (f) shall be made to the nearest cent or to the nearest one hundredth (1/100th) of a share, as the case may be.  Any provision of this paragraph 4 to the contrary notwithstanding, no adjustment in the Conversion Price shall be made if the amount of such adjustment would be less than $0.05, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.05 or more. Timing of Issuance of Additional Common Stock Upon Certain Adjustments .  In any case in which the provisions of this subparagraph (f) shall require that an adjustment shall become effective immediately after a record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any share of Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount of cash in lieu of a fractional share of Common Stock pursuant to subparagraph (e) of this paragraph 4; provided that the Corporation upon request shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares, and such cash, upon the occurrence of the event requiring such adjustment. Current Market Price .  The Current Market Price at any date shall mean, in the event the Common Stock is publicly traded, the average of the daily closing prices per share of Common Stock for 20 consecutive trading days ending no more than 10 business days before such date (as adjusted for any stock dividend, split, combination or reclassification that took effect during such 20 business day period).  The closing price for each day shall be the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the last closing bid and asked prices regular way, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, the closing sale price for such day reported by NASDAQ, if the Common Stock is traded over-the-counter and quoted in the National Market System, or if the Common Stock is so traded, but not so quoted, the average of the closing reported bid and asked prices of the Common Stock as reported by NASDAQ or any comparable system or, if the Common Stock is not listed on NASDAQ or any comparable system, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose.  If the Common Stock is not traded in such manner that the quotations referred to above are available for the period required hereunder, Current Market Price per share of Common Stock shall be deemed to be the fair value as determined by an appraisal conducted by an independent appraisal firm of recognized national standing selected by the Board of Directors, irrespective of any accounting treatment. Statement Regarding Adjustments .  Whenever the Conversion Price shall be adjusted as provided in subparagraph 4(f), the Corporation shall forthwith file, at the office of any transfer agent for the Preferred Stock and at the principal office of the Corporation, a statement showing in detail the facts requiring such adjustment and the Conversion Price that shall be in effect after such adjustment, and the Corporation shall also cause a copy of such statement to be sent by mail, first class postage prepaid, to each holder of shares of Preferred Stock and of Common Stock at its address appearing on the Corporation's records.  Each such statement shall be signed by the Corporation's independent public accountants, if applicable.  Where appropriate, such copy may be given in advance and may be included as part of a notice required to be mailed under the provisions of subparagraph 4(i). Notice to Holders .  In the event the Corporation shall propose to take any action of the type described in clause (i) (but only if the action of the type described in clause (i) would result in an adjustment in the Conversion Price), (iii), (iv) or (v) of subparagraph 4(f), the Corporation shall give notice to each holder of shares of Preferred Stock and Common Stock, in the manner set forth in subparagraph 4(h), which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place.  Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon conversion of shares of Preferred Stock.  In the case of any action which would require the fixing of a record date, such notice shall be given at least 10 days prior to the date so fixed, and in case of all other action, such notice shall be given at least 15 days prior to the taking of such proposed action.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action. Treasury Stock .  For the purposes of this paragraph 4, the sale or other disposition of any Common Stock theretofore held in the Corporation's treasury shall be deemed to be an issuance thereof. Costs .  The Corporation shall pay all documentary, stamp, transfer or other transactional taxes attributable to the issuance or delivery of shares of Common Stock upon conversion of any shares of Preferred Stock; provided that the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares in a name other than that of the holder of the shares of Preferred Stock in respect of which such shares are being issued. Reservation of Shares .  The Corporation shall reserve at all times so long as any shares of Preferred Stock remain outstanding, free from preemptive rights, out of its treasury stock (if applicable) or its authorized but unissued shares of Common Stock, or both, solely for the purpose of effecting the conversion of the shares of Preferred Stock, sufficient shares of Common Stock to provide for the conversion of all outstanding shares of Preferred Stock. Approvals .  If any shares of Common Stock to be reserved for the purpose of conversion of shares of Preferred Stock require registration with or approval of any governmental authority under any Federal or state law before such shares may be validly issued or delivered upon conversion, then the Corporation will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be.  If, and so long as, any Common Stock into which the shares of Preferred Stock are then convertible is listed on any national securities exchange, the Corporation will, if permitted by the rules of such exchange, list and keep listed on such exchange, upon official notice of issuance, all shares of such Common Stock issuable upon conversion. Valid Issuance .  All shares of Common Stock which may be issued upon conversion of the shares of Preferred Stock will upon issuance by the Corporation be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof, and the Corporation shall take no action which will cause a contrary result (including without limitation, any action which would cause the Conversion Price to be less than the par value, if any, of the Common Stock).      Section 5   Voting Rights. a. In addition to the special voting rights provided in subparagraph 5(b) below and by applicable law, the holders of shares of Preferred Stock shall be entitled to vote upon all matters upon which holders of the Common Stock have the right to vote, and shall be entitled to the number of votes equal to the largest number of full shares of Common Stock into which such shares of Preferred Stock could be converted pursuant to the provisions of paragraph 4 hereof at the record date for the determination of the stockholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited, such votes to be counted together with all other shares of capital stock having general voting powers and not separately as a class.  In all cases where the holders of shares of Preferred Stock have the right to vote separately as a class, such holders shall be entitled to one vote for each such share held by them respectively. b. Without the consent of the holders of at least a majority of the shares of Preferred Stock then outstanding, given in writing or by vote at a meeting of stockholders called for such purpose, the Corporation will not (A) increase the authorized amount of Preferred Stock; (B) create any other class of Parity Stock or Senior Stock or increase the authorized amount of any such other class; (C) amend, alter or repeal any provision of the Certificate of Incorporation or this Certificate so as to adversely affect the rights, preferences or privileges of the Preferred Stock or (D) merge or consolidate with or into any other person, or sell substantially all of its assets or business to any other person, except that the Corporation may engage in a transaction under clause (D) if the stockholders of the Corporation immediately prior to such transaction hold at least 50% of the voting power of the surviving corporation in such transaction.      Section 6   Covenants.  In addition to any other rights provided by law, so long as any Preferred Stock is outstanding, the corporation, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of such outstanding shares of Preferred Stock, will not: a. amend or repeal any provision of, or add any provision to, the Corporation's Certificate of Incorporation or By-Laws if such action would alter adversely or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, any Preferred Stock, or increase or decrease the number of shares of Preferred Stock authorized hereby; b. authorize or issue shares of any class or series of stock not expressly authorized herein having any preference or priority as to dividends, assets or other rights superior to or on a parity with any such preference or priority of the Preferred Stock, or authorize or issue shares of stock of any class or any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares of stock of the Corporation having any preference or priority as to dividends, assets or other rights superior to or on a parity with any such preference or priority of the Preferred Stock; c. reclassify any class or series of any Junior Stock into Parity Stock or Senior Stock or reclassify any series of Parity Stock into Senior Stock; d. pay or declare any dividend on any Junior Stock (other than dividends payable in shares of the class or series upon which such dividends are declared or paid, or payable in shares of Common Stock with respect to Junior Stock other than Common Stock, together with cash in lieu of fractional shares and dividends not in excess of dividends paid to the Preferred Stock) while the Preferred Stock remains outstanding, or apply any of its assets to the redemption, retirement, purchase or acquisition, directly or indirectly, through subsidiaries or otherwise, of any Junior Stock, except from employees of the Corporation upon termination of employment or otherwise pursuant to the terms of stock purchase or option agreements providing for the repurchase of, or right of first refusal with respect to, such Junior Stock entered into with such employees; or e. materially change the principal business of the Corporation.      Section 7   Exclusion of Other Rights.  Except as may otherwise be required by law, the shares of Preferred Stock shall not have any preferences or relative, participating, optional or other special rights, other than those specifically set forth in this resolution (as such resolution may be amended from time to time) and in the Corporation's Certificate of Incorporation.  The shares of Preferred Stock shall have no preemptive or subscription rights.      Section 8   Headings of Subdivisions.  The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.      Section 9   Severability of Provisions.  If any right, preference or limitation of the Preferred Stock set forth in this resolution (as such resolution may be amended from time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other rights, preferences and limitations set forth in this resolution (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, preference or limitation shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein.      Section 10   Status of Reacquired Shares.  Shares of Preferred Stock which have been issued and reacquired in any manner shall (upon compliance with any applicable provisions of the laws of the State of Delaware) have the status of authorized and unissued shares of Preferred Stock issuable in series undesignated as to series and may be redesignated and reissued.      Section 11   Waiver of Rights, Preferences or Privileges.  Any right, preference or privilege, including, but not limited to, a Conversion Price adjustment pursuant to Section 4(f) herein, of the Preferred Stock may be waived in writing by a majority of the outstanding shares of the Preferred Stock voting on an as-converted to Common Stock basis, and such waiver shall be binding on all holders of the Preferred Stock.      Section 12   Amendments.  No provision of the terms of the Preferred Stock may be amended without the prior approval in writing of holders of the Preferred Stock holding a majority in interest of the Preferred Stock.           IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to be signed by Gerald M. Grewe, this 2nd day of March, 2001.     By:           Name: Gerald M. Grewe         Title: Senior Vice President   Attested:     By:      Ralph E. Hardy            Secretary               [Signature Page to Certificate of Designations +of Series A Convertible Preferred Stock]

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (Ed H. Bowman, Jr.)              This Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Ed H. Bowman, Jr. ("Employee") is hereby entered into and effective as of May 18, 2001.  This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee. R E C I T A L S              The following statements are true and correct:              As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.              Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of his employment with the Company, has and will continue to become familiar with and aware of information as to the Company's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constitutes the valuable goodwill of the Company.              Therefore, in consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, it is hereby agreed as follows: A G R E E M E N T S              1.          Employment and Duties.              (a)         The Company hereby employs Employee as President and Chief Executive Officer.  As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a President and Chief Executive Officer and will report directly to the Board of Directors of the Company (the "Board").  Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company.              (b)        Employee shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except to the extent that such activity (i) does not interfere with Employee's duties and responsibilities hereunder and (ii) does not violate paragraph 3 hereof.  The foregoing limitations shall not be construed as prohibiting Employee from (A) serving on the boards of directors of other companies or (B) making personal investments in such form or manner as will neither require his services, other than to a minimal extent, in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof.                2.          Compensation.  For all services rendered by Employee, the Company shall compensate Employee as follows:              (a)         Base Salary.  The base salary payable to Employee shall be $575,000 per year (effective January 1, 2001), payable on a regular basis in accordance with the Company's standard payroll procedures but not less than bi-monthly.  On at least an annual basis, the Board will review Employee's performance and may make increases to such base salary if, in its discretion, any such increase is warranted. Such recommended increase would, in all likelihood, require approval by the Board or a duly constituted committee thereof.              (b)        Incentive Bonus Plan.  Employee shall be eligible for a bonus opportunity of up to 100% of his annual base salary in accordance with the Company’s Incentive Bonus Plan as modified from time to time, payable in cash and/or equity of the Company (at the Company’s discretion).  The bonus payment and the Company's targeted performance shall be determined and approved by the Board or the compensation committee thereof.  For 2001, Employee has already been awarded Warrant No. 58 as payment for any 2001 bonus opportunity.              (c)         Executive Perquisites, Benefits and Other Compensation.  Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below:              (i)          Payment of all premiums for coverage for Employee and his dependent family members under health, hospitalization, disability, dental, life and other insurance plans that the Company may have in effect from time to time, and not less favorable than the benefits provided to other Company executives.              (ii)         Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of his services pursuant to this Agreement.  All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy.              (iii)        Four (4) weeks paid vacation for each year during the period of employment or such greater amount as may be afforded officers and key employees generally under the Company's policies in effect from time to time (prorated for any year in which Employee is employed for less than the full year).              (iv)       An automobile allowance in the amount of $1,000 per month (increased from $500 per month effective March 2001).              (v)        The Company shall reimburse Employee up to $300 per month for club dues actually incurred by Employee, provided that such club is used at least 50% of the time for business purposes.                (vi)       The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide employee benefits as available from time to time, which will include participation in the Company's Incentive Compensation Plan.              (vii)      The Company shall provide Employee with reasonable assistance in personal tax planning from Arthur Andersen LLP.              (viii)     Participation in the Company’s 401(k) Plan and Non-Qualified Plan.              (ix)        The Company shall, under Employee’s direction, establish a Supplemental Retirement Plan/Survivor Protection Plan to be placed inside the Company’s Non-Qualified Plan and provide Employee with such benefit.              (x)         The Company shall reimburse Employee up to $15,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits, or such other benefits at the discretion of the Company) or club dues, all as selected by Employee.              3.          Non-Competition Agreement.              (a)         Subject to Section 3(a), Employee will not, during the period of his employment by or with the Company, and for a period of two (2) years immediately following the termination of his employment under this Agreement, for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, business or entity of whatever nature:              (i)          engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any business selling any products or services in direct competition with the Company, within 100 miles of (i) the principal executive offices of the Company or (ii) any place to which the Company provides products or services or in which the Company (including the subsidiaries thereof) is in the process of initiating business operations during the term of this covenant (the "Territory");              (ii)         call upon any person who is, at that time, within the Territory, an employee of the Company (including the subsidiaries thereof) in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the Company (including the subsidiaries thereof), provided that Employee shall be permitted to call upon and hire any member of his immediate family;              (iii)        call upon any person or entity which is, at that time, or which has been, within one (1) year prior to that time, a customer of the Company (including the subsidiaries thereof) within the Territory for the purpose of soliciting or selling products or services in direct competition with the Company within the Territory;              (iv)       call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor, which candidate was either called upon by the Company (including the subsidiaries thereof) or for which the Company made an acquisition analysis, for the purpose of acquiring such entity; or                (v)        disclose customers, whether in existence or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.              As used in paragraph 3(a), references to the business, customers, Territory, etc. of the Company refer to the status of the Company prior to any Change in Control (i.e., such breadth of business, customers, Territory, etc. shall not automatically be expanded to include those of a successor to the Company resulting from a Change in Control).  Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than three percent (3%) of the capital stock of a competing business, whose stock is traded on a national securities exchange or over-the-counter.              (b)        Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by the Company in the event of breach by him by injunctions and restraining orders without the necessity of posting any bond therefor.              (c)         In the course of Employee’s employment with the Company, Employee will become exposed to certain of the Company’s confidential information and business relationships, which the above covenants are designed to protect.  It is agreed by the parties that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company (including the Company's subsidiaries) on the date of the execution of this Agreement and the current plans of the Company (including the Company's subsidiaries); but it is also the intent of the Company and Employee that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company (including the Company's subsidiaries) throughout the term of this covenant, whether before or after the date of termination of the employment of Employee, subject to the following paragraph.  For example, if, during the Term of this Agreement, the Company (including the Company's subsidiaries) engages in new and different activities, enters a new business or established new locations for its current activities or business in addition to or other than the activities or business enumerated under the Recitals above or the locations currently established therefor, then Employee will be precluded from soliciting the customers or employees of such new activities or business or from such new location and from directly competing with such new business within 100 miles of its then-established operating location(s) through the term of this covenant.              It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company (including the Company's subsidiaries), or similar activities or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company (including the Company's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable.                (d)        The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant.  Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and the Agreement shall thereby be reformed to such extent.              (e)         All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.  It is specifically agreed that the period of two (2) years following Employee’s employment set forth at the beginning of this paragraph 3, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this paragraph 3.              4.          Place of Performance.              (a)         Employee’s place of employment is the Company’s headquarters in Dallas, Texas.  Employee understands that he may be requested by the Board to relocate from his present residence to another geographic location in order to more efficiently carry out his duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities.  In the event that Employee is requested to relocate and agrees to do so, the Company will pay all relocation costs to move Employee, his immediate family and their personal property and effects.  Such costs may include, by way of example, but are not limited to, pre-move visits to search for a new residence, investigate schools or for other purposes; temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur, as a result of any payment hereunder, to the extent any relocation costs are not deductible for tax purposes.  The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use his best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and his family.              (b)        Notwithstanding the above, if Employee is requested by the Board to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c).              5.          Term; Termination; Rights on Termination.  The term of this Agreement shall begin on the date hereof and continue through December 31, 2005, and, unless terminated sooner as herein provided, shall continue thereafter on a five-year rolling basis on the same terms and conditions contained herein until written notice is given by the Company or Employee, not less than sixty (60) days prior to the December 31st of any anniversary date of this Agreement during the Initial Term or thereafter, that the balance of the term of the Agreement shall be five (5) years from the January 1st following such notice (the “Term”).  This Agreement and Employee's employment may be terminated in any one of the following ways:                (a)         Death.  The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate.              (b)        Disability.  If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from his full-time duties hereunder for four (4) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such four (4) month period, but which shall not be effective earlier than the last day of such four (4) month period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume his full-time duties at the conclusion of such notice period.  Also, Employee may terminate his employment hereunder if his health should become impaired to an extent that makes the continued performance of his duties hereunder hazardous to his physical or mental health or his life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor.  In the event this Agreement is terminated as a result of Employee's disability, Employee shall receive from the Company, in a lump-sum payment due within ten (10) days of the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for one (1) year, whichever amount is greater.              (c)         Good Cause.  The Company may terminate the Agreement ten (10) days after written notice to Employee for good cause, which shall be: (1) Employee's material and irreparable breach of this Agreement; (2) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of the written notice) of any of Employee's material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud or misconduct with respect to the business or affairs of the Company which materially and adversely affects the operations or reputation of the Company; (4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee.  In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation.              (d)        Without Cause.  At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the Employee.  Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, the base salary at the rate then in effect for whatever time period is remaining under the Term of this Agreement or for two (2) years, whichever amount is greater ("Severance Pay").  Further, any termination without cause by the Company shall operate to shorten the period set forth in paragraph 3(a) and during which the terms of paragraph 3 apply to one (1) year from the date of termination of employment.                (e)         Change in Control.  Refer to paragraph 12 below.              (f)         Termination by Employee for Good Reason.  Employee may terminate his employment hereunder for "Good Reason."  As used herein, "Good Reason" shall mean the continuance of any of the following after ten (10) days' prior written notice by Employee to the Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement:              (i)          the assignment to Employee of any duties materially and adversely inconsistent with Employee's position as specified in paragraph 1 hereof (or such other position to which he may be promoted), including status, offices, responsibilities or persons to whom Employee reports as contemplated under paragraph 1 of this Agreement, or any other action by the Company which results in a material and adverse change in such position, status, offices, titles or responsibilities;              (ii)         Employee's removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement, except as contemplated by paragraphs 5(a), (b), (c) and (e); or              (iii)        any other material breach of this Agreement by the Company that is not cured within the ten (10) day time period set forth in paragraph 5(f) above, including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement. In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder.  In addition, Employee shall be entitled to receive Severance Pay for whatever time period is remaining under the Term of this Agreement or for two (2) years, whichever amount is greater.  Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason.              (g)        Termination by Employee Without Cause.  If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 5(f), Employee shall receive no severance compensation. Upon termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits vested and reimbursements due through the effective date of termination.  Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16.  All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 herein and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in accordance with their terms.                6.          Return of Company Property.  All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company (including the Company’s subsidiaries) or its representatives, vendors or customers which pertain to the business of the Company (including the Company’s subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control.  Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company (including the Company’s subsidiaries) which is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment.              7.          Inventions.  Employee shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company (including the Company’s subsidiaries) and which Employee conceives as a result of his employment by the Company.  Employee hereby assigns and agrees to assign all his interests therein to the Company or its nominee.  Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain letters patent of the United States or any foreign country or to otherwise protect the Company's interest therein.              8.          Trade Secrets.  Employee agrees that he will not, during or after the term of this Agreement with the Company, disclose the specific terms of the Company's (including the Company’s subsidiaries) relationships or agreements with its significant vendors or customers or any other significant and material trade secret of the Company (including the Company’s subsidiaries), whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever, except as is disclosed in the ordinary course of business.              9.          Indemnification.  In the event Employee is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company against Employee), by reason of the fact that he is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith.  In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company shall pay all attorneys' fees of such separate counsel.  Further, while Employee is expected at all times to use his best efforts to faithfully discharge his duties under this Agreement, Employee cannot be held liable to the Company for errors or omissions made in good faith where Employee has not exhibited gross, willful and wanton negligence and misconduct or performed criminal and fraudulent acts which materially damage the business of the Company.                10.        No Prior Agreements.  Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity.  Further, Employee agrees to indemnify the Company for any claim, including, but not limited to, attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any non-competition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement.              11.        Assignment; Binding Effect.  Employee understands that he has been selected for employment by the Company on the basis of his personal qualifications, experience and skills.  Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement and the Company agrees not to assign all or any portion of its obligations under this Agreement (other than to a successor as a result of a Change in Control).  Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns.              12.        Change in Control.              (a)         Unless he elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company hereunder.              (b)        In the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be ten (10) times Employee’s annual salary immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall not apply whatsoever.  Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.              (c)         In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company's obligations hereunder or Employee receives notice after (or within 15 business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control.  In such case, the amount of the lump-sum severance payment due to Employee shall be ten times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall all apply.  Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.                (d)        For purposes of applying paragraph 5 under the circumstances described in (b) and (c) above, the effective date of termination will be the later of the closing date of the transaction giving rise to the Change in Control or Employee’s notice as described above, and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at such time.  Further, Employee will be given sufficient time in order to comply with the Securities and Exchange Commission’s regulations to elect whether to exercise and sell all or any of his vested options to purchase Common Stock of the Company, including any options with accelerated vesting under the provisions of the Company's 1995 Stock Option Plan, as amended or any warrants, such that he may convert the options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires.              (e)         A "Change in Control" shall be deemed to have occurred if:              (i)          any person, other than the Company or an employee benefit plan of the Company, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company and immediately after such acquisition such person is, directly or indirectly, the Beneficial Owner of voting securities representing 30% or more of the total voting power of all of the then-outstanding voting securities of the Company;              (ii)         the individuals (A) who, as of the closing date of the Company’s initial public offering, constitute the Board of Directors of the Company (the “Original Directors”) or (B) who thereafter are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming “Additional Original Directors” immediately following their election) or (C) who are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming “Additional Original Directors” immediately following their election), cease for any reason to constitute a majority of the members of the Board of Directors of the Company;              (iii)        the stockholders of the Company shall approve a merger, consolidation, recapitalization or reorganization of the Company, a reverse stock split of outstanding voting securities of the Company, or consummation of any such transaction if stockholder approval is not sought or obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by holders of at least 75% of the outstanding voting securities of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or                (iv)       the stockholders of the Company shall approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company's assets (i.e., 50% or more of the total assets of the Company (including the Company’s subsidiaries)).              (f)         Continuation of Benefits.  (i) Following the termination of the Executive’s employment in connection with a Change in Control (as contemplated by paragraph 12(b) or 12(c) of this Agreement) (a “Change in Control Termination”) and until the earlier of (A) three (3) years following such Change in Control Termination or (B) the date on which the Executive becomes employed by a new employer (other than to the successor to the Company following such Change in Control), the Company shall, at its expense, provide the Executive with medical, dental, life insurance, disability and accidental death and dismemberment benefits (“Insurance Benefits”) at the highest level provided to the Executive immediately prior to the Change in Control; provided, however, if the Executive becomes employed by a new employer that maintains Insurance Benefits that either (x) do not cover the Executive with respect to a pre-existing condition that was covered under the Company’s Insurance Benefits, or (y) do not cover the Executive for a designated waiting period, or (z) do not provide for a certain benefit, the Executive’s coverage under the Company’s Insurance Benefits shall continue (with respect to such area of non-coverage described in (x), (y) or (z), as applicable), without limitation, until the earlier of the end of the applicable period of non-coverage under the new employer’s Insurance Benefits or the third anniversary of the Change in Control.              (ii) Following a Change in Control Termination the special benefit allowance of $15,000 contemplated by paragraph 2(c)(x) of this Agreement will continue for 3 years thereafter.              (iii) The Company shall reimburse all reasonable expenses incurred by the Executive for reasonable office and secretarial expenses and for reasonable professional outplacement services by qualified consultants selected by the Executive for up to 3 years after a Change in Control Termination.              (iv) The Executive shall not be required to seek other employment following a Change in Control Termination and any compensation earned from other employment shall not reduce the amounts otherwise payable under this Agreement.               (g)       If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties 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 Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) (i.e., in addition to such other severance benefits, Change in Control benefits or any other payments under this Agreement) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.                For purposes of this paragraph Employee’s applicable Federal, state and local taxes shall be computed at the maximum marginal rates, taking into account the effect of any loss of personal exemptions resulting from receipt of the Gross-Up Payment.              All determinations required to be made under this paragraph 12, including whether a Gross-Up Payment is required under this paragraph, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the Company’s current independent accounting firm, or such other firm as the Company may designate in writing prior to a Change in Control (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Employee within twenty business days of the receipt of notice from Employee that there will likely be a Change in Control, 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 party effecting the Change in Control or is otherwise unavailable, Employee (together with all other employees with comparable appointment rights in their respective employment agreements such that all such employees may collectively select a single accounting firm) may 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 with respect to such determinations described above shall be borne solely by the Company.              Employee agrees (unless requested otherwise by the Company) to use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that Employee owes an amount of Excise Tax greater than the amount determined pursuant to this paragraph; provided, that Employee shall be entitled to reimbursement by the Company (on an after tax basis) of all fees and expenses reasonably incurred by Employee in contesting such determination.  In the event the Internal Revenue Service or any court of competent jurisdiction determines that Employee owes an amount of Excise Tax that is greater than the amount previously taken into account and paid under this Agreement (such additional Excise Tax being the “Additional Excise Tax”), the Company shall promptly pay to Employee the amount of such shortfall.  In the case of any payment that the Company is required to make to Employee pursuant to the preceding sentence (a “Later Payment”), the Company shall also pay to Employee an additional amount such that after payment by Employee of all of Employee’s applicable Federal, state and local taxes, including any interest and penalties assessed by any taxing authority, on the Later Payment, Employee will retain from the Later Payment an amount equal to the Additional Excise Tax, which Employee shall use to pay the Additional Excise Tax.              (h)        In the event of a Change in Control, the Company shall require that the ultimate parent entity (or if no parent entity, the acquiring entity itself) of any entity that acquires control (through ownership of securities or assets, consistent with the definitional triggers of a Change in Control set forth above) of the Company in connection with such Change in Control assume or guaranty the Company’s obligations under paragraphs 12(f) and 12(g) of this Agreement.                13.        Complete Agreement.  This Agreement is not a promise of future employment.  Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement.  This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented by evidence of any prior or contemporaneous oral or written agreements, including without limitation Employee’s Amended and Restated Employment Agreement dated January 1, 1999, which is superseded and replaced in its entirety by this Agreement.  This written Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term.              14.        Notice.  Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: F.Y.I. Incorporated   3232 McKinney Avenue   Suite 1000   Dallas, Texas 75204   Attn:  Chairman     with a copy to: F.Y.I. Incorporated   3232 McKinney Avenue   Suite 1000   Dallas, Texas 75204   Attn:  General Counsel     with a copy to: Charles C. Reeder, Esq.   Locke Liddell & Sapp LLP   2200 Ross Avenue   Suite 2200   Dallas, Texas 75201     To Employee: Ed H. Bowman, Jr.   3102 Drexel Drive   Dallas, Texas 75205 Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received.  Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14.              15.        Severability; Headings.  If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.  The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof.              16.        Arbitration.  Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect.  The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party.  The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise materially breached this Agreement.  A decision by a majority of the arbitration panel shall be final and binding.  Judgment may be entered on the arbitrators' award in any court having jurisdiction.  The costs of any arbitration proceeding shall be borne by the party or parties not prevailing in such proceeding as determined by the arbitrators. [Balance of page intentionally left blank]              17.        Governing Law.  This Agreement shall in all respects be construed according to the laws of the State of Delaware.     EMPLOYEE:           --------------------------------------------------------------------------------   Ed H. Bowman, Jr.               F.Y.I. INCORPORATED           By:   --------------------------------------------------------------------------------   Title:      

EMPLOYMENT AGREEMENT                THIS EMPLOYMENT AGREEMENT (the “Agreement”) is executed this 1st day of November, 2000 by and between enherent Corp. (fka PRT Group Inc.), a Delaware corporation, with its principal place of business at 12300 Ford Rd., Suite 450, Dallas, Texas, 75234, with all of its direct and indirect subsidiaries, (the “Employer”) and Robert D. Merkl, an individual residing at 5419 Ashleigh Road, Fairfax, Virginia 22030 (the “Executive”).              RECITALS:              A.         Employer is a global information technology services company.              B.          The Executive is experienced in the information technology services industry and is desirous of becoming an executive for the Employer or the Executive has been an employee of the Employer and as a result of promotion or assumption of additional responsibilities has been awarded the enhanced employment terms set out herein.              C.          Employer believes the Executive will contribute to the growth and profitability of the Employer and desires to employ the Executive as the Vice President, Service Delivery responsible for the Service Delivery organization in the United States and Barbados, West Indies.              D.         Employer agrees that it shall not require Executive to engage in any conduct, which would violate any of the Executive’s post-termination obligations to Executive’s former employer arising under this Agreement.              E.          The Executive is willing to make his services available to Employer on the terms and conditions hereinafter set forth. AGREEMENT:              Therefore, in consideration of the premises, mutual covenants and agreements of the parties contained herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, Employer and the Executive hereby agree as follows:           1)          Employment.  Commencing on November 1, 2000 (the “Effective Date”), Employer, in reliance on such representations, shall employ the Executive and the Executive shall accept employment by Employer, upon the terms and conditions set forth in this Agreement.              2)          Term:  The term of employment (the “Term”) of this Agreement shall begin on the Effective Date and, except as otherwise provided in Sections 8, 9, and 10 shall end on November 1, 2002.  The Term of this Agreement shall be twenty-four (24) months and shall not be further extended without the mutual written consent of the parties.  After completion of the term, Executive’s employment will be on an at-will basis unless otherwise agreed in writing by the parties.              3)          Duties:  The Executive will serve as the Vice President, Service Delivery of the Employer and the Executive shall have the primary responsibility to manage and direct the day-to-day business of the Service Delivery  business unit.  In addition, Executive will be responsible for establishing current and long-range objectives, plans, and policies subject to the approval of the Executive Vice President/GM North Area. The Executive shall perform such duties as may be reasonably assigned to him by the EVP/GM.  With the consent of the EVP/GM, the Executive may (i) devote a reasonable amount of time and effort to charitable, industry or community organizations, and (ii) subject further to the provisions of Section 6, the Executive may serve as a director of other companies.              4)          Compensation:  During the Term, Executive shall be compensated as follows:                            a)          Salary.  Executive shall be paid an annual salary of one hundred thirty-five thousand dollars ($135,000) (the “Annual Base Salary”), to be distributed in equal periodic semi-monthly installments according to Employer’s customary payroll practices.  Nothing contained herein shall be construed to prevent Employer from increasing Executive’s Annual Base Salary more often than annually.  The Annual Base Salary will be reviewed annually by the EVP/GM and increased (but not decreased) if the EVP/GM, in his discretion, determines an increase to be appropriate, based on the types of factors the EVP/GM usually takes into account in reviewing executive level salaries, including, but not limited to, cost-of-living factors.                            b)          Annual Incentive Compensation.  Employer will provide the Executive with a target bonus opportunity of at least forty- percent (40%) of Annual Base Salary (the “Performance Bonus”) under the annual incentive award plan. The Performance Bonus will be paid to Executive no later than March 1st of the next year.  Performance Bonus requirements will be agreed to in writing by the parties and attached hereto as Exhibit 2.                            c)          Employer will make the Executive eligible for participation in Stock Acquisition and Retention Program under the terms and conditions applicable to all other participants, subject to the approval of the Compensation Committee of the Board of Directors.                            d)          Certain Additional Payments and Consideration.  In addition to the above payments,                                         i)           Stock Options.  Executive will be eligible to participate in the Employer Stock Option Plan (“Plan”). All Options are subject to the terms of the Plan; provided, however, in the event of a Termination without Cause of the Executive’s employment by the Employer all stock options granted shall immediately vest and be exerciseable as per the terms of Section 9 (b) below. All Options will vest in three (3) equal annual installments of one-third (1/3) each beginning one (1) year from their respective grant date. A copy of the Plan is attached hereto as Exhibit 1.  If Executive was an employee of Employer prior to the Effective Date and has already been granted stock options, all of Executive’s stock options shall have the same terms as the Options granted hereunder.                                         ii)          Change in Control.  Notwithstanding any other provision of the Plan to the contrary, while Executive’s Options remain outstanding under the Plan, a Change in Control (as defined below) of Employer shall occur, then all Options granted hereunder this Award that are outstanding at the time of such Change in Control shall become immediately exercisable in full, without regard to the years that have elapsed from the date of grant, and, at the option of the Compensation Committee of the Board of Directors, such Options may be cancelled in exchange for a cash payment or a replacement award of equivalent value.  For purposes of this Award as well as this Agreement, a “Change in Control” of Employer shall occur upon the happening of the earliest to occur of the following:                                                      (a)         any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (other than (1) Employer, (2) any trustee or other fiduciary holding securities under an employee benefit plan of Employer or (3) any corporation owned, directly or indirectly, by the stockholders of enherent Corp. in substantially the same proportions as their ownership of the common stock of Employer, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities of Employer (not including in the securities beneficially owned by such person any securities acquired directly from Employer or its affiliates  representing fifty-one percent (51%) or more of the combined voting power of enherent Corp.’s then outstanding voting securities;                                                      (b)        during any period of not more than two (2) consecutive years, individuals who at the beginning of such period constitute the Board (such board of directors being referred to herein as the “Employer Board”), and any new director (other than a director designated by a person who has entered into an agreement with Employer to effect a transaction described in clause (i), (ii) or (iv) of this Section 5A) whose election by the Employer Board or nomination for election by Employer’s Stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors then still in office who either were directors at the beginning of the period of whose election  or nomination for election was previously so approved (other than approval given in connection with an actual or threatened proxy or election contest), cease for any reason to constitute at least seventy percent (70%) of such Employer Board;                                                      (c)         the stockholders of Employer approve a merger or consolidation of Employer with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding without conversion or by being converted into voting securities of the surviving or parent entity) fifty one (51%) or more of the combined voting power of the voting securities of Employer or such surviving or parent entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of enherent Corp. (or similar transaction) in which no “person” (as hereinabove defined) acquires fifty-one (51%) or more of the combined voting power of enherent Corp.’s then outstanding securities; or                                                      (d)        the stockholders of the Employer approve a plan of complete liquidation of the Employer or an agreement for the sale or disposition by the Employer of all or substantially all of the Employer’s assets (or any transaction having a similar effect).              5)          Expense Reimbursement and Other Benefits.                            a)          Reimbursement of Expenses.  During the term of Executive’s employment hereunder, Employer, upon the Executive’s submission of proper substantiation in accordance with Employer’s standard procedure, including copies of all relevant invoices, receipts or other evidence reasonably requested by Employer, by the Executive, shall reimburse the Executive for all reasonable expenses actually paid or incurred by the Executive in the course of and pursuant to the business of Employer.                            b)          Employee Benefits.  Executive shall participate in the Employer Employee Benefits Program.                            c)          Stock Options.  Executive shall be included as a participant under the Employer Incentive Stock Option Plan, eligible to be granted options to acquire shares of Employer’s common stock.  The number of any future options and terms and conditions of options shall be determined in the sole discretion of the Board, or applicable committee thereof, and shall be based on several factors, including the performance of the Employer.                            d)          Vacation.  During the Term, the Executive will be entitled to four (4) weeks paid vacation/personal days for each year.  The Executive will also be entitled to the paid holidays and other paid leave set forth in Employer’s policies.  Vacation days and holidays during any fiscal year that are not used by the Executive during such fiscal year may not be carried over and used in any subsequent fiscal year.  Executive will begin to accrue vacation/personal days on the first day of the month following date of employment at the rate of 1.67 days per month.  Employer observes ten (10) holidays each year; six (6) days are designated by Employer (the holiday schedule is described in Employer’s Summary of Benefits) and four (4) days, which are selected by Executive.                            e)          Retirement Plan. Executive is eligible to participate in the Employer’s 401(k) Savings Plan the first day of the month coinciding with, or following employment with Employer.  The. Employer has a provision enabling a match of 100% of the first 3% of employee contributions.              6)          Restrictions.                            a)          Non-competition.  During the Term and for a one (1) year period after the termination of the Term and for any reason, the Executive shall not, directly or indirectly, engage in or have any interest in any sole proprietorship, partnership, corporation or business or any other person or entity (whether as an executive, officer, director, partner, agent, security holder, creditor, consultant or otherwise) that directly or indirectly (or through any affiliated entity) engages in competition with the Employer (for this purpose, any business that engages in information technology consulting services or products similar to those services or products offered by the Employer and which is actively soliciting the operating units of the clients doing business with Employer at the time of termination of the Agreement shall be deemed to be in competition with the Employer provided that such services or products constitute at least five percent (5%) of the gross revenues of the Employer at the time of termination of the Agreement); provided that such provision shall not apply to the Executive’s ownership of or the acquisition by the Executive, solely as an investment, of securities of any issuer that are registered under Section 12(b) or 12(g) of the Exchange Act and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the NASDAQ Stock Market, or any similar system or automated dissemination of quotations of securities prices in common use, so long as the Executive does not control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control or, more than five percent (5%) of any class of capital stock of such corporation.                            b)          Nondisclosure.  During the Term and for a two (2) year period after the termination of the Term for any reason, the Executive shall not at any time divulge, communicate, use to the detriment of or for the benefit of any other person or persons, or misuse in any way, any Confidential Information (as hereinafter defined) pertaining to the business or the Employer.  Any Confidential Information or data now or hereafter acquired by the Executive with respect to the business of the Employer (which shall include, but not be limited to, information concerning the Employer’s financial condition, prospects, technology, customers, suppliers, sources of leads and methods of doing business) shall be deemed a valuable, special and unique asset of the Employer that is received by the Executive in confidence and as a fiduciary, and Executive shall remain a fiduciary to the Employer with respect to all such information.  For purposes of this Agreement, “Confidential Information” means information disclosed to the Executive or known by the Executive as a consequence of or through his employment by the Employer (including information conceived, originated, discovered or developed by the Executive) prior to or after the date hereof, and not generally know, about the Employer or its or their respective businesses.  Notwithstanding the foregoing, nothing herein shall be deemed to restrict the Executive from disclosing Confidential Information that the Executive clearly demonstrates was or became generally available to the public other than as a result of disclosure by the Executive.                            c)          Non-solicitation of Employees and Clients.  During the Term and for a one (1) year period after the termination of the Term for any reason, the Executive shall not directly or indirectly, for himself or for any other person, firm, corporation, partnership, association or other entity, other than in connection with the performance of Executive’s duties under this Agreement, (i) solicit for employment or attempt to employ or enter into any contractual arrangement with any employee or former employee or independent contractor of Employer, unless such employee or former employee or former independent contractor, has not been employed by Employer for a period in excess of six (6) months, (ii) call on or solicit any of the operating units of the clients doing business with Employer as of the termination of the Term for any reason on behalf of any person or entity in connection with any business competitive with the business of Employer, and/or (iii) make known the names and addresses of such customers (unless the Executive can clearly demonstrate that such information was or became generally available to the public other than as a result of a disclosure by the Executive.                            d)          Ownership of Developments.  All copyrights, patents, trade secrets, or other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Executive during the course of performing work for Employer or its customers (collectively, the “Work Product”) shall belong exclusively to Employer and shall, to the extent possible, be considered a work made by the Executive for hire for Employer within the meaning of Title 17 of the United States Code.  To the extent the Work Product may not be considered work made by the Executive for hire for Employer, the Executive agrees to assign, and automatically assign at the time of creation of the Work Product, without any requirement of further consideration, any right, title, or interest that Executive may have in such Work Product.  Upon the request of Employer, the Executive shall take such further actions, including execution and delivery of instruments of conveyance, as may be appropriate to give full and proper effect to such assignment.                            e)          Books and Records.  All books, records, and accounts relating in any manner to the customers of Employer, whether prepared by the Executive or otherwise coming into the Executive’s possession, shall be the exclusive property of Employer and shall be returned immediately to Employer on termination of the Executive’s employment hereunder or on Employer’s request at any time.                            f)           Acknowledgment by Executive. The Executive acknowledges and confirms that (i) the restrictive covenants contained in this Section 6(f) are reasonably necessary to protect the legitimate business interest of Employer including the legitimate interests of the Employer, and (ii) the restrictions contained in this Section 6(f) (including without limitation the length of the term of the provisions of this Section 6(f) are not over broad, over long, or unfair and are not the result of overreaching, duress or coercion of any kind.  The Executive further acknowledges and confirms that his full, uninhibited and faithful observance of each of the covenants contained in this Section 6(f) will not cause him any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair his ability to obtain employment commensurate with his abilities and on terms fully acceptable to him or otherwise to obtain income required for the comfortable support of him and his family and the satisfaction of the needs of his creditors.  The Executive acknowledges and confirms that his special knowledge of the business of the Employer is such as would cause Employer serious injury or loss if he were to use such ability and knowledge to the benefit of a competitor or were to compete with the Employer in violation of the terms of this Section 6(f).  The Executive further acknowledges that the restrictions contained in this Section 6 are intended to be, and shall be, for the benefit of and shall be enforceable by, Employer’s successors and assigns.                            g)          Reformation by Court.  In the event that a court of competent jurisdiction shall determine that any provision of this Section 6 is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Section 6 within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.                            h)          Extension of Time.  If the Executive shall be in violation of any provision of this Section 6 then each time limitation set forth in this Section 6 shall be extended for a period of time equal to the period of time during which such violation or violations occur.  If Employer seeks injunctive relief from such violation in any court, then the covenants set forth in this Section 6 shall be extended for a period of time equal to the pendency of such proceeding including all appeals by the Executive.                            i)           Survival.  The provisions of this Section 6 shall survive the termination of this Agreement, as applicable.              7)          Disability.  If during the Term Executive is unable to perform his services by reason of illness or incapacity, for a period of sixty (60) consecutive days or three (3) months out of any six (6) month period.  Employer may, at its option, upon written notice to Executive, terminate the Term and his employment hereunder.  In the event of disability of the Executive as defined in this Section 7, employer shall continue to pay seventy-five percent (75%) of Executive’s then current salary and benefits for the lesser of one (1) year or the remainder of the Term.              8)          Termination for Cause.                            a)          Employer shall have the right to terminate the Term and the Executive’s employment hereunder for Cause (as defined below).  Upon any termination pursuant to this Section 8, Employer shall pay to the Executive any unpaid Annual Base Salary through the effective date of termination specified in such notice.  Employer shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)).                            b)          For purposes hereof, the term “Cause” shall mean the Executive’s conviction of a felony, the Executive’s personal dishonesty directly affecting the Employer, willful misconduct (which shall require prior written notice to the Executive from the President unless not curable or such misconduct is materially injurious to Employer), breach of a fiduciary duty involving personal profit to the Executive or intentional failure to substantially perform his duties after written notice to the Executive from the President (and a reasonable opportunity to cure such failure) that, in the reasonable judgment of the President, the Executive has failed to perform specific duties.              9)          Termination Without Cause.                            a)          At any time Employer shall have the right to terminate the Term and the Executive’s employment hereunder by written notice to the Executive.  Any demotion resulting in a material adverse change in the duties, responsibilities or role, or reporting relationships of the Employee shall be treated as a termination without cause of the Executive.  If the Executive is a licensed professional, e.g., Certified Public Accountant or attorney-at-law, then any situation where the Executive is asked to take, certify or sanction any course of action which such licensed professional Executive is prohibited from doing by his/her profession’s rules, regulations, or code of ethics and such action or refusal to take such action in any way leads to the Executive’s termination or resignation, then such termination shall be treated as a Termination Without Cause or Termination for Good Reason as defined herein.                            Upon any termination pursuant to this Section 9 (that is not a termination under any of Sections 7, 8, or 10), Employer shall continue to pay (through Employer’s regularly scheduled payroll) to the Executive (A) the Annual Base Salary at the date of termination for the one (1) year and (B) pay (within forty-five (45) days of the last day of employment) any earned Performance Bonus prorated as of the date of termination.    Employer shall also continue to pay the premiums for the same or substantially similar Welfare Benefits and the Executive shall be entitled to the other benefits set forth in Section 5(b), (d) and (e) for the remainder of the Term.  In the event such entitlement is not allowed by law, the Executive shall be entitled to the cash equivalent of that benefit.                            b)          The Options and any previously granted or subsequently granted stock options shall immediately vest upon a Termination without Cause and shall be exerciseable and may be sold by Executive subject to no restrictions by Employer (other than those imposed by the Employer’s then current insider trading policy or by federal and state securities laws).                            c)          The Employer shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a).  The Executive shall be entitled to receive all severance payments and benefits hereunder regardless of any future employment undertaken by the Executive.              10)        Termination by Executive.                            a)          The Executive shall at all times have the right upon thirty (30) days prior written notice to Employer, to terminate the Term and his employment hereunder.                            b)          Upon any termination pursuant to this Section 10 by the Executive without Good Reason (as defined below),  Employer shall pay to the Executive any unpaid Annual Base Salary through the effective date of termination specified in such notice.  Employer shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)).                            c)          Upon any termination pursuant to this Section 10 by the Executive for Good Reason, Employer shall pay to the Executive the same amounts that would have been payable by Employer to the Executive under Section 9 of this Agreement as if the Executive’s employment had been terminated by Employer without Cause.  Employer shall have no further liability hereunder (other than for reimbursement for reasonable business expenses incurred prior to the date of termination, subject, however, to the provisions of Section 5(a)).                            d)          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 (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 3 of this Agreement, or any other action by Employer which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by Employer promptly after receipt of notice thereof given by the Executive.                                         ii)          any failure by Employer to comply with any of the material provisions of Section 4 of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by Employer promptly after receipt of notice thereof given by the Executive; or                                         iii)         in the event that (A) a Change in Control (as defined in Section 4 hereof) in Employer shall occur during the Term and (B) prior to the earlier of the expiration of the Term and six (6) months after the date of the Change in Control, the Term and Executive’s employment with Employer is terminated by Employer, or new employer as the case may be, without Cause, as defined in Section 9(b) (and other than pursuant to Section 7 by reason of the Executive’s death or the Executive’s disability) or the Executive terminates the Term and his employment for Good Reason, as defined in Section 11(d)(i) or (ii).              11)        Waivers.  It is understood that either party may waive the strict performance of any covenant or agreement made herein; however, any waiver made by a party hereto must be duly made in writing in order to be considered a waiver, and the waiver of one covenant or agreement shall not be considered a waiver of any other covenant or agreement unless specifically in writing as aforementioned.              12)        Savings Provisions.  The invalidity, in whole or in part, of any covenant or restriction, or any section, subsection, sentence, clause, phrase or word, or other provisions of this Agreement, as the same may be amended from time to time shall not affect the validity of the remaining portions thereof.              13)        Governing Law.  This Agreement shall be construed in accordance with and governed by the laws of the State of Texas without giving effect to its choice of law provision.              14)        Notices.  If either party desires to give notice to the other in connection with any of the terms and provisions of this Agreement, said notice must be in writing and shall be deemed given when (a) delivered by hand (with written confirmation of receipt); (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addresses, if sent by a nationally recognized overnight delivery service) receipt requested), in each case addressed to the party for whom it is intended as follows (or such other addresses as either party may designate by notice to the other party, at the Parent Employer’s or Employer’s then principal executive offices):     If to Employer: enherent Corp.           12300 Ford Rd., Suite 450           Dallas, TX 75234           Attention: Jack D. Mullinax                     If to Executive: Robert D. Merkl           5419 Ashleigh Road           Fairfax, VA  22030                  15)        Default.  In the event either party defaults in the performance of its obligations under this Agreement, the non-defaulting party may, after giving 30 days’ notice to the defaulting party to provide a reasonable opportunity to cure such default, proceed to protect its rights by suit in equity, action or law, or, where specifically provided for herein, by arbitration, to enforce performance under this Agreement or to recover damages for breach thereof, including all costs and attorneys’ fees, whether settled out of court, arbitrated, or tried (at both trial and appellate levels).              16)        No Third Party Beneficiary.  Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than Employer, the parties hereto and their respective heirs, personal representatives, legal representatives, successors and assigns, any rights or remedies under or by reason of this Agreement.              17)        Waiver of Jury Trial.  All parties knowingly waive their rights to request a trial by jury in any litigation in any court of law, tribunal or legal proceeding involving the parties hereto or any disputes arising out of or related to this Agreement.  Any controversy of claim arising out of this Agreement, its enforcement or interpretation, or alleged breach default or misrepresentation in connection with any of its provisions, shall be submitted to binding arbitration before JAMS-Endispute in accordance with its rules and procedures for arbitration of employment disputes.  The costs of arbitration, including but not limited to, the filing fees, shall be paid for by the Employer.  The Employer shall also be responsible for payment of its own attorneys’ fees and shall pay the attorney’s fees of the Employee up to a maximum of twenty-five thousand dollars ($25,000.00).              18)        Successors.  This Agreement shall inure to the benefit of and be binding upon the Executive and the Executive’s assigns, heirs, representatives or estate.              19)        Indemnification.  In the event of a lawsuit, such as but not limited to a shareholder suit, after Executive’s departure from the Employer, or termination of this Agreement for Cause or Termination without Cause, the Employer shall reimburse, the Executive from all reasonable travel costs and out-of-pocket expenses incurred by Executive in assisting in the defense of such post-employment suit.  In addition, the Employer shall to the fullest extent allowed under its Amended and Restated Certificate of Incorporation and to the fullest extent permitted by law indemnify, defend and hold harmless Executive form any reasonable legal fees incurred in Executive’s assistance in the defense of or damages awarded against Executive from such post-employment lawsuit.              20)        Press Releases.  The executive will be given the opportunity to review and comment upon any press release announcing his departure from the Employer.  Employer shall not be obligated to withdraw or revise such press release as a result of the Executive’s comments.              IN WITNESS WHEREOF, by its appropriate officer, signed this Agreement and Executive has signed this Agreement, as or the day and year first above written.   AGREED TO BY:   AGREED TO BY:           Executive   Robert D. Merkl --------------------------------------------------------------------------------   enherent Corp.       Jack D. Mullinax       CFO & EVP Corp. Services           By: --------------------------------------------------------------------------------   By:  --------------------------------------------------------------------------------       Title: --------------------------------------------------------------------------------   Date: --------------------------------------------------------------------------------   Date: --------------------------------------------------------------------------------          

EXHIBIT 10.2 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 10.4   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 Dana Kammersgard ("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.  If (i) a Change of Control (defined below) occurs and (ii) during the period beginning two (2) months prior to the effective date of such Change of Control and ending twenty-four (24) months after the effective date of such Change of Control, Employee's employment with the Company is terminated either (A) by the Company for reasons other than Cause (defined below) or for no reason or (B) by Employee for Good Reason (defined below), then, without further action by Employee or the Company, Employee shall be entitled to the benefits set forth below:                   (a)           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 termination 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                   (b)           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 termination (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 to Employee's Employment Agreement with the Company dated August 2, 1999 (the "Employment Agreement"). The Lump Sum Payment provided for in this Section 1(a)(ii) shall be reduced by the amount of any cash severance payment made to Employee by the Company pursuant to paragraph 10 of the Employment Agreement. Any payments made pursuant to paragraph 10 of the Employment Agreement shall be reduced by the amount of any cash payments made hereunder.   2.             DEFINITIONS.  For purposes of this Agreement, capitalized terms used herein shall have the following meanings:                   (a)           "Cause" shall be limited to the occurrence of any of the following events, as set forth in a written resolution duly adopted by a majority of the Board: (i) Employee continuing to engage in conduct which causes material harm to the Company after having been given thirty (30) days written notice of such determination by the Board, (ii) Employee's indictment for violation of any Law constituting a felony (including the Foreign Corrupt Practices Act of 1977) or the foreign equivalent thereof, (iii) Employee's continuing failure to perform the lawful directives of the Board (consistent with the Employment Agreement) or Employee's employment duties and responsibilities to the Company, in each case in all material respects and after having been given thirty (30) days written notice of such determination by the Board which written notice shall specifically identify the directive alleged not to have been followed or the employment duties which it is alleged Employee has continually failed to substantially perform, the basis for the Board's determination thereof and the specific corrective action that the Board proposes that Employee take, and (iv) Employee's incurable breach of any material element of the Company's Confidential Information and Inventions Agreement.  In no event shall Employee's death or Disability constitute Cause or the basis for any termination therefor.                   (b)           "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.                   (c)           "Good Reason" shall mean: (i) a reduction in Employee's annual base salary, (ii) the relocation of Employee's full-time office to a location other than within sixty (60) miles of Carlsbad, California, or (iii) a violation or breach by the Company, in any material respect, of any of its obligations to Employee so long as Employee has given the Company thirty (30) days notice of such breach and the Company has not cured the breach during that thirty (30) day period.                   (d)           "Disability" shall mean Employee's failure or inability, for reasons of health, to perform Employee's usual and customary duties on behalf of the Company in the usual and customary manner for a total of more than ninety (90) consecutive business days (excluding Saturdays, Sundays and Holidays (days during which the Company is closed due to a recognized holiday)).   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)            Notwithstanding anything to the contrary herein, nothing contained in this Agreement shall in any way alter Employee's rights under the Employment Agreement except for the last sentence of paragraph 1(b) above.                   (j)            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.     [THE 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/ Dana Kammersgard           /s/ James L. Lambert Dana Kammersgard           By: James L. Lambert             President and Chief Executive Officer      

EXHIBIT 10 AMENDMENT NO. 6      This Amendment No. 6 to the Trust Agreement between Boise Cascade Corporation and American National Bank and Trust Company of Chicago dated November 2, 1987, as amended and restated as of December 13, 1996, is effective May 1, 2001, and amends the Trust Agreement as follows:      In accordance with Section 1.01 of Article I, The Plans, of the Trust Agreement, the following plans, in the attached form and as they may be amended from time to time, are hereby made subject to the Trust Agreement and are added to Exhibit A thereto:      1.  Key Executive Performance Unit Plan (Exhibit A(r))      2.  2000 Split-Dollar Life Insurance Plan for Selected Executives of Boise Cascade Office Products Corporation (Exhibit A(s))      3.  Boise Cascade Office Products Corporation Split-Dollar Life Insurance Plan (Exhibit A(t))      4.  Boise Cascade Office Products Corporation Key Executive Performance Plan (Exhibit A(u))      5.  Boise Cascade Office Products Corporation Early Retirement Plan for Executive Officers (Exhibit A(v))      6.  Boise Cascade Office Products Corporation Supplemental Pension Plan (Exhibit A(w))      7.  Boise Cascade Office Products Corporation Executive Officer Severance Agreement (Exhibit A(x))      8.  Boise Cascade Office Products Corporation Key Executive Deferred Compensation Plan (Exhibit A(y))      9.  Boise Cascade Office Products Corporation 1995 Executive Officer Deferred Compensation Plan (Exhibit A(z))      10.  Boise Cascade Office Products Corporation 1995 Key Executive Deferred Compensation Plan (Exhibit A(aa))      In witness whereof, the parties have executed this Amendment No. 6 as of the date first written above.   BOISE CASCADE CORPORATION   By /s/ J. W. Holleran    J. W. Holleran    Senior Vice President, Human Resources,    and General Counsel       AMERICAN NATIONAL BANK AND    TRUST COMPANY OF CHICAGO       By /s/ Beverly A. Booker    Title Trust Officer  

Exhibit 10.30 MLA No. Z269 MASTER LOAN AGREEMENT              THIS MASTER LOAN AGREEMENT is entered into as of March 31, 2000, between CoBANK, ACB  ("CoBank", successor by merger to the St. Paul Bank for Cooperatives) and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota  (the "Company"). BACKGROUND              On March 5, 1999, the St. Paul Bank for Cooperatives (“SPB”) entered into a Seasonal Loan Agreement (the “Seasonal Loan Agreement”) and a Term Loan Agreement (the “Term Loan Agreement”) (collectively, the “Existing Loan Agreements”) with the Company.  Under the Seasonal Loan Agreement, SPB made various seasonal loans to the Company, each of which was evidenced by a promissory note.  Under the Term Loan Agreement, SPB made various term loans, each of which was also evidenced by a promissory note.  Subsequently, SPB merged with and into CoBank.  CoBank and the Company now desire to amend and restate the Existing Loan Agreements and consolidate the Existing Loan Agreements into this Master Loan Agreement.  CoBank and the Company also desire to amend and restate the promissory notes evidencing the seasonal loans and term loans made pursuant to the Existing Loan Agreements by entering into various Supplements in place of the promissory notes.  Each Supplement will set forth the amount of the loan, the purpose of the loan, the interest rate or rate options applicable to that loan, the repayment terms of the loan, and any other terms and conditions applicable to that particular loan.  Each loan will be governed by the terms and conditions contained in this Master Loan Agreement and in the Supplement relating to the loan.  Collateral securing loans made pursuant to the Existing Loan Agreements shall continue to secure those same loans, all as now evidenced by various Supplements, to the same extent as provided for in the Existing Loan Agreements and any security agreements (including, without limitation, mortgages and deeds of trust) entered into in connection therewith.              SECTION 1.    Supplements.  In addition to those Supplements entered into to amend and restate the promissory notes executed in connection with the Existing Loan Agreements, the parties may enter into other Supplements in order to evidence new loans that CoBank may make to the Company.  Each Supplement will set forth the amount of the loan, the purpose of the loan, the interest rate or rate options applicable to that loan, the repayment terms of the loan, and any other terms and conditions applicable to that particular loan.  Each loan will be governed by the terms and conditions contained in this Master Loan Agreement and in the Supplement relating to the loan.              SECTION 2.    Availability.  Loans will be made available on any day on which CoBank and the Federal Reserve Banks are open for business upon the telephonic or written request of the Company.  Requests for loans must be received no later than 12:00 noon Company’s local time on the date the loan is desired.  Loans will be made available by wire transfer of immediately available funds to such account or accounts as may be authorized by the Company. The Company shall furnish to CoBank a duly completed and executed copy of a CoBank Delegation and Wire and Electronic Transfer Authorization Form, and CoBank shall be entitled to rely on (and shall incur no liability to the Company in acting on) any request or direction furnished in accordance with the terms thereof.              SECTION 3.    Repayment.  The Company's obligation to repay each loan shall be evidenced by the promissory note set forth in the Supplement relating to that loan or by such replacement note as CoBank shall require.  CoBank shall maintain a record of all loans, the interest accrued thereon, and all payments made with respect thereto, and such record shall, absent proof of manifest error, be conclusive evidence of the outstanding principal and interest on the loans.  All payments shall be made by wire transfer of immediately available funds or by check.  Wire transfers shall be made to ABA No. 307088754 for advice to and credit of CoBANK (or to such other account as CoBank may direct by notice).  The Company shall give CoBank telephonic notice no later than 12:00 noon Company’s local time of its intent to pay by wire and funds received after 3:00 p.m. Company’s local time shall be credited on the next business day.  Checks shall be mailed to  CoBank, Department 167, Denver, Colorado, 80291–0167 (or to such other place as CoBank may direct by notice).  Credit for payment by check will not be given until the latter of: (a) the day on which CoBank receives immediately available funds; or (b) the next business day after receipt of the check.              SECTION 4.    Capitalization.  The Company agrees to purchase such equity in CoBank as CoBank may from time to time require in accordance with its Bylaws.  However, the maximum amount of equity which the Company shall be obligated to purchase in connection with any loan may not exceed the maximum amount permitted by the Bylaws at the time the Supplement relating to that loan is entered into or such loan is renewed or refinanced by CoBank.              SECTION 5.    Security. The Company’s obligations under this agreement, all Supplements (whenever executed), and all instruments and documents contemplated hereby or thereby, shall be secured by a statutory first lien on all equity which the Company may now own or hereafter acquire in CoBank.  This security shall be in addition to any other security that may otherwise be required or provided.              SECTION 6.    Conditions Precedent.                            (A)        Conditions to Initial Supplement.  CoBank’s obligation to extend credit under the initial Supplement hereto is subject to the conditions precedent that CoBank receive, in form and substance satisfactory to CoBank, each of the following:                                          (i)         This Agreement, Etc.  A duly executed copy of this agreement and all instruments and documents contemplated hereby.                                          (ii)        Opinion of Counsel.  A favorable opinion from the Company’s counsel addressed to CoBank covering each matter as CoBank may reasonably require.                                          (iii)       Evidence of Authority.  Such certified board resolutions, evidence of incumbency, and other evidence that CoBank may require that the Supplement, all instruments and documents executed in connection therewith, and, in the case of initial Supplement hereto, this agreement and all instruments and documents executed in connection herewith, have been duly authorized and executed.                            (B)        Conditions to Each Supplement.  CoBank’s obligation to extend credit under each Supplement, including the initial Supplement, is subject to the conditions precedent that CoBank receive, in form and content satisfactory to CoBank, each of the following:                                          (i)         Supplement.  A duly executed copy of the Supplement and all instruments and documents contemplated thereby.                                          (ii)        Fees and Other Charges.  All fees and other charges specifically permitted by this Master Loan Agreement or the Supplements, as well as reasonable expenses for outside counsel.                                          (iii)       Evidence of Perfection, Etc.  Such evidence as CoBank may require that CoBank has a duly perfected first priority lien on all security for the Company’s obligations, and that the Company is in compliance with Section 8(D) hereof.                            (C)        Conditions to Each Loan.  CoBank’s obligation under each Supplement to make any loan to the Company thereunder is subject to the condition that no “Event of Default” (as defined in Section 11 hereof) or event which with the giving of notice and/or the passage of time would become an Event of Default hereunder (a “Potential Default”), shall have occurred and be continuing.              SECTION 7.    Representations and Warranties.                            (A)        This Agreement.  The Company represents and warrants to CoBank that as of the date of this Agreement:                                          (i)         Compliance.  The Company is in compliance with all of the terms of this agreement, and no Event of Default or Potential Default exists hereunder.                            (B)        Each Supplement.  The execution by the Company of each Supplement hereto shall constitute a representation and warranty to CoBank that:                                          (i)         Applications.  Each representation and warranty and all information set forth in any application or other documents submitted in connection with, or to induce CoBank to enter into, such Supplement, is correct in all material respects as of the date of the Supplement.                                          (ii)        Conflicting Agreements, Etc.  This agreement, the Supplements, and all security and other instruments and documents relating hereto and thereto (collectively, at any time, the “Loan Documents”),  do not conflict with, or require the consent of any party to, any other agreement to which the Company is a party or by which it or its property may be bound or affected, and do not conflict with any provision of the Company’s bylaws, articles of incorporation, or other organizational documents.                                          (iii)       Compliance.  The Company is in compliance with all of the terms of the Loan Documents (including, without limitation, Section 8(A) of this agreement on eligibility to borrow from CoBank).                                          (iv)        Binding Agreement.  The Loan Documents create legal, valid, and binding obligations of the Company which are enforceable in accordance with their terms, except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.              SECTION 8.    Affirmative Covenants.  Unless otherwise agreed to in writing by CoBank, while this agreement is in effect, the Company agrees to:                            (A)        Eligibility.  Maintain its status as an entity eligible to borrow from CoBank.                            (B)        Corporate Existence, Licenses. Etc.  (i) Preserve and keep in full force and effect its existence and good standing in the jurisdiction of its incorporation or formation; (ii) qualify and remain qualified to transact business in all jurisdictions where such qualification is required; and (iii) obtain and maintain all licenses, certificates, permits, authorizations, approvals, and the like which are material to the conduct of its business or required by law, rule, regulation, ordinance, code, order, and the like (collectively, “Laws”).                            (C)        Compliance with Laws.  Comply in all material respects with all applicable Laws, including, without limitation, all Laws relating to environmental protection and any patron or member investment program that it may have.  In addition, the Company agrees to cause all persons occupying or present on any of its properties to comply in all material respects with all environmental protection Laws.                            (D)        Insurance.  Maintain insurance with insurance companies or associations acceptable to CoBank in such amounts and covering such risks as are usually carried by companies engaged in the same or similar business and similarly situated, and make such increases in the type or amount of coverage as CoBank may request.  All such policies insuring any collateral for the Company’s obligations to CoBank shall have mortgagee or lender loss payable clauses or endorsements in form and content acceptable to CoBank.  At CoBank’s request, all policies (or such other proof of compliance with this Subsection as may be satisfactory to CoBank) shall be delivered to CoBank.                            (E)        Property Maintenance.  Maintain all of its property that is necessary to or useful in the proper conduct of its business in good working condition, ordinary wear and tear excepted.                            (F)        Books and Records.  Keep adequate records and books of account in which complete entries will be made in accordance with generally accepted accounting principles ("GAAP") consistently applied.                            (G)        Inspection.  Permit CoBank or its agents, upon reasonable notice and during normal business hours or at such other times as the parties may agree, to examine its properties, books, and records, and to discuss its affairs, finances, and accounts, with its respective officers, directors, employees, and independent certified public accountants.                            (H)        Reports and Notices.  Furnish to CoBank:                                          (i)         Annual Financial Statements.  As soon as available, but in no event more than 120 days after the end of each fiscal year of the Company occurring during the term hereof, annual financial statements of the Company prepared in accordance with GAAP consistently applied.  Such financial statements shall:  (a) be audited by independent certified public accountants selected by the Company and acceptable to CoBank; (b) be accompanied by a report of such accountants containing an opinion thereon acceptable to CoBank; (c) be prepared in reasonable detail and in comparative form; and (d) include a balance sheet, a statement of income, a statement of retained earnings, a statement of cash flows, and all notes and schedules relating thereto.                                          (ii)        Interim Financial Statements.  As soon as available, but in no event more than 5 days after the filing with the Securities Exchange Commission, after the end of each quarter, a balance sheet of the Company as of the end of such fiscal quarter, a statement of income for the Company for such period and for the period year to date, and such other interim statements as CoBank may specifically request, all prepared in reasonable detail and in comparative form in accordance with GAAP consistently applied.                                          (iii)       Annual Budgets.  As soon as available, but in no event more than 60 days after the end of any fiscal year of the Company occurring during the term hereof, copies of the Company’s annual budgets and forecasts of operations.                                         (iv)        Capital Expenditures Budget:  The Company will furnish an annual capital expenditure budget, within 60 days after the end of each fiscal year.  The Company will also furnish a revised budget if increases over the original capital expenditure budget are approved by the board of directors.                                          (v)         Notice of Default.  Promptly after becoming aware thereof, notice of the occurrence of an Event of Default or a Potential Default.                                          (vi)        Notice of Non-Environmental Litigation.  Promptly after the commencement thereof, notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency, or instrumentality affecting the Company which, if determined adversely to the Company, could have a material adverse effect on the financial condition, properties, profits, or operations of the Company.                                          (vii)      Notice of Environmental Litigation, Etc.  Promptly after receipt thereof, notice of the receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a condition that may require the Company to undertake or to contribute to a cleanup or other response under environmental Laws, or which seek penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of such Laws, or which claim personal injury or property damage to any person as a result of environmental factors or conditions.                                          (viii)     Bylaws and Articles.  Promptly after any change in the Company’s bylaws or articles of incorporation (or like documents), copies of all such changes, certified by the Company’s Secretary.                                          (ix)       Other Information.  Such other information regarding the condition or operations, financial or otherwise, of the Company as CoBank may from time to time reasonably request, including but not limited to copies of all pleadings, notices, and communications referred to in Subsections 8(H)(vi) and (vii) above.                                         (x)         Officer Certificate.  A quarterly officers certificate within 45 days of each fiscal quarter end, in a form acceptable to CoBank, certified by an officer of the Company, that measures compliance with Minimum Net Working Capital; Long Term Debt Coverage and Long Term Debt to Capitalization.  (Section 10 (A) & (B) & (C)).                            (I)   Grower Agreements.  The Company shall abide by the terms and conditions of its member grower agreements; make no material amendments or changes to the agreements without the written consent of the Bank; and extend the agreements for an additional five years when the current contracts expire.                            (J)        Crystech, L.L.C. (“ Crystech”).  Cause to be furnished to CoBank:                                          (i)         Annual Financial Statements.  As soon as available, but in no event more than 120 days after the end of each fiscal year of Crystech occurring during the term hereof, annual financial statements of Crystech prepared in accordance with GAAP consistently applied.  Such financial statements shall:  (a) be audited by independent certified public accountants selected by Crystech and acceptable to CoBank; (b) be accompanied by a report of such accountants containing an opinion thereon acceptable to CoBank; (c) be prepared in reasonable detail and in comparative form; and (d) include a balance sheet, a statement of income, a statement of retained earnings, a statement of cash flows, and all notes and schedules relating thereto.                                          (ii)        Interim Financial Statements.  As soon as available, but in no event more than 60 days after the end of each quarter, a balance sheet of Crystech as of the end of such fiscal quarter, a statement of income for Crystech for such period and for the period year to date, and such other interim statements as CoBank may specifically request, all prepared in reasonable detail and in comparative form in accordance with GAAP consistently applied.                                          (iii)       Examinations.  Such examination of Crystech’s books and records as CoBank may reasonably request.                            (K)        Annual Paydown.  The Company will paydown all short term loans to $80,000,000 or less for a period of 30 consecutive days during the calendar year.  Total short term loans includes the seasonal loans, Commodity Credit Corporation loans, commercial paper, overdraft loans with original maturity dates of one year or less.  Total short term loans excludes current maturities of long term debt.              SECTION 9.    Negative Covenants.  Unless otherwise agreed to in writing by CoBank, while this agreement is in effect the Company will not:                            (A)        Borrowings.  Create, incur, assume, or allow to exist, directly or indirectly, any indebtedness or liability for borrowed money (including trade or bankers’ acceptances), letters of credit, or the deferred purchase price of property or services (including capitalized leases), except for:  (i) debt to CoBank; (ii) accounts payable to trade creditors incurred in the ordinary course of business; (iii) current operating liabilities (other than for borrowed money) incurred in the ordinary course of business; and (iv) permitted borrowings identified on Attachment A.                            (B)        Liens.  Create, incur, assume, or allow to exist any mortgage, deed of trust, pledge, lien (including the lien of an attachment, judgment, or execution), security interest, or other encumbrance of any kind upon any of its property, real or personal (collectively, “Liens”).  The foregoing restrictions shall not apply to:  (i) Liens in favor of CoBank; (ii) Liens for taxes, assessments, or governmental charges that are not past due; (iii) Liens and deposits under workers' compensation, unemployment insurance, and social security Laws; (iv) Liens and deposits to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), and like obligations arising in the ordinary course of business as conducted on the date hereof; (v) Liens imposed by Law in favor of mechanics, materialmen, warehousemen, and like persons that secure obligations that are not past due or that are being contested in good faith by the Company; and (vi) easements, rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use, and enjoyment of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto except for the permitted liens identified on Attachment B, without the prior written consent of the Bank.  In addition, the Company agrees that it will not agree to a negative pledge with any other lender or third party.                            (C)        Mergers, Acquisitions, Etc.  Merge or consolidate with any other entity or acquire all or a material part of the assets of any person or entity, or form or create any new subsidiary or affiliate, or commence operations under any other name, organization, or entity, including any joint venture.                            (D)        Transfer of Assets.  Sell, transfer, lease, or otherwise dispose of any of its assets, except in the ordinary course of business.                            (E)        Loans.  Lend or advance money, credit, or property to any person or entity, except for trade credit extended in the ordinary course of business and certain inter-company loans made pursuant to Intercompany Loan/Security Agreement dated August 31, 1997 and successor agreements.                            (F)        Contingent Liabilities.  Assume, guarantee, become liable as a surety, endorse, contingently agree to purchase, or otherwise be or become liable, directly or indirectly (including, but not limited to, by means of a maintenance agreement, an asset or stock purchase agreement, or any other agreement designed to ensure any creditor against loss), for or on account of the obligation of any person or entity, except by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of the Company's business and except for any liability on account of a guaranty of indebtedness of Midwest Agri Commodities.                            (G)        Change in Business.  Engage in any business activities or operations substantially different from or unrelated to the Company's present business activities or operations.              SECTION 10.  Financial Covenants.  Unless otherwise agreed to in writing, while this agreement is in effect:                            (A)        Minimum Net Working Capital. The Company shall maintain minimum at all times and measured as of the end of each Fiscal Quarter a ratio of Current Assets less Current Liabilities of not less than $35,000,000.                            (B)        Long Term Debt to Capitalization.  The Company shall maintain at all times and measured as of the end of each Fiscal Quarter a ratio of Long Term Debt divided by the sum of Long Term Debt plus Equity of no greater than fifty-five percent (55%).                           (C)        Long Term Debt Coverage.  The Company shall maintain at all times and measured as of the end of each Fiscal Quarter a ratio of Long Term Debt to Average Net Funds Generated during the most recent three Fiscal Years of not greater than six (6) times.                            (D)        Definitions.  For purposes of this Section 10 and this Master Loan Agreement, the following terms shall be defined as follows:                                          (i)         Average Net Funds Generated. Average Net Funds Generated is the sum of the following for the most recent three fiscal years divided by three (3).                                                                     Add: Unit Retains; Depreciation and amortization; Net income from non-member business and member business tax timing differences; Decrease in investments in other cooperatives (excluding subsidiaries); and Net revenue from sale of stock.                                                                     Minus: Increase in investments in other cooperatives (excluding subsidiaries); Net loss from non-member business and member business tax timing differences; Provision for income tax; and Members’ investment retirements.                                          (ii)        Borrowing Base. A maximum dollar amount available to the Borrower under the terms of the Commitment (as set forth in a Supplement) as determined on the basis of the most recent Borrowing Base Certificate.                                          (iii)       Borrowing Base Certificate. A certification of the value of specified assets of the Borrower used in computing the Borrowing Base.                                          (iv)        Capitalization. The sum of long term debt plus equity as determined in accordance with GAAP.                                          (v)         Current Assets. The current assets of the Borrower as measured in accordance with GAAP.                                          (vi)        Current Liability. The current liabilities of the Borrower as measured in accordance with GAAP.                                          (vii)      Depreciation. Total depreciation of the Borrower as measured in accordance with GAAP.                                          (viii)     Debt. Debt means as to any Person: (a) indebtedness or liability of such Person for borrowed money, or for the deferred purchase price of property or services; (b) obligations of such Person as lessee under capital leases; (c) obligations of such Person arising under bankers’ or trade acceptance facilities; (d) all guarantees, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations of such Person to purchase any of the items included in this definition, to provide funds for payment, to supply funds to invest in any other Person, or otherwise to assure a creditor of another Person against loss; (e) all obligations secured by a lien on property owned by such Person, whether or not the obligations have been assumed; and (f) all obligations of such Person under any agreement providing for an interest rate swap, cap, cap and floor, contingent participation or other hedging mechanisms with respect to interest payable on any of the items described in this definition.                                          (ix)       Equity. Total equity of the Borrower as measured in accordance with GAAP.                                          (x)         Fiscal Quarter. Each three (3) month period beginning on the first day of each of the following months: September, December, March and June.                                          (xi)       Fiscal Year. A year commencing on September 1 and ending on August 31.                                          (xii)      GAAP. Generally accepted accounting principles in effect from time to time.                                          (xiii)     Interest Expense. Current cost of borrowing funds that is shown as a financial expense in the income statement and as measured in accordance with GAAP.                                          (xiv)      Long Term Debt. The long term debt (excluding current maturities) as determined in accordance with GAAP.                                          (xv)       Net Realizable Value. The expected selling price of an inventory item less expected costs to complete and dispose, as determined in accordance with GAAP.                                          (xvi)      Net Working Capital. Shall mean the Total Current Assets minus the Total Current Liabilities of the Borrower as determined in accordance with GAAP accounting principles, consistently applied.                                          (xvii)    Person. Person shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, cooperative association, institution, entity, party or government (whether national, federal, state, provincial, country, city, municipal or otherwise, including without limitation, and instrumentality, division, agency, body or department thereof).                                          (xviii)   Subsidiary. Subsidiary shall mean with respect to any Person: (a) any corporation in which such Person, directly or indirectly, (i) owns more than fifty percent (50%) of the outstanding stock thereof, or (ii) has the power under ordinary circumstances to elect at least a majority of the directors thereof, or (b) any partnership, association, joint venture, limited liability company, or other unincorporated organization or entity with respect to which such Person, directly or indirectly, owns an equity interest in an amount sufficient to control the management thereof.              SECTION 11.  Events of Default.  Each of the following shall constitute an "Event of Default" under this agreement:                            (A)        Payment Default.  The Company should fail to make any payment to, or to purchase any equity in, CoBank when due.  Any payment received by CoBank after its due date shall not be subject to an increase in the interest rate, as provided for in Section 12 below, if the Company is not responsible for the payment delay.                            (B)        Representations and Warranties.  Any representation or warranty made or deemed made by the Company herein or in any Supplement, application, agreement, certificate, or other document related to or furnished in connection with this agreement or any Supplement, shall prove to have been false or misleading in any material respect on or as of the date made or deemed made.                            (C)        Certain Affirmative Covenants.  The Company should fail to perform or comply with Sections 8(A) through 8(H)(ii), 8(H)(viii), or any reporting covenant set forth in any Supplement hereto, and such failure continues for 15 days after written notice thereof shall have been delivered by CoBank to the Company.                            (D)        Other Covenants and Agreements.  The Company should fail to perform or comply with any other covenant or agreement contained herein or in any other Loan Document or shall use the proceeds of any loan for an unauthorized purpose.                            (E)        Cross-Default.  The Company should, after any applicable grace period, breach or be in default under the terms of any other agreement between the Company and CoBank.                            (F)        Other Indebtedness.  The Company should fail to pay when due any indebtedness to any other person or entity for borrowed money or any long-term obligation for the deferred purchase price of property (including any capitalized lease), or any other event occurs which, under any agreement or instrument relating to such indebtedness or obligation, has the effect of accelerating or permitting the acceleration of such indebtedness or obligation, whether or not such indebtedness or obligation is actually accelerated or the right to accelerate is conditioned on the giving of notice, the passage of time, or otherwise.                            (G)        Judgments.  A judgment, decree, or order for the payment of money shall be rendered against the Company in an amount which, if enforced, would have a material adverse effect on the financial condition, profits or operations of the Compay, or a Lien prohibited under Section 9(B) hereof shall have been obtained and shall continue in effect for a period of 20 consecutive days without being discharged, satisfied, or stayed pending appeal.                            (H)        Insolvency, Etc.  The Company shall:  (i) become insolvent or shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they come due; or (ii) suspend its business operations or a material part thereof or make an assignment for the benefit of creditors; or (iii) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, or other custodian for it or any of its property or, in the absence of such application, consent, or acquiescence, a trustee, receiver, or other custodian is so appointed; or (iv) commence or have commenced against it any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation Law of any jurisdiction.                            (I)         Material Adverse Change.  Any material adverse change occurs, as reasonably determined by CoBank, in the Company's financial condition, results of operation, or ability to perform its obligations hereunder or under any instrument or document contemplated hereby.                            (J)        Guaranties. The Company’s agreement to guaranty, assume, or provide surety of other entities’ financial obligations shall not exceed an aggregate amount greater than 10% of the Company’s net worth, without the Bank’s prior written consent.              SECTION 12.  Remedies.  Upon the occurrence and during the continuance of an Event of Default or any Potential Default, CoBank shall have no obligation to continue to extend credit to the Company and may discontinue doing so at any time without prior notice.  CoBank shall promptly notify the Company subsequent to any action to discontinue extending credit to the Company.  In addition, upon the occurrence and during the continuance of any Event of Default, CoBank may, upon notice to the Company, terminate any commitment and declare the entire unpaid principal balance of the loans, all accrued interest thereon, and all other amounts payable under this agreement, all Supplements, and the other Loan Documents to be immediately due and payable.  Upon such a declaration, the unpaid principal balance of the loans and all such other amounts shall become immediately due and payable, without protest, presentment, demand, or further notice of any kind, all of which are hereby expressly waived by the Company.  In addition, upon such an acceleration:                            (A)        Enforcement.  CoBank may proceed to protect, exercise, and enforce such rights and remedies as may be provided by this agreement, any other Loan Document or under Law.  Each and every one of such rights and remedies shall be cumulative and may be exercised from time to time, and no failure on the part of CoBank to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude any other or future exercise thereof, or the exercise of any other right.  Without limiting the foregoing, CoBank may hold and/or set off and apply against the Company's obligations to CoBank the proceeds of any equity in CoBank, any cash collateral held by CoBank, or any balances held by CoBank for the Company’s account (whether or not such balances are then due).                            (B)        Application of Funds.  CoBank may apply all payments received by it to the Company’s obligations to CoBank in such order and manner as CoBank may elect in its sole discretion.                            In addition to the rights and remedies set forth above:  (i) if the Company fails to purchase any equity in CoBank when required or fails to make any payment to CoBank when due, then at CoBank’s option in each instance, such payment shall bear interest from the date due to the date paid at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan; and (ii) after the maturity of any loan (whether as a result of acceleration or otherwise), the unpaid principal balance of such loan (including without limitation, principal, interest, fees and expenses) shall automatically bear interest at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan.  All interest provided for herein shall be payable on demand and shall be calculated on the basis of a year consisting of 360 days.              SECTION 13.  Broken Funding Surcharge.  Notwithstanding any provision contained in any Supplement giving the Company the right to repay any loan prior to the date it would otherwise be due and payable, the Company agrees that in the event it repays any fixed rate balance prior to its scheduled due date or prior to the last day of the fixed rate period applicable thereto (whether such payment is made voluntarily, as a result of an acceleration, or otherwise), the Company will pay to CoBank a surcharge in an amount which would result in CoBank being made whole (on a present value basis) for the actual or imputed funding losses incurred by CoBank as a result thereof.  Notwithstanding the foregoing, in the event any fixed rate balance is repaid as a result of the Company refinancing the loan with another lender or by other means, then in lieu of the foregoing, the Company shall pay to CoBank a surcharge in an amount sufficient (on a present value basis) to enable CoBank to maintain the yield it would have earned during the fixed rate period on the amount repaid.  Such surcharges will be calculated in accordance with methodology established by CoBank (a copy of which will be made available to the Company upon request).              SECTION 14. Complete Agreement, Amendments.  This agreement, all Supplements, and all other instruments and documents contemplated hereby and thereby, are intended by the parties to be a complete and final expression of their agreement.  No amendment, modification, or waiver of any provision hereof or thereof, and no consent to any departure by the Company herefrom or therefrom, shall be effective unless approved by CoBank and contained in a writing signed by or on behalf of CoBank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.  In the event this agreement is amended or restated, each such amendment or restatement shall be applicable to all Supplements hereto.              SECTION 15.  Other Types of Credit.  From time to time, CoBank may issue letters of credit or extend other types of credit to or for the account of the Company.  In the event the parties desire to do so under the terms of this agreement, such extensions of credit may be set forth in any Supplement hereto and this agreement shall be applicable thereto.              SECTION 16.  Applicable Law.  Except to the extent governed by applicable federal law, this agreement and each Supplement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to choice of law doctrine.              SECTION 17.  Notices.  All notices hereunder shall be in writing and shall be deemed to be duly given upon delivery if personally delivered or sent by telegram or facsimile transmission, or 3 days after mailing if sent by express, certified or registered mail, to the parties at the following addresses (or such other address for a party as shall be specified by like notice): If to CoBank, as follows: CoBank, ACB Corporate Finance P.O. Box 5110 Denver, Colorado 80217 – Fax # (303) 694-5830 If to the Company, as follows: American Crystal Sugar Company ATTN: Treasurer 101 North 3rd Street, Moorhead, Minnesota 56560 FAX#:  (218) 236-4702              SECTION 18.  Taxes and Expenses.  To the extent allowed by law, the Company agrees to pay all reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel retained by CoBank) incurred by CoBank in connection with the origination, administration, collection, and enforcement of this agreement and the other Loan Documents, including, without limitation, all costs and expenses incurred in perfecting, maintaining, determining the priority of, and releasing any security for the Company’s obligations to CoBank, and any stamp, intangible, transfer, or like tax payable in connection with this agreement or any other Loan Document.              SECTION 19.  Effectiveness and Severability.  This agreement shall continue in effect until:  (i) all indebtedness and obligations of the Company under this agreement, all Supplements, and all other Loan Documents shall have been paid or satisfied; (ii) CoBank has no commitment to extend credit to or for the account of the Company under any Supplement; and (iii) either party sends written notice to the other terminating this agreement.  Any provision of this agreement or any other Loan Document 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 or thereof.              SECTION 20.  Successors and Assigns.  This agreement, each Supplement, and the other Loan Documents shall be binding upon and inure to the benefit of the Company and CoBank and their respective successors and assigns, except that the Company may not assign or transfer its rights or obligations under this agreement, any Supplement or any other Loan Document without the prior written consent of CoBank.              SECTION 21.  Participations.   From time to time, CoBank may sell to one or more banks or other financial institutions a participation in one or more of the loans or other extensions of credit made pursuant to this agreement.  However, no such participation shall relieve CoBank of any commitment made to the Company under any Supplement hereto.  In connection with the foregoing, CoBank may disclose information concerning the Company  to any participant or prospective participant, provided that such participant or prospective participant agrees to keep such information confidential.              IN WITNESS WHEREOF, the parties have caused this agreement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer --------------------------------------------------------------------------------   No. Z269A AMENDMENT              THIS AMENDMENT is entered into as of March 28, 2001, between CoBANK, ACB (“CoBank”) and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the “Company”). BACKGROUND              CoBank and the Company are parties to a Master Loan Agreement dated March 31, 2000, (such agreement, as previously amended, is hereinafter referred to as the “MLA”).  CoBank and the Company now desire to amend the MLA.  For that reason, and for valuable consideration (the receipt and sufficiency of which are hereby acknowledged), CoBank and the Company agree as follows: 1.          Section 10(A) of the MLA is hereby amended and restated to read as follows:              (A)        Minimum Net Working Capital.  (1) have at the end of each fiscal quarter, other than fiscal year end, an excess of current assets over current liabilities (both as determined in accordance with GAAP consistently applied) of not less than $15,000,000.00 and (2) have at then end of each fiscal year, an excess of current assets over current liabilities (both as determined in accordance with GAAP consistently applied) of not less than $35,000,000.00. 2.          Except as set forth in this amendment, the MLA shall continue in full force and effect as written.              IN WITNESS WHEREOF, the parties have caused this amendment to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer --------------------------------------------------------------------------------   Loan No. Z269T01A REVOLVING TERM LOAN SUPPLEMENT              THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 28, 2001, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"), and amends and restates the Supplement dated March 31, 2000 and numbered Z269T01.              SECTION 1.    The Revolving Term Loan Commitment.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed $77,849,070.00 at any one time outstanding (the "Commitment").  Within the limits of the Commitment, the Company may borrow, repay and reborrow.              SECTION 2.    Purpose and Transfer.  The purpose of the Commitment is to finance the operating needs of the Company.              SECTION 3.    Term.  The term of the Commitment shall be from the date hereof, up to but not including March 30, 2002, or such later date as CoBank may, in its sole discretion, authorize in writing.              SECTION 4.    Interest. The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:              (A)        Variable Rate Option.  At a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate. The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change.              (B)        Quoted Rate Option.   At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance.  Under this option, rates may be fixed on such balances and for such periods as may be agreeable to CoBank in its sole discretion in each instance.              (C)        LIBOR Option.  At a fixed rate equal to "LIBOR" (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points (“bps”) in the chart immediately set forth below).  Under this option:  (a) rates may be fixed  for "Interest Periods" (as hereinafter defined) of 1, 2, 3, and 6  months, as selected by the Company; (b) the minimum amount that may be fixed at any one time shall be $2,000,000.00; and (c) rates may only be fixed on a "Banking Day" (as hereinafter defined) or, at the option of the Company, on 2 Banking Days’ prior notice.  For purposes hereof: (i) "LIBOR" shall mean the rate indicated by Telerate (rounded upward to the nearest thousandth) as having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the Company elects to fix a rate under this option for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; (ii) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; and (iii) "Interest Period" shall mean a period commencing on the day the Company elects to fix a rate under this option (or, at the option of the Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3 or 6 months thereafter, as the case may be; provided, however, that:  (x) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (y) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. LIBOR MARGINS RATE PRODUCT -------------------------------------------------------------------------------- INDEX -------------------------------------------------------------------------------- SPREAD OVER INDEX IN BASIS POINTS -------------------------------------------------------------------------------- One Month LIBOR 90bps Two Months LIBOR 90bps Three Months LIBOR 90bps Six Months LIBOR 90bps              (D) Treasury Option.  At a fixed rate equal to Applicable “Treasury” Margin per annum (as described in terms of basis points (“bps”) in the chart immediately set forth below) above the "U.S. Treasury Rate" (as hereinafter defined) . Under this option, balances of $2,000,000.00 or more may be fixed on or before  for periods ranging from one year to the final maturity date of the loan, as selected by the Company. However, rates may not be fixed in such a manner as to require the Company to have to repay any fixed rate balance prior to the last day of its fixed rate period in order to pay any installment of principal. For purposes hereof, the "U.S. Treasury Rate" shall mean the yield to maturity on U.S. Treasury instruments having the same maturity date as the last day of the fixed rate period selected by the Company, as calculated from the bid price indicated by Telerate (page 5) at the time the rate is fixed.  If, however, no instrument is indicated  for the maturity selected, then the rate shall be interpolated based on the bid prices quoted for the next longest and shortest maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and the parties hereto will agree upon a substitute basis for obtaining such quotations TREASURY MARGINS One Year   U.S.$ Constant Maturity  Treasury (“US$CMT”) 125bps Two Years   US$CMT 125 bps Three Years   US$CMT 125 bps Four Years   US$CMT 125 bps Five Years   US$CMT 125 bps Seven Years   US$CMT 140 bps Ten Years   US$CMT 140 bps Floor (Minimum) Margin (For One to Ten Year Fixed Rate Products Only)   CoBank’s cost of funds (as reasonably determined by CoBank in its sole discretion) 105bps The spread over all of the above indices, including the Floor Margin, may increase or decrease for future fixed amounts  based on the Borrower’s previous fiscal quarter’s leverage ratio, as follows: LEVERAGE RATIO (as defined below) -------------------------------------------------------------------------------- INCREASE / DECREASE TO SPREAD -------------------------------------------------------------------------------- CHANGE TO LIBOR and TREASURY MARGINS (IN BASIS POINTS) -------------------------------------------------------------------------------- A.  Equal to or greater than 1.35:1.00 Increase 20 B.  Equal to or greater than 1.20:1.00, but less than 1.35:1.00 None 0 C.  Less than 1.20:1.00, but greater than or equal to 1.00:1.00 Decrease 10 D.  Less than 1.00:1.00 Decrease 20 Leverage Ratio: The Borrower will maintain a leverage ratio of not more than 1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on November 30, 2002.  Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in the MLA No. Z269, Section 10), divided by total members investments plus the estimated unit retains. The spread shall be adjusted quarterly on the latter of either: (a) five business days after the Bank's receipt of the Borrower's certification of compliance with the leverage ratio, or (b) 30 days after the end of each calendar quarter. The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable quarterly in arrears by the 20th day of the following month.              SECTION 5.    Promissory Note.  The Company promises to repay the loans that are outstanding in annual principal payments of $9,396,579.17 each due on or before December 31st of each year through December 31, 2008, and a final principal payment due on or before December 31, 2009.  All outstanding balances shall be repaid by December 31, 2009. If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business.  In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby. The Company shall be permitted to make special payments, in a minimum amount of $388,500.00, on the variable rate portion of this loan, when all short term financing, including the Company’s seasonal loans, Commodity Credit Corporation loans and other short term loans have been zeroed out.  These special payments may be readvanced through the expiration date of the Commitment. Reinstatement may be denied and canceled at any time at the option of CoBank. The reinstatable commitments arising from such special payments shall be subject to the Commitment Fee as described in Section 8 below.              SECTION 6.    Prepayment.  The loans may be prepaid in whole or in part on one CoBank business day’s prior written notice.  During the term of the Commitment, prepayments shall be applied to such balances, fixed or variable, as the Company shall specify.  After the expiration of the term of the Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.              SECTION 7.    Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of  20 basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day following each calendar quarter.   Such fee shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended term of the Commitment.              SECTION 8.    Commitments Arising From Special Payments.  Commitments arising as a result of special payments described in Section 5 above shall be subject to a commitment fee of 25 basis points (0.25%) on an annualized basis, on the average daily commitment.  Any such fees incurred shall be payable on the last day of the calendar quarter, in arrears, computed on the basis of a year of 360 days for the actual number of days elapsed in which such reinstatable commitments were outstanding.              SECTION 9.    Security.  In addition to any other security that may otherwise be required or provided, the Company’s obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.              IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer --------------------------------------------------------------------------------   Loan No. Z269T01A NP REVOLVING TERM LOAN SUPPLEMENT              THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 28, 2001, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"), and amends and restates the Supplement dated March 31, 2000 and numbered Z269T01NP.              SECTION 1.    The Revolving Term Loan Commitment.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed $60,450,930.00 at any one time outstanding (the "Commitment").  Within the limits of the Commitment, the Company may borrow, repay and reborrow.              SECTION 2.    Purpose and Transfer.  The purpose of the Commitment is to finance the operating needs of the Company.              SECTION 3.    Term.  The term of the Commitment shall be from the date hereof, up to but not including March 30, 2002, or such later date as CoBank may, in its sole discretion, authorize in writing.              SECTION 4.    Interest. The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:              (A)        Variable Rate Option.  At a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate. The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change.              (B)        Quoted Rate Option.   At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance.  Under this option, rates may be fixed on such balances and for such periods as may be agreeable to CoBank in its sole discretion in each instance.              (C)        LIBOR Option.  At a fixed rate equal to "LIBOR" (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points (“bps”) in the chart immediately set forth below).  Under this option:  (a) rates may be fixed  for "Interest Periods" (as hereinafter defined) of 1, 2, 3, and 6  months, as selected by the Company; (b) the minimum amount that may be fixed at any one time shall be $2,000,000.00; and (c) rates may only be fixed on a "Banking Day" (as hereinafter defined) or, at the option of the Company, on 2 Banking Days’ prior notice.  For purposes hereof: (i) "LIBOR" shall mean the rate indicated by Telerate (rounded upward to the nearest thousandth) as having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the Company elects to fix a rate under this option for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; (ii) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; and (iii) "Interest Period" shall mean a period commencing on the day the Company elects to fix a rate under this option (or, at the option of the Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3 or 6 months thereafter, as the case may be; provided, however, that:  (x) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (y) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. LIBOR MARGINS RATE PRODUCT -------------------------------------------------------------------------------- INDEX -------------------------------------------------------------------------------- SPREAD OVER INDEX IN BASIS POINTS -------------------------------------------------------------------------------- One Month LIBOR 90bps Two Months LIBOR 90bps Three Months LIBOR 90bps Six Months LIBOR 90bps              (D) Treasury Option.  At a fixed rate equal to the Applicable Treasury Margin per annum (as described in terms of basis points (“bps”) in the chart immediately set forth below) above the "U.S. Treasury Rate" (as hereinafter defined) . Under this option, balances of $2,000,000.00 or more may be fixed on or before  for periods ranging from one year to the final maturity date of the loan, as selected by the Company. However, rates may not be fixed in such a manner as to require the Company to have to repay any fixed rate balance prior to the last day of its fixed rate period in order to pay any installment of principal. For purposes hereof, the "U.S. Treasury Rate" shall mean the yield to maturity on U.S. Treasury instruments having the same maturity date as the last day of the fixed rate period selected by the Company, as calculated from the bid price indicated by Telerate (page 5) at the time the rate is fixed.  If, however, no instrument is indicated  for the maturity selected, then the rate shall be interpolated based on the bid prices quoted for the next longest and shortest maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and the parties hereto will agree upon a substitute basis for obtaining such quotations. TREASURY MARGINS One Year   U.S.$ Constant Maturity  Treasury (“US$CMT”) 125bps Two Years   US$CMT 125 bps Three Years   US$CMT 125 bps Four Years   US$CMT 125 bps Five Years   US$CMT 125 bps Seven Years   US$CMT 140 bps Ten Years   US$CMT 140 bps Floor (Minimum) Margin (For One to Ten Year Fixed Rate Products Only)   CoBank’s cost of funds (as reasonably determined by CoBank in its sole discretion) 105bps The spread over all of the above indices, including the Floor Margin, may increase or decrease for future fixed amounts  based on the Borrower’s previous fiscal quarter’s leverage ratio, as follows: LEVERAGE RATIO (as defined below) -------------------------------------------------------------------------------- INCREASE / DECREASE TO SPREAD -------------------------------------------------------------------------------- CHANGE TO LIBOR and TREASURY MARGINS (IN BASIS POINTS) -------------------------------------------------------------------------------- A.  Equal to or greater than 1.35:1.00 Increase 20 B.  Equal to or greater than 1.20:1.00, but less than 1.35:1.00 None 0 C.  Less than 1.20:1.00, but greater than or equal to 1.00:1.00 Decrease 10 D.  Less than 1.00:1.00 Decrease 20 Leverage Ratio: The Borrower will maintain a leverage ratio of not more than 1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on November 30, 2002.  Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in the MLA No. Z269, Section 10), divided by total members investments plus the estimated unit retains. The spread shall be adjusted quarterly on the latter of either: (a) five business days after the Bank's receipt of the Borrower's certification of compliance with the leverage ratio, or (b) 30 days after the end of each calendar quarter. The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable quarterly in arrears by the 20th day of the following month.              SECTION 5.    Promissory Note.  The Company promises to repay the loans that are outstanding in annual principal payments of $7,603,420.83 each due on or before December 31st of each year through December 31, 2008, and a final principal payment due on or before December 31, 2009.  All outstanding balances shall be repaid by December 31, 2009. If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business.  In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 4 hereof.  This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby. The Company shall be permitted to make special payments, in a minimum amount of $111,500.00, on the variable rate portion of this loan, when all short term financing, including the Company’s seasonal loans, Commodity Credit Corporation loans and other short term loans have been zeroed out.  These special payments may be readvanced through the expiration date of the Commitment.  Reinstatement may be denied and canceled at any time at the option of CoBank. The reinstatable commitments arising from such special payments shall be subject to the Commitment Fee as described in Section 8 below.              SECTION 6.    Prepayment.  The loans may be prepaid in whole or in part on one CoBank business day’s prior written notice.  During the term of the Commitment, prepayments shall be applied to such balances, fixed or variable, as the Company shall specify.  After the expiration of the term of the Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.              SECTION 7.    Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of  20 basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day following each calendar quarter.   Such fee shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended term of the Commitment.              SECTION 8.    Commitments Arising From Special Payments.  Commitments arising as a result of special payments described in Section 5 above shall be subject to a commitment fee of 25 basis points (0.25%) on an annualized basis, on the average daily commitment.  Any such fees incurred shall be payable on the last day of the calendar quarter, in arrears, computed on the basis of a year of 360 days for the actual number of days elapsed in which such reinstatable commitments were outstanding.              SECTION 9.    Security.  In addition to any other security that may otherwise be required or provided, the Company’s obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.              IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer --------------------------------------------------------------------------------   Loan No. Z269T02A NP REVOLVING TERM LOAN SUPPLEMENT              THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 28, 2001, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"), and amends and restates the Supplement dated March 31, 2000 and numbered Z269T02NP.              SECTION 1.    The Revolving Term Loan Commitment.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed $20,000,000.00 at any one time outstanding (the "Commitment").  Within the limits of the Commitment, the Company may borrow, repay and reborrow, provided, however, no advances shall be made on this Term Loan, until Term Loan No. Z269T01, has been fully advanced.              SECTION 2.    Purpose and Transfer.  The purpose of the Commitment is to finance the operating needs of the Company.              SECTION 3.    Term.  The term of the Commitment shall be from the date hereof, up to but not including March 30, 2002, or such later date as CoBank may, in its sole discretion, authorize in writing.              SECTION 4.    Interest. The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:              (A)        Variable Rate Option.  At a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate. The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change.              (B)        Quoted Rate Option.   At a fixed rate per annum to be quoted by CoBank in its sole discretion in each instance.  Under this option, rates may be fixed on such balances and for such periods as may be agreeable to CoBank in its sole discretion in each instance.              (C)        LIBOR Option.  At a fixed rate equal to "LIBOR" (as hereinafter defined) plus the Applicable LIBOR Margin per annum (as described in terms of basis points (“bps”) in the chart immediately set forth below).  Under this option:  (a) rates may be fixed  for "Interest Periods" (as hereinafter defined) of 1, 2, 3, and 6  months, as selected by the Company; (b) the minimum amount that may be fixed at any one time shall be $2,000,000.00; and (c) rates may only be fixed on a "Banking Day" (as hereinafter defined) or, at the option of the Company, on 2 Banking Days’ prior notice.  For purposes hereof: (i) "LIBOR" shall mean the rate indicated by Telerate (rounded upward to the nearest thousandth) as having been quoted by the British Bankers Association at 11:00 a.m. London time on the date the Company elects to fix a rate under this option for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; (ii) "Banking Day" shall mean a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; and (iii) "Interest Period" shall mean a period commencing on the day the Company elects to fix a rate under this option (or, at the option of the Company, two Banking Days later) and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3 or 6 months thereafter, as the case may be; provided, however, that:  (x) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (y) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month. LIBOR MARGINS RATE PRODUCT -------------------------------------------------------------------------------- INDEX -------------------------------------------------------------------------------- SPREAD OVER INDEX IN BASIS POINTS -------------------------------------------------------------------------------- One Month LIBOR 90bps Two Months LIBOR 90bps Three Months LIBOR 90bps Six Months LIBOR 90bps              (D)        Treasury Option.  At a fixed rate equal to Applicable “Treasury” Margin per annum (as described in terms of basis points (“bps”) in the chart immediately set forth below) above the "U.S. Treasury Rate" (as hereinafter defined) . Under this option, balances of $2,000,000.00 or more may be fixed on or before  for periods ranging from one year to the final maturity date of the loan, as selected by the Company. However, rates may not be fixed in such a manner as to require the Company to have to repay any fixed rate balance prior to the last day of its fixed rate period in order to pay any installment of principal. For purposes hereof, the "U.S. Treasury Rate" shall mean the yield to maturity on U.S. Treasury instruments having the same maturity date as the last day of the fixed rate period selected by the Company, as calculated from the bid price indicated by Telerate (page 5) at the time the rate is fixed.  If, however, no instrument is indicated  for the maturity selected, then the rate shall be interpolated based on the bid prices quoted for the next longest and shortest maturities so indicated. In the event Telerate ceases to provide such quotations or materially changes the form or substance of page 5 (as determined by CoBank), then CoBank will notify the Company and the parties hereto will agree upon a substitute basis for obtaining such quotations. TREASURY MARGINS One Year   U.S.$ Constant Maturity  Treasury (“US$CMT”) 125bps Two Years   US$CMT 125bps Three Years   US$CMT 125bps Four Years   US$CMT 125bps Five Years   US$CMT 125bps Seven Years   US$CMT 140bps Ten Years   US$CMT 140bps Floor (Minimum) Margin (For One to Ten Year Fixed Rate Products Only)   CoBank’s cost of funds (as reasonably determined by CoBank in its sole discretion) 105bps The spread over all of the above indices, including the Floor Margin, may increase or decrease for future fixed amounts  based on the Borrower’s previous fiscal quarter’s leverage ratio, as follows: LEVERAGE RATIO (as defined below) -------------------------------------------------------------------------------- INCREASE / DECREASE TO SPREAD -------------------------------------------------------------------------------- CHANGE TO LIBOR and TREASURY MARGINS (IN BASIS POINTS) -------------------------------------------------------------------------------- A.  Equal to or greater than 1.35:1.00 Increase 20 B.  Equal to or greater than 1.20:1.00, but less than 1.35:1.00 None 0 C.  Less than 1.20:1.00, but greater than or equal to 1.00:1.00 Decrease 10 D.  Less than 1.00:1.00 Decrease 20 Leverage Ratio: The Borrower will maintain a leverage ratio of not more than 1.50:1.0, and attain a leverage ratio of not more than 1.40:1.0 on November 30, 2002.  Leverage ratio is long term debt (excluding current maturities) calculated in accordance with GAAP plus or minus the difference between actual working capital and minimum net working capital (as defined in the MLA No. Z269, Section 10), divided by total members investments plus the estimated unit retains. The spread shall be adjusted quarterly on the latter of either: (a) five business days after the Bank's receipt of the Borrower's certification of compliance with the leverage ratio, or (b) 30 days after the end of each calendar quarter. The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loans. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable quarterly in arrears by the 20th day of the following month.              SECTION 5.    Promissory Note.  The Company promises to repay the loans that are outstanding in annual principal payments of $2,000,000.00 each due on or before December 31st of each year commencing in 2001.  All outstanding balances shall be repaid by December 31, 2009. If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business.  In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.              SECTION 6.    Prepayment.  The loans may be prepaid in whole or in part on one CoBank business day’s prior written notice.  During the term of the Commitment, prepayments shall be applied to such balances, fixed or variable, as the Company shall specify.  After the expiration of the term of the Commitment, prepayments shall, unless CoBank otherwise agrees, be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as CoBank shall specify.              SECTION 7.    Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment at the rate of  20 basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day following each calendar quarter.  Such fee shall be payable for each calendar quarter (or portion thereof) occurring during the original or any extended term of the Commitment.              SECTION 8.    Letters of Credit.  In addition to loans, and if agreeable to CoBank in its sole discretion in each instance, the Company may utilize the Commitment to open irrevocable letters of credit for its account.  Each letter of credit shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder.  The rights and obligations of the parties with respect to each letter of credit will be governed by the Reimbursement Agreement attached hereto as Exhibit A (which rights and obligations shall be in addition to the rights and obligations of the parties hereunder and under the MLA). The fee for issuing each letter of credit shall be determined at the time of application.              SECTION 9.    Security.  In addition to any other security that may otherwise be required or provided, the Company’s obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.              IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer --------------------------------------------------------------------------------   Loan No. Z269T03A NP SINGLE ADVANCE TERM LOAN SUPPLEMENT              THIS SUPPLEMENT to the Master Loan Agreement dated as of March 31, 2000 (the "MLA"), is entered into as of April 21, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"), and amends and restates the Supplement dated March 31, 2000 and numbered Z269T03NP.              SECTION 1.    The Term Loan.  This Supplement is to evidence a term loan to the Company in the original principal commitment amount of $12,000,000.00 (the “Loan”).  The Loan is currently evidenced by Note No. 30800NP (the “Note”) and is subject to the terms of that certain Note Agreement dated December 5, 1994 by and among the Company, CoBank’s predecessor (the St. Paul Bank for Cooperatives), and Bank of North Dakota (the “Note Agreement”).  The outstanding principal balance of the Loan as of the date hereof is $7,200,000.00.              SECTION 2.    Purpose and Transfer.  The purpose of this Supplement is to replace the Note and transfer the indebtedness evidenced thereby to this Supplement.  As of the date of this Supplement, the Note shall be deemed replaced and superseded, but the indebtedness evidenced by such Note shall not be deemed to have been paid off, by this Supplement and the MLA.  The Note Agreement shall remain in full force and effect except that any reference to the “Loan” shall be deemed to mean the indebtedness evidenced by this Supplement, and any reference to “Loan Agreement” shall be deemed a reference to the MLA.  To the extent that the Note Agreement may be inconsistent with the terms of this Supplement or the MLA, the terms of the Note Agreement shall control.  All security given to secure the Note shall secure this Supplement.              SECTION 3.    Availability.  The datefor permitting advances under the Note has expired.  There is no further availability.              SECTION 4.    Interest. The Company agrees to pay interest on the unpaid balance of the Loan at such rate or rates as determined in accordance with the terms of the Note Agreement.  As of the date hereof the interest rate is fixed at 6.34% per annum and shall remain fixed at such rate for the period as provided for in the Note Agreement.  All other matters regarding the calculation and payment of interest shall be in accordance with the terms of the Note Agreement (including, without limitation, the terms applicable to prepayment of fixed rate loans prior to pricing maturity dates).              SECTION 5.    Promissory Note.  The Company promises to repay the Loan in accordance with the repayment terms of the Note Agreement.  If any installment due date is not a day on which CoBank is open for business, then such payment shall be made on the next day on which CoBank is open for business.  In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the terms of the Note Agreement.  This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.              SECTION 6.    Prepayment.  Subject to the terms of the Note Agreement,the Loan may be prepaid in whole or in part on one CoBank business day’s prior written notice.              SECTION 7.    Security.  In addition to any other security that may otherwise be required or provided, the Company’s obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.              IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer --------------------------------------------------------------------------------   Loan No.  Z269S01B STATUSED REVOLVING CREDIT SUPPLEMENT              THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000 (the "MLA"), is entered into as of March 28, 2001, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota (the "Company"), and amends and restates the Supplement dated April 21. 2000 and numbered Z269S01A.              SECTION 1.    The Revolving Credit Facility.  On the terms and conditions set forth in the MLA and this Supplement, CoBank agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed, at any one time outstanding, the lesser of the “Borrowing Base” (as calculated pursuant to the Borrowing Base Certificate, the form of which is attached hereto as Exhibit A) or $180,000,000.00 (the "Commitment"). Within the limits of the Commitment, but subject to the Borrowing Base, the Company may borrow, repay and reborrow.              SECTION 2.    Purpose and Transfer.  The purpose of the Commitment is to finance the Company’s general corporate purposes, fund working capital requirements, back the Company’s commercial paper program, and issue short-term commercial and standby letters of credit.              SECTION 3.    Term.  The term of the Commitment shall be from the date hereof, up to but not including March 30, 2002, or such later date as CoBank may, in its sole discretion, authorize in writing.              SECTION 4.    Interest.  The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:              (A)        Base Rate Option.  At a rate per annum at all times equal to the Base Rate.  For the purposes hereof, Base Rate means that rate in effect from day to day defined as the “prime” rate as published from time to time in the Eastern Edition of The Wall Street Journalas the average prime lending rate for seventy-five percent (75%) of the United States; thirty (30) largest commercial banks, or if The Wall Street Journal shall cease publication or cease publishing the “prime rate” on a regular basis, such other regularly published average prime rate applicable to such commercial banks as is acceptable to the Lender in its reasonable discretion.  Loans for which the Base Rate option is selected are referred to herein as “Base Rate Loans”. Base Rate Loans shall be:  (a) in minimum amounts of $5,000,000 and incremental multiples of $1,000,000; and (b) made available on any Banking Day.  Interest on Base Rate Loans shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears on the twentieth Banking Day of the following month.              (B)        Quoted Rate Option.  At a fixed rate per annum at all times equal to the Quoted Rate.  For the purposes hereof, Quoted Rate means a fixed rate of interest to apply to a loan (referred to herein as a “Quoted Rate Loan”) for a specified period of time not to exceed thirty (30) days quoted by CoBank in its sole discretion. Quoted Rate Loans shall be (i) in minimum amounts of $1,000,000 and incremental multiples of $1,000,000; and (ii) made available on any Banking Day.  The Quoted Rate may not necessarily be the lowest rate at which CoBank funds at that time. Interest on Quoted Rate Loans shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears on the twentieth Banking Day of the following month.              (C)        LIBOR Option.  At a fixed rate equal to LIBOR plus the Applicable Margin (as defined below).  For the purposes hereof, LIBOR means the rate for deposits in U.S. Dollars, with maturities comparable to the selected LIBOR Interest Period, that appears on the display designed as page “3750” of the Telerate Service (or such other page as may replace the 3750 page of that service of if the Telerate Service shall cease displaying such rates, such other service or services as may be nominated by the British Bankers’ Association for the purpose of displaying London Interbank Offered Rates for U.S. Dollar deposits), determined as of 11:00 a.m. London time two Banking Days prior to the commencement of such LIBOR Interest Period.  “LIBOR Interest Period” means a period of one, two, three or six months.  LIBOR pricing will be adjusted for Regulation D reserve requirements.  The Applicable Margin is 70 basis points.  Loans for which the LIBOR option is selected are referred to herein as “LIBOR Loans”. LIBOR Loans shall be:  (a) in a minimum amount of $5,000,000 and incremental multiples of $1,000,000;  (b) made available on three Banking Days prior notice; and (c) be for periods of one, two, three, or six months.  Interest on LIBOR Loans shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable in arrears upon maturity of the applicable LIBOR Interest Period, but no less frequently than quarterly.  The LIBOR option shall be subject to the following limitations: (1)         Notwithstanding anything herein to the contrary, if, on or prior to the determination of the LIBOR rate for any LIBOR Interest Period, CoBank determines (which determination shall be conclusive) that quotations of interest rates in accordance with the definition of LIBOR rate are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for LIBOR rate advances as provided in this Supplement, then CoBank shall give the Company prompt notice thereof, and so long as such condition remains in effect, CoBank shall be under no obligation to make LIBOR rate loans, convert Base Rate loans into LIBOR rate loans, or continue LIBOR rate loans, and the Company shall, on the last day(s) of the then current applicable LIBOR Interest Period(s) for the outstanding LIBOR rate loans, either prepay such LIBOR rate loans or such LIBOR rate loans shall automatically be converted into a Base Rate loan in accordance with this Section 4. (2)         If any law, treaty, rule, regulation or determination of a court or governmental authority or any change therein or in the interpretation or application thereof subsequent to the date hereof (each, a “Change in Law”) shall make it unlawful for CoBank to (a) advance any LIBOR rate loan or (b) maintain all or any portion of a LIBOR rate loan, then CoBank shall promptly notify the Company thereof.  In the former event, any obligation of CoBank to make available any future LIBOR rate loan shall immediately be canceled (and, in lieu thereof shall be made as a Base Rate loan or Quoted Rate loan at the option of the Company), and in the latter event, any such unlawful LIBOR rate loan or portions thereof then outstanding shall be converted, at the option of the Company, to either a Base Rate loan or a Quoted Rate loan; provided, however, that if any such Change in Law shall permit the LIBOR rate to remain in effect until the expiration of the LIBOR rate period applicable to any such unlawful LIBOR rate loan, then such LIBOR rate loan shall continue in effect until the expiration of such LIBOR rate period.  Upon the occurrence of any of the foregoing events on account of any Change in Law, the Company shall pay to CoBank immediately upon demand such amounts as may be necessary to compensate CoBank for any fees, charges, or other costs incurred or payable by CoBank as a result thereof and which are attributable to any LIBOR rate loans made available to the Company hereunder. (3)         If CoBank shall determine that, after the date hereof, 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 governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of CoBank as a consequence of CoBank's obligations hereunder to a level below that which CoBank could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy existing on the date of this Supplement) by an amount deemed by CoBank to be material, then from time to time, within fifteen (15) days after demand by CoBank, the Company shall pay to CoBank such additional amount or amounts as will compensate CoBank for such reduction.  CoBank agrees to take reasonable steps to reduce the amount of such increase, provided, however, that CoBank shall not be required to take any such step, if in CoBank’s sole opinion, CoBank would suffer an economic loss or any negative legal or regulatory consequences as a result thereof.  If CoBank is to require the Company to make payments under this Section then CoBank must make a demand on the Company to make such payment within ninety (90) days of the later of (1) the date on which such capital costs are actually incurred by CoBank, or (2) the date on which CoBank knows, or should have known, that such capital costs have been incurred by CoBank. The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the Base Rate unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, unless CoBank otherwise consents in its sole discretion in each instance, rates may not be fixed for periods expiring after the maturity date of the loan. In the event CoBank so consents and the Commitment is not renewed, then each balance so fixed shall be due and payable on the last day of its fixed rate period, and the promissory note set forth below shall be deemed amended accordingly. All elections provided for herein shall be made telephonically or in writing and must be received by 12:00 noon Company's local time.  As used in this Section 4, "Banking Day" means a day on which CoBank is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England.              SECTION 5.    Promissory Note. The Company promises to repay the unpaid principal balance of the loans on the first CoBank business day following the last day of the term of the Commitment.  In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth in Section 4 hereof.  This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.              SECTION 6.    Borrowing Base Certificate, Etc.  The Company agrees to furnish a Borrowing Base Certificate to CoBank at such times or intervals as CoBank may from time to time request.  Until receipt of such a request, the Company agrees to furnish a Borrowing Base Certificate to CoBank within 30 days after each month end calculating the Borrowing Base as of the last day of the month for which the Certificate  is being furnished.  However, if no balance is outstanding hereunder on the last day of such period, no Report need be furnished.  Regardless of the frequency of the reporting, if at any time the amount outstanding under the Commitment exceeds the Borrowing Base, the Company shall immediately notify CoBank and repay so much of the loans as is necessary to reduce the amount outstanding under the Commitment to the limits of the Borrowing Base.              SECTION 7.   Commitment Fee.  In consideration of the Commitment, the Company agrees to pay to CoBank a commitment fee on the average daily unused portion of the Commitment  at the rate of  20 basis points per annum (calculated on a 360 day basis), payable quarterly in arrears by the 20th day following each calendar quarter. The unused amount of the 364-Day facility will be the difference between the 364-Day Commitment and the sum of the outstanding 364-Day Facility Loans and the undrawn face amount of all outstanding Letters of Credit.              SECTION 8.  Utilization Fee.  For any day on which the outstanding principal amount of loans shall be greater than 25% of the Commitment (but no greater than 50% of the Commitment), the Company shall pay to CoBank a utilization fee equal to 0.125% per annum (calculated on a 360 day basis) on the aggregate amount outstanding on such day.  For any day on which the outstanding principal amount of loans shall be greater than 50% of the Commitment, the Company shall pay to CoBank a utilization fee equal to 0.25% per annum (calculated on a 360 day basis) on the aggregate amount outstanding on such day.  Accrued and unpaid utilization fees, if any, shall be payable quarterly in arrears by the 20th day following each calendar quarter.              SECTION 9. Letters of Credit.  In addition to loans, and if agreeable to CoBank in its sole discretion in each instance, the Company may utilize the Commitment to open irrevocable letters of credit for its account.  Each letter of credit shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder.  The rights and obligations of the parties with respect to each letter of credit will be governed by the Reimbursement Agreement attached hereto as Exhibit B (which rights and obligations shall be in addition to the rights and obligations of the parties hereunder and under the MLA). This Commitment shall expire on December 31, 2002. The fee for issuing each  letter of credit shall be 70 basis points of the face amount of each letter of credit, along with an issuance fee to CoBank, for its own account, equal to the greater of (a) 1/8% of the face amount of the letter of credit, or (b) $2,000. The Company promises to repay the outstanding balance on the Commitment in full on demand, or if no demand is made, then any time on or before the commitment expiration date of December 31, 2002.              IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer -------------------------------------------------------------------------------- [Form of Borrowing Base] American Crystal Sugar Company Monthly Borrowing Base For the month ended __________________ Trade Accounts Receivables $ -------------------------------------------------------------------------------- @ 80% $ -------------------------------------------------------------------------------- (a) Trade Accounts Receivables are defined as those of the Borrower and all Guarantors which:  (1) arise from the sale and delivery of inventory on ordinary trade terms; (2) are evidenced by an invoice; (3) are net of any credit, trade or other allowance given to the account debtor; (4) are not owing by an account debtor who has become insolvent or is the subject of any bankruptcy, reorganization, liquidation or like proceeding; (5) are not subject to any offset or deduction; (6) are not owing by an affiliate of Borrower; (7) are not owing by an obligor located outside of the U.S. unless the receivable is supported by a letter of credit issued by a bank acceptable to the Lender; and (8) are not government receivables.  The above provisions notwithstanding, Trade Receivables shall also exclude (i) any accounts that are past due more than 90 days, and (ii) any contra account regardless of the date; Inventory $ -------------------------------------------------------------------------------- (b)   Inventory as determined on the basis of Net Realizable Value, defined as the expected selling price of an inventory item less expected costs to complete and dispose, as determined in accordance with GAAP. Crop Payments due Non-members and members $ -------------------------------------------------------------------------------- (c)     Net Inventory Value (b-c) $ -------------------------------------------------------------------------------- @ 75% $ -------------------------------------------------------------------------------- (d) Borrowing Base (a+d)     $ --------------------------------------------------------------------------------   Commercial Paper     $ -------------------------------------------------------------------------------- (e) Seasonal Loan     -------------------------------------------------------------------------------- (f) CCC     -------------------------------------------------------------------------------- (g) Total Short-term Loans (e+f+g)     $ --------------------------------------------------------------------------------     Loan No. Z269T04 LETTER OF CREDIT COMMITMENT SUPPLEMENT.              THIS SUPPLEMENT to the Master Loan Agreement dated March 31, 2000  (the "MLA"), is entered into as of March 31, 2000, between CoBANK, ACB ("CoBank") and AMERICAN CRYSTAL SUGAR COMPANY, Moorhead, Minnesota   (the "Company").              SECTION 1.    The Letter of Credit.  On the terms and conditions set forth in the MLA, CoBank agrees to establish a loan commitment to the Company in an amount not to exceed $31,000,000.00 (the "Commitment").  The Commitment shall expire at 12:00 noon (Company’s local time) on April 30, 2013 or on such later date as CoBank may, in its sole discretion, authorize in writing.              SECTION 2.    Purpose.  The purpose of the Commitment is to reimburse CoBank in the event of draws on letters of credit issued by CoBank (or its predecessor)for the benefit of the Company,and to renew, extend and refinance the Company’s obligations to CoBank under the Company’s existing Letter of Credit Commitment (“Existing Letter of Credit Commitment”) as currently evidenced by Note No. 30343  (the “Note”) and the Loan Agreement dated March 5, 1999. (the “Existing Agreement”).  The Company agrees that on the date when all conditions precedent to CoBank’s obligation to extend credit hereunder have been satisfied:  (a) the principal balance outstanding (or any obligations outstanding as a result of any letters of credit currently in effect) under the Existing Letter of Credit Commitment shall be transferred to and charged against this Commitment; (b) all accrued obligations of the Company under the Existing Letter of Credit Commitment for the payment of interest or other charges shall be transferred to and become part of the Company’s obligations under this Supplement as if fully set forth herein; and, (c) the Note and the Existing Agreement (to the extent applicable to the Note) shall be deemed replaced and superseded, but the indebtedness evidenced by such Note shall not be deemed to have been paid off, by this Supplement and the MLA.              SECTION 3.    Promissory Note.  The Company promises to repay all outstanding balances for advances made in support of outstanding letters of credit, upon demand              SECTION 4.    Interest. The Company agrees to pay interest on the unpaid principal balance of each loan, from the date of draw to actual repayment on a daily basis for the actual number of days any portion of the principal is outstanding.  The unpaid principal balance shall bear interest at a rate per annum equal at all times to the rate of interest established by CoBank from time to time as its National Variable Rate, which Rate is intended by CoBank to be a reference rate and not its lowest rate.  The National Variable Rate will change on the date established by CoBank as the effective date of any change therein and CoBank agrees to notify the Company promptly after any such change. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month.              SECTION 5.    Issuance of Letters of Credit.  Each letter of credit issued shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder.  The rights and obligations of the parties with respect to each letter of credit will be governed by the Reimbursement Agreement attached hereto as Exhibit A (which rights and obligations shall be in addition to the rights and obligations of the parties hereunder and under the MLA).  The fee for issuing each  letter of credit shall be determined CoBank at the time of issuance.  The Company promises to repay the outstanding balance on the Commitment in full on demand, or if no demand is made, then any time on or before the Commitment expiration date.              SECTION 6.    Security.  In addition to any other security that may otherwise be required or provided, the Company’s obligations under this Supplement are secured by that Restated Mortgage and Security Agreement dated September 15, 1998, from American Crystal Sugar Company to St. Paul Bank for Cooperatives (now known as CoBank as a result of merger), as Collateral Agent.              IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above. CoBANK, ACB AMERICAN CRYSTAL SUGAR COMPANY         By /s/ Casey Garten -------------------------------------------------------------------------------- By: /s/ Sam Wai --------------------------------------------------------------------------------         Title Vice President -------------------------------------------------------------------------------- Title: Treasurer -------------------------------------------------------------------------------- Exhibit A LETTER OF CREDIT REIMBURSEMENT AGREEMENT In consideration of CoBank issuing one or more letters of credit (each a "Credit") for the Company's account under the Supplement to which this agreement is attached (the “Supplement”), the Company agrees as follows: 1.          The Company will pay to CoBank in United States currency and in immediately available funds the amount of each draft drawn or instrument paid under a Credit.  In addition, the Company agrees to pay to CoBank such fee for issuing each Credit as CoBank shall prescribe, as well as all customary charges associated with the issuance of a Credit.  If a Credit is payable in a foreign currency, the Company will pay to CoBank an amount in United States currency equivalent to CoBank's selling rate of exchange for that currency.  In addition to the amounts set forth above, the Company shall pay to CoBank such amounts as CoBank shall determine are necessary to compensate CoBank for any cost attributable to CoBank issuing or having outstanding any Credit resulting from the application of any law or regulation concerning any reserve, assessment, capital adequacy or similar requirement relating to letters of credit, reimbursement agreements with respect thereto, or to similar liabilities or assets of banks, whether existing at the time of the issuance of a Credit or adopted thereafter.  Each payment hereunder shall be payable on demand at the place and manner set forth in the Master Loan Agreement between the parties (the “MLA”) and with interest from the date of demand to the date paid at CoBank's National Variable Rate.  The Company hereby authorizes CoBank to create a loan under the Supplement bearing interest at the variable rate set forth therein for any sums owing hereunder. 2.          Neither CoBank nor any of its correspondents shall in any way be responsible for the performance by any beneficiary of its obligations to the Company nor for the form, sufficiency, correctness, genuineness, authority of the person signing, falsification or legal effect of any documents called for under a Credit if such documents on their face appear to be in order.  In addition, CoBank and its correspondents may receive and accept or pay as complying with the terms of a Credit any drafts, documents, or certificates, otherwise in order, signed by any person purporting to be an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, or other legal representative of the party authorized under a Credit to draw or issue such instruments or other documents. 3.          In the event the Credit is a commercial Credit, then, in addition to the other provisions hereof, the Company:  (i) agrees to obtain or cause to be in existence insurance on any merchandise described in the Credit against fire and other usual risks and against any additional risks which CoBank may request; and (ii) authorizes and empowers CoBank to collect the amount due under any such insurance and apply the same against any of the Company’s  obligations to CoBank arising under the Credit or otherwise.  In addition, whether the Credit is a commercial or a standby Credit, the Company represents and warrants that any required import, export or foreign exchange licenses or other governmental approvals relevant to the Credit and the merchandise described therein have been obtained and that the transactions contemplated thereby are not prohibited under any  law, rule, regulation, order or the like, including the Foreign Assets Control Regulations of the U.S. Department of Treasury. 4.          All directions and correspondence relating to a Credit are to be sent at the Company’s risk and CoBank does not assume any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by post, telegraph, cable or other electronic means, or for any inaccuracy of translation. 5.          CoBank shall not be responsible for any act, error, neglect, default, omission, insolvency or failure in business of any of its correspondents, and any action taken or omitted by CoBank or its correspondents under or in connection with a Credit shall, if taken or omitted with honesty in fact, be binding on the Company and shall not put CoBank or its correspondents under any resulting liability to the Company.  In no event shall  CoBank be liable for special, consequential or punitive damages. 6.          The Company will indemnify CoBank against and hold it harmless from all loss, damage, cost, and expense (including attorneys’ fees and expenses) arising out of (i) its issuance of or any other action taken by CoBank in connection with a Credit, other than loss or damage resulting from its gross negligence or willful misconduct, and (ii) claims or legal proceedings incident to the collection of amounts owed by the Company hereunder, or the enforcement of CoBank’s rights or the rights of others under a Credit, including, without limitation, legal proceedings relating to any court order, injunction or other process or decree restraining or seeking to restrain CoBank from paying any amount under a Credit. 7.          In the event:  (i) the Company fails to make any payment owing hereunder when the same shall become due and payable; (ii) any covenant or representation or warranty set forth herein is breached; (iii) the “Commitment” (as defined in the Supplement) expires prior to the expiration date of any Credit; or (iv) an “Event of Default” (as defined in the MLA) occurs under the MLA, then, in any such event, the amount of each Credit, together with any amounts payable by us in connection therewith, shall, at CoBank’s option, become immediately due and payable. To the extent that any amount paid by the Company pursuant to this Section 7 shall not then be due under the terms of a Credit, such payment shall serve as security for the Company’s obligation to indemnify CoBank for any amounts subsequently disbursed by CoBank pursuant to a Credit.  Furthermore, upon the institution of any legal proceeding described in Section 6(ii) hereof, the Company will, on demand, assign and deliver to CoBank, as security for the Company’s obligation to indemnify CoBank, cash collateral in an amount satisfactory to CoBank. 8.          CoBank shall be fully protected in, and shall incur no liability to the Company for acting upon, any oral, telephonic, facsimile, cable or other electronic instructions which CoBank in good faith believes to have been given by any authorized person.  CoBank may, at its option, use any means of verifying any instructions received by it and may also, at its option, refuse to act on any oral, telephonic, facsimile, cable or other electronic instructions or any part thereof, without incurring any responsibility for any loss, liability or expenses arising out of such refusal. 9.          The Uniform Customs and Practice as most recently published by the International Chamber of Commerce (hereafter called the "UCP") shall in all respects be deemed a part hereof as fully as if incorporated herein, and shall apply to the Credits.  To the extent the UCP is inconsistent with the governing law set forth in the MLA, the UCP shall control. (to be placed on Company letterhead)   AMERICAN CRYSTAL SUGAR COMPANY COMPLIANCE CERTIFICATE To induce CoBank to make and continue making advances to the Company and to comply with and demonstrate compliance with the terms, covenants, and conditions of the Loan Agreement and all Supplements thereto, this financial statement is furnished to the Bank.  The undersigned certifies that, (i) this statement was prepared from the books and records of the Association, is in agreement with them, and is correct to the best of the undersigned’s knowledge and belief, and (ii) no event has occurred which, with notice or lapse of time, or both, might become an Event of Default under the Loan Agreement.   AMERICAN CRYSTAL SUGAR   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Date   (Name/Title) [Form of Compliance Certificate] American Crystal Sugar Company Quarterly Compliance Certificate Term and Seasonal Loans Net Working Capital:    a) Current Assets as measured in accordance with GAAP $________________      b) Current Liabilities as measured in accordance with GAAP $________________         Net Working Capital (a-b) $________________                Minimum Net Working Capital Required for fiscal quarters other than fiscal year end = $15,000000.              Minimum Net Working Capital Required for fiscal year end = $35,000,000. -------------------------------------------------------------------------------- Long-Term Debt Coverage: Net Funds             Year 1 Year 2 Year 3         a) Unit retains +                                   b) Depreciation and amortization +                                   c) Net income from non-member business and member business tax timing differences +                                   d) Decrease in investments in other cooperatives (excluding subsidiaries) +                                   e) Net revenue from the sale of stock +                                   f) Increase in investments in other cooperatives (excluding subsidiaries) (            ) (            ) (            )                     g) Net loss from non-member business and member business tax timing differences (            ) (            ) (            )                     h) Provision for income tax (            ) (            ) (            )                     i) Members’ investment retirements (            ) (            ) (            )                 Sum (a through i) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------                   Average Net Funds $_______ j                 Long-term Debt $_______ k                 Ratio (k / j) _______: 1 Long-Term Debt to Capitalization:       a) Long-term debt (excluding current maturities) as determined in accordance with GAAP $_______________                 b) Total equity as measured in accordance with GAAP $_______________                 c) Capitalization (a + b) $_______________           Long-Term Debt to Capitalization (a / c) _____________:1.0   Leverage Ratio (Term Pricing Only)       a) Long-term Debt $_______________                 b) Actual Less Minimum Net Working Capital $_______________                 c) Adjusted Long-term Debt (a – b) $_______________                 d) Total Member Investment $_______________                 e) Estimated Unit Retains $_______________                 f) Adjusted Members Investment (d + e) $_______________                 g) Adjusted Leverage Ratio (c / f) _____________:1.0   Pricing Grid (Term Only) A.  >  1.35:1 _______    B.  1.20:1 ________    C.  <  1.20:1 ________    D.  <  1.0:1 _______

Exhibit 10.35 SEPARATION AGREEMENT              This Separation Agreement (“Agreement”) is made between Credence Systems Corporation (“CSC”) and Dennis Wolf (“ Wolf”). RECITALS              WHEREAS, Wolf has been employed by CSC as its Chief Financial Officer since March 1998, and has voluntarily resigned from such employment effective December 15, 2000 (the “Termination Date”);              WHEREAS, Wolf and CSC wish to preserve the goodwill between them and to resolve any and all disputes that exist or may in the future exist between them, arising from or relating to Wolf’s employment with CSC and his resignation; and              THEREFORE, in consideration for the promises and benefits described below, CSC and Wolf (the “Parties”) agree as follows: AGREEMENTS I.  Agreements of CSC         A.  Post-Termination Payments. Provided that this Agreement becomes effective, CSC shall pay Wolf after the Termination Date, bi-weekly installment payments in the gross amount of three thousand six hundred ninety-two dollars and thirty-one cents ($3,692.31), subject to tax withholdings and in accordance with its regular payroll schedule, until the earlier of:               1.  the date Wolf commences other employment or consulting with another employer, company, entity or person, or               2.  December 15, 2001, or               3.  the date Wolf breaches any term of this Agreement or any term of the Proprietary Information and Inventions Agreement signed by Wolf in connection with his employment with CSC (“PIIA”).         B.  COBRA Continuation Coverage. Provided that this Agreement becomes effective and Wolf and/or his eligible dependents timely elects to continue existing coverage under CSC group health plans for the period after December 31, 2000, pursuant to the federal law known as COBRA, CSC shall pay the monthly premiums due on behalf of Wolf and/or his eligible dependents for the period beginning January 1, 2001 through the earlier of:               1.  the date Wolf is eligible to participate in another employer’s health benefit program, or               2.  December 31, 2001, or               3.  the date Wolf breaches any term of this Agreement or any term of the PIIA.         C.  Pay-out of Deferred Compensation. Per Wolf’s request, CSC shall pay to Wolf on January 2, 2001, the total balance of Wolf’s account in the Credence Systems Deferred Compensation Plan, valued as of December 29,2000. Such payment shall be subject to all applicable tax withholdings. II.  Agreements of Wolf         A.  Notice of Employment/Consultation. Wolf shall provide CSC with written notice, pursuant to Section III.E., below, no later than two (2) calendar days after he accepts other employment or consulting with another employer, company, entity or person, which written notice shall contain:               1.  the date Wolf shall commence such employment or consulting; and 1 --------------------------------------------------------------------------------               2.  the date on which Wolf will be eligible to participate in another employer’s, company’s, entity’s or person’s health benefit program.         B.  General Release. Wolf hereby fully and forever waives, releases, acquits and discharges CSC, including its officers, directors, agents, stockholders, employees, affiliates, representatives, predecessors, successors and assigns, from any and all claims, actions, charges, complaints, grievances and causes of action of whatever nature, whether known or unknown, which exist or may in the future exist arising from or relating to events, acts or omissions through the Effective Date of this Agreement, his employment with CSC and the termination thereof, including but not limited to: claims of breach of contract, breach of the covenant of good faith and fair dealing, wrongful termination, unpaid wages, violation of public policy, fraud, intentional or negligent misrepresentation, defamation, personal injury, infliction of emotional distress, and claims under Title VII of the 1964 Civil Rights Act, the Equal Pay Act of 1963, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Civil Rights Act of 1866, the Employee Retirement Income Security Act of 1974, the Family Medical Leave Act, the New York State Human Rights Law and any other local, state and federal laws and regulations relating to employment, except:               1.  any claim Wolf may have for unemployment insurance benefits;               2.  any claim Wolf may have for workers’ compensation insurance benefits under any CSC policy of worker’s compensation insurance;               3.  any claim Wolf may have to any employee benefit, under any employee benefit plan, that vested on or prior to the Termination Date; and               4.  any claim Wolf may have to stock and stock options that vested as of the Termination Date pursuant to existing stock option agreements with CSC.         Wolf understands and agrees that if, hereafter, he discovers facts different from or in addition to those which he now knows or believes to be true, that the waivers and releases of this Agreement shall be and remain effective in all respects notwithstanding such different or additional facts or the discovery of such fact. Wolf agrees that he fully and forever waives any and all rights and benefits conferred upon him by Section 1542 of the Civil Code of the State of California which states as follows (parentheticals added): A general release does not extend to claims which the creditor [i.e., Wolf] 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 [i.e., CSC].         C.  Return of CSC Documents & Property. Wolf agrees that he has returned to CSC no later than the Effective Date of this Agreement, to CSC, any and all documents (paper and electronic) created and received by Wolf during the course of his employment with CSC (including any documents of its subsidiaries), as well as all items of CSC property (including property of its subsidiaries) provided for his use during the course of his employment with CSC, including but not limited to keys and security cards, telephone and credit cards, computer and office equipment. The only exceptions are:               1.  copies of records evidencing the terms, conditions and payment of compensation and benefits during his employment with CSC;               2.  copies of documents evidencing the grant of stock options, and the terms and conditions of such grant(s);               3.  copies of documents provided to shareholders of CSC;               4.  copy of the PIIA; and               5.  copy of this Agreement.         D.  Transition Assistance. After the Termination Date, Wolf shall provide reasonable consultation and assistance as requested by CSC for the purpose of successfully transitioning Wolf’s prior duties and responsibilities to a newly hired Chief Financial Officer. 2 --------------------------------------------------------------------------------         E.  Cooperation in Legal Matters. After the Termination Date, Wolf shall provide information and cooperate, as reasonably requested by CSC, in connection with any legal action involving CSC and arising from or relating in any way to Wolf’s employment with CSC.         F.  Nondisclosure of Agreement. Wolf agrees that he will not disclose to others the fact or terms of this Agreement, except that he may disclose such information to his spouse, and to his attorneys and/or accountants in order for such individuals to render professional services to him. However, each such person may not disclose to any other person the fact or terms of this Agreement, Wolf is responsible for ensuring that they do not make any such disclosures, and any disclosure by such person shall be deemed to be a disclosure by Wolf.         G.  Notice of Resignation. Wolf shall substitute the December 16, 2000 notice of resignation he previously submitted to CSC with the form of notice of resignation attached hereto.         H.  PIIA. Wolf shall, at all times in the future, remain bound by the PIIA he signed in connection with his employment with CSC.         I.  Material Inducements; Breach by Wolf. Wolf hereby agrees and acknowledges that the releases, waivers and promises contained in this Agreement, including the promises of assistance, non-disclosure and confidentiality, and compliance with the PIIA, are material inducements for the consideration described in Section I. above, and that for the breach thereof by Wolf, CSC shall be entitled to recover from Wolf all amounts paid to and on behalf of Wolf pursuant to Section I.A. and Section I.B. III.  Agreements and Acknowledgements of the Parties         A.  Voluntary Termination & Final Wages. Wolf’s employment with CSC terminated, by Wolf’s voluntary resignation, at the close of business on December 15, 2000, after which he received all wages earned, including any accrued but unused paid-time-off (“PTO”), through that date.         B.  Employee Benefits. Wolf’s participation in all employee benefits terminated at close of business on the Termination Date, except that Wolf and his dependents (if any) may continue coverage in CSC’s group health benefit plans through December 31, 2000, and after December 31, 2000, Wolf and his dependents (if any) may elect to continue coverage in CSC’s group health benefit plans pursuant to the federal law known as COBRA.         C.  Stock Options. During his employment, Wolf was granted certain options to purchase shares of CSC common stock. All vesting of such option shares ceased on the Termination Date, at which time Wolf was vested in an aggregate of 77,500 option shares. All pre-existing terms and conditions applicable to such vested option shares remain in effect, including the post termination period during which Wolf must exercise all vested option shares.         D.  Disparagement. Neither Wolf nor CSC, through any of its executives, officers or directors, will make any negative or disparaging statements or comments, either as fact or as opinion, about the other. With respect to statements or comments by Wolf about CSC, such statements or comments include but are not limited to CSC, its subsidiaries, employees, officers, directors, shareholders, vendors, products or services, business, technologies, market position, finances, operations, performance and other similar information concerning CSC. Wolf agrees that he will refer all inquiries by any prospective employer to Dennis Hopwood, Vice President, Human Resources, for information regarding Wolf’s past employment with CSC.         E.  Notices. All written notices pursuant or relating to this Agreement shall be provided by email, facsimile or overnight delivery as follows:               1.  To CSC:   Dennis Hopwood Vice President Human Resources Credence Systems Corporation 5975 Northwest Pinefarm Place Hillsboro, OR 97124       Facsimile: 503-466-7206 Email: [email protected]     3 --------------------------------------------------------------------------------               2.  To Wolf:   Dennis Wolf 6482 Pfeiffer Ranch Court San Jose, CA 95120     Facsimile: _________________ Email: [email protected]             F.  Severability. If any provision, or portion of a provision, of this Agreement is, for any reason, held to be unenforceable, that such unenforceability will not affect any other provision, or portion of a provision, of this Agreement and this Agreement shall be construed as if such unenforceable provision or portion had never been contained herein.         G.  Assignment. This Agreement shall not be assignable by either Wolf or CSC without the express written consent of the other.         H.  Resolution of Disputes. The Parties each agree that any and all disputes which arise out or relate to this Agreement or any of the subjects hereof, except any of the subjects covered by the PIIA , unemployment or worker’s compensation insurance benefits, shall be resolved through final and binding arbitration . Binding arbitration will be conducted in accordance with the rules and regulations of the American Arbitration Association (“AAA”) then in effect relative to commercial disputes provided, however, that the arbitrator(s) shall allow the discovery authorized by California Code of Civil Procedure section 1282 et seq., or any other discovery required by law in arbitration proceedings. Also, to the extent that any of the AAA rules conflict with any arbitration procedures required by applicable law, the arbitration procedures required by applicable law shall govern. Binding arbitration shall be conducted in San Jose, California; if, however, Wolf does not reside within 100 miles of San Jose, California, at the time the dispute arises, then the arbitration may take place in the largest metropolitan area within fifty (50) miles of Wolf’s place of residence when the dispute arose. The Parties will share equally the cost of the arbitration filing and hearing fees and the cost of the arbitrator(s); and each side will bear its own attorneys’ fees although the arbitrator may award the prevailing party his/its reasonable attorneys fees and costs of arbitration. The arbitrator shall issue a written award that sets forth the essential findings and conclusions on which the award is based. The Arbitrator shall have the authority to award any relief authorized by law in connection with the asserted claims or disputes. The Arbitrator’s award shall be subject to correction, confirmation, or vacation, as provided by any applicable law setting forth the standard of judicial review of arbitration awards. The Parties each understand and agree that arbitration shall be instead of any civil litigation, that each side waives its right to a jury trial, and that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law and enforceable by any court having jurisdiction thereof.         I.  Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of California.         J.  Voluntary Execution of Agreement. This Agreement is the result of negotiations between Wolf and CSC and it is executed by each without duress, knowingly and voluntarily, and with full appreciation of the rights and obligations being created and/or waived herein.         K.  Time to Consider Agreement; Effective Date of Agreement. Wolf may have twenty-one (21) days after receipt of this Agreement within which he may review and consider, and should discuss with an attorney of my own choosing, and decide whether or not to sign it. In addition, for the period of seven (7) days after Wolf signs this Agreement, he may revoke it by delivering a written notice of his revocation, no later than the seventh day, consistent with Section III.E, above. The Effective Date of this Agreement shall be the eighth (8th) day after Wolf has signed it, provided that he has delivered it to CSC and he has not revoked it during the seven (7) days after he signed it. 4 --------------------------------------------------------------------------------         L.  Modification & Entire Agreement. This Agreement may not be modified or changed, in whole or part, except by another written agreement signed by Wolf and CSC’ s President and/or Chief Executive Officer. This Agreement contains the entire agreement between the Parties with respect to the subject matters covered and referred to herein, and it supersedes any and all previous oral or written agreements between them except the PIIA which shall remain in full force and effect in accordance with its own terms.     Dated:           --------------------------------------------------------------------------------     Dennis Wolf     CREDENCE SYSTEMS CORPORATION Dated:   By:        --------------------------------------------------------------------------------     Graham J. Siddall President and Chief Executive Officer 5 -------------------------------------------------------------------------------- December 16, 2000 Dr. Graham Siddall President & CEO Credence Systems Corporation Dear Graham,              Due to my deteriorating health situation, I must immediately resign from my employment with Credence Systems Corporation (“Credence”). I also must immediately resign from all other positions, offices, directorships, trusteeships and other posts I hold with Credence and with any of its affiliates and subsidiaries.              I would like to thank you for your support, Graham, and wish to support you in any way that I can during the transition. Respectfully, Dennis P. Wolf Executive Vice President and CFO Credence Systems Corporation 6

QuickLinks -- Click here to rapidly navigate through this document AMENDMENT NUMBER TWO TO AMENDED AND RESTATED CREDIT AGREEMENT     THIS AMENDMENT NUMBER TWO TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment") is made as of May 30, 2001, by and among BANK OF AMERICA, N.A., a national banking association, U.S. BANK NATIONAL ASSOCIATION, a national banking association, KEYBANK NATIONAL ASSOCIATION, a national banking association (the "Lenders"), BANK OF AMERICA, N.A., as agent for the Lenders (the "Agent"); and FLOW INTERNATIONAL CORPORATION, a Washington corporation ("Borrower"). RECITALS     A.  Lenders, Agent and Borrower are parties to that certain Amended and Restated Credit Agreement dated as of December 29, 2000, as amended by that certain First Amendment to the Amended and Restated Credit Agreement dated as of February 28, 2001 (the "Credit Agreement").     B.  Borrower intends to enter into the sale of senior subordinated notes with detachable warrants that would be subordinated to the Senior Funded Debt under the Credit Agreement.     NOW, THEREFORE, the parties hereto agree as follows: AGREEMENT     1.  Definitions. Capitalized terms not otherwise defined in this Amendment shall have the meaning set forth in the Credit Agreement.     2.  Amendment to definition of "Applicable Percentage". Section 1.1 is hereby amended by deleting the matrix in the definition of "Applicable Percentage" and replacing it with the following: Pricing Level --------------------------------------------------------------------------------   Applicable Percentage with respect to the LIBOR Rate or Multi-Currency Rate --------------------------------------------------------------------------------   Applicable Percentage with respect to the Unused Portion -------------------------------------------------------------------------------- I   1.30%   25 basis points II   1.40%   25 basis points III   1.50%   25 basis points IV   2.50%   37.5 basis points     3.  Amendment to definition of "Base Rate". The definition of Base Rate is hereby deleted entirely and replaced with the following: "Base Rate" means the prime rate. (The "prime rate" is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. 1 --------------------------------------------------------------------------------     4.  Amendment to definition of "Pricing Level". Section 1.1 is hereby amended by deleting the matrix in the definition of "Pricing Level" and replacing it with the following: Pricing Level --------------------------------------------------------------------------------   Senior Funded Debt Ratio as of the end of the previous fiscal quarter -------------------------------------------------------------------------------- I   Less than 1.00:1 II   Equal to or greater than 1.00:1 and less than 2.00:1 III   Equal to or greater than 2.00:1 and less than 3.00:1 IV   Equal to or greater than 3.00:1     5.  Amendment to definition of "Senior Funded Debt". Section 1.1 is hereby amended by deleting the definition of "Senior Funded Debt" entirely and replacing it with the following: "Senior Funded Debt" means, (i) for the fiscal quarter ending as at April 30, 2001, the sum of Funded Debt less thirty-five million dollars ($35,000,000.00); and (ii) for any fiscal quarter ending as at July 31, 2001 and thereafter, the sum of Funded Debt less the unpaid principal amount of the Senior Subordinated Notes, each as of the end of such fiscal quarter.     6.  Addition of definition of "Senior Subordinated Notes". Section 1.1 is hereby amended by adding the definition of "Senior Subordinated Notes as follows: "Senior Subordinated Notes" means the "Notes" issued in connection with, and as defined in, the Subordinated Note Purchase Agreement, as approved by the Lenders and Agent.     7.  Deletion of definition of "Senior Unsecured Debt". Section 1.1 is hereby amended by deleting the definition of "Senior Unsecured Debt".     8.  Deletion of definition of "Subordinated Debt". Section 1.1 is hereby amended by deleting the definition of "Subordinated Debt".     9.  Addition of definition of "Subordinated Note Purchase Agreement". Section 1.1 is hereby amended by adding the following definition: "Subordinated Note Purchase Agreement" means, collectively, the agreements providing for the purchase of an aggregate principal amount of $35,000,000 of the Borrower's 13% Senior Subordinated Notes due April 30, 2008 and Warrants to Purchase Common Stock between Borrower and the Purchasers identified therein.     10. Amendment to Section 6.13. Section 6.13 is hereby amended by deleting the first sentence and replacing it with the following: As of the end of each fiscal quarter, Borrower shall maintain, on a consolidated basis, a Funded Debt Ratio of not more than 4.50 to 1.     11. Amendment to Section 6.14. Section 6.14 is hereby amended by deleting the last sentence and replacing it with the following: "Minimum Net Worth" shall mean $27,800,000, plus cumulative quarterly increases equal to fifty percent (50%) of Borrower's net income for all fiscal quarters ending on or after July 31, 1999, excluding any adjustments thereto for losses, plus all amounts contributed to Borrower as outside capital investments at any time after September 1, 1999. 2 --------------------------------------------------------------------------------     12. Amendment to Section 6.15. Section 6.15 is hereby amended by deleting the last sentence and replacing it with the following: As used herein, "Debt" shall mean, on a consolidated basis, all liabilities of Borrower as determined and computed in accordance with GAAP other than the Senior Subordinated Notes, and for clarification purposes only, minority interests.     13. Amendment to Section 6.17. Section 6.17 is hereby amended by deleting subclauses (d) and (e) entirely and replacing them with the following: (d)  3.50 to 1 as at the fiscal quarters ending April 30, 2001, July 31, 2001 and October 30, 2001; (e) 3.25 to 1 as at the fiscal quarters ending January 31, 2002 and April 30, 2002; and (f) 3.00 to 1 as at the fiscal quarters ending July 31, 2002 and thereafter.     14. Amendment to Section 7.3(f). Section 7.3(f) is hereby deleted entirely and replaced with the following: (f)  Senior Subordinated Notes, the principal of which when taken together does not exceed, in the aggregate, at any one time outstanding, Thirty-Five Million Dollars ($35,000,000), and     15. Amendment to Section 7.4. Section 7.4 is hereby deleted entirely and replaced with the following: Except for the guaranties set forth on Schedule 4 hereto or the fully subordinated guaranties delivered pursuant to Section 9.10 of the Subordinated Note Purchase Agreement or as set forth on Schedule 10.5 of the Subordinated Note Purchase Agreement, neither Borrower nor any Guarantor shall assume, guaranty, endorse or otherwise become directly or contingently liable for, or obligated to purchase, pay or provide funds for payment of, any obligation or Indebtedness of any other person, other than by endorsement of negotiable instruments for deposit or collection or by similar transactions in the ordinary course of business.     16. Amendment to Section 7.9. Section 7.9 is hereby amended by deleting it entirely and replacing it with the following: Section 7.9 Senior Subordinated Notes. Borrower shall maintain no funds on deposit with, shall not acquire any certificates of deposit or other financial instruments from, nor hold any Indebtedness owing to Borrower by, any holder of any Senior Subordinated Note unless such holder shall first have executed a written agreement in favor of Lenders (in form and substance acceptable to Lenders) subordinating or waiving its rights to set-off or to assert any "bankers lien."     17. Amendment to Section 8.1. Section 8.1 is hereby amended by adding the following as a new subsection (n): (n)  Prepayment of Principal Default. Borrower shall pay any portion of the principal of the Senior Subordinated Notes before April 30, 2004.     18. Amendment Fee to Bank of America and U.S. Bank. Borrower shall pay to Agent for the benefit of Bank of America, a fee in the amount of 10 basis points of such Lender's Pro Rata Share of the Total Revolving Commitment and Borrower shall pay to Agent for the benefit of U.S. Bank, a fee in the amount of 10 basis points of such Lender's Pro Rata Share of the Total Revolving Commitment (such fees being collectively referred to as the "Amendment Fee"). KeyBank shall not be entitled to any portion of the Amendment Fee. Borrower's obligation to pay the Amendment Fee under this Section 18 shall constitute an amount payable under the Credit Agreement for the purpose of Section 8.1(a) thereof. 3 --------------------------------------------------------------------------------     19. Conditions to Effectiveness. This Amendment shall become effective when: (i) Borrower has paid the Amendment Fee to Agent; (ii) Borrower, Agent and each Lender have executed and delivered counterparts hereof to Agent; and (iii) Borrower has executed and delivered the Subordinated Note Purchase Agreement and the Note Indebtedness (as defined therein) has been fully disbursed to Borrower and the net proceeds thereof have been applied to reduce the principal amount of the Senior Funded Debt.     20. Representations and Warranties. Borrower hereby represents and warrants to the Lenders and Agent that each of the representations and warranties set forth in Article 5 of the Credit Agreement is true and correct in each case as if made on and as of the date of this Amendment and Borrower expressly agrees that it shall be an additional Event of Default under the Credit Agreement if any representation or warranty made hereunder shall prove to have been incorrect in any material respect when made.     21. Amendments to Other Loan Documents. The parties hereto agree that the Security Agreement covers, and the term "Collateral" (as defined therein) shall include, without limitation, letter of credit rights, deposit accounts and promissory notes as such terms are defined in the Washington State Uniform Commercial Code, as amended from time to time (the "UCC"). Parties hereto further agree terms used in the Security Agreement that are defined in the UCC shall be defined as set forth in the UCC.     22. No Further Amendment. Except as expressly modified by the terms of this Amendment, all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and the parties hereto expressly reaffirm and ratify their respective obligations thereunder.     23. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Washington.     24. 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 one and the same agreement.     25. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. 4 -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have executed this Amendment Number One to Amended and Restated Credit Agreement as of the date first above written. BORROWER:   FLOW INTERNATIONAL CORPORATION               By:             -------------------------------------------------------------------------------- Name: Stephen D. Reichenbach Title:  Chief Financial Officer           LENDERS:   BANK OF AMERICA, N.A.               By:             -------------------------------------------------------------------------------- Name: William P. Stivers Title:  Senior Vice President               U.S. BANK NATIONAL ASSOCIATION               By:             -------------------------------------------------------------------------------- Name: Allan Forney Title:   Vice President               KEYBANK NATIONAL ASSOCIATION               By             -------------------------------------------------------------------------------- Name: Jason R. Gill Title:  Vice President           AGENT:   BANK OF AMERICA, N.A.               By:             -------------------------------------------------------------------------------- Name: Ken Puro Title:  Vice President 5 -------------------------------------------------------------------------------- QuickLinks AMENDMENT NUMBER TWO TO AMENDED AND RESTATED CREDIT AGREEMENT RECITALS AGREEMENT

  Exhibit 10.43 EMPLOYMENT AGREEMENT      This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the first day of January, 2001, by and between ISCO International, Inc., a Delaware corporation (the “Company”), and Charles F. Willes (the “Employee”). W I T N E S S E T H :      WHEREAS, the Employee is now employed by the Company as the Chief Financial Officer;      WHEREAS, the Company wishes to ensure that it will continue to have the benefits of the Employee’s services on the terms and conditions hereinafter set forth; and      WHEREAS, the Employee desires to continue to work for the Company on the terms and conditions hereinafter set forth;      NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto hereby agree as follows:           1.     Employment; Term. The Company hereby employs the Employee, and the Employee hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth herein. The term of this Agreement shall commence on the date hereof (the “Effective Date”) and, unless earlier terminated in accordance with Paragraph 5, shall end on December 31, 2003, with the term of employment being that period between the Effective Date and December 31, 2003 (that period, as extended pursuant to the following sentence, the “Term”). As of January 1, 2004, and as of each subsequent January 1st, (each an “Automatic Renewal Date”), unless either party shall have given to the other written notice of non-extension at least sixty (60) days prior to such Automatic Renewal Date, the Term shall, unless earlier terminated in accordance with Paragraph 5, extend automatically for a period of one (1) year to the anniversary of the then otherwise scheduled expiration date of this Agreement. If there is a “Change of Control” (as defined in Paragraph 6(e) below), the Term shall, unless earlier terminated in accordance with Paragraph 5, extend automatically to the second anniversary of the date of the Change of Control, provided that the second anniversary of the date of the Change of Control is later than the last day of the Term as determined without regard to the Change of Control. Certain provisions of this Agreement shall continue in effect after the Term as specifically set forth herein.           2.     Employment.   (a)   The Employee shall serve as the Company’s Chief Financial Officer and, effective August 22, 2001, Executive Vice President. The Employee shall report to the Chief Executive Officer of the Company.   --------------------------------------------------------------------------------     (b)   The Employee shall have such authority and responsibility as may reasonably be assigned by the Chief Executive Officer or the Board of Directors of the Company (the “Board”).     (c)   During the period the Employee is employed by the Company, the Employee shall devote the Employee’s normal full business time and attention to the business and affairs of the Company and use the Employee’s best efforts to perform faithfully the duties and responsibilities of the Employee’s position as described herein. 3.     Compensation.   (a)   The Company shall pay the Employee a base salary (the “Base Salary”) of not less than Two Hundred Thousand Dollars ($200,000) per annum, payable at least monthly, in accordance with the Company’s payroll practices less such deductions as shall be required to be withheld by applicable law and regulations. The Board shall conduct an annual review of the Employee’s Base Salary and Bonus (as defined in Paragraph 3(b)below), but in no event shall the Base Salary be decreased without the consent of the Employee. Any increase in the Base Salary or increase in the Bonus percentage shall be in the sole discretion of the Board.     (b)   Subject to Paragraph 6(c) hereof, for each calendar year completed during the Term, the Employee shall be eligible to receive a bonus (the “Bonus”) of an amount up to 50% of the Base Salary for such year. The amount of the Bonus payable to the Employee for a particular year, if any, shall be based on the accomplishment of corporate and individual performance goals as determined by the Board. The corporate and individual performance goals referenced in the preceding sentence shall be established by the Board and communicated to the Employee before the end of the first quarter of the applicable year. In the event of a disagreement over the attainment of such goals and objectives, the Compensation Committee of the Board, using reasonable judgement, shall have final authority to determine the award of the Bonus. The Bonus payable for a particular year, if any, shall be paid no later than March 15th of the following year and may be paid in cash, Company stock or a combination of the two as determined by the Board in its sole discretion.     (c)   In the event that the Company pays all or part of the Bonus in Company stock, the Board must allow the Employee, and the Employee must be able, to sell the Company stock in the open market on the date of the Bonus grant. The net proceeds (cash received from the sale of the Company stock less transaction fees) from the sale of the Company stock shall not be less than the dollar amount of the -2- --------------------------------------------------------------------------------         Bonus granted. In the event that the Employee is unable to sell the Company stock on the date of the Bonus grant through no fault of his own, the Company will pay the Bonus in cash.   4.     Benefits.   (a)   The Company agrees to reimburse the Employee for all reasonable and necessary travel, business entertainment and other business expenses incurred by the Employee in connection with the performance of the Employee’s duties under this Agreement. Such reimbursements shall be made by the Company within a reasonable time after submission by the Employee of vouchers in accordance with the Company’s standard policies and procedures.     (b)   The Employee shall be entitled to participate in any and all medical insurance, group health, disability insurance, pension and other similar benefit plans which are made generally available by the Company to its senior executives, which shall not be less favorable than those available to any other group of employees of the Company. The Company, in its sole discretion, may at any time amend or terminate its benefit plans or programs.     (c)   The Employee shall be entitled to receive four (4) weeks of annual paid vacation in accordance with the Company’s vacation policy for its senior executives. The Employee shall be entitled to all paid holidays the Company makes available to its employees.   5.     Termination. The Employee’s employment hereunder may be terminated prior to the end of the Term under the following circumstances:           (a)  Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.           (b)  Total Disability. The Company may terminate the Employee’s employment hereunder at any time after the Employee’s “Total Disability.” “Total Disability” means (i) the Employee becomes entitled to receive disability benefits under the Company’s long-term disability plan, or, in the absence of such a plan, (ii) the Employee’s inability to perform the duties and responsibilities contemplated under this Agreement for a period of more than one hundred eighty (180) consecutive days due to physical or mental incapacity or impairment. Such termination shall become effective five (5) business days after the Company gives notice of such termination to the Employee, or to the Employee’s spouse or legal representative (in case of mental incapacitation).           (c)  Termination by the Company With or Without Cause. The Company may terminate the Employee’s employment hereunder with or without Cause at any time after the Company provides thirty (30) days’ written notice (or a shorter period of time, to be determined in good faith by the Board to be essential to prevent serious damage to the -3- --------------------------------------------------------------------------------   Company) to the Employee to such effect. The term “Cause” shall mean any of the following: (i) willful malfeasance or willful misconduct by the Employee in connection with the Employee’s employment; (ii) the Employee’s gross negligence in performing any of the Employee’s duties under this Agreement; (iii) the Employee’s conviction of, or entry of a plea of guilty to, or entry of a plea of nolo contendere with respect to any crime other than a traffic violation or infraction which is a misdemeanor; (iv) the Employee’s willful and continuing breach of any written policy applicable to all employees adopted by the Company, including, but not limited to, policies, concerning conflicts of interest, political contributions, standards of business conduct or fair employment practices, procedures with respect to compliance with securities laws or any similar matters, or adopted pursuant to the requirements of any government contract or regulation; or (v) any other material breach by the Employee of this Agreement after the Company provides written notification to the Employee of such breach and the Employee fails within five (5) days of receipt of such notification to cure the circumstances which gave rise to such breach.           (d)  Termination by the Employee With or Without Good Reason. The Employee’s employment hereunder may be terminated by the Employee as specified below with, or upon thirty (30) days’ prior notice without, Good Reason. For purposes of this Agreement, “Good Reason” means any of the following, without the consent of the Employee: (i) any change in, or diminution of, the Employee’s duties or responsibilities that is inconsistent in any material and adverse respect with the Employee’s duties and responsibilities as contemplated under Section 2 of this Agreement, provided that neither a change in the Employee’s title nor a change in the Employee’s duties and responsibilities alone, without a corresponding material and adverse change in the Employee’s duties or other responsibilities shall constitute Good Reason, and provided further that changes in reporting relationships of other employees to the Employee, including those which occur as a result of strategic business developments such as the sale of a business unit or the outsourcing of a business function, shall not be construed as “adverse” to the Employee for purposes of determining whether Good Reason exists; (ii) any reduction of the Employee’s Base Salary or maximum Bonus level; (iii) any other material breach by the Company of this Agreement after the Employee provides written notification to the Company of such breach and the Company fails within thirty (30) days of receipt of such notification to cure the circumstances which gave rise to such breach, or (iv) any requirement by the Company that the Employee relocate the Employee’s principal office (currently located in Mount Prospect, Illinois) to a location more than thirty-five (35) miles from the Employee’s principal office at the time the Company makes such request. Notwithstanding the foregoing, no act or omission by the Company shall constitute Good Reason hereunder unless the Employee gives the Company written notice thereof within thirty (30) days after he has actual knowledge of such act or omission, and the Company fails to remedy such act or omission within thirty (30) days after receiving such notice.      6.     Compensation Following Termination Prior to the End of the Term. In the event that the Employee’s employment hereunder is terminated prior to the end of the Term, the Employee shall be entitled only to the following compensation and benefits upon such termination: -4- --------------------------------------------------------------------------------                                 (a)  Termination by Reason of Death or Total Disability. In the event that the Employee’s employment is terminated prior to the expiration of the Term by reason of the Employee’s death or Total Disability, pursuant to Paragraph 5(a) or 5(b) hereof, respectively, the Employee (or the Employee’s spouse, designated beneficiary or estate, as the case may be) shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices, any unpaid Bonus previously awarded by the Board in respect of a completed calendar year pursuant to Paragraph 3(b) hereof and any accrued vacation up to the date of termination;     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof; and     iii.   the benefits to which the Employee and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements.                          (b)  Termination by the Company Without Cause or Termination by the Employee With Good Reason. In the event that the Employee’s employment is terminated by the Company without Cause pursuant to Paragraph 5(c) hereof, or by the Employee with Good Reason pursuant to Paragraph 5(d) hereof, the Employee shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices, any unpaid Bonus previously awarded by the Board pursuant to Paragraph 3(b) hereof and any accrued unpaid vacation;     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof;     iii.   subject to Paragraph 6(e) hereof, continued payment of the Base Salary (as determined under Paragraph 3(a) hereof) in accordance with the Company’s standard payroll practices for one (1) year following the date of such termination; provided that unless the Employee’s termination of employment by the Company without Cause or by the Employee with Good Reason occurs “in anticipation of a Change of Control” (as defined in Paragraph 6(e) below), or on or before the second anniversary of a Change of Control (as defined in Paragraph 6(e) below), such continued payments shall be offset by any salary, wage or similar payments paid or payable, directly or indirectly, to the Employee during the year following the date of termination from another employer or recipient of the Employee’s services (such payments being determined without regard to any individual waivers or other similar arrangements). -5- --------------------------------------------------------------------------------     iv.   the benefits to which the Employee and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements; and     v.   subject to Paragraph 6(e) hereof, continuation of health and insurance benefits (other than disability insurance benefits) for one (1) year following the date of such termination on the same terms and conditions as in effect immediately prior to the termination; provided that the Company shall not be required to provide benefits otherwise required by this clause (v) after such time as the Employee becomes entitled to receive benefits of the same type from another employer or recipient of the Employee’s services (such entitlement being determined without regard to any individual waivers or other similar arrangements).                               (c)  Termination by the Company for Cause or Termination by the Employee Without Good Reason. In the event that the Employee’s employment is terminated prior to the expiration of the Term of this Agreement by the Company for Cause pursuant to Paragraph 5(c) hereof or by the Employee without Good Reason pursuant to Paragraph 5(d) hereof, the Employee shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices and any accrued unpaid vacation;     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof; and     iii.   the benefits to which the Employee, designated beneficiary and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements. Notwithstanding the foregoing, in no event shall any unpaid Bonus previously awarded by the Board pursuant to Paragraph 3(b) hereof be paid following a termination by the Company for Cause pursuant to Paragraph 5(c) hereof or by the Employee without Good Reason pursuant to Paragraph 5(d) hereof.                               (d)  Termination due to Company’s Notice of Non-Extension. In the event that during the Term the Company provides the Employee with a notice of non-extension as described in Section 1 hereof, upon the termination of the Employee’s employment by the Company pursuant to such notice, the Employee shall be entitled to the following amounts or benefits:   i.   any accrued but unpaid Base Salary (as determined pursuant to Paragraph 3(a) hereof) for services rendered to the date of termination in accordance with the Company’s standard payroll practices, any accrued unpaid vacation and any -6- --------------------------------------------------------------------------------         unpaid Bonus previously awarded by the Board pursuant to Paragraph 3(b) hereof;     ii.   any incurred but unreimbursed expenses required to be reimbursed pursuant to Paragraph 4(a) hereof;     iii.   continued payment of the Base Salary (as determined under Paragraph 3(a) hereof) in accordance with the Company’s standard payroll practices for six (6) months following the date of such termination; provided that such continued payments shall be offset by any salary, wage, or similar payments paid or payable, directly or indirectly, to the Employee during the year following the date of termination from another employer or recipient of the Employee’s services (such payments being determined without regard to any individual waivers or other similar arrangements);     iv.   the benefits to which the Employee, designated beneficiary and/or the Employee’s family may be entitled upon such termination pursuant to the plans, programs and arrangements referred to in Paragraph 4 hereof, as determined and paid in accordance with the terms of such plans, programs and arrangements; and     v.   continuation of health and insurance benefits (other than disability insurance benefits) for six (6) months following the date of such termination on the same terms and conditions as in effect immediately prior to the termination; provided that the Company shall not be required to provide benefits otherwise required by this clause (v) after such time as the Employee becomes entitled to receive benefits of the same type from another employer or recipient of the Employee’s services (such entitlement being determined without regard to any individual waivers or other similar arrangements).                               (e)  Termination Upon or Following a Change of Control. If there is a “Change of Control” (as defined below) and the Employee’s employment is terminated by the Company without Cause or by the Employee with Good Reason prior to the expiration of the Term of this Agreement and “in anticipation of a Change of Control” (as hereinafter defined) or within two (2) years following a Change of Control, the words “two (2) years” shall replace the words “one (1) year” in clauses (iii) and (v) of Paragraph 6(b). For purposes of this Agreement, a Change of Control shall be deemed to have occurred if:   i.   the stock of the Company ceases to be registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended; or     ii.   the stockholders of the Company approve a definitive agreement (A) to merge or consolidate the Company with or into another corporation other than a majority-owned subsidiary of the Company, pursuant to which (x) the Company is not the surviving or resulting entity or (y) the persons who were the members of the Board prior to such approval do not represent a majority of the directors of the -7- --------------------------------------------------------------------------------         surviving, resulting or acquiring entity or the parent thereof, or (B) to sell or otherwise dispose of all or substantially all of the Company’s assets; or     iii.   during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board. For purposes of this Agreement, Employee’s termination of employment by the Company without Cause or by Employee with Good Reason shall be treated as “in anticipation of a Change of Control” if such termination occurs during the six-month period immediately preceding the date on which a Change of Control is consummated.                               (f)  No Other Benefits or Compensation. Except as may be specifically provided under this Agreement or under the terms of any incentive compensation, employee benefit or fringe benefit plan applicable to the Employee at the time of the termination of the Employee’s employment prior to the end of the Term, the Employee shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to any future period after such termination; provided, however, the benefits are the time of termination are at least equal to the benefits at the time of the signing of this Agreement.                               (g)  Waiver of Personal Liability. To the extent permitted by applicable law, Employee hereby acknowledges that he shall have recourse only to the Company (and its successors-in-interest) with respect to any claims he may have for compensation or benefits arising in connection with his employment, whether or not under this Agreement or under any other plan, program, or arrangement, including, but not limited to any agreement relating to the grant or exercise of stock options or other equity rights in the Company. To the extent permitted by applicable law, the Employee hereby waives any such claims for compensation, benefits and equity rights against officers, directors, stockholders or other representatives in their personal or separate capacities.      7.     Confidentiality, Ownership, and Covenants of Non-Competition and Non-Solicitation.                               (a)  Confidentiality. The Employee recognizes that the Company’s business interests require the fullest practical protection and confidential treatment of all information not generally known within the relevant trade group or by the public, including all documents, writings, memoranda, business plans, illustrations, designs, plans, processes, programs, inventions, computer software, reports, sources of supply, customer lists, supplier lists, trade secrets and all other valuable or unique information and techniques acquired, developed or used by the Company relating to its businesses, operations, employees and customers (hereinafter collectively termed “Protected Information”). The Employee expressly acknowledges and agrees that Protected Information constitutes trade secrets and confidential -8- --------------------------------------------------------------------------------   and proprietary business information of the Company. No Protected Information shall include information which is or becomes part of the public domain through no breach of this Agreement by the Employee. The Employee agrees that Protected Information is essential to the success of the Company’s business, and it is the policy of the Company to maintain as secret and confidential Protected Information which gives the Company a competitive advantage over those who do not know the Protected Information and is expressly and implicitly protected by the Company from unauthorized disclosure. Accordingly, the Employee agrees to keep secret Protected Information and to treat confidentially and not to knowingly permit any other entity to, directly or indirectly, appropriate, divulge, disclose or otherwise disseminate to any other entity nor use in any manner for the Employee, and not to intentionally use or aid others in using any such Protected Information in competition with the Company or its Affiliates except to the extent that disclosure is required by law; provided, however, that the Employee shall provide the Company with notice as far in advance of any required disclosure as is practicable in order for the Company to obtain an order for the assurance that any information required to be disclosed will be treated as Protected Information and the Employee shall use all reasonable efforts to cooperate with the Company in connection therewith and in furtherance thereof. The obligation of non-disclosure of information shall continue to exists for so long as such information remains Protected Information. For purposes of this Agreement, trade secrets are subject to the protection of the Illinois Trade Secret Act. The provisions of this Paragraph 7(a) are not intended to supersede or limit the effect of any prior confidentiality or proprietary rights agreements previously executed by the Employee including the Confidential Information, Proprietary Rights and Non-Competition Agreement between the Company and the Employee, a copy of which is attached hereto as Exhibit B. However, if there is any conflict between the terms and conditions of this Agreement and the Confidential Information, Proprietary Rights and Non-Competition Agreement attached hereto as Exhibit B, then the terms and conditions of this Agreement, as interpreted by the Board, shall govern.           (b)  Ownership. The Employee hereby assigns to the Company all of the Employee’s right (including patent rights, copyrights, trade secret rights, and all other rights throughout the world), title and interest in and to Inventions, whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by the Employee, either alone or jointly with others, during the course of the performance of services for the Company. The Employee shall also assign to, or as directed by, the Company, all of the Employee’s right, title and interest in and to any and all Inventions, the full title to which is required to be in the United States government by a contract between the Company and the United States government or any of its agencies. For the purpose of this Agreement, the term “Inventions” collectively refers to any and all inventions, trade secrets, improvements, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs, and techniques regarding any of the foregoing. The provisions of this Paragraph 7(b) are not intended to supersede or limit the effect of any prior confidentiality or proprietary rights agreements previously executed by the Employee including the Confidential Information, Proprietary Rights and Non-Competition Agreement between the Company and the Employee, a copy of which is attached hereto as Exhibit B. However, if there is any conflict between the terms and conditions of this Agreement and the Confidential Information, Proprietary Rights and Non-Competition -9- --------------------------------------------------------------------------------   Agreement attached hereto as Exhibit B, then the terms and conditions of this Agreement, as interpreted by the Board, shall govern.           (c)  Covenants of Non-Competition and Non-Solicitation. The Employee acknowledges that the Employee’s services pursuant to this Agreement are unique and extraordinary, that the Company will be dependent upon the Employee for the development and growth of its business and related functions, and that the Employee will continue to develop personal relationships with significant customers of the Company and to have control of confidential information concerning, and lists of customers of, the Company. The Employee further acknowledges that the business of the Company is international in scope and cannot be confined to any particular geographic area of the United States. For the foregoing reasons, the Employee covenants and agrees that at no time during the Restriction Period (as defined below) shall the Employee either alone or as a stockholder, partner, consultant, owner, agent, creditor, co-venturer of any other entity or in any other capacity, directly or indirectly, engage in the Business (as defined below); provided that nothing herein shall prohibit the Employee from being an owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Employee does not actively participate in the business of such corporation. For the purpose of this Paragraph 7(c), the “Business” means the business of developing, manufacturing and marketing high temperature superconductivity products and interference reduction products, designed to enhance the quality, capacity, coverage and flexibility of cellular, personal communication services and other wireless telecommunications services.      For the reasons acknowledged by the Employee at the beginning of this Paragraph 7(c), the Employee additionally acknowledges, covenants, and agrees that at no time during the Term nor during the period commencing on the date of termination of the Employee’s employment with the Company and ending the day following the first anniversary of the date of termination of the Employee’s employment with the Company for any reason, shall the Employee, directly or indirectly, either alone or as a stockholder, partner, consultant, adviser, owner, agent, creditor, co-venturer of any other entity, or in any other capacity, (i) knowingly sell to or solicit sales of products produced in the Business to any customer or account which was a customer or account of the Company during the Employee’s employment with the Company, or (ii) (other than through general, non targeted advertisements) intentionally solicit, hire, knowingly attempt to solicit or hire, or knowingly participate in any attempt to solicit or hire any person who was an employee of the Company or any of its Affiliates during the Employee’s employment with the Company.      For purposes of this Agreement, the Restriction Period means the Term and the period commencing on the date of termination of the Employee’s employment with the Company and ending the day following the first anniversary of the date of termination of the Employee’s employment with the Company for any reason; provided that the Company may elect to extend the Restriction Period for up to one (1) year beyond the first anniversary of the date of termination of the Employee’s employment with the Company if (A) the Company provides written notice of its intent to so extend the Restriction Period at least six (6) months prior to the date on which the Restriction Period would otherwise expire and (B) the Company pays to the Employee the Base Salary, without offset for salary, wages or similar payments from -10- --------------------------------------------------------------------------------   another employer during such extended period, at the rate such Base Salary was being paid to the Employee at the time of termination, for one (1) year beyond the period for which the Company would otherwise be obligated to continue the Base Salary pursuant to this Agreement in the absence of the extension of the Restriction Period.      (d)  Equitable Remedies. The Employee acknowledges, covenants and agrees that, in the event the Employee shall violate any provisions of this Section 8, the Company will have the right to enforce this Agreement by all remedies that may be available at law or in equity.      8.     Assignability; Binding Effect. This Agreement is a personal contract calling for the provision of unique services by the Employee, and the Employee’s rights and obligations hereunder may not be sold, transferred, assigned or pledged. In the event of any attempted assignment or transfer of rights hereunder by the Employee contrary to the provisions hereof (other than as may be required by law), the Company will have no further liability for payments hereunder. The rights and obligations of the Company hereunder will be binding upon and run in favor of the successors and assigns of the Company and, in connection therewith, and notwithstanding any other provision of this Agreement to the contrary, in the event that there is such a successor or assign, on and after the date of such succession or assignment, “Company” shall thereupon instead refer to such successor or assign, as the case may be. This Agreement does not create, and shall not be interpreted or construed to create, any rights enforceable by any person not a party to this Agreement, except as specifically provided herein.      9.     Entire Agreement. This Agreement represents the entire agreement between the parties concerning the Employee’s employment with the Company and supersedes all prior negotiations, discussions, understandings and agreements, whether written or oral, between the Employee and the Company relating to the subject matter of this Agreement. All prior employment agreements, between the Company and the Employee shall remain in full force and effect with respect all matters addressed in such prior employment agreements occurring on or before the effective date of this Agreement.      10.     Amendment or Modification, Waiver. No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing signed by the Employee and by a duly authorized officer of the Company other that the Employee. No waiver by any party to this Agreement of any breach by another party of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same time, any prior time or any subsequent time.      11.     Notices. All notices, demands or other communications of any kind to be given or delivered under this Agreement shall be in writing and shall be deemed to have been properly given if (a) delivered by hand, (b) delivered by a nationally recognized overnight courier service, (c) sent by registered or certified United States Mail, return receipt requested and first class postage prepaid, or (d) facsimile transmission followed by a confirmation copy delivered by a nationally recognized overnight courier service. Such communications shall be sent to the parties at their respective addresses as follows: -11- --------------------------------------------------------------------------------         If to the Employee   Charles F. Willes     860 Insignia Court     Palatine, IL 60067   If to the Company:   ISCO International, Inc.     451 Kingston Court     Mount Prospect, IL 60056     Attention: Chief Executive Officer   with a copy to:   Barry M. Abelson, Esquire     Pepper Hamilton LLP     3000 Two Logan Square     18th & Arch Streets     Philadelphia, PA 19103-2799     FAX: 215-981-4750 Either party may change such address for delivery to the other party by delivery of a notice in conformity with the provisions of this Section specifying such change. Notice shall be deemed to have been properly given (i) on the date of delivery, if delivery is by hand, (ii) three (3) days after the date of mailing if sent by certified or registered mail, (iii) one (1) day after date of delivery to the overnight courier if sent by overnight courier, or (iv) the next business day after the date of transmission by facsimile.      12.     Severability. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid and unenforceable shall not be affected, and each provision of this Agreement shall be validated and shall be enforced to the fullest extent permitted by law. If for any reason any provision of this Agreement containing restrictions is held to cover an area or to be for a length of time that is unreasonable or in any other way is construed to be too broad or to any extent invalid, such provision shall not be determined to be entirely null, void and of no effect; instead, it is the intention and desire of both the Company and the Employee that, to the extent that the provision is or would be valid or enforceable under applicable law, any court of competent jurisdiction shall construe and interpret or reform this Agreement to provide for a restriction having the maximum enforceable area, time period and such other constraints or conditions (although not greater than those currently contained in this Agreement) as shall be valid and enforceable under the applicable law.      13.     Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. -12- --------------------------------------------------------------------------------        14.     Headings. All descriptive headings of sections and paragraphs in this Agreement are intended solely for convenience of reference, and no provision of this Agreement is to be construed by reference to the heading of any section or paragraph.      15.     Withholding Taxes. All salary, benefits, reimbursements and any other payments to the Employee under this Agreement shall be subject to all applicable payroll and withholding taxes and deductions required by any law, rule or regulation of any federal, state or local authority.      16.     Applicable Law/ Jurisdiction. The laws of the State of Illinois shall govern the interpretation, validity and performance of the terms of this Agreement, without reference to rules relating to conflicts of law. The parties select and irrevocably submit to the exclusive jurisdiction of a court of competent jurisdiction located in the State of Illinois for any action to enforce, construe or interpret this Agreement. The Employee and the Company each hereby waives any objection to venue in such state on the basis of forum non-conveniens.      IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first above written.       ISCO INTERNATIONAL, INC   By: /s/ George Calhoun -------------------------------------------------------------------------------- GEORGE CALHOUN Chief Executive Officer   /s/ Charles F. Willes -------------------------------------------------------------------------------- CHARLES F. WILLES -13-

Exhibit 10.26     AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT dated as of August 30, 2001   among   PENTAIR, INC.,   Various Financial Institutions,   BANK ONE, NA, as Syndication Agent,   THE BANK OF TOKYO-MITSUBISHI, LTD., MORGAN GUARANTY TRUST COMPANY OF NEW YORK and U.S. BANK NATIONAL ASSOCIATION, as Co-Documentation Agents,   FLEET NATIONAL BANK and FIRST UNION NATIONAL BANK, as Co-Agents,   and   BANK OF AMERICA, N.A., as Administrative Agent               BANC OF AMERICA SECURITIES LLC and BANC ONE CAPITAL MARKETS, INC. Co-Lead Arrangers and Co-Book Managers     AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT     THIS AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT dated as of August 30, 2001 is among PENTAIR, INC. (the “Company”), the financial institutions listed on the signature pages hereof (the “Lenders”), BANK ONE, N.A., as Syndication Agent, and BANK OF AMERICA, N.A., as Administrative Agent. WHEREAS, the Company, various financial institutions (the “Existing Lenders”) and  the Administrative Agent entered into a 364-Day Credit Agreement dated as of September 2, 1999 (as amended, the “Credit Agreement”; terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein); and WHEREAS, the parties hereto desire to amend the Credit Agreement as set forth herein and to restate the Credit Agreement in its entirety to read as set forth in the Credit Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1            Amendments.  Effective as of the date hereof and subject to the occurrence of the Restatement Effective Date (as defined below), the Credit Agreement shall be amended as set forth below: 1.1           Extension of Termination Date.  The definition of the term “Termination Date” in Section 1.01 shall be amended by deleting the date “August 30, 2001” therein and substituting the date “August 29, 2002” therefor. 1.2           Amendment to Schedule 2.01.  Schedule 2.01 is amended in its entirety by substituting Schedule 2.01 hereto therefor. 1.3           Amendment to Exhibit H.   Exhibit H is amended in its entirety by substituting Exhibit H hereto therefor. SECTION 2            Representations and Warranties.  The Company represents and warrants to the Lenders and the Administrative Agent that:  (a) each of the representations and warranties of the Company set forth in the Credit Agreement, as amended and restated hereby (as so amended and restated, the “Restated Credit Agreement”) is true and correct as of the date hereof, with the same effect as if made on such date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they were true and correct as of such earlier date); (b) the execution and delivery hereof by the Company and the performance by the Company of its obligations under the Restated Credit Agreement (i) are within the powers of the Company, (ii) have been duly authorized by all necessary action on the part of the Company, (iii) have received all necessary governmental approval and (iv) do not and will not contravene or conflict with (x) any provision of law or the certificate of incorporation or by–laws or other organizational documents of the Company or (y) any agreement, judgment, injunction, order, decree or other instrument which is binding upon the Company or any of its Subsidiaries; and (c) the Restated Credit Agreement is the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws of general application affecting the enforcement of creditors’ rights or by general principles of equity limiting the availability of equitable remedies. SECTION 3            Effectiveness.  The Restated Credit Agreement shall become effective on the date (the “Restatement Effective Date”) when the Administrative Agent shall have received: (a)           Restated Credit Agreement.  Signature pages hereto signed by the Company, each of the Lenders and the Administrative Agent (it being understood that Administrative Agent may rely on a facsimile of any signature page as if it were an original). (b)           Resolutions; Incumbency. (i)            Copies of resolutions of the board of directors of the Company authorizing the execution and delivery of this agreement and the consummation of the transactions contemplated hereby, certified as of the Restatement Effective Date by the Secretary or an Assistant Secretary of the Company, and (ii)           A certificate of the Secretary or an Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to execute and deliver this agreement. (c)           Confirmation.  A Confirmation substantially in the form of Exhibit A signed by each Subsidiary Guarantor. (d)           Certificate.  A certificate of the President, the chief financial officer, the chief accounting officer or the vice president-treasurer of the Company, dated as of the Restatement Effective Date, stating that: (i)            the representations and warranties contained in Section 2 are true and correct on and as of such date, as though made on and as of such date, (ii)           no Event of Default or Unmatured Event of Default exists or would result from the effectiveness of this agreement, and (iii)          since December 31, 2000, no event or circumstance has occurred that has resulted or could reasonably be expected to result in a Material Adverse Effect. (e)           Legal Opinion.  An opinion of Louis L. Ainsworth, Senior Vice President and General Counsel of the Company, substantially in the form of Attachment 1. (f)            Other Documents.  Such other documents as the Administrative Agent or any Lender may reasonably request. (g)           Payment of Obligations.  Evidence of payment by the Company of all amounts payable under the Credit Agreement (other than contingent indemnification obligations) and all accrued and unpaid fees, costs and expenses payable hereunder to the extent then due. SECTION 4            Miscellaneous. 4.1           Amendment and Restatement.  Upon the effectiveness hereof, the Credit Agreement shall be restated in its entirety to read as set forth in the Credit Agreement as amended hereby and all rights and obligations of the parties shall be as set forth in the Restated Credit Agreement (except that any provision of the Credit Agreement which by its terms survives termination thereof shall remain in full force and effect). 4.2           Counterparts.  This agreement may be executed in any number of counterparts and by the different parties 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. 4.3           Expenses.  The Company agrees to pay all reasonable costs and expenses of the Administrative Agent, including reasonable fees and charges of counsel to the Administrative Agent, in connection with the preparation, execution and delivery of this agreement. 4.4           Governing Law.  This agreement shall be a contract made under and governed by the laws of the State of Illinois applicable to contracts made and to be performed entirely within such State. 4.5           Successors and Assigns.  This agreement shall be binding upon the Company, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Administrative Agent and the respective successors and assigns of the Lenders and the Administrative Agent.   IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.       PENTAIR, INC.       By:       Title:           BANK OF AMERICA, N.A.,   as Administrative Agent and as a Lender       By:       Title:           BANK ONE, NA (Main Office Chicago)       By:       Title:           THE BANK OF TOKYO-MITSUBISHI, LTD.       By:       Title:           MORGAN GUARANTY TRUST COMPANY OF NEW YORK       By:       Title:           U.S. BANK NATIONAL ASSOCIATION       By:       Title:           FLEET NATIONAL BANK       By:       Title:           FIRST UNION NATIONAL BANK       By:       Title:           BANCA NAZIONALE DEL LAVORO S.P.A. NEW YORK BRANCH       By:       Title:           By:       Title:           THE INDUSTRIAL BANK OF JAPAN, LIMITED       By:       Title:           CREDIT LYONNAIS CHICAGO BRANCH       By:       Title:           By:       Title:           NATIONAL CITY BANK       By:       Title:           BANCA ANTONVENETA NEW YORK BRANCH       By:       Title:           By:       Title:           BANK HAPOALIM B.M.       By:       Title:           By:       Title:           MELLON BANK, N.A.       By:       Title:         THE DAI-ICHI KANGYO BANK, LTD.       By:       Title:           BANCA DI ROMA – CHICAGO BRANCH       By:       Title:           By:       Title:           WELLS FARGO BANK, NATIONAL ASSOCIATION       By:       Title:           By:       Title:           BNP PARIBAS       By:       Title:           By:       Title:           THE BANK OF NEW YORK       By:       Title:           SANWA BANK LIMITED       By:       Title:           By:       Title:           SCHEDULE 2.01   COMMITMENTS AND PRO RATA SHARES         Pro Rata   Lender   Commitment   Share               Bank of America, N.A.   $ 30,000,000   9.523809523 % Bank One, NA   $ 30,000,000   9.523809523 % The Bank of Tokyo-Mitsubishi, Ltd.   $ 30,000,000   9.523809523 % Morgan Guaranty Trust Company of New York   $ 30,000,000   9.523809523 % U.S. Bank National Association   $ 30,000,000   9.523809523 % Fleet National Bank   $ 20,000,000   6.349206349 % First Union National Bank   $ 20,000,000   6.349206349 % Banca Nazionale del Lavoro S.p.A. New York Branch   $ 17,000,000   5.396825396 % The Industrial Bank of Japan, Limited   $ 10,000,000   3.174603174 % Credit Lyonnais Chicago Branch   $ 10,000,000   3.174603174 % National City Bank   $ 10,000,000   3.174603174 % Banca Antonveneta New York Branch   $ 10,000,000   3.174603174 % Bank Hapoalim B.M.   $ 10,000,000   3.174603174 % Mellon Bank, N.A.   $ 10,000,000   3.174603174 % The Dai-Ichi Kangyo Bank, Ltd.   $ 8,500,000   2.698412698 % Banca di Roma – Chicago Branch   $ 8,500,000   2.698412698 % Wells Fargo Bank, National Association   $ 8,500,000   2.698412698 % BNP Paribas   $ 7,500,000   2.38095238 % The Bank of New York   $ 7,500,000   2.38095238 % Sanwa Bank Limited   $ 7,500,000   2.38095238 %             TOTAL   $ 315,000,000   100 %   EXHIBIT A CONFIRMATION BY GUARANTORS To the Administrative Agent and the Lenders under and as defined in the Credit Agreement referred to below Please refer to the Amended and Restated 364-Day Credit Agreement dated as of August 30, 2001 (the “Restated Credit Agreement”) among Pentair, Inc. (the “Company”), various financial institutions and Bank of America, N.A., as Administrative Agent.  Capitalized terms used but not defined herein are used as defined in the Restated Credit Agreement. Each of the undersigned hereby confirms to the Administrative Agent and the Lenders that, after giving effect to the effectiveness of the Restated Credit Agreement, the Subsidiary Guaranty (i) continues in full force and effect as a guaranty of all obligations of the Company under the Restated Credit Agreement and (ii) continues to be a legal, valid and binding obligation of such undersigned, enforceable against such undersigned in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity. [Remainder of page intentionally left blank.]   IN WITNESS WHEREOF, each of the undersigned has caused this Confirmation to be executed and delivered by its duly authorized representative as of August 30, 2001. APLEX INDUSTRIES, INC. BIESEMEYER MANUFACTURING CORPORATION CENTURY MANUFACTURING CO. CODELINE CORPORATION COMPOOL, INC. DELTA INTERNATIONAL MACHINERY CORPORATION DEVILBISS AIR POWER COMPANY ELECTRONIC ENCLOSURES, INC. ENPAC CORPORATION ESSEF CORPORATION FALCON MANUFACTURING, INC. FLECK CONTROLS, INC. HOFFMAN ENCLOSURES INC. LINCOLN AUTOMOTIVE COMPANY LINCOLN INDUSTRIAL CORPORATION MCNEIL (OHIO) CORPORATION NATIONAL POOL TILE GROUP, INC. ORSCO, INC. PENTAIR ENCLOSURES, INC. PENTAIR ELECTRONIC PACKAGING COMPANY PENTAIR POOL PRODUCTS, INC. PENTAIR TOOL & EQUIPMENT SALES CO. PORTER-CABLE CORPORATION PUREX POOL SYSTEMS, INC. RAINBOW ACQUISITION CORP. SANFORD TECHNOLOGIES SCHROFF, INC. STRUCTURAL AUSTRALIA WALKER DICKSON, INC. WEB TOOL & MANUFACTURING, INC. WTM, INC.     By:       Name: Roy Rueb   Title:  Secretary and Treasurer   EXHIBIT H FORM OF ASSIGNMENT AND ACCEPTANCE This Assignment and Acceptance (this “Assignment”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”).  Capitalized terms used but not defined herein shall have the respective meanings given to them in the Amended and Restated 364-Day Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment as if set forth herein in full.   For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, the interest in and to all of the Assignor’s rights and obligations under the Credit Agreement and any other documents or instruments delivered pursuant thereto that represents the amount and percentage interest identified below of all of the Assignor’s outstanding rights and obligations under the respective facilities identified below (the “Assigned Interest”).  Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment, without representation or warranty by the Assignor.   1.             Assignor:              ______________________________   2.             Assignee:              ______________________________ [, an Affiliate of the Assignor] [, a Lender]   3.             Borrower:               Pentair, Inc.   4.             Administrative                 Agent:                   Bank of America, N.A., as administrative agent under the Credit                                                 Agreement   5.             Credit Agreement:           The Amended and Restated 364-Day Credit Agreement, dated as of August 30, 2001, among  Pentair, Inc., various financial institutions and Bank of America, N.A., as administrative agent   6.             Payment of  Administrative Agent’s Fee: The [Assignor][Assignee] shall, prior to the Effective Date, pay to the Administrative Agent for its own account a processing fee in the amount specified in Section 11.06(b) of the Credit Agreement.   7.             Assigned Interest:   Facility Assigned   Aggregate Amount of Commitment/Loans for all Lenders   Amount of Commitment/Loans Assigned   Percentage Assigned of Commitment/Loans1               2   $   $   %     $   $   %     $   $   %   Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]                   1 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.                 2 Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g. “Commitment,” “Committed Loan,” “Bid Loan”).     The terms set forth in this Assignment are hereby agreed to:     ASSIGNOR           [NAME OF ASSIGNOR]           By:           Title:         ASSIGNEE           [NAME OF ASSIGNEE]           By:           Title: [Consented to and Accepted:]3   -------------------------------------------------------------------------------- 3 To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.     [BANK OF AMERICA, N.A., as     Administrative Agent]       By:         Title:   [Consented to:]4   [PENTAIR, INC.]   By: _________________________________       Title:   -------------------------------------------------------------------------------- 4 To be added only if the consent of the Company is required by the terms of the Credit Agreement.   ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE     STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION AGREEMENT   1.         Representations and Warranties.   1.1.      Assignor.  The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with any Credit Document(as hereinafter defined), (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document delivered pursuant thereto, other than this Assignment (collectively the “Credit Documents”), or any collateral thereunder, (iii) the financial condition of the Company, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or (iv) the performance or observance by the Company, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Credit Document.   1.2.      Assignee.  The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it is a bank or other financial institution, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.01 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and to purchase the Assigned Interest on the basis of which it has made such analysis and decision, (v) as of the date hereof, the Company will not be obligated to pay any greater amount to the Assignee under Article V of the Credit Agreement than the Company is obligated to pay to the Assignor under such Article and (vi) if it is organized under the laws of a jurisdiction outside the United States, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement (including, without limitation, Section 5.05(e) thereof), duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender.   2.         Assignee’s Address for Notices, etc.  Attached hereto as Schedule 1 is all contact information, address, account and other administrative information relating to the Assignee.   3.         Payments.  From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to, on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.   4.         General Provisions.  This Assignment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment.  This Assignment shall be governed by, and construed in accordance with, the substantive laws of the State of Illinois without regard to the choice of law provisions thereof.   SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT ADMINISTRATIVE DETAILS   (Assignee to list names of credit contacts, addresses, phone and facsimile numbers, electronic mail addresses and account and payment information)    

  Exhibit 10(b) Note: Certain portions of this document have been marked “[c.i.]” to indicate that confidential treatment has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission. MASTER SERVICE AGREEMENT This Master Service Agreement, (the “Master Agreement”) effective June 15th 2001 (the “Effective Date”), is made by and between DUSA Pharmaceuticals, Inc., with corporate offices located at 25 Upton Drive, Wilmington, Massachusetts 01887 (hereinafter “DUSA”) and Therapeutics Inc., with corporate offices located at 4180 La Jolla Village Drive, Suite 255, La Jolla, California 92037 (hereinafter “THERAPEUTICS”). WHEREAS, DUSA and THERAPEUTICS desire to enter into this Master Agreement to provide the terms and conditions upon which DUSA may engage THERAPEUTICS from time-to-time for the purpose of managing the clinical development of DUSA’s new products in the field of dermatology, and other related services or projects by executing individual Work Orders (as defined below) specifying the details of the service and the related terms and conditions. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party, DUSA and THERAPEUTICS agree as follows: 1.   Definitions   (a)   “FDA” as used herein shall mean the United States Food and Drug Administration   (b)   “Good Clinical Practices” shall mean Good Clinical Practices as defined by the FDA.   (c)   “IND” as used herein shall mean an Investigational New Drug Application.   (d)   “IRB” as used herein shall mean the board(s) established pursuant to 21 CFR Part 56 for the purpose of reviewing clinical investigations.   (e)   “Investigator” as used herein shall mean a licensed physician who is a qualified clinical investigator willing and able, and engaged to conduct a clinical investigation of the Study Drug as set forth in a Protocol.   (f)   “NDA” as used herein shall mean a New Drug Application, or foreign equivalent.   (g)   “Phase I Clinical Study” as used herein shall mean those human clinical studies on sufficient numbers of persons that are designed to establish that a product is safe for its intended use and to support its continued clinical testing.   (h)   “Phase II Clinical Study” as used herein shall mean those human clinical studies on sufficient numbers of persons that are designed to establish the safety and efficacy of a product for its intended use.   (i)   “Phase III Clinical Study” as used herein shall mean an expanded human study of a level necessary for submission to, and approval for marketing of a product by, the FDA of an NDA.   --------------------------------------------------------------------------------   (j)   “Protocol” as used herein shall mean particular clinical testing procedures and conditions for the clinical evaluation of the Study Drug or Study Device, from time to time, during the Term.   (k)   “Services” as used herein shall mean the services to be provided to DUSA by THERAPEUTICS pursuant to a Work Order (as defined in Section 2).   (l)   “Study” as used herein shall mean the clinical research provided for in a Protocol.   (m)   “Study Drug” as used herein shall mean Levulan® PDT/PD or other drug being tested in a Study for which THERAPEUTICS is providing Services and related drug materials as described in a Protocol.   (n)   “Study Device” as used herein shall mean the BLU-U™ brand device or other device being tested in a Study as described in a Protocol.   2.   Work Orders, Nature of Work   (a)   Work Orders The specific details of each project under this Master Agreement (each “Project”) shall be separately negotiated and specified in writing on a Work Order in a form substantially similar to that attached to this Master Agreement as Exhibit 1. Each Work Order will include, as applicable, the Protocol, scope of work, timeline, budget and payment schedule and such other terms as shall be agreed upon by the parties. The terms of this Master Agreement shall be automatically incorporated into the terms of any Work Order. This Master Agreement and each Work Order, independent from other Work Orders, constitute the entire agreement for a Project. To the extent any terms or provisions of a Work Order conflict with the terms and provisions of this Master Agreement, the terms and provisions of this Master Agreement shall control, unless otherwise expressly set forth in the Work Order.   (b)   Change Orders Any material change in the details of a Work Order shall require a written amendment to the Work Order called a Change Order, which shall be in a form substantially similar to that attached to this Master Agreement as Exhibit 2. Each Change Order shall detail the requested changes to the applicable task, responsibility, duty, budget, timeline or other matters. A Change Order will only become effective upon the execution of the Change Order by both parties.   (c)   Transfer of Obligations Notwithstanding any other provision of this Master Agreement, and in addition to any other specific responsibilities of THERAPEUTICS which are set forth herein, pursuant to 21 CFR Part 312.52, DUSA may, from time to time, transfer and THERAPEUTICS may assume all or some of the specific obligations of DUSA as “Sponsor” under the Federal Food, Drug, and Cosmetic Act (“Act”). A description of such obligations to be transferred to THERAPEUTICS will be provided in each Work Order. It is agreed that the same description and extent of obligations 2 --------------------------------------------------------------------------------       transferred will be included in Section #13 of any applicable INDs filed on Form FDA 1571. THERAPEUTICS agrees to carry out diligently all transferred obligations. Unless otherwise required by the terms of any Work Order, or any applicable law, rule or regulation, any and all interaction or communication with the FDA shall be conducted exclusively or as directed by DUSA, with the cooperation and assistance of THERAPEUTICS as requested by DUSA from time to time and at DUSA’s cost and expense.   (d)   Performance of Services. THERAPEUTICS agrees to use commercially reasonable efforts to diligently perform, and to cause its employees, officers, permitted subcontractors and representatives to diligently perform the Services in accordance with the terms and conditions of this Master Agreement and each Work Order. Such efforts may include, without limitation, implementing reasonable procedures such as bonuses and other incentives for timely completion of the Services. HOWEVER, THERAPEUTICS MAKES NO OTHER REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE SERVICES, EXPRESS OR IMPLIED, AND THERAPEUTICS SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SERVICES TO BE PROVIDED HEREUNDER.   3.   Term and Termination   (a)   This Master Agreement shall commence on the Effective Date and shall have an initial term of two (2) years (the “Initial Term”), unless earlier terminated as provided herein. The Initial Term will be automatically renewed for additional one year term(s), unless either party notifies the other not less than ninety (90) days prior to the end of the Initial Term, or any subsequent term that such party does not wish to renew this Master Agreement.   (b)   DUSA may terminate this Master Agreement or any Work Order for any reason upon ninety (90) days prior written notice to THERAPEUTICS.   (c)   If either party believes a termination is necessary to protect the safety or welfare of the Study subjects, then such party shall have the right to terminate the applicable Work Orders on notice to the other party.   (d)   Either party may terminate this Master Agreement, or any Work Order, upon written notice to the other party, if the other party materially breaches this Master Agreement, or such Work Order, and such party fails to cure said breach within ninety (90) days after receipt of written notice from the non-breaching party outlining the breach and its intention to terminate.   (e)   DUSA and THERAPEUTICS agree to discuss, cooperate and coordinate all activities being undertaken by THERAPEUTICS upon termination of this Master Agreement to 3 --------------------------------------------------------------------------------       insure patient safety, continuity of treatment and compliance with applicable local, federal and/or state laws, regulations and ordinances.   (f)   Upon termination of this Master Agreement or any Work Order, THERAPEUTICS will, at DUSA’s written request, promptly provide DUSA with a copy of all records relating to the Project’s performance and all periodic reports and/or patient records, maintaining confidentiality.   (g)   Should DUSA choose to terminate a Work Order prior to completion, for any reason, other than THERAPEUTICS’ material breach of this Master Agreement, insolvency or bankruptcy, DUSA agrees to pay THERAPEUTICS:   (i)   all reasonable direct fees earned hereunder for Services performed up to the effective date of termination in accordance with the terms of a Work Order being terminated, and     (ii)   all non-cancelable costs incurred in connection with any Work Order being terminated to the date of termination. (h)   In the event a Work Order is terminated by DUSA before conclusion by reason of any uncured material breach by THERAPEUTICS pursuant to Section 3(d) above, any third party pass-through costs associated with terminating the Work Order, e.g. Investigator fees or patient enrollment costs, will be:   (i)   borne by THERAPEUTICS if attributable to THERAPEUTICS’ material breach of its obligations under the Master Agreement or Work Order and previously paid to THERAPEUTICS;     (ii)   borne by DUSA if not previously paid to THERAPEUTICS; or     (iii)   negotiated between DUSA and THERAPEUTICS if neither of the above. (i)   Notwithstanding anything to the contrary herein, and in addition to any other obligations of DUSA hereunder, at the expiration of this Master Agreement or upon termination of this Master Agreement by DUSA for any reason other than uncured material breach by THERAPEUTICS pursuant to Section 3(d) above, DUSA shall pay to THERAPEUTICS, (i) if such expiration or termination occurs within two years after the Effective Date, including at the end of the Initial Term, an amount equal to [c.i.] the Minimum Monthly Fee (as defined herein) in effect for the month immediately preceding such expiration or termination, (ii) if such expiration or termination occurs more than two years, but less than or equal to three years, from the Effective Date, an amount equal to [c.i.] the Minimum Monthly Fee in effect for the month immediately preceding such expiration or termination, or (iii) if such expiration or termination occurs more than three years from the Effective Date, an amount equal to [c.i.] the Minimum Monthly Fee in 4 --------------------------------------------------------------------------------       effect for the month immediately proceeding such expiration or termination if DUSA did not provide written notice to THERAPEUTICS of such expiration or termination at least six months in advance thereof.   (j)   Sections 3, 4(c), 4(d), 4(f), 7, 8, 9, 11, 12, 13, 14, 23, 24, 25, 26 and 28 shall survive any expiration or termination of this Master Agreement.   4.   Compensation   (a)   For purposes of this Master Agreement, the term “Minimum Monthly Fee” for a particular month shall mean an amount no more than [c.i.] and no less than [c.i.], and shall be determined based on the factors listed on Exhibit 3 hereto. The Minimum Monthly Fee shall be set forth in monthly invoices from THERAPEUTICS that contain the basis for the calculation thereof based on the factors set forth on Exhibit 3.   (b)   Beginning on the Effective Date and every month thereafter during the term of this Master Agreement, DUSA shall pay to THERAPEUTICS the greater of the following:   (i)   The Minimum Monthly Fee for that month; or     (ii)   Amounts due under all Work Orders, plus the following costs (related to the factors set forth on Exhibit 3):       (x) [c.i.] of General Corporate Support; and         (y) [c.i.] of Program Management & In-Licensing. (c)   DUSA shall pay the following bonuses to THERAPEUTICS if, at any time during or after the term of this Master Agreement, DUSA initiates the first Phase III Clinical Study of a Study Drug (“Phase III Bonus”) or receives approval of an NDA for a Study Drug (“NDA Bonus”) with respect to each dermatology indication for which THERAPEUTICS provided Services as clinical development lead; provided that the Work Order governing such Services was not terminated by DUSA pursuant to Section 3(d) for uncured breach by THERAPEUTICS. The amount of the Phase III Bonus and NDA Bonus payable to THERAPEUTICS, if any, is dependent on the level of clinical testing for which THERAPEUTICS provided Services for a particular indication, as set forth in the following table. If THERAPEUTICS provides Services for more than one level of clinical development for a particular indication, the amount of the Phase III Bonus and/or NDA Bonus payable to THERAPEUTICS, if any, shall be the greatest amount indicated in the following table for the level of clinical testing for which THERAPEUTICS provided Services. It is the parties’ intention that THERAPEUTICS shall be eligible for the Phase III Bonus and the NDA Bonus only with respect to dermatology indications for which THERAPEUTICS provided Services as clinical 5 --------------------------------------------------------------------------------       development lead. Each Work Order shall specify whether or not THERAPEUTICS will be eligible for such bonuses for the Services to be performed thereunder.                       PHASE III   NDA SERVICES   BONUS   BONUS --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Phase I Clinical Study     [c.i.]       [c.i.]   Phase II Clinical Study     [c.i.]       [c.i.]   Phase III Clinical Study     [c.i.]       [c.i.]   (d)   If, by April 1, 2002, THERAPEUTICS completes Services under a Work Order that establishes feasibility for ALA PDT in acne, onychomycosis or warts, as determined by DUSA in good faith, and DUSA elects to continue clinical development or otherwise make an additional significant investment with respect to such indication, then DUSA shall pay THERAPEUTICS [c.i.].   (e)   THERAPEUTICS will be eligible for annual performance bonuses of up to [c.i.] of all amounts paid by DUSA to THERAPEUTICS for employee labor costs associated with projects not related to an NDA research and development program (e.g., DUSA’s FDA required long-term AK tracking study), pursuant to Sections 4(a) and (b) for the immediately proceeding year, based on milestones and other criteria to be mutually agreed upon by the parties.   (f)   DUSA shall make any bonus payment required hereunder within 30 days after the occurrence of the event triggering the obligation to make the bonus payment.   (g)   On the Effective Date and on each anniversary of the Effective Date during the term of this Master Agreement, DUSA shall either (i) issue to THERAPEUTICS a number of unregistered shares of DUSA’s common stock (the “Shares”) equal to the greater of (a) 5,000 Shares, as adjusted for stock splits, recapitalizations and the like, unless the aggregate value of such Shares based on the closing price of DUSA common stock on the NASDAQ National Market or then current principal national securities exchange on which its common stock is listed (the “Closing Price”) on the date of issuance is greater than [c.i.], in which case the number of Shares having an aggregate value of [c.i.] or (b) [c.i.] divided by the Closing Price on the date of issuance, or (ii) pay THERAPEUTICS the cash equivalent of the number of Shares as determined in (i) above, based on the Closing Price on the date of issuance, up to a maximum of [c.i.]. The decision whether DUSA will issue Shares pursuant to (i) above or pay cash pursuant to (ii) above shall be at DUSA’s sole discretion. The Shares will be issued to THERAPEUTICS as a private placement based upon customary representations THERAPEUTICS shall make to DUSA as set forth in Exhibit 4 attached hereto. THERAPEUTICS acknowledges that the Shares will be subject to significant restrictions 6 --------------------------------------------------------------------------------       on transfer and THERAPEUTICS will not be able to sell or otherwise dispose of the Shares without registration or an opinion of legal counsel to the Company that the Shares may be sold or transferred in a transaction exempt from registration. 5.     Work Order Compensation (a) Unless otherwise agreed in a particular Work Order, the following shall apply with respect to all payments by DUSA for Services under a Work Order:   (i)   THERAPEUTICS will be compensated for its Services, itemized expenses, and pass-through costs, net of discounts, incurred in the performance of the Services pursuant to the budget and payment schedule set forth in each respective Work Order.     (ii)   All taxes (and penalties thereon) imposed on any payment by DUSA to THERAPEUTICS shall be the responsibility of THERAPEUTICS.     (iii)   THERAPEUTICS will submit monthly invoices to DUSA which shall contain an itemized accounting for fees, expenses and pass-through costs related to a Work Order.     (iv)   THERAPEUTICS will invoice DUSA promptly upon achievement of agreed to milestones (if other than monthly) for payment of Services.     (v)   Invoices shall be payable by DUSA within thirty (30) days after receipt by DUSA (late payments should be subject to interest at a rate equal to the lesser of 2% per month or the maximum rate permitted by applicable law). (b)   If any portion of an invoice is disputed, then DUSA shall pay the undisputed amounts as set forth in the preceding sentence and the parties shall use good faith efforts to reconcile the disputed amount as soon as practicable. THERAPEUTICS shall maintain adequate accounting records for all receipts and disbursements of supplies and monies directly related to any Work Order. DUSA shall be permitted to audit these records at reasonable business hours upon reasonable notice to THERAPEUTICS.   (c)   It is the parties’ expectation that the budget for any Work Order relating to Services to be provided by THERAPEUTICS in the nature of a contract research organization shall be based upon the rates and fees set forth on Exhibit 5 hereto.   6.   Personnel   (a)   The Services with respect to each Project shall be performed by THERAPEUTICS under the direction of the person identified as the Project Manager in the applicable Work Order. THERAPEUTICS will perform its Services in a professional, workmanlike and timely manner and will ensure that the personnel or subcontractors it uses to perform the 7 --------------------------------------------------------------------------------       Services are appropriately trained and qualified. DUSA shall be entitled in good faith to request that the Project Manager be removed and replaced with a new Project Manager, and THERAPEUTICS shall make best efforts to honor such request.   7.   Confidentiality   (a)   Any confidential information (“Confidential Information”) of a party (“Discloser”) acquired by another party (“Recipient”) under this Master Agreement or any Work Order, including, without limitation, the results of any Study or Project, shall not be disclosed to any third party who does not have a need to know such Confidential Information for purposes of performing Recipient’s obligations under this Agreement or any Work Order, without the prior written authorization from Discloser. Recipient shall use the Confidential Information only for the purpose of fulfilling its obligations under this Master Agreement or any Work Order. Recipient represents and warrants that it has obtained or will obtain agreements with its employees and agents (including subcontractors) to maintain the confidentiality of all Confidential Information as provided herein. THERAPEUTICS agrees, on behalf of itself, and on behalf of its employees, agents, subcontractors and any entity controlled by, controlling or under common control with THERAPEUTICS, not to publish or present the results of any research or other project without DUSA’s prior written approval.   (b)   The obligations of Recipient with regard to Confidential Information shall continue for a period of ten (10) years from the date that such Confidential Information is acquired by Recipient.   (c)   The obligations of Recipient regarding the confidentiality and nondisclosure of information as provided in this section shall not apply to information that is:   (i)   already known to Recipient as shown by its prior written records without prior disclosure from Discloser;     (ii)   becomes publicly available through no fault of Recipient;     (iii)   received from a third party which has the legal right to disclose it to Recipient; or     (iv)   required by law to be disclosed; provided that Recipient notifies Discloser in writing of its intention to disclose Confidential Information with sufficient time to allow Discloser to seek a protective order or file an application for confidential treatment as may be permissible. (d)   Recipient acknowledges that the disclosure of Confidential Information without Discloser’s expressed permission may cause Discloser irreparable harm and that the breach or threatened breach of nondisclosure provisions of this Master Agreement may 8 --------------------------------------------------------------------------------       entitle Discloser to seek injunctive relief, in addition to any other legal remedies that may be available.   8.   Ownership and Inventions.   (a)   All materials, documents and information, programs and suggestions of every kind and descriptions provided by DUSA to THERAPEUTICS or to Investigators and all data or reports generated by Investigators participating in a DUSA-sponsored Study or prepared by THERAPEUTICS in connection with the Services performed hereunder shall be the sole and exclusive property of DUSA.   (b)   THERAPEUTICS shall retain and preserve one (1) copy only of all such property of DUSA for a period of two (2) years after the NDA has been approved or a Project discontinued. At the end of such two (2) year period, THERAPEUTICS may destroy all such material upon giving DUSA written notice of its intent to do so at least thirty (30) days prior to destruction. Failure of DUSA to respond to such notice within the thirty (30) day period shall be evidence of DUSA’s acquiescence in the destruction of such material.   (c)   All rights, title and interest in and to any and all data, discoveries or inventions arising pursuant to this Master Agreement and/or Work Order shall be owned solely and exclusively by DUSA regardless of inventorship. THERAPEUTICS will disclose promptly to DUSA or its nominee any and all inventions, discoveries, improvements and modification, conceived or reduced to practice by THERAPEUTICS or any Investigator or at any Study site arising from the Services to DUSA pursuant to this Master Agreement or any Work Order and relating to such Services. THERAPEUTICS agrees to assign all its interest therein to DUSA or its nominee and, whenever requested to do so by DUSA, THERAPEUTICS will execute any and all applications, assignments or other instruments and give testimony which DUSA shall deem necessary to apply for and obtain patent letters in the United States or any foreign country or to otherwise protect DUSA’s interests, therein, at DUSA’s sole cost and expense, including the payment of THERAPEUTICS’ standard rates therefor. These obligations shall continue beyond the termination of this Master Agreement and shall be binding upon THERAPEUTICS’ assignees, administrators, subcontractors and other legal representatives. 9.   Access to Records THERAPEUTICS will permit representatives of DUSA and/or any authorized regulatory authorities to have access at reasonable times to clinical/laboratory facilities at THERAPEUTICS’ premises for the purpose of observing performance of the Services and/or reviewing resulting data. 9 --------------------------------------------------------------------------------   10.   Adverse Experience Reporting Pursuant to any Protocol attached to any Work Order, THERAPEUTICS agrees throughout the duration of this Master Agreement, to promptly notify DUSA of any information concerning any serious or unexpected event or injury, and the severity thereof, associated with the clinical uses, studies, investigations or tests, whether or not determined to be attributable to any Study Drug or Study Device. 11.   Publications Project results may not be published or publicly disclosed to, in whole or in part, by THERAPEUTICS or its affiliates without the prior express written consent of DUSA. 12.   Indemnification   (a)   DUSA agrees to indemnify, defend and hold harmless THERAPEUTICS, its respective officers, trustees, affiliates, agents, servants and employees and independent contractors (hereafter collectively referred to as “Indemnitees”) from and against any and all loss, cost (including the reasonable costs of providing medical care), claims, actions, liability and/or suits (including reasonable attorneys’ fees) suffered or incurred by an Indemnitee as a result of (i) bodily injury to a patient in any Study being conducted pursuant to this Master Agreement or any Work Order directly caused by administration of a Study Drug or Study Device, or (ii) DUSA’s negligent performance of the obligations required under this Master Agreement or any intentional or reckless misconduct by DUSA, except to the extent that any such loss, cost, claims, actions, liability and/or suits is caused by   (i)   the negligence or intentional or reckless misconduct of any Indemnitee;     (ii)   failure to adhere to Good Clinical Practices by any Indemnitee; or     (iii)   failure by any Indemnitee to follow a Protocol. (b)   THERAPEUTICS agrees to provide DUSA with prompt notice of any such claim or action. In the event the aforesaid indemnity is invoked, DUSA shall have the right, but not the obligation, to manage and control the defense and settlement of any and all such actions and lawsuits, and shall have the right to select and engage counsel of its own choice. THERAPEUTICS shall cooperate fully with DUSA in the defense of any and all actions and lawsuits. No Indemnitee shall be entitled to compromise or settle any such claim, action, suit or judgment without prior written approval of DUSA.   (c)   THERAPEUTICS agrees to indemnify, defend and hold harmless DUSA, its parents, subsidiaries and affiliates, as well as the officers, directors, employees and agents of each, against and in respect of any and all losses, costs (including the reasonable costs of providing medical care), claims, actions, liability and/or suits (including reasonable 10 --------------------------------------------------------------------------------       attorneys’ fees) suffered or incurred by DUSA resulting from THERAPEUTICS’ negligent performance of the obligations required under this Master Agreement or any Work Order, or from any intentional or reckless misconduct, including any negligent failure on the part of THERAPEUTICS to honor THERAPEUTICS’ financial obligations to any subcontractor of THERAPEUTICS.   (d)   DUSA agrees to provide THERAPEUTICS with prompt notice of any such claim or action. In the event the aforesaid indemnity is invoked, THERAPEUTICS shall have the right, but not the obligation, to manage and control the defense and settlement of any and all such actions and lawsuits, and shall have the right to select and engage counsel of its own choice. DUSA shall cooperate fully with THERAPEUTICS in the defense of any and all actions and lawsuits. No Indemnitee shall be entitled to compromise or settle any such claim, action, suit or judgment without prior written approval of THERAPEUTICS.   (e)   DUSA shall, at the request of THERAPEUTICS or an Investigator, execute and deliver to the Investigator a letter setting forth DUSA’s obligations to the Investigator under sub-paragraph (a ).   13.   Force Majeure and Delays In the event either party shall be delayed or hindered in or prevented from the performance of any act required hereunder by reasons of strike, lockouts, labor troubles, inability to procure materials, failure of power or restrictive government or judicial orders, or decrees, riots, insurrection, war, acts of God, inclement weather or other similar reason or cause beyond that party’s control (not including the inability of a party’s software to perform data-dependent calculations properly), then performance of such act (except for the payment of money owed) shall be excused for the period of such delay; provided, however, if such delay continues in excess of eight (8) weeks, either party may terminate the affected Work Order(s) without penalty under any Work Order, except that DUSA shall be obligated to pay THERAPEUTICS (a) all reasonable direct fees earned under this Master Agreement or the terminated Work Order(s) up to the effective date of termination in accordance with the terms of the terminated Work Order(s), (b) all reasonable non-cancelable costs incurred in connection with the terminated Work Order(s) to the dated of termination, and (c) the payment described in Section 3(i) of this Master Agreement. 14.   Notices Whenever any notice is to be given pursuant to this Master Agreement, it must be in writing using first class certified mail, return receipt requested, nationally recognized overnight carrier, or facsimile, postage prepaid to the addresses set forth below: 11 --------------------------------------------------------------------------------         THERAPEUTICS:   Therapeutics, Inc.     4180 La Jolla Village Drive, Suite 255     La Jolla, CA 92037     Attn: Daniel Piacquadio, President DUSA:   DUSA Pharmaceuticals, Inc.     25 Upton Drive     Wilmington, MA 01887     Attn: Paul Sowyrda     Vice President, Product Development and Marketing Such notice shall be effective five days after deposit if sent by mail, the next business day if sent by overnight carrier and upon receipt of electronic confirmation of delivery if sent by facsimile. 15.   Legal Compliance THERAPEUTICS shall perform all work under this Master Agreement and any Work Order in conformity with all applicable federal, state and local laws and regulations including but not limited to the Act and the regulations promulgated pursuant thereto, as amended from time to time, and with the standard of care customary in the contract research organization industry. For purposes of DUSA providing the FDA with certification pursuant to Section 306(k) of the Act, THERAPEUTICS warrants that no person (including Investigators, sub-investigators or any other person working under the supervision of THERAPEUTICS) performing Services pursuant to this Master Agreement or any Work Order has been debarred or convicted of crimes pursuant to Sections 306(a) and (b) of the Act. THERAPEUTICS agrees to notify DUSA immediately upon THERAPEUTICS’ learning of the occurrence of any such debarment, conviction, or inquiry relating to a potential debarment, of any person performing Services pursuant to this Master Agreement or any Work Order and agrees that said person shall be immediately prohibited from performing Services under this Master Agreement or any Work Order. DUSA represents that it shall not request THERAPEUTICS to perform assignments or tasks that violate any applicable law or regulation. 16.   Regulatory Inspections If any governmental or regulatory authority conducts or gives notice to THERAPEUTICS of its intent to conduct an inspection of THERAPEUTICS or at any study site or take any other regulatory action with respect to the Services provided under this Master Agreement or any Work Order, THERAPEUTICS shall (a) cooperate with DUSA and reasonably act to obtain the cooperation of any Investigators; (b) provide DUSA prior notice of any inspection or other regulatory action; (c) allow DUSA the right to be present at any such inspection. DUSA shall have primary responsibility of preparing any responses which may be required; and the sole opportunity to challenge any order of a regulatory or governmental activity affecting its IND, 12 --------------------------------------------------------------------------------   NDA, or any Project. If THERAPEUTICS has attempted to comply with the provisions of this Paragraph but is nevertheless required by a governmental or regulatory authority to comply with their demand or request, then compliance by THERAPEUTICS shall not cause a breach of this Master Agreement. 17.   Insurance Each of THERAPEUTICS and DUSA represents that it maintains and will continue in force during the Initial Term or any renewal term of this Master Agreement, at its sole cost and expense, the insurance listed below. Each party shall provide to the other certificates of insurance evidencing the insurance required hereunder and will provide prompt written notice to other party prior to any cancellation of such coverage or material change in such coverage.   (i)   Worker’s Compensation and Occupational Disease Disability insurance as required by the laws of the state(s) in which Services are to be performed;     (ii)   Comprehensive Automobile Liability insurance for vehicles furnished by such party or used by such party in the performance of this Master Agreement or any Work Order with bodily injury and property damage limits of $1,000,000 each occurrence, combined single limit;     (iii)   Commercial General Liability insurance with bodily injury and property damage limits of $1,000,000 each occurrence, aggregate combined single limit;     (iv)   Excess Liability insurance with limits of $2,000,000 per occurrence/aggregate combined single limit which shall be excess of the coverages described in Paragraphs 17(ii) and (iii) above; and     (v)   With respect to DUSA only, clinical trials liability insurance in the amount of $20,000,000 combined single limit. (b)   To the extent permitted by law, the insurance set forth above as well as any other coverages agreed to be purchased hereunder shall contain waivers of subrogation and/or rights of recovery as to claims against the other party.   (c)   THERAPEUTICS shall be identified as an additional insured under DUSA’s clinical trials liability insurance described in sub-paragraph (v) above.   (d)   THERAPEUTICS and DUSA agree that with regard to this Master Agreement, the insurance coverage to be provided hereunder shall be considered as primary insurance and not contributory with any similar instance which the other party and/or its employees and agents may maintain on their own behalf. 13 --------------------------------------------------------------------------------   18.   Assignment This Master Agreement and each Work Order may not be assigned by either party without the other’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that DUSA may assign this Master Agreement without consent to any successor in interest by merger, consolidation, recapitalization, or sale of substantially all of its assets or a majority of the control of its common stock. 19.   Independent Contractors For purpose of this Master Agreement, the relationship between the parties is that of an independent contractor and neither party shall have the authority to bind or act on behalf of the other party without its prior written consent. Nothing contained in the Master Agreement shall be construed to create the relationship of principal and agent or employer and employee between DUSA and THERAPEUTICS, or their respective employees, servants, agents or independent contractors. 20.   Relationship with Investigators If a particular Work Order obligates THERAPEUTICS to contract with an Investigator(s) or investigative site then any such contract shall be on a form mutually acceptable to THERAPEUTICS and DUSA, and any material changes to such form shall require prior approval by DUSA. DUSA will be responsible for promptly reviewing, commenting on and/or approving such form contracts and proposed changes. 21.   Advertising THERAPEUTICS shall not issue any information or statement to the press or public relating to the results of any Study without the prior written consent of DUSA. Neither party shall use the name or trademarks of the other party in any announcement, publication or promotional material or in any form of public distribution without the prior written consent of the other party, except as required by applicable law, any court or administrative order or any Work Order. 22.   THERAPEUTICS Representations THERAPEUTICS represents that (a) it has the right and authority to enter into this Master Agreement and to perform the Services required pursuant to each Work Order; (b) the person executing this Master Agreement has the authority to do so; and (c) THERAPEUTICS is not a party to any existing agreement or arrangement that would prevent THERAPEUTICS from entering into this Master Agreement or would adversely affect THERAPEUTICS’ performance under this Master Agreement. These representations will also apply with respect to the execution of each Work Order by THERAPEUTICS. 14 --------------------------------------------------------------------------------   23.   Severability If any provision of this Master Agreement or any Work Order shall be deemed void in whole or in part for any reason whatsoever, the remaining provisions shall remain in full force and effect. 24.   Estoppel The waiver or forbearance by either party or the failure by either party to claim a breach of any provision of this Master Agreement or Work Order shall not be deemed to constitute a waiver or estoppel with respect to any subsequent breach or with respect to any provision thereof. 25.   Applicable Law This Master Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey. 26.   Descriptive Heading The descriptive heading of the Master Agreement sections are inserted for convenience only and shall not control or affect the meaning or construction of any provision hereof. 27.   Binding Effect The Master Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. THERAPEUTICS shall not have the right to assign the Master Agreement or any of the rights or obligations hereunder without the prior written consent of DUSA, provided that such consent shall not be unreasonably withheld. 28.   Entire Understanding This Master Agreement and each Work Order represents the entire understanding of the parties with respect to the subject matter hereof. Any modification to this Master Agreement or any Work Order must be in writing and signed by both parties. IN WITNESS WHEREOF, the parties hereto have executed this Master Agreement on the day and year written below.             DUSA Pharmaceuticals, Inc.   Therapeutics Inc.   By:     By:      --------------------------------------------------------------------------------     --------------------------------------------------------------------------------   Paul Sowyrda     Daniel Piacquadio   Title: Vice President, Product Development and Marketing     Title: President 15 --------------------------------------------------------------------------------   EXHIBIT 1 SAMPLE Work Order ____ This Work Order (“Work Order”) is entered to and becomes, upon execution by both parties below, a part of the Master Services Agreement (the “Master Agreement”) between such parties dated June 1, 2001, and sets forth the specific terms and conditions relating to the Services listed below: 1.   Scope of work. Attached hereto and incorporated herein as a part of this Work Order is a project description for Levulan® identified as the Proposal, THERAPEUTICS Project Number “               ” dated                . The Project description shall also include any attachments including the Protocol entitled: “                                   ” and supplement thereto specifically referenced in the project description, and any amendments that are agreed to by the parties in writing. THERAPEUTICS shall conduct the Services required by the project description and any amendments thereto. Except as otherwise provided by this Work Order, THERAPEUTICS shall follow the procedures and methodology, and shall observe and comply with the schedules, specified in the project description and any Change Orders thereto. 2.   Study Period. {Insert starting and ending dates.} The Project will commence on                 and be completed on                     . Services currently requested for warts include:        (a) Investigator selection to the extent required          (b) Subject recruitment          (c) Monitoring          (d) Management of statistical analysis          (e) Clinical report summary   --------------------------------------------------------------------------------   3.   Project Budget / Fees and Expenses. See attached budget {Attach budget to this document.}                                       Fee Basis:           Hourly Services   Rate:   $             --------------------------------------------------------------------------------                       --------------------------------------------------------------------------------                 Fixed Price   Total Fee:   $             --------------------------------------------------------------------------------                       --------------------------------------------------------------------------------                 Time and Materials   Estimated Fee:   $             --------------------------------------------------------------------------------                       --------------------------------------------------------------------------------   Upon completion of the Services under this Work Order, will THERAPEUTICS be eligible to receive the bonuses provided for in Section 4(c) of the Master Agreement (check one of the following):                        YES                        NO 4.      Payment Terms and Payment Schedule {Insert specific description of payment schedule, or you can attach it and refer to it in this section.} In any event, total payments under this Work Order shall not exceed US$     without DUSA’s prior written approval. 5.   THERAPEUTICS Personnel THERAPEUTICS has assigned a full staff who are appropriately trained individuals with experience in conducting and managing the Services that are described in this Work Order.          Names of people assigned and hourly rates (if applicable):       Title Name Rate Project Manager Clinical Operation Manager Data Manager Statistician Medical Writer 6.   Work Authorization THERAPEUTICS’ execution and return of one copy of this Work Order and any attachments hereto shall constitute authorization for THERAPEUTICS to conduct the Study or Services described herein. 2 --------------------------------------------------------------------------------   IN WITNESS WHEREOF, the parties hereto have caused this Work Order to be executed by their respective authorized representatives to be effective as of the date last below written.             DUSA Pharmaceuticals, Inc.   Therapeutics Inc.   By:     By:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Name:     Name:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Title:     Title:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Date:     Date:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- 3 --------------------------------------------------------------------------------   EXHIBIT 2 CHANGE ORDER FORM                   Change Order Number:       Date Completed:         Client:   DUSA Pharmaceuticals, Inc.   Work Order Reference:         Client Contact requesting modification:       Project Identification and/or Number(s):         Date of Client request to modify Work Order:       Does this change the overall timeline?   YES   NO Original Cost:   US $   Revised Cost:   US $ Description of Modification: {Insert specific description, or attach detail and refer to it in this section.} AGREED TO, ACKNOWLEDGED, AND ACCEPTED BY: The parties have caused this Change Order to be executed under seal in duplicate by their duly authorized representatives, and entered into as of the date of the last party below to execute.             DUSA Pharmaceuticals, Inc.   Therapeutics Inc.   By:     By:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Print Name:     Print Name:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Title:     Title:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Date:     Date:   --------------------------------------------------------------------------------     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   EXHIBIT 3 FACTORS FOR CALCULATION OF MINIMUM MONTHLY FEE       TITLE   RATE --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- General Corporate Support   [c.i.]. Estimate based upon [c.i.]   Project Administrator   Project Administrator @ [c.i.], approval to hire [c.i.] THERAPEUTICS employee for DUSA projects at this level, estimated salary range [c.i.]. Fee due from [c.i.]   Consultant Support   General consultative services for program support e.g. medical consultant, etc., [c.i.]. Fee due only if service is utilized.   Project Manager/Monitor   Project manager/monitor @ [c.i.], approval to hire [c.i.] THERAPEUTICS employees for DUSA projects at this level, estimated salary range at this level, estimated salary range [c.i.]. Fee due from [c.i.]   Program Management & In-Licensing   Piacquadio’s services at the rate of [c.i.] if requested by DUSA thereafter in writing at least 90 but no more than 120 days in advance, allocation includes coverage for DUSA dermatology development program management and responsibility for in-licensing of new technology or products.   --------------------------------------------------------------------------------   EXHIBIT 4 Representations and Warranties for Stock Issuances          Representations and Warranties of the Undersigned. To induce the Company to make this stock grant, the undersigned hereby represents and warrants to the Company that:                   (a) the undersigned, if an individual, has reached the age of majority in the jurisdiction in which he resides, is a bona fide resident of the jurisdiction contained in the address set forth on the signature page of this Representation Letter, is legally competent to execute this Representation Letter, does not intend to change residence to another jurisdiction and is not a resident of Canada;                   (b) the undersigned, if an entity, is duly authorized to execute this Representation Letter and this Representation Letter, when executed and delivered by the undersigned, will constitute a legal, valid and binding obligation enforceable against the undersigned in accordance with its terms; and the execution, delivery and performance of this Representation Letter and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate or other necessary action on the part of the undersigned;                   (c) the Shares being granted hereby are being acquired by the undersigned for investment purposes only, for the account of the undersigned and not with the view to any resale or distribution thereof, and the undersigned is not participating, directly or indirectly, in a distribution of such Shares and will not take, or cause to be taken, any action that would cause the undersigned to be deemed an “underwriter” of such Shares as defined in Section 2(11) of the Act;                   (d) the undersigned has had access to all materials, books, records, documents and information relating to the Company which the undersigned has requested, and has been able to verify the accuracy of the information contained therein;                   (e) the undersigned acknowledges and understands that investment in the Shares involves a high degree of risk, including without limitation, the risks set forth in the Company's filings with the Securities and Exchange Commission from time to time;                   (f) the undersigned acknowledges that the undersigned has been offered an opportunity to ask questions of, and receive answers from, officers of the Company concerning all material aspects of the Company and its business, and that any request for such information has been fully complied with to the extent the Company possesses such information or can acquire it without unreasonable effort or expense;                   (g) the undersigned has such knowledge and experience in financial and business matters that the undersigned is capable of evaluating the merits and risks of an investment in the Company and can afford a complete loss of his investment in the Company;                   (h) the undersigned has not relied upon any representations or other information (whether oral or written) from the Company, other than as set forth herein and no oral or written representations have been made or oral or written information furnished to the undersigned or its advisors, if any, in connection with the Stock Grant for the Shares;                   (i) the undersigned recognizes that no governmental agency has passed upon or endorsed the merits of the issuance of the Shares or made any finding or determination as to the fairness of this transaction;                   (j) the undersigned is not receiving the Shares as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or meeting to which the public was invited;   --------------------------------------------------------------------------------                     (k) the undersigned is an “Accredited Investor” as that term is defined in Section 501(a) of Regulation D promulgated under the Act. Specifically the undersigned is (check appropriate item(s)):                            (i) a bank as defined in Section 3(a)(2) of the Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Exchange Act; an insurance company as defined in Section 2(13) of the Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) of (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000, an employee benefit plan within the meaning of the Employment Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000, or if a self-directed plan, with investment decisions made solely by persons that are Accredited Investors;                            (ii) a private business development company as defined in Section 202(a)(22) of the investment Advisers Act of 1940;                            (iii) an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring Shares, with total assets in excess of $5,000,000;                            (iv) a director or executive officer of the Company;                            (v) a natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds $1,000,000;                            (vi) a natural person who had an individual income (not including his or her spouse’s income) in excess of $200,000 in 1998 and 1999 or joint income with his or her spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching such income level in 2000;                            (vii) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring Shares, whose purchase is directed by a person having such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks entailed in the purchase of Shares; or                            (viii) an entity in which all of the equity owners are Accredited Investors. (If this alternative is checked, the undersigned must identify each equity owner and provide statements signed by each demonstrating how each is qualified as an Accredited Investor.) (l)  the undersigned certifies that the representations set forth herein concerning the undersigned are true and correct as of the date hereof. 2 --------------------------------------------------------------------------------   EXHIBIT 5 GUIDELINES FOR CERTAIN BUDGETS         PROJECT   RATES --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Program Management   Included in program Management & In-Licensing Fees (see above)   Project Initiation Fees     Protocol Development:   [c.i.] depending on complexity   Protocol amendments   Billed at hourly rate   CRF Creation:   [c.i.] depending on complexity   CRF Assembly:   [c.i.] plus [c.i.] above [c.i.] sites   Subject Recruitment Package:   [c.i.] plus [c.i.] above [c.i.] sites   Project Implementation Fees   Project Management: [c.i.] for up to the first [c.i.] trial sites, each additional site @ [c.i.]       Medical Monitoring: [c.i.] for up to the first [c.i.] trial sites, each additional site @ [c.i.]       PI Monitoring: Set up and study closure [c.i.], trial site visits @ [c.i.] plus travel.       Data Management & Statistical Management billed @ [c.i.]       Study Analysis & Report Writing @ [c.i.]       Medical Consultative services at [c.i.]       Project management billed from [c.i.]       Medical monitoring billed for [c.i.]   Other Fees   Consulting Services (Phase I studies, etc.) & Trial site related fees billed @ [c.i.]       Approved expenses (FEDEX, reproduction, clinical supplies, cell phone, out-of-pocket expenses: actual and reasonable in accordance with DUSA policies etc.) billed @ [c.i.]     2

Exhibit 10.14 EXCESS BOND TO SECURE PREMIUM AND DEDUCTIBLE OBLIGATIONS Bond Number-22-12-56 KNOW ALL MEN BY THESE PRESENTS: That Labor Ready, Inc., as principal ("Principal") and National Union Fire Insurance Company of Pittsburgh. Pa. as surety (“Surety"), are held and firmly bound unto Reliance National lndemnity Company and each of its affiliates and subsidiaries, as obligee (herein collectively and individually referred to as "Obligee") for the payment of the Obligations (hereafter defined), up to the maximum penal sum of TEN MILLION, AND NO/1100   ($10,000,000.00)   lawful money of the United States to payment of which sum, Principal and Surety herqby bind themselves, their successors and assigns, jointly and severally, firmly by these presents. WHEREAS, Obligee has issued certain insurance policies on behalf of the Principal and has entered into certain other agreements with the Principal which are described on Exhibit A hereto and as may be amended and/or renewed from time to time (herein collectively referred to as the "Agreement(s)"), and: WHEREAS, the Obligee requires security for the Principal’s Obligations to Obligee under each of the Agreements ("Obligations"). WHEREAS, the Obligee currently holds, or will hold, security for the Obligations ("Underlying Security") and now desires “excess" security. WHEREAS, such excess security will not be liquidated until all other forms of Underlying Security for the Obligations have been liquidated. NOW, THEREFORE, if and when the Obligations shall be fully and finally paid and satisfied this Excess Bond shall be null and void; otherwise this Excess Bond shall remain in full force and effect and Principal and Surety in any event agree as follows: 1) Within ten (10) business days of Surety's receipt of a demand for payment under this Excess Bond ("Demand"), Surety shall pay to the Obligee the amount of such Demand. The Obligee's Demand to the Surety of the amount due, either as security or for payment or for reimbursement of Obligations pursuant to the Agreement(s), shall be absolute proof of the existence and extent of the liability of the Principal and the Surety to the Obliges hereunder, The Obligee may present one or more Demands at any time in its sole discretion, provided however, Surety shall not be obligated to pay an aggregate amount in excess of the penal sum of the Excess Bond. 2) In the event that Obligee shall demand either a portion of the penal sum of the Excess Bond or the entire penal sum of the Excess Bond (less any previous amounts paid to Obligee under the Excess Bond) under a Demand, Obligee shall hold all funds ("Excess Bond Collateral") received as security for the Obligations and shall apply such Excess Bond Collateral to the Obligations from time to time in its sole discretion; provided, however, that the Obligee shall not apply such Excess Bond Collateral to the Obligations until the full amount of all Underlying Security has been applied to the Obligations. At such time as Obligee determines in its sole discretion that all of the Obligations are fully and finally paid and such payment is not subject to avoidance or other turnover, Obligee shall return to the Surety the unapplied portion of the Excess Bond Collateral. The Surety, whether in its capacity as surety or subrogee of the Principal, waives, to the fullest extent permitted by applicable law each and every right which it may have to contest Obligee's computation of the Obligations or the application of the Excess Bond Collateral by the Obligee to the Obligations, and waives, to the fullest extent permitted by applicable law, each and every right which it may have to seek reimbursement, restitution or recovery of any Excess Bond Collateral. Obligee shall not be required to (i) segregate Excess Bond Collateral from its general funds, (ii) hold or invest Excess Bond Collateral in an interest-bearing or income-producing investment or (iii) account to Surety for interest or income in the event the same would be otherwise attributable to Excess Bond Collateral. The Principal shall not at any time have any rights or property interests in this Excess Bond, the Excess Bond Collateral or other proceeds of this Excess Bond. 3) Failure to pay or reimburse the Obligee as herein provided shall cause the Surety to be additionally liable for any and all reasonable costs and expenses, including attorney's fees and interest, incurred by the Obligee in enforcing this Excess Bond, such liability to be in addition to the bond penalty. 4) Surety's obligations hereunder shall not be affected by (i) any matter or proceeding arising in connection with any modification, limitation, discharge, assumption, or reinstatement with respect to any Agreements or Obligations, (ii) any modification of or amendment to any Agreements or Obligations without Surety's consent or prior notification provided that, thepenal sum of the Excess Bond may not be increased without the consent of Surety; however, failure,to give such consent will not prevent Obligee from drawing up to the full amount of the Excess Bond (less any previous amounts paid to Obligee under the Excess Bond) either as security or for payment or for reimbursement under the Agreements, or (iii) any other circumstances which might otherwise constitute a legal or equitable discharge or defense for Surety. 5) This Excess Bond shall become effective 01/01/2000 and shall remain in full force and effect thereafter for a period of one year and will automatically extend for additional one year periods from the expiry date hereof, or any future expiration date, unless the Surety provides to the Obligee not less then ninety (90) days advance written notice of its intent not to renew this Excess Bond or unless this Excess Bond is earlier canceled pursuant to the following. This Excess Bond may be canceled at any time upon ninety (90) days advance written notice from Surety to Obligee. It is understood and agreed that the Obligee may recover the full amount of the Excess Bond (less any previous amounts paid to Obligee under the Excess Bond) if the Surety cancels or nonrenews the Excess Bond and, within thirty (30) days prior to the effective date of cancellation or nonrenewal, the Obligee has not received collateral acceptable to it to replace the Excess Bond. 6) Any notice, Demand or request for payment, given or made under this Excess Bond shall be made in writing and shall be given by a personal delivery or expedited delivery service, postage pre–paid, addressed to the parties at the addresses specified below or to such other address as shall have been specified by such parties to each of the parties to the transactons contemplated hereby. Such notice, Demand or request for payment shall be accompanied by the Obligees written certification that: "All other bonds, letters of credit and other similar instruments required as security for Obligations under Agreements described in Exhibit A of National Union Fire Insurance Company of Pittsburgh, Pa, bond number 22-12-56 have been drawn upon and all funds thereunder have been received by Reliance Nationaal Indemnity Company as Obligee.", together with satisfactory written proof of actual receipt of said funds by the Obligee. If to the Surety:           National Union Fire Insurance Company of Pittsburgh, Pa           175 Water Street, 6th Floor           New York, NY 10038           Attention: Bond Claim If to Obligee:           Reliance National Indemnity Company           One Market Place, #2300           San Francisco, CA  94105           Attention: John Lazar If to the Principal           Labor Ready, Inc.           1016 So. 28th Street           Tacoma, WA 98409           Attention: Gary Gibson Notice given under this Excess Bond shall be effective only when received. In WITNESS THEREOF, the said Principal and Surety have signed and sealed this instrument on this 8th day of May, 2000. LABOR READY, INC. By /s/ Ronald L. Junck       Principal NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. By /s/ Debbie Poppe       Attorney-in-fact, Debbie Poppe EXHIBIT A TO EXCESS BOND NUMBER 22-12-56 “Agreement(s)' shall be defined as those Agreements listed below, includIng any modifications that may be made from time to time, and the insurance policies described therein: 1. Agreement(s):  NWA0151254-01 Date: 01/01/00 – 01/01/01 2. Agreement(s):  NWA0151355-01 Date: 01/01/00 – 01/01/01    

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.23 RETENTION AGREEMENT     This Retention Agreement (the "Agreement") is made and entered into effective as of December          , 2000, by and between                              (the "Employee") and NetRatings, Inc., a Delaware corporation (the "Company"). R E C I T A L     In order to provide the Employee with enhanced financial security and sufficient encouragement to remain with the Company, the Board of Directors of the Company (the "Board") believes that it is imperative to provide the Employee with certain benefits upon the involuntary termination of the Employee's employment provided that such termination was not for cause. A G R E E M E N T     In consideration of the mutual covenants herein contained and the continued employment of the Employee by the Company, the parties agree as follows:     1.  At-Will Employment.  The Company and the Employee acknowledge that the Employee's employment is and shall continue to be at-will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be established under the Company's then existing employee benefit plans or policies at the time of termination.     2.  Severance Benefits.       (a)  Acceleration of Vesting.  Subject to Sections 2(c) and 2(e) below and as consideration for the covenants made herein by Employee including Employee's covenant in Section 4 herein, if the Employee's employment with the Company terminates as a result of an Involuntary Termination (as defined in Section 3(c)), then (i) the unvested portion of any stock option(s) held by the Employee that were granted by the Company shall immediately accelerate and become fully vested, and such options shall remain exercisable for the period prescribed in the Employee's stock option agreements and (ii) the Company's right of repurchase as to any shares sold to Employee pursuant to a restricted stock purchase agreement or similar agreement shall immediately lapse as to all shares issued pursuant to such agreement.     (b)  Severance Payment.  Subject to Sections 2(c) and 2(e) below and as consideration for the covenants made herein by Employee including Employee's covenant in Section 4 herein, if the Employee's employment with the Company terminates as a result of an Involuntary Termination (as defined in Section 3(c)) then Employee shall be entitled to receive twelve (12) months' of the Employee's Total Annual Earnings (as defined in Section 3(e)) as in effect as of the date of such termination, all less applicable withholding, paid in over the twelve (12) month period in accordance with the Company's normally scheduled payroll dates.     (c)  280G Compliance.  In the event the Employee becomes entitled to the payments and benefits provided under this Agreement and/or any other payments or benefits with a Change of Control (as defined in Section 3(b)) of the Company (collectively, the "Payments"), and such Payments would result in a "parachute payment" as described in Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the amount of such Payments shall be either:      (i) the full amount of the Payments, or 1 --------------------------------------------------------------------------------     (ii) a reduced amount which would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code (the "Excise Tax"), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by the Employee, on an after-tax basis, of the greatest amount of benefit. Unless the Company or the Employee otherwise agree in writing, any determination required under this Section shall be made in writing by independent public accountants appointed by the Company and reasonably acceptable to the Employee (the "Accountants"), whose determination shall be conclusive and binding upon the Employee and the Company for all purposes. The Company shall bear all costs the Accountants may reasonably incur.     (d)  Voluntary Resignation; Termination For Cause.  If the Employee voluntarily resigns from the Company (and such resignation is not an Involuntary Termination defined in Section 3(c)), or if the Company terminates the Employee's employment for Cause, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing benefit plans at the time of such termination.     (e)  Release of Claims.  The Employee shall not be entitled to any of the benefits described in this Section 2 unless and until the Employee, in consideration for such benefits, executes a release of claims in a form satisfactory to the Company; provided, however, that such release shall not apply to any right of the Employee to be indemnified by the Company.     3.  Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:     (a)  Cause.  "Cause" shall mean: (i) any act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee which is intended to result in substantial personal enrichment of the Employee; (ii) the Employee's conviction of a felony which the Board reasonably believes has had or will have a material detrimental effect on the Company's reputation or business; (iii) a willful act by the Employee which constitutes misconduct and is injurious to the Company; and (iv) continued willful violations by the Employee of the Employee's obligations to the Company after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties.     (b)  Change of Control.  "Change of Control" shall mean the occurrence of any of the following events: (i) the acquisition by any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of the "beneficial ownership" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iii) the sale or disposition of all or substantially all of the assets of the Company; or (iv) the approval by the stockholders of the Company of a plan of complete liquidation of the Company.     (c)  Involuntary Termination.  "Involuntary Termination" shall mean (i) without the Employee's express written consent, the reduction of the Employee's duties which results in a significant diminution of the Employee's position or responsibilities with the Company, or the 2 -------------------------------------------------------------------------------- removal of the Employee from his employment position in the Company other than for Cause; (ii) without the Employee's express written consent, a material reduction by the Company in the Employee's total cash compensation as in effect immediately prior to such reduction; (iii) without the Employee's express written consent, a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (iv) without the Employee's express written consent, the relocation of the Company to a facility or location more than 30 miles from the Company's then present location; or (iv) the death or Disability (as defined in Section 3(d) below) of the Employee; or (vi) any breach by the Company of any material provision of this Agreement.     (d)  Disability.  "Disability" shall mean the inability of the Employee to perform his duties as an employee of the Company as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and reasonably acceptable to the Employee (or the Employee's legal representative).     (e)  Total Annual Earnings.  "Total Annual Earnings" means the sum of the Employee's annual salary and targeted annual incentive bonus, as in effect immediately prior to the date of the Employee's termination of employment with the Company.     4.  Other Activities.       (a) In order to protect the Company's valuable proprietary information, Employee agrees that during Employee's employment and for a period of one (1) year following the termination of such employment with the Company for any reason, Employee shall not, as a compensated or uncompensated officer, director, consultant, advisor, partner, joint venturer, investor, independent contractor, employee or otherwise, provide any labor, services, advice or assistance to any of the following entities, which are direct competitors of the Company: Jupiter-Media Metrix, NetValue, Comscore Networks, PC Data, Forrester Research, Gartner Group, IDC; or to any other companies which the Board may determine from time to time are direct competitors of the Company. Employee acknowledges and agrees that the restrictions contained in the preceding sentence are reasonable and necessary, as there is a significant risk that Employee's provision of labor, services, advice or assistance to any of those competitors could result in the inevitable disclosure of the Company's proprietary information. Employee further acknowledge and agree that the restrictions contained in this paragraph will not preclude Employee from engaging in any trade, business or profession that Employee is qualified to engage in. Notwithstanding the foregoing, Employee is permitted to own, individually, as a passive investor up to a one percent (1%) interest in any publicly traded entity.     (b) Following employee's termination, Employee shall not, for a period of twelve (12) months knowingly solicit for the purposes of employment or to hire, without prior written consent of the Company, any employee of the Company, either directly or indirectly through an associated company, employee search or placement firm or any other third party.     5.  Successors.       (a)  Company's Successors.  Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and assets shall assume the Company's obligations under this Agreement.     (b)  Employee's Successors.  Without the written consent of the Company, the Employee shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity. Notwithstanding the foregoing, the terms of this Agreement and all rights of the 3 -------------------------------------------------------------------------------- Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.     6.  Notices.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.     7.  Miscellaneous Provisions.       (a)  Waiver.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the party hereto adversely affected thereby. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.     (b)  Whole Agreement.  This Agreement, any stock option agreements representing options, and any other restricted stock purchase agreement or similar agreement represent the entire agreement and understanding between the parties as to the subject matter herein and supersede all prior or contemporaneous agreements, whether written or oral, including the Change of Control Agreement entered into between the Company and Employee dated                              . Nothing in this Agreement, however, is intended to affect the rights of the Employee, or the covered dependents of the Employee, under any applicable law with respect to health insurance continuation coverage.     (c)  Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware.     (d)  Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.     (e)  Arbitration.  The Company and the Employee agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement shall be settled by arbitration to be held in Santa Clara County, California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's award in any court having jurisdiction.     (f)  No Assignment of Benefits.  The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this Section 8(f) shall be void.     (g)  Employment Taxes.  Payments made pursuant to this Agreement may be subject to withholding of applicable income and employment taxes.     (h)  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. 4 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. COMPANY:   NETRATINGS, INC.     By:             --------------------------------------------------------------------------------     Title:             --------------------------------------------------------------------------------           EMPLOYEE:   [EMPLOYEE NAME]               -------------------------------------------------------------------------------- 5 -------------------------------------------------------------------------------- QuickLinks RETENTION AGREEMENT R E C I T A L A G R E E M E N T